Interactive Brokers Group, Inc. Q4 FY2024 earnings call

• In 2024, the company added 775 thousand accounts, a record annual number, with 217 thousand in the fourth quarter alone. Client equity rose 33% to $568 billion.
• Record pretax income in Q4 ($1 billion+) and full-year ($5 billion+), with GAAP pretax margin at 75% in Q4 and 71% for the full year.
• Product enhancements include: for Financial Advisor clients, enhancements to the Advisor Portal, multi-stock tax loss harvesting tool, models and model rebalance tools, and a generative AI-powered Commentary Builder. For options traders, 4 new liquidity providers added to options ATS. For after-hours traders, stock scanners updated for overnight trading. Internationally, added PEA accounts in France and translated account application into 13 languages.
• Launched trading on Saudi Exchange, added IB algorithms for HK options, offered crypto in HK, expanded funding options like eDDA for HKD, Open Banking for Euro, and Plaid for Euro/GBP.
• 8+ regulatory projects in various jurisdictions, on track. ForecastEx exchange for predictions, with cautious expansion.

In the fourth quarter, Interactive Brokers achieved record net revenues and pretax income. Commission revenues rose to a record $477 million in Q4, with full-year commissions at $1.7 billion, up 25% from the prior year. Net interest income reached a quarterly record of $807 million and a yearly record of $3.1 billion despite multiple rate cuts. Other fees and services generated $81 million in Q4 and $280 million for the year, up 47% and 42% respectively. By geography, the majority of accounts are outside the US, with Asia and Europe seeing the fastest growth in accounts and client equity. By client segments, Individuals had the fastest account growth, while individuals led in client equity growth. Commission growth was fastest for Proprietary traders, and net interest income growth was led by individuals.

• Management expects steady account growth in 2025 due to market enthusiasm, pro-business administration, and expected marketing spend increase for individual accounts.
• Fixed expenses not expected to accelerate, but advertising could be a driver. No specific per-year account guidance, but bullish on continued growth.

• Regulatory changes in multiple jurisdictions could impact operations.
• Dependence on market conditions and interest rate changes affecting net interest income.
• Cryptocurrency market volatility and regulatory uncertainties.

Q: Modeling on expenses, how to think about execution, clearing, and distribution fees going into 1Q?

A: Paul Brody noted these are variable costs driven by volume, with order routing changes and rebates from venues affecting the picture.

Q: Thoughts on account growth in 2025?

A: Milan Galik said marketing spend will slowly increase, expecting steady growth due to market enthusiasm and pro-business administration.

Q: Impact of bulge bracket prime broker deregulation on prime brokerage growth?

A: Milan Galik said deregulation not expected to meaningfully impact, and product roadmap includes revamped capital introduction events, algorithm offerings in APAC, and serving 34 hedge funds with $160M average assets.

Q: Traction on ForecastEx platform?

A: Thomas Peterffy said prediction markets are growing slowly, with careful expansion to build systems and personnel.

Q: Crypto offering outlook?

A: Milan Galik said plan to offer crypto in EU, optimistic on clarified regulations, and expect to increase listed tokens and account investment percentage in crypto.

Q: Fixed expense growth outlook?

A: Milan Galik said not expecting acceleration, with attention to attracting talent and Paul Brody noting advertising as a component.

Q: Stock sales consideration?

A: Thomas Peterffy said would do stock sales in blocks when price reaches right level.