Interactive Brokers Q3 Earnings Call Transcript
Interactive Brokers Group Inc. (NASDAQ:IBKR) released its third-quarter earnings report on Thursday.
Below are the transcripts from the earnings call.
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OPERATOR
Thank you for standing by and welcome to the Interactive Brokers Group third quarter 2025 earnings call. At this time all participants are in listen only mode. After the speaker’s presentation, there will be a question and answer session. To ask a question during this session, you’ll need to press star 11 on your telephone. If your question has been answered and you’d like to remove yourself from the queue, simply press. As a reminder, today’s program is being recorded. And now I’d like to introduce your host for today’s program, Nancy Stuebe, Director of Investor Relations. Please go ahead.
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Nancy Stuebe (Director of Investor Relations)
Good afternoon and thank you for joining us for our third quarter 2025 earnings call. Joining us today are Thomas Petterfy, our founder and chairman; Milan Galik, our president and CEO and Paul Brody, our CFO. I will be presenting Malone’s comments on the business and all three will be available at our Q and 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. During the third quarter the market climbed a huge wall of worry with little pause. There is no shortage of traditional reasons for investors to be concerned about the economy or the markets, but as they’ve cropped up they are treated either as a positive like the huge sums of money being spent on AI, or the minor impediment like the government shutdown. The Federal Reserve cut interest rates this quarter for the first time since late last year. With a less restrictive regulatory environment and steady to declining interest rates, market sentiment in the third quarter was positive overall, with the S&P 500 index rising 8% and showing strong positive returns in each month. Investors bought dips if the market declined and participated in rallies as they occurred, showing their continued comfort with the current economic backdrop at ibkr. In any given week this quarter, the most active names showed a preponderance of buying over selling. Our strong net new account growth came from all regions and all client types. This is organic account growth. We attract clients without temporary bonuses or incentives. Our products, pricing and execution quality speak compellingly for themselves. During the quarter we added our 4 millionth customer and reached $150 billion in client cash balances, both up over 30% from last year for client equity, it took us from 2020 to 2024 to advance from 250 to 500 billion dollars. It took just over one year to add the next 250 billion. This quarter our client equity surpassed three quarters of a trillion dollars, up 40% from last year versus 16% for the S&P. The 790,000 net new accounts we’ve added through the third quarter already exceed what we added in all of last year. More accounts meant more activity, which helped expand client trading volumes this quarter, especially in stocks and options. Our commission revenue increased by 23% compared to last year, which is slightly understated since the SEC fee rate, which is included within our commission revenue, was reduced to zero in May. Net interest income was up 21% on a combination of larger balances and securities lending opportunities. From a greater number of accounts, our total net revenues were up 21%. Volumes rose to record 418 million in options contracts and were up 67% in equities. As more people globally continue to participate in the markets in terms of newer products, we are seeing increasing activity by our clients in crypto forecast contracts and overnight trading hours. We now offer a wide variety of over 8,200 open forecast contracts, 27% more than last quarter, and contract volumes traded grew 165% in the second quarter. In crypto, our trade volumes rose 87% from last quarter and are up over five times versus last year. While this is from a base we want to grow much bigger, it is a sign of the growing strength of our offering. In addition, we introduced recurring buy orders for cryptocurrency and added Solana to our Hong Kong crypto offering. Overnight trading, where we offer over 10,000 US stocks and ETFs as well as equity, index, futures and options and global corporate and government bonds was up 90% from 2024, which itself had seen higher volumes so surrounding the first fed funds rate cut in years. As we’ve noted for our global client base, US Overnight hours are their daytime trading hours, so this offering in particular resonates with them. We are continually making additions and enhancements to our platform as well as infrastructure upgrades. We added new liquidity providers for options, U.S. stocks and our light program and for U.S. treasuries, corporate and international bonds, further enhancing execution quality for our active trading clients. Our pipeline of potential introducing broker clients remains healthy with a steady stream of new prospects entering as we onboard the ibrokers who have previously signed up to offer the platform. Demand continues steadily around the world for our global Introducing Broker Offering in terms of new efforts