10-QPeriod: Q2 FY2022

Interactive Brokers Group, Inc. Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 9, 2022For Securities:IBKR

Summary

Interactive Brokers Group, Inc. (IBKR) reported its second-quarter 2022 financial results, showing a decrease in net revenues to $656 million from $754 million in the prior-year quarter, largely due to lower other income, partially offset by an increase in net interest income. Diluted earnings per share (EPS) were $0.72 for the quarter, down from $1.00 in the prior year. Despite the revenue decline, the company maintained strong profitability with a pretax profit margin of 60%. The company highlighted growth in commission revenue, driven by increased customer options and futures trading volume, though this was tempered by a significant decrease in stock trading volume. Net interest income saw a substantial increase of 27% due to rising benchmark interest rates and an increase in customer balances, reflecting a more favorable interest rate environment. However, other income experienced a significant drop, primarily due to the non-recurrence of a substantial gain from a strategic investment in the prior year and negative impacts from the company's currency diversification strategy.

Financial Highlights

31 data points
Beta

Revenue

$365.00M

Net Income

$72.00M

19.7% Net Margin

EPS (Diluted)

$0.18

Total Assets

$113.39B

Cash & Equivalents

$2.88B

Free Cash Flow

-$541.00M

Financial Statements
Beta
Revenue$365.00M
Interest Expense$112.00M
Net Income$72.00M
EPS (Basic)$0.18
EPS (Diluted)$0.18
Shares Outstanding (Basic)395.42M
Shares Outstanding (Diluted)398.78M

Key Highlights

  • 1Net revenues decreased by 13% to $656 million in Q2 2022 compared to $754 million in Q2 2021.
  • 2Diluted EPS declined to $0.72 in Q2 2022 from $1.00 in Q2 2021.
  • 3Commissions revenue increased by 5% to $322 million, driven by higher options and futures trading volume, but stock volume declined significantly.
  • 4Net interest income rose by 27% to $348 million, benefiting from higher benchmark interest rates and increased customer balances.
  • 5Other income (loss) shifted from a gain of $118 million in Q2 2021 to a loss of $57 million in Q2 2022, primarily due to the absence of a prior-year gain from a strategic investment and currency diversification impacts.
  • 6Total equity increased to $10.6 billion as of June 30, 2022, up from $10.2 billion at the end of 2021.
  • 7The company reported a strong pretax profit margin of 60% for the quarter, although down from 72% in the prior-year quarter.

Frequently Asked Questions

The decrease in net revenues was primarily driven by a significant drop in 'Other income' to a loss of $57 million from a gain of $118 million in the prior year. This was mainly due to the non-recurrence of a large gain from a strategic investment in the prior year and negative impacts from the company's currency diversification strategy. While commissions revenue saw a slight increase, it was not enough to offset the decline in other income.

Rising interest rates positively impacted Interactive Brokers by increasing net interest income by 27% to $348 million. This was due to higher benchmark interest rates on customer balances and margin loans, as well as increased customer cash balances. The company benefits from rising rates as it has a significant amount of customer cash and margin loan balances.

The company's currency diversification strategy, which aims to hold equity in a basket of currencies (GLOBAL), had a negative impact on comprehensive earnings in the second quarter of 2022, decreasing them by $158 million. This was reflected as a loss of $53 million in 'Other income' and a loss of $105 million in 'Other Comprehensive Income' (OCI), as the U.S. dollar value of the GLOBAL decreased.

Overall customer trading activity, as measured by Daily Average Revenue Trades (DARTs), decreased by 6% in the second quarter of 2022 compared to the prior year. While options and futures contract volumes increased, stock share volume saw a significant decline of 53%, attributed to a decrease in trading of low-priced stocks and 'meme' stocks compared to the prior-year period.