StoneX Group Inc.

Welcome to StoneX Group's second quarter earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Bill Dunaway, Chief Financial Officer. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for our second quarter ended March 31st, 2022. After the market closed yesterday, we issued a press release reporting our results for our second fiscal quarter of 2022. This report is available on our website at www.stonex.com, as well as a slide presentation, which we will refer to on this call and our discussions of our quarterly and year-to-date 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, the following discussion should be taken in conjunction with the most recent financial statements and notes thereto, as well as the Form 10-Q filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there could be no assurances that 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 as 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 bill good morning everyone and thanks for joining our fiscal 2022 second quarter earnings call as i mentioned last time during our q1 call market conditions generally turned more favorable for our business as the financial market contemplated inflation and the fed response there too what we had not anticipated is the geopolitical shock which came from the russian invasion of ukraine which added significant uncertainty and volatility especially in the commodity markets As we have mentioned a number of times previously, ideal market conditions for us are moderate market volatility and a decent level of short-term interest rates. Extreme volatility certainly provides good revenue opportunities. However, also potentially leads to liquidity stress on our clients, which generally leads to a higher bad debt charge. Our risk management approach is to ensure that when we see these extreme market events, the net result is still a positive for our shareholders and our bottom line. Our team has now experienced many such situations, and we have implemented a robust risk management process, which over time has become embedded into the StoneX DNA. I was exceptionally pleased with how our team reacted. We have front office risk and operational people standing shoulder to shoulder and running towards potential problems. Our risk management process starts well before any crisis occurs, as we set positions and tenant limits on clients who are now onboarded and we continually stress test all of our client portfolios and adjust accordingly for changing market conditions. Our job is to make sure our clients understand the risks they are taking and have a mitigation plan and sufficient liquidity to navigate these market events. Not only do these extreme market conditions provide immediate revenue opportunities and of course the associated risks, but they also cause clients to rethink who they deal with and where their assets reside And larger banks, once again, recalibrate the type of clients they want to deal with. As we experienced following previous such situations, we are seeing a number of clients looking to transition their business to us. The result we achieved is a record quarter for core operational earnings, besting the record we set in the prior year period. So we're actually comparing against our previous record. ROE on stated book value was 26.1% for the quarter and 29% on a tangible book basis. Our quarterly earnings were $64 million or $3.11 per share. On a year-to-date basis, we achieved an ROE of 22.1% on stated book and earnings of $105.7 million or $5.15 per share. We continue to believe that the market environment will provide some positive tailwinds for us over the next year or so with sporadic volatility as the Fed withdraws its support for the market and interest rates increase, both direct and positive drivers for our business. Turning now to the slide deck and starting with slide number three, comparing operating revenues and the key operating metrics against the prior year period, which remember was in fact our record result up until now. Operating revenues were up 16% for the quarter with increases in all product areas except for securities and physical contracts. On a year-to-date basis, all products were up strong double digits except for securities, which was down 4%. Transaction volumes increased both for the quarter as well as on the year-to-date basis. In fact, we had three of our five busiest days ever in terms of transactional counts during this period of volatility. the other two days being the initial onset of the COVID pandemic. Revenue capture increased significantly in most products for the quarter and year-to-date, except for securities, which was down 21% and 23% respectively, and FX CFD contracts, which declined marginally 2% in both periods. Our average client float, both on the list of derivatives and as well on the securities clearing side, experienced strong growth, up 38% and 29% respectively, due both to higher margin rates imposed by the exchanges due to volatility, as well as market share gains, and in aggregate now stands at over $7 billion, up 36% from a year ago. Interest earnings on client balances were up 79% versus a year ago due to higher client balances, and we are now starting to see interest rate increases. interest earnings should start accelerating strongly as the new rate hikes start to work their way through the system versus the immediately