INTERACTIVE BROKERS : ANNOUNCES 2Q2022 RESULTS - Form 8-K

INTERACTIVE BROKERS GROUP ANNOUNCES 2Q2022 RESULTS

- - -

GAAP DILUTED EPS OF $0.72, ADJUSTED¹ EPS OF $0.84

GAAP NET REVENUES OF $656 MILLION, ADJUSTED NET REVENUES OF $717 MILLION

GREENWICH, CONN, July 19, 2022 - Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, announced results for the quarter ended June 30, 2022.

Reported diluted earnings per share were $0.72 for the current quarter and $0.84 as adjusted. For the year-ago quarter, reported diluted earnings per share were $1.00 and $0.82 as adjusted.

Reported net revenues were $656 million for the current quarter and $717 million as adjusted. For the year-ago quarter, reported net revenues were $754 million and $650 million as adjusted.

Reported income before income taxes was $392 million for the current quarter and $453 million as adjusted. For the year-ago quarter, reported income before income taxes was $541 million and $437 million as adjusted.

Financial Highlights

(All comparisons are to the year-ago quarter.)

•	Commission revenue increased 5% to $322 million on higher customer options and futures trading volume tempered by lower stock volume.

•	Net interest income increased 27% to $348 million on higher benchmark interest rates and customer balances, partially offset by a decline in securities lending activity.

•

Other income decreased $175 million to a loss of $57 million. This decrease was mainly comprised of the non-recurrence of a $113 million gain related to our strategic investment in Up Fintech Holding Limited ("Tiger Brokers"), $44 million related to our currency diversification strategy, and $7 million related to our U.S. government securities portfolio.

•	Reported pretax profit margin was 60% for the current quarter and 63% as adjusted. For the year-ago quarter, reported pretax margin was 72% and 67% as adjusted.

•	Total equity of $10.6 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, 2022, to shareholders of record as of September 1, 2022.

¹ See the reconciliation of non-GAAP financial measures starting on page 9.

1

Business Highlights

(All comparisons are to the year-ago quarter.)

•	Customer accounts increased 36% to 1.92 million.

•	Customer equity decreased 19% to $294.8 billion, including approximately 3% due to an omnibus broker that is now using a trust company for custody.

•	Total DARTs2 decreased 6% to 2.17 million.

•	Cleared DARTs decreased 7% to 1.93 million.

•	Customer credits increased 13% to $92.5 billion.

•	Customer margin loans decreased 13% to $42.6 billion.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we base our net worth in GLOBALs, a basket of 10 major currencies in which we hold our equity. In this quarter, our currency diversification strategy decreased our comprehensive earnings by $158 million, as the U.S. dollar value of the GLOBAL decreased by approximately 1.46%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $53 million) and (2) Other Comprehensive Income (loss of $105 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, July 19, 2022, at 4:30 p.m. ET to discuss its quarterly results. Members of the public who would like to listen to the conference call should register at https://register.vevent.com/register/BI118f80f52cdc4c4bac02487cd4edacd0 to obtain the dial-in details. The number should be dialed approximately ten minutes prior to the start of the conference call. The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.

About Interactive Brokers Group, Inc.:

Interactive Brokers Group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 150 markets in numerous countries and currencies, from a single unified platform to clients worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments. For the fifth consecutive year, Barron's ranked Interactive Brokers #1 with 5 out of 5 stars in its March 25, 2022, Best Online Brokers Review.

Cautionary Note Regarding Forward-Looking Statements:

The foregoing information contains certain forward-looking statements that reflect the Company's current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company's operations and business environment which may cause the Company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company's financial results may be found in the Company's filings with the Securities and Exchange Commission.

For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, [e-mail] or Media: Rob Garfield, [e-mail].

