Le Lézard
Classified in: Business, Covid-19 virus
Subjects: EARNINGS, Conference Call, Webcast

Interactive Brokers Group Announces 3Q2020 Results


Interactive Brokers Group, Inc. (Nasdaq: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.58 for the quarter ended September 30, 2020 compared to $0.45 for the same period in 2019, and adjusted diluted earnings per share of $0.53 for this quarter compared to $0.57 for the year-ago quarter.

Net revenues were $548 million and income before income taxes was $334 million this quarter, compared to net revenues of $466 million and income before income taxes of $281 million for the same period in 2019. Adjusted net revenues were $518 million and adjusted income before income taxes was $304 million this quarter, compared to adjusted net revenues of $525 million and adjusted income before income taxes of $340 million for the same period in 2019.

Financial Highlights

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on December 14, 2020 to shareholders of record as of December 1, 2020.

Business Highlights

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 effects of the COVID-19 pandemic on the Company's financial results for the third 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 during this period; 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 $72 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.91%. The effects of the currency diversification strategy are reported as components of (1) Other Income ($27 million) and (2) Other Comprehensive Income ($45 million).

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, October 20, 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 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

2017

 

                 265,501

     

         14,835

     

         31,282

     

       311,618

     

               1,246

2018

 

                 328,099

 

24%

 

         21,880

 

47%

 

         18,663

 

 (40%)

 

       368,642

 

18%

 

               1,478

2019

 

                 302,289

 

 (8%)

 

         26,346

 

20%

 

         17,136

 

 (8%)

 

       345,771

 

 (6%)

 

               1,380

 

                                   

3Q2019

 

                   78,793

     

           6,566

     

           4,738

     

         90,097

     

               1,419

3Q2020

 

                 160,015

 

103%

 

         14,701

 

124%

 

           7,453

 

57%

 

       182,169

 

102%

 

               2,846

 

                                   

2Q2020

 

                 153,212

     

         13,752

     

           7,252

     

       174,216

     

               2,765

3Q2020

 

                 160,015

 

4%

 

         14,701

 

7%

 

           7,453

 

3%

 

       182,169

 

5%

 

               2,846

CONTRACT AND SHARE VOLUMES:                
(in 000's, except %)                        
                         
TOTAL   Options   %   Futures1   %   Stocks   %
Period   (contracts)   Change   (contracts)   Change   (shares)   Change

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%)

 

                       

3Q2019

 

       103,972

     

         36,124

     

      43,107,364

   

3Q2020

 

       163,972

 

58%

 

         39,186

 

8%

 

      87,514,614

 

103%

 

                       

2Q2020

 

       151,665

     

         43,393

     

      67,637,445

   

3Q2020

 

       163,972

 

8%

 

         39,186

 

 (10%)

 

      87,514,614

 

29%

                         
ALL CUSTOMERS   Options   %   Futures1   %   Stocks   %
Period   (contracts)   Change   (contracts)   Change   (shares)   Change

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%)

 

                       

3Q2019

 

         93,124

     

         35,427

     

      41,025,047

   

3Q2020

 

       153,612

 

65%

 

         38,685

 

9%

 

      85,893,357

 

109%

 

                       

2Q2020

 

       140,787

     

         42,582

     

      65,818,295

   

3Q2020

 

       153,612

 

9%

 

         38,685

 

 (9%)

 

      85,893,357

 

31%

                         
CLEARED CUSTOMERS Options   %   Futures1   %   Stocks   %
Period   (contracts)   Change   (contracts)   Change   (shares)   Change

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%)

 

                       

3Q2019

 

         80,840

     

         35,108

     

      39,891,867

   

3Q2020

 

       137,660

 

70%

 

         38,405

 

9%

 

      83,246,086

 

109%

 

                       

2Q2020

 

       124,010

     

         42,259

     

      62,937,898

   

3Q2020

 

       137,660

 

11%

 

         38,405

 

 (9%)

 

      83,246,086

 

32%

                         
1 Includes options on futures                        

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

CONTRACT AND SHARE VOLUMES, continued:                  
(in 000's, except %)                        
                         
                         
PRINCIPAL TRANSACTIONS   Options   %   Futures1   %   Stocks   %
Period   (contracts)   Change   (contracts)   Change   (shares)   Change

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%)

 

                       

3Q2019

 

         10,848

     

              697

     

        2,082,317

   

3Q2020

 

         10,360

 

 (4%)

 

              501

 

 (28%)

 

        1,621,257

 

 (22%)

 

                       

2Q2020

 

         10,878

     

              811

     

        1,819,150

   

3Q2020

 

