Interactive Brokers Group Announces 2Q2021 Results
Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $1.00 for the quarter ended June 30, 2021 compared to $0.40 for the same period in 2020, and adjusted diluted earnings per share of $0.82 for this quarter compared to $0.57 for the year-ago quarter.
Net revenues were $754 million and income before income taxes was $541 million for this quarter, compared to net revenues of $539 million and income before income taxes of $222 million for the same period in 2020. Adjusted net revenues were $650 million and adjusted income before income taxes was $437 million for this quarter, compared to adjusted net revenues of $523 million and adjusted income before income taxes of $310 million for the same period in 2020.
Financial Highlights
Commission revenue increased $31 million, or 11%, from the year-ago quarter on higher customer stock and options trading volumes within an active trading environment. Net interest income increased $78 million, or 40%, from the year-ago quarter on higher margin loan balances and strong securities lending activity. Other income increased $91 million from the year-ago quarter. This increase was mainly comprised of (1) $99 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which increased to a $113 million mark-to-market gain this quarter from a $14 million mark-to-market gain in the same period in 2020; and (2) $13 million related to our U.S. government securities portfolio, which lost $0.2 million this quarter compared to a $13 million loss in the same period in 2020; partially offset by (3) $25 million related to our currency diversification strategy, which lost $9 million this quarter compared to a gain of $16 million in the same period in 2020. General and administrative expenses decreased $97 million from the year-ago quarter, primarily due to the non-recurrence of $103 million in expenses incurred to compensate certain affected customers in connection with their losses on West Texas Intermediate Crude Oil contracts in April 2020, as previously disclosed. 72% pretax profit margin for this quarter, up from 41% in the year-ago quarter. 67% adjusted pretax profit margin for this quarter, up from 59% in the year-ago quarter. Total equity of $9.9 billion.The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on September 14, 2021 to shareholders of record as of September 1, 2021.
Business Highlights
Customer accounts increased 61% from the year-ago quarter to 1.41 million. Customer equity grew 79% from the year-ago quarter to $363.5 billion. Total DARTs2 increased 32% from the year-ago quarter to 2.30 million. Cleared DARTs increased 34% from the year-ago quarter to 2.08 million. Customer credits increased 16% from the year-ago quarter to $82.1 billion. Customer margin loans increased 96% from the year-ago quarter to $48.8 billion.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 has affected 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.The initial effects of the COVID-19 pandemic on the Company’s financial results, which may have lasting effects as more investors are brought into the financial markets, can be summarized as follows: (1) higher commission revenue due to increased trading activity and a higher rate of customer accounts opened throughout 2020 and into 2021; and (2) generally lower net interest margin resulting from lower benchmark interest rates. Reduced net interest income on customer cash balances was more than offset in the current quarter by strong growth in margin loan balances and a good performance in securities lending.
The impact of the COVID-19 pandemic on the Company’s future financial results remains uncertain and 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 $12 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.17%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $9 million) and (2) Other Comprehensive Income (gain of $21 million).
Conference Call Information:
Interactive Brokers Group, Inc. will hold a conference call with investors today, July 20, 2021, 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 26, 2021, 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
Cleared Non-Cleared Avg. Trades
Customer % Customer % Principal % Total % per U.S.
