IBKR
$52.64
Interactive Brokers
($.34)
(.64%)
Earnings Details
3rd Quarter September 2020
Tuesday, October 20, 2020 4:01:00 PM
Tweet Share Watch
Summary

Interactive Brokers Misses

Interactive Brokers (IBKR) reported 3rd Quarter September 2020 earnings of $0.53 per share on revenue of $593.0 million. The consensus earnings estimate was $0.53 per share on revenue of $495.5 million. The Earnings Whisper number was $0.58 per share. Revenue fell 7.8% compared to the same quarter a year ago.

Interactive Brokers Group Inc is an automated electronic broker and market maker engaged in routing orders and executing and processing trades in securities, futures, foreign exchange instruments, and mutual funds.

Results
Reported Earnings
$0.53
Earnings Whisper
$0.58
Consensus Estimate
$0.53
Reported Revenue
$593.0 Mil
Revenue Estimate
$495.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Interactive Brokers Group Announces 3Q2020 Results

Diluted Earnings Per Share of $0.58, Adjusted Diluted Earnings Per Share of $0.53.

Pretax Income of $334 Million on $548 Million in Net Revenues.

Adjusted Pretax Income of $304 Million on $518 Million in Adjusted Net Revenues1.

Declares Quarterly Dividend of $0.10 Per Share.

GREENWICH, Conn.--(BUSINESS WIRE)--Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.58 for the quarter ended September 30, 2020 compared to $0.45 for the same period in 2019, and adjusted diluted earnings per share of $0.53 for this quarter compared to $0.57 for the year-ago quarter.

Net revenues were $548 million and income before income taxes was $334 million this quarter, compared to net revenues of $466 million and income before income taxes of $281 million for the same period in 2019. Adjusted net revenues were $518 million and adjusted income before income taxes was $304 million this quarter, compared to adjusted net revenues of $525 million and adjusted income before income taxes of $340 million for the same period in 2019.

Financial Highlights

  • Commission revenue showed strong growth, increasing $92 million, or 49%, from the year-ago quarter on higher customer trading volumes within an active trading environment worldwide.
  • Net interest income decreased $96 million, or 33%, from the year-ago quarter as the average Federal Funds effective rate decreased to 0.09% from 2.19% in the year-ago quarter.
  • Other income increased $76 million from the year-ago quarter. This increase was mainly comprised of (1) $74 million related to our currency diversification strategy, which gained $27 million this quarter compared to a loss of $47 million in the same period in 2019; and (2) $19 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which swung to a $6 million mark-to-market gain this quarter from a $13 million mark-to-market loss in the same period in 2019; partially offset by (3) a $13 million impairment loss on our investment in OneChicago Exchange recognized in this quarter.
  • 61% pretax profit margin for this quarter, up from 60% in the year-ago quarter. 59% adjusted pretax profit margin for this quarter, down from 65% in the year-ago quarter.
  • Total equity of $8.5 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, 2020 to shareholders of record as of December 1, 2020.

Business Highlights

  • Customer equity grew 49% from the year-ago quarter to $232.7 billion.
  • Customer credits increased 27% from the year-ago quarter to $70.8 billion.
  • Customer margin loans increased 17% from the year-ago quarter to $30.0 billion.
  • Customer accounts increased 47% from the year-ago quarter to 981 thousand.
  • Total DARTs2 increased 113% from the year-ago quarter to 1.83 million.
  • Cleared DARTs increased 110% from the year-ago quarter to 1.63 million.

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 affects 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.
  • As announced on April 9, 2020, during the second quarter of 2020 the Company donated $5 million to assist efforts to provide food and support for people affected by the COVID-19 pandemic in the United States as well as to advance medical solutions.

The effects of the COVID-19 pandemic on the Company’s financial results for the third quarter of 2020 can be summarized as follows: (1) higher commission revenue due to increased trading activity and a higher rate of customer accounts opened during this period; and (2) lower net interest income resulting from lower benchmark interest rates.

