Interactive Brokers Group Announces 1Q2024 Results

Rhea-AI Summary

Interactive Brokers Group, Inc. (IBKR) announces strong 1Q2024 results with GAAP diluted EPS of $1.61 and adjusted EPS of $1.64. Net revenues reached $1,203 million, with a quarterly dividend increase from $0.10 to $0.25. Key financial highlights include a 6% increase in commission revenue, 17% rise in net interest income, and a 25% growth in customer accounts. The company's currency diversification strategy impacted earnings negatively by $104 million.

Positive

• Strong GAAP diluted EPS and adjusted EPS for 1Q2024.
• Significant increase in net revenues and quarterly dividend raise.
• Positive growth in commission revenue and net interest income.
• Impressive rise in customer accounts and equity.
• Currency diversification strategy resulted in a negative impact on earnings.

Negative

• Effects of currency diversification strategy led to a $104 million decrease in comprehensive earnings.
• Mixed customer trading volume across product types.
• Decrease in futures contract and stock share volumes.
• Slight decrease in total equity compared to the previous quarter.

Insights

Financial Analyst

Interactive Brokers Group's increase in GAAP diluted EPS from $1.42 to $1.61 and adjusted EPS from $1.35 to $1.64 signifies a robust year-over-year growth in profitability, which is a positive signal for investors. The firm's ability to raise its quarterly dividend from $0.10 to $0.25 could be interpreted as a strong indication of financial health and a confidence from management in the company's cash flow stability and future earnings. For retail investors, this tangible return on investment can make the stock more attractive. However, the impact of the currency diversification strategy resulting in a $104 million decrease in comprehensive earnings warrants attention. Although this may protect against currency fluctuations, investors should remain aware of potential volatility in such strategies.

Market Analyst

The reported increase in customer accounts by 25% and customer equity by 36% reflects Interactive Brokers Group's expanding customer base and growing trust in the service, likely driven by its technology-driven brokerage platform. The mixed customer trading volume data, with a significant uptick in options contract volume by 24% but a decline in futures and stock share volumes, suggests a shift in client trading behavior, potentially influenced by market conditions or internal product shifts. For investors, these figures highlight areas of growth as well as sectors that may need strategical reinforcement.

Risk Management Analyst

The uptrend in net interest income by 17% due to higher benchmark interest rates, customer margin loans and credit balances indicates that Interactive Brokers has capitalized on the current interest rate environment. However, the reliance on margin loans and market interest rates introduces a degree of risk; if interest rates decline or if there is a significant market correction impacting margin loans, it could inversely affect net interest income. So, while the short-term benefits are evident, investors should be mindful of the associated interest rate and credit risks in their long-term outlook.

GAAP DILUTED EPS OF $1.61, ADJUSTED¹ EPS OF $1.64

GAAP NET REVENUES OF $1,203 MILLION, ADJUSTED NET REVENUES OF $1,216 MILLION

RAISES QUARTERLY DIVIDEND FROM $0.10 TO $0.25

GREENWICH, CT.--(BUSINESS WIRE)-- Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, announced results for the quarter ended March 31, 2024.

Reported diluted earnings per share were $1.61 for the current quarter and $1.64 as adjusted. For the year-ago quarter, reported diluted earnings per share were $1.42 and $1.35 as adjusted.

Reported net revenues were $1,203 million for the current quarter and $1,216 million as adjusted. For the year-ago quarter, reported net revenues were $1,056 million and $1,015 million as adjusted.

Reported income before income taxes was $866 million for the current quarter and $879 million as adjusted. For the year-ago quarter, reported income before income taxes was $761 million and $720 million as adjusted.

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

• Commission revenue increased 6% to $379 million. Customer trading volume was mixed across product types with options contract volume up 24%, while futures contract and stock share volumes were down 3% and 16%, respectively.
• Net interest income increased 17% to $747 million on higher benchmark interest rates, customer margin loans and customer credit balances.
• Other fees and services increased $16 million, or 37%, to $59 million, driven primarily by increases of $13 million in risk exposure fees and $2 million in FDIC sweeps fees.
• Execution, clearing and distribution fees expenses increased 6% to $101 million, driven by higher customer trading volume in options.
• Pretax profit margin for the current quarter was 72% both as reported and as adjusted. For the year-ago quarter, reported pretax margin was 72% and 71% as adjusted.
• Total equity of $14.7 billion.

