Interactive Brokers Group Announces 1Q2021 Results

Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $1.16 for the quarter ended March 31, 2021 compared to $0.60 for the same period in 2020, and adjusted diluted earnings per share of $0.98 for this quarter compared to $0.69 for the year-ago quarter.

Net revenues were $893 million and income before income taxes was $639 million for this quarter, compared to net revenues of $532 million and income before income taxes of $308 million for the same period in 2020. Adjusted net revenues were $796 million and adjusted income before income taxes was $542 million for this quarter, compared to adjusted net revenues of $581 million and adjusted income before income taxes of $357 million for the same period in 2020.

Financial Highlights

  • Commission revenue showed strong growth, increasing $143 million, or 53%, from the year-ago quarter on higher customer trading volumes within an active trading environment worldwide.
  • Net interest income increased $49 million, or 19%, from the year-ago quarter on strong securities lending activity, tempered by a decrease in the average Federal Funds effective rate to 0.08% from 1.25% in the year-ago quarter, which reduced earnings on segregated customer cash and margin lending.
  • Other income increased $151 million from the year-ago quarter. This increase was mainly comprised of $107 million related to our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”), which swung to a $99 million mark-to-market gain this quarter from a $8 million mark-to-market loss in the same period in 2020; and $47 million related to our currency diversification strategy, which lost $2 million this quarter compared to a loss of $49 million in the same period in 2020.
  • General and administrative expenses increased $22 million from the year-ago quarter, led by $19 million in additional costs for Brexit-related regulatory onboarding to bring our new brokerage operations on line in Europe.
  • 72% pretax profit margin for this quarter, up from 58% in the year-ago quarter. 68% adjusted pretax profit margin for this quarter, up from 61% in the year-ago quarter.
  • Total equity of $9.4 billion.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on June 14, 2021 to shareholders of record as of June 1, 2021.

Business Highlights

  • Customer accounts increased 74% from the year-ago quarter to 1.33 million.
  • Customer equity grew 106% from the year-ago quarter to $330.6 billion.
  • Total DARTs2 increased 128% from the year-ago quarter to 3.31 million.
  • Cleared DARTs increased 128% from the year-ago quarter to 2.96 million.
  • Customer credits increased 30% from the year-ago quarter to $84.5 billion.
  • Customer margin loans increased 113% from the year-ago quarter to $42.2 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 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.

The initial effects of the COVID-19 pandemic on the Company’s financial results, which may have continued through the first quarter of 2021, 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 the first quarter of 2021; and (2) lower net interest income resulting from lower benchmark interest rates. Reduced net interest income on customer cash balances and margin lending was offset in the current quarter by a strong 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.

__________________________

1 See the reconciliation of non-GAAP financial measures starting on page 10.

2 Daily average revenue trades (DARTs) are based on customer orders.

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 $78 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.84%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $2 million) and (2) Other Comprehensive Income (loss of $76 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, April 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.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

TRADE VOLUMES:
(in 000's, except %)
Cleared Non-ClearedAvg. Trades
Customer%Customer%Principal%Total%per U.S.
PeriodTradesChangeTradesChangeTradesChangeTradesChangeTrading 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

 

1Q2020

128,564

11,373

4,879

144,816

2,336

1Q2021

273,985

113%

24,079

112%

8,418

73%

306,482

112%

5,024

 

4Q2020

178,614

17,008

7,455

203,077

3,223

1Q2021

273,985

53%

24,079

42%

8,418

13%

306,482

51%

5,024

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

Options%Futures1%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change

2018

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%

1Q2020

138,206

49,204

62,298,036

1Q2021

231,797

68%

40,868

(17%)

308,934,824

396%

4Q2020

170,191

35,295

121,062,599

1Q2021

231,797

36%

40,868

16%

308,934,824

155%

ALL CUSTOMERS

Options%Futures1%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change

2018

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%

1Q2020

128,842

48,437

59,897,045

1Q2021

221,898

72%

40,361

(17%)

