INTERACTIVE BROKERS GROUP ANNOUNCES 2Q2018 RESULTS

— — —

INCOME BEFORE TAXES OF $271 MILLION ON $445 MILLION IN NET REVENUES,  EARNINGS PER SHARE ON NET INCOME OF $0.58 AND EARNINGS PER SHARE ON COMPREHENSIVE INCOME OF $0.39.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, July 17, 2018 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share on net income of $0.58 for the quarter ended June 30, 2018, compared to $0.32 for the same period in 2017, and diluted earnings per share on comprehensive income of $0.39 for the quarter, compared to $0.41 for the same period in 2017.

Net revenues were $445 million and income before income taxes was $271 million this quarter, compared to net revenues of $387 million and income before income taxes of $204 million for the same period in 2017. The results for the quarter were positively impacted by strong growth in net interest income, which increased $70 million, or 45%, and higher commissions, which increased $25 million, or 16% from the year-ago quarter.

In addition, the results for the quarter include a $21 million loss on our currency diversification strategy, compared to a $29 million gain in the same period in 2017; and a $3 million net mark-to-market gain on our U.S. government securities portfolio, compared to a $3 million net mark-to-market loss in the same period in 2017.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on September 14, 2018 to shareholders of record as of August 31, 2018.

Business Highlights

·	61% pretax profit margin for this quarter, up from 53% in the year-ago quarter.

·	64% Electronic Brokerage pretax profit margin for this quarter, up from 59% in the year-ago quarter.

·	Customer equity grew 29% from the year-ago quarter to $134.7 billion and customer debits increased 27% to $28.8 billion.

·	Customer accounts increased 27% from the year-ago quarter to 542 thousand.

·	Total DARTs1 increased 19% from the year-ago quarter to 797 thousand.

·	Brokerage segment equity was $5.2 billion. Total equity was $6.7 billion.

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

Segment Overview

Electronic Brokerage

Electronic brokerage segment income before income taxes increased 43%, to $283 million in the quarter ended June 30, 2018, compared to the same period last year. Net revenues increased 33% to $443 million on higher net interest income, commissions revenue and other income.

Net interest income increased 47% as average customer credit and margin loan balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 16% from the year-ago quarter on higher customer volumes in futures and options, which increased 21% and 13%, respectively, while stock volumes decreased 5% from the year-ago quarter. Other income increased 58% on higher net mark-to-market gains on our U.S. government securities portfolio and other investments. Pretax profit margin was 64% for the quarter ended June 30, 2018, up from 59% in the same period last year.

Customer accounts grew 27% to 542 thousand and customer equity increased 29% from the year-ago quarter to $134.7 billion. Total DARTs for cleared and execution-only customers increased 19% to 797 thousand from the year-ago quarter. Cleared DARTs were 739 thousand, 19% higher than in the same period last year.

Market Making

Market making segment income before income taxes increased to $9 million in the quarter ended June 30, 2018, as compared to a pretax loss of $24 million in the year-ago quarter, during which we continued to wind down operations in this segment. The quarter's results reflect lower operating costs on the remaining operations and the non-recurrence of $22 million in one-time exit costs related to the wind-down of our options market making business recognized in the year-ago quarter. In the third quarter of 2017 we completed the transfer of our U.S. options market making business to Two Sigma Securities, LLC and by year-end we had exited the majority of our market making activities outside the U.S.

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 decreased our comprehensive earnings by $100 million, as the U.S. dollar value of the GLOBAL decreased by approximately 1.41%. 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, Inc. will hold a conference call with investors today, July 17, 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.:

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

 

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2015		634,388				140,668				172,742,520
2016		572,834		(10%)		143,287		2%		155,439,227		(10%)
2017		395,885		(31%)		124,123		(13%)		220,247,921		42%
2Q2017		91,879				30,805				53,378,165
2Q2018		93,253		1%		36,693		19%		51,370,386		(4%)
1Q2018		115,438				43,449				68,380,398
2Q2018		93,253		(19%)		36,693		(16%)		51,370,386		(25%)

 

MARKET MAKING

		Options		%		Futures1		%		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%)
2Q2017		19,831				1,143				1,620,275
2Q2018		11,813		(40%)		756		(34%)		2,442,203		51%
1Q2018		13,256				935				2,817,831
2Q2018		11,813		(11%)		756		(19%)		2,442,203		(13%)

 

