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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.

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.

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.

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.

_______________________

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

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

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

TRADE VOLUMES:
(in 000's, except %)

 

 

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

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

 

 

TOTAL

Options % Futures1 % Stocks %

Period

(contracts) Change (contracts) Change (shares) Change

2018

408,406

151,762

210,257,186

2019

390,739

(4%)

128,770

(15%)

176,752,967

(16%)

2020

624,035

60%

167,078

30%

338,513,068

92%

 

 

2Q2020

151,665

43,393

67,637,445

2Q2021

196,715

30%

35,061

(19%)

172,099,915

154%

 

 

1Q2021

231,797

40,868

308,934,824

2Q2021

196,715

(15%)

35,061

(14%)

172,099,915

(44%)

 

 

ALL CUSTOMERS

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%)

 

 

CLEARED CUSTOMERS

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%)

 

 
1 Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

PRINCIPAL TRANSACTIONS Options % Futures1 % Stocks %
Period (contracts) Change (contracts) Change (shares) Change

2018

49,554

3,277

11,347,811

2019

41,452

(16%)

2,407

(27%)

8,926,477

(21%)

2020

39,840

(4%)

2,523

5%

7,249,464

(19%)

 

 

2Q2020

10,878

811

1,819,150

2Q2021

7,642

(30%)

426

(47%)

682,542

(62%)

 

 

1Q2021

9,899

507

2,769,439

2Q2021

7,642

(23%)

426

(16%)

682,542

(75%)

 
1 Includes options on futures
CUSTOMER STATISTICS
 
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%)

 
1 Excludes non-customers.
2 Commissionable Order - a customer order that generates commissions.

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

%

___________________________________________________

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

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).

 

 

3

Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company’s consolidated statements of comprehensive income. For the three and six months ended June 30, 2021 and 2020, $4 million, $4 million, $12 million, and $8 million were reported in other fees and services, respectively. For the three and six months ended June 30, 2021 and 2020, $0 million, $1 million, -$1 million, and $5 million were reported in other income, respectively.

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

 

Note: Amounts may not add due to rounding.
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.

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