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

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

				Three Months		Six Months
				Ended June 30,		Ended June 30,
				2022		2021		2022		2021
				(in millions, except share and per share data)
Revenues:
	Commissions		$	322		$	307		$	671		$	719
	Other fees and services			43			55			96			111
	Other income (loss)			(57)			118			(96)			238
		Total non-interest income			308			480			671			1,068
	Interest income			460			307			792			697
	Interest expense			(112)			(33)			(162)			(118)
		Total net interest income			348			274			630			579
		Total net revenues			656			754			1,301			1,647
Non-interest expenses:
	Execution, clearing and distribution fees		77			54			148			122
	Employee compensation and benefits			112			96			223			193
	Occupancy, depreciation and amortization	23			19			45			39
	Communications			9			8			17			16
	General and administrative			42			35			80			94
	Customer bad debt			1			1			2			3
		Total non-interest expenses			264			213			515			467
Income before income taxes			392			541			786			1,180
Income tax expense			32			35			60			88
Net income			360			506			726			1,092
Net income attributable to noncontrolling interests		288			414			581			893
Net income available for common stockholders	$	72		$	92		$	145		$	199
Earnings per share:
	Basic		$	0.73		$	1.01		$	1.47		$	2.19
	Diluted		$	0.72		$	1.00		$	1.46		$	2.17
Weighted average common shares outstanding:
	Basic			98,853,981			91,365,234			98,541,798			91,078,868
	Diluted			99,695,489			92,199,169			99,461,867			91,984,246

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

				Three Months		Six Months
				Ended June 30,		Ended June 30,
				2022		2021		2022		2021
				(in millions, except share and per share data)
Comprehensive income:
	Net income available for common stockholders		$	72		$	92		$	145		$	199
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes	(24)			5			(34)			(12)
		Income taxes related to items of other comprehensive income		-			-			-			-
	Other comprehensive income (loss), net of tax			(24)			5			(34)			(12)
Comprehensive income available for common stockholders	$	48		$	97		$	111		$	187
Comprehensive earnings per share:
	Basic		$	0.48		$	1.06		$	1.12		$	2.06
	Diluted		$	0.47		$	1.05		$	1.11		$	2.04
Weighted average common shares outstanding:
	Basic			98,853,981			91,365,234			98,541,798			91,078,868
	Diluted			99,695,489			92,199,169			99,461,867			91,984,246
Comprehensive income attributable to noncontrolling interests:
	Net income attributable to noncontrolling interests		$	288		$	414		$	581		$	893
	Other comprehensive income - cumulative translation adjustment		(81)			16			(112)			(43)
Comprehensive income attributable to noncontrolling interests	$	207		$	430		$	469		$	850

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

					June 30, 2022		December 31, 2021
					(in millions)
Assets
Cash and cash equivalents				$	2,881		$	2,395
Cash - segregated for regulatory purposes					23,536			22,888
Securities - segregated for regulatory purposes					30,709			15,121
Securities borrowed					3,855			3,912
Securities purchased under agreements to resell					6,288			4,380
Financial instruments owned, at fair value					551			673
Receivables from customers, net of allowance for credit losses				42,552			54,935
Receivables from brokers, dealers and clearing organizations				1,939			3,771
Other assets					1,003			1,038
	Total assets				$	113,314		$	109,113
Liabilities and equity
Liabilities
Short-term borrowings				$	17		$	27
Securities loaned					10,696			11,769
Financial instruments sold but not yet purchased, at fair value				218			182
Other payables:
	Customers					90,765			85,634
	Brokers, dealers and clearing organizations					308			557
	Other payables					708			722
						91,781			86,913
	Total liabilities					102,712			98,891
Equity
Stockholders' equity					2,524			2,395
Noncontrolling interests					8,078			7,827
	Total equity					10,602			10,222
	Total liabilities and equity				$	113,314		$	109,113
		June 30, 2022		December 31, 2021
Ownership of IBG LLC Membership Interests	Interests		%		Interests			%
IBG, Inc.	99,601,921		23.7%		98,230,127			23.5%
Noncontrolling interests (IBG Holdings LLC)	319,880,492		76.3%		319,880,492			76.5%
Total IBG LLC membership interests	419,482,413		100.0%		418,110,619			100.0%

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

TRADE VOLUMES:

(in 000's, except %)

		Cleared				Non-Cleared												Avg. Trades
		Customer		%		Customer		%		Principal		%		Total		%		per U.S.
Period		Trades		Change		Trades		Change		Trades		Change		Trades		Change		Trading Day
2019		302,289				26,346				17,136				345,771				1,380
2020		620,405		105%		56,834		116%		27,039		58%		704,278		104%		2,795
2021		871,319		40%		78,276		38%		32,621		21%		982,216		39%		3,905
2Q2021	196,659				16,130				7,975				220,764				3,504
2Q2022	186,791		(5%)		18,274		13%		8,327		4%		213,392		(3%)		3,442
1Q2022	212,818				20,671				9,225				242,714				3,915
2Q2022	186,791		(12%)		18,274		(12%)		8,327		(10%)		213,392		(12%)		3,442

