Interactive Brokers Group Announces 2Q2023 Results

GREENWICH, Conn.--(BUSINESS WIRE)--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.

Contacts

For Interactive Brokers Group, Inc.
Investors: Nancy Stuebe, [e-mail]

or

Media: Rob Garfield, [e-mail]