Interactive brokers group announces 4q2019 results
Greenwich, conn.--(business wire)--interactive brokers group, inc. (nasdaq gs:ibkr), an automated global electronic broker, reported diluted earnings per share of $0.57 for the quarter ended december 31, 2019 compared to $0.57 for the same period in 2018, and adjusted diluted earnings per share of $0.58 for both this quarter and for the same period in 2018. net revenues were $500 million and income before income taxes was $312 million this quarter, compared to net revenues of $492 million and income before income taxes of $309 million for the same period in 2018. adjusted net revenues were $503 million and adjusted income before income taxes was $315 million this quarter, compared to adjusted net revenues of $496 million and adjusted income before income taxes of $313 million. the results for the quarter were positively impacted by strong growth in net interest income, which increased $44 million, or 18%, from the year-ago quarter; partially counterbalanced by lower commissions revenue, which decreased $37 million, or 18%, from the year-ago quarter. the interactive brokers group, inc. board of directors declared a quarterly cash dividend of $0.10 per share. this dividend is payable on march 13, 2020 to shareholders of record as of february 28, 2020. effective this quarter, we introduced the reporting of non-gaap financial measures which exclude certain items that may not be indicative of our core operating results and business outlook and may be useful in evaluating the operating performance of our business and provide a better comparison of our results in the current period to those in prior and future periods. see the reconciliation of non-gaap financial measures starting on page 11. business highlights fourth quarter 2019: 62% pretax profit margin for this quarter, down from 63% in the year-ago quarter. 65% electronic brokerage pretax profit margin for this quarter, up from 63% in the year-ago quarter. customer equity grew 36% from the year-ago quarter to $174.1 billion and customer debits increased 15% to $31.0 billion. customer accounts increased 15% from the year-ago quarter to 690 thousand. total darts2 decreased 16% from the year-ago quarter to 797 thousand. brokerage segment equity was $6.8 billion. total equity was $7.9 billion. full year 2019: 60% pretax profit margin for 2019, down from 63% in 2018. 62% electronic brokerage pretax profit margin for 2019, down from 64% in 2018. total darts decreased 3% from 2018 to 833 thousand. ____________________ 1 see the reconciliation of non-gaap financial measures starting on page 11. 2 daily average revenue trades (darts) are based on customer orders. segment overview electronic brokerage electronic brokerage segment income before income taxes increased 1% to $314 million in the quarter ended december 31, 2019, compared to the same period last year. net revenues decreased 1% to $486 million on lower commissions revenue and other income, partially offset by higher net interest income. commissions revenue decreased 18% from the year-ago quarter on lower customer trading volume in options, futures and stocks. net interest income increased 19% as average customer credit balances and securities lending balances increased from the year-ago quarter. pretax profit margin was 65% for the quarter ended december 31, 2019, up from 63% in the same period last year. customer accounts grew 15% to 690 thousand and customer equity increased 36% from the year-ago quarter to $174.1 billion. total darts for cleared and execution-only customers decreased 16% to 797 thousand from the year-ago quarter. cleared darts decreased 16% to 719 thousand from the same period last year. market making market making segment income before income taxes decreased 44% to $5 million in the quarter ended december 31, 2019, compared to the same period last year, primarily due to lower net revenues from the remaining operations. corporate for the quarter ended december 31, 2019, we recognized a mark-to-market loss of approximately $7 million on our strategic investment in up fintech holding limited (“tiger brokers”). for the twelve months ended december 31, 2019 we recognized a net mark-to-market gain of $9 million on this investment. effects of foreign currency diversification in connection with our currency diversification strategy, we have determined to base our net worth in globals, a basket of 14 major currencies