Interactive Brokers Group Announces 2Q2018 Results

Interactive Brokers Group, Inc. (NASDAQ GS: IBKR), an automated global electronic broker and market maker, today reported diluted earnings per share on net income of $0.58 for the quarter ended June 30, 2018, compared to $0.32 for the same period in 2017, and diluted earnings per share on comprehensive income of $0.39 for the quarter, compared to $0.41 for the same period in 2017.

Net revenues were $445 million and income before income taxes was $271 million this quarter, compared to net revenues of $387 million and income before income taxes of $204 million for the same period in 2017. The results for the quarter were positively impacted by strong growth in net interest income, which increased $70 million, or 45%, and higher commissions, which increased $25 million, or 16% from the year-ago quarter.

In addition, the results for the quarter include a $21 million loss on our currency diversification strategy, compared to a $29 million gain in the same period in 2017; and a $3 million net mark-to-market gain on our U.S. government securities portfolio, compared to a $3 million net mark-to-market loss in the same period in 2017.

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, 2018 to shareholders of record as of August 31, 2018.

Business Highlights

• 61% pretax profit margin for this quarter, up from 53% in the year-ago quarter.
• 64% Electronic Brokerage pretax profit margin for this quarter, up from 59% in the year-ago quarter.
• Customer equity grew 29% from the year-ago quarter to $134.7 billion and customer debits increased 27% to $28.8 billion.
• Customer accounts increased 27% from the year-ago quarter to 542 thousand.
• Total DARTs¹ increased 19% from the year-ago quarter to 797 thousand.
• Brokerage segment equity was $5.2 billion. Total equity was $6.7 billion.

Segment Overview

Electronic Brokerage

Electronic brokerage segment income before income taxes increased 43%, to $283 million in the quarter ended June 30, 2018, compared to the same period last year. Net revenues increased 33% to $443 million on higher net interest income, commissions revenue and other income.

Net interest income increased 47% as average customer credit and margin loan balances and benchmark interest rates increased from the year-ago quarter. Commissions revenue increased 16% from the year-ago quarter on higher customer volumes in futures and options, which increased 21% and 13%, respectively, while stock volumes decreased 5% from the year-ago quarter. Other income increased 58% on higher net mark-to-market gains on our U.S. government securities portfolio and other investments. Pretax profit margin was 64% for the quarter ended June 30, 2018, up from 59% in the same period last year.

Customer accounts grew 27% to 542 thousand and customer equity increased 29% from the year-ago quarter to $134.7 billion. Total DARTs for cleared and execution-only customers increased 19% to 797 thousand from the year-ago quarter. Cleared DARTs were 739 thousand, 19% higher than in the same period last year.

Market Making

Market making segment income before income taxes increased to $9 million in the quarter ended June 30, 2018, as compared to a pretax loss of $24 million in the year-ago quarter, during which we continued to wind down operations in this segment. The quarter’s results reflect lower operating costs on the remaining operations and the non-recurrence of $22 million in one-time exit costs related to the wind-down of our options market making business recognized in the year-ago quarter. In the third quarter of 2017 we completed the transfer of our U.S. options market making business to Two Sigma Securities, LLC and by year-end we had exited the majority of our market making activities outside the U.S.

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 decreased our comprehensive earnings by $100 million, as the U.S. dollar value of the GLOBAL decreased by approximately 1.41%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the corporate segment and (2) Other Comprehensive Income ("OCI”).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, July 17, 2018, 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 120 markets in numerous countries and currencies, from a single IB Universal 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, March 26, 2018. 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.

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