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Interactive Brokers Group Announces 4Q2020 Results

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DILUTED EARNINGS PER SHARE OF $0.81, ADJUSTED DILUTED EARNINGS PER SHARE OF $0.69.

PRETAX INCOME OF $392 MILLION ON $599 MILLION IN NET REVENUES.

ADJUSTED PRETAX INCOME OF $375 MILLION ON $582 MILLION IN ADJUSTED NET REVENUES1.

DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.81 for the quarter ended December 31, 2020 compared to $0.57 for the same period in 2019, and adjusted diluted earnings per share of $0.69 for this quarter compared to $0.58 for the year-ago quarter.

Net revenues were $599 million and income before income taxes was $392 million for this quarter, compared to net revenues of $500 million and income before income taxes of $312 million for the same period in 2019. Adjusted net revenues were $582 million and adjusted income before income taxes was $375 million for this quarter, compared to adjusted net revenues of $503 million and adjusted income before income taxes of $315 million for the same period in 2019.

Financial Highlights

  • Commission revenue showed strong growth, increasing $120 million, or 71%, from the year-ago quarter on higher customer trading volumes within an active trading environment worldwide.

  • Net interest income decreased $62 million, or 22%, from the year-ago quarter as the average Federal Funds effective rate decreased to 0.09% from 1.65% in the year-ago quarter.

  • Other income increased $25 million from the year-ago quarter. This increase was mainly comprised of $39 million related to our strategic investment in Up Fintech Holding Limited ("Tiger Brokers"), which swung to a $32 million mark-to-market gain this quarter from a $7 million mark-to-market loss in the same period in 2019; partially offset by $25 million related to our currency diversification strategy, which lost $13 million this quarter compared to a gain of $12 million in the same period in 2019.

  • 65% pretax profit margin for this quarter, up from 62% in the year-ago quarter. 64% adjusted pretax profit margin for this quarter, up from 63% in the year-ago quarter.

  • Total equity of $9.0 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 12, 2021 to shareholders of record as of March 1, 2021.

Business Highlights

  • Customer accounts increased 56% from the year-ago quarter to 1.07 million.

  • Customer equity grew 66% from the year-ago quarter to $288.6 billion.

  • Total DARTs2 increased 165% from the year-ago quarter to 2.11 million.

  • Cleared DARTs increased 160% from the year-ago quarter to 1.87 million.

  • Customer credits increased 34% from the year-ago quarter to $77.7 billion.

  • Customer margin loans increased 26% from the year-ago quarter to $39.0 billion.

COVID-19 Pandemic

In March 2020, the World Health Organization recognized the outbreak of Coronavirus Disease 2019 (COVID-19) caused by a novel strain of the coronavirus as a pandemic. The pandemic affects all countries in which we operate. The response of governments and societies to the COVID-19 pandemic, which includes temporary closures of certain businesses; social distancing; travel restrictions, "shelter in place" and other governmental regulations; and reduced consumer spending due to job losses, has significantly impacted market volatility and general economic conditions.

The COVID-19 pandemic has precipitated unprecedented market conditions with equally unprecedented social and community challenges. Amid these challenges:

  • The Company is committed to ensuring the highest levels of service to its customers so they can effectively manage their assets, portfolios and risks. The Company’s technical infrastructure has withstood the challenges presented by the extraordinary volatility and increased market volume.

  • The Company can run its business from alternate office locations and/or remotely if a Company office must temporarily close due to the spread of the COVID-19 pandemic.

  • As announced on April 9, 2020, during the second quarter of 2020 the Company donated $5 million to assist efforts to provide food and support for people affected by the COVID-19 pandemic in the United States as well as to advance medical solutions.

The initial effects of the COVID-19 pandemic on the Company’s financial results, which may have continued through the fourth quarter of 2020, can be summarized as follows: (1) higher commission revenue due to increased trading activity and a higher rate of customer accounts opened throughout 2020; and (2) lower net interest income resulting from lower benchmark interest rates.

