Interactive Brokers Group Announces 3Q2022 Results

GREENWICH, Conn.--(BUSINESS WIRE)--Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, announced results for the quarter ended September 30, 2022.

Reported diluted earnings per share were $0.97 for the current quarter and $1.08 as adjusted. For the year-ago quarter, reported diluted earnings per share were $0.43 and $0.78 as adjusted.

Reported net revenues were $790 million for the current quarter and $847 million as adjusted. For the year-ago quarter, reported net revenues were $464 million and $650 million as adjusted.

Reported income before income taxes was $523 million for the current quarter and $580 million as adjusted. For the year-ago quarter, reported income before income taxes was $234 million and $420 million as adjusted.

Financial Highlights

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

• Commission revenue increased 3% to $320 million on higher customer futures trading volume and higher options commission per contract, tempered by lower stock volume.
• Net interest income increased 73% to $473 million on higher benchmark interest rates and customer credit balances, partially offset by a decline in margin lending balances.
• Other income increased $122 million to a loss of $48 million. This increase was mainly comprised of a $171 million lesser loss related to our strategic investment in Up Fintech Holding Limited ("Tiger Brokers"), partially offset by $37 million related to our currency diversification strategy and $7 million related to trading activities.
• Reported pretax profit margin was 66% for the current quarter and 68% as adjusted. For the year-ago quarter, reported pretax margin was 50% and 65% as adjusted.
• Total equity of $10.9 billion.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 14, 2022, to shareholders of record as of December 1, 2022.

___________________________

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 31% to 2.01 million.
• Customer equity decreased 19% to $287.1 billion.
• Total DARTs² decreased 15% to 1.92 million.
• Cleared DARTs decreased 15% to 1.71 million.
• Customer credits increased 10% to $94.7 billion.
• Customer margin loans decreased 19% to $40.5 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 $163 million, as the U.S. dollar value of the GLOBAL decreased by approximately 1.46%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $40 million) and (2) Other Comprehensive Income (loss of $123 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, October 18, 2022, 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/BId2b20dea2a3343ec87ad7f87670ee43b 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 fifth consecutive year, Barron's ranked Interactive Brokers #1 with 5 out of 5 stars in its March 25, 2022, 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								Nine Months
		Ended September 30,								Ended September 30,
		2022				2021				2022				2021
		(in millions, except share and per share data)
Revenues:
Commissions		$	320			$	311			$	991			$	1,030
Other fees and services			45				49				141				160
Other income (loss)			(48	)			(170	)			(144	)			68
Total non-interest income			317				190				988				1,258
Interest income			783				325				1,575				1,022
Interest expense			(310	)			(51	)			(472	)			(169	)
Total net interest income			473				274				1,103				853
Total net revenues			790				464				2,091				2,111
Non-interest expenses:
Execution, clearing and distribution fees			86				61				234				183
Employee compensation and benefits			112				98				335				291
Occupancy, depreciation and amortization			23				19				68				58
Communications			8				8				25				24
General and administrative			37				44				117				138
Customer bad debt			1				-				3				3
Total non-interest expenses			267				230				782				697
Income before income taxes			523				234				1,309				1,414
Income tax expense			40				28				100				116
Net income			483				206				1,209				1,298
Net income attributable to noncontrolling interests			384				164				965				1,057
Net income available for common stockholders		$	99			$	42			$	244			$	241
Earnings per share:
Basic		$	0.98			$	0.44			$	2.45			$	2.60
Diluted		$	0.97			$	0.43			$	2.43			$	2.58
Weighted average common shares outstanding:
Basic			101,818,667				96,229,958				99,646,091				92,814,767
Diluted			102,555,482				96,989,968				100,505,075				93,671,689

