Exhibit 99.1
INTERACTIVE BROKERS GROUP ANNOUNCES 4Q2019 RESULTS
— — —
DILUTED EARNINGS PER SHARE OF $0.57, ADJUSTED DILUTED EARNINGS PER SHARE OF $0.58.
INCOME BEFORE TAXES OF $312 MILLION ON $500 MILLION IN NET REVENUES. ADJUSTED
INCOME BEFORE TAXES OF $315 MILLION ON $503 MILLION IN ADJUSTED NET REVENUES1.
DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.
GREENWICH, CONN, January 21, 2019 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.57 for the quarter ended December 31, 2019 compared to $0.57 for the same period in 2018, and adjusted diluted earnings per share of $0.58 for both this quarter and for the same period in 2018.
Net revenues were $500 million and income before income taxes was $312 million this quarter, compared to net revenues of $492 million and income before income taxes of $309 million for the same period in 2018. Adjusted net revenues were $503 million and adjusted income before income taxes was $315 million this quarter, compared to adjusted net revenues of $496 million and adjusted income before income taxes of $313 million. The results for the quarter were positively impacted by strong growth in net interest income, which increased $44 million, or 18%, from the year-ago quarter; partially counterbalanced by lower commissions revenue, which decreased $37 million, or 18%, from the year-ago quarter.
The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 13, 2020 to shareholders of record as of February 28, 2020.
Effective this quarter, we introduced the reporting of non-GAAP financial measures which exclude certain items that may not be indicative of our core operating results and business outlook and may be useful in evaluating the operating performance of our business and provide a better comparison of our results in the current period to those in prior and future periods. See the reconciliation of non-GAAP financial measures starting on page 11.
Business Highlights
Fourth Quarter 2019:
| • | 62% pretax profit margin for this quarter, down from 63% in the year-ago quarter. |
| • | 65% Electronic Brokerage pretax profit margin for this quarter, up from 63% in the year-ago quarter. |
| • | Customer equity grew 36% from the year-ago quarter to $174.1 billion and customer debits increased 15% to $31.0 billion. |
| • | Customer accounts increased 15% from the year-ago quarter to 690 thousand. |
| • | Total DARTs2 decreased 16% from the year-ago quarter to 797 thousand. |
| • | Brokerage segment equity was $6.8 billion. Total equity was $7.9 billion. |
Full Year 2019:
| • | 60% pretax profit margin for 2019, down from 63% in 2018. |
| • | 62% Electronic Brokerage pretax profit margin for 2019, down from 64% in 2018. |
| • | Total DARTs decreased 3% from 2018 to 833 thousand. |
1 See the reconciliation of non-GAAP financial measures starting on page 11.
2 Daily average revenue trades (DARTs) are based on customer orders.
Segment Overview
Electronic Brokerage
Electronic brokerage segment income before income taxes increased 1% to $314 million in the quarter ended December 31, 2019, compared to the same period last year. Net revenues decreased 1% to $486 million on lower commissions revenue and other income, partially offset by higher net interest income.
Commissions revenue decreased 18% from the year-ago quarter on lower customer trading volume in options, futures and stocks. Net interest income increased 19% as average customer credit balances and securities lending balances increased from the year-ago quarter. Pretax profit margin was 65% for the quarter ended December 31, 2019, up from 63% in the same period last year.
Customer accounts grew 15% to 690 thousand and customer equity increased 36% from the year-ago quarter to $174.1 billion. Total DARTs for cleared and execution-only customers decreased 16% to 797 thousand from the year-ago quarter. Cleared DARTs decreased 16% to 719 thousand from the same period last year.
Market Making
Market making segment income before income taxes decreased 44% to $5 million in the quarter ended December 31, 2019, compared to the same period last year, primarily due to lower net revenues from the remaining operations.
Corporate
For the quarter ended December 31, 2019, we recognized a mark-to-market loss of approximately $7 million on our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”). For the twelve months ended December 31, 2019 we recognized a net mark-to-market gain of $9 million on this investment.
