EX-99.1 2 ibkr_8k-20191231er.htm IBKR 4Q19 EARNINGS RELEASE
Exhibit 99.1

INTERACTIVE BROKERS GROUP ANNOUNCES 4Q2019 RESULTS

— — —

DILUTED EARNINGS PER SHARE OF $0.57, ADJUSTED DILUTED EARNINGS PER SHARE OF $0.58.
INCOME BEFORE TAXES OF $312 MILLION ON $500 MILLION IN NET REVENUES. ADJUSTED
INCOME BEFORE TAXES OF $315 MILLION ON $503 MILLION IN ADJUSTED NET REVENUES1.
DECLARES QUARTERLY DIVIDEND OF $0.10 PER SHARE.

GREENWICH, CONN, January 21, 2019 — Interactive Brokers Group, Inc. (NASDAQ GS: IBKR), an automated global electronic broker, reported diluted earnings per share of $0.57 for the quarter ended December 31, 2019 compared to $0.57 for the same period in 2018, and adjusted diluted earnings per share of $0.58 for both this quarter and for the same period in 2018.

Net revenues were $500 million and income before income taxes was $312 million this quarter, compared to net revenues of $492 million and income before income taxes of $309 million for the same period in 2018. Adjusted net revenues were $503 million and adjusted income before income taxes was $315 million this quarter, compared to adjusted net revenues of $496 million and adjusted income before income taxes of $313 million. The results for the quarter were positively impacted by strong growth in net interest income, which increased $44 million, or 18%, from the year-ago quarter; partially counterbalanced by lower commissions revenue, which decreased $37 million, or 18%, from the year-ago quarter.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on March 13, 2020 to shareholders of record as of February 28, 2020.

Effective this quarter, we introduced the reporting of non-GAAP financial measures which exclude certain items that may not be indicative of our core operating results and business outlook and may be useful in evaluating the operating performance of our business and provide a better comparison of our results in the current period to those in prior and future periods. See the reconciliation of non-GAAP financial measures starting on page 11.

Business Highlights

Fourth Quarter 2019:
•
62% pretax profit margin for this quarter, down from 63% in the year-ago quarter.
•
65% Electronic Brokerage pretax profit margin for this quarter, up from 63% in the year-ago quarter.
•
Customer equity grew 36% from the year-ago quarter to $174.1 billion and customer debits increased 15% to $31.0 billion.
•
Customer accounts increased 15% from the year-ago quarter to 690 thousand.
•
Total DARTs2 decreased 16% from the year-ago quarter to 797 thousand.
•
Brokerage segment equity was $6.8 billion. Total equity was $7.9 billion.

Full Year 2019:
•
60% pretax profit margin for 2019, down from 63% in 2018.
•
62% Electronic Brokerage pretax profit margin for 2019, down from 64% in 2018.
•
Total DARTs decreased 3% from 2018 to 833 thousand.


1 See the reconciliation of non-GAAP financial measures starting on page 11.
2 Daily average revenue trades (DARTs) are based on customer orders.
1

Segment Overview

Electronic Brokerage
Electronic brokerage segment income before income taxes increased 1% to $314 million in the quarter ended December 31, 2019, compared to the same period last year. Net revenues decreased 1% to $486 million on lower commissions revenue and other income, partially offset by higher net interest income.

Commissions revenue decreased 18% from the year-ago quarter on lower customer trading volume in options, futures and stocks. Net interest income increased 19% as average customer credit balances and securities lending balances increased from the year-ago quarter. Pretax profit margin was 65% for the quarter ended December 31, 2019, up from 63% in the same period last year.

Customer accounts grew 15% to 690 thousand and customer equity increased 36% from the year-ago quarter to $174.1 billion. Total DARTs for cleared and execution-only customers decreased 16% to 797 thousand from the year-ago quarter. Cleared DARTs decreased 16% to 719 thousand from the same period last year.

Market Making
Market making segment income before income taxes decreased 44% to $5 million in the quarter ended December 31, 2019, compared to the same period last year, primarily due to lower net revenues from the remaining operations.

Corporate
For the quarter ended December 31, 2019, we recognized a mark-to-market loss of approximately $7 million on our strategic investment in Up Fintech Holding Limited (“Tiger Brokers”). For the twelve months ended December 31, 2019 we recognized a net mark-to-market gain of $9 million on this investment.