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2022				2021				2022				2021
		(in millions, except share and per share data)
Comprehensive income:
Net income available for common stockholders		$	99			$	42			$	244			$	241
Other comprehensive income:
Cumulative translation adjustment, before income taxes			(30	)			(9	)			(64	)			(21	)
Income taxes related to items of other comprehensive income			-				-				-				-
Other comprehensive loss, net of tax			(30	)			(9	)			(64	)			(21	)
Comprehensive income available for common stockholders		$	69			$	33			$	180			$	220
Comprehensive earnings per share:
Basic		$	0.68			$	0.34			$	1.81			$	2.37
Diluted		$	0.68			$	0.34			$	1.79			$	2.35
Weighted average common shares outstanding:
Basic			101,818,667				96,229,958				99,646,091				92,814,767
Diluted			102,555,482				96,989,968				100,505,075				93,671,689
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests		$	384			$	164			$	965			$	1,057
Other comprehensive income - cumulative translation adjustment			(93	)			(31	)			(205	)			(74	)
Comprehensive income attributable to noncontrolling interests		$	291			$	133			$	760			$	983

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
						September 30, 2022			December 31, 2021
						(in millions)
Assets
Cash and cash equivalents						$	3,184		$	2,395
Cash - segregated for regulatory purposes							25,432			22,888
Securities - segregated for regulatory purposes							31,301			15,121
Securities borrowed							3,908			3,912
Securities purchased under agreements to resell							4,860			4,380
Financial instruments owned, at fair value							1,093			673
Receivables from customers, net of allowance for credit losses							40,424			54,935
Receivables from brokers, dealers and clearing organizations							3,321			3,771
Other assets							1,160			1,038
Total assets						$	114,683		$	109,113
Liabilities and equity
Liabilities
Short-term borrowings						$	35		$	27
Securities loaned							9,490			11,769
Financial instruments sold but not yet purchased, at fair value							411			182
Other payables:
Customers							92,594			85,634
Brokers, dealers and clearing organizations							380			557
Other payables							873			722
							93,847			86,913
Total liabilities							103,783			98,891
Equity
Stockholders' equity							2,677			2,395
Noncontrolling interests							8,223			7,827
Total equity							10,900			10,222
Total liabilities and equity						$	114,683		$	109,113
		September 30, 2022					December 31, 2021
Ownership of IBG LLC Membership Interests		Interests		%			Interests			%
IBG, Inc.		102,873,607		24.5	%		98,230,127			23.5	%
Noncontrolling interests (IBG Holdings LLC)		316,609,102		75.5	%		319,880,492			76.5	%
Total IBG LLC membership interests		419,482,709		100.0	%		418,110,619			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
2019		302,289				26,346				17,136				345,771				1,380
2020		620,405		105%		56,834		116%		27,039		58%		704,278		104%		2,795
2021		871,319		40%		78,276		38%		32,621		21%		982,216		39%		3,905
3Q2021		193,218				18,106				8,228				219,552				3,431
3Q2022		170,240		(12%)		16,181		(11%)		7,953		(3%)		194,374		(11%)		3,037
2Q2022		186,791				18,274				8,327				213,392				3,442
3Q2022		170,240		(9%)		16,181		(11%)		7,953		(4%)		194,374		(9%)		3,037

CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
TOTAL		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2019		390,739				128,770				176,752,967
2020		624,035		60%		167,078		30%		338,513,068		92%
2021		887,849		42%		154,866		(7%)		771,273,709		128%
3Q2021		214,988				36,940				172,828,874
3Q2022		215,988		0%		50,486		37%		75,776,756		(56%)
2Q2022		217,642				51,562				81,137,875
3Q2022		215,988		(1%)		50,486		(2%)		75,776,756		(7%)
ALL CUSTOMERS		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2019		349,287				126,363				167,826,490
2020		584,195		67%		164,555		30%		331,263,604		97%
2021		852,169		46%		152,787		(7%)		766,211,726		131%
3Q2021		205,797				36,473				172,082,316
3Q2022		208,145		1%		49,725		36%		74,944,418		(56%)
2Q2022		209,124				50,707				80,079,410
3Q2022		208,145		(0%)		49,725		(2%)		74,944,418		(6%)
CLEARED CUSTOMERS		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2019		302,068				125,225				163,030,500
2020		518,965		72%		163,101		30%		320,376,365		97%
2021		773,284		49%		151,715		(7%)		752,720,070		135%
3Q2021		186,656				36,245				169,002,045
3Q2022		185,166		(1%)		49,242		36%		72,394,078		(57%)
2Q2022		188,617				50,313				77,283,249
3Q2022		185,166		(2%)		49,242		(2%)		72,394,078		(6%)
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
2019		41,452				2,407				8,926,477
2020		39,840		(4%)		2,523		5%		7,249,464		(19%)
2021		35,680		(10%)		2,079		(18%)		5,061,983		(30%)
3Q2021		9,191				467				746,558
3Q2022		7,843		(15%)		761		63%		832,338		11%
2Q2022		8,518				855				1,058,465
3Q2022		7,843		(8%)		761		(11%)		832,338		(21%)
1 Includes options on futures

CUSTOMER STATISTICS
Year over Year			3Q2022			3Q2021		% Change
Total Accounts (in thousands)			2,012			1,536		31%
Customer Equity (in billions)1		$	287.1		$	353.8		(19%)
Cleared DARTs (in thousands)			1,706			2,017		(15%)
Total Customer DARTs (in thousands)			1,920			2,263		(15%)
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.96		$	2.46		20%
Cleared Avg. DARTs per Account (Annualized)			217			343		(37%)
Consecutive Quarters			3Q2022			2Q2022		% Change
Total Accounts (in thousands)			2,012			1,923		5%
Customer Equity (in billions)1		$	287.1		$	294.8		(3%)
Cleared DARTs (in thousands)			1,706			1,927		(11%)
Total Customer DARTs (in thousands)			1,920			2,173		(12%)
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.96		$	2.74		8%
Cleared Avg. DARTs per Account (Annualized)			217			259		(16%)
(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								Nine Months
		Ended September 30,								Ended September 30,
		2022				2021				2022				2021
		(in millions)
Average interest-earning assets
Segregated cash and securities		$	55,453			$	37,239			$	49,749			$	41,212
Customer margin loans			42,425				46,636				44,777				43,611
Securities borrowed			4,235				3,567				3,826				3,836
Other interest-earning assets			9,103				7,426				8,932				6,751
FDIC sweeps1			2,173				2,707				2,189				2,758
		$	113,389			$	97,575			$	109,473			$	98,168
Average interest-bearing liabilities
Customer credit balances		$	92,846			$	78,625			$	89,096			$	78,063
Securities loaned			9,622				10,489				10,437				10,891
Other interest-bearing liabilities			1				-				5				145
		$	102,469			$	89,114			$	99,537			$	89,099
Net interest income
Segregated cash and securities, net		$	228			$	(4	)		$	288			$	(4	)
Customer margin loans2			317				141				663				386
Securities borrowed and loaned, net			114				123				340				434
Customer credit balances, net2			(248	)			8				(276	)			25
Other net interest income1/3			65				9				95				25
Net interest income3		$	476			$	277			$	1,110			$	866
Net interest margin ("NIM")			1.67	%			1.13	%			1.36	%			1.18	%
Annualized yields
Segregated cash and securities			1.63	%			-0.04	%			0.77	%			-0.01	%
Customer margin loans			2.96	%			1.20	%			1.98	%			1.18	%
Customer credit balances			1.06	%			-0.04	%			0.41	%			-0.04	%

