Form 8-K Interactive Brokers Grou For: Jul 20

INTERACTIVE BROKERS GROUP ANNOUNCES 2Q2021 RESULTS

— — —

DILUTED EARNINGS PER SHARE OF $1.00, ADJUSTED DILUTED EARNINGS PER SHARE¹ OF $0.82.

PRETAX INCOME OF $541 MILLION ON $754 MILLION IN NET REVENUES.

ADJUSTED PRETAX INCOME OF $437 MILLION ON $650 MILLION IN ADJUSTED NET REVENUES¹.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, July 20, 2021 — Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $1.00 for the quarter ended June 30, 2021 compared to $0.40 for the same period in 2020, and adjusted diluted earnings per share of $0.82 for this quarter compared to $0.57 for the year-ago quarter.

Net revenues were $754 million and income before income taxes was $541 million for this quarter, compared to net revenues of $539 million and income before income taxes of $222 million for the same period in 2020. Adjusted net revenues were $650 million and adjusted income before income taxes was $437 million for this quarter, compared to adjusted net revenues of $523 million and adjusted income before income taxes of $310 million for the same period in 2020.

Financial Highlights

•	Commission revenue increased $31 million, or 11%, from the year-ago quarter on higher customer stock and options trading volumes within an active trading environment.

•	Net interest income increased $78 million, or 40%, from the year-ago quarter on higher margin loan balances and strong securities lending activity.

•

Other income increased $91 million from the year-ago quarter. This increase was mainly comprised of (1) $99 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which increased to a $113 million mark-to-market gain this quarter from a $14 million mark-to-market gain in the same period in 2020; and (2) $13 million related to our U.S. government securities portfolio, which lost $0.2 million this quarter compared to a $13 million loss in the same period in 2020; partially offset by (3) $25 million related to our currency diversification strategy, which lost $9 million this quarter compared to a gain of $16 million in the same period in 2020.

•

General and administrative expenses decreased $97 million from the year-ago quarter, primarily due to the non-recurrence of $103 million in expenses incurred to compensate certain affected customers in connection with their losses on West Texas Intermediate Crude Oil contracts in April 2020, as previously disclosed.

•	72% pretax profit margin for this quarter, up from 41% in the year-ago quarter. 67% adjusted pretax profit margin for this quarter, up from 59% in the year-ago quarter.

•	Total equity of $9.9 billion.

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, 2021 to shareholders of record as of September 1, 2021.

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

Business Highlights

•	Customer accounts increased 61% from the year-ago quarter to 1.41 million.

•	Customer equity grew 79% from the year-ago quarter to $363.5 billion.

•	Total DARTs2 increased 32% from the year-ago quarter to 2.30 million.

•	Cleared DARTs increased 34% from the year-ago quarter to 2.08 million.

•	Customer credits increased 16% from the year-ago quarter to $82.1 billion.

•	Customer margin loans increased 96% from the year-ago quarter to $48.8 billion.

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 has affected 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.

The initial effects of the COVID-19 pandemic on the Company’s financial results, which may have lasting effects as more investors are brought into the financial markets, can be summarized as follows: (1) higher commission revenue due to increased trading activity and a higher rate of customer accounts opened throughout 2020 and into 2021; and (2) generally lower net interest margin resulting from lower benchmark interest rates. Reduced net interest income on customer cash balances was more than offset in the current quarter by strong growth in margin loan balances and a good performance in securities lending.

The impact of the COVID-19 pandemic on the Company’s future financial results remains uncertain and 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.

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

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 $12 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.17%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $9 million) and (2) Other Comprehensive Income (gain of $21 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, July 20, 2021, 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 26, 2021, 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, [email protected] or Media: Rob Garfield, [email protected].

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

 

		Cleared				Non-Cleared												Avg. Trades
		Customer		%		Customer		%		Principal		%		Total		%		per U.S.
Period		Trades		Change		Trades		Change		Trades		Change		Trades		Change		Trading Day
2018		328,099				21,880				18,663				368,642				1,478
2019		302,289		(8%)		26,346		20%		17,136		(8%)		345,771		(6%)		1,380
2020		620,405		105%		56,834		116%		27,039		58%		704,278		104%		2,795
2Q2020		153,212				13,752				7,252				174,216				2,765
2Q2021		196,659		28%		16,130		17%		7,975		10%		220,764		27%		3,504
1Q2021		273,985				24,079				8,418				306,482				5,024
2Q2021		196,659		(28%)		16,130		(33%)		7,975		(5%)		220,764		(28%)		3,504

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2018		358,852				148,485				198,909,375
2019		349,287		(3%)		126,363		(15%)		167,826,490		(16%)
2020		584,195		67%		164,555		30%		331,263,604		97%
2Q2020		140,787				42,582				65,818,295
2Q2021		189,073		34%		34,635		(19%)		171,417,373		160%
1Q2021		221,898				40,361				306,165,385
2Q2021		189,073		(15%)		34,635		(14%)		171,417,373		(44%)

