Bulletin
Investor Alert

press release

July 16, 2019, 4:01 p.m. EDT

Interactive Brokers Group Announces 2Q2019 Results

Income Before Taxes of $225 Million on $413 Million in Net Revenues, Earnings Per Share on Net Income of $0.43 and Earnings Per Share on Comprehensive Income of $0.46. Declares Quarterly Dividend of $0.10 Per Share.

Interactive Brokers Group, Inc. (iex:IBKR), an automated global electronic broker, reported diluted earnings per share on net income of $0.43 for the quarter ended June 30, 2019 compared to $0.57 for the same period in 2018, and diluted earnings per share on comprehensive income of $0.46 for the quarter, compared to $0.39 for the same period in 2018.

Net revenues were $413 million and income before income taxes was $225 million this quarter, compared to net revenues of $445 million and income before income taxes of $271 million for the same period in 2018. The results for the quarter were positively impacted by strong growth in net interest income, which increased $34 million, or 15%, from the year-ago quarter; partially counterbalanced by lower commissions revenue, which decreased $7 million, or 4%, from the year-ago quarter.

In addition, the results for the quarter also include a $6 million loss on our currency diversification strategy, compared to a $21 million loss in the same period in 2018; and a $74 million mark-to-market loss on our investment in Tiger Brokers.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on September 13, 2019 to shareholders of record as of August 30, 2019.

Business Highlights

  • 54% pretax profit margin for this quarter, down from 61% in the year-ago quarter.

  • 64% Electronic Brokerage pretax profit margin for this quarter, unchanged from the year-ago quarter.

  • Customer equity grew 14% from the year-ago quarter to $153.1 billion and customer debits decreased 11% to $25.7 billion.

  • Customer accounts increased 19% from the year-ago quarter to 645 thousand.

  • Total DARTs1 increased 4% from the year-ago quarter to 828 thousand.

  • Brokerage segment equity was $6.4 billion. Total equity was $7.6 billion.

[____________________]

[1] Daily average revenue trades (DARTs) are based on customer orders.

Segment Overview

Electronic Brokerage

Electronic brokerage segment income before income taxes increased 7% to $302 million in the quarter ended June 30, 2019, compared to the same period last year. Net revenues increased 7% to $473 million on higher net interest and other income, partially offset by lower commissions revenue.

Commissions revenue decreased 4% from the year-ago quarter on lower customer trading volume across most product types, which reflected smaller average trade sizes. Net interest income increased 16% as average customer credit balances and benchmark interest rates increased from the year-ago quarter. Other income increased 3% on higher net mark-to-market gains on our U.S. government securities portfolio and higher fees earned from our Insured Bank Deposit Sweep Program. Pretax profit margin was 64% for the quarter ended June 30, 2019, unchanged from the same period last year.

Customer accounts grew 19% to 645 thousand and customer equity increased 14% from the year-ago quarter to $153.1 billion. Total DARTs for cleared and execution-only customers increased 4% to 828 thousand from the year-ago quarter. Cleared DARTs were 740 thousand, slightly higher than the same period last year.

Market Making

Market making segment income before income taxes increased 22% to $11 million in the quarter ended June 30, 2019, compared to the same period last year, primarily due to lower operating costs in the remaining operations.

Corporate

For the quarter ended June 30, 2019, we recognized a mark-to-market loss of approximately $74 million in our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), compared to a mark-to-market gain of $103 million recognized in the first quarter of 2019 after its initial public offering on March 20, 2019. As a result, we recognized a net gain of $29 million for the six months ended June 30, 2019.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 14 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $10 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.24%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the corporate segment and (2) Other Comprehensive Income (“OCI”).

Regulatory Matters

The Company is subject to regulatory oversight and examination by numerous governmental and self-regulatory authorities. It is currently providing information to certain of such authorities, including FINRA, the SEC, the CFTC and the United States Department of Justice, and cooperating with those authorities. The Company believes that the regulators are focused on compliance practices, including anti money laundering and Bank Secrecy Act practices. The Company periodically reviews these practices to make them more robust and to keep pace with changing regulatory standards, and the Company has been enhancing and augmenting its procedures and personnel in these areas over the past several years. While the outcome of the examinations and inquiries currently in progress cannot be predicted, the Company does not believe that they are likely to have a materially adverse effect on the Company’s financial results.

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, July 16, 2019, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (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 affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 125 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to customers worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost according to Barron's Best Online Brokers review, February 25, 2019. We strive to provide our customers with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments.