306,165,385

411%

4Q2020

160,953

34,851

119,654,910

1Q2021

221,898

38%

40,361

16%

306,165,385

156%

CLEARED CUSTOMERS

Options%Futures1%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change

2018

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%

1Q2020

112,916

47,979

57,653,853

1Q2021

202,583

79%

40,019

(17%)

301,675,030

423%

4Q2020

144,378

34,459

116,538,527

1Q2021

202,583

40%

40,019

16%

301,675,030

159%

1 Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

PRINCIPAL TRANSACTIONS

Options%Futures1%Stocks%

Period

(contracts)Change(contracts)Change(shares)Change

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%)

1Q2020

9,364

767

2,400,991

1Q2021

9,899

6%

507

(34%)

2,769,439

15%

4Q2020

9,238

444

1,407,689

1Q2021

9,899

7%

507

14%

2,769,439

97%

1 Includes options on futures

CUSTOMER STATISTICS
 
 
Year over Year

1Q2021

1Q2020

% Change
Total Accounts (in thousands)

1,325

760

74%

Customer Equity (in billions)1$

330.6

$

160.7

106%

 
Cleared DARTs (in thousands)

2,964

1,301

128%

Total Customer DARTs (in thousands)

3,308

1,454

128%

 
Cleared Customers
Commission per Cleared Commissionable Order2$

2.31

$

3.30

(30%)

Cleared Avg. DART per Account (Annualized)

622

453

37%

Net Revenue per Avg. Account (Annualized)$

2,610

$

3,069

(15%)

 
Consecutive Quarters

1Q2021

4Q2020

% Change
Total Accounts (in thousands)

1,325

1,073

23%

Customer Equity (in billions)1$

330.6

$

288.6

15%

 
Cleared DARTs (in thousands)

2,964

1,871

58%

Total Customer DARTs (in thousands)

3,308

2,109

57%

 
Cleared Customers
Commission per Cleared Commissionable Order2$

2.31

$

2.46

(6%)

Cleared Avg. DART per Account (Annualized)

622

459

36%

Net Revenue per Avg. Account (Annualized)$

2,610

$

2,151

21%

 
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
Ended March 31,

2021

2020

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

46,726

$

33,864

Customer margin loans

39,964

27,096

Securities borrowed

5,108

3,816

Other interest-earning assets

5,416

5,668

FDIC sweeps1

2,817

2,532

$

100,031

$

72,976

 
Average interest-bearing liabilities
Customer credit balances$

77,887

$

58,499

Securities loaned

11,117

4,529

Other interest-bearing liabilities

138

618

$

89,142

$

63,646

 
Net interest income
Segregated cash and securities, net$

2

$

106

Customer margin loans2

117

139

Securities borrowed and loaned, net

175

62

Customer credit balances, net2

9

(69)

Other net interest income1/3

9

26

Net interest income3$

312

$

264

 
Net interest margin ("NIM")

1.26%

1.45%

 
Annualized yields
Segregated cash and securities

0.02%

1.26%

Customer margin loans

1.19%

2.06%

Customer credit balances

-0.05%

0.47%

___________________________

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 months ended March 31, 2021 and 2020, $8 million and $4 million were reported in other fees and services, respectively. For the three months ended March 31, 2021 and 2020, -$1 million and $4 million were reported in other income, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 
Three Months
Ended March 31,

2021

2020

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

412

$

269

Other fees and services

56

38

Other income (loss)

120

(31)

 
Total non-interest income

588

276

 
Interest income

390

369

Interest expense

(85)

(113)

 
Total net interest income

305

256

 
Total net revenues

893

532

 
Non-interest expenses:
Execution, clearing and distribution fees

68

77

Employee compensation and benefits

97

80

Occupancy, depreciation and amortization

20

17

Communications

8

6

General and administrative

59

37

Customer bad debt

2

7

 
Total non-interest expenses

254

224

 
Income before income taxes

639

308

 
Income tax expense

53

18

 
Net income

586

290

 
Net income attributable to noncontrolling interests

479

244

 
Net income available for common stockholders$

107

$

46

 
Earnings per share:
Basic$

1.18

$

0.60

Diluted$

1.16

$

0.60

 
Weighted average common shares outstanding:
Basic

90,789,321

76,751,168

Diluted

91,766,142

77,568,464

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 
Three Months
Ended March 31,

