Interactive Brokers Group Inc Q4 2024 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Craig Siegenthaler - Bank of America - Analyst : Good morning or good evening, everyone. I hope you're all doing well. First, when I have a modeling one on expenses. So execution, clearing and distribution fees, as you pointed out in your prepared remarks, they did grow a lot slower than DARTs and commissions. In the press release, you kind of called out would look like a few negatives. In the prepared remarks, you called out rebates. But how should we think about this line item heading into 1Q? And then any high-level thoughts on modeling it because a lot of us model it relative to commissions or DARTs.

Question: Craig Siegenthaler - Bank of America - Analyst : Got it. And then just for my follow-up, we keep watching equity build. It's almost at $17 billion now. I just wanted your thoughts on how fast we should expect this capital balance into new building? And is this really helping your hedge fund prime marketing efforts given the size? And any updated thoughts on share repurchases in the future?

Question: Craig Siegenthaler - Bank of America - Analyst : Thank you, Milan.

Question: Benjamin Budish - Barclays Capital Inc - Analyst : Hi, good evening and thanks for taking the question. Maybe first, just I was curious to get your thoughts on what account growth could look like in 2025. I know you tend not to kind of give guidance on a per year basis, but it's just kind of remarkable of the momentum we've seen over the course of the year and kind of accelerating as you're growing larger. So just curious, what do you think are the key factors in '25? Can you maybe talk about the word of math momentum you're seeing maybe unpack a little bit of kind of where you're leading? And I think you -- in the prepared remarks and in the press or you called out a bit of a pickup in advertising spend. So just curious what your thoughts there are on what account growth could look like this year.

Question: Benjamin Budish - Barclays Capital Inc - Analyst : Got it. Maybe 1 quick modeling follow-up for Paul. I think for the employee comp and benefits line, you called out a capitalized expense. Just curious, in Q1 and kind of going into the year, should we think about the level kind of the first couple of quarters of 2024 as the starting point? Or does it kind of reset lower? Just any guidance you could give there would be helpful.

Question: James Yarrow - Goldman Sachs - Analyst : Milan and Paul, for taking the questions here. Maybe just starting on aspirations in the high-touch part of the prime brokerage offering, which you've obviously expanded in 2024. If there's deregulation of the bulge prime brokers, which the market clearly expects, could this present a more meaningful threat to growth of the business? And then just what are you -- is on the product road map for this business in 2025?

Question: James Yarrow - Goldman Sachs - Analyst : That's right.

Question: James Yarrow - Goldman Sachs - Analyst : Excellent. That's very clear. Maybe just turning to the margins. Your adjusted margin did rise to best-in-class 75.6%. Can it continue to rise off of these levels? Is there an efficient horizon that you see for the margin?

Question: James Yarrow - Goldman Sachs - Analyst : Okay. That's very clear. Thank you.

Question: Brennan Hawken - UBS Investment Bank - Analyst : Good afternoon. Thanks for taking my question. Margin balances have really shown very, very solid growth despite the volatility in the market. So how should we be thinking about that on a go-forward basis? What trends have you seen quarter-to-date? And maybe taking a step back, -- when you think about how your customer base has changed in recent years, how should we be thinking about margin penetration for you versus history?

Question: Brennan Hawken - UBS Investment Bank - Analyst : Thanks for taking my questions.

Question: Dan Fannon - Jefferies LLC - Analyst : Thanks, good evening. So just following up on areas of investment in product development, as you think about 2025, you've talked a bit about the prime brokerage as well as some of the things that were in -- that you've come to market with here in the fourth quarter. So curious just about the areas of investment and really on that product development side for the individual that you see or focused on into 2025?

Question: Dan Fannon - Jefferies LLC - Analyst : Understood. And then as a follow-up on, you've talked at previous periods about M&A and kind of inorganic growth. Can you give us an update on your thoughts today? And maybe kind of the current market opportunity for inorganic potential combinations?

Question: Dan Fannon - Jefferies LLC - Analyst : Understood. Thank you.

Question: Patrick Moley - Piper Sandler & Co. - Analyst : Yes, good evening. Thanks for taking the question. So I had one on the just prediction markets and the forecast x platform. It seemed like the election brought a lot of people into the prediction market. So I just was hoping you could give us an update on kind of the traction that you're seeing there, your outlook for next year and whether there's any kind of milestones or things we should be looking out for on the product road map there?

Question: Patrick Moley - Piper Sandler & Co. - Analyst : All right. Great. And then maybe just a follow-up on Crypto. There's a lot of excitement around crypto here. It seems like the incoming administration, the change in leadership in the SEC is going to foster a new kind of era more favorable to the crypto trading firms, I guess, if you will. Your offering right now is relatively robust compared to some of the others. How are you feeling right now about that offering? And if there was to be more comprehensive legislation, what areas, if at all, would you look to expand the offering? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 21, 2025 / 9:30PM, IBKR.OQ - Q4 2024 Interactive Brokers Group Inc Earnings Call

Question: Patrick Moley - Piper Sandler & Co. - Analyst : All right, thanks for that. That's it for me.

Question: Chris Allen - Citigroup Inc. - Analyst : Oh, apologies, my, my headphone (inaudible) evening, everyone. maybe I can just follow up on the crypto question. Any color you could provide in terms of your customer base, how like any percent -- rough percentage that are actually trading crypto on your platform currently? And if there was a regulation, where would be the opportunity set to expand in the U.S., maybe from a product offering perspective?

Question: Chris Allen - Citigroup Inc. - Analyst : And then just as a follow-up, on SEC lending, recognized the headwinds from lower levels of IPO and M&A activity. Just kind of curious, how is your capacity to lend -- for (inaudible) lending compare now versus the end of '23 [in '22]? Has it expanded with the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 21, 2025 / 9:30PM, IBKR.OQ - Q4 2024 Interactive Brokers Group Inc Earnings Call account growth I'm just trying to think about what the potential could look like in a better environment, which many you expect as we move through 2025 and it's '26?

Question: Kyle Voigt - Keefe, Bruyette & Woods, Inc - Analyst : Hi, good evening. So I know you gave some commentary on pretax margin and investments for 2025. But maybe if I could just ask a question specifically on fixed expense growth. If we exclude some of the onetime items that you had in the third quarter and even the $5 million of 4Q comp that you noted earlier in the call, we're kind of calculating fixed expense growth of roughly 12% for the full year 2024. So I think that's generally in line with that low double-digit expense growth rate you posted historically. I guess relative to that bogey, is there any way to frame whether core fixed expense growth should accelerate or decelerate versus that low double-digit level as we look out into 2025?

Question: Kyle Voigt - Keefe, Bruyette & Woods, Inc - Analyst : And for my follow-up, and I know this was asked last quarter as well, but the stock continues to perform very strongly even since then. But for Thomas, just curious as to whether you would consider any stock sales to help increase the public float. And if so, would that still only be in blocks and not in open market transactions.