Effects of Foreign Currency Diversification
In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 14 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $50 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.74%. The effects of the currency diversification strategy are reported as components of (1) Other Income ($12 million) in the corporate segment and (2) Other Comprehensive Income ($38 million). With the introduction of non-GAAP measures, which exclude the impact of the GLOBAL, the Company has removed diluted earnings per share on comprehensive income from the above disclosures.
Regulatory Matters
The Company is subject to regulatory oversight and examination by numerous governmental and self-regulatory authorities. The Company is currently providing information to certain of such authorities, including FINRA, the SEC, the CFTC and the United States Department of Justice, and cooperating with those authorities. The Company believes that the regulators are focused on compliance practices, including anti money laundering and Bank Secrecy Act practices. The Company periodically reviews these practices to make them more robust and to keep pace with changing regulatory standards, and the Company has been enhancing and augmenting its procedures and personnel in these areas over the past several years. While the outcome of the examinations and inquiries currently in progress cannot be predicted, the Company does not believe that they are likely to have a materially adverse effect on the Company’s financial results.
Conference Call Information:
Interactive Brokers Group, Inc. will hold a conference call with investors today, January 21, 2020, 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 125 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to customers worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost according to Barron's Best Online Brokers review, February 25, 2019. We strive to provide our customers with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments.
Cautionary Note Regarding Forward-Looking Statements:
The foregoing information contains certain forward-looking statements that reflect the Company’s current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company’s operations and business environment which may cause the Company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company’s financial results may be found in the Company’s filings with the Securities and Exchange Commission.
For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, 203-618-4070 or Media: Kalen Holliday, 203-913-1369.
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA
TRADE VOLUMES:
(in 000's, except %)
| | | | | | | | | | | Brokerage | | | | | | | | |
| | | Market | | | | Brokerage | | | | Non | | | | | | | | Avg. Trades |
| | | Making | | % | | Cleared | | % | | Cleared | | % | | Total | | % | | per U.S. |
| Period | | Trades | | Change | | Trades | | Change | | Trades | | Change | | Trades | | Change | | Trading Day |
| 2017 | | 31,282 | | | | 265,501 | | | | 14,835 | | | | 311,618 | | | | 1,246 |
| 2018 | | 18,663 | | (40%) | | 328,099 | | 24% | | 21,880 | | 47% | | 368,642 | | 18% | | 1,478 |
| 2019 | | 17,136 | | (8%) | | 302,289 | | (8%) | | 26,346 | | 20% | | 345,771 | | (6%) | | 1,380 |
| | | | | | | | | | | | | | | | | | | |
| 4Q2018 | | 4,825 | | | | 88,806 | | | | 7,251 | | | | 100,882 | | | | 1,627 |
