10-QPeriod: Q2 FY2020

Interactive Brokers Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2020

Filed August 7, 2020For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported strong revenue growth in its second quarter of 2020, driven by a significant increase in customer trading activity and account openings, largely attributed to heightened market volatility and the ongoing COVID-19 pandemic. Commission revenue surged by 55% year-over-year, reflecting robust trading volumes across options, futures, and stocks. Despite a decline in net interest income due to lower benchmark interest rates, the company's overall net revenues increased by 31% to $539 million. While the company incurred a substantial loss of $104 million related to the unprecedented negative prices in West Texas Intermediate Crude Oil futures, and faced increased general and administrative expenses due to this event and a COVID-19 donation, its core brokerage business demonstrated resilience. The company's balance sheet remains highly liquid, with total assets of $84.0 billion and a significant excess regulatory capital of $6.1 billion across its operating subsidiaries, underscoring its financial stability.

Financial Highlights

32 data points
Beta

Revenue

$316.00M

Net Income

$32.00M

10.1% Net Margin

EPS (Diluted)

$0.10

Total Assets

$83.97B

Cash & Equivalents

$3.12B

Free Cash Flow

-$1.56B

Financial Statements
Beta
Revenue$316.00M
Interest Expense$48.00M
Net Income$32.00M
EPS (Basic)$0.10
EPS (Diluted)$0.10
Shares Outstanding (Basic)309.43M
Shares Outstanding (Diluted)312.13M

Key Highlights

  • 1Net revenues increased by 31% to $539 million in Q2 2020 compared to Q2 2019, driven by a 55% surge in commission revenue due to increased customer trading activity.
  • 2Total customer accounts grew by 36% year-over-year to 876 thousand, and customer equity increased by 33% to $203.2 billion.
  • 3Despite a 24% decrease in net interest income due to lower benchmark interest rates, the company's net interest income from securities lending increased by 67%.
  • 4A significant one-time loss of $104 million was recognized due to the West Texas Intermediate Crude Oil futures event, impacting general and administrative expenses.
  • 5The company reported $6.1 billion in aggregate excess regulatory capital across its operating subsidiaries as of June 30, 2020, indicating strong financial health and compliance.
  • 6Cash, cash equivalents, and restricted cash increased by $3.5 billion to $15.8 billion for the six months ended June 30, 2020, primarily driven by operating activities and a substantial increase in customer credit balances.

Frequently Asked Questions

The COVID-19 pandemic significantly increased market volatility, leading to higher customer trading activity and a surge in commission revenue. It also contributed to a large increase in customer accounts and equity. However, lower benchmark interest rates negatively impacted net interest income, and the company incurred a significant loss related to the WTI crude oil futures event.

The primary driver of revenue increase was commission revenue, which surged by 55% year-over-year. This was due to a significant increase in customer trading volumes across options, futures, and stocks, spurred by heightened market volatility.

Interactive Brokers manages market risk through a proprietary automated pricing model, hedging strategies, and continuous monitoring. The company employs a Value-at-Risk (VaR) methodology and stress testing, particularly for its remaining market-making activities and currency exposures. The reduction in market-making positions has also helped mitigate some of these risks.

The $104 million loss resulted from specific customer positions in West Texas Intermediate Crude Oil futures contracts that settled at negative prices. Interactive Brokers compensated affected customers for their losses, leading to this one-time charge, which impacted the general and administrative expenses for the quarter.