22.01.2009 12:00:00

Interactive Brokers Group Announces Record 2008 Results

Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic market maker and broker, today reported diluted earnings per share of $2.24 for the year ended December 31, 2008, compared to pro forma diluted earnings per share of $1.59 in 2007.

Net revenues were $1,850 million and income before income taxes and minority interest was $1,250 million for the year, compared to net revenues of $1,468 million and income before income taxes of $932 million in 2007.

Business Highlights

  • Diluted earnings per share grew by 41% from the prior year.
  • 68% pre-tax margin for 2008 and 63% pre-tax margin for this quarter.
  • Market Making pre-tax income increased 43% from the prior year.
  • 76% Market Making pre-tax margin for 2008.
  • Electronic Brokerage pre-tax income increased 13% from the prior year.
  • 44% Electronic Brokerage pre-tax margin for 2008.
  • Cleared DARTs grew by 46% to 316,000 in 2008.

"2008 was a record year, for the first time our profits have exceeded the billion Dollar mark," said Thomas Peterffy, our CEO. "It is not easy to report record profits in a year that has been generally difficult for our industry.

Our focus on long term growth, controlling risk and building technology continues to pay dividends, year after year. Our shareholders’ equity of $4.4 billion makes us the largest among those firms that did not receive government support in the industry and it provides us with a solid footing to keep building our business."

Segment Overview

Market Making

Market Making segment income before income taxes increased 43% in 2008. Pre-tax margin expanded to 76% in 2008 from 70% in 2007. High market volumes and volatility again demonstrated the benefits of our automated trading system and integrated real time risk management. We avoided counterparty risks and balance sheet exposure from illiquid positions by making markets only in exchange traded products that are cleared through central clearing houses. Market Making options contract volume increased by 21% and futures volume increased by 48% in 2008.

Electronic Brokerage

Electronic Brokerage segment income before income taxes grew 13% in 2008. This growth was driven by robust customer trading and a greater number of customer accounts which generated 38% higher revenues from commissions and execution fees in 2008. Net interest income declined 9% due to lower benchmark rates. Pre-tax margin was 44% for 2008. Our real-time margining system worked efficiently during the periods of severe market stress, allowing us to avoid most of the losses associated with large adverse price moves. Total DARTs* for cleared and execution-only customers increased 35% to 357,000 in 2008, compared to 265,000 during 2007. Cleared DARTs increased by 46% to 316,000 in 2008.

*Daily average revenue trades (DARTs) are based on customer orders.

_____________________

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, January 22, 2009, at 4:30 p.m. ET to discuss its 2008 results. Investors who would like to listen to the conference call live should dial 800-390-5360 (U.S. domestic) and 719-785-1753 (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.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

             
TRADE VOLUMES:
(in 000's, except %) Brokerage
  Market   Brokerage Non Avg. Trades
Making % Cleared % Cleared % Total % per U.S.
Period Trades Change Trades Change Trades

Change

Trades Change Trading Day
2003 32,772 22,748 2,367 57,887 230
2004 41,506 27% 28,876 27% 2,932 24% 73,314 27% 290
2005 54,044 30% 34,800 21% 7,380 152% 96,224 31% 382
2006 66,043 22% 51,238 47% 12,828 74% 130,109 35% 518
2007 99,086 50% 72,931 42% 16,638 30% 188,655 45% 752
2008 101,672 3% 120,195 65% 16,966 2% 238,833 27% 944
 
4Q2007 24,871 22,464 4,376 51,711 808
4Q2008 29,628 19% 33,187 48% 3,953 -10% 66,768 29% 1,043
       
 
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)  
 
TOTAL Options % Futures* % Stocks %
Period (contracts) Change (contracts) Change (shares) Change
2003 194,358 31,034 17,038,250
2004 269,715 39% 37,748 22% 17,487,528 3%
2005 409,794 52% 44,560 18% 21,925,120 25%
2006 563,623 38% 62,419 40% 34,493,410 57%
2007 673,144 19% 83,134 33% 47,324,798 37%
2008 784,497 17% 108,984 31% 55,845,428 18%
 
4Q2007 181,814 23,020 12,895,696
4Q2008 204,870 13% 26,284 14% 15,902,631 23%
         
 
MARKET MAKING Options % Futures* % Stocks %
Period (contracts) Change (contracts) Change (shares) Change
2003 177,459 6,638 12,578,584
2004 236,569 33% 10,511 58% 12,600,280 0%
2005 308,613 30% 11,551 10% 15,625,801 24%
2006 371,929 21% 14,818 28% 21,180,377 36%
2007 447,905 20% 14,520 -2% 24,558,314 16%
2008 541,394 21% 21,544 48% 26,008,433 6%
 