Effects of Foreign Currency Diversification
In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 14 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $50 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.74%. The effects of the currency diversification strategy are reported as components of (1) Other Income ($12 million) in the corporate segment and (2) Other Comprehensive Income ($38 million). With the introduction of non-GAAP measures, which exclude the impact of the GLOBAL, the Company has removed diluted earnings per share on comprehensive income from the above disclosures.

Regulatory Matters
The Company is subject to regulatory oversight and examination by numerous governmental and self-regulatory authorities. The Company is currently providing information to certain of such authorities, including FINRA, the SEC, the CFTC and the United States Department of Justice, and cooperating with those authorities. The Company believes that the regulators are focused on compliance practices, including anti money laundering and Bank Secrecy Act practices. The Company periodically reviews these practices to make them more robust and to keep pace with changing regulatory standards, and the Company has been enhancing and augmenting its procedures and personnel in these areas over the past several years. While the outcome of the examinations and inquiries currently in progress cannot be predicted, the Company does not believe that they are likely to have a materially adverse effect on the Company’s financial results.
2

Conference Call Information:
Interactive Brokers Group, Inc. will hold a conference call with investors today, January 21, 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 125 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to customers 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 customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost according to Barron's Best Online Brokers review, February 25, 2019. We strive to provide our customers 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.
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.

For Interactive Brokers Group, Inc. Investors: Nancy Stuebe, 203-618-4070 or Media: Kalen Holliday, 203-913-1369.
3
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA
TRADE VOLUMES:
(in 000's, except %)
                   
Brokerage
                
   
Market
      
Brokerage
      
Non
              
Avg. Trades
   
Making
  
%
  
Cleared
  
%
  
Cleared
  
%
  
Total
  
%
  
per U.S.
Period
  
Trades
  
Change
  
Trades
  
Change
  
Trades
  
Change
  
Trades
  
Change
  
Trading Day
2017
  
            31,282
      
     265,501
      
       14,835
      
     311,618
      
            1,246
2018
  
            18,663
  
 (40%)
  
     328,099
  
24%
  
       21,880
  
47%
  
     368,642
  
18%
  
            1,478
2019
  
            17,136
  
 (8%)
  
     302,289
  
 (8%)
  
       26,346
  
20%
  
     345,771
  
 (6%)
  
            1,380
                                     
4Q2018
  
              4,825
      
       88,806
      
         7,251
      
     100,882
      
            1,627
4Q2019
  
              4,204
  
 (13%)
  
       73,291
  
 (17%)
  
         6,284
  
 (13%)
  
       83,779
  
 (17%)
  
            1,330
                                     
3Q2019
  
              4,738
      
       78,793
      
         6,566
      
       90,097
      
            1,419
4Q2019
  
              4,204
  
 (11%)
  
       73,291
  
 (7%)
  
         6,284
  
 (4%)
  
       83,779
  
 (7%)
  
            1,330

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%)
                         
4Q2018
  
     107,417
      
       41,684
      
     44,933,688
    
4Q2019
  
     100,520
  
 (6%)
  
       29,078
  
 (30%)
  
     39,391,536
  
 (12%)
                         
3Q2019
  
     103,972
      
       36,124
      
     43,107,364
    
4Q2019
  
     100,520
  
 (3%)
  
       29,078
  
 (20%)
  
     39,391,536
  
 (9%)

MARKET MAKING
   
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%)
                         
4Q2018
  
       12,680
      
           828
      
       3,091,834
    
4Q2019
  
         8,958
  
 (29%)
  
           448
  
 (46%)
  
       1,403,411
  
 (55%)
                         
3Q2019
  
       10,848
      
           697
      
       2,082,317
    
4Q2019
  
         8,958
  
 (17%)
  
           448
  
 (36%)
  
       1,403,411
  
 (33%)

BROKERAGE TOTAL
   
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%)
                         
4Q2018
  
       94,737
      
       40,856
      
     41,841,854
    
4Q2019
  
       91,562
  
 (3%)
  
       28,630
  
 (30%)
  
     37,988,125
  
 (9%)
                         