| 4Q2019 | | 4,204 | | (13%) | | 73,291 | | (17%) | | 6,284 | | (13%) | | 83,779 | | (17%) | | 1,330 |
| | | | | | | | | | | | | | | | | | | |
| 3Q2019 | | 4,738 | | | | 78,793 | | | | 6,566 | | | | 90,097 | | | | 1,419 |
| 4Q2019 | | 4,204 | | (11%) | | 73,291 | | (7%) | | 6,284 | | (4%) | | 83,779 | | (7%) | | 1,330 |
CONTRACT AND SHARE VOLUMES:
TOTAL
| | | Options | | % | | Futures1 | | % | | Stocks | | % |
| Period | | (contracts) | | Change | | (contracts) | | Change | | (shares) | | Change |
| 2017 | | 395,885 | | | | 124,123 | | | | 220,247,921 | | |
| 2018 | | 408,406 | | 3% | | 151,762 | | 22% | | 210,257,186 | | (5%) |
| 2019 | | 390,739 | | (4%) | | 128,770 | | (15%) | | 176,752,967 | | (16%) |
| | | | | | | | | | | | | |
| 4Q2018 | | 107,417 | | | | 41,684 | | | | 44,933,688 | | |
| 4Q2019 | | 100,520 | | (6%) | | 29,078 | | (30%) | | 39,391,536 | | (12%) |
| | | | | | | | | | | | | |
| 3Q2019 | | 103,972 | | | | 36,124 | | | | 43,107,364 | | |
| 4Q2019 | | 100,520 | | (3%) | | 29,078 | | (20%) | | 39,391,536 | | (9%) |
MARKET MAKING
| | | Options | | % | | Futures1 | | % | | Stocks | | % |
| Period | | (contracts) | | Change | | (contracts) | | Change | | (shares) | | Change |
| 2017 | | 102,025 | | | | 5,696 | | | | 7,139,622 | | |
| 2018 | | 49,554 | | (51%) | | 3,277 | | (42%) | | 11,347,811 | | 59% |
| 2019 | | 41,452 | | (16%) | | 2,407 | | (27%) | | 8,926,477 | | (21%) |
| | | | | | | | | | | | | |
| 4Q2018 | | 12,680 | | | | 828 | | | | 3,091,834 | | |
| 4Q2019 | | 8,958 | | (29%) | | 448 | | (46%) | | 1,403,411 | | (55%) |
| | | | | | | | | | | | | |
| 3Q2019 | | 10,848 | | | | 697 | | | | 2,082,317 | | |
| 4Q2019 | | 8,958 | | (17%) | | 448 | | (36%) | | 1,403,411 | | (33%) |
BROKERAGE TOTAL
| | | Options | | % | | Futures1 | | % | | Stocks | | % |
| Period | | (contracts) | | Change | | (contracts) | | Change | | (shares) | | Change |
| 2017 | | 293,860 | | | | 118,427 | | | | 213,108,299 | | |
| 2018 | | 358,852 | | 22% | | 148,485 | | 25% | | 198,909,375 | | (7%) |
| 2019 | | 349,287 | | (3%) | | 126,363 | | (15%) | | 167,826,490 | | (16%) |
| | | | | | | | | | | | | |
| 4Q2018 | | 94,737 | | | | 40,856 | | | | 41,841,854 | | |
| 4Q2019 | | 91,562 | | (3%) | | 28,630 | | (30%) | | 37,988,125 | | (9%) |
| | | | | | | | | | | | | |
| 3Q2019 | | 93,124 | | | | 35,427 | | | | 41,025,047 | | |
| 4Q2019 | | 91,562 | | (2%) | | 28,630 | | (19%) | | 37,988,125 | | (7%) |
1 | Includes options on futures. |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED
BROKERAGE CLEARED
| | | Options | | % | | Futures1 | | % | | Stocks | | % |
| Period | | (contracts) | | Change | | (contracts) | | Change | | (shares) | | Change |
| 2017 | | 253,304 | | | | 116,858 | | | | 209,435,662 | | |
| 2018 | | 313,795 | | 24% | | 146,806 | | 26% | | 194,012,882 | | (7%) |
| 2019 | | 302,068 | | (4%) | | 125,225 | | (15%) | | 163,030,500 | | (16%) |
| | | | | | | | | | | | | |
| 4Q2018 | | 83,984 | | | | 40,463 | | | | 40,271,369 | | |
| 4Q2019 | | 81,468 | | (3%) | | 28,307 | | (30%) | | 36,969,492 | | (8%) |
| | | | | | | | | | | | | |
| 3Q2019 | | 80,840 | | | | 35,108 | | | | 39,891,867 | | |
| 4Q2019 | | 81,468 | | 1% | | 28,307 | | (19%) | | 36,969,492 | | (7%) |
1 | Includes options on futures. |
BROKERAGE STATISTICS(in 000's, except % and where noted)
| Year over Year | | 4Q2019 | | | 4Q2018 | | % Change |
