Enhanced Investments - Financial Portal

Published: 2023-07-18 16:01:41 ET

EX-99.1 2 ibkr-8k_20230630er.htm 2Q23 EARNINGS RELEASE

INTERACTIVE BROKERS GROUP ANNOUNCES 2Q2023 RESULTS

— — —

GAAP DILUTED EPS OF $1.20, ADJUSTED¹ EPS OF $1.32

GAAP NET REVENUES OF $1,000 MILLION, ADJUSTED NET REVENUES OF $1,064 MILLION

GREENWICH, CONN, July 18, 2023 — Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, announced results for the quarter ended June 30, 2023.

Reported diluted earnings per share were $1.20 for the current quarter and $1.32 as adjusted. For the year-ago quarter, reported diluted earnings per share were $0.72 and $0.84 as adjusted.

Reported net revenues were $1,000 million for the current quarter and $1,064 million as adjusted. For the year-ago quarter, reported net revenues were $656 million and $717 million as adjusted.

Reported income before income taxes was $652 million for the current quarter and $716 million as adjusted. For the year-ago quarter, reported income before income taxes was $392 million and $453 million as adjusted.

Financial Highlights

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

•	Commission revenue was unchanged at $322 million. Customer trading volume was mixed across product types with options contracts volume up 9% while futures contracts and stock share volumes were down 3% and 28%, respectively.

•	Net interest income increased 99% to $694 million on higher benchmark interest rates and customer credit balances.

•

Execution, clearing and distribution fees expenses increased 21% to $93 million driven by higher customer trading volume in options, the non-recurrence of a $3 million OCC rebate in the year-ago quarter, and a $1 million increase in market data fees, which are associated with market data revenue included in other fees and services.

•

General and administrative expenses increased $43 million to $85 million. The increase is largely attributable to reserves related to the previously-disclosed regulatory investigations into the use of unapproved electronic messaging and record-keeping requirements. As has been publicly reported, the SEC and CFTC are conducting an industry-wide sweep that has resulted in substantial settlements with other financial services firms.

•	Reported pretax profit margin was 65% for the current quarter and 67% as adjusted. For the year-ago quarter, reported pretax margin was 60% and 63% as adjusted.

•	Total equity of $12.7 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, 2023, to shareholders of record as of September 1, 2023.

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

Business Highlights

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

•	Customer accounts increased 19% to 2.29 million.

•	Customer equity increased 24% to $365.0 billion.

•	Total DARTs² decreased 14% to 1.87 million.

•	Cleared DARTs decreased 13% to 1.67 million.

•	Customer credits increased 7% to $98.9 billion.

•	Customer margin loans decreased 2% to $41.9 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 $24 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.14%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $55 million) and (2) Other Comprehensive Income (gain of $31 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, July 18, 2023, 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/BIdb81bf27b8a947f2af9d311979370b58 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 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.

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

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

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

			Three Months				Six Months
			Ended June 30,				Ended June 30,
			2023		2022		2023		2022
			(in millions, except share and per share data)

Revenues:
	Commissions		$	322	$	322	$	679	$	671
	Other fees and services			47		43		90		96
	Other loss			(63)		(57)		(44)		(96)
		Total non-interest income		306		308		725		671

	Interest income			1,545		460		2,892		792
	Interest expense			(851)		(112)		(1,561)		(162)
		Total net interest income		694		348		1,331		630
		Total net revenues		1,000		656		2,056		1,301

Non-interest expenses:
	Execution, clearing and distribution fees			93		77		188		148
	Employee compensation and benefits			136		112		264		223
	Occupancy, depreciation and amortization			25		23		49		45
	Communications			10		9		19		17
	General and administrative			85		42		121		80
	Customer bad debt			(1)		1		2		2
		Total non-interest expenses		348		264		643		515

Income before income taxes				652		392		1,413		786
Income tax expense				51		32		112		60
Net income				601		360		1,301		726
Net income attributable to noncontrolling interests				476		288		1,028		581
Net income available for common stockholders			$	125	$	72	$	273	$	145