The Interactive Brokers Group, Inc. Board of Directors declared an increase in the quarterly cash dividend from $0.10 per share to $0.25 per share. This dividend is payable on June 14, 2024, to shareholders of record as of May 31, 2024.

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

• Customer accounts increased 25% to 2.75 million.
• Customer equity increased 36% to $465.9 billion.
• Total DARTs² increased 14% to 2.35 million.
• Customer credits increased 9% to $104.9 billion.
• Customer margin loans increased 30% to $51.2 billion.

Other Items

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 $104 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.73%. 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 $102 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, April 16, 2024, 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/BI26c88a82ea0c42b9a6ac91b51a30659c 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 serve 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 sixth consecutive year, Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its June 9, 2023, 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.

^{____________________
1} See the reconciliation of non-GAAP financial measures starting on page 9.
² Daily average revenue trades (DARTs) are based on customer orders.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
		Three Months
		Ended March 31,
			2024				2023
		(in millions, except share and per share data)
Revenues:
Commissions		$	379			$	357
Other fees and services			59				43
Other income (loss)			18				19
Total non-interest income			456				419
Interest income			1,760				1,347
Interest expense			(1,013	)			(710	)
Total net interest income			747				637
Total net revenues			1,203				1,056
Non-interest expenses:
Execution, clearing and distribution fees			101				95
Employee compensation and benefits			145				128
Occupancy, depreciation and amortization			26				24
Communications			10				9
General and administrative			50				36
Customer bad debt			5				3
Total non-interest expenses			337				295
Income before income taxes			866				761
Income tax expense			71				61
Net income			795				700
Net income attributable to noncontrolling interests			620				552
Net income available for common stockholders		$	175			$	148
Earnings per share:
Basic		$	1.63			$	1.44
Diluted		$	1.61			$	1.42
Weighted average common shares outstanding:
Basic			107,070,830				102,958,660
Diluted			108,149,440				104,042,571

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
		Three Months
		Ended March 31,
			2024			2023
		(in millions, except share and per share data)
Comprehensive income:
Net income available for common stockholders		$	175			$	148
Other comprehensive income:
Cumulative translation adjustment, before income taxes			(26	)			5
Income taxes related to items of other comprehensive income			-				-
Other comprehensive income (loss), net of tax			(26	)			5
Comprehensive income available for common stockholders		$	149			$	153
Comprehensive earnings per share:
Basic		$	1.39			$	1.48
Diluted		$	1.37			$	1.47
Weighted average common shares outstanding:
Basic			107,070,830				102,958,660
Diluted			108,149,440				104,042,571
Comprehensive income attributable to noncontrolling interests:
Net income attributable to noncontrolling interests		$	620			$	552
Other comprehensive income - cumulative translation adjustment			(76	)			14
Comprehensive income attributable to noncontrolling interests		$	544			$	566