         10,360

 

 (5%)

 

              501

 

 (38%)

 

        1,621,257

 

 (11%)

                         
1 Includes options on futures                      

 

CUSTOMERS STATISTICS                
 
Year over Year    

3Q2020

   

3Q2019

  % Change
   Total Accounts (in thousands)    

                     981

   

                     666

 

47%

   Customer Equity (in billions)1   $

232.7

  $

156.6

 

49%

                 
   Cleared DARTs (in thousands)    

                  1,629

   

                     777

 

110%

   Total Customer DARTs (in thousands)    

                  1,832

   

                     859

 

113%

                 
Cleared Customers                
   Commission per Cleared Commissionable Order2   $

2.69

  $

3.69

 

 (27%)

   Cleared Avg. DARTs per Account (Annualized)    

                     442

   

                     297

 

49%

   Net Revenue per Avg. Account (Annualized)   $

2,154

  $

2,995

 

 (28%)

                 
Consecutive Quarters    

3Q2020

   

2Q2020

  % Change
   Total Accounts (in thousands)    

                     981

   

                     876

 

12%

   Customer Equity (in billions)1   $

232.7

  $

203.2

 

15%

                 
   Cleared DARTs (in thousands)    

                  1,629

   

                  1,558

 

5%

   Total Customer DARTs (in thousands)    

                  1,832

   

                  1,746

 

5%

                 
Cleared Customers                
   Commission per Cleared Commissionable Order2   $

2.69

  $

2.81

 

 (4%)

   Cleared Avg. DARTs per Account (Annualized)    

                     442

   

                     480

 

 (8%)

   Net Revenue per Avg. Account (Annualized)   $

2,154

  $

2,442

 

 (12%)

                 
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   Nine Months
        Ended September 30,   Ended September 30,
       

2020

 

2019

 

2020

 

2019

                             
        (in millions)
Average interest-earning assets                        
  Segregated cash and securities   $

                  43,589

  $

                  29,443

  $

                  41,283

  $

                  27,384

  Customer margin loans    

                  28,490

   

                  26,134

   

                  27,052

   

                  26,014

  Securities borrowed    

                    4,477

   

                    4,036

   

                    4,448

   

                    3,900

  Other interest-earning assets    

                    5,075

   

                    5,362

   

                    5,288

   

                    5,202

  FDIC sweeps1    

                    2,982

   

                    2,151

   

                    2,864

   

                    1,999

        $

                  84,613

  $

                  67,126

  $

                  80,935

  $

                  64,499

                             
Average interest-bearing liabilities                        
  Customer credit balances   $

                  68,867

  $

                  53,762

  $

                  65,716

  $

                  51,786

  Securities loaned    

                    5,756

   

                    4,160

   

                    5,304

   

                    3,993

  Other interest-bearing liabilities    

                       251

   

                       173

   

                       313

   

                         78

        $

                  74,874

  $

                  58,095

  $

                  71,333

  $

                  55,857

                             
Net interest income                        
  Segregated cash and securities, net   $

                         14

  $

                       153

  $

                       159

  $

                       434

  Customer margin loans2    

                         83

   

                       175

   

                       287

   

                       537

  Securities borrowed and loaned, net    

                         86

   

                         77

   

                       228

   

                       177

  Customer credit balances, net2    

                            8

   

                      (137)

   

                        (55)

   

                      (421)

  Other net interest income1/3    

                         10

   

                         31

   

                         47

   

                         94

    Net interest income3   $

                       201

  $

                       299

  $

                       666

  $

                       821

                             
Net interest margin ("NIM")    

0.94%

   

1.77%

   

1.10%

   

1.70%

                             
Annualized yields                        
  Segregated cash and securities    

0.13%

   

2.06%

   

0.51%

   

2.12%

  Customer margin loans    

1.16%

   

2.66%

   

1.41%

   

2.76%

  Customer credit balances    

-0.05%

   

1.01%

   

0.11%

   

1.09%

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 nine months ended September 30, 2020 and 2019, $6 million, $4 million, $14 million, and $10 million were reported in other fees and services, respectively. For the three and nine months ended September 30, 2020 and 2019, $0 million, $4 million, $5 million, and $15 million were reported in other income, respectively.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

        Three Months   Nine Months 
        Ended September 30,   Ended September 30,
       

2020

 

2019

 

2020

 

2019

          (in millions, except share and per share data)
                             
Revenues:                        
  Commissions   $

279

  $

187

  $

824

  $

538

  Other fees and services1/2  

45

 

35

 

123

 

105

  Other income (loss)1/3    

29

   

(47)

