10-QPeriod: Q3 FY2011

Interactive Brokers Group, Inc. Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:IBKR

Summary

Interactive Brokers Group (IBKR) reported strong financial results for the third quarter and the first nine months of 2011, driven by a favorable market environment characterized by heightened volatility and increased trading volumes. The company experienced significant growth in both its electronic brokerage and market making segments. Diluted earnings per share saw a substantial increase year-over-year, reflecting robust revenue growth across key business lines. The company benefited from increased customer activity, evidenced by a rise in Daily Average Revenue Trades (DARTs) and customer equity. Net interest income also grew substantially due to higher customer cash and margin balances. While currency fluctuations presented a headwind, particularly impacting market making gains due to a strengthening U.S. dollar, the company's overall performance remained strong. IBKR continues to invest in technology and automation, allowing it to maintain operational efficiency and a strong competitive position in the global electronic brokerage and market making space.

Financial Highlights

28 data points
Beta

Revenue

$408.86M

Net Income

$22.49M

5.5% Net Margin

EPS (Diluted)

$0.12

Total Assets

$33.15B

Cash & Equivalents

$1.56B

Free Cash Flow

$258.18M

Financial Statements
Beta
Revenue$408.86M
Net Income$22.49M
EPS (Basic)$0.12
EPS (Diluted)$0.12
Shares Outstanding (Basic)179.33M
Shares Outstanding (Diluted)180.83M

Key Highlights

  • 1Diluted EPS surged to $0.50 for Q3 2011, a 92% increase from $0.26 in Q3 2010, though comprehensive EPS was $0.36 due to currency translation effects.
  • 2Consolidated net revenues increased by 29% year-over-year for Q3 2011, reaching $385.6 million, driven by higher commissions, trading gains, and net interest income.
  • 3The electronic brokerage segment saw income before taxes increase by 66% year-over-year in Q3 2011, supported by a 45% rise in commissions and execution fees and an 82% increase in net interest income.
  • 4Market making segment income before taxes grew by 24% year-over-year in Q3 2011, with trading gains up 22%, fueled by wider bid-offer spreads, increased volatility, and higher trading volumes.
  • 5Customer activity significantly increased, with Total Daily Average Revenue Trades (DARTs) up 39% and customer equity growing by 23% to $23.3 billion year-over-year for Q3 2011.
  • 6The company's pre-tax margin expanded to 56% for Q3 2011, up from 54% in the prior year's quarter, indicating improved operational efficiency.
  • 7Despite a strengthening U.S. dollar impacting reported earnings by an estimated $108.7 million on Comprehensive Income, IBKR maintained strong growth across its business segments.

Frequently Asked Questions

Revenue growth in Q3 2011 was primarily driven by increased commissions and execution fees resulting from higher customer trading volumes, significant growth in net interest income due to rising customer cash and margin balances, and higher trading gains in the market making segment benefiting from wider bid-offer spreads and increased market volatility.

A strengthening U.S. dollar negatively impacted Interactive Brokers' results, particularly for its market making segment. The company estimates this had a negative effect of approximately $66.5 million on trading gains for Q3 2011 compared to the prior year, and approximately $108.7 million on its Comprehensive Income due to currency translation effects.

The 'GLOBAL' is a basket of major currencies that Interactive Brokers uses to base its net worth. This strategy is employed to actively manage its global currency exposure, as roughly half of its equity is denominated in currencies other than U.S. dollars. Changes in the value of this basket relative to the U.S. dollar affect reported earnings.

At September 30, 2011, the aggregate excess regulatory capital for all of the operating companies was $2.33 billion, indicating a strong capital position well above regulatory requirements.