3Q2019
  
       93,124
      
       35,427
      
     41,025,047
    
4Q2019
  
       91,562
  
 (2%)
  
       28,630
  
 (19%)
  
     37,988,125
  
 (7%)

1
Includes options on futures.

4
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
OPERATING DATA, CONTINUED

BROKERAGE CLEARED
   
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%)
                         
4Q2018
  
       83,984
      
       40,463
      
     40,271,369
    
4Q2019
  
       81,468
  
 (3%)
  
       28,307
  
 (30%)
  
     36,969,492
  
 (8%)
                         
3Q2019
  
       80,840
      
       35,108
      
     39,891,867
    
4Q2019
  
       81,468
  
1%
  
       28,307
  
 (19%)
  
     36,969,492
  
 (7%)
 
1
Includes options on futures.
   
BROKERAGE STATISTICS
(in 000's, except % and where noted)

Year over Year
  
4Q2019
    
4Q2018
  
% Change
   Total Accounts
  
                     690
    
                     598
  
15%
   Customer Equity (in billions)1
$
174.1
  
$
128.4
  
36%
               
   Cleared DARTs
  
                     719
    
                     856
  
 (16%)
   Total Customer DARTs
  
                     797
    
                     951
  
 (16%)
               
Cleared Customers (in $'s, except DART per account)
          
   Commission per DART
$
3.61
  
$
3.79
  
 (5%)
   DART per Avg. Account (Annualized)
  
                     266
    
                     364
  
 (27%)
   Net Revenue per Avg. Account (Annualized)
$
2,801
  
$
3,225
  
 (13%)
               
Consecutive Quarters
  
4Q2019
    
3Q2019
  
% Change
   Total Accounts
  
                     690
    
                     666
  
4%
   Customer Equity (in billions)1
$
174.1
  
$
156.6
  
11%
               
   Cleared DARTs
  
                     719
    
                     777
  
 (7%)
   Total Customer DARTs
  
                     797
    
                     859
  
 (7%)
               
Cleared Customers (in $'s, except DART per account)
          
   Commission per DART
$
3.61
  
$
3.69
  
 (2%)
   DART per Avg. Account (Annualized)
  
                     266
    
                     297
  
 (10%)
   Net Revenue per Avg. Account (Annualized)
$
2,801
  
$
2,995
  
 (6%)
 
1
Excludes non-customers.
5
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
NET INTEREST MARGIN
(UNAUDITED)

       
Three Months
  
Twelve Months
       
Ended December 31,
  
Ended December 31,
       
2019
  
2018
  
2019
  
2018
                             
       
(in millions)
Average interest-earning assets
                        
 
Segregated cash and securities
  
$
                  29,437
  
$
                  21,957
  
$
                  27,812
  
$
                  20,911
 
Customer margin loans
    
                  27,529
    
                  28,805
    
                  26,483
    
                  29,253
 
Securities borrowed
    
                    4,026
    
                    3,407
    
                    3,930
    
                    3,310
 
Other interest-earning assets
    
                    5,887
    
                    4,825
    
                    5,407
    
                    4,362
 
FDIC sweeps1
    
                    2,201
    
                    1,673
    
                    2,046
    
                    1,259
       
$
                  69,080
  
$
                  60,667
  
$
                  65,678
  
$
                  59,095
                             
Average interest-bearing liabilities
                        
 
Customer credit balances
  
$
                  55,185
  
$
                  49,153
  
$
                  52,625
  
$
                  48,179
 
Securities loaned
    
                    4,292
    
                    3,729
    
                    4,088
    
                    3,982
 
Other interest-bearing liabilities
    
                       477
    
                          -
    
                       196
    
                       241
       
$
                  59,954
  
$
                  52,882
  
$
                  56,909
  
$
                  52,402
                             
Net interest income
                        
 
Segregated cash and securities, net
  
$
                       126
  
$
                       104
  
$
                       560
  
$
                       337
 
Customer margin loans2
    
                       157
    
                       192
    
                       694
    
                       677
 
Securities borrowed and loaned, net
    
                         80
    
                         50
    
                       257
    
                       216
 
Customer credit balances, net2
    
                       (94)
    
                     (121)
    
                     (515)
    
                     (362)
 
