Interactive Brokers Group, Inc. Q1 FY2025 earnings call

• Strong account growth: Added 279,000 new accounts, a record, with 32% total account growth, and client credit balances up 19% to $125.2 billion. - Record trading volumes: Options contract volumes up 25%, futures up 16%, stock share volume up 47%. - Global client growth: Accounts and client equity grew fastest in Asia, with Europe close behind. - New product introductions: Offered forecast x contracts in Canada and EEA, launched Canadian first home savings accounts, added new cryptocurrencies, launched trading of Nifty fifty index futures in Singapore, etc. - Expense control: Compensation and benefits expense ratio to adjusted net revenues at 11%, down slightly from prior year. - Dividend increase: Raised dividend from $1 per year to $1.28, and plan to split stock four for one.

In the first quarter, Interactive Brokers Group saw strong financial results. Commission revenue reached a record, up 36% versus the prior year first quarter, reaching over half a billion dollars. Net interest income was $770 million, up 3% year on year, driven by higher balances but partially offset by lower benchmark interest rates. Other fees and services generated $78 million, up 32% from the prior year, primarily driven by higher risk exposure fees. Execution clearing and distribution costs were $121 million, up 20% over the year-ago quarter on higher volumes. Account growth was robust with 279,000 new accounts added, a record, and total account growth 32%. Client credit balances rose 19% to a record $125.2 billion, and client equity was up 23% to $573.5 billion.

• Raised dividend in recognition of financial strength. - Continue to focus on automating brokerage business and expanding offerings while minimizing costs. - Maintain capital allocation to support growth in existing business and future opportunities.

• Market volatility: Cracks in the market showed with declines in S&P 500 and significant drops in some stocks. - Regulatory changes: Uncertainties in crypto regulation and potential impact of tariffs. - M&A challenges: Dearth of suitable acquisition opportunities at favorable prices.

Q: Could you speak to the impact of retail pressure on equity market levels on your business in April, has there been any notable deleveraging across your client base? And what has this meant for trading activity? And separately, could you speak to a shift in client allocations to cash versus in risk assets? And then the impact on margin loans.

A: We saw very significant volumes as the market dropped and then bonded back up we saw record volumes. There were some shifts: clients traded less fewer options, traded more futures and fixed income. Saw a slight decrease in margin loans around 10-12% as clients reduced risk posture.

Q: Could you talk about the shift in client allocations to cash versus in risk assets and the impact on margin loans?

A: Clients shifted to more cash and less risk assets, leading to a slight decrease in margin loans around 10-12%.

Q: Could you speak to a shift in client allocations to cash versus in risk assets and the impact on margin loans?

A: Clients shifted to more cash and less risk assets, leading to a slight decrease in margin loans around 10-12%.

Q: Can you talk about what drove the decision to nearly triple the size of your crypto offering this year and your comfortability with expanding that offering?

A: Added seven cryptocurrencies due to changes in regulatory environment like rescinded accounting guidance, SEC's decreased regulation by enforcement, and dismissed Coinbase lawsuits. Expect crypto to grow but not as fast as hoped currently.

Q: Can you provide insight on how client activity was tracking month to date, specifically on account growth, customer credit balances, and margin loans?

A: Saw significant client inflow, increase in approved new accounts, drop in margin loans by around 12%, and greater than expected inflow of cash; trading activity roughly corresponds to average volume levels in previous quarter.

Q: Could you remind us what your excess capital was as of March thirty-first and any changes in inorganic priorities?

A: Excess capital remains in the six to seven billion range. Still looking for M&A opportunities but haven't found suitable ones yet; last significant attempt to acquire a competitor didn't succeed due to not being able to acquire 100%.

Q: Could you speak about your dividend policy and whether investors should expect annual increases?

A: Target dividends to be between half a percent and one percent of the stock price. Explained that dividends are targeted based on this range.

Q: Could you comment on the decline in risk exposure fees in the first quarter and if they will continue to move lower?

A: Exposure fees fluctuate more than margin balances. Clients reduce options exposures quickly as market falls, so exposure fees are expected to fluctuate more than margin balances.