| Total Accounts | | 690 | | | 598 | | 15% |
Customer Equity (in billions)1 | $ | 174.1 | | $ | 128.4 | | 36% |
| | | | | | | | |
| Cleared DARTs | | 719 | | | 856 | | (16%) |
| Total Customer DARTs | | 797 | | | 951 | | (16%) |
| | | | | | | | |
| Cleared Customers (in $'s, except DART per account) | | | | | |
| Commission per DART | $ | 3.61 | | $ | 3.79 | | (5%) |
| DART per Avg. Account (Annualized) | | 266 | | | 364 | | (27%) |
| Net Revenue per Avg. Account (Annualized) | $ | 2,801 | | $ | 3,225 | | (13%) |
| | | | | | | | |
| Consecutive Quarters | | 4Q2019 | | | 3Q2019 | | % Change |
| Total Accounts | | 690 | | | 666 | | 4% |
Customer Equity (in billions)1 | $ | 174.1 | | $ | 156.6 | | 11% |
| | | | | | | | |
| Cleared DARTs | | 719 | | | 777 | | (7%) |
| Total Customer DARTs | | 797 | | | 859 | | (7%) |
| | | | | | | | |
| Cleared Customers (in $'s, except DART per account) | | | | | |
| Commission per DART | $ | 3.61 | | $ | 3.69 | | (2%) |
| DART per Avg. Account (Annualized) | | 266 | | | 297 | | (10%) |
| Net Revenue per Avg. Account (Annualized) | $ | 2,801 | | $ | 2,995 | | (6%) |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
(UNAUDITED)
| | | | | Three Months | | Twelve Months |
| | | | | Ended December 31, | | Ended December 31, |
| | | | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | | | | | | | |
| | | | | (in millions) |
| Average interest-earning assets | | | | | | | | | | | | |
| | Segregated cash and securities | | $ | 29,437 | | $ | 21,957 | | $ | 27,812 | | $ | 20,911 |
| | Customer margin loans | | | 27,529 | | | 28,805 | | | 26,483 | | | 29,253 |
| | Securities borrowed | | | 4,026 | | | 3,407 | | | 3,930 | | | 3,310 |
| | Other interest-earning assets | | | 5,887 | | | 4,825 | | | 5,407 | | | 4,362 |
| | FDIC sweeps1 | | | 2,201 | | | 1,673 | | | 2,046 | | | 1,259 |
| | | | | $ | 69,080 | | $ | 60,667 | | $ | 65,678 | | $ | 59,095 |
| | | | | | | | | | | | | | | |
| Average interest-bearing liabilities | | | | | | | | | | | | |
| | Customer credit balances | | $ | 55,185 | | $ | 49,153 | | $ | 52,625 | | $ | 48,179 |
| | Securities loaned | | | 4,292 | | | 3,729 | | | 4,088 | | | 3,982 |
| | Other interest-bearing liabilities | | | 477 | | | - | | | 196 | | | 241 |
| | | | | $ | 59,954 | | $ | 52,882 | | $ | 56,909 | | $ | 52,402 |
| | | | | | | | | | | | | | | |
| Net interest income | | | | | | | | | | | | |
| | Segregated cash and securities, net | | $ | 126 | | $ | 104 | | $ | 560 | | $ | 337 |
| | Customer margin loans2 | | | 157 | | | 192 | | | 694 | | | 677 |
| | Securities borrowed and loaned, net | | | 80 | | | 50 | | | 257 | | | 216 |
| | Customer credit balances, net2 | | | (94) | | | (121) | | | (515) | | | (362) |
| | Other net interest income1/3 | | | 27 | | | 27 | | | 121 | | | 90 |
| | | Net interest income3 | | $ | 296 | | $ | 252 | | $ | 1,117 | | $ | 958 |
| | | | | | | | | | | | | | | |
| Net interest margin ("NIM") | | | 1.70% | | | 1.65% | | | 1.70% | | | 1.62% |
| | | | | | | | | | | | | | | |
| Annualized yields | | | | | | | | | | | | |
| | Segregated cash and securities | | | 1.70% | | | 1.88% | | | 2.01% | | | 1.61% |
| | Customer margin loans | | | 2.26% | | | 2.64% | | | 2.62% | | | 2.31% |
| | Customer credit balances | | | 0.68% | | | 0.98% | | | 0.98% | | | 0.75% |