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
2016                      64,038                259,932                  16,515                340,485                         1,354
2017                      31,282    (51%)            265,501   2%              14,835    (10%)            311,618    (8%)                     1,246
2018                      18,663    (40%)            328,099   24%              21,880   47%            368,642   18%                     1,478
                                     
2Q2018                        4,575                  78,026                    4,641                  87,242                         1,363
2Q2019                        3,853    (16%)              74,269    (5%)                6,827   47%              84,949    (3%)                     1,348
                                     
1Q2019                        4,342                  75,935                    6,669                  86,946                         1,425
2Q2019                        3,853    (11%)              74,269    (2%)                6,827   2%              84,949    (2%)                     1,348
CONTRACT AND SHARE VOLUMES:                    
(in 000's, except %)                          
                           
TOTAL   Options   %   Futures1   %   Stocks   %  
Period   (contracts)   Change   (contracts) Change   (shares)   Change  
2016            572,834                143,287                155,439,227      
2017            395,885    (31%)            124,123    (13%)            220,247,921   42%  
2018            408,406   3%            151,762   22%            210,257,186    (5%)  
                           
2Q2018              93,253                  36,693                  51,370,386      
2Q2019              96,007   3%              32,424    (12%)              42,995,205    (16%)  
                           
1Q2019              90,242                  31,142                  51,258,862      
2Q2019              96,007   6%              32,424   4%              42,995,205    (16%)  
                           
MARKET MAKING   Options   %   Futures1   %   Stocks   %  
Period   (contracts)   Change   (contracts)   Change   (shares)   Change  
2016            307,377                  14,205                  13,082,887      
2017            102,025    (67%)                5,696    (60%)                7,139,622    (45%)  
2018              49,554    (51%)                3,277    (42%)              11,347,811   59%  
                           
2Q2018              11,813                       756                    2,442,203      
2Q2019              10,008    (15%)                   621    (18%)                2,598,531   6%  
                           
1Q2019              11,638                       640                    2,842,219      
2Q2019              10,008    (14%)                   621    (3%)                2,598,531    (9%)  
                           
BROKERAGE TOTAL Options   %   Futures1   %   Stocks   %  
Period   (contracts)   Change   (contracts)   Change   (shares)   Change  
2016            265,457                129,082                142,356,340      
2017            293,860   11%            118,427    (8%)            213,108,299   50%  
2018            358,852   22%            148,485   25%            198,909,375    (7%)  
                           
2Q2018              81,440                  35,937                  48,928,183      
2Q2019              85,999   6%              31,803    (12%)              40,396,674    (17%)  
                           
1Q2019              78,604                  30,502                  48,416,643      
2Q2019              85,999   9%              31,803   4%              40,396,674    (17%)  
                           
[1] Includes options on futures.                      
                           
                           
BROKERAGE CLEARED Options   %   Futures1   %   Stocks   %  
Period   (contracts)   Change   (contracts)   Change   (shares)   Change  
2016            227,413                128,021                138,523,932      
2017            253,304   11%            116,858    (9%)            209,435,662   51%  
2018            313,795   24%            146,806   26%            194,012,882    (7%)  
                           
2Q2018              71,873                  35,679                  47,840,126      
2Q2019              71,524   0%              31,564    (12%)              39,086,399    (18%)  
                           
1Q2019              68,237                  30,246                  47,082,741      
2Q2019              71,524   5%              31,564   4%              39,086,399    (17%)  
                           
                           
[1] Includes options on futures.                      
                   
BROKERAGE STATISTICS                  
(in 000's, except % and where noted)                  
                   
Year over Year     2Q2019     2Q2018   % Change  
   Total Accounts                          645                          542   19%  
   Customer Equity (in billions) [1]   $ 153.1   $ 134.7   14%  
                   
   Cleared DARTs                          740                          739   0%  
   Total Customer DARTs                          828                          797   4%  
                   
Cleared Customers (in $'s, except DART per account)                  
   Commission per DART   $ 3.68   $ 3.86    (5%)  
   DART per Avg. Account (Annualized)                          293                          350    (16%)  
   Net Revenue per Avg. Account (Annualized)   $ 2,863   $ 3,190    (10%)  
                   
Consecutive Quarters     2Q2019     1Q2019   % Change  
   Total Accounts                          645                          623   4%  
   Customer Equity (in billions) [1]   $ 153.1   $ 147.6   4%  
                   
   Cleared DARTs                          740                          757    (2%)  
   Total Customer DARTs                          828                          848    (2%)  
                   
Cleared Customers (in $'s, except DART per account)                  
   Commission per DART   $ 3.68   $ 3.68   0%  
   DART per Avg. Account (Annualized)                          293                          311    (6%)  
   Net Revenue per Avg. Account (Annualized)   $ 2,863   $ 2,961    (3%)  
                   
[1 ] Excludes non-customers.                  