		Options		%		Futures1		%		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%
2Q2017		72,048				29,662				51,757,890
2Q2018		81,440		13%		35,937		21%		48,928,183		(5%)
1Q2018		102,182				42,514				65,562,567
2Q2018		81,440		(20%)		35,937		(15%)		48,928,183		(25%)

 

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

BROKERAGE CLEARED

		Options		%		Futures1		%		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%
2Q2017		62,342				29,255				50,807,138
2Q2018		71,873		15%		35,679		22%		47,840,126		(6%)
1Q2018		87,705				41,742				64,494,943
2Q2018		71,873		(18%)		35,679		(15%)		47,840,126		(26%)

 

BROKERAGE STATISTICS

 

Year over Year		2Q2018			2Q2017		% Change
Total Accounts		542			428		27%
Customer Equity (in billions)1	$	134.7		$	104.8		29%
Cleared DARTs		739			621		19%
Total Customer DARTs		797			669		19%
Cleared Customers (in $'s, except DART per account)
Commission per DART	$	3.86		$	4.00		(4%)
DART per Avg. Account (Annualized)		350			372		(6%)
Net Revenue per Avg. Account (Annualized)	$	3,190		$	3,141		2%
Consecutive Quarters		2Q2018			1Q2018		% Change
Total Accounts		542			517		5%
Customer Equity (in billions)1	$	134.7		$	129.2		4%
Cleared DARTs		739			876		(16%)
Total Customer DARTs		797			939		(15%)
Cleared Customers (in $'s, except DART per account)
Commission per DART	$	3.86		$	4.04		(4%)
DART per Avg. Account (Annualized)		350			439		(20%)
Net Revenue per Avg. Account (Annualized)	$	3,190		$	3,768		(15%)

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

 

				Three Months						Six Months
				Ended June 30,						Ended June 30,
				2018			2017			2018			2017
				(in millions)
Average interest-earning assets
	Segregated cash and securities			$	19,512		$	24,063		$	20,248		$	24,298
	Customer margin loans				29,839			22,134			29,658			20,924
	Securities borrowed				3,327			4,062			3,202			4,031
	Other interest-earning assets				4,020			2,681			4,079			2,512
	FDIC sweeps1				1,186			61			973			47
				$	57,884		$	53,001		$	58,160		$	51,812
Average interest-bearing liabilities
	Customer credit balances			$	47,390		$	44,791		$	47,657		$	43,903
	Securities loaned				4,013			3,653			4,178			3,632
				$	51,403		$	48,444		$	51,835		$	47,535
Net interest income
	Segregated cash and securities, net2			$	75		$	47		$	149		$	86
	Customer margin loans3				164			89			303			164
	Securities borrowed and loaned, net				36			37			83			70
	Customer credit balances, net2/3				(63)			(23)			(112)			(32)
	Other net interest income1/4				20			5			31			9
		Net interest income		$	232		$	155		$	454		$	297
Net interest margin ("NIM")					1.61%			1.17%			1.57%			1.16%
Annualized yields
	Segregated cash and securities				1.54%			0.78%			1.48%			0.71%
	Customer margin loans				2.20%			1.61%			2.06%			1.58%
	Customer credit balances				0.53%			0.21%			0.47%			0.15%

 

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	We have recategorized components of net interest income related to currencies with negative interest rates and as such, prior period amounts have been adjusted to conform to the current period presentation. For the quarter and six months ended June 30, 2017, $4 million and $8 million has been recategorized from net interest income on "segregated cash and securities, net" to "customer credit balances, 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	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						Six Months
			Ended June 30,						Ended June 30,
			2018			2017			2018			2017
			(in millions)
Electronic Brokerage	Net revenues		$	443		$	334		$	908		$	648
	Non-interest expenses			160			136			334			265
	Income before income taxes		$	283		$	198		$	574		$	383
	Pre-tax profit margin			64%			59%			63%			59%
Market Making	Net revenues		$	22		$	23		$	43		$	31
	Non-interest expenses			13			47			25			77
	Income (loss) before income taxes		$	9		$	(24)		$	18		$	(46)
	Pre-tax profit (loss) margin			41%			(104%)			42%			(148%)
Corporate 1	Net revenues		$	(20)		$	30		$	21		$	82
	Non-interest expenses			1			-			2			2
	Income (loss) before income taxes		$	(21)		$	30		$	19		$	80
Total	Net revenues		$	445		$	387		$	972		$	761
	Non-interest expenses			174			183			361			344
	Income before income taxes		$	271		$	204		$	611		$	417
	Pre-tax profit margin			61%			53%			63%			55%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

