10-KPeriod: FY2018

Interactive Brokers Group, Inc. Annual Report, Year Ended Dec 31, 2018

Filed February 28, 2019For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported a strong performance for the fiscal year ending December 31, 2018, driven primarily by its electronic brokerage segment, which accounted for 96% of net revenues. The company experienced significant growth in customer accounts (up 24%) and trading volumes, benefiting from increased market volatility and rising interest rates, which boosted net interest income. While the market-making segment saw a decline in revenues due to its planned wind-down, the overall financial health of the company remained robust, with substantial excess regulatory capital. The company continues to invest heavily in its proprietary technology to maintain a competitive edge in providing low-cost, high-speed trade execution and a comprehensive trading platform to its global customer base.

Financial Highlights

34 data points
Beta

Revenue

$2.37B

Net Income

$169.00M

7.1% Net Margin

EPS (Diluted)

$0.57

Total Assets

$60.55B

Cash & Equivalents

$2.60B

Free Cash Flow

$2.36B

Financial Statements
Beta
Revenue$2.37B
Interest Expense$463.00M
Net Income$169.00M
EPS (Basic)$0.57
EPS (Diluted)$0.57
Shares Outstanding (Basic)293.75M
Shares Outstanding (Diluted)297.07M

Key Highlights

  • 1Electronic brokerage, the dominant revenue driver, saw a 31% increase in total net revenues, fueled by a 20% rise in commissions and a 38% increase in net interest income.
  • 2Total customer accounts grew by 24% to 598,000, indicating strong customer acquisition and retention.
  • 3Market volatility increased significantly in 2018, which positively impacted trading activity and commissions for Interactive Brokers.
  • 4Rising interest rates contributed positively to net interest income, as the company benefited from higher yields on customer margin loans and segregated cash balances.
  • 5The company is in the process of phasing out its market-making business, which led to a decrease in segment revenues.
  • 6Interactive Brokers maintained strong regulatory capital compliance, with aggregate excess regulatory capital of $5.8 billion as of December 31, 2018.
  • 7Despite a challenging market environment, the company demonstrated operational efficiency, with non-interest expenses as a percentage of total net revenues decreasing slightly year-over-year.

Frequently Asked Questions

Interactive Brokers Group's primary business segment is electronic brokerage, which generated 96% of its net revenues in 2018. This segment performed strongly, with total net revenues increasing by 31% year-over-year, driven by higher commissions and net interest income. Customer accounts and trading volumes also saw significant growth.

The market-making segment's net revenues decreased in 2018 as the company continued its planned wind-down of these operations, particularly in options market making. While it no longer contributes significantly to overall results, the company intends to continue certain proprietary trading activities to facilitate its brokerage clients' trading.

The increase in net interest income was primarily driven by higher average customer credit and margin loan balances, coupled with rising benchmark interest rates, particularly the U.S. Federal Funds rate. These factors allowed Interactive Brokers to earn more on its customer deposits and loans.

Interactive Brokers manages market risk through proprietary technology, automated risk controls, and hedging strategies. The company also maintains a strong focus on regulatory compliance, with all operating companies being in compliance with their respective capital requirements, and holding significant excess regulatory capital ($5.8 billion as of December 31, 2018).