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN 
(UNAUDITED)

        Three Months   Six Months  
        Ended June 30,   Ended June 30,  
        2019   2018   2019   2018
                             
        (in millions)
Average interest-earning assets                          
  Segregated cash and securities   $                   27,313   $                   19,512   $                   26,452   $                   20,248  
  Customer margin loans                       26,184                       29,839                       25,929                       29,658  
  Securities borrowed                         3,991                         3,327                         3,840                         3,202  
  Other interest-earning assets                         5,105                         4,020                         5,095                         4,079  
  FDIC sweeps [1]                         2,012                         1,186                         1,924                            973  
        $                   64,605   $                   57,884   $                   63,240   $                   58,160  
                               
Average interest-bearing liabilities                          
  Customer credit balances   $                   51,777   $                   47,390   $                   50,838   $                   47,657  
  Securities loaned                         4,131                         4,013                         3,913                         4,178  
        $                   55,908   $                   51,403   $                   54,751   $                   51,835  
                               
Net interest income                          
  Segregated cash and securities, net [2]   $                        145   $                          71   $                        281   $                        142  
  Customer margin loans [3]                            188                            164                            362                            303  
  Securities borrowed and loaned, net [4]                              48                              53                            100                            112  
  Customer credit balances, net [3/4]                          (147)                            (80)                          (284)                          (141)  
  Other net interest income [1/2/5]                              33                              24                              63                              38  
    Net interest income [5]   $                        267   $                        232   $                        522   $                        454  
                               
Net interest margin ("NIM")     1.66%     1.61%     1.66%     1.57%  
                               
Annualized yields                          
  Segregated cash and securities     2.13%     1.46%     2.14%     1.41%  
  Customer margin loans     2.88%     2.20%     2.82%     2.06%  
  Customer credit balances     1.14%     0.68%     1.13%     0.60%  
 
[1]   Represents the average amount of customer cash swept into FDIC-insured banks as part of our Insured Bank Deposit Sweep Program. This item is not
recorded in the Company's consolidated statements of financial condition. Income derived from program deposits is reported in other net interest income in the table
above.
[ ]    
[2]   During the quarter ended September 30, 2018, we reclassified certain components of net interest income related to investments in U.S. Treasury notes
and reverse repurchase agreements and as such, prior period amounts have been adjusted to conform to the current period presentation. For the three
and six months ended June 30, 2018, $4 million and $7 million have been reclassified from net interest income on "Segregated cash and securities, net"
to "Other net interest income, net", respectively.
[ ]    
[3]   Interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within
each customer’s account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments).   
[ ]    
[4]   During the quarter ended December 31, 2018, we reclassified components of net interest income related to interest paid on short sale proceeds and as
such, prior period amounts have been adjusted to conform to the current period presentation. For the three and six months ended June 30, 2018, ($17)
million and ($29) million have been reclassified from net interest income on “Securities borrowed and loaned, net” to “Customer credit balances, net”, respectively.   
     
[5]   Includes income from financial instruments which has the same characteristics as interest, but is reported in other income in the Company’s consolidated
statements of comprehensive income, of $8 million and $7 million for the three months ended June 30, 2019 and 2018, and $17 million and $12 million for
the six months ended June 30, 2019 and 2018, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)

                         
      Three Months   Six Months
      Ended June 30,   Ended June 30,
      2019   2018   2019   2018
      (in millions)
                           
Electronic Brokerage Net revenues   $ 473   $ 443   $ 929   $ 908
  Non-interest expenses     171   160     377     334
             
  Income before income taxes   $ 302 $ 283   $ 552   $ 574
               
  Pre-tax profit margin     64%     64%     59%     63%
                           
Market Making Net revenues   $ 20   $ 22   $ 35   $ 43
  Non-interest expenses     9   13     18     25
                 
  Income before income taxes   $ 11 $ 9   $ 17   $ 18
               
  Pre-tax profit margin     55%     41%     49%     42%
                           
Corporate 1 Net revenues   $ (80)   $ (20)   $                          7   $ 21
  Non-interest expenses                              8                            1                            12                              2
                 
  Income (loss) before income taxes   $ (88) $ (21)   $ (5)   $ 19
               
                           
Total Net revenues   $ 413   $ 445   $ 971   $ 972
  Non-interest expenses     188   174     407     361
                 
  Income before income taxes   $ 225 $ 271   $ 564   $ 611
                           
  Pre-tax profit margin     54%     61%     58%     63%
                           
[1 ] Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

        Three Months   Six Months
        Ended June 30,   Ended June 30,
        2019   2018   2019   2018
          (in millions, except share and per share data)
                             