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2019		390,739				128,770				176,752,967
2020		624,035		60%		167,078		30%		338,513,068		92%
2021		887,849		42%		154,866		(7%)		771,273,709		128%
2Q2021		196,715				35,061				172,099,915
2Q2022		217,642		11%		51,562		47%		81,137,875		(53%)
1Q2022		245,343				53,570				97,406,991
2Q2022		217,642		(11%)		51,562		(4%)		81,137,875		(17%)

ALL CUSTOMERS

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2019		349,287				126,363				167,826,490
2020		584,195		67%		164,555		30%		331,263,604		97%
2021		852,169		46%		152,787		(7%)		766,211,726		131%
2Q2021		189,073				34,635				171,417,373
2Q2022		209,124		11%		50,707		46%		80,079,410		(53%)
1Q2022		234,790				52,728				95,990,985
2Q2022		209,124		(11%)		50,707		(4%)		80,079,410		(17%)

CLEARED CUSTOMERS

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2019		302,068				125,225				163,030,500
2020		518,965		72%		163,101		30%		320,376,365		97%
2021		773,284		49%		151,715		(7%)		752,720,070		135%
2Q2021		170,902				34,355				168,601,027
2Q2022		188,617		10%		50,313		46%		77,283,249		(54%)
1Q2022		212,628				52,264				92,860,481
2Q2022		188,617		(11%)		50,313		(4%)		77,283,249		(17%)

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
2019		41,452				2,407				8,926,477
2020		39,840		(4%)		2,523		5%		7,249,464		(19%)
2021		35,680		(10%)		2,079		(18%)		5,061,983		(30%)
2Q2021		7,642				426				682,542
2Q2022		8,518		11%		855		101%		1,058,465		55%
1Q2022		10,553				842				1,416,006
2Q2022		8,518		(19%)		855		2%		1,058,465		(25%)

1	Includes options on futures.

CUSTOMER STATISTICS

Year over Year			2Q2022			2Q2021		% Change
Total Accounts (in thousands)			1,923			1,414		36%
Customer Equity (in billions)1		$	294.8		$	363.5		(19%)
Cleared DARTs (in thousands)			1,927			2,082		(7%)
Total Customer DARTs (in thousands)			2,173			2,304		(6%)
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.74		$	2.38		15%
Cleared Avg. DARTs per Account (Annualized)			259			382		(32%)
Consecutive Quarters			2Q2022			1Q2022		% Change
Total Accounts (in thousands)			1,923			1,809		6%
Customer Equity (in billions)1		$	294.8		$	355.9		(17%)
Cleared DARTs (in thousands)			1,927			2,234		(14%)
Total Customer DARTs (in thousands)			2,173			2,522		(14%)
Cleared Customers
Commission per Cleared Commissionable Order2		$	2.74		$	2.57		7%
Cleared Avg. DARTs per Account (Annualized)			259			321		(19%)

1	Excludes non-customers.
2	Commissionable Order - a customer order that generates commissions.

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

				Three Months		Six Months
				Ended June 30,		Ended June 30,
				2022		2021		2022		2021
				(in millions)
Average interest-earning assets
	Segregated cash and securities		$	50,508		$	39,671		$	46,898		$	43,199
	Customer margin loans			44,764			44,234			45,953			42,099
	Securities borrowed			3,775			2,833			3,621			3,971
	Other interest-earning assets			9,482			7,411			8,847			6,414
	FDIC sweeps1			2,176			2,749			2,198			2,783
				$	110,705		$	96,898		$	107,517		$	98,466
Average interest-bearing liabilities
	Customer credit balances		$	90,048		$	77,676		$	87,222		$	77,782
	Securities loaned			10,599			11,068			10,844			11,093
	Other interest-bearing liabilities			1			296			7			217
				$	100,648		$	89,040		$	98,073		$	89,092
Net interest income
	Segregated cash and securities, net		$	53		$	(2)		$	60		$	-
	Customer margin loans2			197			128			346			245
	Securities borrowed and loaned, net			116			136			226			311
	Customer credit balances, net2			(37)			8			(28)			17
	Other net interest income1/3			22			7			30			16
		Net interest income3		$	351		$	277		$	634		$	589
Net interest margin ("NIM")			1.27%			1.15%			1.19%			1.21%
Annualized yields
	Segregated cash and securities			0.42%			-0.02%			0.26%			0.00%
	Customer margin loans			1.77%			1.16%			1.52%			1.17%
	Customer credit balances			0.17%			-0.04%			0.06%			-0.04%

1	Represents the average amount of customer cash swept into FDIC-insured banks as part of our Insured Bank Deposit Sweep Program. This item is not recorded in the Company's consolidated statements of financial condition. Income derived from program deposits is reported in other net interest income in the table above.
2	Interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within each customer's account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments).
3	Includes income from financial instruments that has the same characteristics as interest, but is reported in other fees and services and other income in the Company's consolidated statements of comprehensive income. For the three and six months ended June 30, 2022 and 2021, $3 million, $4 million, $4 million, and $12 million were reported in other fees and services, respectively. For the three and six months ended June 30, 2022 and 2021, $0 million, $0 million, $0 million, and -$1 million were reported in other income, respectively.