Earnings per share:
	Basic		$	1.21	$	0.73	$	2.65	$	1.47
	Diluted		$	1.20	$	0.72	$	2.62	$	1.46

Weighted average common shares outstanding:
	Basic			103,587,557		98,853,981		103,274,846		98,541,798
	Diluted			104,463,729		99,695,489		104,254,888		99,461,867

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

			Three Months				Six Months
			Ended June 30,				Ended June 30,
			2023		2022		2023		2022
			(in millions, except share and per share data)

Comprehensive income:
	Net income available for common stockholders		$	125	$	72	$	273	$	145
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes		7		(24)		12		(34)
		Income taxes related to items of other comprehensive income		-		-		-		-
	Other comprehensive income (loss), net of tax			7		(24)		12		(34)
Comprehensive income available for common stockholders			$	132	$	48	$	285	$	111

Comprehensive earnings per share:
	Basic		$	1.28	$	0.48	$	2.76	$	1.12
	Diluted		$	1.27	$	0.47	$	2.74	$	1.11

Weighted average common shares outstanding:
	Basic			103,587,557		98,853,981		103,274,846		98,541,798
	Diluted			104,463,729		99,695,489		104,254,888		99,461,867


Comprehensive income attributable to noncontrolling interests:
	Net income attributable to noncontrolling interests		$	476	$	288	$	1,028	$	581
	Other comprehensive income - cumulative translation adjustment			24		(81)		38		(112)
Comprehensive income attributable to noncontrolling interests			$	500	$	207	$	1,066	$	469

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

				June 30, 2023		December 31, 2022
				(in millions)

Assets
Cash and cash equivalents				$	3,681	$	3,436
Cash - segregated for regulatory purposes					25,770		25,167
Securities - segregated for regulatory purposes					33,457		31,781
Securities borrowed					5,999		4,749
Securities purchased under agreements to resell					6,431		6,029
Financial instruments owned, at fair value					495		485
Receivables from customers, net of allowance for credit losses					41,966		38,760
Receivables from brokers, dealers and clearing organizations					1,400		3,469
Other assets					1,394		1,267
	Total assets			$	120,593	$	115,143

Liabilities and equity

Liabilities
Short-term borrowings				$	17	$	18
Securities loaned					10,261		8,940
Financial instruments sold but not yet purchased, at fair value					157		146
Other payables:
	Customers				95,999		93,195
	Brokers, dealers and clearing organizations				376		291
	Other payables				1,126		938
					97,501		94,424
	Total liabilities				107,936		103,528

Equity
Stockholders' equity					3,158		2,848
Noncontrolling interests					9,499		8,767
	Total equity				12,657		11,615
	Total liabilities and equity			$	120,593	$	115,143

		June 30, 2023			December 31, 2022
Ownership of IBG LLC Membership Interests		Interests	%		Interests		%

IBG, Inc.		104,363,296	24.8%		102,927,703		24.5%
Noncontrolling interests (IBG Holdings LLC)		316,609,102	75.2%		316,609,102		75.5%

Total IBG LLC membership interests		420,972,398	100.0%		419,536,805		100.0%

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
2020	620,405		56,834		27,039		704,278		2,795
2021	871,319	40%	78,276	38%	32,621	21%	982,216	39%	3,905
2022	735,619	(16%)	70,049	(11%)	32,863	1%	838,531	(15%)	3,347

2Q2022	186,791		18,274		8,327		213,392		3,442
2Q2023	161,710	(13%)	14,071	(23%)	8,383	1%	184,164	(14%)	2,970

1Q2023	180,261		15,369		8,187		203,817		3,287
2Q2023	161,710	(10%)	14,071	(8%)	8,383	2%	184,164	(10%)	2,970

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

	Options	%	Futures¹	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2020	624,035		167,078		338,513,068
2021	887,849	42%	154,866	(7%)	771,273,709	128%
2022	908,415	2%	207,138	34%	330,035,586	(57%)

2Q2022	217,642		51,562		81,137,875
2Q2023	236,803	9%	49,644	(4%)	58,720,684	(28%)