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 which has the same characteristics as interest, but is reported in other income in the Company’s consolidated statements of comprehensive income, of $9 million for the three months ended December 31, 2019 and 2018, and $34 million and $29 million for the twelve months ended December 31, 2019 and 2018, respectively. |
| | | | | | | | | | | | | | | |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)
| | | | Three Months | | Twelve Months |
| | | | Ended December 31, | | Ended December 31, |
| | | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | (in millions) |
| | | | | | | | | | | | | | |
| Electronic Brokerage | Net revenues | | $ | 486 | | $ | 490 | | $ | 1,921 | | $ | 1,842 |
| | Non-interest expenses | | | 172 | | | 179 | | | 724 | | | 665 |
| | | | | | | | | | | | | | |
| | Income before income taxes | | $ | 314 | | $ | 311 | | $ | 1,197 | | $ | 1,177 |
| | | | | | | | | | | | | | |
| | Pre-tax profit margin | | | 65% | | | 63% | | | 62% | | | 64% |
| | | | | | | | | | | | | | |
| Market Making | Net revenues | | $ | 15 | | $ | 17 | | $ | 67 | | $ | 76 |
| | Non-interest expenses | | | 10 | | | 8 | | | 37 | | | 42 |
| | | | | | | | | | | | | | |
| | Income before income taxes | | $ | 5 | | $ | 9 | | $ | 30 | | $ | 34 |
| | | | | | | | | | | | | | |
| | Pre-tax profit margin | | | 33% | | | 53% | | | 45% | | | 45% |
| | | | | | | | | | | | | | |
Corporate 1 | Net revenues | | $ | (1) | | $ | (15) | | $ | (51) | | $ | (15) |
| | Non-interest expenses | | | 6 | | | (4) | | | 19 | | | - |
| | | | | | | | | | | | | | |
| | Income (loss) before income taxes | | $ | (7) | | $ | (11) | | $ | (70) | | $ | (15) |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Total | Net revenues | | $ | 500 | | $ | 492 | | $ | 1,937 | | $ | 1,903 |
| | Non-interest expenses | | | 188 | | | 183 | | | 780 | | | 707 |
| | | | | | | | | | | | | | |
| | Income before income taxes | | $ | 312 | | $ | 309 | | $ | 1,157 | | $ | 1,196 |
| | | | | | | | | | | | | | |
| | Pre-tax profit margin | | | 62% | | | 63% | | | 60% | | | 63% |
1 | Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy. |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| | | | | Three Months | | Twelve Months |
| | | | | Ended December 31, | | Ended December 31, |
| | | | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | (in millions, except share and per share data) |
| | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | |
| | Commissions | | $ | 168 | | $ | 205 | | $ | 706 | | $ | 777 |
| | Interest income | | | 418 | | | 385 | | | 1,726 | | | 1,392 |
| | Trading gains | | | 7 | | | 7 | | | 27 | | | 39 |
| | Other income | | | 38 | | | 37 | | | 121 | | | 158 |
| | | | | | | | | | | | | | | |
| | | Total revenues | | | 631 | | | 634 | | | 2,580 | | | 2,366 |
| | | | | | | | | | | | | | | |
| | Interest expense | | | 131 | | | 142 | | | 643 | | | 463 |
| | | | | | | | | | | | | | | |
| | | Total net revenues | | | 500 | | | 492 | | | 1,937 | | | 1,903 |
| | | | | | | | | | | | | | | |
| Non-interest expenses: | | | | | | | | | | | | |
| | Execution, clearing and distribution fees | | | 59 | | | 73 | | | 251 | | | 269 |
| | Employee compensation and benefits | | | 75 | | | 63 | | | 288 | | | 264 |
| | Occupancy, depreciation and amortization | | | 17 | | | 14 | | | 60 | | | 49 |
| | Communications | | | 6 | | | 5 | | | 25 | | | 25 |