Period
Trades Change Trades Change Trades Change Trades Change Trading Day
2018
328,099
21,880
18,663
368,642
1,478
2019
302,289
(8%)
26,346
20%
17,136
(8%)
345,771
(6%)
1,380
2020
620,405
105%
56,834
116%
27,039
58%
704,278
104%
2,795
2Q2020
153,212
13,752
7,252
174,216
2,765
2Q2021
196,659
28%
16,130
17%
7,975
10%
220,764
27%
3,504
1Q2021
273,985
24,079
8,418
306,482
5,024
2Q2021
196,659
(28%)
16,130
(33%)
7,975
(5%)
220,764
(28%)
3,504
CONTRACT AND SHARE VOLUMES:(in 000's, except %)
TOTAL
Options % Futures1 % Stocks %Period
(contracts) Change (contracts) Change (shares) Change2018
408,406
151,762
210,257,186
2019
390,739
(4%)
128,770
(15%)
176,752,967
(16%)
2020
624,035
60%
167,078
30%
338,513,068
92%
2Q2020
151,665
43,393
67,637,445
2Q2021
196,715
30%
35,061
(19%)
172,099,915
154%
1Q2021
231,797
40,868
308,934,824
2Q2021
196,715
(15%)
35,061
(14%)
172,099,915
(44%)
ALL CUSTOMERS
Options % Futures1 % Stocks %Period
(contracts) Change (contracts) Change (shares) Change2018
358,852
148,485
198,909,375
2019
349,287
(3%)
126,363
(15%)
167,826,490
(16%)
2020
584,195
67%
164,555
30%
331,263,604
97%
2Q2020
140,787
42,582
65,818,295
2Q2021
189,073
34%
34,635
(19%)
171,417,373
160%
1Q2021
221,898
40,361
306,165,385
2Q2021
189,073
(15%)
34,635
(14%)
171,417,373
(44%)
CLEARED CUSTOMERS
Options % Futures1 % Stocks %Period
(contracts) Change (contracts) Change (shares) Change2018
313,795
146,806
194,012,882
2019
302,068
(4%)
125,225
(15%)
163,030,500
(16%)
2020
518,965
72%
163,101
30%
320,376,365
97%
2Q2020
124,010
42,259
62,937,898
2Q2021
170,902
38%
34,355
(19%)
168,601,027
168%
1Q2021
202,583
40,019
301,675,030
2Q2021
170,902
(16%)
34,355
(14%)
168,601,027
(44%)
1 Includes options on futures
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED
2018
49,554
3,277
11,347,811
2019
41,452
(16%)
2,407
(27%)
8,926,477
(21%)
2020
39,840
(4%)
2,523
5%
7,249,464
(19%)
2Q2020
10,878
811
1,819,150
2Q2021
7,642
(30%)
426
(47%)
682,542
(62%)
1Q2021
9,899
507
2,769,439
2Q2021
7,642
(23%)
426
(16%)
682,542
(75%)
1 Includes options on futures CUSTOMER STATISTICS Year over Year2Q2021
2Q2020
% Change Total Accounts (in thousands)1,414
876
61%
Customer Equity (in billions)1 $363.5
$203.2
79%
Cleared DARTs (in thousands)2,082
1,558
34%
Total Customer DARTs (in thousands)2,304
1,746
32%
Cleared Customers Commission per Cleared Commissionable Order2 $2.38
$2.81
(15%)
Cleared Avg. DART per Account (Annualized)382
480
(20%)
Consecutive Quarters2Q2021
1Q2021
% Change Total Accounts (in thousands)1,414
1,325
7%
Customer Equity (in billions)1 $363.5
$330.6
10%
Cleared DARTs (in thousands)2,082
2,964
(30%)
Total Customer DARTs (in thousands)2,304
3,308
(30%)
Cleared Customers Commission per Cleared Commissionable Order2 $2.38
$2.31
3%
Cleared Avg. DART per Account (Annualized)382
622
(39%)
1 Excludes non-customers. 2 Commissionable Order - a customer order that generates commissions.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
(UNAUDITED)
2021
2020
2021
2020
(in millions) Average interest-earning assets Segregated cash and securities $39,671
$
45,463
$
43,199
$
38,978
Customer margin loans
44,234
22,751
42,099
25,614
Securities borrowed
2,833
4,911
3,971
4,420
Other interest-earning assets
7,411
5,157
6,414
5,501
FDIC sweeps1
2,749
2,990
2,783
2,745
$
96,898
$
81,272
$
98,466
$
77,258
Average interest-bearing liabilities Customer credit balances $
77,676
$
66,673
$
77,782
$
62,564
Securities loaned
11,068
4,972
11,093
4,852
Other interest-bearing liabilities
296
43
217
375
$
89,040
$
71,688
$
89,092
$
67,791
Net interest income Segregated cash and securities, net $
(2
)
$39
$
-
$
145
Customer margin loans2
128
65
245
204
Securities borrowed and loaned, net
136
80
311
142
Customer credit balances, net2
