INTERACTIVE BROKERS : ANNOUNCES 4Q2022 RESULTS - Form 8-K

INTERACTIVE BROKERS GROUP ANNOUNCES 4Q2022 RESULTS

- - -

GAAP DILUTED EPS OF $1.31, ADJUSTED¹ EPS OF $1.30

GAAP NET REVENUES OF $976 MILLION, ADJUSTED NET REVENUES OF $958 MILLION

GREENWICH, CONN, January 17, 2023 - Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, announced results for the quarter ended December 31, 2022.

Reported diluted earnings per share were $1.31 for the current quarter and $1.30 as adjusted. For the year-ago quarter, reported diluted earnings per share were $0.67 and $0.83 as adjusted.

Reported net revenues were $976 million for the current quarter and $958 million as adjusted. For the year-ago quarter, reported net revenues were $603 million and $683 million as adjusted.

Reported income before income taxes was $689 million for the current quarter and $671 million as adjusted. For the year-ago quarter, reported income before income taxes was $373 million and $453 million as adjusted.

Financial Highlights

(All comparisons are to the year-ago quarter.)

•	Commission revenue increased 3% to $331 million on higher customer futures trading volume and larger average trade size in options, tempered by lower customer stock trading volume.

•	Net interest income increased 92% to $565 million on higher benchmark interest rates and customer credit balances, despite a decline in margin lending balances.

•

Other income increased $107 million to a gain of $37 million. This increase was mainly comprised of $58 million related to our strategic investment in Up Fintech Holding Limited ("Tiger Brokers"), $34 million related to our currency diversification strategy and $6 million related to the remeasurement of our Tax Receivable Agreement liability.

•	Reported pretax profit margin was 71% for the current quarter and 70% as adjusted. For the year-ago quarter, reported pretax margin was 62% and 66% as adjusted.

•	Total equity of $11.6 billion.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 14, 2023, to shareholders of record as of March 1, 2023.

¹ See the reconciliation of non-GAAP financial measures starting on page 9.

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Business Highlights

(All comparisons are to the year-ago quarter.)

•	Customer accounts increased 25% to 2.09 million.

•	Customer equity decreased 18% to $306.7 billion.

•	Total DARTs2 decreased 22% to 1.89 million.

•	Cleared DARTs decreased 22% to 1.69 million.

•	Customer credits increased 9% to $95.2 billion.

•	Customer margin loans decreased 29% to $38.9 billion.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we base our net worth in GLOBALs, a basket of 10 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $169 million, as the U.S. dollar value of the GLOBAL increased by approximately 1.65%. The effects of the currency diversification strategy are reported as components of (1) Other Income (gain of $11 million) and (2) Other Comprehensive Income (gain of $158 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, January 17, 2023, at 4:30 p.m. ET todiscuss its quarterly results. Members of the public who would like to listen to the conference call should registerathttps://register.vevent.com/register/BI026f8edd62a546f3b96958af68b730d5 to obtain the dial-in details. The number should be dialed approximately ten minutes prior to the start of the 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 150 markets in numerous countries and currencies, from a single unified platform to clients 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 clients with a uniquely sophisticated platform to manage their investment portfolios. We strive to provide our clients 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. For the fifth consecutive year, Barron's ranked Interactive Brokers #1 with 5 out of 5 stars in its March 25, 2022, Best Online Brokers Review.

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.

For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, [e-mail] or Media: Rob Garfield, [e-mail].

² Daily average revenue trades (DARTs) are based on customer orders.

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

				Three Months		Twelve Months
				Ended December 31,		Ended December 31,
				2022		2021		2022		2021
				(in millions, except share and per share data)
Revenues:
	Commissions		$	331		$	320		$	1,322		$	1,350
	Other fees and services			43			58			184			218
	Other income (loss)			37			(70)			(107)			(2)
		Total non-interest income			411			308			1,399			1,566
	Interest income			1,111			350			2,686			1,372
	Interest expense			(546)			(55)			(1,018)			(224)
		Total net interest income			565			295			1,668			1,148
		Total net revenues			976			603			3,067			2,714
Non-interest expenses:
	Execution, clearing and distribution fees	90			53			324			236
	Employee compensation and benefits	119			108			454			399
	Occupancy, depreciation and amortization	22			22			90			80
	Communications			8			9			33			33
	General and administrative			48			38			165			176
	Customer bad debt			-			-			3			3
		Total non-interest expenses			287			230			1,069			927
Income before income taxes			689			373			1,998			1,787
Income tax expense			56			35			156			151
Net income			633			338			1,842			1,636
Net income attributable to noncontrolling interests		497			271			1,462			1,328
Net income available for common stockholders	$	136		$	67		$	380		$	308
Earnings per share:
	Basic		$	1.32		$	0.68		$	3.78		$	3.27
	Diluted		$	1.31		$	0.67		$	3.75		$	3.24
Weighted average common shares outstanding:
	Basic			102,875,250			98,181,875			100,460,016			94,167,572
	Diluted			103,656,668			98,980,339			101,299,609			95,009,880