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2018		313,795				146,806				194,012,882
2019		302,068		(4%)		125,225		(15%)		163,030,500		(16%)
2020		518,965		72%		163,101		30%		320,376,365		97%
2Q2020		124,010				42,259				62,937,898
2Q2021		170,902		38%		34,355		(19%)		168,601,027		168%
1Q2021		202,583				40,019				301,675,030
2Q2021		170,902		(16%)		34,355		(14%)		168,601,027		(44%)

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

PRINCIPAL TRANSACTIONS

Year over Year			2Q2021			2Q2020		% Change
Total Accounts (in thousands)			1,414			876		61%
Customer Equity (in billions)1		$	363.5		$	203.2		79%
Cleared DARTs (in thousands)			2,082			1,558		34%
Total Customer DARTs (in thousands)			2,304			1,746		32%
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.38		$	2.81		(15%)
Cleared Avg. DART per Account (Annualized)			382			480		(20%)
Consecutive Quarters			2Q2021			1Q2021		% Change
Total Accounts (in thousands)			1,414			1,325		7%
Customer Equity (in billions)1		$	363.5		$	330.6		10%
Cleared DARTs (in thousands)			2,082			2,964		(30%)
Total Customer DARTs (in thousands)			2,304			3,308		(30%)
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.38		$	2.31		3%
Cleared Avg. DART per Account (Annualized)			382			622		(39%)

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

				Three Months						Six Months
				Ended June 30,						Ended June 30,
				2021			2020			2021			2020
				(in millions)
Average interest-earning assets
	Segregated cash and securities			$	39,671		$	45,463		$	43,199		$	38,978
	Customer margin loans				44,234			22,751			42,099			25,614
	Securities borrowed				2,833			4,911			3,971			4,420
	Other interest-earning assets				7,411			5,157			6,414			5,501
	FDIC sweeps1				2,749			2,990			2,783			2,745
				$	96,898		$	81,272		$	98,466		$	77,258
Average interest-bearing liabilities
	Customer credit balances			$	77,676		$	66,673		$	77,782		$	62,564
	Securities loaned				11,068			4,972			11,093			4,852
	Other interest-bearing liabilities				296			43			217			375
				$	89,040		$	71,688		$	89,092		$	67,791
Net interest income
	Segregated cash and securities, net			$	(2)		$	39		$	-		$	145
	Customer margin loans2				128			65			245			204
	Securities borrowed and loaned, net				136			80			311			142
	Customer credit balances, net2				8			6			17			(63)
	Other net interest income1/3				7			11			16			37
		Net interest income3		$	277		$	201		$	589		$	465
Net interest margin ("NIM")					1.15%			0.99%			1.21%			1.21%
Annualized yields
	Segregated cash and securities				-0.02%			0.34%			0.00%			0.75%
	Customer margin loans				1.16%			1.15%			1.17%			1.60%
	Customer credit balances				-0.04%			-0.04%			-0.04%			0.20%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

				Three Months						Six Months
				Ended June 30,						Ended June 30,
				2021			2020			2021			2020
				(in millions, except share and per share data)
Revenues:
	Commissions			$	307		$	276		$	719		$	545
	Other fees and services				55			40			111			78
	Other income (loss)				118			27			238			(4)
		Total non-interest income			480			343			1,068			619
	Interest income				307			244			697			613
	Interest expense				(33)			(48)			(118)			(161)
		Total net interest income			274			196			579			452
		Total net revenues			754			539			1,647			1,071
Non-interest expenses:
	Execution, clearing and distribution fees				54			76			122			153
	Employee compensation and benefits				96			82			193			162
	Occupancy, depreciation and amortization				19			17			39			34
	Communications				8			7			16			13
	General and administrative				35			132			94			169
	Customer bad debt				1			3			3			10
		Total non-interest expenses			213			317			467			541
Income before income taxes					541			222			1,180			530
Income tax expense					35			15			88			33
Net income					506			207			1,092			497
Net income attributable to noncontrolling interests					414			175			893			419
Net income available for common stockholders				$	92		$	32		$	199		$	78
Earnings per share:
	Basic			$	1.01		$	0.41		$	2.19		$	1.01
	Diluted			$	1.00		$	0.40		$	2.17		$	1.00
Weighted average common shares outstanding:
	Basic				91,365,234			77,357,609			91,078,868			77,054,388
	Diluted				92,199,169			78,031,462			91,984,246			77,799,963

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

				Three Months						Six Months
				Ended June 30,						Ended June 30,
				2021			2020			2021			2020
				(in millions, except share and per share data)
Comprehensive income:
	Net income available for common stockholders			$	92		$	32		$	199		$	78
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes			5			4			(12)			(3)
		Income taxes related to items of other comprehensive income			-			-			-			-
	Other comprehensive income (loss), net of tax				5			4			(12)			(3)
Comprehensive income available for common stockholders				$	97		$	36		$	187		$	75
Comprehensive earnings per share:
	Basic			$	1.06		$	0.46		$	2.06		$	0.97
	Diluted			$	1.05		$	0.46		$	2.04		$	0.96
Weighted average common shares outstanding:
	Basic				91,365,234			77,357,609			91,078,868			77,054,388
	Diluted				92,199,169			78,031,462			91,984,246			77,799,963
Comprehensive income attributable to noncontrolling interests:
	Net income attributable to noncontrolling interests			$	414		$	175		$	893		$	419
	Other comprehensive income - cumulative translation adjustment				16			18			(43)			(13)
Comprehensive income attributable to noncontrolling interests				$	430		$	193		$	850		$	406