The impact of the COVID-19 pandemic on the Company’s future financial results could be significant but currently cannot be quantified, as it depends on numerous evolving factors that currently cannot be accurately predicted, including, but not limited to the duration and spread of the pandemic; its impact on our customers, employees and vendors; governmental actions in response to the pandemic; and the overall impact of the pandemic in the economy and society; among other factors. Any of these events could have a materially adverse effect on the Company’s financial results.

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 $82 million, as the U.S. dollar value of the GLOBAL increased by approximately 1.01%. The effects of the currency diversification strategy are reported as components of (1) Other Income (loss of $13 million) and (2) Other Comprehensive Income (gain of $95 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, January 19, 2021, 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 135 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account 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. Barron’s ranked Interactive Brokers #1 with 5 out of 5 stars in its February 24, 2020, Best Online Broker 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.

1 See the reconciliation of non-GAAP financial measures starting on page 10.
2 Daily average revenue trades (DARTs) are based on customer orders.

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

2018

328,099

21,880

18,663

368,642

1,478

2019

302,289

(8%)

26,346

20%

17,136

(8%)

345,771

(6%)

1,380

2020

620,405

105%

56,834

116%

27,039

58%

704,278

104%

2,795

4Q2019

73,291

6,284

4,204

83,779

1,330

4Q2020

178,614

144%

17,008

171%

7,455

77%

203,077

142%

3,223

3Q2020

160,015

14,701

7,453

182,169

2,846

4Q2020

178,614

12%

17,008

16%

7,455

0%

203,077

11%

3,223

CONTRACT AND SHARE VOLUMES:

(in 000's, except %)

TOTAL

Options

%

Futures1

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2018

408,406

151,762

210,257,186

2019

390,739

(4%)

128,770

(15%)

176,752,967

(16%)

2020

624,035

60%

167,078

30%

338,513,068

92%

4Q2019

100,520

29,078

39,391,536

4Q2020

170,191

69%

35,295

21%

121,062,599

207%

3Q2020

163,972

39,186

87,514,614

4Q2020

170,191

4%

35,295

(10%)

121,062,599

38%

ALL CUSTOMERS

Options

%

Futures1

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2018

358,852

148,485

198,909,375

2019

349,287

(3%)

126,363

(15%)

167,826,490

(16%)

2020

584,195

67%

164,555

30%

331,263,604

97%

4Q2019

91,562

28,630

37,988,125

4Q2020

160,953

76%

34,851

22%

119,654,910

215%

3Q2020

153,612

38,685

85,893,357

4Q2020

160,953

5%

34,851

(10%)

119,654,910

39%

CLEARED CUSTOMERS

Options

%

Futures1

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2018

313,795

146,806

194,012,882

2019

302,068

(4%)

125,225

(15%)

163,030,500

(16%)

2020

518,965

72%

163,101

30%

320,376,365

97%

4Q2019

81,468

28,307

36,969,492

4Q2020

144,378

77%

34,459

22%

116,538,527

215%

3Q2020

137,660

38,405

83,246,086

4Q2020

144,378

5%

34,459

(10%)

116,538,527

40%

1 Includes options on futures

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED

PRINCIPAL TRANSACTIONS

Options

%

Futures1

%

Stocks

%

Period

(contracts)

Change

(contracts)

Change

(shares)

Change

2018

49,554

3,277

11,347,811

2019

41,452

(16%)

2,407

(27%)

8,926,477

(21%)

2020

39,840

(4%)

2,523

5%

7,249,464

(19%)

4Q2019

8,958

448

1,403,411

4Q2020

9,238

3%

444

(1%)

1,407,689

0%

3Q2020

10,360

501

1,621,257

4Q2020

9,238

(11%)

444

(11%)

1,407,689

(13%)

1 Includes options on futures

CUSTOMER STATISTICS

(in 000's, except % and where noted)

Year over Year

4Q2020

4Q2019

% Change

Total Accounts (in thousands)

1,073

690

56%

Customer Equity (in billions)1

$

288.6

$

174.1

66%

Cleared DARTs (in thousands)

1,871

719

160%

Total Customer DARTs (in thousands)