8
6
17
(63
)
Other net interest income1/37
11
16
37
Net interest income3 $
277
$
201
$
589
$
465
Net interest margin ("NIM")
1.15
%
0.99
%
1.21
%
1.21
%
Annualized yields Segregated cash and securities-0.02
%
0.34
%
0.00
%
0.75
%
Customer margin loans1.16
%
1.15
%
1.17
%
1.60
%
Customer credit balances-0.04
%
-0.04
%
-0.04
%
0.20
%
___________________________________________________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, 2021 and 2020, $4 million, $4 million, $12 million, and $8 million were reported in other fees and services, respectively. For the three and six months ended June 30, 2021 and 2020, $0 million, $1 million, -$1 million, and $5 million were reported in other income, respectively.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
2021
2020
2021
2020
(in millions, except share and per share data) Revenues: Commissions$
307
$
276
$
719
$
545
Other fees and services
55
40
111
78
Other income (loss)
118
27
238
(4
)
Total non-interest income
480
343
1,068
619
Interest income
307
244
697
613
Interest expense
(33
)
(48
)
(118
)
(161
)
Total net interest income
274
196
579
452
Total net revenues
754
539
1,647
1,071
Non-interest expenses:
Execution, clearing and distribution fees
54
76
122
153
Employee compensation and benefits
96
82
193
162
Occupancy, depreciation and amortization
19
17
39
34
Communications
8
7
16
13
General and administrative
35
132
94
169
Customer bad debt
1
3
3
10
Total non-interest expenses
213
317
467
541
Income before income taxes
541
222
1,180
530
Income tax expense
35
15
88
33
Net income
506
207
1,092
497
Net income attributable to noncontrolling interests
414
175
893
419
Net income available for common stockholders
$
92
$
32
$
199
$
78
Earnings per share:
Basic
$
1.01
$
0.41
$
2.19
$
1.01
Diluted
$
1.00
$
0.40
$
2.17
$
1.00
Weighted average common shares outstanding:
Basic
91,365,234
77,357,609
91,078,868
77,054,388
Diluted
92,199,169
78,031,462
91,984,246
77,799,963
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
2021
2020
2021
2020
(in millions, except share and per share data)
Comprehensive income: Net income available for common stockholders$
92
$
32
$
199
$
78
Other comprehensive income:
Cumulative translation adjustment, before income taxes
5
4
(12
)
(3
)
Income taxes related to items of other comprehensive income
-
-
-
-
Other comprehensive income (loss), net of tax
5
4
(12
)
(3
)
Comprehensive income available for common stockholders$
97
$
36
$
187
$
75
Comprehensive earnings per share:
Basic
$
1.06
$
0.46
$
2.06
$
0.97
Diluted
$
1.05
$
0.46
$
2.04
$
0.96
Weighted average common shares outstanding:
Basic
91,365,234
77,357,609
91,078,868
77,054,388
Diluted
92,199,169
78,031,462
91,984,246
77,799,963
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests
$
414
$
175
$
893
$
419
Other comprehensive income - cumulative translation adjustment
16
18
(43
)
(13
)
Comprehensive income attributable to noncontrolling interests$
430
$
193
$
850
$
406
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
2021 December 31,
2020 (in millions) Assets Cash and cash equivalents
$
3,218
$
4,292
Cash - segregated for regulatory purposes
22,099
15,903
Securities - segregated for regulatory purposes
15,635
27,821
Securities borrowed
3,630
4,956
Securities purchased under agreements to resell
4,166
792
Financial instruments owned, at fair value
726
630
Receivables from customers, net of allowance for credit losses
49,954
39,333
Receivables from brokers, dealers and clearing organizations
3,983
1,254
Other assets
920
698
Total assets
$
104,331
$
95,679
Liabilities and equity
Liabilities
Short-term borrowings
$
425
$
118
Securities loaned
11,580
9,838
Financial instruments sold but not yet purchased, at fair value
191
153
Other payables:
