Thank you for standing by. Welcome to the Interactive Brokers Group First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. Now, it's my pleasure to hand the conference over to the Director of Investor Relations, Nancy Stuby. Please proceed.

Good afternoon, and thank you for joining us for our first quarter 2026 earnings call. Joining us today are Thomas Pederfee, our founder and chairman, Milan Gallick, our president and CEO, and Paul Brody, our CFO. I will be presenting Milan's comments on the business and all three will be available at our Q&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 the disclaimers in our press release. You should also review a description of risk factors contained in our financial reports filed with the SEC. In the first quarter, markets began with a strong January, supported by solid equity performance, optimism around corporate earnings, expanding market breadth, and resilience despite geopolitical risks. However, that momentum did not persist. most global market indices declined in february and fell further in march broadly mirroring the kind of price movement we saw in the first quarter of 2025. the s p 500 ended the quarter down five percent notably each of the magnificent seven technology stocks declined by more than the broader market resulting in relative outperformance by the rest of the index despite this backdrop we continue to see strong interest from both institutional and individual investors globally in opening and funding accounts. Client engagement remained healthy. Trading activity increased and clients gradually took on more risks since last year's tariff-driven market decline as reflected in higher DARTs and increased risk exposure fees over the past several quarters. We continue to set records across key metrics, including net revenue, total accounts, and account ads. Growth in new accounts has driven higher clients' uninvested cash balances, which increased 35% year-over-year to a record $169 billion. Client equity rose 38% to $789 billion and was up 1% sequentially, despite the 5% decline in the market, as continued account funding offset market performance. across products stocks options and futures all deliver double-digit year-over-year growth of note futures contract volumes increased 20 percent to a quarterly record driven by higher volatility and increased demand for hedging turning to our strategic initiatives we have been incorporating ai across the organization we had introduced investment themes and connections tools which use ai to streamline research and visualize relationships among trends companies and securities to give our clients actionable investment ideas this quarter we expanded international company coverage and integrated themes into market screeners watch lists and news summaries we continued enhancing our ask ibkr tool which enables clients to query their portfolios for insights such as sector exposure performance, tax lots, corporate actions, and fundamentals. It now provides more direct and relevant responses. We also expanded the number of news sources we are authorized to summarize using AI. Within client service, our AI-powered chatbot continues to improve, successfully addressing a growing share of client inquiries in multiple languages. We continue to increase its accuracy and coverage while enabling our reps to focus on more complex issues we are also applying ai to further automate processes across areas like onboarding compliance and other operational areas expanding the use of ai remains a priority across the firm both to enhance the client experience and to improve internal efficiency while we have made meaningful progress we see significant opportunities to extend it further our efforts translated into strong financial performance quarterly commission revenue and total net revenues both reached record levels at the same time we remain disciplined on expenses our pre-text profit margin was 77 maintaining our position as an industry leader and marking the sixth consecutive quarter with margins above 70 percent in recognition of this and as a sign of confidence in the strength of our business model its growth potential and of our capital base we revisited our allocation of capital and decided to increase the amount of dividend we paid 35 cents a year turning to our customer segments our introducing broker pipeline remains exceptionally strong we continue to maintain a robust pool of prospects while onboarding a substantial number of new introducing brokers and supporting the growth of existing ones for larger introducing brokers we offer customized solutions and have made it easier for them to launch with a wide range of configurable features. Many international brokers require specialized functionality to address their local investment, tax, and regulatory requirements. We have user interface enhancements in development that we look forward to discussing in future quarters. Within our hedge fund segment our high-touch prime brokerage offering continues to gain traction and we are particularly encouraged by referrals to new to new clients from existing clients we've also received positive feedback on our ability to handle complex requirements and several clients have launched additional strategies on our platform we had a productive quarter for new product introductions in cryptocurrency we expanded our offering to clients in the eea significantly broadening our footprint. We also introduced crypto transfer-in capabilities, allowing clients to consolidate external holdings into their IBKR-linked accounts. In addition, we launched access to the Coinbase derivatives exchange, providing trading in nano-sized crypto contracts and perpetual-style futures. Our prediction markets have been live and trading 24-7. In anticipation of increased interest ahead of the 2026 U.S. midterm elections, we introduced Election Board, a discovery and trading tool that helps clients browse and trade political event contracts. You may also have seen our client outperformance advertising campaign. As we shared previously, in 2025, the average account across each of our client segments outperformed the S&P on a net basis after fees and commissions. Our average individual account returned 19.2 percent versus 17.9 percent for the S&P, while our average hedge fund account returned 28.9 percent. The campaign began with digital channels and has since expanded into print and television globally. These outperformance results reflect our low-cost offering and high interest paid on client cash, the strength of our platform, and are focused on best execution. This focus means that we seek to maximize client outcomes by routing orders directly to the venues offering the best price rather than selling order flow to third parties. We continue to see growth in overnight trading, which is increasingly important for our global customer base. Overnight trading volumes nearly tripled year-over-year in the first quarter, increasing to 8.1 million trades from 2.8 million and up from 6.2 million in the fourth quarter. We remain highly active across all areas of the business, with multiple initiatives underway across platforms and client segments. We look forward to sharing further updates in the coming quarters. With that, I will turn the call over to Paul Brody. Paul?