2,109

797

165%

Cleared Customers

Commission per Cleared Commissionable Order2

$

2.46

$

3.63

(32%)

Cleared Avg. DART per Account (Annualized)

459

266

73%

Net Revenue per Avg. Account (Annualized)

$

2,151

$

2,801

(23%)

Consecutive Quarters

4Q2020

3Q2020

% Change

Total Accounts (in thousands)

1,073

981

9%

Customer Equity (in billions)1

$

288.6

$

232.7

24%

Cleared DARTs (in thousands)

1,871

1,629

15%

Total Customer DARTs (in thousands)

2,109

1,832

15%

Cleared Customers

Commission per Cleared Commissionable Order2

$

2.46

$

2.69

(9%)

Cleared Avg. DART per Account (Annualized)

459

442

4%

Net Revenue per Avg. Account (Annualized)

$

2,151

$

2,154

(0%)

1 Excludes non-Customers.

2 Commissionable Order - a customer order that generates commissions.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

NET INTEREST MARGIN

(UNAUDITED)

Three Months

Twelve Months

Ended December 31,

Ended December 31,

2020

2019

2020

2019

(in millions)

Average interest-earning assets

Segregated cash and securities

$

43,128

$

29,437

$

41,898

$

27,812

Customer margin loans

32,775

27,529

28,960

26,483

Securities borrowed

3,808

4,026

4,235

3,930

Other interest-earning assets

5,799

5,887

5,593

5,407

FDIC sweeps1

2,919

2,298

2,882

2,075

$

88,429

$

69,177

$

83,568

$

65,707

Average interest-bearing liabilities

Customer credit balances

$

71,190

$

55,185

$

67,540

$

52,625

Securities loaned

6,499

4,292

5,702

4,088

Other interest-bearing liabilities

17

495

215

211

$

77,706

$

59,972

$

73,457

$

56,924

Net interest income

Segregated cash and securities, net

$

7

$

126

$

166

$

560

Customer margin loans2

93

157

380

694

Securities borrowed and loaned, net

115

80

343

257

Customer credit balances, net2

9

(94

)

(46

)

(515

)

Other net interest income1/3

8

27

55

121

Net interest income3

$

232

$

296

$

898

$

1,117

Net interest margin ("NIM")

1.04

%

1.70

%

1.07

%

1.70

%

Annualized yields

Segregated cash and securities

0.06

%

1.70

%

0.40

%

2.01

%

Customer margin loans

1.13

%

2.26

%

1.31

%

2.62

%

Customer credit balances

-0.05

%

0.68

%

0.07

%

0.98

%

____________________

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, 2020 and 2019, $7 million, $5 million, $21 million, and $15 million were reported in other fees and services, respectively. For the three and twelve months ended December 31, 2020 and 2019, $0 million, $4 million, $5 million, and $19 million were reported in other income, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

Three Months

Twelve Months

Ended December 31,

Ended December 31,

2020

2019

2020

2019

(in millions, except share and per share data)

Revenues:

Commissions

$

288

$

168

$

1,112

$

706

Other fees and services1/2

52

36

175

141

Other income 1/3

34

9

59

7

Total non-interest income

374

213

1,346

854

Interest income

280

418

1,133

1,726

Interest expense

(55

)

(131

)

(261

)

(643

)

Total net interest income

225

287

872

1,083

Total net revenues

599

500

2,218

1,937

Non-interest expenses:

Execution, clearing and distribution fees

66

59

293

251

Employee compensation and benefits

86

75

325

288

Occupancy, depreciation and amortization

18

17

69

60

Communications

7

6

26

25

General and administrative

30

32

236

112

Customer bad debt

-

(1

)

13

44

Total non-interest expenses

207

188

962

780

Income before income taxes

392

312

1,256

1,157

Income tax expense

12

18

77

68

Net income

380

294

1,179

1,089

Net income attributable to noncontrolling interests

309

250

984

928

Net income available for common stockholders

$

71

$

44

$

195

$

161

Earnings per share:

Basic

$

0.82

$

0.58

$

2.44

$

2.11

Diluted

$

0.81

$

0.57

$

2.42

$

2.10

Weighted average common shares outstanding:

Basic

87,076,038

76,749,142

79,939,289

76,121,570

Diluted

87,772,443

77,357,093

80,638,908

76,825,863

____________________

1

In the first quarter of 2020, we changed the presentation of our consolidated statements of income to better align with our business strategy. Previously reported amounts have been adjusted to conform with the new presentation.