| | General and administrative | | | 32 | | | 26 | | | 112 | | | 96 |
| | Customer bad debt | | | (1) | | | 2 | | | 44 | | | 4 |
| | | | | | | | | | | | | | | |
| | | Total non-interest expenses | | | 188 | | | 183 | | | 780 | | | 707 |
| | | | | | | | | | | | | | | |
| Income before income taxes | | | 312 | | | 309 | | | 1,157 | | | 1,196 |
| | | | | | | | | | | | | | | |
| Income tax expense | | | 18 | | | 19 | | | 68 | | | 71 |
| | | | | | | | | | | | | | | |
| Net income | | | 294 | | | 290 | | | 1,089 | | | 1,125 |
| | | | | | | | | | | | | | | |
| Net income attributable to noncontrolling interests | | 250 | | | 247 | | | 928 | | | 956 |
| | | | | | | | | | | | | | | |
| Net income available for common stockholders | | $ | 44 | | $ | 43 | | $ | 161 | | $ | 169 |
| | | | | | | | | | | | | | | |
| Earnings per share: | | | | | | | | | | | | |
| | Basic | | $ | 0.58 | | $ | 0.58 | | $ | 2.11 | | $ | 2.30 |
| | Diluted | | $ | 0.57 | | $ | 0.57 | | $ | 2.10 | | $ | 2.28 |
| | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | |
| | Basic | | | 76,749,142 | | | 75,097,578 | | | 76,121,570 | | | 73,438,209 |
| | Diluted | | | 77,357,093 | | | 75,810,322 | | | 76,825,863 | | | 74,266,370 |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| | | | | Three Months | | Twelve Months |
| | | | | Ended December 31, | | Ended December 31, |
| | | | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | (in millions, except share and per share data) |
| | | | | | | | | | | | | | | |
| Comprehensive income: | | | | | | | | | | | | |
| | Net income available for common stockholders | | $ | 44 | | $ | 43 | | $ | 161 | | $ | 169 |
| | Other comprehensive income: | | | | | | | | | | | | |
| | | Cumulative translation adjustment, before income taxes | 7 | | | - | | | 4 | | | (14) |
| | | Income taxes related to items of other comprehensive income | | - | | | - | | | - | | | (1) |
| | Other comprehensive income (loss), net of tax | | | 7 | | | - | | | 4 | | | (13) |
| Comprehensive income available for common stockholders | | $ | 51 | | $ | 43 | | $ | 165 | | $ | 156 |
| | | | | | | | | | | | | | | |
| Comprehensive earnings per share: | | | | | | | | | | | | |
| | Basic | | $ | 0.67 | | $ | 0.56 | | $ | 2.18 | | $ | 2.12 |
| | Diluted | | $ | 0.66 | | $ | 0.56 | | $ | 2.16 | | $ | 2.09 |
| | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | |
| | Basic | | | 76,749,142 | | | 75,097,578 | | | 76,121,570 | | | 73,438,209 |
| | Diluted | | | 77,357,093 | | | 75,810,322 | | | 76,825,863 | | | 74,266,370 |
| | | | | | | | | | | | | | | |
| Comprehensive income attributable to noncontrolling interests: | | | | | | | | | | |
| Net income attributable to noncontrolling interests
| | $ | 250 | | $ | 247 | | $ | 928 | | $ | 956 |
| Other comprehensive income - cumulative translation adjustment | | | 31 | | | (6) | | | 20 | | | (66) |
| Comprehensive income attributable to noncontrolling interests | $ | 281 | | $ | 241 | | $ | 948 | | $ | 890 |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | | | | | | December 31, 2019 | | December 31, 2018 |
| | | | | | | (in millions) |
| | | | | | | | | | | |
| Assets | | | | | | | | | |
| Cash and cash equivalents | | | | | $ | 2,882 | | $ | 2,597 |
| Cash - segregated for regulatory purposes | | | | | | 9,400 | | | 7,503 |
| Securities - segregated for regulatory purposes | | | | | | 17,824 | | | 15,595 |