Other net interest income1/3
    
                         27
    
                         27
    
                       121
    
                         90
   
Net interest income3
  
$
                       296
  
$
                       252
  
$
                    1,117
  
$
                       958
                             
Net interest margin ("NIM")
    
1.70%
    
1.65%
    
1.70%
    
1.62%
                             
Annualized yields
                        
 
Segregated cash and securities
    
1.70%
    
1.88%
    
2.01%
    
1.61%
 
Customer margin loans
    
2.26%
    
2.64%
    
2.62%
    
2.31%
 
Customer credit balances
    
0.68%
    
0.98%
    
0.98%
    
0.75%


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 which has the same characteristics as interest, but is reported in other income in the Company’s consolidated statements of comprehensive income, of $9 million for the three months ended December 31, 2019 and 2018, and $34 million and $29 million for the twelve months ended December 31, 2019 and 2018, respectively.
                             


6
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(UNAUDITED)

     
Three Months
  
Twelve Months
     
Ended December 31,
  
Ended December 31,
     
2019
  
2018
  
2019
  
2018
     
(in millions)
                           
Electronic Brokerage
Net revenues
  
$
486
  
$
490
  
$
1,921
  
$
1,842
 
Non-interest expenses
    
172
    
179
    
724
    
665
                           
 
Income before income taxes
  
$
314
  
$
311
  
$
1,197
  
$
1,177
                           
 
Pre-tax profit margin
    
65%
    
63%
    
62%
    
64%
                           
Market Making
Net revenues
  
$
15
  
$
17
  
$
67
  
$
76
 
Non-interest expenses
    
10
    
8
    
37
    
42
                           
 
Income before income taxes
  
$
5
  
$
9
  
$
30
  
$
34
                           
 
Pre-tax profit margin
    
33%
    
53%
    
45%
    
45%
                           
Corporate 1
Net revenues
  
$
(1)
  
$
(15)
  
$
                     (51)
  
$
(15)
 
Non-interest expenses
    
                         6
    
                       (4)
    
                       19
    
                         -
                           
 
Income (loss) before income taxes
  
$
(7)
  
$
(11)
  
$
(70)
  
$
(15)
                           
                           
Total
Net revenues
  
$
500
  
$
492
  
$
1,937
  
$
1,903
 
Non-interest expenses
    
188
    
183
    
780
    
707
                           
 
Income before income taxes
  
$
312
  
$
309
  
$
1,157
  
$
1,196
                           
 
Pre-tax profit margin
    
62%
    
63%
    
60%
    
63%
 
1
Corporate includes corporate related activities as well as inter-segment eliminations and gains and losses on positions held as part of our overall currency diversification strategy.

7
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)  

       
Three Months
  
Twelve Months
       
Ended December 31,
  
Ended December 31,
       
2019
  
2018
  
2019
  
2018
       
(in millions, except share and per share data)
                             
Revenues:
                        
 
Commissions
  
$
168
  
$
205
  
$
706
  
$
777
 
Interest income
    
418
    
385
    
1,726
    
1,392
 
Trading gains
    
7
    
7
    
27
    
39
 
Other income
    
38
    
37
    
121
    
158
                             
   
Total revenues
    
631
    
634
    
2,580
    
2,366
                             
 
Interest expense
    
131
    
142
    
643
    
463
                             
   
Total net revenues
    
500
    
492
    
1,937
    
1,903
                             
Non-interest expenses:
                        
 
Execution, clearing and distribution fees
    
59
    
73
    
251
    
269
 
Employee compensation and benefits
    
75
    
63
    
288
    
264
 
Occupancy, depreciation and amortization
    
17
    
14
    
60
    
49
 
Communications
    
6
    
5
    
25
    
25
 
General and administrative
    
32
    
26
    
112
    
96
 
Customer bad debt
    
                       (1)
    
                         2
    
44
    
4
                             
   
Total non-interest expenses
    
188
    
183
    
780
    
707
                             
Income before income taxes
    
312
    
309
    
1,157
    
1,196
                             
Income tax expense
    
18
    
19
    
68
    
71
                             
Net income
    
294
    
290
    
1,089
    
1,125
                             
Net income attributable to noncontrolling interests
  
250
    
247
    
928
    
956
                             
Net income available for common stockholders
  
$
44
  
$
43
  
$
161
  
$
169
                             
Earnings per share:
                        
