10-QPeriod: Q2 FY2014

Interactive Brokers Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 11, 2014For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported solid financial results for the second quarter and first half of 2014. Net revenues increased by 9% year-over-year for the quarter and 33% for the half, driven by strong performance in both its electronic brokerage and market-making segments. The company saw significant growth in net interest income, particularly from increased customer cash and margin balances, and improved trading gains, partly influenced by favorable currency translation effects. Despite a decrease in commissions due to lower volumes in forex and futures, overall profitability improved, with diluted earnings per share (EPS) on a non-comprehensive basis rising to $0.26 for the quarter and $0.60 for the half. The company continues to benefit from its highly automated, low-cost operating model, which is reflected in its strong pretax margins. Growth in customer accounts and customer equity highlights the ongoing expansion of its client base. IBKR's financial condition remains robust, with substantial excess regulatory capital and a liquid balance sheet, positioning it well for continued operations and potential market opportunities.

Financial Highlights

28 data points
Beta

Revenue

$321.00M

Net Income

$15.00M

4.7% Net Margin

EPS (Diluted)

$0.07

Total Assets

$40.16B

Cash & Equivalents

$1.00B

Free Cash Flow

$55.00M

Financial Statements
Beta
Revenue$321.00M
Net Income$15.00M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)224.32M
Shares Outstanding (Diluted)229.20M

Key Highlights

  • 1Total net revenues increased by 9% to $309.3 million for Q2 2014 compared to Q2 2013, and by 33% to $664.2 million for the six months ended June 30, 2014.
  • 2Diluted earnings per share (non-comprehensive basis) increased to $0.26 for Q2 2014, up from $0.21 in Q2 2013, and to $0.60 for the six months ended June 30, 2014, up from $0.35 in the prior year period.
  • 3Net interest income saw significant growth, increasing by 33% for the quarter and 29% for the six months, driven by higher customer cash and margin balances.
  • 4Trading gains increased by 42% for the quarter and 171% for the six months, partly aided by favorable currency translation effects.
  • 5Electronic brokerage segment income before income taxes increased by 7% for the quarter and 13% for the six months.
  • 6Market making segment income before income taxes significantly improved, rising to $46.5 million for the quarter and $134.6 million for the six months, compared to $7.6 million and a loss of $21.4 million, respectively, in the prior year periods.
  • 7Total accounts grew by 17% year-over-year to 262,000, and customer equity increased by 44% to $53.9 billion.

Frequently Asked Questions

The primary drivers of revenue growth were higher trading gains and a significant increase in net interest income, which was fueled by growth in customer cash and margin balances. Favorable currency translation effects also positively impacted trading gains.

Both segments showed improvement. The electronic brokerage segment's income before taxes grew by 7% year-over-year for the quarter, driven by higher net interest income. The market-making segment saw a substantial rebound, with income before taxes increasing significantly to $46.5 million from $7.6 million in the prior year's quarter, largely due to improved trading gains and currency translation effects.

The company maintains a highly liquid balance sheet, with approximately 98.9% of its total assets considered liquid as of June 30, 2014. It also holds substantial excess regulatory capital of $3.23 billion across its operating companies and had no borrowings outstanding under its credit facilities. Management believes cash flows from operations and available cash are adequate for future liquidity needs.

Currency fluctuations, particularly the weakening of the U.S. dollar, had a positive impact on trading gains, contributing $15.2 million in gains for the quarter compared to a $42.9 million loss in the prior year's quarter. The company actively manages its foreign currency exposure through a basket of 16 currencies called the 'GLOBAL'.