Customers
81,452
75,882
Brokers, dealers and clearing organizations
207
182
Other payables
548
503
82,207
76,567
Total liabilities
94,403
86,676
Equity
Stockholders' equity
2,150
1,951
Noncontrolling interests
7,778
7,052
Total equity
9,928
9,003
Total liabilities and equity
$
104,331
$
95,679
June 30,2021 December 31,
2020 Ownership of IBG LLC Membership Interests Interests % Interests % IBG, Inc.
92,091,373
22.0%
90,780,444
21.8%
Noncontrolling interests (IBG Holdings LLC)325,960,034
78.0%
325,960,034
78.2%
Total IBG LLC membership interests418,051,407
100.0%
416,740,478
100.0%
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
2021
2020
2021
2020
(in millions) Adjusted net revenues1 Net revenues - GAAP$
754
$
539
$
1,647
$
1,071
Non-GAAP adjustments
Currency diversification strategy, net
9
(16
)
11
33
Mark-to-market on investments2
(113
)
-
(212
)
-
Total non-GAAP adjustments
(104
)
(16
)
(201
)
33
Adjusted net revenues
$
650
$
523
$
1,446
$
1,104
Adjusted income before income taxes1
Income before income taxes - GAAP
$
541
$
222
$
1,180
$
530
Non-GAAP adjustments
Currency diversification strategy, net
9
(16
)
11
33
Mark-to-market on investments2
(113
)
-
(212
)
-
Customer compensation expense3
-
103
-
103
Bad debt expense4
-
1
-
1
Total non-GAAP adjustments
(104
)
88
(201
)
137
Adjusted income before income taxes
$
437
$
310
$
979
$
667
Adjusted pre-tax profit margin
67
%
59
%
68
%
60
%
Three Months Six Months Ended June 30, Ended June 30,2021
2020
2021
2020
(in millions) Adjusted net income available for common stockholders1 Net income available for common stockholders - GAAP$
92
$
32
$
199
$
78
Non-GAAP adjustments
Currency diversification strategy, net
2
(3
)
2
6
Mark-to-market on investments2
(25
)
(0
)
(46
)
0
Customer compensation expense3
-
19
-
19
Bad debt expense4
-
0
-
0
Income tax effect of above adjustments5
6
(4
)
10
(5
)
Total non-GAAP adjustments
(17
)
12
(34
)
20
Adjusted net income available for common stockholders
$
75
$
44
$
165
$
98
Note: Amounts may not add due to rounding. Three Months Six Months Ended June 30, Ended June 30,
2021
2020
2021
2020
(in dollars) Adjusted diluted EPS1 Diluted EPS - GAAP$
1.00
$
0.40
$
2.17
$
1.00
Non-GAAP adjustments
Currency diversification strategy, net
0.02
(0.04
)
0.03
0.08
Mark-to-market on investments2
(0.27
)
(0.00
)
(0.50
)
0.00
Customer compensation expense3
0.00
0.25
0.00
0.24
Bad debt expense4
0.00
0.00
0.00
0.00
Income tax effect of above adjustments5
0.06
(0.05
)
0.11
(0.07
)
Total non-GAAP adjustments
(0.19
)
0.16
(0.37
)
0.26
Adjusted diluted EPS
$
0.82
$
0.57
$
1.80
$
1.26
Diluted weighted average common shares outstanding
92,199,169
78,031,462
91,984,246
77,799,963
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 attributable to IBG, Inc. of our GLOBAL currency diversification strategy, the mark-to-market gains (losses) on investments, customer compensation expenses and unusual bad debt expense.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, customer compensation expenses 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.
3 Customer compensation expenses were incurred to compensate certain affected customers in connection with their losses on West Texas Intermediate Crude Oil contracts in April 20, 2020, as previously disclosed.
4 Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the three and six months ended June 30, 2020, unusual bad debt expense reflects losses incurred by customers in excess of the equity in their accounts, related to the West Texas Intermediate Crude Oil event, as previously disclosed.
5 The income tax effect is estimated using the corporate income tax rates applicable to the Company.
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