01—Abstract
Summary
Summary of the 10-Q filed November 12, 2019. Cited figures are marked; the original filing is the authoritative source.
Interactive Brokers Group, Inc. (IBKR) reported its third-quarter and year-to-date results for 2019.
The company demonstrated strong revenue growth driven by higher net interest income and commissions, despite a slight decrease in overall commissions year-over-year for the nine-month period. Total net revenues for the nine months ended September 30, 2019, increased to $1.437 billiona, up from $1.411 billion in the prior year. Diluted earnings per share for the nine months were $1.52, a decrease from $1.71 in the prior year, reflecting increased customer bad debt expense and higher non-interest expenses.
The company continues to expand its electronic brokerage segment, attracting more customers globally, while its market-making segment is being phased out. The company's balance sheet remains robust, with a significant portion of its assets classified as liquid. IBKR maintained strong regulatory capital levels across its operating companies.
Management expressed confidence in the company's liquidity and ability to meet future needs through operational cash flows and available borrowings. Despite a challenging market environment with fluctuating volatility and interest rates, Interactive Brokers continues to focus on its technology-driven platform and customer service, aiming to attract and retain a diverse client base.
02—Key points
Key Highlights
- Total net revenues for the nine months ended September 30, 2019, increased to $1.437 billion, up from $1.411 billion in the same period last year.
- Diluted earnings per share for the nine months ended September 30, 2019, were $1.52, down from $1.71 in the prior year, impacted by increased customer bad debt expenses and higher non-interest expenses.
- The electronic brokerage segment remains the primary revenue driver, with net revenues increasing by 14% year-over-year for the third quarter, driven by higher net interest income and commissions.
- Customer accounts grew by 16% year-over-year to 666,000, and customer equity increased by 10% to $156.6 billion as of September 30, 2019.
- Net interest income saw significant growth, increasing by 19% for the third quarter and 17% for the nine-month period, driven by higher customer credit balances and benchmark interest rates.
- The company maintained strong liquidity, with total assets of $67.8 billion as of September 30, 2019, of which approximately 99.1% were considered liquid.
- Aggregate excess regulatory capital for all operating companies stood at $6.2 billion as of September 30, 2019, with all entities in compliance with their capital requirements.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed November 12, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $643.00M$558.00M | +15.2% |
| Interest Expense | $177.00M— | — |
| Net Income | $36.00M$39.00M | −7.7% |
| EPS (Basic) | $0.12$0.13 | −11.5% |
| EPS (Diluted) | $0.11$0.13 | −11.8% |
| Shares Outstanding (Basic) | 306.97M298.60M | +2.8% |
| Shares Outstanding (Diluted) | 309.40M301.44M | +2.6% |
05—Questions
Frequently Asked Questions
What was the company's financial performance in the third quarter of 2019 compared to the prior year?
For the three months ended September 30, 2019, Interactive Brokers reported diluted earnings per share of $0.45, a decrease from $0.51 in the prior year quarter. Total net revenues increased by 6% to $466 million, driven by higher net interest income and commissions, although other income decreased. Non-interest expenses also increased, impacting profitability.
How did the company's customer base and equity evolve during this period?
Interactive Brokers experienced significant growth in its customer base. Total customer accounts increased by 16% year-over-year to 666,000 as of September 30, 2019. Customer equity also rose by 10% to $156.6 billion, supported by healthy inflows and generally rising securities markets.
What is the current status of the market-making business, and how is it impacting the company's results?
Interactive Brokers has substantially exited its options market-making business. The remaining market-making activities are limited and are expected to decline further. While this segment contributed minimal revenue ($17 million in Q3 2019), the company's primary focus and growth are driven by its electronic brokerage segment.
How has the company managed its interest rate exposure and what was the impact on net interest income?
The company actively manages its interest rate exposure. Net interest income saw substantial growth, increasing by 19% year-over-year for the third quarter, primarily due to higher customer credit balances and rising benchmark interest rates. The company passes a significant portion of interest earned on customer cash balances back to its clients, which helps attract and retain them.
06—Continue