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

				Three Months		Twelve Months
				Ended December 31,		Ended December 31,
				2022		2021		2022		2021
				(in millions, except share and per share data)
Comprehensive income:
	Net income available for common stockholders		$	136		$	67		$	380		$	308
	Other comprehensive income:
		Cumulative translation adjustment, before income taxes	38			(1)			(26)			(22)
		Income taxes related to items of other comprehensive income		-			-			-			-
	Other comprehensive income (loss), net of tax			38			(1)			(26)			(22)
Comprehensive income available for common stockholders	$	174		$	66		$	354		$	286
Comprehensive earnings per share:
	Basic		$	1.70		$	0.67		$	3.53		$	3.04
	Diluted		$	1.68		$	0.67		$	3.50		$	3.01
Weighted average common shares outstanding:
	Basic			102,875,250			98,181,875			100,460,016			94,167,572
	Diluted			103,656,668			98,980,339			101,299,609			95,009,880
Comprehensive income attributable to noncontrolling interests:
	Net income attributable to noncontrolling interests		$	497		$	271		$	1,462		$	1,328
	Other comprehensive income - cumulative translation adjustment		120			(1)			(85)			(75)
Comprehensive income attributable to noncontrolling interests	$	617		$	270		$	1,377		$	1,253

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

					December 31, 2022		December 31, 2021
					(in millions)
Assets
Cash and cash equivalents				$	3,436		$	2,395
Cash - segregated for regulatory purposes					25,167			22,888
Securities - segregated for regulatory purposes					31,781			15,121
Securities borrowed					4,749			3,912
Securities purchased under agreements to resell					6,029			4,380
Financial instruments owned, at fair value					485			673
Receivables from customers, net of allowance for credit losses				38,760			54,935
Receivables from brokers, dealers and clearing organizations				3,469			3,771
Other assets					1,267			1,038
	Total assets				$	115,143		$	109,113
Liabilities and equity
Liabilities
Short-term borrowings				$	18		$	27
Securities loaned					8,940			11,769
Financial instruments sold but not yet purchased, at fair value				146			182
Other payables:
	Customers					93,195			85,634
	Brokers, dealers and clearing organizations					291			557
	Other payables					938			722
						94,424			86,913
	Total liabilities					103,528			98,891
Equity
Stockholders' equity					2,848			2,395
Noncontrolling interests					8,767			7,827
	Total equity					11,615			10,222
	Total liabilities and equity				$	115,143		$	109,113
		December 31, 2022		December 31, 2021
Ownership of IBG LLC Membership Interests	Interests		%		Interests			%
IBG, Inc.	102,927,703		24.5%		98,230,127			23.5%
Noncontrolling interests (IBG Holdings LLC)	316,609,102		75.5%		319,880,492			76.5%
Total IBG LLC membership interests	419,536,805		100.0%		418,110,619			100.0%

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA

TRADE VOLUMES:

(in 000's, except %)

		Cleared				Non-Cleared												Avg. Trades
		Customer		%		Customer		%		Principal		%		Total		%		per U.S.
Period		Trades		Change		Trades		Change		Trades		Change		Trades		Change		Trading Day
2020		620,405				56,834				27,039				704,278				2,795
2021		871,319		40%		78,276		38%		32,621		21%		982,216		39%		3,905
2022		735,619		(16%)		70,049		(11%)		32,863		1%		838,531		(15%)		3,347
4Q2021		207,457				19,961				8,001				235,419				3,707
4Q2022		165,769		(20%)		14,923		(25%)		7,358		(8%)		188,050		(20%)		3,009
3Q2022		170,240				16,181				7,953				194,374				3,037
4Q2022		165,769		(3%)		14,923		(8%)		7,358		(7%)		188,050		(3%)		3,009

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2020		624,035				167,078				338,513,068
2021		887,849		42%		154,866		(7%)		771,273,709		128%
2022		908,415		2%		207,138		34%		330,035,586		(57%)
4Q2021		244,349				41,997				117,410,095
4Q2022		229,441		(6%)		51,519		23%		75,713,964		(36%)
3Q2022		215,988				50,486				75,776,756
4Q2022		229,441		6%		51,519		2%		75,713,964		(0%)