The impact of the COVID-19 pandemic on the Company’s future financial results could be significant but 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 $72 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.91%. The effects of the currency diversification strategy are reported as components of (1) Other Income ($27 million) and (2) Other Comprehensive Income ($45 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, October 20, 2020, 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 24, 2020, 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

2017

 

                 265,501

   

         14,835

   

         31,282

   

       311,618

   

               1,246

2018

 

                 328,099

 

24%

 

         21,880

 

47%

 

         18,663

 

 (40%)

 

       368,642

 

18%

 

               1,478

2019

 

                 302,289

 

 (8%)

 

         26,346

 

20%

 

         17,136

 

 (8%)

 

       345,771

 

 (6%)

 

               1,380

 

                  

3Q2019

 

                   78,793

   

           6,566

   

           4,738

   

         90,097

   

               1,419

3Q2020

 

                 160,015

 

103%

 

         14,701

 

124%

 

           7,453

 

57%

 

       182,169

 

102%

 

               2,846

 

                  

2Q2020

 

                 153,212

   

         13,752

   

           7,252

   

       174,216

   

               2,765

3Q2020

 

                 160,015

 

4%

 

         14,701

 

7%

 

           7,453

 

3%

 

       182,169

 

5%

 

               2,846

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

2017

 

       395,885

   

       124,123

   

    220,247,921

  

2018

 

       408,406

 

3%

 

       151,762

 

22%

 

    210,257,186

 

 (5%)

2019

 

       390,739

 

 (4%)

 

       128,770

 

 (15%)

 

    176,752,967

 

 (16%)

 

            

3Q2019

 

       103,972

   

         36,124

   

      43,107,364

  

3Q2020

 

       163,972

 

58%

 

         39,186

 

8%

 

      87,514,614

 

103%

 

            

2Q2020

 

       151,665

   

         43,393

   

      67,637,445

  

3Q2020

 

       163,972

 

8%

 

         39,186

 

 (10%)

 

      87,514,614

 

29%

             
ALL CUSTOMERS Options % Futures1 % Stocks %
Period (contracts) Change (contracts) Change (shares) Change

2017

 

       293,860

   

       118,427

   

    213,108,299

  

2018

 

       358,852

 

22%

 

       148,485

 

25%

 

    198,909,375

 

 (7%)

2019

 

       349,287

 

 (3%)

 

       126,363

 

 (15%)

 

    167,826,490

 

 (16%)

 

            

3Q2019

 

         93,124

   

         35,427

   

      41,025,047

  

3Q2020

 

       153,612

 

65%

 

         38,685

 

9%

 

      85,893,357

 

109%

 

            

2Q2020

 

       140,787

   

         42,582

   

      65,818,295

  

3Q2020

 

       153,612

 

9%

 

         38,685

 

 (9%)

 

      85,893,357

 

31%

             
CLEARED CUSTOMERSOptions % Futures1 % Stocks %
Period (contracts) Change (contracts) Change (shares) Change

2017

 

       253,304

   

       116,858

   

    209,435,662

  

2018

 

       313,795

 

24%

 

       146,806

 

26%

 

    194,012,882

 

 (7%)

2019

 

       302,068

 

 (4%)

 

       125,225

 

 (15%)

 

    163,030,500

 

 (16%)

 

            

3Q2019

 

         80,840

   

         35,108

   

      39,891,867

  

3Q2020

 

       137,660

 

70%

 

         38,405

 

9%

 

      83,246,086

 

109%

 

            

2Q2020

 

       124,010

   

         42,259

   

      62,937,898

  

3Q2020

 

       137,660

 

11%

 

         38,405

 

 (9%)

 

      83,246,086

 

32%

             
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

2017

 

       102,025

   

           5,696

   

        7,139,622

  

2018

 

         49,554

 

 (51%)

 

           3,277

 

 (42%)

 

      11,347,811

 

59%

2019

 

         41,452

 

 (16%)

 

           2,407

 

 (27%)

 

        8,926,477

 

 (21%)

 

            

3Q2019

 

         10,848

   

              697

   

        2,082,317

  

3Q2020

 

         10,360

 

 (4%)

 

              501

 

 (28%)

 

        1,621,257

 

 (22%)

 

            

2Q2020

 

         10,878

   

              811

   

        1,819,150

  

3Q2020

 

         10,360

 

 (5%)

 

              501

 

 (38%)

 

        1,621,257

 

 (11%)

             
1 Includes options on futures           

 

CUSTOMERS STATISTICS        
 
Year over Year  

3Q2020

  

3Q2019

 % Change
   Total Accounts (in thousands)  

                     981

  

                     666

 

47%

   Customer Equity (in billions)1 $

232.7

 $

156.6

 

49%

         
   Cleared DARTs (in thousands)  

                  1,629

  

                     777

 

110%

   Total Customer DARTs (in thousands)  

                  1,832

  

                     859

 

113%

         
Cleared Customers        
   Commission per Cleared Commissionable Order2 $

2.69

 $

3.69

 

