INTERACTIVE BROKERS GROUP ANNOUNCES 1Q2018 RESULTS

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REPORTS COMPREHENSIVE EARNINGS PER SHARE OF $0.65,

INCOME BEFORE TAXES OF $340 MILLION ON $527 MILLION IN NET REVENUES,

AND EARNINGS PER SHARE ON NET INCOME OF $0.63.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, April 17, 2018 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share on a comprehensive basis of $0.65 for the quarter ended March 31, 2018, compared to diluted earnings per share on a comprehensive basis of $0.40 for the same period in 2017. Excluding other comprehensive income, the Company reported diluted earnings per share of $0.63 for the quarter, compared to diluted earnings per share of $0.34 for the same period in 2017.

Net revenues were $527 million and income before income taxes was $340 million this quarter, compared to net revenues of $374 million and income before income taxes of $213 million for the same period in 2017. The results for the quarter were positively impacted by strong growth in net interest income, which increased $75 million, or 53%, and higher commissions, which increased $66 million, or 43% from the year-ago quarter.

In addition, the results for the quarter include a $38 million gain on our currency diversification strategy, compared to a $49 million gain in the same period in 2017; and a $3 million net mark-to-market loss on our U.S. government securities portfolio, compared to a $1 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 June 14, 2018 to shareholders of record as of June 1, 2018.

Business Highlights

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

·	63% Electronic Brokerage pretax profit margin for this quarter, up from 59% in the year-ago quarter.

·	Customer equity grew 33% from the year-ago quarter to $129.2 billion and customer debits increased 40% to $29.3 billion.

·	Customer accounts increased 27% from the year-ago quarter to 517 thousand.

·	Total DARTs1 increased 43% from the year-ago quarter to 939 thousand.

·	Brokerage segment equity was $5.1 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 57%, to $291 million in the quarter ended March 31, 2018, compared to the same period last year. Net revenues increased 48% to $465 million on higher net interest income and commissions revenue.

Net interest income increased 56% as average customer credit and margin loan balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 43% from the year-ago quarter on higher customer volumes in futures, options and stocks, which increased 53%, 48% and 28%, respectively, from the year-ago quarter. Pretax profit margin was 63% for the quarter ended March 31, 2018, up from 59% in the same period last year.

Customer accounts grew 27% to 517 thousand and customer equity increased 33% from the year-ago quarter to $129.2 billion. Total DARTs for cleared and execution-only customers increased 43% to 939 thousand from the year-ago quarter. Cleared DARTs were 876 thousand, 44% 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 March 31, 2018, as compared to a pretax loss of $22 million in the year-ago quarter, during which we began to wind down operations in this segment. The current quarter's results reflect higher trading gains and lower operating costs on the remaining operations. 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 increased our comprehensive earnings by $46 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.69%. 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, April 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.:

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. Focusing on technology and automation for over 41 years has enabled us to equip our customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost. Due to our range of services, low costs and technology, IBKR is ranked the "Top Online Broker", according to Barron's Best Online Brokers review, March 24, 2018. 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

										Brokerage
		Market				Brokerage				Non								Avg. Trades
		Making		%		Cleared		%		Cleared		%		Total		%		per U.S.
Period		Trades		Change		Trades		Change		Trades		Change		Trades		Change		Trading Day
2014		64,530				206,759				18,055				289,344				1,155
2015		65,937		2%		242,846		17%		18,769		4%		327,553		13%		1,305
2016		64,038		(3%)		259,932		7%		16,515		(12%)		340,485		4%		1,354
2017		31,282		(51%)		265,501		2%		14,835		(10%)		311,618		(8%)		1,246
1Q2017		12,224				62,914				3,665				78,803				1,271
1Q2018		4,469		(63%)		89,621		42%		4,695		28%		98,785		25%		1,619
4Q2017		4,263				71,502				3,800				79,565				1,273
1Q2018		4,469		5%		89,621		25%		4,695		24%		98,785		24%		1,619

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1	Includes options on futures.

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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
2014		225,662				106,074				137,153,132
2015		244,356		8%		124,206		17%		153,443,988		12%
2016		227,413		(7%)		128,021		3%		138,523,932		(10%)
2017		253,304		11%		116,858		(9%)		209,435,662		51%
1Q2017		60,366				27,528				50,397,970
1Q2018		87,705		45%		41,742		52%		64,494,943		28%
4Q2017		66,232				30,041				55,714,749
1Q2018		87,705		32%		41,742		39%		64,494,943		16%

 

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BROKERAGE STATISTICS

Year over Year		1Q2018			1Q2017		% Change
Total Accounts		517			406		27%
Customer Equity (in billions)1	$	129.2		$	96.8		33%
Cleared DARTs		876			609		44%
Total Customer DARTs		939			657		43%
Cleared Customers (in $'s, except DART per account)
Commission per DART	$	4.04		$	4.01		1%
DART per Avg. Account (Annualized)		439			385		14%
Net Revenue per Avg. Account (Annualized)	$	3,768		$	3,157		19%
Consecutive Quarters		1Q2018			4Q2017		% Change
Total Accounts		517			483		7%
Customer Equity (in billions)1	$	129.2		$	124.8		4%
Cleared DARTs		876			681		29%
Total Customer DARTs		939			730		29%
Cleared Customers (in $'s, except DART per account)
Commission per DART	$	4.04		$	3.92		3%
DART per Avg. Account (Annualized)		439			363		21%
Net Revenue per Avg. Account (Annualized)	$	3,768		$	3,318		14%

