Interactive Brokers Group, Inc. (NASDAQ:IBKR) Q1 2019 Earnings Conference Call - Final Transcript

Apr 16, 2019 • 04:30 pm ET


Interactive Brokers Group, Inc. (NASDAQ:IBKR) Q1 2019 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Interactive Brokers Group First Quarter Financial Results. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference is being recorded. Now it's my pleasure to turn the call to Nancy Stuebe, Director of Investor Relations.

Nancy Stuebe

Thank you, operator. Good afternoon and thank you for joining us for our first quarter 2019 earnings conference call. Once again, Thomas is on the call, but asked me to present his comments on the business, he will handle the Q&A. As a reminder, today's call may include forward-looking statements, which represent the Company's belief regarding future events, which by their nature are not certain and are outside of the Company's control. Our actual results and financial condition may differ, possibly materially from what is indicated in these forward-looking statements. We ask that you refer to the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC.

Interactive Brokers achieved more new records in the first quarter with accounts rising 21% from the year-ago quarter and passing 600,000 for the first time. Client equity reached an all-time high of $147.6 billion. This quarter we had the third highest quarterly DARTs ever in our Company's history. This occurred even though volumes returned to more traditional levels, after a period of very high volatility in the first quarter of last year.

As our customer base has grown, our DARTs have shown a secular trend upward, punctuated by spikes in volume during turbulent markets. Over the past two-year period, our DARTs rose from 657,000 in the first quarter of 2017 to 848,000 in the first quarter of 2019. The year-on-year decline this quarter is a reflection of just such a spike in last year's first quarter conditions which pushed our DARTs for that quarter to 939,000. That volume increase last year coincided with the spike in volatility when the VIX more than tripled over the course of the first quarter from under 10 to over 30.

We continue to focus on our strategy of growing our customer base in all segments so we can take advantage of volatility in any scenario, and more so when it is higher. Our business is strong even with moderate volatility, but because of the highly automated nature of our platform and our low-cost structure, more trading activities sends the higher proportion of revenues to our bottom line.

Another factor in comparing our volumes versus last year was our decision to limit the riskiest microcap stock business which occurred shortly after the first quarter of 2018. Supporting these stocks had presented us with increased time and legal burden in trying to ensure that the trading of certain of these securities would not be questioned by the regulators.

Unfortunately, we've been unable to obtain clear regulatory guidance that would allow us to automate the compliance process rather than reviewing each security