EX-99.1 2 earningsrelease_3q2017.htm 3Q2017 EARNINGS RELEASE
Exhibit 99.1
 
INTERACTIVE BROKERS GROUP ANNOUNCES 3Q2017 RESULTS

— — —

REPORTS COMPREHENSIVE EARNINGS PER SHARE OF $0.44,
INCOME BEFORE TAXES OF $268 MILLION ON $426 MILLION IN NET REVENUES,
AND EARNINGS PER SHARE ON NET INCOME OF $0.43.
DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.


GREENWICH, CONN, October 17, 2017 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share on a comprehensive basis of $0.44 for the quarter ended September 30, 2017, compared to diluted earnings per share on a comprehensive basis of $0.30 for the same period in 2016.

Excluding other comprehensive income, the Company reported diluted earnings per share of $0.43 for the quarter ended September 30, 2017, compared to diluted earnings per share of $0.30 for the same period in 2016.

Net revenues were $426 million and income before income taxes was $268 million this quarter, compared to net revenues of $345 million and income before income taxes of $183 million for the same period in 2016.

The results for the quarter were positively impacted by strong growth in net interest income, which increased $46 million, or 34%, and higher commissions, which increased $19 million, or 13% from the year-ago quarter. Trading gains decreased 71% from the year-ago quarter on lower market making trading volumes as we completed the wind down of our U.S. options market making business.

In addition, the results for the quarter include a $32 million gain on our currency diversification strategy, compared to a $13 million gain in the same period in 2016; a $1 million net mark-to-market gain on our U.S. government securities portfolio compared to a $15 million net mark-to-market loss in the same period in 2016; and a $10 million net recovery of exit costs related to the wind-down of our options market making business.

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, 2017 to shareholders of record as of December 1, 2017.

Business Highlights

·
63% pretax profit margin for this quarter, up from 53% in the year-ago quarter.
·
61% Electronic Brokerage pretax profit margin for this quarter, up from 56% in the year-ago quarter.
·
Customer equity grew 40% from the year-ago quarter to $115.7 billion and customer debits increased 39% to $25.1 billion.
·
Customer accounts increased 24% from the year-ago quarter to 457 thousand.
·
Total DARTs increased 14% from the year-ago quarter to 695 thousand.
·
Brokerage segment equity was $4.6 billion. Total equity was $6.3 billion.
1

Segment Overview

Electronic Brokerage
Electronic brokerage segment income before income taxes increased 39%, to $225 million in the quarter ended September 30, 2017, compared to the same period last year. Net revenues increased 27% to $367 million on higher net interest income, commissions revenue, and a net mark-to-market gain on our U.S. government securities portfolio.

Net interest income increased 31% as average customer credit and margin loan balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 15% from the year-ago quarter on higher customer volumes in options, futures and stocks, which increased 17%, 4% and 50%, respectively, from the year-ago quarter. Other income increased 129% over the year-ago quarter, driven by a non-recurrence of net mark-to-market losses on investments in U.S. government securities in the year-ago quarter. Pretax profit margin was 61% for the quarter ended September 30, 2017, up from 56% in the same period last year.

Customer accounts grew 24% to 457 thousand and customer equity increased 40% from the year-ago quarter to $115.7 billion. Total DARTs1 for cleared and execution-only customers increased 14% to 695 thousand from the year-ago quarter. Cleared DARTs were 646 thousand, 15% higher than in the same period last year.

Market Making
Market making segment income before income taxes increased to $11 million in the quarter ended September 30, 2017, due to lower operating costs, as we completed the wind down of our U.S. options market making business. In addition, the results for the quarter include a $10 million net recovery of exit costs.

Effects of Foreign Currency Diversification
In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 14 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $32 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.56%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the corporate segment and (2) Other Comprehensive Income ("OCI").



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


Conference Call Information:
Interactive Brokers Group will hold a conference call with investors today, October 17, 2017, 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 120 markets in numerous countries and currencies from a single IB Universal Account℠ to customers 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 customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost according to Barron's Best Online Brokers review, March 20, 2017. We strive to provide our customers with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low prices, positioning them to achieve superior returns on investments.