 
Basic
  
$
0.58
  
$
0.58
  
$
2.11
  
$
2.30
 
Diluted
  
$
0.57
  
$
0.57
  
$
2.10
  
$
2.28
                             
Weighted average common shares outstanding:
                      
 
Basic
    
76,749,142
    
75,097,578
    
76,121,570
    
73,438,209
 
Diluted
    
77,357,093
    
75,810,322
    
76,825,863
    
74,266,370



8
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)

       
Three Months
  
Twelve Months
       
Ended December 31,
  
Ended December 31,
       
2019
  
2018
  
2019
  
2018
       
(in millions, except share and per share data)
                             
Comprehensive income:
                        
 
Net income available for common stockholders
  
$
44
  
$
43
  
$
161
  
$
169
 
Other comprehensive income:
                        
   
Cumulative translation adjustment, before income taxes
                         7
    
                         -
    
4
    
(14)
   
Income taxes related to items of other comprehensive income
  
                         -
    
                         -
    
                         -
    
                       (1)
 
Other comprehensive income (loss), net of tax
    
                         7
    
                         -
    
4
    
(13)
Comprehensive income available for common stockholders
  
$
51
  
$
43
  
$
165
  
$
156
                             
Comprehensive earnings per share:
                        
 
Basic
  
$
0.67
  
$
0.56
  
$
2.18
  
$
2.12
 
Diluted
  
$
0.66
  
$
0.56
  
$
2.16
  
$
2.09
                             
Weighted average common shares outstanding:
                        
 
Basic
    
76,749,142
    
75,097,578
    
76,121,570
    
73,438,209
 
Diluted
    
77,357,093
    
75,810,322
    
76,825,863
    
74,266,370
                             
Comprehensive income attributable to noncontrolling interests:
                    

Net income attributable to noncontrolling interests
 
$
250
  
$
247
  
$
928
  
$
956

Other comprehensive income - cumulative translation adjustment     
31
    
(6)
    
20
    
(66)
Comprehensive income attributable to noncontrolling interests
$
281
  
$
241
  
$
948
  
$
890


9
INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

           
December 31,
2019
  
December 31,
2018
           
(in millions)
                     
Assets
                  
Cash and cash equivalents
        
$
2,882
  
$
2,597
Cash - segregated for regulatory purposes
          
                 9,400
    
                 7,503
Securities - segregated for regulatory purposes
          
               17,824
    
               15,595
Securities borrowed
          
                 3,916
    
                 3,331
Securities purchased under agreements to resell
          
                 3,111
    
                 1,242
Financial instruments owned, at fair value
          
                 1,916
    
                 2,119
Receivables from customers, net of allowance for doubtful accounts
        
               31,304
    
               27,017
Receivables from brokers, dealers and clearing organizations
        
                    685
    
                    706
Other assets
          
                    638
    
                    437
                     
 
Total assets
        
$
71,676
  
$
60,547
                     
Liabilities and equity
                  
                     
Liabilities
                  
Short-term borrowings
        
$
16
  
$
17
Securities loaned
          
                 4,410
    
                 4,037
Securities sold under agreements to repurchase
          
                 1,909
    
                       -
Financial instruments sold but not yet purchased, at fair value
        
                    457
    
                    681
Other payables:
                  
 
Customers
          
               56,248
    
               47,993
 
Brokers, dealers and clearing organizations
          
                    220
    
                    298
 
Other payables
          
                    476
    
                    365
             
               56,944
    
               48,656
                     
 
Total liabilities
          
               63,736
    
               53,391
                     
Equity
                  
Stockholders' equity
          
                 1,452
    
                 1,282
Noncontrolling interests
          
                 6,488
    
                 5,874
 
Total equity
          
                 7,940
    
                 7,156
                     
 
Total liabilities and equity
        
$
71,676
  
$
60,547
                     
                     
   