Thank you, Nancy, and good afternoon. Thanks, everyone, for joining the call. We will start with our revenue items on page three of the release. We are pleased with our financial results this quarter as we again produced record net revenues and strong results in our key operating metrics. Commissions rose 19% versus last year's first quarter, reaching over $600 million for the first time. We saw robust trading volumes from our growing base of active customers across stocks, options, and futures. Net interest income rose 17% year-on-year to $904 million, driven by higher balances and partially offset by lower benchmark interest rates. We saw a strain from margin borrowing and from our segregated cash portfolio, partially offset by interest we paid on our customers' cash balances. Other fees and services generated 86 million dollars, up 10 percent, primarily driven by higher market data and FDIC sweep fees, as well as higher payments for order flow from options exchange mandated programs. 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. Without these excluded items, other income was seventy seven million dollars for the quarter. Turning to expenses, execution, clearing, and distribution costs were 106 million dollars in the quarter, down 12 percent over the year ago quarter, driven by lower SEC regulatory fees, which were set at zero in last year's second quarter. Versus the fourth quarter, execution and clearing was higher due to exchange fees on greater futures trading volumes. Because they are largely passed through, these fees increased both our commission revenue and execution costs. Execution and clearing costs were 13 percent of commission revenues in the first quarter for a gross transactional profit margin of 87 percent. We calculate this by excluding from execution, clearing, and distribution 24 million dollars of non-transaction-based costs, predominantly market data fees, which do not have a direct commission revenue component. As a reminder, even for the upcoming quarters, the SEC raised its fee rate for securities from zero to $20.60 per million, effective April 4th. For comparison, based on our volume in the first quarter of 2025, SEC fees then totaled $24 million when the fee rate was $27.80. And again, these fees are a pass-through for us, increasing both commission revenue and execution and clearing expense equally, with no impact on the income we earn. Compensation benefits expense was $167 million for the quarter for a ratio of compensation expense to adjusted net revenues of 10 percent, down slightly from 11 percent last year. Note there are several calendar-based components that tend to increase comp and benefits expense modestly, such as additional U.S. FICA tax on salaries in the first quarter and on the vesting of stock incentive plan shares in the second quarter. Our headcount at March 31st was 3,232. GNA expenses were 68 million dollars up from the year-ago quarter, mainly on expansion of advertising. Our pre-tax margin was 77 percent for the quarter as reported and as adjusted income taxes of 117 million dollars reflects the sum of the public company's 56 million and the operating company's 61 million this quarter the public company's adjusted effective tax rate was 17.2 percent within its usual range going to our balance sheet on page five of the release the consistent strength of our business and our healthy balance sheet support our raising the dividend from $0.32 to $0.35 per year, returning capital to shareholders while still maintaining an ample capital base for the current business and future opportunities. Our total assets were 39% higher than in the prior year at $219 billion, with growth driven by higher margin lending and segregated cash and securities balances. New account growth also helped drive our record customer credit balances. We continue to have no long-term debt, and profit growth drove our firm equity up 22 percent to $21.3 billion. We maintain a balance sheet geared towards supporting growth in our existing business and helping us win new business by demonstrating our strength to prospective clients and partners while also considering overall capital allocation turning to operating data we had near record customer activity and options with our contract volumes up 16 over the prior year futures contract volumes rose 20 for the quarter to a new quarterly record and stock share volumes were up 25 all were in line with industry volumes stock share volumes generally increased versus last year as clients