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.


For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, 203-618-4070 or Media: Kalen Holliday, 203-913-1369.
3
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA
TRADE VOLUMES:
(in 000's, except %)
                   
Brokerage
                
   
Market
      
Brokerage
      
Non
              
Avg. Trades
   
Making
  
%
  
Cleared
  
%
  
Cleared
  
%
  
Total
  
%
  
per U.S.
Period
  
Trades
  
Change
  
Trades
  
Change
  
Trades
  
Change
  
Trades
  
Change
  
Trading Day
2014
  
            64,530
      
    206,759
      
       18,055
      
    289,344
      
         1,155
2015
  
            65,937
  
2%
  
    242,846
  
17%
  
       18,769
  
4%
  
    327,553
  
13%
  
         1,305
2016
  
            64,038
  
-3%
  
    259,932
  
7%
  
       16,515
  
-12%
  
    340,485
  
4%
  
         1,354
                                     
3Q2016
            15,474
      
       61,181
      
         3,736
      
       80,391
      
         1,256
3Q2017
               6,834
  
-56%
  
       66,262
  
8%
  
         3,698
  
-1%
  
       76,794
  
-4%
  
         1,229
                                     
2Q2017
               7,960
      
       64,823
      
         3,672
      
       76,455
      
         1,214
3Q2017
               6,834
  
-14%
  
       66,262
  
2%
  
         3,698
  
1%
  
       76,794
  
0%
  
         1,229
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
 
TOTAL
   
Options
  
%
  
Futures*
  
%
  
Stocks
  
%
Period
  
(contracts)
  
Change
  
(contracts)
  
Change
  
(shares)
  
Change
2014
  
    631,265
      
    123,048
      
     153,613,174
    
2015
  
    634,388
  
0%
  
    140,668
  
14%
  
     172,742,520
  
12%
2016
  
    572,834
  
-10%
  
    143,287
  
2%
  
     155,439,227
  
-10%
                         
3Q2016
  
    138,767
      
       32,521
      
       38,515,753
    
3Q2017
  
       93,470
  
-33%
  
       31,508
  
-3%
  
       55,195,706
  
43%
                         
2Q2017
  
       91,879
      
       30,805
      
       53,378,165
    
3Q2017
  
       93,470
  
2%
  
       31,508
  
2%
  
       55,195,706
  
3%
 
MARKET MAKING
   
Options
  
%
  
Futures*
  
%
  
Stocks
  
%
Period
  
(contracts)
  
Change
  
(contracts)
  
Change
  
(shares)
  
Change
2014
  
    344,741
      
       15,668
      
       12,025,822
    
2015
  
    335,406
  
-3%
  
       14,975
  
-4%
  
       15,376,076
  
28%
2016
  
    307,377
  
-8%
  
       14,205
  
-5%
  
       13,082,887
  
-15%
                         
3Q2016
  
       74,966
      
         3,338
      
         2,874,332
    
3Q2017
  
       18,676
  
-75%
  
         1,040
  
-69%
  
         1,814,393
  
-37%
                         
2Q2017
  
       19,831
      
         1,143
      
         1,620,275
    
3Q2017
  
       18,676
  
-6%
  
         1,040
  
-9%
  
         1,814,393
  
12%
 
BROKERAGE TOTAL
   
Options
  
%
  
Futures*
  
%
  
Stocks
  
%
Period
  
(contracts)
  
Change
  
(contracts)
  
Change
  
(shares)
  
Change
2014
  
    286,524
      
    107,380
      
     141,587,352
    
2015
  
    298,982
  
4%
  
    125,693
  
17%
  
     157,366,444
  
11%
2016
  
    265,457
  
-11%
  
    129,082
  
3%
  
     142,356,340
  
-10%
                         
3Q2016
  
       63,801
      
       29,183
      
       35,641,421
    
3Q2017
  
       74,794
  
17%
  
       30,468
  
4%
  
       53,381,313
  
50%
                         
2Q2017
  
       72,048
      
       29,662
      
       51,757,890
    
3Q2017
  
       74,794
  
4%
  
       30,468
  
3%
  
       53,381,313
  
3%

* Includes options on futures
4
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED

BROKERAGE CLEARED
   
Options
  
%
  
Futures*
  
%
  
Stocks
  
%
Period
  
(contracts)
  
Change
  
(contracts)
  
Change
  
(shares)
  
Change
2014
  
    225,662
      
    106,074
      
     137,153,132
    
2015
  
    244,356
  
8%
  
    124,206
  
17%
  
     153,443,988
  
12%
2016
  
    227,413
  
-7%
  
    128,021
  
3%
  
     138,523,932
  
-10%
                         
3Q2016
       55,579
      
       28,986
      
       34,817,202
    
3Q2017
       64,363
  
16%
  
       30,034
  
4%
  
       52,515,806
  
51%
                         
2Q2017
       62,342
      
       29,255
      
       50,807,138
    
3Q2017
       64,363
  
3%
  
       30,034
  
3%
  
       52,515,806
  
3%
 
* Includes options on futures
 
BROKERAGE STATISTICS
(in 000's, except % and where noted)
Year over Year
  
3Q2017
    
3Q2016
  
% Change
   Total Accounts
  
                         457
    
                         370
  
24%
   Customer Equity (in billions)*
$
115.7
  
$
82.7
  
40%
               
   Cleared DARTs
  
                         646
    
                         564
  
15%
   Total Customer DARTs
  
                         695
    
                         609
  
14%
               
Cleared Customers (in $'s, except DART per account)
              
   Commission per DART
$
3.96
  
$
3.91
  
1%
   DART per Avg. Account (Annualized)
  
                         365
    
                         390
  
-6%
   Net Revenue per Avg. Account (Annualized)
$
3,249
  
$
3,191
  
2%
               
Consecutive Quarters
  
3Q2017
    
2Q2017
  
% Change
   Total Accounts
  
                         457
    
                         428
  
7%
   Customer Equity (in billions)*
$
115.7
  
$
104.8
  
10%
               
   Cleared DARTs
  
                         646
    
                         621
  
4%
   Total Customer DARTs
  
                         695
    
                         669
  
4%
               
Cleared Customers (in $'s, except DART per account)
              
   Commission per DART
$
3.96
  
$
4.00
  
-1%
   DART per Avg. Account (Annualized)
  
                         365
    
                         372
  
-2%
   Net Revenue per Avg. Account (Annualized)
$
3,249
  
$
3,141
  
3%
 
* Excludes non-customers.
  

5

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
(UNAUDITED)

       
Three Months Ended September 30,
  
Nine Months Ended September 30,
         2017    2016    2017    2016
       
(in millions)
Average interest-earning assets
                        
 
Segregated cash & securities
  
$
                  24,043
  
$
                  25,525
  
$
                  24,207
  
$
                  24,027
 
Customer margin loans
    
                  24,132
    
                  16,473
    
                  22,017
    
                  15,917
 
Securities borrowed
    
                    4,096
    
                    4,275
    
                    4,071
    
                    4,056
 
Other interest earning assets
    
                    3,155
    
                    2,169
    
                    2,748
    
                    2,484
       
$
                  55,426
  
$
                  48,442
  
$
                  53,043
  
$
                  46,484
                             
Average interest-bearing liabilities
                        
 
Customer credit balances
  
$
                  46,910
  
$
                  41,414
  
$
                  44,901
  
$
                  39,297
 
Securities loaned
    
                    3,964
    
                    3,071
    
                    3,765
    
                    2,758
       
$
                  50,874
  
$
                  44,485
  
$
                  48,666
  
$
                  42,055
                             
Net interest income
                        
 
Segregated cash and securities, net
  
$
                         66
  
$
40
  
$
160
  
$
110
 
Customer margin loans
    
                       106
    
54
    
270
    
157
 
Securities borrowed and loaned, net
    
                         42
    
42
    
112
    
118
 
Customer credit balances
    
                       (40)
    
                         (3)
    
                       (80)
    
                         (8)
 
