Interactive Brokers Group Announces 2Q2017 Results

Interactive Brokers Group Announces 2Q2017 Results

Reports Comprehensive Earnings Per Share of $0.41, Income before Taxes of $204 Million on $387 Million in Net Revenues, and Earnings Per Share on Net Income of $0.32

Declares Quarterly Dividend of $0.10 Per Share

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 $0.41 for the quarter ended June 30, 2017, compared to diluted earnings per share on a comprehensive basis of $0.36 for the same period in 2016.

Excluding other comprehensive income, the Company reported diluted earnings per share of $0.32 for the quarter ended June 30, 2017, compared to diluted earnings per share of $0.40 for the same period in 2016.

Net revenues were $387 million and income before income taxes was $204 million this quarter, compared to net revenues of $369 million and income before income taxes of $213 million for the same period in 2016.

The results for the quarter were positively impacted by strong growth in net interest income, which increased $29 million, or 23%, and higher commissions, which increased $8 million, or 5% from the year-ago quarter. Trading gains decreased 62% from the year-ago quarter on lower market making trading volumes, as we wind down our options market making business, and decreases in volatility and in the actual-to-implied volatility ratio.

In addition, the results for the quarter include a $66 million gain on our currency diversification strategy, compared to a $2 million loss in the same period in 2016; a $3 million net mark-to-market loss on our U.S. government securities portfolio compared to a $14 million net mark-to-market gain in the same period in 2016; and approximately $22 million in one-time exit costs related to the wind-down of our options market making business, primarily consisting of the write-down of exchange trading rights.

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, 2017 to shareholders of record as of September 1, 2017.

Business Highlights

• 53% pretax profit margin for this quarter, down from 58% in the year-ago quarter.
• 59% Electronic Brokerage pretax profit margin for this quarter, down from 62% in the year-ago quarter.
• Customer equity grew 42% from the year-ago quarter to $104.8 billion and customer debits increased 51% to $22.7 billion.
• Customer accounts increased 20% from the year-ago quarter to 428 thousand.
• Total DARTs increased 3% from the year-ago quarter to 669 thousand.
• Brokerage segment equity was $4.5 billion. Total equity was $6.2 billion.

Segment Overview

Electronic Brokerage

Electronic brokerage segment income before income taxes increased 4%, to $198 million in the quarter ended June 30, 2017, compared to the same period last year. Net revenues increased 8% to $334 million on higher net interest income and commissions revenue, partially offset by a net mark-to-market loss on our U.S. government securities portfolio.

Net interest income increased 25% as average customer credit and margin balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 5% from the year-ago quarter on higher customer volumes in options and stocks, which increased 12% and 55%, respectively, from the year-ago quarter. Other income decreased 33% over the year-ago quarter, driven by a non-recurrence of net mark-to-market gains on investments in U.S. government securities in the year-ago quarter. Pretax profit margin was 59% for the quarter ended June 30, 2017, down from 62% in the same period last year.

Customer accounts grew 20% to 428 thousand and customer equity increased 42% from the year-ago quarter to $104.8 billion. Total DARTs¹ for cleared and execution-only customers increased 3% to 669 thousand from the year-ago quarter. Cleared DARTs were 621 thousand, 4% higher than in the same period last year.

Market Making

Market making segment income before income taxes decreased to a loss of $24 million in the quarter ended June 30, 2017, due to lower trading volumes, as we wind down our options market making business, and decreases in volatility and in the actual-to-implied volatility ratio. In addition, the results for the quarter include approximately $22 million in one-time exit costs, primarily consisting of the write-down of exchange trading rights, in line with previously disclosed estimates.

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 $66 million, as the U.S. dollar value of the GLOBAL increased by approximately 1.06%. 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”).

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

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, July 18, 2017, 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

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