INTERACTIVE BROKERS GROUP ANNOUNCES 3Q2020 RESULTS

— — —

DILUTED EARNINGS PER SHARE OF $0.58, ADJUSTED DILUTED EARNINGS PER SHARE OF $0.53.

PRETAX INCOME OF $334 MILLION ON $548 MILLION IN NET REVENUES.

ADJUSTED PRETAX INCOME OF $304 MILLION ON $518 MILLION IN ADJUSTED NET REVENUES¹.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, October 20, 2020 — Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.58 for the quarter ended September 30, 2020 compared to $0.45 for the same period in 2019, and adjusted diluted earnings per share of $0.53 for this quarter compared to $0.57 for the year-ago quarter.

Net revenues were $548 million and income before income taxes was $334 million this quarter, compared to net revenues of $466 million and income before income taxes of $281 million for the same period in 2019. Adjusted net revenues were $518 million and adjusted income before income taxes was $304 million this quarter, compared to adjusted net revenues of $525 million and adjusted income before income taxes of $340 million for the same period in 2019.

Financial Highlights

•	Commission revenue showed strong growth, increasing $92 million, or 49%, from the year-ago quarter on higher customer trading volumes within an active trading environment worldwide.

•	Net interest income decreased $96 million, or 33%, from the year-ago quarter as the average Federal Funds effective rate decreased to 0.09% from 2.19% in the year-ago quarter.

•

Other income increased $76 million from the year-ago quarter. This increase was mainly comprised of (1) $74 million related to our currency diversification strategy, which gained $27 million this quarter compared to a loss of $47 million in the same period in 2019; and (2) $19 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which swung to a $6 million mark-to-market gain this quarter from a $13 million mark-to-market loss in the same period in 2019; partially offset by (3) a $13 million impairment loss on our investment in OneChicago Exchange recognized in this quarter.

•	61% pretax profit margin for this quarter, up from 60% in the year-ago quarter. 59% adjusted pretax profit margin for this quarter, down from 65% in the year-ago quarter.

•	Total equity of $8.5 billion.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 14, 2020 to shareholders of record as of December 1, 2020.

¹ See the reconciliation of non-GAAP financial measures starting on page 10.

Business Highlights

•	Customer equity grew 49% from the year-ago quarter to $232.7 billion.

•	Customer credits increased 27% from the year-ago quarter to $70.8 billion.

•	Customer margin loans increased 17% from the year-ago quarter to $30.0 billion.

•	Customer accounts increased 47% from the year-ago quarter to 981 thousand.

•	Total DARTs2 increased 113% from the year-ago quarter to 1.83 million.

•	Cleared DARTs increased 110% from the year-ago quarter to 1.63 million.

COVID-19 Pandemic

In March 2020, the World Health Organization recognized the outbreak of Coronavirus Disease 2019 (COVID-19) caused by a novel strain of the coronavirus as a pandemic. The pandemic affects all countries in which we operate. The response of governments and societies to the COVID-19 pandemic, which includes temporary closures of certain businesses; social distancing; travel restrictions, “shelter in place” and other governmental regulations; and reduced consumer spending due to job losses, has significantly impacted market volatility and general economic conditions.

The COVID-19 pandemic has precipitated unprecedented market conditions with equally unprecedented social and community challenges. Amid these challenges:

•	The Company is committed to ensuring the highest levels of service to its customers so they can effectively manage their assets, portfolios and risks. The Company’s technical infrastructure has withstood the challenges presented by the extraordinary volatility and increased market volume.

•	The Company can run its business from alternate office locations and/or remotely if a Company office must temporarily close due to the spread of the COVID-19 pandemic.

•	As announced on April 9, 2020, during the second quarter of 2020 the Company donated $5 million to assist efforts to provide food and support for people affected by the COVID-19 pandemic in the United States as well as to advance medical solutions.

The effects of the COVID-19 pandemic on the Company’s financial results for the third quarter of 2020 can be summarized as follows: (1) higher commission revenue due to increased trading activity and a higher rate of customer accounts opened during this period; and (2) lower net interest income resulting from lower benchmark interest rates.