   

25

   

(2)

                             
    Total non-interest income    

353

   

175

   

972

   

641

                             
  Interest income    

240

   

468

   

853

   

1,308

  Interest expense    

(45)

   

(177)

   

(206)

   

(512)

                             
    Total net interest income    

195

   

291

   

647

   

796

                             
    Total net revenues     

548

   

466

   

1,619

   

1,437

                             
Non-interest expenses:                        
  Execution, clearing and distribution fees    

74

   

68

   

227

   

192

  Employee compensation and benefits    

77

   

67

   

239

   

213

  Occupancy, depreciation and amortization    

17

   

15

   

51

   

43

  Communications    

6

   

7

   

19

   

19

  General and administrative     

37

   

30

   

206

   

80

  Customer bad debt    

3

   

(2)

   

13

   

45

                             
    Total non-interest expenses     

214

   

185

   

755

   

592

                             
Income before income taxes    

334

   

281

   

864

   

845

                             
Income tax expense    

32

   

20

   

65

   

50

                             
Net income    

302

   

261

   

799

   

795

                             
Net income attributable to noncontrolling interests    

256

   

225

   

675

   

678

                             
Net income available for common stockholders   $

46

  $

36

  $

124

  $

117

                             
Earnings per share:                        
  Basic    $

0.59

  $

0.46

  $

1.60

  $

1.54

  Diluted   $

0.58

  $

0.45

  $

1.58

  $

1.52

                             
Weighted average common shares outstanding:                        
  Basic     

78,509,625

   

76,742,789

   

77,543,008

   

75,910,080

  Diluted    

79,120,548

   

77,348,976

   

78,243,699

   

76,646,487

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   Nine Months 
        Ended September 30,   Ended September 30,
       

2020

 

2019

 

2020

 

2019

          (in millions, except share and per share data)
                             
Comprehensive income:                        
  Net income available for common stockholders   $

46

  $

36

  $

124

  $

117

  Other comprehensive income:                        
    Cumulative translation adjustment, before income taxes    

                                 8

   

                                (6)

   

                         5

   

                       (3)

    Income taxes related to items of other comprehensive income    

                                  -

   

                                  -

   

                          -

   

                          -

  Other comprehensive income (loss), net of tax    

                                 8

   

                                (6)

   

                         5

   

                       (3)

Comprehensive income available for common stockholders   $

54

  $

30

  $

129

  $

114

                             
Comprehensive earnings per share:                        
  Basic    $

0.69

  $

0.39

  $

1.67

  $

1.50

  Diluted    $

0.69

  $

0.39

  $

1.65

  $

1.49

                             
Weighted average common shares outstanding:                        
  Basic     

78,509,625

   

76,742,789

   

77,543,008

   

75,910,080

  Diluted     

79,120,548

   

77,348,976

   

78,243,699

   

76,646,487

                             
Comprehensive income attributable to noncontrolling interests:                        
Net income attributable to noncontrolling interests   $

256

  $

225

  $

675

  $

678

Other comprehensive income - cumulative translation adjustment    

37

   

(22)

   

24

   

(11)

Comprehensive income attributable to noncontrolling interests   $

293

  $

203

  $

699

  $

667

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)

            September 30,
2020
  December 31,
2019
            (in millions)
                     
Assets                    
Cash and cash equivalents           $

                     3,292

  $

2,882

Cash - segregated for regulatory purposes            

                   12,789

   

                     9,400

Securities - segregated for regulatory purposes            

                   29,316

   

                   17,824

Securities borrowed            

                     3,995

   

                     3,916

Securities purchased under agreements to resell            

                     1,401

   

                     3,111

Financial instruments owned, at fair value            

                        452

   

                     1,916

Receivables from customers, net of allowance for doubtful accounts          

                   30,343

   

                   31,304

Receivables from brokers, dealers and clearing organizations            

                     2,575

   

                        685

Other assets            

                        535

   

                        638

                     
Total assets         $

84,698

  $

71,676

                     
Liabilities and equity                    
                     
Liabilities                    
Short-term borrowings           $

                        628

  $

16

Securities loaned            

                     5,738

   

                     4,410

Securities sold under agreements to repurchase            

                           -  

   

                     1,909

Financial instruments sold but not yet purchased, at fair value            

                        187

   

                        457

Other payables:                    
Customers          

                   68,830

   

                   56,248

Brokers, dealers and clearing organizations          

                        313

   

                        220

Other payables          

                        456

   

                        476

             

                   69,599

   

                   56,944

                     
Total liabilities          

                   76,152

   

                   63,736

                     
Equity                    
Stockholders' equity            

                     1,609

   

                     1,452

Noncontrolling interests            

                     6,937

   

                     6,488

Total equity          

                     8,546

   

                     7,940

                     
Total liabilities and equity         $

84,698

  $

71,676

                     
    September 30, 2020     December 31, 2019
Ownership of IBG LLC Membership Interests  

Interests

 

 %

 

 

Interests

 

 

 %

                     
IBG, Inc.  