 (27%)

   Cleared Avg. DARTs per Account (Annualized)  

                     442

  

                     297

 

49%

   Net Revenue per Avg. Account (Annualized) $

2,154

 $

2,995

 

 (28%)

         
Consecutive Quarters  

3Q2020

  

2Q2020

 % Change
   Total Accounts (in thousands)  

                     981

  

                     876

 

12%

   Customer Equity (in billions)1 $

232.7

 $

203.2

 

15%

         
   Cleared DARTs (in thousands)  

                  1,629

  

                  1,558

 

5%

   Total Customer DARTs (in thousands)  

                  1,832

  

                  1,746

 

5%

         
Cleared Customers        
   Commission per Cleared Commissionable Order2 $

2.69

 $

2.81

 

 (4%)

   Cleared Avg. DARTs per Account (Annualized)  

                     442

  

                     480

 

 (8%)

   Net Revenue per Avg. Account (Annualized) $

2,154

 $

2,442

 

 (12%)

         
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,
    

2020

 

2019

 

2020

 

2019

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

                  43,589

 $

                  29,443

 $

                  41,283

 $

                  27,384

 Customer margin loans  

                  28,490

  

                  26,134

  

                  27,052

  

                  26,014

 Securities borrowed  

                    4,477

  

                    4,036

  

                    4,448

  

                    3,900

 Other interest-earning assets  

                    5,075

  

                    5,362

  

                    5,288

  

                    5,202

 FDIC sweeps1  

                    2,982

  

                    2,151

  

                    2,864

  

                    1,999

    $

                  84,613

 $

                  67,126

 $

                  80,935

 $

                  64,499

               
Average interest-bearing liabilities            
 Customer credit balances $

                  68,867

 $

                  53,762

 $

                  65,716

 $

                  51,786

 Securities loaned  

                    5,756

  

                    4,160

  

                    5,304

  

                    3,993

 Other interest-bearing liabilities  

                       251

  

                       173

  

                       313

  

                         78

    $

                  74,874

 $

                  58,095

 $

                  71,333

 $

                  55,857

               
Net interest income            
 Segregated cash and securities, net $

                         14

 $

                       153

 $

                       159

 $

                       434

 Customer margin loans2  

                         83

  

                       175

  

                       287

  

                       537

 Securities borrowed and loaned, net  

                         86

  

                         77

  

                       228

  

                       177

 Customer credit balances, net2  

                            8

  

                      (137)

  

                        (55)

  

                      (421)

 Other net interest income1/3  

                         10

  

                         31

  

                         47

  

                         94

  Net interest income3 $

                       201

 $

                       299

 $

                       666

 $

                       821

               
Net interest margin ("NIM")  

0.94%

  

1.77%

  

1.10%

  

1.70%

               
Annualized yields            
 Segregated cash and securities  

0.13%

  

2.06%

  

0.51%

  

2.12%

 Customer margin loans  

1.16%

  

2.66%

  

1.41%

  

2.76%

 Customer credit balances  

-0.05%

  

1.01%

  

0.11%

  

1.09%

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, 2020 and 2019, $6 million, $4 million, $14 million, and $10 million were reported in other fees and services, respectively. For the three and nine months ended September 30, 2020 and 2019, $0 million, $4 million, $5 million, and $15 million were reported in other income, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

    Three Months Nine Months 
    Ended September 30, Ended September 30,
    

2020

 

2019

 

2020

 

2019

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

279

 $

187

 $

824

 $

538

 Other fees and services1/2 

45

 

35

 

123

 

105

 Other income (loss)1/3  

29

  

(47)

  

25

  

(2)

               
  Total non-interest income  

353

  

175

  

972

  

641

               
 Interest income  

240

  

468

  

853

  

1,308

 Interest expense  

(45)

  

(177)

  

(206)

  

(512)

               
  Total net interest income  

195

  

291

  

647

  

796

               
  Total net revenues   

548

  

466

  

1,619

  

1,437

               
Non-interest expenses:            
 Execution, clearing and distribution fees  

74

  

68

  

227

  

192

 Employee compensation and benefits  

77

  

67

  

239

  

213

 Occupancy, depreciation and amortization  

17

  

15

  

51

  

43

 Communications  

6

  

7

  

19

  

19

 General and administrative   

37

  

30

  

206

  

80

 Customer bad debt  

3

  

(2)

  

13

  

45

               
  Total non-interest expenses   

214

  

185

  

755

  

592

               
Income before income taxes  

334

  