Other net interest income1
    
                           9
    
3
    
18
    
12
   
Net interest income
  
$
                       183
  
$
                       136
  
$
                       480
  
$
                       389
                             
Net interest margin ("NIM")
    
1.31%
    
1.12%
    
1.21%
    
1.12%
                             
Annualized yields
                        
 
Segregated cash & securities
    
1.09%
    
0.62%
    
0.88%
    
0.61%
 
Customer margin loans
    
1.74%
    
1.30%
    
1.64%
    
1.32%
 
Customer credit balances
    
0.34%
    
0.03%
    
0.24%
    
0.03%
 
 
1
Includes income from financial instruments which has the same characteristics as interest, but is reported in other income.
 

6

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
         Three Months    Nine Months
          Ended September 30,     Ended September 30,
         2017    2016    2017    2016
         
(in millions)
                             
Electronic Brokerage
Net revenues
  
$
367
  
$
288
  
$
1,015
  
$
945
   
Non-interest expenses
    
142
    
126
    
407
    
357
                             
   
Income before income taxes
  
$
225
  
$
162
  
$
608
  
$
588
                             
   
Pre-tax profit margin
    
61%
    
56%
    
60%
    
62%
                             
Market Making
Net revenues
  
$
30
  
$
43
  
$
61
  
$
145
   
Non-interest expenses
    
19
    
36
    
96
    
113
                             
   
Income (loss) before income taxes
  
$
11
  
$
7
  
$
(35)
  
$
32
                             
   
Pre-tax profit (loss) margin
    
37%
    
16%
    
-57%
    
22%
                             
Corporate 1
Net revenues
  
$
29
  
$
14
  
$
111
  
$
113
   
Non-interest expenses
    
                   (3)
    
                     -
    
                   (1)
    
                     -
                             
   
Income before income taxes
  
$
32
  
$
14
  
$
112
  
$
113
                             
Total
Net revenues
  
$
426
  
$
345
  
$
1,187
  
$
1,203
   
Non-interest expenses
    
158
    
162
    
502
    
470
                             
   
Income before income taxes
  
$
268
  
$
183
  
$
685
  
$
733
                             
   
Pre-tax profit margin
    
63%
    
53%
    
58%
    
61%
1
Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy.
 
7
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
         Three Months    Nine Months
         Ended September 30,    Ended September 30,
         2017    2016    2017    2016
         
(in millions, except share and per share data)
Revenues:
                        
 
Trading gains
  
$
11
  
$
38
  
$
26
  
$
124
 
Commissions
    
163
    
144
    
477
    
462
 
Interest income
    
243
    
157
    
626
    
446
 
Other income
    
70
    
27
    
205
    
228
                             
   
Total revenues
    
487
    
366
    
1,334
    
1,260
                             
 
Interest expense
    
61
    
21
    
147
    
57
                             
   
Total net revenues
    
426
    
345
    
1,187
    
1,203
                             
Non-interest expenses:
                        
 
Execution and clearing
    
61
    
62
    
185
    
183
 
Employee compensation and benefits
    
64
    
58
    
192
    
174
 
Occupancy, depreciation and amortization
    
11
    
13
    
34
    
38
 
Communications
    
7
    
7
    
22
    
23
 
General and administrative
    
15
    
19
    
67
    
46
 
Customer bad debt
    
                     -
    
                     3
    
2
    
6
                             
   
Total non-interest expenses
    
158
    
162
    
502
    
470
                             
Income before income taxes
    
268
    
183
    
685
    
733
                             
Income tax expense
    
21
    
15
    
56
    
55
                             
Net income
    
247
    
168
    
629
    
678
                             
Net income attributable to noncontrolling interests
    
216
    
148
    
551
    
598
                             
Net income available for common stockholders
  
$
31
  
$
20
  
$
78
  
$
80
                             
Earnings per share:
                        
 
Basic
  
$
0.44
  
$
0.30
  
$
1.12
  
$
1.22
 
Diluted
  
$
0.43
  
$
0.30
  
$
1.10
  
$
1.20
                             
Weighted average common shares outstanding:
                        
