Interactive Brokers Group, Inc. (NASDAQ:IBKR) Q1 2017 Earnings Conference Call Transcript

Jul 18, 2017 • 04:30 pm ET


Interactive Brokers Group, Inc. (NASDAQ:IBKR) Q1 2017 Earnings Conference Call Transcript


Loading Event

Loading Transcript


Good day, ladies and gentlemen, and welcome to the Interactive Brokers Group Second Quarter Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time (Operator Instructions).

I would now like to introduce your host for today's program Nancy Stuebe, Director of Investor Relations. Please go ahead.

Nancy Stuebe

Thank you, operator and welcome everyone to our second quarter earnings call. Our earnings were released today after the market closed and are also available on our website. Our speakers today are Thomas Peterffy, our Chairman and CEO; and Paul Brody, our Group CFO. They will start the call with some prepared remarks about the quarter and then we will take your questions.

(Forward-Looking Cautionary Statements)

I'd now like to turn the call over to Thomas Peterffy. Thomas?

Thomas Peterffy

Good afternoon everyone and thank you for joining us to review our 2017 second quarter performance. In this quarter, we have again set new records for our Brokerage business. In May, we exceeded $100 billion of customer equity for the first time, and finished the quarter with $104.8 billion, up 42% from last year. We also hit all-time highs in both customer accounts, up 20%, to over 427,000, and in margin lending with $22.7 billion outstanding, up 51% from the year-ago quarter.

Our growth and momentum continued to increase. And as we have said in the past, we think we can do even better growing new accounts, although recent asset growth rates will be hard to match. Market volatility remains at historic lows, and this impacts the entire Brokerage industry, especially Interactive Brokers because our more frequently trading clients find more opportunities in the moving market and less in a stationary one.

The average VIX for the second quarter was 11.45, which was down 27% from last year and was down even versus a weak first quarter. There are many theories about the cause of this, and I offered my own theory, but for now the low volatility continues and we must work with it. We did see encouraging signs within group customer trading levels as the quarter progressed. Despite the drop in the VIX, our DARTs rose 3% versus last year. This meant positive results on the revenue side in our Brokerage business.

We have two sources of revenues, commissions and net interest. Our commission revenue this quarter was ahead of last year. New customers recognized the value of our platform and our superior price execution. This has led to strength in all of our customer segments, especially in hedge fund and introducing brokers. We have seen throughout the quarter an improving trend in commissions overall as our customers traded more as the quarter went on.

Nevertheless, the rising commission revenue did not keep pace with the rise of clients' accounts or assets, far from it. But at least in the course of this past quarter, the opposing trends decreasing volatility on the one hand and increasing