281

  

864

  

845

               
Income tax expense  

32

  

20

  

65

  

50

               
Net income  

302

  

261

  

799

  

795

               
Net income attributable to noncontrolling interests  

256

  

225

  

675

  

678

               
Net income available for common stockholders $

46

 $

36

 $

124

 $

117

               
Earnings per share:            
 Basic  $

0.59

 $

0.46

 $

1.60

 $

1.54

 Diluted $

0.58

 $

0.45

 $

1.58

 $

1.52

               
Weighted average common shares outstanding:            
 Basic   

78,509,625

  

76,742,789

  

77,543,008

  

75,910,080

 Diluted  

79,120,548

  

77,348,976

  

78,243,699

  

76,646,487

1

 In the first quarter of 2020, we changed the presentation of our consolidated statements of income to better align with our business strategy. Previously reported amounts have been adjusted to conform with the new presentation. 
             

2

 Includes market data fees, account activity fees, risk exposure fees, order flow income from options exchange mandated programs, and revenues from other fees and services.
             

3

 Includes gains (losses) from principal transactions; the impact of our currency diversification strategy; gains (losses) from our equity method investments, other revenue not directly attributable to our core business offerings.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

    Three Months Nine Months 
    Ended September 30, Ended September 30,
    

2020

 

2019

 

2020

 

2019

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

46

 $

36

 $

124

 $

117

 Other comprehensive income:            
  Cumulative translation adjustment, before income taxes  

                                 8

  

                                (6)

  

                         5

  

                       (3)

  Income taxes related to items of other comprehensive income  

                                  -

  

                                  -

  

                          -

  

                          -

 Other comprehensive income (loss), net of tax  

                                 8

  

                                (6)

  

                         5

  

                       (3)

Comprehensive income available for common stockholders $

54

 $

30

 $

129

 $

114

               
Comprehensive earnings per share:            
 Basic  $

0.69

 $

0.39

 $

1.67

 $

1.50

 Diluted  $

0.69

 $

0.39

 $

1.65

 $

1.49

               
Weighted average common shares outstanding:            
 Basic   

78,509,625

  

76,742,789

  

77,543,008

  

75,910,080

 Diluted   

79,120,548

  

77,348,976

  

78,243,699

  

76,646,487

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

256

 $

225

 $

675

 $

678

Other comprehensive income - cumulative translation adjustment  

37

  

(22)

  

24

  

(11)

Comprehensive income attributable to noncontrolling interests $

293

 $

203

 $

699

 $

667

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)

      September 30,
2020
 December 31,
2019
      (in millions)
           
Assets          
Cash and cash equivalents     $

                     3,292

 $

2,882

Cash - segregated for regulatory purposes      

                   12,789

  

                     9,400

Securities - segregated for regulatory purposes      

                   29,316

  

                   17,824

Securities borrowed      

                     3,995

  

                     3,916

Securities purchased under agreements to resell      

                     1,401

  

                     3,111

Financial instruments owned, at fair value      

                        452

  

                     1,916

Receivables from customers, net of allowance for doubtful accounts     

                   30,343

  

                   31,304

Receivables from brokers, dealers and clearing organizations      

                     2,575

  

                        685

Other assets      

                        535

  

                        638

           
Total assets    $

84,698

 $

71,676

           
Liabilities and equity          
           
Liabilities          
Short-term borrowings     $

                        628

 $

16

Securities loaned      

                     5,738

  

                     4,410

Securities sold under agreements to repurchase      

                           -  

  

                     1,909

Financial instruments sold but not yet purchased, at fair value      

                        187

  

                        457

Other payables:          
Customers     

                   68,830

  

                   56,248

Brokers, dealers and clearing organizations     

                        313

  

                        220

Other payables     

                        456

  

                        476

       

                   69,599

  

                   56,944

           
Total liabilities     

                   76,152

  

                   63,736

           
Equity          
Stockholders' equity      

                     1,609

  

                     1,452

Noncontrolling interests      

                     6,937

  

                     6,488

Total equity     

                     8,546

  

                     7,940

           
Total liabilities and equity    $

84,698

 $

71,676

           
  September 30, 2020  December 31, 2019
Ownership of IBG LLC Membership Interests 

Interests

 

 %

 

 

Interests

 

 

 %

           
IBG, Inc. 