prior quarter operating revenues were up 21 versus the three months ended december 31 there were double digit increases in product revenues across the board except for global payments and physical contracts which were both down marginally the prior periods being records for that Strong volume increases across the board, except for OTC and global payments, which were marginally down. Revenue capture was up across the board versus the immediately prior quarter, and our average client float was up 12%. Moving to slide four and looking at the same metrics on a 12-month basis, our operating revenues were up 20% versus the trailing 12 months ended March 31, 2021. There were double-digit increases in product revenues across the board, except for physical contracts, which were up 6% of a record performance in the prior period and securities, which was unchanged. Strong volume increases across the board, except for listed derivatives, which was up only modestly. Revenue capture was up enlisted and OTC derivatives, however, declined in securities and FX and CFPs. Our average client float was up 30% and interest earned on client balances was up 64%. Turning to slide five and a summary of the earnings as reported, but also on an adjusted basis, which includes the ongoing accounting impact of the game transactions. We recorded operating revenues of $544.7 million, up 16% versus the prior period, which is a record. We achieved record quarterly revenues for three of our four segments, commercial, institutional, and retail. Global payments were slightly behind the immediately prior quarter, which was its record quarter. Total compensation and other expenses were up 24% for the quarter. Most notably, variable compensation due to high incentive compensation. Fixed compensation costs increased 5%. Other costs, including trading system, market information, non-trading technology costs, and other fixed expenses increased over the prior year as a result of the strategic initiatives I've touched on over the last several calls and will discuss again later on this call. Our selling and marketing costs were up 120% over the prior year, and while not technically variable, reflects our digital marketing spend during times of heightened market activity when it is more effective. Bad debts were $12.3 million due to the market stress I mentioned earlier. This is slightly above the 1% of operating revenue we target, although on a trading 12-month basis, it represents 1.1%. of operating revenues, so very much in line with that target. Net earnings were $64 million or $3.11 diluted per share, representing a 26.1% ROE. Looking at the summary for the training 12 months, our revenues were $1.8 billion, up 20% over the prior comparable period. Net income was $147.2 and $152 million on an adjusted basis. Our reported EPS was $7.18 for the training 12 months for a 15.8% ROE or 16.3% on an adjusted basis. Our quarterly earnings were up 53% or $22.3 million higher than the immediately prior quarter with EPS showing a similar increase. We ended the quarter with book value per share of $49.86. and shareholder equity eclipsed the billion-dollar benchmark for the first time. Turning to slide six, which is our segment summary, just to touch on the highlights before Bill gets into more detail, aggregate segment operating revenues were up 16% for the quarter, and segment income was up 19% versus the record results last year. On a sequential basis, operating revenues were up 21%, and segment income was up 30%. The standouts for the quarter were our commercial segment, which increased operating revenues 28%, and segment income 26%, both new records. Retail showed good growth in operating revenue, up 17%, and segment income up 42%, also both new records. Global payments operating revenue is up 22%, and segment income 23%. Institutional segment increased revenues 6%, however, segment income was down 4% due to lower revenue capture versus the comparable period. For the trailing 12 months, we see much of the same with double-digit growth across the board, except for the security segment, which was down 12%. These are strong quarterly results, but as we've said repeatedly, we take a long-term view in how we manage the company and our franchises. As such, we believe the best way to gauge our results and progress is to look at longer-term performance, such as the trailing 12 months, rather than specific quarters taken in isolation. Turning to slide 7, which sets out our trailing 12-month financial performance, these numbers have been adjusted for the accounting treatment related to the gain acquisition, as disclosed in our prior filings and appear in the reconciliation provided on the last page of the earnings deck. If you look at the graph on the left hand side, the blue bars represent our trailing 12 month operating revenues over the last nine quarters. As you can see, this has been a remarkably smooth and strongly upward trend as we have steadily expanded our footprint and capabilities. Our revenues are up 50% over this period or 22% annual compound growth. Our adjusted pre-tax income likewise has grown significantly. up 58% for a 25% TAGA. On the right-hand side, you can see adjusted net income in the yellow bars, which is up 69% over this period for a 30% annual compound growth rate. With that, I'll hand you over to Bill Dunaway for a discussion of the financial results. Bill.