Revenues:                        
  Commissions   $ 178   $ 185   $ 351   $ 405
  Interest income     432     333     840     644
  Trading gains     6     12     13     25
  Other income (loss)     (30)     23     102     100
                             
    Total revenues     586     553     1,306     1,174
                             
  Interest expense     173     108     335     202
                             
    Total net revenues      413     445     971     972
                             
Non-interest expenses:                        
  Execution, clearing and distribution fees     63     66     124     139
  Employee compensation and benefits     75     68     146     138
  Occupancy, depreciation and amortization     14     11     28     23
  Communications     6     7     12     13
  General and administrative      26     22     50     45
  Customer bad debt                              4                              -     47     3
                             
    Total non-interest expenses      188     174     407     361
                             
Income before income taxes     225     271     564     611
                             
Income tax expense     15     13     30     34
                             
Net income     210     258     534     577
                             
Net income attributable to noncontrolling interests     178     217     453     490
                             
Net income available for common stockholders   $ 32   $ 41   $ 81   $ 87
                             
Earnings per share:                        
  Basic    $ 0.43   $ 0.57   $ 1.08   $ 1.21
  Diluted   $ 0.43   $ 0.57   $ 1.07   $ 1.20
                             
Weighted average common shares outstanding:                        
  Basic      75,868,349     72,476,729     75,486,825     71,979,104
  Diluted     76,594,934     73,329,496     76,288,342     72,923,744
                             
Comprehensive income:                        
  Net income available for common stockholders   $ 32   $ 41   $ 81   $ 87
  Other comprehensive income:                        
    Cumulative translation adjustment, before income taxes                              4                          (14)     3     (13)
    Income taxes related to items of other comprehensive income                              -                            (1)                              -                            (1)
  Other comprehensive income (loss), net of tax                              4                          (13)     3     (12)
Comprehensive income available for common stockholders   $ 36   $ 28   $ 84   $ 75
                             
Comprehensive income attributable to noncontrolling interests:                        
Net income attributable to noncontrolling interests   $ 178   $ 217   $ 453   $ 490
Other comprehensive income - cumulative translation adjustment     12     (65)     11     (58)
Comprehensive income attributable to noncontrolling interests   $ 190   $ 152   $ 464   $ 432

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)

                       
  Three Months   Six Months
  Ended June 30,   Ended June 30,
  2019   2018   2019   2018
    (in millions, except share and per share data)
                       
Comprehensive income available for common stockholders   $ 36   $ 28   $ 84   $ 75
                       
Comprehensive earnings per share:                        
Basic   $ 0.47   $ 0.39   $ 1.11   $ 1.05
Diluted   $ 0.46   $ 0.39   $ 1.10 $ 1.03
                       
Weighted average common shares outstanding:                        
Basic     75,868,349     72,476,729     75,486,825     71,979,104
Diluted     76,594,934     73,329,496     76,288,342     72,923,744

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)     

                 
        June 30,2019   December 31,2018
        (in millions)
                 
Assets                
Cash and cash equivalents       $ 3,162   $ 2,597
Cash - segregated for regulatory purposes                          8,819                      7,503
Securities - segregated for regulatory purposes                        20,273                    15,595
Securities borrowed                          4,028                      3,331
Securities purchased under agreements to resell                          1,302                      1,242
Financial instruments owned, at fair value                          1,192                      2,119
Receivables from customers, net of allowance for doubtful accounts                        25,904                    27,017
Receivables from brokers, dealers and clearing organizations                             685                         706
Other assets                             669                         437
                 
Total assets       $ 66,034   $ 60,547
                 
Liabilities and equity                
                 
Liabilities                
Short-term borrowings       $ 15   $ 17
Securities loaned                          4,101                      4,037
Financial instruments sold but not yet purchased, at fair value                             357                         681
Other payables:                
Customers                        53,054                    47,993
Brokers, dealers and clearing organizations                             385                         298
Other payables                             502                         365
                         53,941                    48,656
                 
Total liabilities                        58,414                    53,391
                 
Equity                
Stockholders' equity                          1,380                      1,282
Noncontrolling interests                          6,240                      5,874
Total equity                          7,620                      7,156
                 
Total liabilities and equity       $ 66,034   $ 60,547
                 
  June 30, 2019   December 31, 2018
Ownership of IBG LLC Membership Interests Interests    %   Interests      %
                 
IBG, Inc. 76,727,339   18.5%   75,100,955     18.1%
Noncontrolling interests (IBG Holdings LLC) 338,691,717   81.5%   338,691,717     81.9%
                 
Total IBG LLC membership interests 415,419,056   100.0%   413,792,672     100.0%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190716005981/en/

SOURCE: Interactive Brokers Group, Inc.

For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, 203-618-4070 or Media: Kalen Holliday, 203-913-1369  

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