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Interactive Brokers Group Announces 2Q2023 Results

GAAP DILUTED EPS OF $1.20, ADJUSTED1 EPS OF $1.32

GAAP NET REVENUES OF $1,000 MILLION, ADJUSTED NET REVENUES OF $1,064 MILLION

Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, announced results for the quarter ended June 30, 2023.

Reported diluted earnings per share were $1.20 for the current quarter and $1.32 as adjusted. For the year-ago quarter, reported diluted earnings per share were $0.72 and $0.84 as adjusted.

Reported net revenues were $1,000 million for the current quarter and $1,064 million as adjusted. For the year-ago quarter, reported net revenues were $656 million and $717 million as adjusted.

Reported income before income taxes was $652 million for the current quarter and $716 million as adjusted. For the year-ago quarter, reported income before income taxes was $392 million and $453 million as adjusted.

Financial Highlights

(All comparisons are to the year-ago quarter.)

  • Commission revenue was unchanged at $322 million. Customer trading volume was mixed across product types with options contracts volume up 9% while futures contracts and stock share volumes were down 3% and 28%, respectively.
  • Net interest income increased 99% to $694 million on higher benchmark interest rates and customer credit balances.
  • Execution, clearing and distribution fees expenses increased 21% to $93 million driven by higher customer trading volume in options, the non-recurrence of a $3 million OCC rebate in the year-ago quarter, and a $1 million increase in market data fees, which are associated with market data revenue included in other fees and services.
  • General and administrative expenses increased $43 million to $85 million. The increase is largely attributable to reserves related to the previously-disclosed regulatory investigations into the use of unapproved electronic messaging and record-keeping requirements. As has been publicly reported, the SEC and CFTC are conducting an industry-wide sweep that has resulted in substantial settlements with other financial services firms.
  • Reported pretax profit margin was 65% for the current quarter and 67% as adjusted. For the year-ago quarter, reported pretax margin was 60% and 63% as adjusted.
  • Total equity of $12.7 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, 2023, to shareholders of record as of September 1, 2023.

__________________________

1 See the reconciliation of non-GAAP financial measures starting on page 9.

Business Highlights

(All comparisons are to the year-ago quarter.)

  • Customer accounts increased 19% to 2.29 million.
  • Customer equity increased 24% to $365.0 billion.
  • Total DARTs2 decreased 14% to 1.87 million.
  • Cleared DARTs decreased 13% to 1.67 million.
  • Customer credits increased 7% to $98.9 billion.
  • Customer margin loans decreased 2% to $41.9 billion.

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 decreased our comprehensive earnings by $24 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.14%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $55 million) and (2) Other Comprehensive Income (gain of $31 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, July 18, 2023, at 4:30 p.m. ET to discuss its quarterly results. Members of the public who would like to listen to the conference call should register at https://register.vevent.com/register/BIdb81bf27b8a947f2af9d311979370b58 to obtain the dial-in details. The number should be dialed approximately ten minutes prior to the start of the 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 150 markets in numerous countries and currencies, from a single unified platform 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. For the sixth consecutive year, Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its June 9, 2023, Best Online Brokers 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.

_______________________________

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

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 
Three Months Six Months
Ended June 30, Ended June 30,

2023

2022

2023

2022

(in millions, except share and per share data)
 
Revenues:
Commissions $

322

$

322

$

679

$

671

Other fees and services

47

43

90

96

Other loss

(63)

(57)

(44)

(96)

Total non-interest income

306

308

725

671

 
Interest income

1,545

460

2,892

792

Interest expense

(851)

(112)

(1,561)

(162)

Total net interest income

694

348

1,331

630

Total net revenues

1,000

656

2,056

1,301

 
Non-interest expenses:
Execution, clearing and distribution fees

93

77

188

148

Employee compensation and benefits

136

112

264

223

Occupancy, depreciation and amortization

25

23

49

45

Communications

10

9

19

17

General and administrative

85

42

121

80

Customer bad debt

(1)