ALL CUSTOMERS

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2020		584,195				164,555				331,263,604
2021		852,169		46%		152,787		(7%)		766,211,726		131%
2022		873,914		3%		203,933		33%		325,368,714		(58%)
4Q2021		235,400				41,318				116,546,652
4Q2022		221,855		(6%)		50,773		23%		74,353,901		(36%)
3Q2022		208,145				49,725				74,944,418
4Q2022		221,855		7%		50,773		2%		74,353,901		(1%)

CLEARED CUSTOMERS

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2020		518,965				163,101				320,376,365
2021		773,284		49%		151,715		(7%)		752,720,070		135%
2022		781,373		1%		202,145		33%		314,462,672		(58%)
4Q2021		213,143				41,096				113,441,967
4Q2022		194,962		(9%)		50,326		22%		71,924,864		(37%)
3Q2022		185,166				49,242				72,394,078
4Q2022		194,962		5%		50,326		2%		71,924,864		(1%)

1	Includes options on futures.

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

OPERATING DATA, CONTINUED

PRINCIPAL TRANSACTIONS

		Options		%		Futures1		%		Stocks		%
Period		(contracts)		Change		(contracts)		Change		(shares)		Change
2020		39,840				2,523				7,249,464
2021		35,680		(10%)		2,079		(18%)		5,061,983		(30%)
2022		34,501		(3%)		3,205		54%		4,666,872		(8%)
4Q2021		8,949				679				863,443
4Q2022		7,586		(15%)		746		10%		1,360,063		58%
3Q2022		7,843				761				832,338
4Q2022		7,586		(3%)		746		(2%)		1,360,063		63%

1	Includes options on futures.

CUSTOMER STATISTICS

Year over Year			4Q2022			4Q2021		% Change
Total Accounts (in thousands)			2,091			1,676		25%
Customer Equity (in billions)1		$	306.7		$	373.8		(18%)
Cleared DARTs (in thousands)			1,689			2,162		(22%)
Total Customer DARTs (in thousands)			1,889			2,436		(22%)
Cleared Customers
Commission per Cleared Commissionable Order2		$	3.15		$	2.38		32%
Cleared Avg. DARTs per Account (Annualized)			206			339		(39%)
Consecutive Quarters			4Q2022			3Q2022		% Change
Total Accounts (in thousands)			2,091			2,012		4%
Customer Equity (in billions)1		$	306.7		$	287.1		7%
Cleared DARTs (in thousands)			1,689			1,706		(1%)
Total Customer DARTs (in thousands)			1,889			1,920		(2%)
Cleared Customers
Commission per Cleared Commissionable Order2		$	3.15		$	2.96		6%
Cleared Avg. DARTs per Account (Annualized)			206			217		(5%)

1	Excludes non-customers.
2	Commissionable Order - a customer order that generates commissions.

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

				Three Months		Twelve Months
				Ended December 31,		Ended December 31,
				2022		2021		2022		2021
				(in millions)
Average interest-earning assets
	Segregated cash and securities		$	57,327		$	37,674		$	51,644		$	40,328
	Customer margin loans			39,277			51,889			43,402			45,681
	Securities borrowed			4,368			3,200			3,961			3,677
	Other interest-earning assets			9,203			7,861			9,000			7,029
	FDIC sweeps1			2,347			2,377			2,229			2,663
				$	112,522		$	103,001		$	110,235		$	99,376
Average interest-bearing liabilities
	Customer credit balances		$	93,401		$	83,001		$	90,172		$	79,297
	Securities loaned			9,071			10,810			10,095			10,871
	Other interest-bearing liabilities			1			1			4			109
				$	102,473		$	93,812		$	100,271		$	90,277
Net interest income
	Segregated cash and securities, net		$	454		$	(5)		$	742		$	(9)
	Customer margin loans2			420			149			1,083			535
	Securities borrowed and loaned, net			73			134			413			568
	Customer credit balances, net2			(487)			8			(763)			33
	Other net interest income1/3			112			11			207			36
		Net interest income3		$	572		$	297		$	1,682		$	1,163
Net interest margin ("NIM")			2.02%			1.14%			1.53%			1.17%
Annualized yields
	Segregated cash and securities			3.14%			-0.05%			1.44%			-0.02%
	Customer margin loans			4.24%			1.14%			2.50%			1.17%
	Customer credit balances			2.07%			-0.04%			0.85%			-0.04%

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 that has the same characteristics as interest, but is reported in other fees and services and other income in the Company's consolidated statements of comprehensive income. For the three and twelve months ended December 31, 2022 and 2021, $3 million, $1 million, $10 million, and $15 million were reported in other fees and services, respectively. For the three and twelve months ended December 31, 2022 and 2021, $3 million, $1 million, $4 million, and $0 million were reported in other income, respectively.