in which we hold our equity. in this quarter, our currency diversification strategy increased our comprehensive earnings by $50 million, as the u.s. dollar value of the global increased by approximately 0.74%. the effects of the currency diversification strategy are reported as components of (1) other income ($12 million) in the corporate segment and (2) other comprehensive income ($38 million). with the introduction of non-gaap measures, which exclude the impact of the global, the company has removed diluted earnings per share on comprehensive income from the above disclosures. regulatory matters the company is subject to regulatory oversight and examination by numerous governmental and self-regulatory authorities. the company is currently providing information to certain of such authorities, including finra, the sec, the cftc and the united states department of justice, and cooperating with those authorities. the company believes that the regulators are focused on compliance practices, including anti money laundering and bank secrecy act practices. the company periodically reviews these practices to make them more robust and to keep pace with changing regulatory standards, and the company has been enhancing and augmenting its procedures and personnel in these areas over the past several years. while the outcome of the examinations and inquiries currently in progress cannot be predicted, the company does not believe that they are likely to have a materially adverse effect on the company’s financial results. conference call information: interactive brokers group, inc. will hold a conference call with investors today, january 21, 2020, at 4:30 p.m. et to discuss its quarterly results. investors who would like to listen to the conference call live should dial 877-324-1965 (u.s. domestic) and 631-291-4512 (international). the number should be dialed approximately ten minutes prior to the start of the conference call. ask for the “interactive brokers conference call.” the conference call will also be accessible simultaneously, and through replays, as an audio webcast through the investor relations section of the interactive brokers web site, www.interactivebrokers.com/ir. about interactive brokers group, inc.: interactive brokers group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 125 markets in numerous countries and currencies, from a single ibkr integrated investment account to customers worldwide. we service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. our four decades of focus on technology and automation has enabled us to equip our customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost according to barron's best online brokers review, february 25, 2019. we strive to provide our customers with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments. cautionary note regarding forward-looking statements: the foregoing information contains certain forward-looking statements that reflect the company’s current views with respect to certain current and future events and financial performance. these forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the company’s operations and business environment which may cause the company’s actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. any forward-looking statements in this release are based upon information available to the company on the date of this release. the company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. additional information on risk factors that could potentially affect the company’s financial results may be found in the company’s filings with the securities and exchange commission. interactive brokers group, inc. and subsidiaries operating data period 2017 31,282 265,501 14,835 311,618 1,246 2018 18,663 (40%) 328,099 24% 21,880 47% 368,642 18% 1,478 2019 17,136 (8%) 302,289 (8%) 26,346 20% 345,771 (6%) 1,380 4q2018 4,825 88,806 7,251 100,882 1,627 4q2019 4,204 (13%) 73,291 (17%) 6,284 (13%) 83,779 (17%) 1,330 3q2019 4,738 78,793 6,566 90,097 1,419 4q2019 4,204 (11%) 73,291 (7%) 6,284 (4%) 83,779 (7%) 1,330 total period 2017 395,885 124,123 220,247,921 2018 408,406 3% 151,762 22% 210,257,186 (5%) 2019 390,739 (4%) 128,770 (15%) 176,752,967 (16%) 4q2018 107,417 41,684 44,933,688 4q2019 100,520 (6%) 29,078 (30%) 39,391,536 (12%) 3q2019 103,972 36,124 43,107,364 4q2019 100,520 (3%) 29,078 (20%) 39,391,536 (9%) market making period 2017 102,025 5,696 7,139,622 2018 49,554 (51%) 3,277 (42%) 11,347,811 59% 2019 41,452 (16%) 2,407 (27%) 8,926,477 (21%) 4q2018 12,680 828 3,091,834 4q2019 8,958 (29%) 448 (46%) 1,403,411 (55%) 3q2019 10,848 697 2,082,317 4q2019 8,958 (17%) 448 (36%) 1,403,411 (33%) brokerage total period 2017 293,860 118,427 213,108,299 2018 358,852 22% 148,485 25% 198,909,375 (7%) 2019 349,287 (3%) 126,363 (15%) 167,826,490 (16%) 4q2018 94,737 40,856 41,841,854 4q2019 91,562 (3%) 28,630 (30%) 37,988,125 (9%) 3q2019 93,124 35,427 41,025,047 4q2019 91,562 (2%) 28,630 (19%) 37,988,125 (7%) interactive brokers group, inc. and subsidiaries operating data, continued brokerage cleared period 2017 253,304 116,858 209,435,662 2018 313,795 24% 146,806 26% 194,012,882 (7%) 2019 302,068 (4%) 125,225 (15%) 163,030,500 (16%) 4q2018 83,984 40,463 40,271,369 4q2019 81,468 (3%) 28,307 (30%) 36,969,492 (8%) 3q2019 80,840 35,108 39,891,867 4q2019 81,468 1% 28,307 (19%) 36,969,492 (7%) 690 598 15% $ 174.1 $ 128.4 36% 719 856 (16%) 797 951 (16%) $ 3.61 $ 3.79 (5%) 266 364 (27%) $ 2,801 $ 3,225 (13%) 690 666 4% $ 174.1 $ 156.6 11% 719 777 (7%) 797 859 (7%) $ 3.61 $ 3.69 (2%) 266 297 (10%) $ 2,801 $ 2,995 (6%) interactive brokers group, inc. and subsidiaries net interest margin (unaudited) three months twelve months ended december 31, ended december 31, 2019 2018 2019 2018 (in millions) $ 29,437 $ 21,957 $ 27,812 $ 20,911 27,529 28,805 26,483 29,253 4,026 3,407 3,930 3,310 5,887 4,825 5,407 4,362 2,201 1,673 2,046 1,259 $ 69,080 $ 60,667 $ 65,678 $ 59,095 $ 55,185 $ 49,153 $ 52,625 $ 48,179 4,292 3,729 4,088 3,982 477 - 196 241 $ 59,954 $ 52,882 $ 56,909 $ 52,402 $ 126 $ 104 $ 560 $ 337 157 192 694 677 80 50 257 216 (94 ) (121 ) (515 ) (362 ) 27 27 121 90 $ 296 $ 252 $ 1,117 $ 958 1.70 % 1.65 % 1.70 % 1.62 % 1.70 % 1.88 % 2.01 % 1.61 % 2.26 % 2.64 % 2.62 % 2.31 % 0.68 % 0.98 % 0.98 % 0.75 % 1 represents the average amount of customer cash swept into fdic-insured banks as part of our insured bank deposit sweep program. this item is not recorded in the company's consolidated statements of financial condition. income derived from program deposits is reported in other net interest income in the table above. 2 interest income and interest expense on customer margin loans and customer credit balances, respectively, are calculated on daily cash balances within each customer’s account on a net basis, which may result in an offset of balances across multiple account segments (e.g., between securities and commodities segments). 3 includes income from financial instruments which has the same characteristics as interest, but is reported in other income in the company’s consolidated statements of comprehensive income, of $9 million for the three months ended december 31, 2019 and 2018, and $34 million and $29 million for the twelve months ended december 31, 2019 and 2018, respectively. interactive brokers group, inc. and subsidiaries segment financial information (unaudited) three months twelve months ended december 31, ended december 31, 2019 2018 2019 2018 (in millions) $ 486 $ 490 $ 1,921 $ 1,842 172 179 724 665 $ 314 $ 311 $ 1,197 $ 1,177 65 % 63 % 62 % 64 % $ 15 $ 17 $ 67 $ 76 10 8 37 42 $ 5 $ 9 $ 30 $ 34 33 % 53 % 45 % 45 % $ (1) $ (15) $ (51) $ (15) 6 (4) 19 -- $ (7) $ (11) $ (70) $ (15) $ 500 $ 492 $ 1,937 $ 1,903 188 183 780 707 $ 312 $ 309 $ 1,157 $ 1,196 62 % 63 % 60 % 63 % 1 interactive brokers group, inc. and subsidiaries consolidated statements of income (unaudited) three months twelve months ended december 31, ended december 31, 2019 2018 2019 2018 (in millions, except share and per share data) $ 168 $ 205 $ 706 $ 777 418 385 1,726 1,392 7 7 27 39 38 37 121 158 631 634 2,580 2,366 131 142 643 463 500 492 1,937 1,903 59 73 251 269 75 63 288 264 17 14 60 49 6 5 25 25 32 26 112 96 (1 ) 2 44 4 188 183 780 707 312 309 1,157 1,196 18 19 68 71 294 290 1,089 1,125 250 247 928 956 $ 44 $ 43 $ 161 $ 169 $ 0.58 $ 0.58 $ 2.11 $ 2.30 $ 0.57 $ 0.57 $ 2.10 $ 2.28 76,749,142 75,097,578 76,121,570 73,438,209 77,357,093 75,810,322 76,825,863 74,266,370 interactive brokers group, inc. and subsidiaries consolidated statements of comprehensive income (unaudited) three months twelve months ended december 31, ended december 31, 2019 2018 2019 2018 (in millions, except share and per share data) $ 44 $ 43 $ 161 $ 169 7 - 4 (14 ) - - - (1 ) 7 - 4 (13 ) $ 51 $ 43 $ 165 $ 156 $ 0.67 $ 0.56 $ 2.18 $ 2.12 $ 0.66 $ 0.56 $ 2.16 $ 2.09 76,749,142 75,097,578 76,121,570 73,438,209 77,357,093 75,810,322 