| Securities borrowed | | | | | | 3,916 | | | 3,331 |
| Securities purchased under agreements to resell | | | | | | 3,111 | | | 1,242 |
| Financial instruments owned, at fair value | | | | | | 1,916 | | | 2,119 |
| Receivables from customers, net of allowance for doubtful accounts | | | | | 31,304 | | | 27,017 |
| Receivables from brokers, dealers and clearing organizations | | | | | 685 | | | 706 |
| Other assets | | | | | | 638 | | | 437 |
| | | | | | | | | | | |
| | Total assets | | | | | $ | 71,676 | | $ | 60,547 |
| | | | | | | | | | | |
| Liabilities and equity | | | | | | | | | |
| | | | | | | | | | | |
| Liabilities | | | | | | | | | |
| Short-term borrowings | | | | | $ | 16 | | $ | 17 |
| Securities loaned | | | | | | 4,410 | | | 4,037 |
| Securities sold under agreements to repurchase | | | | | | 1,909 | | | - |
| Financial instruments sold but not yet purchased, at fair value | | | | | 457 | | | 681 |
| Other payables: | | | | | | | | | |
| | Customers | | | | | | 56,248 | | | 47,993 |
| | Brokers, dealers and clearing organizations | | | | | | 220 | | | 298 |
| | Other payables | | | | | | 476 | | | 365 |
| | | | | | | | 56,944 | | | 48,656 |
| | | | | | | | | | | |
| | Total liabilities | | | | | | 63,736 | | | 53,391 |
| | | | | | | | | | | |
| Equity | | | | | | | | | |
| Stockholders' equity | | | | | | 1,452 | | | 1,282 |
| Noncontrolling interests | | | | | | 6,488 | | | 5,874 |
| | Total equity | | | | | | 7,940 | | | 7,156 |
| | | | | | | | | | | |
| | Total liabilities and equity | | | | | $ | 71,676 | | $ | 60,547 |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | December 31, 2019 | | | December 31, 2018 |
| Ownership of IBG LLC Membership Interests | Interests | | % | | | Interests | | | % |
| | | | | | | | | | | |
| IBG, Inc. | 76,759,595 | | 18.5% | | | 75,100,955 | | | 18.1% |
| Noncontrolling interests (IBG Holdings LLC) | 338,670,642 | | 81.5% | | | 338,691,717 | | | 81.9% |
| | | | | | | | | | | |
| Total IBG LLC membership interests | 415,430,237 | | 100.0% | | | 413,792,672 | | | 100.0% |
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
| | | | Three Months | | Twelve Months |
| | | | Ended December 31, | | Ended December 31, |
| | | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | (in millions) |
| | | | | | | | | | | | | | |
Adjusted net revenues1 | | | | | | | | | | | | |
| Net revenues - GAAP | | $ | 500 | | $ | 492 | | $ | 1,937 | | $ | 1,903 |
| | | | | | | | | | | | | | |
| Non-GAAP adjustments | | | | | | | | | | | | |
| | Currency diversification strategy, net | | | (12) | | | 12 | | | 60 | | | 19 |
| | Mark-to-market on investments2 | | | 15 | | | (8) | | | (13) | | | (9) |
| Total non-GAAP adjustments | | | 3 | | | 4 | | | 47 | | | 10 |
| | | | | | | | | | | | | | |
| Adjusted net revenues | | $ | 503 | | $ | 496 | | $ | 1,984 | | $ | 1,913 |
| | | | | | | | | | | | | | |
Adjusted income before income taxes1 | | | | | | | | | | | | |
| Income before income taxes - GAAP | | $ | 312 | | $ | 309 | | $ | 1,157 | | $ | 1,196 |
| | | | | | | | | | | | | | |
| Non-GAAP adjustments | | | | | | | | | | | | |
| | Currency diversification strategy, net | | | (12) | | | 12 | | | 60 | | | 19 |
| | Mark-to-market on investments2 | | | 15 | | | (8) | | | (13) | | | (9) |
| | Unusual bad debt expense3 | | | - | | | - | | | 42 | | | - |
