INTERACTIVE BROKERS GROUP ANNOUNCES 4Q2017 RESULTS

— — —

REPORTS COMPREHENSIVE LOSS PER SHARE OF $0.02,

INCOME BEFORE TAXES OF $364 MILLION ON $515 MILLION IN NET REVENUES,

AND LOSS PER SHARE ON NET INCOME OF $0.02.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, January 16, 2018 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported a diluted loss per share on a comprehensive basis of $0.02 for the quarter ended December 31, 2017, compared to a diluted loss per share on a comprehensive basis of $0.05 for the same period in 2016. Excluding other comprehensive income, the Company reported a diluted loss per share of $0.02 for the quarter, compared to diluted earnings per share of $0.07 for the same period in 2016. The results for the quarter were negatively impacted by the effects of the Tax Cuts and Jobs Act (the "Tax Act"), enacted on December 22, 2017, which decreased diluted earnings per share by $0.45.

Net revenues were $515 million and income before income taxes was $364 million this quarter, compared to net revenues of $193 million and income before income taxes of $28 million for the same period in 2016. The results for the quarter were positively impacted by strong growth in net interest income, which increased $66 million, or 48%, and higher commissions, which increased $20 million, or 13% from the year-ago quarter. Trading gains decreased 64% from the year-ago quarter on lower market making trading volumes as we completed the transfer of our U.S. options market making business to Two Sigma Securities, LLC in the third quarter of 2017.

In addition, the results for the quarter include a $6 million gain on our currency diversification strategy, compared to a $152 million loss in the same period in 2016; and a $9 million net mark-to-market loss on our U.S. government securities portfolio, compared to an $11 million net mark-to-market loss in the same period in 2016.

The Tax Act significantly revised U.S. corporate income tax law by, among other things, reducing the corporate income tax rate to 21% and implementing a modified territorial tax system that includes a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. As a result of the Tax Act, this quarter includes a net reduction in consolidated earnings of approximately $84 million, of which $62 million is due to the one-time repatriation tax and a net $22 million is related to the remeasurement of U.S. deferred tax assets at lower enacted corporate tax rates. The impact of the Tax Act recognized this quarter may materially differ due to, among other things, changes in interpretations and assumptions the Company has made, guidance that may be issued and actions the Company may take as a result of the Tax Act.

For the year ended December 31, 2017, comprehensive diluted earnings per share were $1.22, compared to comprehensive diluted earnings per share of $1.19 in 2016. Excluding other comprehensive income, the Company reported diluted earnings per share of $1.07 for 2017, compared to diluted earnings per share of $1.25 in 2016. The results for 2017 were negatively impacted by the effects of the Tax Act, which decreased diluted earnings per share by $0.46. Net revenues were $1,702 million and income before income taxes was $1,049 million for 2017, compared to net revenues of $1,396 million and income before income taxes of $761 million in 2016.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 14, 2018 to shareholders of record as of March 1, 2018.

 

 

 

Business Highlights

Fourth Quarter 2017:

·	71% pretax profit margin for this quarter, up from 15% in the year-ago quarter.

·	65% Electronic Brokerage pretax profit margin for this quarter, up from 57% in the year-ago quarter.

·	Customer equity grew 46% from the year-ago quarter to $124.8 billion and customer debits increased 52% to $29.5 billion.

·	Customer accounts increased 25% from the year-ago quarter to 483 thousand.

·	Total DARTs1 increased 14% from the year-ago quarter to 730 thousand.

·	Brokerage segment equity was $4.9 billion. Total equity was $6.4 billion.

Full Year 2017:

·	62% pretax profit margin for 2017, up from 55% in 2016.

·	61% Electronic Brokerage pretax profit margin for 2017, unchanged from 2016.

·	Total DARTs increased 4% from 2016 to 688 thousand.

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

Segment Overview

Electronic Brokerage

Electronic brokerage segment income before income taxes increased 50%, to $252 million in the quarter ended December 31, 2017, compared to the same period last year. Net revenues increased 33% to $390 million on higher net interest income and commissions revenue.

Net interest income increased 51% as average customer credit and margin loan balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 13% from the year-ago quarter on higher customer volumes in options and stocks, which increased 15% and 43%, respectively, from the year-ago quarter. Pretax profit margin was 65% for the quarter ended December 31, 2017, up from 57% in the same period last year.

Customer accounts grew 25% to 483 thousand and customer equity increased 46% from the year-ago quarter to $124.8 billion. Total DARTs for cleared and execution-only customers increased 14% to 730 thousand from the year-ago quarter. Cleared DARTs were 681 thousand, 15% higher than in the same period last year.

Market Making

Market making segment income before income taxes decreased to $8 million in the quarter ended December 31, 2017, due to lower trading gains, partially offset by lower operating costs, as we completed the transfer of our U.S. options market making business to Two Sigma Securities, LLC in the third quarter of 2017.

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 $5 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.14%.  In 2017, our currency diversification strategy increased our comprehensive earnings by $175 million, as the U.S. dollar value of the GLOBAL increased by approximately 3.06%. 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").