and product introductions, we again had a busy quarter. We worked continually to innovate and give our clients the products they ask for. We added both Nesa’s tax advantage savings accounts for Japan and ISK’s tax advantaged accounts in Sweden to our growing offering of country specific savings plans. We introduced our proprietary Connections feature where clients can discover multiple investing relationships connected to any one company. These include stocks, ETFs, forecast contracts, options and economic indicators, as well as competitor data, related products and option strategies. As an example, investors holding long positions in sectors like home building can use connections to explore related businesses like mortgage financing, review forecast contracts linked to new home sales or housing starts, and gain insight into option strategies that could help reduce their exposure to economic fluctuations in the housing market. Decades of work Expanding our product offering and geographic reach is what makes Connections possible, helping clients uncover opportunities other platforms can’t we have so far been averaging about 20,000 unique daily users, so it’s a feature that has resonated with our clients. Connections complements the Investment Themes feature we debuted last quarter, where clients can use natural language prompts like quantum computing or artificial intelligence to find actionable investment opportunities. In recognition that our prime brokerage offering and its many features benefit our clients, giving them a competitive edge, the latest annual PREC and Hedge Fund rankings showed that Interactive Brokers rose to rank four for number of hedge funds serviced, behind only Goldman Sachs, Morgan Stanley and JP Morgan, and ahead of all the other historically better known names in the funds industry. This should serve as evidence that we must be doing something better than some of the entrenched players and that potential clients may benefit from adding us as an additional prime broker. We have much on our plate for the remainder of the year and even more to come in 2026. I look forward to sharing these developments with you as they are introduced. The trend towards more global investing across multiple client types and across jurisdictions, and our ability to give investors the tools to invest in the companies and products they want, paying for them in currencies they wish around the clock continues this trend and our ability to serve our clients needs with a lower cost structure and a much broader product and tool set is what sets us apart and will continue to do so in the years ahead. I want to thank our team and especially our founder Thomas Petterfi, for the hard work and dedication it took to bring Interactive Brokers from its humble beginnings all the way into the S&P 500 index this quarter. It is an achievement in which we all rightfully Take pride. With that, I will turn the call over to Paul Brody.
Paul Brody (Chief Financial Officer)
Paul thank you, Nancy. Good afternoon everyone. I will review our third quarter results and then we’ll open it up for questions starting with our revenue items on page three of the release. We’re pleased with our financial results this quarter as we again produced record net revenues and pre tax income commissions rose to a record $537 million, 23% above last year’s third quarter. We continue to see higher trading volumes from our growing base of active customers, outpacing industry volumes across major product classes. Our Options volume rose 27% and set a new quarterly volume record and equity volumes were up 67% from last year. Net interest income also reached a quarterly record of $967 million despite lower benchmark rates in most major currencies. Higher segregated cash and margin loan balances and significantly stronger securities lending contributed to these results. Net interest income also received a benefit from lower benchmark rates on the interest we pay our customer. Cash balances. Other fees and services generated $66 million, down 8% from the prior year, driven by more cautious risk taking by clients leading to lower risk exposure fees partially offset by positive contributions from higher FDIC sweep and market data fees. Other income includes gains and losses on our investments, our currency diversification strategy and principal transactions. Note that many of these non core items are excluded in our adjusted earnings. Other income was $85 million as reported and 40 million as adjusted, primarily driven by a gain on a long held investment. Turning to expenses, execution, clearing and distribution costs were 92 million in the quarter, down 21% from the year ago quarter primarily due to two factors. First, we had a full quarter effect of the SEC reducing its fee rate to 0 after it was cut midway through the second quarter. SEC fees were $20 million in the third quarter last year and 24 million in the first quarter of 2025 and second, we achieved higher rebates and lower costs at exchanges resulting from our smart order routing optimization. These costs and rebates are largely passed through to customers, so these reductions don’t have much impact on our profitability, but they are components of our clients profitability and one …
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