 
Basic
    
71,109,577
    
67,083,654
    
69,405,624
    
65,351,842
 
Diluted
    
71,973,483
    
68,470,224
    
70,409,619
    
66,738,754
                             
Comprehensive income:
                        
 
Net income available for common stockholders
  
$
31
  
$
20
  
$
78
  
$
80
 
Other comprehensive income:
                        
   
Cumulative translation adjustment, before income taxes
    
                     1
    
                     -
    
11
    
3
   
Income taxes related to items of other comprehensive income
    
                     -
    
                     -
    
                     -
    
                     -
 
Other comprehensive income, net of tax
    
                     1
    
                     -
    
11
    
3
Comprehensive income available for common stockholders
  
$
32
  
$
20
  
$
89
  
$
83
                             
Comprehensive income attributable to noncontrolling interests:
                    
 
 Net income attributable to noncontrolling interests  
$
216
  
$
148
  
$
551
  
$
598
 
 Other comprehensive income - cumulative translation adjustment    
5
    
2
    
55
    
19
Comprehensive income attributable to noncontrolling interests
$
221
  
$
150
  
$
606
  
$
617
 
 
 
8
 

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
EARNINGS PER SHARE ON COMPREHENSIVE INCOME
(UNAUDITED)

 
 
        Three Months   Nine Months
         Ended September 30,    Ended September 30,
         2017    2016    2017    2016
        (in millions, except share and per share data)
                             
Comprehensive income available for common stockholders, net of tax
$
32
  
$
20
  
$
89
  
$
83
                             
Comprehensive earnings per share:
                        
 
Basic 
  
$
0.45
  
$
0.31
  
$
1.28
  
$
1.27
 
Diluted 
  
$
0.44
  
$
0.30
  
$
1.26
  
$
1.25
                             
                             
Weighted average common shares outstanding: 
                        
 
Basic 
    
71,109,577
    
67,083,654
    
69,405,624
    
65,351,842
 
Diluted 
    
71,973,483
    
68,470,224
    
70,409,619
    
66,738,754
 
 


9


INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) 
 
           
September 30,
2017 
  
December 31,
2016
             
(in millions)   
Assets
                  
Cash and cash equivalents
        
$
2,056
  
$
1,925
Cash and securities - segregated for regulatory purposes
          
               23,566
    
               24,017
Securities borrowed
          
                 4,195
    
                 3,629
Securities purchased under agreements to resell
          
                    589
    
                    111
Financial instruments owned, at fair value
          
                 2,580
    
                 4,037
Receivables from customers, net of allowance for doubtful accounts
        
               25,333
    
               19,409
Receivables from brokers, dealers and clearing organizations
          
                 1,039
    
                 1,040
Other assets
          
                    485
    
                    505
                     
 
Total assets
        
$
59,843
  
$
54,673
                     
Liabilities and equity
                  
                     
Liabilities
                  
Short-term borrowings
        
$
38
  
$
74
Securities loaned
          
                 4,132
    
                 4,293
Financial instruments sold but not yet purchased, at fair value
        
                 1,177
    
                 2,145
Other payables:
                  
 
Customers
          
               47,550
    
               41,731
 
Brokers, dealers and clearing organizations
          
                    233
    
                    239
 
Other payables
          
                    401
    
                    371
             
               48,184
    
               42,341
                     
 
Total liabilities
          
               53,531
    
               48,853
                     
Equity
                  
Stockholders' equity
          
                 1,096
    
                    974
Noncontrolling interests
          
                 5,216
    
                 4,846
 
Total equity
          
                 6,312
    
                 5,820
                     
 
Total liabilities and equity
        
$
59,843
  
$
54,673
                     
                     
   
September 30, 2017 
    
December 31, 2016  
Ownership of IBG LLC Membership Interests
Interests
  
 %
    
Interests
    
 %
                     
IBG, Inc.
71,477,590
  
17.4%
    
67,989,967
    
16.6%
Noncontrolling interests (IBG Holdings LLC)
340,229,444
  
82.6%
    
341,444,304
    
83.4%
                     
Total IBG LLC membership interests
411,707,034
  
100.0%
    
409,434,271
    
100.0%



10