The impact of the COVID-19 pandemic on the Company’s future financial results could be significant but currently cannot be quantified, as it depends on numerous evolving factors that currently cannot be accurately predicted, including, but not limited to the duration and spread of the pandemic; its impact on our customers, employees and vendors; governmental actions in response to the pandemic; and the overall impact of the pandemic in the economy and society; among other factors. Any of these events could have a materially adverse effect on the Company’s financial results.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we base our net worth in GLOBALs, a basket of 10 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $72 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.91%. The effects of the currency diversification strategy are reported as components of (1) Other Income ($27 million) and (2) Other Comprehensive Income ($45 million).

² Daily average revenue trades (DARTs) are based on customer orders.

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, October 20, 2020, 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 135 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to clients 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 clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients 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. Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its February 24, 2020, Best Online Broker Review.

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, 203-618-4069.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2017		102,025				5,696				7,139,622
2018		49,554		(51%)		3,277		(42%)		11,347,811		59%
2019		41,452		(16%)		2,407		(27%)		8,926,477		(21%)
3Q2019		10,848				697				2,082,317
3Q2020		10,360		(4%)		501		(28%)		1,621,257		(22%)
2Q2020		10,878				811				1,819,150
3Q2020		10,360		(5%)		501		(38%)		1,621,257		(11%)

---

Year over Year			3Q2020			3Q2019		% Change
Total Accounts (in thousands)			981			666		47%
Customer Equity (in billions)1		$	232.7		$	156.6		49%
Cleared DARTs (in thousands)			1,629			777		110%
Total Customer DARTs (in thousands)			1,832			859		113%
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.69		$	3.69		(27%)
Cleared Avg. DARTs per Account (Annualized)			442			297		49%
Net Revenue per Avg. Account (Annualized)		$	2,154		$	2,995		(28%)
Consecutive Quarters			3Q2020			2Q2020		% Change
Total Accounts (in thousands)			981			876		12%
Customer Equity (in billions)1		$	232.7		$	203.2		15%
Cleared DARTs (in thousands)			1,629			1,558		5%
Total Customer DARTs (in thousands)			1,832			1,746		5%
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.69		$	2.81		(4%)
Cleared Avg. DARTs per Account (Annualized)			442			480		(8%)
Net Revenue per Avg. Account (Annualized)		$	2,154		$	2,442		(12%)

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

				Three Months						Nine Months
				Ended September 30,						Ended September 30,
				2020			2019			2020			2019
				(in millions)
Average interest-earning assets
	Segregated cash and securities			$	43,589		$	29,443		$	41,283		$	27,384
	Customer margin loans				28,490			26,134			27,052			26,014
	Securities borrowed				4,477			4,036			4,448			3,900
	Other interest-earning assets				5,075			5,362			5,288			5,202
	FDIC sweeps1				2,982			2,151			2,864			1,999
				$	84,613		$	67,126		$	80,935		$	64,499
Average interest-bearing liabilities
	Customer credit balances			$	68,867		$	53,762		$	65,716		$	51,786
	Securities loaned				5,756			4,160			5,304			3,993
	Other interest-bearing liabilities				251			173			313			78
				$	74,874		$	58,095		$	71,333		$	55,857
Net interest income
	Segregated cash and securities, net			$	14		$	153		$	159		$	434
	Customer margin loans2				83			175			287			537
	Securities borrowed and loaned, net				86			77			228			177
	Customer credit balances, net2				8			(137)			(55)			(421)
	Other net interest income1/3				10			31			47			94
		Net interest income3		$	201		$	299		$	666		$	821
Net interest margin ("NIM")					0.94%			1.77%			1.10%			1.70%
Annualized yields
	Segregated cash and securities				0.13%			2.06%			0.51%			2.12%
	Customer margin loans				1.16%			2.66%			1.41%			2.76%
	Customer credit balances				-0.05%			1.01%			0.11%			1.09%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

				Three Months						Nine Months
				Ended September 30,						Ended September 30,
				2020			2019			2020			2019
				(in millions, except share and per share data)
Revenues:
	Commissions			$	279		$	187		$	824		$	538
	Other fees and services1/2				45			35			123			105
	Other income (loss)1/3				29			(47)			25			(2)
		Total non-interest income			353			175			972			641
	Interest income				240			468			853			1,308
	Interest expense				(45)			(177)			(206)			(512)
		Total net interest income			195			291			647			796
		Total net revenues			548			466			1,619			1,437
Non-interest expenses:
	Execution, clearing and distribution fees				74			68			227			192
	Employee compensation and benefits				77			67			239			213
	Occupancy, depreciation and amortization				17			15			51			43
	Communications				6			7			19			19
	General and administrative				37			30			206			80
	Customer bad debt				3			(2)			13			45
		Total non-interest expenses			214			185			755			592
Income before income taxes					334			281			864			845
Income tax expense					32			20			65			50
Net income					302			261			799			795
Net income attributable to noncontrolling interests					256			225			675			678
Net income available for common stockholders				$	46		$	36		$	124		$	117
Earnings per share:
	Basic			$	0.59		$	0.46		$	1.60		$	1.54
	Diluted			$	0.58		$	0.45		$	1.58		$	1.52
Weighted average common shares outstanding:
	Basic				78,509,625			76,742,789			77,543,008			75,910,080
	Diluted				79,120,548			77,348,976			78,243,699			76,646,487