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
							March 31, 2024			December 31, 2023
							(in millions)
Assets
Cash and cash equivalents							$	4,063		$	3,753
Cash - segregated for regulatory purposes								29,961			28,840
Securities - segregated for regulatory purposes								29,292			35,386
Securities borrowed								6,362			5,835
Securities purchased under agreements to resell								6,674			5,504
Financial instruments owned, at fair value								1,112			1,488
Receivables from customers, net of allowance for credit losses								51,395			44,472
Receivables from brokers, dealers and clearing organizations								1,684			1,643
Other assets								1,695			1,502
Total assets							$	132,238		$	128,423
Liabilities and equity
Liabilities
Short-term borrowings							$	14		$	17
Securities loaned								14,216			11,347
Financial instruments sold but not yet purchased, at fair value								236			193
Other payables:
Customers								101,197			101,012
Brokers, dealers and clearing organizations								561			590
Other payables								1,355			1,197
								103,113			102,799
Total liabilities								117,579			114,356
Equity
Stockholders' equity								3,732			3,584
Noncontrolling interests								10,927			10,483
Total equity								14,659			14,067
Total liabilities and equity							$	132,238		$	128,423
		March 31, 2024					December 31, 2023
Ownership of IBG LLC Membership Interests		Interests		%			Interests			%
IBG, Inc.		107,099,483		25.4	%			107,049,483			25.4	%
Noncontrolling interests (IBG Holdings LLC)		313,976,354		74.6	%			313,976,354			74.6	%
Total IBG LLC membership interests		421,075,837		100.0	%			421,025,837			100.0	%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES OPERATING DATA
EXECUTED ORDER VOLUMES:
(in 000's, except %)
		Customer		%			Principal		%			Total		%
Period		Orders		Change			Orders		Change			Orders		Change
2021		646,440					27,334					673,774
2022		532,064		(18	%)		26,966		(1	%)		559,030		(17	%)
2023		483,015		(9	%)		29,712		10	%		512,727		(8	%)
1Q2023		127,329					6,757					134,086
1Q2024		143,320		13	%		9,190		36	%		152,510		14	%
4Q2023		120,886					7,932					128,818
1Q2024		143,320		19	%		9,190		16	%		152,510		18	%
CONTRACT AND SHARE VOLUMES:
(in 000's, except %)
TOTAL
		Options		%			Futures1		%			Stocks		%
Period		(contracts)		Change			(contracts)		Change			(shares)		Change
2021		887,849					154,866					771,273,709
2022		908,415		2	%		207,138		34	%		330,035,586		(57	%)
2023		1,020,736		12	%		209,034		1	%		252,742,847		(23	%)
1Q2023		247,508					55,197					75,522,066
1Q2024		307,593		24	%		54,046		(2	%)		64,027,092		(15	%)
4Q2023		279,945					53,883					59,046,908
1Q2024		307,593		10	%		54,046		0	%		64,027,092		8	%
CUSTOMER
		Options		%			Futures1		%			Stocks		%
Period		(contracts)		Change			(contracts)		Change			(shares)		Change
2021		852,169					152,787					766,211,726
2022		873,914		3	%		203,933		33	%		325,368,714		(58	%)
2023		981,172		12	%		206,073		1	%		248,588,960		(24	%)
1Q2023		239,038					54,577					74,562,384
1Q2024		296,146		24	%		53,018		(3	%)		62,898,480		(16	%)
4Q2023		269,082					52,996					58,112,082
1Q2024		296,146		10	%		53,018		0	%		62,898,480		8	%
PRINCIPAL TRANSACTIONS
		Options		%			Futures1		%			Stocks		%
Period		(contracts)		Change			(contracts)		Change			(shares)		Change
2021		35,680					2,079					5,061,983
2022		34,501		(3	%)		3,205		54	%		4,666,872		(8	%)
2023		39,564		15	%		2,961		(8	%)		4,153,887		(11	%)
1Q2023		8,470					620					959,682
1Q2024		11,447		35	%		1,028		66	%		1,128,612		18	%
4Q2023		10,863					887					934,826
1Q2024		11,447		5	%		1,028		16	%		1,128,612		21	%
1 Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES OPERATING DATA, CONTINUED
CUSTOMER STATISTICS
Year over Year		1Q2024		1Q2023		% Change
Total Accounts (in thousands)		2,746		2,195		25%
Customer Equity (in billions)1		$465.9		$343.1		36%
Total Customer DARTs (in thousands)		2,350		2,054		14%
Cleared Customers
Commission per Cleared Commissionable Order2		$2.93		$3.16		(7%)
Cleared Avg. DARTs per Account (Annualized)		197		214		(8%)
Consecutive Quarters		1Q2024		4Q2023		% Change
Total Accounts (in thousands)		2,746		2,562		7%
Customer Equity (in billions)1		$465.9		$426.0		9%
Total Customer DARTs (in thousands)		2,350		1,934		22%
Cleared Customers
Commission per Cleared Commissionable Order2		$2.93		$3.19		(8%)
Cleared Avg. DARTs per Account (Annualized)		197		172		15%
(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,
			2024				2023
		(in millions)
Average interest-earning assets
Segregated cash and securities		$	61,132			$	59,679
Customer margin loans			46,653				39,303
Securities borrowed			5,368				4,868
Other interest-earning assets			9,952				9,777
FDIC sweeps1			3,861				2,428
		$	126,966			$	116,055
Average interest-bearing liabilities
Customer credit balances		$	99,510			$	95,802
Securities loaned			11,734				8,571
Other interest-bearing liabilities			-				1
		$	111,244			$	104,374
Net interest income
Segregated cash and securities, net		$	764			$	603
Customer margin loans2			678				477
Securities borrowed and loaned, net			26				88
Customer credit balances, net2			(881	)			(653	)
Other net interest income1/3			175				125
Net interest income3		$	762			$	640
Net interest margin ("NIM")			2.41	%			2.24	%
Annualized yields
Segregated cash and securities			5.03	%			4.10	%
Customer margin loans			5.85	%			4.92	%
Customer credit balances			3.56	%			2.76	%