December 31, 2019
    
December 31, 2018
Ownership of IBG LLC Membership Interests
Interests
  
 %
    
Interests
    
 %
                     
IBG, Inc.
76,759,595
  
18.5%
    
75,100,955
    
18.1%
Noncontrolling interests (IBG Holdings LLC)
338,670,642
  
81.5%
    
338,691,717
    
81.9%
                     
Total IBG LLC membership interests
415,430,237
  
100.0%
    
413,792,672
    
100.0%


10

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

     
Three Months
  
Twelve Months
     
Ended December 31,
  
Ended December 31,
     
2019
  
2018
  
2019
  
2018
     
(in millions)
                           
Adjusted net revenues1
                        
Net revenues - GAAP
  
$
500
  
$
492
  
$
1,937
  
$
1,903
                           
Non-GAAP adjustments
                        
 
Currency diversification strategy, net
    
(12)
    
12
    
60
    
19
 
Mark-to-market on investments2
    
                       15
    
                       (8)
    
(13)
    
(9)
Total non-GAAP adjustments
    
3
    
4
    
47
    
10
                           
Adjusted net revenues
  
$
503
  
$
496
  
$
1,984
  
$
1,913
                           
Adjusted income before income taxes1
                        
Income before income taxes - GAAP
  
$
312
  
$
309
  
$
1,157
  
$
1,196
                           
Non-GAAP adjustments
                        
 
Currency diversification strategy, net
    
(12)
    
12
    
60
    
19
 
Mark-to-market on investments2
    
                       15
    
                       (8)
    
                     (13)
    
                       (9)
 
Unusual bad debt expense3
    
                         -
    
                         -
    
42
    
                         -
Total non-GAAP adjustments
    
                         3
    
                         4
    
                       89
    
                       10
                           
Adjusted income before income taxes
  
$
315
  
$
313
  
$
1,246
  
$
1,206


     
Three Months
  
Twelve Months
     
Ended December 31,
  
Ended December 31,
     
2019
  
2018
  
2019
  
2018
     
(in millions)
Adjusted net income available for common stockholders1
                  
Net income available for common stockholders - GAAP
$
44
  
$
43
  
$
161
  
$
169
                           
Non-GAAP adjustments
                        
 
Currency diversification strategy, net
    
(2)
    
2
    
11
    
3
 
Mark-to-market on investments2
    
                         3
    
                       (1)
    
                       (2)
    
(2)
 
Unusual bad debt expense3
    
                         -
      -    
                         8
    
0
 
Income tax effect of above adjustments4
    
                         0
    
0
    
                       (3)
    
(1)
Total non-GAAP adjustments
    
                         1
    
                         1
    
                       13
    
                         1
                           
Adjusted net income available for common stockholders
$
45
  
$
44
  
$
174
  
$
170
Note: Amounts may not add due to rounding.

11

     
Three Months
  
Twelve Months
     
Ended December 31,
  
Ended December 31,
     
2019
  
2018
  
2019
  
2018
     
(in dollars, except share amounts)
Adjusted diluted EPS1
                        
Diluted EPS - GAAP
  
$
0.57
  
$
0.57
  
$
2.10
  
$
2.28
                           
Non-GAAP adjustments
                        
 
Currency diversification strategy, net
    
(0.03)
    
0.03
    
0.14
    
0.05
 
Mark-to-market on investments2
    
0.03
    
                  (0.02)
    
(0.03)
    
(0.02)
 
Unusual bad debt expense3
    
0.00
    
0.00
    
0.10
    
0.00
 
Income tax effect of above adjustments
    
0.00
    
0.00
    
(0.04)
    
(0.02)
Total non-GAAP adjustments
    
0.01
    
0.01
    
0.17
    
0.01
                           
Adjusted diluted EPS
  
$
0.58
  
$
0.58
  
$
2.27
  
$
2.28
                           
Diluted weighted average common shares outstanding
77,357,093
    
75,810,322
    
76,825,863
    
74,266,370
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 and our net mark-to-market gains (losses) on investments2.
•
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 and unusual bad debt expense3.
•
We define adjusted net income available to common stockholders as net income available for common stockholders adjusted to remove the after-tax effects of our GLOBAL currency diversification strategy, the mark-to-market on investments, and unusual bad debt expense attributable to IBG, Inc.
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.
  3Unusual 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. (More information can be found in the disclosures in our Forms 10-Q filed with the SEC during 2019.)
  4 The income tax effect is estimated using the corporate income tax rates applicable to the Company.

12