79,057,622

 

19.0%

  

76,759,595

  

18.5%

Noncontrolling interests (IBG Holdings LLC) 

337,670,642

 

81.0%

  

338,670,642

  

81.5%

           
Total IBG LLC membership interests 

416,728,264

 

100.0%

  

415,430,237

  

100.0%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

   Three Months Nine Months
   Ended September 30, Ended September 30,
   

2020

 

2019

 

2020

 

2019

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

548

 $

466

 $

1,619

 $

1,437

              
Non-GAAP adjustments            
 Currency diversification strategy, net  

(27)

  

47

  

6

  

72

 Mark-to-market on investments2  

                       (3)

  

                       12

  

                       (3)

  

                     (28)

              
Total non-GAAP adjustments  

(30)

  

59

  

3

  

44

              
Adjusted net revenues $

518

 $

525

 $

1,622

 $

1,481

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

334

 $

281

 $

864

 $

845

              
Non-GAAP adjustments            
 Currency diversification strategy, net  

(27)

  

47

  

6

  

72

 Mark-to-market on investments2  

                       (3)

  

                       12

  

                       (3)

  

                     (28)

 Customer compensation expense3  

0

  

0

  

103

  

0

 Bad debt expense4  

0

  

0

  

                         1

  

                       42

              
Total non-GAAP adjustments  

                     (30)

  

                       59

  

                     107

  

                       86

              
              
Adjusted income before income taxes $

304

 $

340

 $

971

 $

931

              
Adjusted pre-tax profit margin  

59%

  

65%

  

60%

  

63%

              
              

 

             
   Three Months Nine Months
   Ended September 30, Ended September 30,
   

2020

 

2019

 

2020

 

2019

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

46

 $

36

 $

124

 $

117

              
Non-GAAP adjustments            
 Currency diversification strategy, net  

(5)

  

9

  

1

  

13

 Mark-to-market on investments2  

                       (1)

  

                         2

  

                       (1)

  

(5)

 Customer compensation expense3  

                          -

  

                          -

  

                       19

  

                          -

 Bad debt expense4  

                          -

  

                          -

  

                         0

  

8

 Income tax effect of above adjustments5  

                         1

  

                       (3)

  

                       (4)

  

(4)

              
Total non-GAAP adjustments  

                       (4)

  

                         9

  

                       16

  

                       12

              
Adjusted net income available for common stockholders $

42

 $

45

 $

140

 $

129

              
Note: Amounts may not add due to rounding.            
   Three Months Nine Months
   Ended September 30, Ended September 30,
   

2020

 

2019

 

2020

 

2019

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

0.58

 $

0.45

 $

1.58

 $

1.52

              
Non-GAAP adjustments            
 Currency diversification strategy, net  

(0.06)

  

0.11

  

0.02

  

0.17

 Mark-to-market on investments2  

(0.01)

  

0.03

  

(0.01)

  

(0.06)

 Customer compensation expense3  

0.00

  

0.00

  

0.24

  

0.00

 Bad debt expense4  

0.00

  

0.00

  

0.00

  

0.10

 Income tax effect of above adjustments  

0.02

  

(0.03)

  

(0.05)

  

(0.05)

              
Total non-GAAP adjustments  

(0.05)

  

0.11

  

0.20

  

0.16

              
Adjusted diluted EPS $

0.53

 $

0.57

 $

1.79

 $

1.68

              
Diluted weighted average common shares outstanding  

79,120,548

  

77,348,976

  

78,243,699

  

76,646,487

              
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 of our GLOBAL currency diversification strategy, the mark-to-market on investments, customer compensation expenses, and unusual bad debt expense attributable to IBG, Inc.

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 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 described below.

3 Customer compensation expenses were incurred to compensate certain affected customers in connection with their losses resulting from the West Texas Intermediate Crude Oil event. On April 20, 2020, the energy markets exhibited extraordinary price activity in the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate Crude Oil contract. The price of the May 2020 physically-settled contract dropped to an unprecedented negative price of $37.63.

4 Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the nine months ending September 30, 2019, unusual bad debt expense reflects losses recognized on margin lending to a small number of our brokerage customers that had taken relatively large positions in a security listed on a major U.S. exchange, which lost a substantial amount of its value in a very short timeframe. For the nine months ended September 30, 2020, unusual bad debt expense reflects losses incurred by futures customers in excess of the equity in their accounts related to the West Texas Intermediate Crude Oil event described above.

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

For Interactive Brokers Group, Inc.
Investors:
Nancy Stuebe, 203-618-4070

Media:
Kalen Holliday, 203-618-4069

Source: Interactive Brokers Group, Inc.