Current Report (SEC Filing - 8-K)

INTERACTIVE BROKERS GROUP ANNOUNCES 1Q2021 RESULTS

- - -

DILUTED EARNINGS PER SHARE OF $1.16, ADJUSTED DILUTED EARNINGS PER SHARE¹ OF $0.98.

PRETAX INCOME OF $639 MILLION ON $893 MILLION IN NET REVENUES.

ADJUSTED PRETAX INCOME OF $542 MILLION ON $796 MILLION IN ADJUSTED NET REVENUES¹.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, April 20, 2021 - 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.

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

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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.

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

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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.

For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, [email protected] or Media: Rob Garfield, [email protected].

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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
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

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.

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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%

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%

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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.

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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

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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

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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, 2021		December 31, 2020
Ownership of IBG LLC Membership Interests	Interests		%		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%

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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%

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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.