2021

2020

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

107

$

46

Other comprehensive income:
Cumulative translation adjustment, before income taxes

(17)

(7)

Income taxes related to items of other comprehensive income

-

-

Other comprehensive loss, net of tax

(17)

(7)

Comprehensive income available for common stockholders$

90

$

39

 
Comprehensive earnings per share:
Basic$

0.99

$

0.51

Diluted$

0.98

$

0.51

 
Weighted average common shares outstanding:
Basic

90,789,321

76,751,168

Diluted

91,766,142

77,568,464

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

479

$

244

Other comprehensive income - cumulative translation adjustment

(59)

(31)

Comprehensive income attributable to noncontrolling interests$

420

$

213

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 
March 31,
2021
December 31,
2020
(in millions)
 
Assets
Cash and cash equivalents$

2,756

$

4,292

Cash - segregated for regulatory purposes

21,204

15,903

Securities - segregated for regulatory purposes

25,069

27,821

Securities borrowed

5,708

4,956

Securities purchased under agreements to resell

1,692

792

Financial instruments owned, at fair value

640

630

Receivables from customers, net of allowance for credit losses

42,645

39,333

Receivables from brokers, dealers and clearing organizations

3,368

1,254

Other assets

811

698

 
Total assets$

103,893

$

95,679

 
Liabilities and equity
 
Liabilities
Short-term borrowings$

341

$

118

Securities loaned

11,867

9,838

Financial instruments sold but not yet purchased, at fair value

191

153

Other payables:
Customers

81,204

75,882

Brokers, dealers and clearing organizations

310

182

Other payables

543

503

82,057

76,567

 
Total liabilities

94,456

86,676

 
Equity
Stockholders' equity

2,036

1,951

Noncontrolling interests

7,401

7,052

Total equity

9,437

9,003

 
Total liabilities and equity$

103,893

$

95,679

 
March 31, 2021December 31, 2020
Ownership of IBG LLC Membership InterestsInterests%Interests%
 
IBG, Inc.

90,830,444

21.8%

90,780,444

21.8%

Noncontrolling interests (IBG Holdings LLC)

325,960,034

78.2%

325,960,034

78.2%

 
Total IBG LLC membership interests

416,790,478

100.0%

416,740,478

100.0%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

 
Three Months
Ended March 31,

2021

2020

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

893

$

532

 
Non-GAAP adjustments
Currency diversification strategy, net

2

49

Mark-to-market on investments2

(99)

-

Total non-GAAP adjustments

(97)

49

Adjusted net revenues$

796

$

581

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

639

$

308

 
Non-GAAP adjustments
Currency diversification strategy, net

2

49

Mark-to-market on investments2

(99)

-

Total non-GAAP adjustments

(97)

49

Adjusted income before income taxes$

542

$

357

 
Adjusted pre-tax profit margin

68%

61%

 
Three Months
Ended March 31,

2021

2020

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

107

$

46

 
Non-GAAP adjustments
Currency diversification strategy, net

0

9

Mark-to-market on investments2

(22)

-

Income tax effect of above adjustments3

4

(2)

Total non-GAAP adjustments

(17)

7

Adjusted net income available for common stockholders$

90

$

54

 
Note: Amounts may not add due to rounding.
 
 
 
 
Three Months
Ended March 31,

2021

2020

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

1.16

$

0.60

 
Non-GAAP adjustments
Currency diversification strategy, net

0.00

0.12

Mark-to-market on investments2

(0.24)

0.00

Income tax effect of above adjustments3

0.05

(0.02)

Total non-GAAP adjustments

(0.19)

0.09

Adjusted diluted EPS$

0.98

$

0.69

 
Diluted weighted average common shares outstanding

91,766,142

77,568,464

 
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 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 GLOBAL currency diversification strategy and the 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 GLOBAL 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 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 The income tax effect is estimated using the corporate income tax rates applicable to the Company.

Contacts:

For Interactive Brokers Group, Inc.
Investors: Nancy Stuebe, investor-relations@ibkr.com
or
Media: Rob Garfield, media@ibkr.com

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