Interactive Brokers Group Announces 3Q2022 Results
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 income473
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 interests419,482,709
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 Day2019
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) Change2019
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) Change2019
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) Change2019
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 futuresINTERACTIVE 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) Change2019
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 Year3Q2022
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 Quarters3Q2022
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 loans2317
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 securities1.63
%
-0.04
%
0.77
%
-0.01
%
Customer margin loans2.96
%
1.20
%
1.98
%
1.18
%
Customer credit balances1.06
%
-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 adjustments57
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 adjustments57
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 liability30.00
(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.
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