4Q2007 123,550 3,960 6,353,053
4Q2008 153,314 24% 5,776 46% 8,085,820 27%

         
 
BROKERAGE TOTAL Options % Futures* % Stocks %
Period (contracts) Change (contracts) Change (shares) Change
2003 16,898 24,396 4,459,667
2004 33,146 96% 27,237 12% 4,887,247 10%
2005 101,181 205% 33,009 21% 6,299,319 29%
2006 191,694 89% 47,601 44% 13,313,033 111%
2007 225,239 17% 68,614 44% 22,766,484 71%
2008 243,103 8% 87,440 27% 29,836,995 31%
 
4Q2007 58,264 19,060 6,542,643
4Q2008 51,556 -12% 20,508 8% 7,816,811 19%
           
BROKERAGE CLEARED Options % Futures* % Stocks %
Period (contracts) Change (contracts) Change (shares) Change
2003 11,351 19,086 3,612,503
2004 16,438 45% 24,118 26% 4,339,462 20%
2005 23,456 43% 30,646 27% 5,690,308 31%
2006 32,384 38% 45,351 48% 12,492,870 120%
2007 51,586 59% 66,278 46% 20,353,584 63%
2008 77,207 50% 85,599 29% 26,334,752 29%
 
4Q2007 15,860 18,404 5,820,904
4Q2008 18,711 18% 20,164 10% 6,961,864 20%
 
* Includes options on futures
     
 
BROKERAGE STATISTICS
(in 000's, except % and where noted)
4Q2008 4Q2007 % Change
Total Accounts 111 95 17%
Customer Equity (in billions) * $8.9 $8.8 1%
 
Cleared DARTs 340 259 31%
Total Customer DARTs 372 307 21%
 
(in $'s, except DART per account)
Commission per DART $3.86 $4.27
DART per Avg. Account (Annualized) 789 701
Net Revenue per Avg. Account (Annualized) $3,939 $4,386
 
* Excludes non-customers (i.e., officers, directors and affiliated parties)
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED)

           
Three Months Twelve Months
Ended December 31, Ended December 31,
2008 2007 2008   2007
(in millions)
 
Market Making Net revenues $308.8 $279.0 $1,343.5 $1,031.2
Non-interest expenses 87.2 74.8 315.9 311.4
 
Income before income taxes $221.6 $204.2 $1,027.6 $719.8
 
Pre-tax profit margin 72% 73% 76% 70%
 
Electronic Brokerage Net revenues $118.7 $118.2 $505.8 $425.2
Non-interest expenses 75.7 56.1 281.8 227.3
 
Income before income taxes $43.0 $62.1 $224.0 $197.9
 
Pre-tax profit margin 36% 53% 44% 47%
 
Corporate* Net revenues $1.8 $0.3 $0.8 $11.8
Non-interest expenses (2.6) (2.1) 2.7 (2.1)
 
Income before income taxes $4.4 $2.4 ($1.9) $13.9
 
 
Total Net revenues $429.3 $397.5 $1,850.1 $1,468.2
Non-interest expenses 160.3 128.8 600.4 536.6
 
Income before income taxes and minority interest $269.0 $268.7 $1,249.7 $931.6
 
Pre-tax profit margin 63% 68% 68% 63%
 
* Corporate includes corporate related activities as well as inter-segment eliminations.
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

               
Three Months Twelve Months
Ended December 31,

Ended December 31,

Actual Actual Actual     Pro forma
2008 2007 2008 2007
(in millions, except share and per share data)
 
Revenues:
Trading gains $298.0 $249.8 $1,304.0 $888.1
Commissions and execution fees 87.6 75.0 359.5 261.1
Interest income 63.4 185.0 437.2 782.2
Other income 25.8 23.1 81.4 92.0
 
Total revenues 474.8 532.9 2,182.1 2,023.4
 
Interest expense 45.5 135.4 332.0 555.2
 
Total net revenues 429.3 397.5 1,850.1 1,468.2
 
Non-interest expenses:
Execution and clearing 78.7 79.0 322.7 335.7
Employee compensation and benefits 38.6 26.1 158.0 118.8
Occupancy, depreciation and amortization 10.1 7.4 37.7 26.5
Communications 5.3 3.9 18.7 14.9
General and administrative 27.6 12.4 63.3 40.7
 
Total non-interest expenses 160.3 128.8 600.4 536.6
 
Income before income taxes and minority interest 269.0 268.7 1,249.7 931.6
 
Income tax expense 34.0 24.2 128.4 71.2
Minority interest 214.7 225.6 1,028.3 794.4
 