gravitated to larger, higher quality names and traded relatively less in pink sheet and some other very low-priced stocks. Growth in the notional dollar value of shares traded in the quarter was significantly higher than the growth in share volumes. On page seven, you can see that total customer darts were 4.4 million trades per day in the quarter, up 24% from the prior year. Commission per clear commissionable order of $2.69 was off slightly from last year when the full SEC fee rate was being charged. Page eight shows our net interest margin numbers. Total gap net interest income was $904 million for the quarter, up 17% on the year ago quarter. And our NIM table net interest income was $953 million, up 20%. We include for NIM purposes certain income that is more appropriately considered interest, but that for GAAP purposes is classified as other fees and services or as other income. Our net interest income reflects strong annual increases in balances, as well as reductions in benchmark rates in most major currencies, including the full quarter impact of December's cuts in the U.S. The growth in balances resulted in a rise in interest income on margin loans and customer cash balances partially offset by higher interest expense on customer cash balances. This quarter, central banks in most major markets held their benchmarks constant. Year-on-year, the average U.S. Fed funds rate fell 69 basis points or by 16 percent. Despite this decline our margin loan interest was up 17 percent and our segregated cash interest was up three percent both bolstered by higher balances the average duration of our investment portfolio remained at less than 30 days even during the quarter the US dollar yield curve inversion from the short to medium term substantially flattened so we continue to maximize what we earn by focusing on short-term yields rather than accept the uncertainty and higher duration risk of longer maturity. This strategy also allows us to maintain a relatively tight maturity mismatch between our assets and liabilities. Securities lending that interest was higher than last year though we did not see as much activity and hard-to-borrow names as in the fourth quarter. Contributors to annual growth include several factors. Our growing account base, which increases our inventory of attractive stocks to lend including international securities the interest we pay on short cash balances which makes us attracted to investors who utilize short selling our fully paid lending program shares proceeds with clients generally on a 50 50 basis which appeals to investors looking to maximize the return on their portfolios and finally more activity in some of the typical drivers of securities lending including IPOs and M&A activity. A portion of what we earn from securities lending is classified as interest on segregated cash. We estimate that if the additional interest earned and paid on cash collateral were included under securities borrowed and loaned, then total net revenue related to securities lending would have been 270 million dollars this quarter, up 45 percent over the prior year quarter. Fully rate-sensitive customer balances ended the current quarter at $27.8 billion versus $20.3 billion in the year-ago quarter. Now, for our estimates of the impact of changes in rates, we estimate the effect of a 25 basis point decrease in the benchmark Fed funds rate to be an $82 million reduction in annual net interest income. Note that our starting point for this estimate is March 31st, with the Fed funds effective rate at 3.64 percent and balances as of that date. Any growth in our balance sheet and interest earning assets would reduce this impact. About a third of our customer interest sensitive balances is not in U.S. dollars, so estimates of a U.S. rate change exclude those currencies. We estimate the effect of a 25 basis point decrease in all the relevant non-USD benchmark rates would reduce annual net interest income by 35 million dollars. In conclusion, we started the year with another financially strong quarter reflecting our continued ability to grow our customer base and deliver on our core value proposition to customers while simultaneously scaling the business. Our business strategy continues to be effective automating as much of the brokerage business as possible, continuously improving and expanding on what we offer while minimizing what we charge and with that we will turn back to the moderator and open up the line for questions thank you so much and as a

