Interactive Brokers Group Announces 2016 Results

Interactive Brokers Group, Inc. (NASDAQ GS: IBKR) an automated global electronic broker and market maker, today reported diluted earnings per share on a comprehensive basis of $1.19 for the year ended December 31, 2016, compared to diluted earnings per share on a comprehensive basis of $0.62 for 2015.

Excluding other comprehensive income, the Company reported diluted earnings per share of $1.25 for the year ended December 31, 2016, compared to diluted earnings per share of $0.78 for 2015.

Net revenues were $1,396 million and income before income taxes was $761 million for 2016, compared to net revenues of $1,189 million and income before income taxes of $458 million in 2015.

The results for the year were positively impacted by strong growth in net interest income, which increased 24% from 2015, and the non-recurrence of unsecured customer losses caused by the sudden move in the value of the Swiss franc in January 2015. Trading gains decreased 39% in 2016 on lower market making trading volumes and decreases in volatility and in the actual-to-implied volatility ratio compared to 2015.

In addition, the results for the year include a $65 million loss on our currency diversification strategy, compared to a $269 million loss in 2015; and a $26 million net mark-to-market gain on our U.S. government securities portfolio compared to a $33 million net mark-to-market loss in 2015.

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, 2017 to shareholders of record as of March 1, 2017.

Business Highlights

• 55% pretax profit margin for 2016.
• 61% Electronic Brokerage pretax profit margin for 2016, up from 49% in 2015.
• 23% Market Making pretax profit margin for 2016, down from 44% in 2015.
• Customer equity grew 27% from 2015 to $85.5 billion and customer debits increased 14% to $19.4 billion.
• Customer accounts increased 16% from 2015 to 385 thousand.
• Total DARTs increased 2% from 2015 to 660 thousand.
• Brokerage segment equity was $4.1 billion. Total equity was $5.8 billion.

Segment Overview

Electronic Brokerage

Electronic Brokerage segment income before income taxes increased 41%, to $756 million in 2016, compared to 2015, due to higher net interest income and the non-recurrence of unsecured customer losses caused by the sudden move in the value of the Swiss franc in January 2015, as further described below. Net revenues increased 13% to $1,239 million on higher net interest income and net mark-to-market gains on our U.S. government securities portfolio, partially offset by slightly lower commissions and execution fees revenue.

Net interest income increased 25% from 2015. Other income increased 62% over the same period, driven by net mark-to-market gains on investments in U.S. government securities. Commissions and execution fees revenue decreased 1% from 2015 on lower customer volumes in options and stocks, which decreased 11% and 10%, respectively, from 2015. Pretax profit margin was 61% in 2016, up from 49% in 2015.

Customer accounts grew 16% to 385 thousand and customer equity increased 27% over 2015 to $85.5 billion. Total DARTs1 for cleared and execution-only customers increased 2% to 660 thousand from 2015. Cleared DARTs were 609 thousand, 3% higher than in 2015.

Market Making

Market Making segment income before income taxes decreased 66% to $44 million in 2016, compared to 2015, due to lower trading volumes and decreases in volatility and in the actual-to-implied volatility ratio. Pretax profit margin decreased to 23% in 2016 from 44% in 2015.

Sudden Move in the Value of the Swiss Franc

On January 15, 2015, due to the sudden, large move in the value of the Swiss franc that followed an unprecedented action by the Swiss National Bank, which removed a previously instituted and repeatedly reconfirmed cap of the exchange rate relative to the Euro, several of our customers who held currency futures and spot positions suffered losses in excess of their deposits with us. We took immediate action to hedge our exposure to the foreign currency receivables from these customers. During 2015, we incurred losses, net of hedging activity and debt collection efforts, of $119 million. We continue to actively pursue collection of these debts. The ultimate effect of this incident on our results will depend upon the outcome of our debt collection efforts.

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 15 major currencies in which we hold our equity. In 2016, our currency diversification strategy decreased our comprehensive earnings by $65 million, as the U.S. dollar value of the GLOBAL decreased by approximately 0.93%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the Corporate segment and (2) Other Comprehensive Income (“OCI”).

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

Conference Call Information:

Interactive Brokers Group will hold a conference call with investors today, January 17, 2017, at 4:30 p.m. ET to discuss its annual 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 120 markets in numerous countries and currencies from a single IB Universal AccountSM 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 extremely low cost relative to the financial services industry. We strive to provide our customers with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at unusually low prices, positioning them to achieve superior returns compared to our competitors.

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.

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