Net income $20.3 $18.9 $93.0 $66.0
 
 
Earnings per share
Basic $0.50 $0.47 $2.30 $1.64
Diluted $0.49 $0.46 $2.24 $1.59
 
Weighted average common shares outstanding
Basic 40,576,319 40,143,299 40,434,273 40,142,474
Diluted 399,085,336 401,317,597 399,905,060 401,317,190
 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

     
December 31, 2008   December 31, 2007
(in millions)
Assets
Cash and cash equivalents

$986.6

$521.8
Cash and securities - segregated for regulatory purposes 4,949.0 5,232.6
Securities borrowed 5,911.9 6,862.0
Securities purchased under agreements to resell 715.7 35.0
Trading assets, at fair value 11,114.7 16,857.5
Receivable from customers, net of allowance 1,621.2 1,916.1
Receivable from brokers, dealers and clearing organizations 2,526.9 2,484.2
Other assets 530.7 632.9
 
Total assets

$28,356.7

$34,542.1
 
 
Liabilities and stockholders' equity
 
Liabilities
Trading liabilities - financial instruments sold but not yet purchased, at fair value $13,476.8 $14,315.9
Securities loaned 656.6 4,968.9
Short-term borrowings

208.1

1,415.7

Other payables:
Customers 6,929.6 7,630.7
Brokers, dealers and clearing organizations 1,614.8 1,568.6
Other payables 619.6 608.0
9,164.0 9,807.3
 
Senior notes payable and senior secured credit facility 443.1 460.5
Minority interest 3,894.2 3,165.4
Stockholders' equity 513.9 408.4
 
Total liabilities and stockholders' equity

$28,356.7

$34,542.1

 
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

FOR THE YEAR ENDED DECEMBER 31, 2007

PRO FORMA CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

   
Year Ended December 31, 2007
Historical   Adjustments     Pro Forma(1)
Statement of Income Data: (in millions, except share and per share data)
Revenues:
Trading gains $ 888.1 $ - $ 888.1
Commissions and execution fees 261.1 - 261.1
Interest income 782.2 - 782.2
Other income   92.0   -   92.0
 
Total revenues   2,023.4   -   2,023.4
 
Interest expense   555.2   -   555.2
 
Total net revenues   1,468.2   -   1,468.2
 
Non-interest expenses:
Execution and clearing 335.7 - 335.7
Employee compensation and benefits 118.8 - 118.8
Occupancy, depreciation and amortization 26.5 - 26.5
Communications 14.9 - 14.9

General and administrative(2)

  40.5   0.2   40.7
 
Total non-interest expenses   536.4   0.2   536.6
 
Income before income taxes and minority interest 931.8 (0.2) 931.6
Income tax expense(3),(4) 46.0 25.2 71.2
Minority interest(5)   -   (794.4)   (794.4)
 
Net income $ 885.8 $ (819.8) $ 66.0
 
Earnings per share(6)
Basic $ 1.64
Diluted $ 1.59
 
Weighted average common shares outstanding
Basic   40,142,474
Diluted   401,317,190
 

See accompanying notes to unaudited pro forma consolidated statement of income.

 
 
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
 

Because the Company began its public reporting during 2007, the Pro Forma Consolidated Statement of Income is necessary to present 2007 and 2008 results on a comparative basis.

 
Represents adjustments to reflect the following:
 

(1) Pro forma earnings per share calculation (i) includes the 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 that will be payable, estimated at $0.165 million annually.

 

(3) The income tax adjustment of $25.2 million for the year ended December 31, 2007, represents the sum of the current income tax expense adjustment for this period and the deferred income tax expense adjustment for this period (referenced in footnote 4 below).

 

(4) Additional deferred income tax expense will be $25.4 million annually, resulting from the straight-line amortization of the deferred tax asset of $380.8 million arising from the acquisition of the 10.0% member interest in IBG LLC (see footnote 3 above) over 15 years.

 

(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 footnote 1 above). The adjustments are equal to approximately 89.7% of total net income for the twelve month periods presented.

 

(6) Basic pro forma earnings per share are calculated based on 40.1 million shares of Common Stock and 100 shares of Class B common stock being outstanding, including 0.1 million shares issued pursuant to the 2007 Stock Incentive Plan and the 2007 ROI Unit Stock Plan. Diluted earnings per share are 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, and the full difference between the book and tax basis of IBG LLC’s assets would also be available for reducing income tax expense. Therefore, the net income utilized to calculate diluted earnings per share would be $640 million for the year ended December 31, 2007.

 

Diluted weighted average common shares outstanding of 401.3 million shares also includes 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.

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