reminder to ask a question press star one one on your telephone and wait for your name to be announced to remove yourself press star one one again one moment for our first question please it comes from the line of Patrick Moley

with Piper Sandler. Please proceed. Yes, good afternoon. Thanks for taking the question. So last week, the SEC eliminated the pattern day trader rule. It seems like it could be a pretty significant structural change for the industry, and it'll make more active day trading available to far more retail investors. So I was just curious how you're thinking about the strategic opportunity here, if you think that there's any avenue for increased account growth because of this and how you're just thinking about the overall opportunity to attract some of these smaller wallet retail investors. Thanks.

Well, we welcome the change. The regulators are basically replacing an outdated concept of counting trades and an arbitrary equity threshold or account size with a risk-based system, real-time intraday margin requirements with the expectation is that it will broaden the retail access increase the trading frequency and engagement and also liquidity in the markets the rule will probably speed up the outcomes the discipline participants who have expedients Some well-tried trading methodology will probably end up growing their accounts faster, whereas those that trade in a more haphazard fashion will probably realize their losses faster.

Okay, so you're viewing this as an opportunity for IBKR, I guess? Any color on the strategic opportunity here?

it is an opportunity in the sense that majority of our accounts are individual accounts many of these these individual accounts are smaller accounts and they will be able to trade frequently

so in that sense it is an opportunity okay all right thanks and then maybe just if you could help us break down the account growth that you saw in the first quarter it seems like it's a pretty two-sided market for the business. You know, on one hand, you have the war and you have energy market volatility that I think is bringing people to the market and wanting to trade. And then on the other hand, I think that there's some concern about what this could mean, you know, for the rest of the year and whether it could create some frictions, I guess, in terms of new account formation, particularly internationally. So any thoughts on just the current environment and, you know, just account growth through the storm here as we enter into the, you know, the back half of the year?

No, I don't think we need to expect anything different from what we have seen in the past. What tends to happen is that the equity market prices are increasing more and more of the public homes to participate on the run-up, and we see strong account openings, Whereas as the volatility increases, that may discourage newcomers from joining the markets, but that gets offset by increase in the darts, increase in the trading. So, as I said, the increased volatility is something that we have seen before for different reasons. So I would expect things to continue the way we have seen over the past several years. Okay. Appreciate it, Milan. That's it for me.

Thank you. One moment for our next question, please. It comes from James Yarrow with Goldman Sachs. Please proceed.

Good afternoon, and thanks for taking the question. I wanted to return to a topic discussed on last quarter's call on your focus on accelerating marketing spend to support account growth. Is there any way you could provide a bit more detail on what marketing spend trends might have looked like, either historically or perhaps both historically and today? and maybe if you could just provide a little bit more color on how you would think about scaling marketing going forward.

Well, we are hell-bent on trying to increase our marketing spend, but we are also very strict about getting the required minimum return on every additional marketing dollar. So as a result, while we keep trying to increase the spend, It is going very slowly. So what we are really doing is we're trying to find additional marketing outlets that are going to hopefully give us more opportunity to spend more.

Thanks, Thomas. That's very clear. As my follow-up, there has been discussion among U.S. brokers and banks recently around potential AI-enabled cash optimization tools. which I think the idea is that they could ensure that customers receive yields on their deposits that are closer to Fed funds. I'm curious if you have any views on these sorts of tools, and I guess is there any consideration that this could affect your pricing on deposits?

So we're not happy about these tools because we have always been paying close to market rates, And if these tools force other brokers to do the same, then they're going to have more competition. But I don't think they will do that.

I mean, it is somewhat ironic that we hear these noises about using the AI in the area of cash optimization from the banks, banks that have been paying very, very little on the uninvested cash. And if you think about it, there isn't that much that AI needs to do here. It's really the broker's or the bank's decision of how much of the interest income they want the client to enjoy versus how much of it they want to keep to themselves. And we have historically been on the forefront of the industry. Our costs have been low, and that has helped us maximize the outcome for our clients.

Thanks a lot, Thomas. Very clear.

Thank you. Our next question is from Ben Bodesh with Barclays. Please proceed.

Hi, good evening, and thank you for taking the question. Maybe to start following up on Patrick's second question, I'm just curious. I remember a year ago, the markets were selling off quite a bit in April, and you gave us and update on your margin balances, which, you know, tend to follow the S&P. It seems like there's, you know, we're seeing the opposite this month where the end of March, you know, since then the markets are up fairly meaningfully. I'm just curious if you can give any more of a detailed update. You know, what are margin balances looking like, you know, intramonth? Are we seeing this sort of, you know, S&P growth supported, you know, reacceleration of account growth? Particularly curious on the margins because that seemed to be such an interesting topic last year, and I would think, you know, you'd see a bit of a rebound, but just curious any details you can share there so our margin loans are

precisely at the end of the quarter eighty six point six billion dollars but that that's part of our every month and we release our margin balances so if anybody cares to look at that they could see what's happening all right fair

enough um and then maybe uh just a higher level topic uh on prediction markets just curious any updates you can share in terms of you know i know you've always framed this up as a very long-term opportunity um any updates you can share in terms of conversations with institutions that may be interested in onboarding uh to forecast x you know any progress there uh thank you

uh forecast x is receiving more and more inquiries from people who have sworn months ago that they will never enter the prediction market, and now more and more of them are curious and are considering becoming members. Yes, so I think this is going to be a huge thing, as I have said before, and it's going to be, you know, a lot of prediction training.