76,825,863 74,266,370 $ 250 $ 247 $ 928 $ 956 31 (6 ) 20 (66 ) $ 281 $ 241 $ 948 $ 890 interactive brokers group, inc. and subsidiaries condensed consolidated balance sheets (unaudited) $ 2,882 $ 2,597 9,400 7,503 17,824 15,595 3,916 3,331 3,111 1,242 1,916 2,119 31,304 27,017 685 706 638 437 $ 71,676 $ 60,547 $ 16 $ 17 4,410 4,037 1,909 - 457 681 56,248 47,993 220 298 476 365 56,944 48,656 63,736 53,391 1,452 1,282 6,488 5,874 7,940 7,156 $ 71,676 $ 60,547 76,759,595 18.5 % 75,100,955 18.1 % 338,670,642 81.5 % 338,691,717 81.9 % 415,430,237 100.0 % 413,792,672 100.0 % interactive brokers group, inc. and subsidiaries reconciliation of non-gaap financial measures (unaudited) three months twelve months ended december 31, ended december 31, 2019 2018 2019 2018 (in millions) $ 500 $ 492 $ 1,937 $ 1,903 (12 ) 12 60 19 15 (8 ) (13 ) (9 ) 3 4 47 10 $ 503 $ 496 $ 1,984 $ 1,913 $ 312 $ 309 $ 1,157 $ 1,196 (12 ) 12 60 19 15 (8 ) (13 ) (9 ) - - 42 - 3 4 89 10 $ 315 $ 313 $ 1,246 $ 1,206 three months twelve months ended december 31, ended december 31, 2019 2018 2019 2018 (in millions) $ 44 $ 43 $ 161 $ 169 (2 ) 2 11 3 3 (1 ) (2 ) (2 ) - - 8 0 0 0 (3 ) (1 ) 1 1 13 1 $ 45 $ 44 $ 174 $ 170 three months twelve months ended december 31, ended december 31, 2019 2018 2019 2018 (in dollars, except share amounts) $ 0.57 $ 0.57 $ 2.10 $ 2.28 (0.03 ) 0.03 0.14 0.05 0.03 (0.02 ) (0.03 ) (0.02 ) 0.00 0.00 0.10 0.00 0.00 0.00 (0.04 ) (0.02 ) 0.01 0.01 0.17 0.01 $ 0.58 $ 0.58 $ 2.27 $ 2.28 77,357,093 75,810,322 76,825,863 74,266,370 note: the term “gaap” in the following explanation refers to generally accepted accounting principles in the united states. 1 adjusted net revenues, adjusted income before income taxes, adjusted net income available for common stockholders and adjusted diluted earnings per share (“eps”) are non-gaap financial measures as defined by sec regulation g. we define adjusted net revenues as net revenues adjusted to remove the effect of our global currency diversification strategy and our net mark-to-market gains (losses) on investments2. we define adjusted income before income taxes as income before income taxes adjusted to remove the effect of our global currency diversification strategy, our net mark-to-market gains (losses) on investments and unusual bad debt expense3. we define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects of our global currency diversification strategy, the mark-to-market on investments, and unusual bad debt expense attributable to ibg, inc. management believes these non-gaap items are important measures of our financial performance because they exclude certain items that may not be indicative of our core operating results and business outlook and may be useful to investors and analysts in evaluating the operating performance of the business and facilitating a meaningful comparison of our results in the current period to those in prior and future periods. our global currency diversification strategy, our mark-to-market on investments and unusual bad debt expense are excluded because management does not believe they are indicative of our underlying core business performance. adjusted net revenues, adjusted income before income taxes, adjusted net income available to common stockholders and adjusted diluted eps should be considered in addition to, rather than as a substitute for, gaap net revenues, income before income taxes, net income attributable to common stockholders and diluted eps. 2 mark-to-market on investments represents the net mark-to-market gains (losses) on our u.s. government securities portfolio, which are typically held to maturity, investments in equity securities that do not qualify for equity method accounting which are measured at fair value, and equity securities taken over by the company from customers related to losses on margin loans described below. 3 unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. for the twelve months ending december 31, 2019, unusual bad debt expense reflects losses recognized on margin lending to a small number of our brokerage customers that had taken relatively large positions in a security listed on a major u.s. exchange, which lost a substantial amount of its value in a very short timeframe. (more information can be found in the disclosures in our forms 10-q filed with the sec during 2019.) 4 the income tax effect is estimated using the corporate income tax rates applicable to the company.