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

					June 30, 2021			December 31, 2020
					(in millions)
Assets
Cash and cash equivalents					$	3,218		$	4,292
Cash - segregated for regulatory purposes						22,099			15,903
Securities - segregated for regulatory purposes						15,635			27,821
Securities borrowed						3,630			4,956
Securities purchased under agreements to resell						4,166			792
Financial instruments owned, at fair value						726			630
Receivables from customers, net of allowance for credit losses						49,954			39,333
Receivables from brokers, dealers and clearing organizations						3,983			1,254
Other assets						920			698
	Total assets				$	104,331		$	95,679
Liabilities and equity
Liabilities
Short-term borrowings					$	425		$	118
Securities loaned						11,580			9,838
Financial instruments sold but not yet purchased, at fair value						191			153
Other payables:
	Customers					81,452			75,882
	Brokers, dealers and clearing organizations					207			182
	Other payables					548			503
						82,207			76,567
	Total liabilities					94,403			86,676
Equity
Stockholders' equity						2,150			1,951
Noncontrolling interests						7,778			7,052
	Total equity					9,928			9,003
	Total liabilities and equity				$	104,331		$	95,679
		June 30, 2021				December 31, 2020
Ownership of IBG LLC Membership Interests		Interests		%		Interests			%
IBG, Inc.		92,091,373		22.0%		90,780,444			21.8%
Noncontrolling interests (IBG Holdings LLC)		325,960,034		78.0%		325,960,034			78.2%
Total IBG LLC membership interests		418,051,407		100.0%		416,740,478			100.0%

 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

			Three Months						Six Months
			Ended June 30,						Ended June 30,
			2021			2020			2021			2020
			(in millions)
Adjusted net revenues1
Net revenues - GAAP			$	754		$	539		$	1,647		$	1,071
Non-GAAP adjustments
	Currency diversification strategy, net			9			(16)			11			33
	Mark-to-market on investments2			(113)			-			(212)			-
Total non-GAAP adjustments				(104)			(16)			(201)			33
Adjusted net revenues			$	650		$	523		$	1,446		$	1,104
Adjusted income before income taxes1
Income before income taxes - GAAP			$	541		$	222		$	1,180		$	530
Non-GAAP adjustments
	Currency diversification strategy, net			9			(16)			11			33
	Mark-to-market on investments2			(113)			-			(212)			-
	Customer compensation expense3			-			103			-			103
	Bad debt expense4			-			1			-			1
Total non-GAAP adjustments				(104)			88			(201)			137
Adjusted income before income taxes			$	437		$	310		$	979		$	667
Adjusted pre-tax profit margin				67%			59%			68%			60%

			Three Months						Six Months
			Ended June 30,						Ended June 30,
			2021			2020			2021			2020
			(in millions)
Adjusted net income available for common stockholders1
Net income available for common stockholders - GAAP			$	92		$	32		$	199		$	78
Non-GAAP adjustments
	Currency diversification strategy, net			2			(3)			2			6
	Mark-to-market on investments2			(25)			(0)			(46)			0
	Customer compensation expense3			-			19			-			19
	Bad debt expense4			-			0			-			0
	Income tax effect of above adjustments5			6			(4)			10			(5)
Total non-GAAP adjustments				(17)			12			(34)			20
Adjusted net income available for common stockholders			$	75		$	44		$	165		$	98

			Three Months						Six Months
			Ended June 30,						Ended June 30,
			2021			2020			2021			2020
			(in dollars)
Adjusted diluted EPS1
Diluted EPS - GAAP			$	1.00		$	0.40		$	2.17		$	1.00
Non-GAAP adjustments
	Currency diversification strategy, net			0.02			(0.04)			0.03			0.08
	Mark-to-market on investments2			(0.27)			(0.00)			(0.50)			0.00
	Customer compensation expense3			0.00			0.25			0.00			0.24
	Bad debt expense4			0.00			0.00			0.00			0.00
	Income tax effect of above adjustments5			0.06			(0.05)			0.11			(0.07)
Total non-GAAP adjustments				(0.19)			0.16			(0.37)			0.26
Adjusted diluted EPS			$	0.82		$	0.57		$	1.80		$	1.26
Diluted weighted average common shares outstanding				92,199,169			78,031,462			91,984,246			77,799,963

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 attributable to IBG, Inc. of our GLOBAL currency diversification strategy, the mark-to-market gains (losses) on investments, customer compensation expenses and unusual bad debt expense.

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, customer compensation expenses 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.

 ³ Customer compensation expenses were incurred to compensate certain affected customers in connection with their losses on West Texas Intermediate Crude Oil contracts in April 20, 2020, as previously disclosed.

 ⁴ Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the three and six months ended June 30, 2020, unusual bad debt expense reflects losses incurred by customers in excess of the equity in their accounts, related to the West Texas Intermediate Crude Oil event, as previously disclosed.

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