All right. I think you're taking the questions.

thank you one moment for our next question that comes from brennan hawken with the bmo capital

markets uh hi thanks for taking my question um you you touched on the uh non-us dollar sensitivity to rates um with a third of those balances there is it possible to get a currency breakdown uh for those balances and and maybe which of those currencies are growing the fastest

Yeah, we don't really get into it at that granular level, Brennan. But, you know, we make that differentiation between USD and non-USD because, of course, the bulk is in USD. But we want to make sure that, in your mind, there's a differentiation when you see the benchmark rates change. What can you expect?

Okay, thanks, Paul. And then is it still fair to assume you framed the changes in rates as a drop in those policy rates, but are the upside and downside scenarios symmetrical,

or do they differ if rates are moving up? They're roughly symmetrical. There are some low-rate non-US dollar currencies as we saw when rates here went near zero there's a little bit of a asymmetry when you go from positive to negative territory but that's fairly minor so other than that they are pretty

symmetrical great thanks take my question thank you and as a reminder

ladies and gentlemen if you do have a question simply press star 1 1 to get in the queue. Our next question is from Chris Allen with KBW. Yeah, afternoon, everyone. I just wanted

to ask about crypto. You continue to build out capabilities there. You announced the transfer capabilities in crypto. I know it's just been a few weeks, but I'm wondering if you've seen any clients proactively transferring positions to IBKR since you offered that capability.

we indeed have released it only a couple of weeks ago we do see amounts coming in it's mostly united states but internationally we see that as well and the other thing that we announced not long ago was launching our european offering we have done that in cooperation with our partner, ZeroHash. We have so far been under soft release. We have issued a press release about it. We have sent an email notification to existing clients. We have not yet been marketing it externally.

Got it. And maybe just following up on that, anything else you think you need to offer right now to increase or accelerate your digital asset penetration or you think you're kind of already there with your product solutions offering i mean i can always add coins things on that one those lines

there are a couple of things we still need to do we are not covering all the geographies we are working on that in singapore for example and the other thing that we need to work on is the staking as you know some of the currencies cryptocurrencies use the proof-of-stake concept, which allows the holders of those currencies to earn very significant interest income. And our partner, ZeroHash, is working on that capability. And as soon as they have it, we're going to integrate it into our offering. Great. Thanks. Thank you. Our last

question comes from Karim Sieff with Bank of America. Please proceed. Hi. Good afternoon,

everyone and thank you very much for taking my question just one question actually on the crypto business I if you could talk a little bit more about that agreement or partnership that you've had with coin based derivatives you know maybe around like you know the client demand there and how we should kind of like you know think about the potential revenue opportunity and any of the you know the economics that you could share with us thank you so the agreement that

we have with them is very simple the coinbase derivatives exchange lists a number of cryptocurrency futures most of them are different in terms of size from what the large exchanges offer they're significantly smaller contracts so they are geared towards retail in retail traders there is a one that particular instrument type that is interesting to the traders those are the so-called perpetual futures that was the main reason why we have decided to integrate that offering into ours the crypt the perpetual cryptocurrency futures they command very very significant volumes and that is why have why we we joined the exchange and now offering it to our clients our clients traded it's not a very large number of accounts yet but the ones that are

trading it are trading it in big numbers got it thank you very much for taking my question

thank you and ladies and gentlemen this concludes our q a session and i will pass it back to nancy

stewby for closing comments thank you everyone for participating today as a reminder this call will be available for replay on our website and we will also be posting a clean version of our transcript on the site tomorrow thank you again and we will talk to you next quarter end

And this concludes our conference. Thank you for participating, and you may now disconnect.