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INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(UNAUDITED)

			Three Months		Twelve Months
			Ended December 31,		Ended December 31,
			2022		2021		2022		2021
			(in millions)
Adjusted net revenues1
Net revenues - GAAP		$	976		$	603		$	3,067		$	2,714
Non-GAAP adjustments
	Currency diversification strategy, net			(11)			23			100			37
	Mark-to-market on investments2			(1)			57			52			30
	Remeasurement of TRA liability3			(6)			-			(6)			(1)
Total non-GAAP adjustments			(18)			80			146			66
Adjusted net revenues		$	958		$	683		$	3,213		$	2,780
Adjusted income before income taxes1
Income before income taxes - GAAP		$	689		$	373		$	1,998		$	1,787
Non-GAAP adjustments
	Currency diversification strategy, net			(11)			23			100			37
	Mark-to-market on investments2			(1)			57			52			30
	Remeasurement of TRA liability3			(6)			-			(6)			(1)
Total non-GAAP adjustments			(18)			80			146			66
Adjusted income before income taxes		$	671		$	453		$	2,144		$	1,853
Adjusted pre-tax profit margin			70%			66%			67%			67%

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			Three Months		Twelve Months
			Ended December 31,		Ended December 31,
			2022		2021		2022		2021
			(in millions)
Adjusted net income available for common stockholders1
Net income available for common stockholders - GAAP	$	136		$	67		$	380		$	308
Non-GAAP adjustments
	Currency diversification strategy, net			(3)			6			24			8
	Mark-to-market on investments2			(0)			13			13			7
	Remeasurement of TRA liability3			(6)			0			(6)			(1)
	Income tax effect of above adjustments4			1			(4)			(7)			(3)
	Remeasurement of deferred income taxes5			7			-			7			1
Total non-GAAP adjustments			(1)			15			30			12
Adjusted net income available for common stockholders	$	134		$	82		$	410		$	320

Note: Amounts may not add due to rounding.

			Three Months		Twelve Months
			Ended December 31,		Ended December 31,
			2022		2021		2022		2021
			(in dollars)
Adjusted diluted EPS1
Diluted EPS - GAAP		$	1.31		$	0.67		$	3.75		$	3.24
Non-GAAP adjustments
	Currency diversification strategy, net			(0.03)			0.06			0.24			0.09
	Mark-to-market on investments2			(0.00)			0.13			0.12			0.07
	Remeasurement of TRA liability3			(0.06)			0.00			(0.06)			(0.01)
	Income tax effect of above adjustments4			0.01			(0.04)			(0.07)			(0.03)
	Remeasurement of deferred income taxes5			0.07			0.00			0.07			0.01
Total non-GAAP adjustments			(0.01)			0.15			0.30			0.13
Adjusted diluted EPS		$	1.30		$	0.83		$	4.05		$	3.37
Diluted weighted average common shares outstanding	103,656,668			98,980,339			101,299,609			95,009,880

Note: Amounts may not add due to rounding.

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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 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 currency diversification strategy and our net mark-to-market gains (losses) on investments.

•	We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects attributable to IBG, Inc. of our currency diversification strategy and our mark-to-market gains (losses) on investments.

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 currency diversification strategy and our mark-to-market on investments 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 and municipal 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 certain other investments, including equity securities taken over by the Company from customers related to losses on margin loans.

³ Remeasurement of our tax receivable agreement ("TRA") liability represents the change in the amount payable to IBG Holdings LLC under the TRA, primarily due to changes in the Company's effective tax rates. This is related to the remeasurement of the deferred tax assets described below. For further information refer to Note 4 - Equity and Earnings per Share under Part II, Item 8 - Financial Statements and Supplementary Data of the Company's Annual Report on Form 10 K filed with the Securities Exchange Commission ("SEC") on February 25, 2022.

⁴ The income tax effect is estimated using the corporate income tax rates applicable to the Company.

⁵ Remeasurement of certain deferred tax assets represents the change in the unamortized balance of deferred tax assets related to the step-up in basis arising from the acquisition of interests in IBG LLC, primarily due to changes in the Company's effective tax rates. For further information refer to Note 4 - Equity and Earnings per Share under Part II, Item 8 - Financial Statements and Supplementary Data of the Company's Annual Report on Form 10 K filed with the Securities Exchange Commission ("SEC") on February 25, 2022.

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