10-QPeriod: Q2 FY2019

Interactive Brokers Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 8, 2019For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported its financial results for the quarter ended June 30, 2019. The company experienced a decrease in net revenues to $413 million from $445 million in the prior year period, primarily due to lower other income, commissions, and trading gains, partially offset by higher net interest income. Diluted earnings per share also saw a decline to $0.43 from $0.57 year-over-year. Despite the top-line revenue decrease, the company's electronic brokerage segment demonstrated resilience, with income before income taxes increasing by 7% due to robust growth in net interest income and other income. This segment benefited from higher customer credit balances and benchmark interest rates, as well as a net mark-to-market gain on its U.S. government securities portfolio. However, a notable increase in customer bad debt expense of $44 million for the six-month period, largely due to margin lending losses, impacted overall profitability. The company continues to manage its global currency exposure through a diversification strategy, which had a positive impact on comprehensive earnings for the quarter.

Financial Highlights

32 data points
Beta

Revenue

$586.00M

Net Income

$32.00M

5.5% Net Margin

EPS (Diluted)

$0.11

Total Assets

$66.03B

Cash & Equivalents

$3.16B

Free Cash Flow

$1.44B

Financial Statements
Beta
Revenue$586.00M
Interest Expense$173.00M
Net Income$32.00M
EPS (Basic)$0.11
EPS (Diluted)$0.11
Shares Outstanding (Basic)303.47M
Shares Outstanding (Diluted)306.38M

Key Highlights

  • 1Net revenues decreased by 7% to $413 million for the three months ended June 30, 2019, compared to $445 million in the prior year quarter.
  • 2Diluted earnings per share (EPS) decreased to $0.43 from $0.57 year-over-year for the three months ended June 30, 2019.
  • 3Net interest income increased by 15% to $259 million for the three months ended June 30, 2019, driven by higher customer credit balances and benchmark interest rates.
  • 4Electronic brokerage segment income before income taxes increased by 7% year-over-year, showcasing the segment's resilience.
  • 5Customer bad debt expense significantly increased to $47 million for the six months ended June 30, 2019, compared to $3 million in the prior year period, primarily due to margin lending losses.
  • 6Total customer accounts grew by 19% year-over-year to 645 thousand as of June 30, 2019.
  • 7The company maintained strong regulatory capital, with aggregate excess regulatory capital for all operating companies at $6.3 billion as of June 30, 2019.

Frequently Asked Questions

The decrease in net revenues was primarily driven by lower other income, commissions revenue, and trading gains. This was partially offset by an increase in net interest income.

The electronic brokerage segment showed resilience, with income before income taxes increasing by 7% year-over-year. This was due to higher net interest income and other income, despite lower commissions revenue. Customer accounts and equity also saw significant growth.

The significant increase in customer bad debt expense, particularly for the six-month period, was primarily due to losses incurred on margin lending, stemming from a concentrated position in a security that experienced a substantial value decline.

Interactive Brokers manages its global currency exposure through a currency diversification strategy, maintaining its net worth in a basket of 14 currencies called the 'GLOBAL'. This strategy aims to diversify risk and align hedging with business operations, and it positively impacted comprehensive earnings during the quarter.