Interactive Brokers Group Announces Strong Second Quarter Results
Reports Income Before Taxes And Minority Interest Of $259.3 Million On $395.4 Million In Net Revenues, Earnings Per Share Of $0.44
Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic market maker and broker, today reported diluted earnings per share of $0.44 for the quarter ended June 30, 2008, compared to pro forma diluted earnings per share of $0.28 for the same period in 2007.
Net revenues were $395.4 million and income before income taxes and minority interest was $259.3 million for the quarter, compared to net revenues of $294.7 million and income before income taxes of $164.5 million for the same period in 2007.
- Diluted earnings per share increased by 57.1% from the year ago quarter.
- 65.6% pre-tax margin for this quarter.
- Market Making pre-tax income grew 73.3% from the year ago quarter.
- 74.3% Market Making pre-tax margin for this quarter.
- Electronic Brokerage pre-tax income rose 32.4% from the year ago quarter.
- 47.7% Electronic Brokerage pre-tax margin for this quarter.
- Cleared DARTs increased to 285,000, or 50.8%, from the year ago quarter.
"We are pleased to announce a 57% year on year increase in our earnings for the second quarter," said Thomas Peterffy, our Chairman and CEO. "Perhaps the most remarkable development during the quarter was the very substantial increase in futures trading on the part of our customers. We see evidence that our solid financial footing and comprehensive risk controls are attracting customers to us from weaker competitors. These times of financial strain among our broker dealer competitors represent a unique opportunity for us to increase our customer acquisition rates and to widen our technological lead."
Electronic Brokerage segment income before income taxes grew 32.4% in the quarter ended June 30, 2008 compared to the same period in 2007. This growth was driven by higher revenues from commission and execution fees and a small increase in net interest income. Pre-tax margin increased from 44.4% in the second quarter of 2007 to 47.7% for this quarter, reflecting leverage from automation. Total DARTs* for cleared and execution-only customers increased 38.1% to 326,000 during the three months ended June 30, 2008, compared to 236,000 during the three months ended June 30, 2007. Cleared DARTs increased by 50.8% to 285,000 for the three months ended June 30, 2008 compared to the same period in 2007.
Market Making segment income before income taxes increased 73.3% in the quarter ended June 30, 2008 compared to the same period in 2007. Pre-tax margin expanded to 74.3% in this quarter from 61.5% in the same quarter of 2007. High market volumes and volatility demonstrated the benefits of our automated trading system and integrated real time risk management. Market Making options contract volume in the quarter ended June 30, 2008 increased by 13.1% from the same period in 2007.
*Daily average revenue trades (DARTs) are based on customer orders.
Conference Call Information:
Interactive Brokers Group will hold a conference call with investors today, July 24, 2008, at 5:30 p.m. EDT to discuss its second quarter results. Investors who would like to listen to the conference call live should dial 877-440-5803 (U.S. domestic) and 719-325-4850 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the "Interactive Brokers Conference Call."
The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.
About Interactive Brokers Group, Inc.:
Interactive Brokers Group is an automated global electronic market maker and broker specializing in routing orders and executing and processing trades in securities, futures and foreign exchange instruments on more than 70 electronic exchanges and trading venues around the world. As a market maker, we provide liquidity at these marketplaces and, as a broker, we provide professional traders and investors with direct access to stocks, options, futures, forex, bonds and mutual funds from a single IB Universal AccountSM. Employing proprietary software on a global communications network, Interactive Brokers Group continuously integrates its software with a growing number of exchanges and trading venues into one automatically functioning, computerized platform that requires minimal human intervention.
Cautionary Note Regarding Forward-Looking Statements:
The foregoing information contains certain forward-looking statements that reflect the company's current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the company's operations and business environment which may cause the company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the company on the date of this release. The company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the company's financial results may be found in the company's filings with the Securities and Exchange Commission.
For Interactive Brokers Group, Inc. Media: Andrew Wilkinson, 203-913-1369 or Investors: Deborah Liston, 203-618-4070.
Represents adjustments to reflect the following:
|(1)||The unaudited pro forma consolidated statement of income for the three and six month periods ended June 30, 2007 give pro forma effect to the recapitalization, and the consummation of our initial public offering and our application of the net proceeds from the offering to purchase membership interests in IBG LLC from IBG Holdings as though such transactions had occurred on January 1, 2007. Pro forma earnings per share calculations (i) include restricted shares of Common Stock that have been issued or are to be issued pursuant to the 2007 ROI Unit Stock Plan and (ii) issuance of restricted shares of Common Stock pursuant to the 2007 Stock Incentive Plan, but excludes shares of Common Stock that are issuable in the future pursuant to the 2007 Stock Incentive Plan.|
|(2)||Adjusted for Delaware franchise taxes, $0.165 million annually.|
|(3)||The income tax adjustments of $5.5 million and $11.7 million for the three and six month periods ended June 30, 2007, respectively, represent the sum of the incremental current and deferred income tax expense for these periods (referenced in note 4 below).|
|(4)||Subsequent to the IPO, additional deferred income tax expense is $25.4 million, calculated on a straight line basis, resulting from the amortization of the deferred tax asset of $380.8 million arising from the acquisition of the 10.3% member interest in IBG LLC (see note 3 above) over 15 years. Of this amount, $4.4 million and $8.8 million would have been amortizable for the three and six month periods ended June 30, 2007, respectively, under current tax law. This additional deferred income tax expense is, however, fully offset by reduced current income tax expense in calculating the total provision for income taxes.|
|(5)||Adjusted for the approximate 89.7% interest in IBG LLC that IBG Holdings LLC holds arising from the Recapitalization and the IPO, including initial share issuances pursuant to employee equity incentive plans (see note 1 above). The adjustments are equal to approximately 89.7% of IBG LLC’s total net income for the periods presented.|
|(6)|| Basic earnings per share were calculated
based on 40.1 million shares of Common Stock and 100 shares of Class
B common stock being outstanding. Diluted earnings per share were calculated
based on an assumed purchase by us of all remaining IBG LLC membership
interests held by IBG Holdings LLC and the issuance by us of 360 million
shares of Common Stock, resulting in a total of 401.3 million shares
deemed outstanding as of the beginning of each period. There is no impact
on earnings per share for such purchase and issuance because 100% of
net income before minority interest would be available to common stockholders
as IBG Holdings LLC would no longer hold a minority interest. Therefore,
the net income utilized to calculate diluted earnings per share would
be $113 million and $237 million for the three and six month period ended
June 30, 2007, respectively.
Diluted weighted average common shares outstanding include 1.2 million shares of Common Stock to be issued pursuant to the 2007 ROI Unit Stock Plan. Shares of Common Stock to be issued in connection with the 2007 Stock Incentive Plan have been excluded from diluted weighted average common shares outstanding because such shares are non-dilutive.