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

				Three Months						Nine Months
				Ended September 30,						Ended September 30,
				2020			2019			2020			2019
				(in millions, except share and per share data)
Comprehensive income:
	Net income available for common stockholders			$	46		$	36		$	124		$	117
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes			8			(6)			5			(3)
		Income taxes related to items of other comprehensive income			-			-			-			-
	Other comprehensive income (loss), net of tax				8			(6)			5			(3)
Comprehensive income available for common stockholders				$	54		$	30		$	129		$	114
Comprehensive earnings per share:
	Basic			$	0.69		$	0.39		$	1.67		$	1.50
	Diluted			$	0.69		$	0.39		$	1.65		$	1.49
Weighted average common shares outstanding:
	Basic				78,509,625			76,742,789			77,543,008			75,910,080
	Diluted				79,120,548			77,348,976			78,243,699			76,646,487
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests				$	256		$	225		$	675		$	678
Other comprehensive income - cumulative translation adjustment					37			(22)			24			(11)
Comprehensive income attributable to noncontrolling interests				$	293		$	203		$	699		$	667

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

						September 30, 2020			December 31, 2019
						(in millions)
Assets
Cash and cash equivalents						$	3,292		$	2,882
Cash - segregated for regulatory purposes							12,789			9,400
Securities - segregated for regulatory purposes							29,316			17,824
Securities borrowed							3,995			3,916
Securities purchased under agreements to resell							1,401			3,111
Financial instruments owned, at fair value							452			1,916
Receivables from customers, net of allowance for doubtful accounts							30,343			31,304
Receivables from brokers, dealers and clearing organizations							2,575			685
Other assets							535			638
	Total assets					$	84,698		$	71,676
Liabilities and equity
Liabilities
Short-term borrowings						$	628		$	16
Securities loaned							5,738			4,410
Securities sold under agreements to repurchase							-			1,909
Financial instruments sold but not yet purchased, at fair value							187			457
Other payables:
	Customers						68,830			56,248
	Brokers, dealers and clearing organizations						313			220
	Other payables						456			476
							69,599			56,944
	Total liabilities						76,152			63,736
Equity
Stockholders' equity							1,609			1,452
Noncontrolling interests							6,937			6,488
	Total equity						8,546			7,940
	Total liabilities and equity					$	84,698		$	71,676
		September 30, 2020					December 31, 2019
Ownership of IBG LLC Membership Interests		Interests		%			Interests			%
IBG, Inc.		79,057,622		19.0%			76,759,595			18.5%
Noncontrolling interests (IBG Holdings LLC)		337,670,642		81.0%			338,670,642			81.5%
Total IBG LLC membership interests		416,728,264		100.0%			415,430,237			100.0%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

			Three Months						Nine Months
			Ended September 30,						Ended September 30,
			2020			2019			2020			2019
			(in millions)
Adjusted net revenues1
Net revenues - GAAP			$	548		$	466		$	1,619		$	1,437
Non-GAAP adjustments
	Currency diversification strategy, net			(27)			47			6			72
	Mark-to-market on investments2			(3)			12			(3)			(28)
Total non-GAAP adjustments				(30)			59			3			44
Adjusted net revenues			$	518		$	525		$	1,622		$	1,481
Adjusted income before income taxes1
Income before income taxes - GAAP			$	334		$	281		$	864		$	845
Non-GAAP adjustments
	Currency diversification strategy, net			(27)			47			6			72
	Mark-to-market on investments2			(3)			12			(3)			(28)
	Customer compensation expense3			0			0			103			0
	Bad debt expense4			0			0			1			42
Total non-GAAP adjustments				(30)			59			107			86
Adjusted income before income taxes			$	304		$	340		$	971		$	931
Adjusted pre-tax profit margin				59%			65%			60%			63%