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

			Three Months		Six Months
			Ended June 30,		Ended June 30,
			2022		2021		2022		2021
			(in millions)
Adjusted net revenues1
Net revenues - GAAP		$	656		$	754		$	1,301		$	1,647
Non-GAAP adjustments
	Currency diversification strategy, net			53			9			71			11
	Mark-to-market on investments2			8			(113)			37			(212)
Total non-GAAP adjustments			61			(104)			108			(201)
Adjusted net revenues		$	717		$	650		$	1,409		$	1,446
Adjusted income before income taxes1
Income before income taxes - GAAP		$	392		$	541		$	786		$	1,180
Non-GAAP adjustments
	Currency diversification strategy, net			53			9			71			11
	Mark-to-market on investments2			8			(113)			37			(212)
Total non-GAAP adjustments			61			(104)			108			(201)
Adjusted income before income taxes		$	453		$	437		$	894		$	979
Adjusted pre-tax profit margin			63%			67%			63%			68%

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			Three Months		Six Months
			Ended June 30,		Ended June 30,
			2022		2021		2022		2021
			(in millions)
Adjusted net income available for common stockholders1
Net income available for common stockholders - GAAP	$	72		$	92		$	145		$	199
Non-GAAP adjustments
	Currency diversification strategy, net			13			2			17			2
	Mark-to-market on investments2			2			(25)			9			(46)
	Income tax effect of above adjustments3			(3)			6			(5)			10
Total non-GAAP adjustments			12			(17)			20			(34)
Adjusted net income available for common stockholders	$	84		$	75		$	165		$	165

Note: Amounts may not add due to rounding.

			Three Months		Six Months
			Ended June 30,		Ended June 30,
			2022		2021		2022		2021
			(in dollars)
Adjusted diluted EPS1
Diluted EPS - GAAP		$	0.72		$	1.00		$	1.46		$	2.17
Non-GAAP adjustments
	Currency diversification strategy, net			0.13			0.02			0.17			0.03
	Mark-to-market on investments2			0.02			(0.27)			0.09			(0.50)
	Income tax effect of above adjustments3			(0.03)			0.06			(0.05)			0.11
Total non-GAAP adjustments			0.12			(0.19)			0.20			(0.37)
Adjusted diluted EPS		$	0.84		$	0.82		$	1.66		$	1.80
Diluted weighted average common shares outstanding	99,695,489			92,199,169			99,461,867			91,984,246

Note: Amounts may not add due to rounding.

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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 currency diversification strategy and our net mark-to-market gains (losses) on investments2.

•	We define adjusted income before income taxes as income before income taxes adjusted to remove the effect of our currency diversification strategy and our net mark-to-market gains (losses) on investments.

•	We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects attributable to IBG, Inc. of our currency diversification strategy and our mark-to-market gains (losses) on investments.

Management believes these non-GAAP items are important measures of our financial performance because they exclude certain items that may not be indicative of our core operating results and business outlook and may be useful to investors and analysts in evaluating the operating performance of the business and facilitating a meaningful comparison of our results in the current period to those in prior and future periods. Our currency diversification strategy and our mark-to-market on investments are excluded because management does not believe they are indicative of our underlying core business performance. Adjusted net revenues, adjusted income before income taxes, adjusted net income available to common stockholders and adjusted diluted EPS should be considered in addition to, rather than as a substitute for, GAAP net revenues, income before income taxes, net income attributable to common stockholders and diluted EPS.

² Mark-to-market on investments represents the net mark-to-market gains (losses) on our U.S. government and municipal securities portfolio, which are typically held to maturity, investments in equity securities that do not qualify for equity method accounting which are measured at fair value, and certain other investments, including equity securities taken over by the Company from customers related to losses on margin loans.

³ The income tax effect is estimated using the corporate income tax rates applicable to the Company.

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