______________________________
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, 2024 and 2023, $6 million and $3 million were reported in other fees and services, respectively. For the three months ended March 31, 2024 and 2023, $9 million and $0 million were reported in other income, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED)
		Three Months
		Ended March 31,
			2024				2023
		(in millions)
Adjusted net revenues1
Net revenues - GAAP		$	1,203			$	1,056
Non-GAAP adjustments
Currency diversification strategy, net			2				(1	)
Mark-to-market on investments2			11				(40	)
Total non-GAAP adjustments			13				(41	)
Adjusted net revenues		$	1,216			$	1,015
Adjusted income before income taxes1
Income before income taxes - GAAP		$	866			$	761
Non-GAAP adjustments
Currency diversification strategy, net			2				(1	)
Mark-to-market on investments2			11				(40	)
Total non-GAAP adjustments			13				(41	)
Adjusted income before income taxes		$	879			$	720
Adjusted pre-tax profit margin			72	%			71	%

		Three Months
		Ended March 31,
			2024				2023
		(in millions)
Adjusted net income available for common stockholders1
Net income available for common stockholders - GAAP		$	175			$	148
Non-GAAP adjustments
Currency diversification strategy, net			0				0
Mark-to-market on investments2			3				(10	)
Income tax effect of above adjustments3			(1	)			2
Total non-GAAP adjustments			2				(8	)
Adjusted net income available for common stockholders		$	177			$	140
Note: Amounts may not add due to rounding.
		Three Months
		Ended March 31,
			2024				2023
		(in dollars)
Adjusted diluted EPS1
Diluted EPS - GAAP		$	1.61			$	1.42
Non-GAAP adjustments
Currency diversification strategy, net			0.00				(0.00	)
Mark-to-market on investments2			0.03				(0.09	)
Income tax effect of above adjustments3			(0.01	)			0.02
Total non-GAAP adjustments			0.02				(0.07	)
Adjusted diluted EPS		$	1.64			$	1.35
Diluted weighted average common shares outstanding			108,149,440				104,042,571
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.

• 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 net mark-to-market gains (losses) on investments.
• We define adjusted diluted EPS as adjusted net income available for common stockholders divided by the diluted weighted average number of shares outstanding for the period.

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 investments in equity securities that do not qualify for equity method accounting which are measured at fair value, on our U.S. government and municipal securities portfolio, which are typically held to maturity, and on 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 statutory income tax rates applicable to the Company.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240416986944/en/

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

Source: Interactive Brokers Group, Inc.

FAQ

What were Interactive Brokers Group's (IBKR) GAAP diluted EPS and adjusted EPS for 1Q2024?

The GAAP diluted EPS was $1.61, and the adjusted EPS was $1.64.

What was the increase in commission revenue for Interactive Brokers Group (IBKR) in 1Q2024?

Commission revenue increased by 6% to $379 million.

How did net interest income change for Interactive Brokers Group (IBKR) in 1Q2024?

Net interest income increased by 17% to $747 million.

What was the percentage growth in customer accounts for Interactive Brokers Group (IBKR) in 1Q2024?

Customer accounts increased by 25% to 2.75 million.

What impact did the currency diversification strategy have on Interactive Brokers Group's (IBKR) earnings in 1Q2024?

The currency diversification strategy decreased earnings by $104 million.

When is the increased quarterly cash dividend payable to Interactive Brokers Group (IBKR) shareholders?

The increased dividend of $0.25 per share is payable on June 14, 2024.

How can the public listen to Interactive Brokers Group's (IBKR) conference call on April 16, 2024?

The public can register at the provided link to obtain dial-in details for the conference call.

What was the total equity amount for Interactive Brokers Group (IBKR) in 1Q2024?

Total equity was $14.7 billion for the quarter.