| Total non-GAAP adjustments | | | 3 | | | 4 | | | 89 | | | 10 |
| | | | | | | | | | | | | | |
| Adjusted income before income taxes | | $ | 315 | | $ | 313 | | $ | 1,246 | | $ | 1,206 |
| | | | Three Months | | Twelve Months |
| | | | Ended December 31, | | Ended December 31, |
| | | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | (in millions) |
Adjusted net income available for common stockholders1 | | | | | | | | | |
| Net income available for common stockholders - GAAP | $ | 44 | | $ | 43 | | $ | 161 | | $ | 169 |
| | | | | | | | | | | | | | |
| Non-GAAP adjustments | | | | | | | | | | | | |
| | Currency diversification strategy, net | | | (2) | | | 2 | | | 11 | | | 3 |
| | Mark-to-market on investments2 | | | 3 | | | (1) | | | (2) | | | (2) |
| | Unusual bad debt expense3 | | | - | | | - | | | 8 | | | 0 |
| | Income tax effect of above adjustments4 | | | 0 | | | 0 | | | (3) | | | (1) |
| Total non-GAAP adjustments | | | 1 | | | 1 | | | 13 | | | 1 |
| | | | | | | | | | | | | | |
| Adjusted net income available for common stockholders | $ | 45 | | $ | 44 | | $ | 174 | | $ | 170 |
Note: Amounts may not add due to rounding.
| | | | Three Months | | Twelve Months |
| | | | Ended December 31, | | Ended December 31, |
| | | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | (in dollars, except share amounts) |
Adjusted diluted EPS1 | | | | | | | | | | | | |
| Diluted EPS - GAAP | | $ | 0.57 | | $ | 0.57 | | $ | 2.10 | | $ | 2.28 |
| | | | | | | | | | | | | | |
| Non-GAAP adjustments | | | | | | | | | | | | |
| | Currency diversification strategy, net | | | (0.03) | | | 0.03 | | | 0.14 | | | 0.05 |
| | Mark-to-market on investments2 | | | 0.03 | | | (0.02) | | | (0.03) | | | (0.02) |
| | Unusual bad debt expense3 | | | 0.00 | | | 0.00 | | | 0.10 | | | 0.00 |
| | Income tax effect of above adjustments | | | 0.00 | | | 0.00 | | | (0.04) | | | (0.02) |
| Total non-GAAP adjustments | | | 0.01 | | | 0.01 | | | 0.17 | | | 0.01 |
| | | | | | | | | | | | | | |
| Adjusted diluted EPS | | $ | 0.58 | | $ | 0.58 | | $ | 2.27 | | $ | 2.28 |
| | | | | | | | | | | | | | |
| Diluted weighted average common shares outstanding | 77,357,093 | | | 75,810,322 | | | 76,825,863 | | | 74,266,370 |
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 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, our net mark-to-market gains (losses) on investments and unusual bad debt expense3. |
| • | We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects of our GLOBAL currency diversification strategy, the mark-to-market on investments, and unusual bad debt expense attributable to IBG, Inc. |
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, our mark-to-market on investments and unusual bad debt expense 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 described below.
3Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the twelve months ending December 31, 2019, unusual bad debt expense reflects losses recognized on margin lending to a small number of our brokerage customers that had taken relatively large positions in a security listed on a major U.S. exchange, which lost a substantial amount of its value in a very short timeframe. (More information can be found in the disclosures in our Forms 10-Q filed with the SEC during 2019.)
4 The income tax effect is estimated using the corporate income tax rates applicable to the Company.
