10-QPeriod: Q1 FY2015

Interactive Brokers Group, Inc. Quarterly Report for Q1 Ended Mar 31, 2015

Filed May 11, 2015For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported a net loss of $13 million, or $(0.22) per diluted share, for the first quarter of 2015. This represents a significant decline from the same period in the prior year, which saw a net income of $19 million, or $0.34 per diluted share. The primary drivers for this loss were a $121 million charge related to customer losses from the Swiss franc event and a $197 million loss on the company's currency diversification strategy. Despite these extraordinary items, the company's core operations showed resilience. Excluding these impacts, net revenues increased by 2% and pre-tax income was relatively flat. The electronic brokerage segment, which represents the majority of the company's business, saw revenue growth driven by increased commissions and net interest income, though its profitability was significantly impacted by the customer bad debt from the Swiss franc event. The market making segment experienced a decline in income due to a challenging market environment characterized by low volatility and intense competition. Looking ahead, IBKR continues to focus on its technology-driven platform and expanding its electronic brokerage services. The company reported strong growth in customer accounts and equity. Liquidity remains robust, with a highly liquid balance sheet and substantial excess regulatory capital.

Financial Highlights

29 data points
Beta

Revenue

$187.00M

Net Income

-$13.00M

-7.0% Net Margin

EPS (Diluted)

$-0.06

Total Assets

$43.29B

Cash & Equivalents

$990.00M

Free Cash Flow

-$220.00M

Financial Statements
Beta
Revenue$187.00M
Net Income-$13.00M
EPS (Basic)$-0.06
EPS (Diluted)$-0.06
Shares Outstanding (Basic)233.89M
Shares Outstanding (Diluted)233.89M

Key Highlights

  • 1Reported a net loss of $13 million for Q1 2015, a significant decrease from a net income of $19 million in Q1 2014.
  • 2Diluted Earnings Per Share (EPS) was $(0.22) in Q1 2015, compared to $0.34 in Q1 2014.
  • 3The company incurred a $121 million charge related to customer losses following the Swiss franc event.
  • 4A $197 million loss was recorded due to the company's currency diversification strategy.
  • 5Electronic brokerage segment revenue increased by 29%, driven by higher commissions and net interest income.
  • 6Market making segment income declined by 59% due to low volatility and high competition.
  • 7Total customer accounts grew by 17% year-over-year, reaching 296,000.

Frequently Asked Questions

The primary reasons for the decrease in net income were two significant events: a $121 million charge related to customer losses incurred due to the sudden move in the Swiss franc following an action by the Swiss National Bank, and a $197 million loss on the company's currency diversification strategy due to the strengthening of the U.S. dollar.

Excluding the impact of the Swiss franc event and currency strategy, the electronic brokerage segment showed resilience. Net revenues increased by 21% year-over-year to $272 million, driven by higher commissions and net interest income from increased customer balances and borrowings. Core income before income taxes saw a 27% increase, with a pre-tax profit margin of 63%.

Interactive Brokers operates globally and is exposed to foreign currency risk through its international operations and accumulated earnings in foreign subsidiaries. The company manages this risk by maintaining its net worth in 'GLOBALs,' a basket of 16 diversified currencies. This strategy aims to align its hedging with the currencies used in its business. The strengthening of the U.S. dollar against these currencies in the first quarter of 2015 resulted in a significant loss related to this strategy.

The sudden and significant move in the Swiss franc caused several customers to incur losses exceeding their deposits. Interactive Brokers incurred a net loss of $121 million after hedging activities related to these customer receivables. The company is actively pursuing debt collection, and the ultimate financial effect will depend on the outcome of these efforts.