2

Includes market data fees, account activity fees, risk exposure fees, order flow income from options exchange mandated programs, and revenues from other fees and services.

3

Includes gains (losses) from principal transactions; the impact of our currency diversification strategy; gains (losses) from our equity method investments, other revenue not directly attributable to our core business offerings.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

Three Months

Twelve Months

Ended December 31,

Ended December 31,

2020

2019

2020

2019

(in millions, except share and per share data)

Comprehensive income:

Net income available for common stockholders

$

71

$

44

$

195

$

161

Other comprehensive income:

Cumulative translation adjustment, before income taxes

21

7

26

4

Income taxes related to items of other comprehensive income

-

-

-

-

Other comprehensive income, net of tax

21

7

26

4

Comprehensive income available for common stockholders

$

92

$

51

$

221

$

165

Comprehensive earnings per share:

Basic

$

1.05

$

0.67

$

2.77

$

2.18

Diluted

$

1.05

$

0.66

$

2.74

$

2.16

Weighted average common shares outstanding:

Basic

87,076,038

76,749,142

79,939,289

76,121,570

Diluted

87,772,443

77,357,093

80,638,908

76,825,863

Comprehensive income attributable to noncontrolling interests:

Net income attributable to noncontrolling interests

$

309

$

250

$

984

$

928

Other comprehensive income - cumulative translation adjustment

74

31

98

20

Comprehensive income attributable to noncontrolling interests

$

383

$

281

$

1,082

$

948

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

December 31,
2020

December 31,
2019

(in millions)

Assets

Cash and cash equivalents

$

4,292

$

2,882

Cash - segregated for regulatory purposes

15,903

9,400

Securities - segregated for regulatory purposes

27,821

17,824

Securities borrowed

4,956

3,916

Securities purchased under agreements to resell

792

3,111

Financial instruments owned, at fair value

630

1,916

Receivables from customers, net of allowance for doubtful accounts

39,333

31,304

Receivables from brokers, dealers and clearing organizations

1,254

685

Other assets

698

638

Total assets

$

95,679

$

71,676

Liabilities and equity

Liabilities

Short-term borrowings

$

118

$

16

Securities loaned

9,838

4,410

Securities sold under agreements to repurchase

-

1,909

Financial instruments sold but not yet purchased, at fair value

153

457

Other payables:

Customers

75,882

56,248

Brokers, dealers and clearing organizations

182

220

Other payables

503

476

76,567

56,944

Total liabilities

86,676

63,736

Equity

Stockholders' equity

1,951

1,452

Noncontrolling interests

7,052

6,488

Total equity

9,003

7,940

Total liabilities and equity

$

95,679

$

71,676

December 31, 2020

December 31, 2019

Ownership of IBG LLC Membership Interests

Interests

%

Interests

%

IBG, Inc.

90,780,444

21.8%

76,759,595

18.5%

Noncontrolling interests (IBG Holdings LLC)

325,960,034

78.2%

338,670,642

81.5%

Total IBG LLC membership interests

416,740,478

100.0%

415,430,237

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,

2020

2019

2020

2019

(in millions)

Adjusted net revenues1

Net revenues - GAAP

$

599

$

500

$

2,218

$

1,937

Non-GAAP adjustments

Currency diversification strategy, net

13

(12

)

19

60

Mark-to-market on investments2

(33

)

15

(36

)

(13

)

Remeasurement of TRA liability3

3

-

3

-

Total non-GAAP adjustments

(17

)

3

(14

)

47

Adjusted net revenues

$

582

$

503

$

2,204

$

1,984

Adjusted income before income taxes1

Income before income taxes - GAAP

$

392

$

312

$

1,256

$

1,157

Non-GAAP adjustments

Currency diversification strategy, net

13

(12

)