				Three Months						Six Months
				Ended June 30,						Ended June 30,
				2018			2017			2018			2017
					(in millions, except share and per share data)
Revenues:
	Commissions			$	185		$	160		$	405		$	314
	Interest income				333			206			644			383
	Trading gains				12			13			25			15
	Other income				23			59			100			135
		Total revenues			553			438			1,174			847
	Interest expense				108			51			202			86
		Total net revenues			445			387			972			761
Non-interest expenses:
	Execution and clearing				66			63			139			124
	Employee compensation and benefits				68			66			138			128
	Occupancy, depreciation and amortization				11			10			23			23
	Communications				7			7			13			15
	General and administrative				22			36			45			52
	Customer bad debt				-			1			3			2
		Total non-interest expenses			174			183			361			344
Income before income taxes					271			204			611			417
Income tax expense					12			17			33			35
Net income					259			187			578			382
Net income attributable to noncontrolling interests					217			164			490			335
Net income available for common stockholders				$	42		$	23		$	88		$	47
Earnings per share:
	Basic			$	0.58		$	0.33		$	1.22		$	0.68
	Diluted			$	0.58		$	0.32		$	1.21		$	0.67
Weighted average common shares outstanding:
	Basic				72,476,729			69,087,853			71,979,104			68,539,526
	Diluted				73,329,496			70,063,427			72,923,743			69,613,567
Comprehensive income:
	Net income available for common stockholders			$	42		$	23		$	88		$	47
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes			(14)			6			(13)			10
		Income taxes related to items of other comprehensive income			-			-			-			-
	Other comprehensive income (loss), net of tax				(14)			6			(13)			10
Comprehensive income available for common stockholders				$	28		$	29		$	75		$	57
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests				$	217		$	164		$	490		$	335
Other comprehensive income - cumulative translation adjustment					(65)			31			(58)			50
Comprehensive income attributable to noncontrolling interests				$	152		$	195		$	432		$	385

 

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

EARNINGS PER SHARE ON COMPREHENSIVE INCOME

(UNAUDITED)

 

				Three Months						Six Months
				Ended June 30,						Ended June 30,
				2018			2017			2018			2017
					(in millions, except share and per share data)
Comprehensive income available for common stockholders, net of tax				$	28		$	29		$	75		$	57
Comprehensive earnings per share:
	Basic			$	0.39		$	0.42		$	1.05		$	0.83
	Diluted			$	0.39		$	0.41		$	1.03		$	0.81
Weighted average common shares outstanding:
	Basic				72,476,729			69,087,853			71,979,104			68,539,526
	Diluted				73,329,496			70,063,427			72,923,743			69,613,567

 

 

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

						June 30, 2018			December 31, 2017
						(in millions)
Assets
Cash and cash equivalents						$	2,500		$	1,732
Cash - segregated for regulatory purposes							7,686			6,547
Securities - segregated for regulatory purposes							13,368			13,685
Securities borrowed							3,588			2,957
Securities purchased under agreements to resell							533			2,035
Financial instruments owned, at fair value							2,088			3,154
Receivables from customers, net of allowance for doubtful accounts							28,970			29,821
Receivables from brokers, dealers and clearing organizations							1,134			823
Other assets							436			408
	Total assets					$	60,303		$	61,162
Liabilities and equity
Liabilities
Short-term borrowings						$	193		$	15
Securities loaned							4,091			4,444
Securities sold under agreements to repurchase							-			1,316
Financial instruments sold but not yet purchased, at fair value							630			767
Other payables:
	Customers						48,239			47,548
	Brokers, dealers and clearing organizations						100			283
	Other payables						350			356
							48,689			48,187
	Total liabilities						53,603			54,729
Equity
Stockholders' equity							1,183			1,090
Noncontrolling interests							5,517			5,343
	Total equity						6,700			6,433
	Total liabilities and equity					$	60,303		$	61,162
		June 30, 2018					December 31, 2017
Ownership of IBG LLC Membership Interests		Interests		%			Interests			%
IBG, Inc.		73,544,946		17.8%			71,479,604			17.4%
Noncontrolling interests (IBG Holdings LLC)		340,229,444		82.2%			340,229,444			82.6%
Total IBG LLC membership interests		413,774,390		100.0%			411,709,048			100.0%