10-QPeriod: Q2 FY2015

Interactive Brokers Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 10, 2015For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported its financial results for the quarter ending June 30, 2015. The company demonstrated strong revenue growth, primarily driven by its electronic brokerage segment, which saw a significant increase in commissions and execution fees. This growth was fueled by a rise in customer account numbers and trading activity, particularly in stocks and futures. The company also benefited from higher net interest income due to increased customer margin borrowings and cash balances. Despite a notable loss of $119 million related to the Swiss franc event in the first quarter, which impacted year-to-date results, the company's core operations remained robust. Management highlighted the ongoing strategic shift towards electronic brokerage and a continued reduction in market-making segment employees. The company maintained strong regulatory capital levels and reported effective disclosure controls and procedures. Investors should note the company's continued international expansion and its efforts to manage currency diversification effectively.

Financial Highlights

29 data points
Beta

Revenue

$405.00M

Net Income

$23.00M

5.7% Net Margin

EPS (Diluted)

$0.09

Total Assets

$45.16B

Cash & Equivalents

$1.04B

Free Cash Flow

$121.00M

Financial Statements
Beta
Revenue$405.00M
Net Income$23.00M
EPS (Basic)$0.10
EPS (Diluted)$0.09
Shares Outstanding (Basic)237.93M
Shares Outstanding (Diluted)244.16M

Key Highlights

  • 1Net revenues increased by 25% year-over-year to $387 million in Q2 2015, driven by commissions and interest income.
  • 2Diluted earnings per share (EPS) rose to $0.37 in Q2 2015 from $0.26 in Q2 2014, reflecting improved profitability.
  • 3Electronic brokerage segment income before taxes grew by 42% year-over-year, demonstrating the segment's strong performance.
  • 4Customer accounts grew by 18% and customer equity increased by 22% year-over-year, indicating sustained client growth.
  • 5Customer margin borrowings reached a record high of $19.0 billion, contributing significantly to net interest income.
  • 6A $119 million net loss was incurred in Q1 2015 due to the Swiss franc event, which negatively impacted year-to-date results.
  • 7The company maintained substantial excess regulatory capital of $3.3 billion as of June 30, 2015.

Frequently Asked Questions

The primary driver of revenue growth was the electronic brokerage segment, which saw increased commissions and execution fees due to higher customer account growth and trading activity, along with a significant increase in net interest income from higher customer margin borrowings and cash balances.

The company incurred a $119 million net loss in the first quarter of 2015 related to customer losses from the Swiss franc event. This loss significantly impacted the year-to-date results, although the company is actively pursuing debt collection from affected customers.

The company is strategically reducing its focus on the market-making segment, evidenced by a continued reduction in employees within that segment, while concurrently growing its electronic brokerage business. This shift aims to optimize resource allocation and capitalize on the strengths of the brokerage platform.

Interactive Brokers manages its foreign currency exposure by maintaining its net worth in a basket of 16 major currencies called 'GLOBAL'. This strategy diversifies risk and aligns with the global nature of its business. While the company historically did not hedge this exposure, it now incorporates cash forex and forex options to manage currency risk on a continuous basis.