			Three Months						Nine Months
			Ended September 30,						Ended September 30,
			2020			2019			2020			2019
			(in millions)
Adjusted net income available for common stockholders1
Net income available for common stockholders - GAAP			$	46		$	36		$	124		$	117
Non-GAAP adjustments
	Currency diversification strategy, net			(5)			9			1			13
	Mark-to-market on investments2			(1)			2			(1)			(5)
	Customer compensation expense3			-			-			19			-
	Bad debt expense4			-			-			0			8
	Income tax effect of above adjustments5			1			(3)			(4)			(4)
Total non-GAAP adjustments				(4)			9			16			12
Adjusted net income available for common stockholders			$	42		$	45		$	140		$	129

			Three Months						Nine Months
			Ended September 30,						Ended September 30,
			2020			2019			2020			2019
			(in dollars)
Adjusted diluted EPS1
Diluted EPS - GAAP			$	0.58		$	0.45		$	1.58		$	1.52
Non-GAAP adjustments
	Currency diversification strategy, net			(0.06)			0.11			0.02			0.17
	Mark-to-market on investments2			(0.01)			0.03			(0.01)			(0.06)
	Customer compensation expense3			0.00			0.00			0.24			0.00
	Bad debt expense4			0.00			0.00			0.00			0.10
	Income tax effect of above adjustments			0.02			(0.03)			(0.05)			(0.05)
Total non-GAAP adjustments				(0.05)			0.11			0.20			0.16
Adjusted diluted EPS			$	0.53		$	0.57		$	1.79		$	1.68
Diluted weighted average common shares outstanding				79,120,548			77,348,976			78,243,699			76,646,487

Note: Amounts may not add due to rounding.

Note: The term “GAAP” in the following explanation refers to generally accepted accounting principles in the United States.

¹ Adjusted net revenues, adjusted income before income taxes, adjusted net income available for common stockholders and adjusted diluted earnings per share (“EPS”) are non-GAAP financial measures as defined by SEC Regulation G.

•	We define adjusted net revenues as net revenues adjusted to remove the effect of our GLOBAL currency diversification strategy and our net mark-to-market gains (losses) on investments2.

•	We define adjusted income before income taxes as income before income taxes adjusted to remove the effect of our GLOBAL currency diversification strategy, our net mark-to-market gains (losses) on investments, customer compensation expenses3 and unusual bad debt expense4.

•

We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects of our GLOBAL currency diversification strategy, the mark-to-market on investments, customer compensation expenses, and unusual bad debt expense attributable to IBG, Inc.

Management believes these non-GAAP items are important measures of our financial performance because they exclude certain items that may not be indicative of our core operating results and business outlook and may be useful to investors and analysts in evaluating the operating performance of the business and facilitating a meaningful comparison of our results in the current period to those in prior and future periods. Our GLOBAL currency diversification strategy, our mark-to-market on investments and unusual bad debt expense are excluded because management does not believe they are indicative of our underlying core business performance. Adjusted net revenues, adjusted income before income taxes, adjusted net income available to common stockholders and adjusted diluted EPS should be considered in addition to, rather than as a substitute for, GAAP net revenues, income before income taxes, net income attributable to common stockholders and diluted EPS.

 ² Mark-to-market on investments represents the net mark-to-market gains (losses) on our U.S. government securities portfolio, which are typically held to maturity, investments in equity securities that do not qualify for equity method accounting which are measured at fair value, and equity securities taken over by the Company from customers related to losses on margin loans described below.

 ³ Customer compensation expenses were incurred to compensate certain affected customers in connection with their losses resulting from the West Texas Intermediate Crude Oil event. On April 20, 2020, the energy markets exhibited extraordinary price activity in the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate Crude Oil contract. The price of the May 2020 physically-settled contract dropped to an unprecedented negative price of $37.63.

 ⁴ Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the nine months ending September 30, 2019, unusual bad debt expense reflects losses recognized on margin lending to a small number of our brokerage customers that had taken relatively large positions in a security listed on a major U.S. exchange, which lost a substantial amount of its value in a very short timeframe. For the nine months ended September 30, 2020, unusual bad debt expense reflects losses incurred by futures customers in excess of the equity in their accounts related to the West Texas Intermediate Crude Oil event described above.

 ⁵ The income tax effect is estimated using the corporate income tax rates applicable to the Company.