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 nine months ended September 30, 2022 and 2021, $3 million, $2 million, $7 million, and $14 million were reported in other fees and services, respectively. For the three and nine months ended September 30, 2022 and 2021, $1 million, $0 million, $1 million, and -$1 million were reported in other income, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2022				2021				2022				2021
		(in millions)
Adjusted net revenues1
Net revenues - GAAP		$	790			$	464			$	2,091			$	2,111
Non-GAAP adjustments
Currency diversification strategy, net			40				3				111				14
Mark-to-market on investments2			17				184				54				(28	)
Remeasurement of TRA liability3			-				(1	)			0				(1	)
Total non-GAAP adjustments			57				186				165				(15	)
Adjusted net revenues		$	847			$	650			$	2,256			$	2,096
Adjusted income before income taxes1
Income before income taxes - GAAP		$	523			$	234			$	1,309			$	1,414
Non-GAAP adjustments
Currency diversification strategy, net			40				3				111				14
Mark-to-market on investments2			17				184				54				(28	)
Remeasurement of TRA liability3			-				(1	)			-				(1	)
Total non-GAAP adjustments			57				186				165				(15	)
Adjusted income before income taxes		$	580			$	420			$	1,474			$	1,399
Adjusted pre-tax profit margin			68	%			65	%			65	%			67	%

		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2022				2021				2022				2021
		(in millions)
Adjusted net income available for common stockholders1
Net income available for common stockholders - GAAP		$	99			$	42			$	244			$	241
Non-GAAP adjustments
Currency diversification strategy, net			10				1				26				3
Mark-to-market on investments2			4				43				13				(6	)
Remeasurement of TRA liability3			-				(1	)			-				(1	)
Income tax effect of above adjustments4			(3	)			(10	)			(8	)			1
Remeasurement of deferred income taxes5			-				1				-				1
Total non-GAAP adjustments			11				33				31				(2	)
Adjusted net income available for common stockholders		$	111			$	75			$	276			$	239
Note: Amounts may not add due to rounding.
		Three Months								Nine Months
		Ended September 30,								Ended September 30,
		2022				2021				2022				2021
		(in dollars)
Adjusted diluted EPS1
Diluted EPS - GAAP		$	0.97			$	0.43			$	2.43			$	2.58
Non-GAAP adjustments
Currency diversification strategy, net			0.09				0.01				0.26				0.03
Mark-to-market on investments2			0.04				0.44				0.13				(0.06	)
Remeasurement of TRA liability3			0.00				(0.01	)			0.00				(0.01	)
Income tax effect of above adjustments4			(0.03	)			(0.10	)			(0.08	)			0.01
Remeasurement of deferred income taxes5			0.00				0.01				0.00				0.01
Total non-GAAP adjustments			0.11				0.34				0.31				(0.02	)
Adjusted diluted EPS		$	1.08			$	0.78			$	2.74			$	2.55
Diluted weighted average common shares outstanding			102,555,482				96,989,968				100,505,075				93,671,689
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 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.

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 our U.S. government and municipal 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 certain other investments, including equity securities taken over by the Company from customers related to losses on margin loans.

³ Remeasurement of our tax receivable agreement ("TRA") liability represents the change in the amount payable to IBG Holdings LLC under the TRA, primarily due to changes in the Company's effective tax rates. This is related to the remeasurement of the deferred tax assets described below. For further information refer to Note 4 - Equity and Earnings per Share under Part II, Item 8 - Financial Statements and Supplementary Data of the Company's Annual Report on Form 10 K filed with the Securities Exchange Commission ("SEC") on February 25, 2022.

⁴ The income tax effect is estimated using the corporate income tax rates applicable to the Company.

⁵ Remeasurement of certain deferred tax assets represents the change in the unamortized balance of deferred tax assets related to the step-up in basis arising from the acquisition of interests in IBG LLC, primarily due to changes in the Company's effective tax rates. For further information refer to Note 4 - Equity and Earnings per Share under Part II, Item 8 - Financial Statements and Supplementary Data of the Company's Annual Report on Form 10 K filed with the Securities Exchange Commission ("SEC") on February 25, 2022.

Contacts

For Interactive Brokers Group, Inc.

Investors:
Nancy Stuebe
[e-mail]

Media:
Rob Garfield
[e-mail].