1

2

2

Total non-interest expenses

348

264

643

515

 
Income before income taxes

652

392

1,413

786

Income tax expense

51

32

112

60

Net income

601

360

1,301

726

Net income attributable to noncontrolling interests

476

288

1,028

581

Net income available for common stockholders $

125

$

72

$

273

$

145

 
Earnings per share:
Basic $

1.21

$

0.73

$

2.65

$

1.47

Diluted $

1.20

$

0.72

$

2.62

$

1.46

 
Weighted average common shares outstanding:
Basic

103,587,557

98,853,981

103,274,846

98,541,798

Diluted

104,463,729

99,695,489

104,254,888

99,461,867

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 
Three Months Six Months
Ended June 30, Ended June 30,

2023

2022

2023

2022

(in millions, except share and per share data)
 
Comprehensive income:
Net income available for common stockholders $

125

$

72

$

273

$

145

Other comprehensive income:
Cumulative translation adjustment, before income taxes

7

(24)

12

(34)

Income taxes related to items of other comprehensive income

-

-

-

-

Other comprehensive income (loss), net of tax

7

(24)

12

(34)

Comprehensive income available for common stockholders $

132

$

48

$

285

$

111

 
Comprehensive earnings per share:
Basic $

1.28

$

0.48

$

2.76

$

1.12

Diluted $

1.27

$

0.47

$

2.74

$

1.11

 
Weighted average common shares outstanding:
Basic

103,587,557

98,853,981

103,274,846

98,541,798

Diluted

104,463,729

99,695,489

104,254,888

99,461,867

 
 
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests $

476

$

288

$

1,028

$

581

Other comprehensive income - cumulative translation adjustment

24

(81)

38

(112)

Comprehensive income attributable to noncontrolling interests $

500

$

207

$

1,066

$

469

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

June 30,

2023
December 31,

2022
(in millions)
 
Assets  
Cash and cash equivalents   $

3,681

$

3,436

Cash - segregated for regulatory purposes  

25,770

25,167

Securities - segregated for regulatory purposes  

33,457

31,781

Securities borrowed  

5,999

4,749

Securities purchased under agreements to resell  

6,431

6,029

Financial instruments owned, at fair value  

495

485

Receivables from customers, net of allowance for credit losses  

41,966

38,760

Receivables from brokers, dealers and clearing organizations  

1,400

3,469

Other assets  

1,394

1,267

Total assets   $

120,593

$

115,143

 
Liabilities and equity  
 
Liabilities  
Short-term borrowings   $

17

$

18

Securities loaned  

10,261

8,940

Financial instruments sold but not yet purchased, at fair value  

157

146

Other payables:  
Customers  

95,999

93,195

Brokers, dealers and clearing organizations  

376

291

Other payables  

1,126

938

97,501

94,424

Total liabilities  

107,936

103,528

 
Equity  
Stockholders' equity  

3,158

2,848

Noncontrolling interests  

9,499

8,767

Total equity  

12,657

11,615

 
Total liabilities and equity   $

120,593

$

115,143

 
June 30,

2023
December 31,

2022
Ownership of IBG LLC Membership Interests Interests % Interests %
 
IBG, Inc.

104,363,296

24.8%

102,927,703

24.5%

Noncontrolling interests (IBG Holdings LLC)

316,609,102

75.2%

316,609,102

75.5%

 
Total IBG LLC membership interests

420,972,398

100.0%

419,536,805

100.0%

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

2020

620,405

56,834

27,039

704,278

2,795

2021

871,319

40%

78,276

38%

32,621

21%

982,216

39%

3,905

2022

735,619

(16%)

70,049

(11%)

32,863

1%

838,531

(15%)

3,347

 

2Q2022

186,791

18,274

8,327

213,392

3,442

2Q2023

161,710

(13%)

14,071

(23%)

8,383

1%

184,164

(14%)

2,970

 

1Q2023

180,261

15,369

8,187

203,817

3,287

2Q2023

161,710

(10%)

14,071

(8%)

8,383

2%

184,164

(10%)

2,970

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

 

 

TOTAL

Options % Futures1 % Stocks %

Period

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

2020

624,035

167,078

338,513,068

2021

887,849

42%

154,866

(7%)