19

60

Mark-to-market on investments2

(33

)

15

(36

)

(13

)

Remeasurement of TRA liability3

3

-

3

-

Customer compensation expense4

-

-

103

-

Bad debt expense5

-

-

1

42

Total non-GAAP adjustments

(17

)

3

90

89

Adjusted income before income taxes

$

375

$

315

$

1,346

$

1,246

Adjusted pre-tax profit margin

64

%

63

%

61

%

63

%

Three Months

Twelve Months

Ended December 31,

Ended December 31,

2020

2019

2020

2019

(in millions)

Adjusted net income available for common stockholders1

Net income available for common stockholders - GAAP

$

71

$

44

$

195

$

161

Non-GAAP adjustments

Currency diversification strategy, net

3

(2

)

4

11

Mark-to-market on investments2

(7

)

3

(7

)

(2

)

Remeasurement of TRA liability3

3

-

3

-

Customer compensation expense4

-

-

20

-

Bad debt expense5

-

-

0

8

Income tax effect of above adjustments6

1

-

(3

)

(3

)

Remeasurement of deferred income taxes7

(11

)

-

(11

)

-

Total non-GAAP adjustments

(11

)

1

6

13

Adjusted net income available for common stockholders

$

60

$

45

$

201

$

174

Note: Amounts may not add due to rounding.

Three Months

Twelve Months

Ended December 31,

Ended December 31,

2020

2019

2020

2019

(in dollars)

Adjusted diluted EPS1

Diluted EPS - GAAP

$

0.81

$

0.57

$

2.42

$

2.10

Non-GAAP adjustments

Currency diversification strategy, net

0.03

(0.03

)

0.05

0.14

Mark-to-market on investments2

(0.08

)

0.03

(0.08

)

(0.03

)

Remeasurement of TRA liability3

0.04

0.00

0.04

0.00

Customer compensation expense4

0.00

0.00

0.24

0.00

Bad debt expense5

0.00

0.00

0.00

0.10

Income tax effect of above adjustments6

0.01

0.00

(0.04

)

(0.04

)

Remeasurement of deferred income taxes7

(0.12

)

0.00

(0.14

)

0.00

Total non-GAAP adjustments

(0.12

)

0.01

0.08

0.17

Adjusted diluted EPS

$

0.69

$

0.58

$

2.49

$

2.27

Diluted weighted average common shares outstanding

87,772,443

77,357,093

80,638,908

76,825,863

Note: Amounts may not add due to rounding.

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, our net mark-to-market gains (losses) on investments2, and the remeasurement of our Tax Receivable Agreement ("TRA") liability3.

  • 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, the remeasurement of our TRA liability, customer compensation expenses4, and unusual bad debt expense5.

  • 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 GLOBAL currency diversification strategy, the mark-to-market gains (losses) on investments, the remeasurement of our TRA liability, customer compensation expenses, unusual bad debt expense, and the remeasurement of certain deferred tax assets7.

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, the remeasurement of our TRA liability, customer compensation expense, unusual bad debt expense, and the remeasurement of certain deferred tax assets 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 Remeasurement of our TRA liability represents the change in the amount payable to IBG Holdings LLC under the TRA as a result of changes in the Company’s effective corporate 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 28, 2020.

4 Customer compensation expenses were incurred to compensate certain affected customers in connection with their losses resulting from the West Texas Intermediate Crude Oil event. On April 20, 2020, the energy markets exhibited extraordinary price activity in the New York Mercantile Exchange ("NYMEX") West Texas Intermediate Crude Oil contract. The price of the May 2020 physically-settled contract dropped to an unprecedented negative price of $37.63.

5 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. For the twelve months ended December 31, 2020, unusual bad debt expense reflects losses incurred by futures customers in excess of the equity in their accounts related to the West Texas Intermediate Crude Oil event described above.

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

7 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 as a result of changes in the Company’s effective corporate 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 28, 2020.

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Contacts

For Interactive Brokers Group, Inc.
Investors: Nancy Stuebe, 203-618-4070

or
Media: Kalen Holliday, 203-618-4069