1Q2023	247,508		55,197		75,522,066
2Q2023	236,803	(4%)	49,644	(10%)	58,720,684	(22%)

ALL CUSTOMERS

	Options	%	Futures¹	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2020	584,195		164,555		331,263,604
2021	852,169	46%	152,787	(7%)	766,211,726	131%
2022	873,914	3%	203,933	33%	325,368,714	(58%)

2Q2022	209,124		50,707		80,079,410
2Q2023	227,884	9%	49,040	(3%)	57,711,637	(28%)

1Q2023	239,038		54,577		74,562,384
2Q2023	227,884	(5%)	49,040	(10%)	57,711,637	(23%)

CLEARED CUSTOMERS

	Options	%	Futures¹	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2020	518,965		163,101		320,376,365
2021	773,284	49%	151,715	(7%)	752,720,070	135%
2022	781,373	1%	202,145	33%	314,462,672	(58%)

2Q2022	188,617		50,313		77,283,249
2Q2023	194,082	3%	48,506	(4%)	55,664,831	(28%)

1Q2023	209,605		53,957		72,041,499
2Q2023	194,082	(7%)	48,506	(10%)	55,664,831	(23%)

Includes options on futures.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

PRINCIPAL TRANSACTIONS

	Options	%	Futures¹	%	Stocks	%
Period	(contracts)	Change	(contracts)	Change	(shares)	Change
2020	39,840		2,523		7,249,464
2021	35,680	(10%)	2,079	(18%)	5,061,983	(30%)
2022	34,501	(3%)	3,205	54%	4,666,872	(8%)

2Q2022	8,518		855		1,058,465
2Q2023	8,919	5%	604	(29%)	1,009,047	(5%)

1Q2023	8,470		620		959,682
2Q2023	8,919	5%	604	(3%)	1,009,047	5%

Includes options on futures.

CUSTOMER STATISTICS

Year over Year		2Q2023		2Q2022	% Change
Total Accounts (in thousands)		2,290		1,923	19%
Customer Equity (in billions)¹	$	365.0	$	294.8	24%

Cleared DARTs (in thousands)		1,673		1,927	(13%)
Total Customer DARTs (in thousands)		1,865		2,173	(14%)

Cleared Customers
Commission per Cleared Commissionable Order²	$	3.11	$	2.74	14%
Cleared Avg. DARTs per Account (Annualized)		186		259	(28%)

Consecutive Quarters		2Q2023		1Q2023	% Change
Total Accounts (in thousands)		2,290		2,195	4%
Customer Equity (in billions)¹	$	365.0	$	343.1	6%

Cleared DARTs (in thousands)		1,673		1,845	(9%)
Total Customer DARTs (in thousands)		1,865		2,054	(9%)

Cleared Customers
Commission per Cleared Commissionable Order²	$	3.11	$	3.16	(2%)
Cleared Avg. DARTs per Account (Annualized)		186		214	(13%)

Excludes non-customers.

Commissionable Order - a customer order that generates commissions.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

			Three Months				Six Months
			Ended June 30,				Ended June 30,
			2023		2022		2023		2022

			(in millions)
Average interest-earning assets
	Segregated cash and securities		$	61,038	$	50,508	$	60,359	$	46,898
	Customer margin loans			39,989		44,764		39,646		45,953
	Securities borrowed			5,649		3,775		5,259		3,621
	Other interest-earning assets			10,090		9,482		9,934		8,847
	FDIC sweeps¹			2,719		2,176		2,574		2,198
			$	119,485	$	110,705	$	117,770	$	107,517

Average interest-bearing liabilities
	Customer credit balances		$	96,416	$	90,048	$	96,109	$	87,222
	Securities loaned			9,729		10,599		9,150		10,844
	Other interest-bearing liabilities			-		1		1		7
			$	106,145	$	100,648	$	105,260	$	98,073

Net interest income
	Segregated cash and securities, net		$	700	$	53	$	1,303	$	60
	Customer margin loans²			547		197		1,024		346
	Securities borrowed and loaned, net			79		116		167		226
	Customer credit balances, net²			(774)		(37)		(1,427)		(28)
	Other net interest income^1/3			145		22		270		30
		Net interest income³	$	697	$	351	$	1,337	$	634

Net interest margin ("NIM")				2.34%		1.27%		2.29%		1.19%

Annualized yields
	Segregated cash and securities			4.60%		0.42%		4.35%		0.26%
	Customer margin loans			5.49%		1.77%		5.21%		1.52%
	Customer credit balances			3.22%		0.17%		2.99%		0.06%

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.