771,273,709

128%

2022

908,415

2%

207,138

34%

330,035,586

(57%)

 

 

2Q2022

217,642

51,562

81,137,875

2Q2023

236,803

9%

49,644

(4%)

58,720,684

(28%)

 

 

1Q2023

247,508

55,197

75,522,066

2Q2023

236,803

(4%)

49,644

(10%)

58,720,684

(22%)

 

 

ALL CUSTOMERS

Options % Futures1 % Stocks %

Period

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

2020

584,195

164,555

331,263,604

2021

852,169

46%

152,787

(7%)

766,211,726

131%

2022

873,914

3%

203,933

33%

325,368,714

(58%)

 

 

2Q2022

209,124

50,707

80,079,410

2Q2023

227,884

9%

49,040

(3%)

57,711,637

(28%)

 

 

1Q2023

239,038

54,577

74,562,384

2Q2023

227,884

(5%)

49,040

(10%)

57,711,637

(23%)

 

 

CLEARED CUSTOMERS

Options % Futures1 % Stocks %

Period

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

2020

518,965

163,101

320,376,365

2021

773,284

49%

151,715

(7%)

752,720,070

135%

2022

781,373

1%

202,145

33%

314,462,672

(58%)

 

 

2Q2022

188,617

50,313

77,283,249

2Q2023

194,082

3%

48,506

(4%)

55,664,831

(28%)

 

 

1Q2023

209,605

53,957

72,041,499

2Q2023

194,082

(7%)

48,506

(10%)

55,664,831

(23%)

 

 

1 Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

 
CONTRACT AND SHARE VOLUMES, continued:
(in 000's, except %)
 
PRINCIPAL TRANSACTIONS Options % Futures1 % Stocks %
Period (contracts) Change (contracts) Change (shares) Change

2020

39,840

2,523

7,249,464

2021

35,680

(10%)

2,079

(18%)

5,061,983

(30%)

2022

34,501

(3%)

3,205

54%

4,666,872

(8%)

 

2Q2022

8,518

855

1,058,465

2Q2023

8,919

5%

604

(29%)

1,009,047

(5%)

 

1Q2023

8,470

620

959,682

2Q2023

8,919

5%

604

(3%)

1,009,047

5%

 
1 Includes options on futures
CUSTOMER STATISTICS
 
Year over Year

2Q2023

2Q2022

% Change
Total Accounts (in thousands)

2,290

1,923

19%

Customer Equity (in billions)1 $

365.0

$

294.8

24%

 
Cleared DARTs (in thousands)

1,673

1,927

(13%)

Total Customer DARTs (in thousands)

1,865

2,173

(14%)

 
Cleared Customers
Commission per Cleared Commissionable Order2 $

3.11

$

2.74

14%

Cleared Avg. DARTs per Account (Annualized)

186

259

(28%)

 
Consecutive Quarters

2Q2023

1Q2023

% Change
Total Accounts (in thousands)

2,290

2,195

4%

Customer Equity (in billions)1 $

365.0

$

343.1

6%

 
Cleared DARTs (in thousands)

1,673

1,845

(9%)

Total Customer DARTs (in thousands)

1,865

2,054

(9%)

 
Cleared Customers
Commission per Cleared Commissionable Order2 $

3.11

$

3.16

(2%)

Cleared Avg. DARTs per Account (Annualized)

186

214

(13%)

 
(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,

2023

2022

2023

2022

 
(in millions)
Average interest-earning assets
Segregated cash and securities $

61,038

$

50,508

$

60,359

$

46,898

Customer margin loans

39,989

44,764

39,646

45,953

Securities borrowed

5,649

3,775

5,259

3,621

Other interest-earning assets

10,090

9,482

9,934

8,847

FDIC sweeps1

2,719

2,176

2,574

2,198

$

119,485

$

110,705

$

117,770

$

107,517

 
Average interest-bearing liabilities
Customer credit balances $

96,416

$

90,048

$

96,109

$

87,222

Securities loaned

9,729

10,599

9,150

10,844

Other interest-bearing liabilities

-

1

1

7

$

106,145

$

100,648

$

105,260

$

98,073

 
Net interest income
Segregated cash and securities, net $

700

$

53

$

1,303

$

60

Customer margin loans2

547

197

1,024

346

Securities borrowed and loaned, net

79

116

167

226

Customer credit balances, net2

(774)

(37)

(1,427)

(28)

Other net interest income1/3

145

22

270

30

Net interest income3 $

697

$

351

$

1,337

$

634

 
Net interest margin ("NIM")

2.34%

1.27%

2.29%

1.19%

 
Annualized yields
Segregated cash and securities

4.60%

0.42%

4.35%

0.26%

Customer margin loans

5.49%

1.77%

5.21%

1.52%

Customer credit balances

3.22%

0.17%

2.99%

0.06%

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, 2023 and 2022, $5 million, $8 million, $3 million, and $4 million were reported in other fees and services, respectively. For the three and six months ended June 30, 2023 and 2022, -$2 million, -$2 million, $0 million, and $0 million were reported in other income, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

 
Three Months Six Months
Ended June 30, Ended June 30,

2023

2022

2023

2022

 
(in millions)
 
Adjusted net revenues1
Net revenues - GAAP $

1,000

$

656

$

2,056

$

1,301

 
Non-GAAP adjustments
Currency diversification strategy, net

55

53

54

71

Mark-to-market on investments2

9

8

(31)

37

Total non-GAAP adjustments

64

61

23

108

Adjusted net revenues $

1,064

$

717

$

2,079

$

1,409

 
Adjusted income before income taxes1
Income before income taxes - GAAP $

652

$

392

$

1,413

$

786

 
Non-GAAP adjustments
Currency diversification strategy, net

55

53

54

71

Mark-to-market on investments2

9

8

(31)

37

Total non-GAAP adjustments

64

61

23

108

Adjusted income before income taxes $

716

$

453

$

1,436

$

894

 
Adjusted pre-tax profit margin

67%

63%

69%

63%

Three Months Six Months
Ended June 30, Ended June 30,

2023

2022

2023

2022

 
(in millions)
Adjusted net income available for common stockholders1
Net income available for common stockholders - GAAP $

125

$

72

$

273

$

145

 
Non-GAAP adjustments
Currency diversification strategy, net

14

13

14

17

Mark-to-market on investments2

2

2

(8)

9

Income tax effect of above adjustments3

(3)

(3)

(1)

(5)

Total non-GAAP adjustments

13

12

5

20

Adjusted net income available for common stockholders $

138

$

84

$

278

$

165

 
Note: Amounts may not add due to rounding.
 
Three Months Six Months
Ended June 30, Ended June 30,

2023

2022

2023

2022

 
(in dollars)
Adjusted diluted EPS1
Diluted EPS - GAAP $

1.20

$

0.72

$

2.62

$

1.46

 
Non-GAAP adjustments
Currency diversification strategy, net

0.13

0.13

0.13

0.17

Mark-to-market on investments2

0.02

0.02

(0.07)

0.09

Income tax effect of above adjustments3

(0.03)

(0.03)

(0.01)

(0.05)

Total non-GAAP adjustments

0.12

0.12

0.04

0.20

Adjusted diluted EPS $

1.32

$

0.84

$

2.67

$

1.66

 
Diluted weighted average common shares outstanding

104,463,729

99,695,489

104,254,888

99,461,867

 
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.

  • We define adjusted net revenues as net revenues adjusted to remove the effect of our 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 currency diversification strategy and our net mark-to-market gains (losses) on investments.
  • 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 currency diversification strategy and our mark-to-market gains (losses) on investments.
  • We define adjusted diluted EPS as adjusted net income available for common stockholders divided by the diluted weighted average number of shares outstanding for the period.

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 currency diversification strategy and our mark-to-market on investments 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 investments in equity securities that do not qualify for equity method accounting which are measured at fair value, on our U.S. government and municipal securities portfolio, which are typically held to maturity, and on certain other investments, including equity securities taken over by the Company from customers related to losses on margin loans.

3 The income tax effect is estimated using the statutory income tax rates applicable to the Company.

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