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, January 16, 2018, 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 120 markets in numerous countries and currencies from a single IB Universal 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, March 20, 2017. 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 prices, 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.

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

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

 

MARKET MAKING

		Options		%		Futures*		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2015		335,406				14,975				15,376,076
2016		307,377		-8%		14,205		-5%		13,082,887		-15%
2017		102,025		-67%		5,696		-60%		7,139,622		-45%
4Q2016		73,843				3,481				2,249,744
4Q2017		11,228		-85%		1,002		-71%		1,750,178		-22%
3Q2017		18,676				1,040				1,814,393
4Q2017		11,228		-40%		1,002		-4%		1,750,178		-4%

		Options		%		Futures*		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2015		298,982				125,693				157,366,444
2016		265,457		-11%		129,082		3%		142,356,340		-10%
2017		293,860		11%		118,427		-8%		213,108,299		50%
4Q2016		67,852				30,692				39,555,524
4Q2017		78,153		15%		30,443		-1%		56,622,951		43%
3Q2017		74,794				30,468				53,381,313
4Q2017		78,153		4%		30,443		0%		56,622,951		6%

* Includes options on futures.

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

 

BROKERAGE CLEARED

		Options		%		Futures*		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2015		244,356				124,206				153,443,988
2016		227,413		-7%		128,021		3%		138,523,932		-10%
2017		253,304		11%		116,858		-9%		209,435,662		51%
4Q2016		59,354				30,452				38,598,113
4Q2017		66,232		12%		30,041		-1%		55,714,749		44%
3Q2017		64,363				30,034				52,515,806
4Q2017		66,232		3%		30,041		0%		55,714,749		6%

 

* Includes options on futures.

BROKERAGE STATISTICS

 

Year over Year		4Q2017			4Q2016		% Change
Total Accounts		483			385		25%
Customer Equity (in billions)*	$	124.8		$	85.5		46%
Cleared DARTs		681			591		15%
Total Customer DARTs		730			640		14%
Cleared Customers (in $'s, except DART per account)
Commission per DART	$	3.92		$	4.01		-2%
DART per Avg. Account (Annualized)		363			394		-8%
Net Revenue per Avg. Account (Annualized)	$	3,318		$	3,205		4%
Consecutive Quarters		4Q2017			3Q2017		% Change
Total Accounts		483			457		6%
Customer Equity (in billions)*	$	124.8		$	115.7		8%
Cleared DARTs		681			646		5%
Total Customer DARTs		730			695		5%
Cleared Customers (in $'s, except DART per account)
Commission per DART	$	3.92		$	3.96		-1%
DART per Avg. Account (Annualized)		363			365		-1%
Net Revenue per Avg. Account (Annualized)	$	3,318		$	3,249		2%

* Excludes non-customers.

  

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

				Three Months						Twelve Months
				Ended December 31,						Ended December 31,
				2017			2016			2017			2016
				(in millions)
Average interest-earning assets
	Segregated cash and securities			$	22,803		$	24,679		$	23,824		$	24,134
	Customer margin loans				26,982			18,407			23,289			16,506
	Securities borrowed				3,757			4,560			3,964			4,155
	Other interest-earning assets				3,610			2,397			2,970			2,495
				$	57,152		$	50,043		$	54,047		$	47,290
Average interest-bearing liabilities
	Customer credit balances			$	47,561		$	42,315		$	45,515		$	39,980
	Securities loaned				4,350			3,424			3,917			2,897
				$	51,911		$	45,739		$	49,432		$	42,877
Net interest income
	Segregated cash and securities, net			$	66		$	39		$	226		$	149
	Customer margin loans				122			60			392			217
	Securities borrowed and loaned, net				49			38			161			156
	Customer credit balances				(43)			(4)			(123)			(12)
	Other net interest income1				13			5			32			17
		Net interest income		$	207		$	138		$	688		$	527
Net interest margin ("NIM")					1.44%			1.10%			1.27%			1.11%
Annualized yields
	Segregated cash and securities				1.15%			0.63%			0.95%			0.62%
	Customer margin loans				1.79%			1.30%			1.68%			1.31%
	Customer credit balances				0.36%			0.04%			0.27%			0.03%

---

 

1	Includes income from financial instruments which has the same characteristics as interest, but is reported in other income.