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).

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, 2023 and 2022, $5 million, $8 million, $3 million, and $4 million were reported in other fees and services, respectively. For the three and six months ended June 30, 2023 and 2022, -$2 million, -$2 million, $0 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				Six Months
		Ended June 30,				Ended June 30,
		2023		2022		2023		2022

		(in millions)
Adjusted net revenues¹
Net revenues - GAAP		$	1,000	$	656	$	2,056	$	1,301

Non-GAAP adjustments
	Currency diversification strategy, net		55		53		54		71
	Mark-to-market on investments²		9		8		(31)		37
Total non-GAAP adjustments			64		61		23		108
Adjusted net revenues		$	1,064	$	717	$	2,079	$	1,409

Adjusted income before income taxes¹
Income before income taxes - GAAP		$	652	$	392	$	1,413	$	786

Non-GAAP adjustments
	Currency diversification strategy, net		55		53		54		71
	Mark-to-market on investments²		9		8		(31)		37
Total non-GAAP adjustments			64		61		23		108
Adjusted income before income taxes		$	716	$	453	$	1,436	$	894

Adjusted pre-tax profit margin			67%		63%		69%		63%

		Three Months				Six Months
		Ended June 30,				Ended June 30,
		2023		2022		2023		2022

		(in millions)
Adjusted net income available for common stockholders¹
Net income available for common stockholders - GAAP		$	125	$	72	$	273	$	145

Non-GAAP adjustments
	Currency diversification strategy, net		14		13		14		17
	Mark-to-market on investments²		2		2		(8)		9
	Income tax effect of above adjustments³		(3)		(3)		(1)		(5)
Total non-GAAP adjustments			13		12		5		20
Adjusted net income available for common stockholders		$	138	$	84	$	278	$	165

Note: Amounts may not add due to rounding.

		Three Months				Six Months
		Ended June 30,				Ended June 30,
		2023		2022		2023		2022

		(in dollars)
Adjusted diluted EPS¹
Diluted EPS - GAAP		$	1.20	$	0.72	$	2.62	$	1.46

Non-GAAP adjustments
	Currency diversification strategy, net		0.13		0.13		0.13		0.17
	Mark-to-market on investments²		0.02		0.02		(0.07)		0.09
	Income tax effect of above adjustments³		(0.03)		(0.03)		(0.01)		(0.05)
Total non-GAAP adjustments			0.12		0.12		0.04		0.20
Adjusted diluted EPS		$	1.32	$	0.84	$	2.67	$	1.66

Diluted weighted average common shares outstanding			104,463,729		99,695,489		104,254,888		99,461,867

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.

¹Adjusted 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 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.

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

Enhanced Investments, Inc.
329 South Oyster Bay Road #2085
Plainview, NY 11803
team@eninvs.com

Important disclosures

Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request.
All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services.
Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice.

Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities.
Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance.
All the strategies assume investments in equity invstrumenta only and are more relevant for "agressive investment profile". Eastern European flagship strategy assumes using up to 20% leverage of total portfolio. GlobalCommodities and US Growth strategy currently assume no leverage.
Results for the Enhanced Investments strategies as compared to the performance of Illustrative Benchmarks is for informational purposes only. Our investment program does not mirror that of the Illustrative Benchmarks and the volatility may be materially different from the volatility of Illustrative Benchmarks. Reference or comparison to an Illustrative Benchmark does not imply that strategies of Enhanced Investments will be constructed in the same way as the Illustrative Benchmark or achieve returns, volatility, or other results similar to those of the Illustrative Benchmark. The S&P 500 is an unmanaged market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.
Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request.
All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services.
Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice.