StoneX Group Inc.

Good day and thank you for standing by. Welcome to the StoneX Group Inc. Q4 Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Bill Dunaway, Chief Financial Officer. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for our fourth quarter ended September 30, 2021. After the market closed yesterday, we issued a press release reporting our results for our fourth fiscal quarter of 2021. This release is available on our website at www.stonex.com, as well as a slide presentation, which we refer to on this call in our Discussions section. of our quarterly and fiscal year results. You will need to sign on to the live webcast in order to view the presentation. The presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we are required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto, as well as the Form 10-K filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties detailed in our filings with the SEC. Although the company believes its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, There can be no assurances the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether a result of new information, future events, or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance. With that, I'll now turn the call over to Sean O'Connor, the company's CEO.

Thanks, Phil. Good morning, everyone, and thanks for joining our fiscal 2021 quarter earnings call. In Q4, our results were below our expectations and our long-term ROE target. During the September quarter, market conditions were less beneficial than in prior quarters, with generally less of a volatility tailwind than a year ago or even earlier in the fiscal year. As most of you know, we have always taken a long-term view in how we manage the company and continue to grow our franchise, and I was pleased to see that our annual results were again very close to our long-term ROE target of 15%. Before I get into the discussion of the quarterly results, I want to note, since we are wrapping up fiscal 2021, that last year's fiscal results included a significant non-recurring gain on our acquisition of Gain Capital Holdings. Adjusting for the impact of that, both last fiscal year and the current year-to-date results, we saw core operating performance in fiscal 2021 with adjusted income of $124.3 million, up 25%, and an adjusted ROE of 14.9% for the year. So starting with the earnings deck and starting on slide four, comparing operating revenues and product metrics against the prior quarter, Operating revenues overall were up 14% for the quarter versus a year ago, with increases in all product areas versus a year ago, with OTC derivatives being standout with an increase of 52% off the back of better commodity markets versus a year ago. This operating revenue growth was driven by increased volumes across the board, which speak to enhanced client engagement, although it should be noted that the year-ago quarter wasn't a particularly strong one for us either. Volume increases were offset by reduced revenue capture, especially in securities and FX and CFDs where market volatility declined. On average, our client float, both in listed derivatives and securities clearing, experienced strong growth of 25% and 21%, respectively due to both higher client volumes as well as market share gains, and in aggregate now stands at 5.8 billion, up 10% from a year ago, and up slightly from the immediately preceding quarter. Interest earnings were actually up this quarter versus a year ago due to higher client balances, and we're also now comparing against post-COVID interest rate environments. Turning to slide five and looking at revenue and product metrics for the full fiscal year, operating revenues were up 28% versus a year ago, partially due to the gain acquisition. There were a number of There were double-digit increases in revenues across the board, a really good result given that we're comparing against the exceptional 2020 result where we experienced heightened volatility as a tailwind. Strong volume increases across the board except for listed derivatives, which were down slightly, again speaks to enhanced client engagement. Volume increases were offset by reduced revenue capture, especially in securities, where market volatility declined with lower volatility post-COVID disruption. Also notable is the increase in revenue capture in our listed derivatives business. Some of this increase is due to relatively more volume for our higher margin commercial sector. However, institutional listed derivatives, our most competitive product, increased its revenue capture by 18% as we actively repriced our offering to institutional clients. More on this later. I average clients float both in listed derivatives and securities clearing experience strong growth of 39% and 30%. However, interest in fee earnings were down significantly as the prior year incorporated a period prior to the Fed action to reduce interest rates. Turning now to slide six and a summary of our earnings as reported and on an adjusted basis. So removing the accounting impact of the August 2020 acquisition of GAIN. We recorded operating revenues of 390.1 million, up 14% versus the prior year. Aggregate costs were up 12% for the quarter, largely due to GAIN and the associated overheads that were only included for two or three months in the prior year's quarter, as well as recent investments in technology and support functions to both foster future growth and support the franchise we have built. As compared to the immediately prior quarter, Overall operating revenues were down 10%, or 41 million, which drove the decline in pre-tax income. Largest declines versus the preceding quarter were in securities, which was down 18%, or 25 million, and OTC derivatives down 30%, or 15.3 million, of a very good performance in the prior quarter. Listed derivatives were down 12%. These declines were offset by modest gains in global payments, FX, CFDs, and physical contracts. Net earnings were $7.3 million and a diluted EPS of $0.36, both down significantly versus a year ago due largely to the accounting treatment of the gain acquisition mentioned earlier. On an adjusted basis, excluding the non-recurring accounting treatment of gain, quarterly earnings were up 55%, although ROE was still below our target at only 4.3%. Looking at the summary for the fiscal year, our operating revenues were $1.7 billion, up 28%, and a new record. The acquisition of GAIN being a significant contributor to this. Net income was $116.3 million, down 31%. However, adjusted net income was $124.3 million, up 25%, and a new record for our core operating results for a fiscal year. I reported... Diluted EPS was $5.74, although the current year adjustments related to the gain acquisition reduced the diluted EPS by approximately $0.40 and reduced the prior year EPS by $3.59. After consideration of these EPS adjustments, our adjusted EPS for the 2021 year would have been $6.14 versus $5.02 for 2020, an increase of 23%. Our reported ROE was 13.9% and on an adjusted basis was 14.9% for the fiscal year. Although our interest earnings on the float may seem immaterial in the context of overall operating revenues, this number drops straight to the bottom line. We estimate that 100 basis points increase in short-term interest rates potentially adds $27 million or $1.38 to net income. Reflecting on our 2021 results, We have always managed our business for the long term rather than for quarterly results, and we believe that shareholders should look at this the same way and look at our financial performance through cycles. Looking at our adjusted results, which best reflect the core earnings of the company, I'm extremely pleased with our 2021 performance. We have 52% more capital than we had two years ago, and we have deployed it effectively at around our target ROE, and we have significantly grown both the scale and diversity of our client footprint. We have delivered 28% top-line revenue growth and on an adjusted basis, 25% earnings growth against a very challenging 2020 comparison when we enjoyed significant volatility tailwinds. We have delivered this growth without any increase in our share count other than small options activity, although we did take on some high-priced, high-yield debt to fund the gain acquisition. The gain retail platform delivered on its first-year expectations, both in terms of revenues and cost synergies, although as anticipated, the results were volatile, with most of the bottom line being delivered in Q2 and much more modest net contributions in the other quarters of the year. In addition, higher interest expense related to the high yield notes exacerbated quarterly earnings volatility this fiscal year. However, this is not concerning given how we run our business and how we focus on long-term results. Turning to slide seven, which is our segment summary, And just to briefly touch on the highlights before Bill gets into more detail, advocate segment operating revenues were up 15% for the quarter and segment income up 8% for the quarter. That said, on a sequential basis, operating revenues were down 11% and segment income was down 26%. The standouts were our commercial segment, which had operating revenues up 23% and segment income up 29%. and global payments operating revenue up 18% and segment income up 11%. Retail shows good growth in the operating revenue, although segment income was down 34% versus a year ago. For the year overall, we saw strong growth in both operating revenue and segment income across the board. Very pleasing to see that, especially given the tough comparable period. With that, I'll now hand you back to Bill Dunaway for a more detailed discussion. Bill.