79,057,622

 

19.0%

   

76,759,595

   

18.5%

Noncontrolling interests (IBG Holdings LLC)  

337,670,642

 

81.0%

   

338,670,642

   

81.5%

                     
Total IBG LLC membership interests  

416,728,264

 

100.0%

   

415,430,237

   

100.0%

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

      Three Months   Nine Months
      Ended September 30,   Ended September 30,
     

2020

 

2019

 

2020

 

2019

                           
      (in millions)
                           
Adjusted net revenues1                        
Net revenues - GAAP   $

548

  $

466

  $

1,619

  $

1,437

                           
Non-GAAP adjustments                        
  Currency diversification strategy, net    

(27)

   

47

   

6

   

72

  Mark-to-market on investments2    

                       (3)

   

                       12

   

                       (3)

   

                     (28)

                           
Total non-GAAP adjustments    

(30)

   

59

   

3

   

44

                           
Adjusted net revenues   $

518

  $

525

  $

1,622

  $

1,481

                           
Adjusted income before income taxes1                        
Income before income taxes - GAAP   $

334

  $

281

  $

864

  $

845

                           
Non-GAAP adjustments                        
  Currency diversification strategy, net    

(27)

   

47

   

6

   

72

  Mark-to-market on investments2    

                       (3)

   

                       12

   

                       (3)

   

                     (28)

  Customer compensation expense3    

0

   

0

   

103

   

0

  Bad debt expense4    

0

   

0

   

                         1

   

                       42

                           
Total non-GAAP adjustments    

                     (30)

   

                       59

   

                     107

   

                       86

                           
                           
Adjusted income before income taxes   $

304

  $

340

  $

971

  $

931

                           
Adjusted pre-tax profit margin    

59%

   

65%

   

60%

   

63%

                           
                           

 

                         
      Three Months   Nine Months
      Ended September 30,   Ended September 30,
     

2020

 

2019

 

2020

 

2019

                           
      (in millions)
Adjusted net income available for common stockholders1                        
Net income available for common stockholders - GAAP   $

46

  $

36

  $

124

  $

117

                           
Non-GAAP adjustments                        
  Currency diversification strategy, net    

(5)

   

9

   

1

   

13

  Mark-to-market on investments2    

                       (1)

   

                         2

   

                       (1)

   

(5)

  Customer compensation expense3    

                          -

   

                          -

   

                       19

   

                          -

  Bad debt expense4    

                          -

   

                          -

   

                         0

   

8

  Income tax effect of above adjustments5    

                         1

   

                       (3)

   

                       (4)

   

(4)

                           
Total non-GAAP adjustments    

                       (4)

   

                         9

   

                       16

   

                       12

                           
Adjusted net income available for common stockholders   $

42

  $

45

  $

140

  $

129

                           
Note: Amounts may not add due to rounding.                        
      Three Months   Nine Months
      Ended September 30,   Ended September 30,
     

2020

 

2019

 

2020

 

2019

                           
      (in dollars)
Adjusted diluted EPS1                        
Diluted EPS - GAAP   $

0.58

  $

0.45

  $

1.58

  $

1.52

                           
Non-GAAP adjustments                        
  Currency diversification strategy, net    

(0.06)

   

0.11

   

0.02

   

0.17

  Mark-to-market on investments2    

(0.01)

   

0.03

   

(0.01)

   

(0.06)

  Customer compensation expense3    

0.00

   

0.00

   

0.24

   

0.00

  Bad debt expense4    

0.00

   

0.00

   

0.00

   

0.10

  Income tax effect of above adjustments    

0.02

   

(0.03)

   

(0.05)

   

(0.05)

                           
Total non-GAAP adjustments    

(0.05)

   

0.11

   

0.20

   

0.16

                           
Adjusted diluted EPS   $

0.53

  $

0.57

  $

1.79

  $

1.68

                           
Diluted weighted average common shares outstanding    

79,120,548

   

77,348,976

   

78,243,699

   

76,646,487

                           
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.

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 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.

4 Unusual bad debt expense includes material losses on margin loans resulting from unusual events that occur in the marketplace. For the nine months ending September 30, 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 nine months ended September 30, 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.

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


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