 

 

  

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

 

				Three Months
				Ended March 31,
				2018			2017
				(in millions)
Average interest-earning assets
	Segregated cash and securities			$	20,989		$	24,637
	Customer margin loans				29,428			19,802
	Securities borrowed				3,019			3,973
	Other interest-earning assets				3,943			2,258
	FDIC sweeps1				781			35
				$	58,160		$	50,705
Average interest-bearing liabilities
	Customer credit balances			$	47,865		$	43,115
	Securities loaned				4,341			3,695
				$	52,206		$	46,810
Net interest income
	Segregated cash and securities, net			$	74		$	43
	Customer margin loans2				139			75
	Securities borrowed and loaned, net				47			33
	Customer credit balances, net2				(49)			(13)
	Other net interest income3				11			4
		Net interest income		$	222		$	142
Net interest margin ("NIM")					1.55%			1.12%
Annualized yields
	Segregated cash and securities				1.43%			0.71%
	Customer margin loans				1.92%			1.54%
	Customer credit balances				0.42%			0.12%

 

 

 

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(UNAUDITED)

 

			Three Months
			Ended March 31,
			2018			2017
			(in millions)
Electronic Brokerage	Net revenues		$	465		$	314
	Non-interest expenses			174			129
	Income before income taxes		$	291		$	185
	Pre-tax profit margin			63%			59%
Market Making	Net revenues		$	21		$	8
	Non-interest expenses			12			30
	Income (loss) before income taxes		$	9		$	(22)
	Pre-tax profit (loss) margin			43%			(275%)
Corporate 1	Net revenues		$	41		$	52
	Non-interest expenses			1			2
	Income before income taxes		$	40		$	50
Total	Net revenues		$	527		$	374
	Non-interest expenses			187			161
	Income before income taxes		$	340		$	213
	Pre-tax profit margin			65%			57%

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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
				Ended March 31,
				2018			2017
				(in millions, except share and per share data)
Revenues:
	Trading gains			$	13		$	2
	Commissions				220			154
	Interest income				311			177
	Other income				77			76
		Total revenues			621			409
	Interest expense				94			35
		Total net revenues			527			374
Non-interest expenses:
	Execution and clearing				73			61
	Employee compensation and benefits				70			62
	Occupancy, depreciation and amortization				12			13
	Communications				6			8
	General and administrative				23			16
	Customer bad debt				3			1
		Total non-interest expenses			187			161
Income before income taxes					340			213
Income tax expense					21			18
Net income					319			195
Net income attributable to noncontrolling interests					273			171
Net income available for common stockholders				$	46		$	24
Earnings per share:
	Basic			$	0.64		$	0.35
	Diluted			$	0.63		$	0.34
Weighted average common shares outstanding:
	Basic				71,475,950			67,985,107
	Diluted				72,512,462			69,157,614
Comprehensive income:
	Net income available for common stockholders			$	46		$	24
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes			1			4
		Income taxes related to items of other comprehensive income			-			-
	Other comprehensive income, net of tax				1			4
Comprehensive income available for common stockholders				$	47		$	28
Comprehensive income attributable to noncontrolling interests:
	Net income attributable to noncontrolling interests			$	273		$	171
	Other comprehensive income - cumulative translation adjustment				7			19
Comprehensive income attributable to noncontrolling interests				$	280		$	190

 

 

 

 

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

EARNINGS PER SHARE ON COMPREHENSIVE INCOME

(UNAUDITED)

 

			Three Months
			Ended March 31,
			2018			2017
			(in millions, except share and per share data)
Comprehensive income available for common stockholders, net of tax			$	47		$	28
Comprehensive earnings per share:
	Basic		$	0.66		$	0.41
	Diluted		$	0.65		$	0.40
Weighted average common shares outstanding:
	Basic			71,475,950			67,985,107
	Diluted			72,512,462			69,157,614

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

						March 31, 2018			December 31, 2017
						(in millions)
Assets
Cash and cash equivalents						$	1,901		$	1,732
Cash and securities - segregated for regulatory purposes							20,268			20,232
Securities borrowed							2,968			2,957
Securities purchased under agreements to resell							677			2,035
Financial instruments owned, at fair value							2,415			3,154
Receivables from customers, net of allowance for doubtful accounts							29,464			29,821
Receivables from brokers, dealers and clearing organizations							1,002			823
Other assets							398			408
	Total assets					$	59,093		$	61,162
Liabilities and equity
Liabilities
Short-term borrowings						$	19		$	15
Securities loaned							4,171			4,444
Securities sold under agreements to repurchase							-			1,316
Financial instruments sold but not yet purchased, at fair value							242			767
Other payables:
	Customers						47,423			47,548
	Brokers, dealers and clearing organizations						170			283
	Other payables						362			356
							47,955			48,187
	Total liabilities						52,387			54,729
Equity
Stockholders' equity							1,132			1,090
Noncontrolling interests							5,574			5,343
	Total equity						6,706			6,433
	Total liabilities and equity					$	59,093		$	61,162
		March 31, 2018					December 31, 2017
Ownership of IBG LLC Membership Interests		Interests		%			Interests			%
IBG, Inc.		71,481,136		17.4%			71,479,604			17.4%
Noncontrolling interests (IBG Holdings LLC)		340,229,444		82.6%			340,229,444			82.6%
Total IBG LLC membership interests		411,710,580		100.0%			411,709,048			100.0%