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED) 

			Three Months						Twelve Months
			Ended December 31,						Ended December 31,
			2017			2016			2017			2016
			(in millions)
Electronic Brokerage	Net revenues		$	390		$	294		$	1,405		$	1,239
	Non-interest expenses			138			126			545			483
	Income before income taxes		$	252		$	168		$	860		$	756
	Pre-tax profit margin			65%			57%			61%			61%
Market Making	Net revenues		$	25		$	45		$	86		$	190
	Non-interest expenses			17			33			113			146
	Income (loss) before income taxes		$	8		$	12		$	(27)		$	44
	Pre-tax profit (loss) margin			32%			27%			(31%)			23%
Corporate 1	Net revenues		$	100		$	(146)		$	211		$	(33)
	Non-interest expenses			(4)			6			(5)			6
	Income (loss) before income taxes		$	104		$	(152)		$	216		$	(39)
Total	Net revenues		$	515		$	193		$	1,702		$	1,396
	Non-interest expenses			151			165			653			635
	Income before income taxes		$	364		$	28		$	1,049		$	761
	Pre-tax profit margin			71%			15%			62%			55%

---

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						Twelve Months
				Ended December 31,						Ended December 31,
				2017			2016			2017			2016
					(in millions, except share and per share data)
Revenues:
	Trading gains			$	14		$	39		$	40		$	163
	Commissions				170			150			647			612
	Interest income				282			160			908			606
	Other income (loss)				127			(134)			332			94
		Total revenues			593			215			1,927			1,475
	Interest expense				78			22			225			79
		Total net revenues			515			193			1,702			1,396
Non-interest expenses:
	Execution and clearing				56			61			241			244
	Employee compensation and benefits				57			68			249			242
	Occupancy, depreciation and amortization				13			13			47			51
	Communications				6			7			28			30
	General and administrative				19			16			86			62
	Customer bad debt				-			-			2			6
		Total non-interest expenses			151			165			653			635
Income before income taxes					364			28			1,049			761
Income tax expense					200			7			256			62
Net income					164			21			793			699
Net income attributable to noncontrolling interests					166			17			717			615
Net income (loss) available for common stockholders				$	(2)		$	4		$	76		$	84
Earnings (loss) per share:
	Basic			$	(0.02)		$	0.07		$	1.09		$	1.28
	Diluted			$	(0.02)		$	0.07		$	1.07		$	1.25
Weighted average common shares outstanding:
	Basic				71,473,863			67,983,085			69,926,933			66,013,247
	Diluted				72,373,829			68,967,280			70,904,921			67,299,413
Comprehensive income:
	Net income (loss) available for common stockholders			$	(2)		$	4		$	76		$	84
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes			-			(7)			11			(4)
		Income taxes related to items of other comprehensive income			-			-			-			-
	Other comprehensive income, net of tax				-			(7)			11			(4)
Comprehensive income (loss) available for common stockholders				$	(2)		$	(3)		$	87		$	80
Comprehensive income attributable to noncontrolling interests:
		Net income attributable to noncontrolling interests		$	166		$	17		$	717		$	615
		Other comprehensive income - cumulative translation adjustment			(1)			(40)			54			(21)
Comprehensive income (loss) attributable to noncontrolling interests				$	165		$	(23)		$	771		$	594

 

 

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

EARNINGS PER SHARE ON COMPREHENSIVE INCOME

(UNAUDITED)

 

				Three Months						Twelve Months
				Ended December 31,						Ended December 31,
				2017			2016			2017			2016
					(in millions, except share and per share data)
Comprehensive income (loss) available for common stockholders, net of tax				$	(2)		$	(3)		$	87		$	80
Comprehensive earnings (loss) per share:
	Basic			$	(0.02)		$	(0.05)		$	1.24		$	1.21
	Diluted			$	(0.02)		$	(0.05)		$	1.22		$	1.19
Weighted average common shares outstanding:
	Basic				71,473,863			67,983,085			69,926,933			66,013,247
	Diluted				72,373,829			68,967,280			70,904,921			67,299,413

 

 

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

						December 31, 2017			December 31, 2016
						(in millions)
Assets
Cash and cash equivalents						$	1,781		$	1,925
Cash and securities - segregated for regulatory purposes							20,232			24,017
Securities borrowed							2,957			3,629
Securities purchased under agreements to resell							2,061			111
Financial instruments owned, at fair value							3,154			4,037
Receivables from customers, net of allowance for doubtful accounts							29,821			19,409
Receivables from brokers, dealers and clearing organizations							774			1,040
Other assets							382			505
	Total assets					$	61,162		$	54,673
Liabilities and equity
Liabilities
Short-term borrowings						$	15		$	74
Securities loaned							4,444			4,293
Securities sold under agreements to repurchase							1,316			-
Financial instruments sold but not yet purchased, at fair value							767			2,145
Other payables:
	Customers						47,548			41,731
	Brokers, dealers and clearing organizations						283			239
	Other payables						356			371
							48,187			42,341
	Total liabilities						54,729			48,853
Equity
Stockholders' equity							1,090			974
Noncontrolling interests							5,343			4,846
	Total equity						6,433			5,820
	Total liabilities and equity					$	61,162		$	54,673
		December 31, 2017					December 31, 2016
Ownership of IBG LLC Membership Interests		Interests		%			Interests			%
IBG, Inc.		71,479,604		17.4%			67,989,967			16.6%
Noncontrolling interests (IBG Holdings LLC)		340,229,444		82.6%			341,444,304			83.4%
Total IBG LLC membership interests		411,709,048		100.0%			409,434,271			100.0%