StoneX Group Inc.

Interest expense related to trading activities increased 13.6 million versus the prior year, primarily due to increases in short-term interest rates as well as higher average borrowings in our physical commodity business. Interest expense on corporate funding was relatively flat with the prior year period. Variable compensation increased 21.5 million versus the prior year due to the increase in net operating revenues and represented 33% of net operating revenues in the current period. compared to 34% of net operating revenues in the prior year period. Fixed compensation increased 3.4 million versus the prior year with the growth principally related to salary and benefit costs of increased headcount, which increased 11% as compared to the prior year period, which is partially offset by an increase in deferred compensation. Our fixed expenses increased 24.7 million as compared to the prior year to 101.7 million, and we're up 1.8 million versus the immediately preceding quarter. As compared to the prior year, selling and marketing expenses increased $7.9 million and professional fees increased $3.7 million. The increase in selling and marketing primarily relates to increase in digital marketing in our retail Forex business. We have started to see increases in travel and business development, increasing $3.6 million as compared to the prior year. In addition, trading systems and market information increased $1.6 and non-trading technology and support increased $1.6 million as part of their initiative to expand additional offerings. Depreciation and amortization increased 2 million and primarily relates to an increase in internally developed software. We had net recoveries of bad debt expense of 700,000 for the quarter versus 1.3 million and 12.3 million in expense in the prior year and immediately preceding quarters respectively. In the prior year, we recorded a $3.6 million in gain on acquisition and other gains, which primarily related to an adjustment to the liabilities assumed in the acquisition of gain capital While in the immediately preceding quarter, we received a $6.4 million foreign exchange antitrust class action lawsuit settlement. We recorded no gain on acquisition or other gains in the current period. Net income for the third quarter of fiscal 2022 was 49.1 million and represented a 44% increase over the prior year. This represents a 23% decline versus our all-time best quarterly performance recorded in the immediately preceding quarter. Moving on to slide number nine, I'll provide some more information on our operating segments. The commercial segment had another strong quarter, adding $18 million in operating revenues versus the prior year. However, this represents a $13.9 million decline versus the immediately preceding record second quarter. Within the segment, lifted derivative operating revenues declined $3.7 million versus the prior year as a result of a 5% decline in contract volumes as well as a 2% decline in average rate for contracts. OTC derivative operating revenues were $50.2 million for the quarter, which was up $500,000 versus the prior year quarter, primarily as a result of an 8% increase in the average rate per contract, which was partially offset by a 5% decline in OTC derivative contract volumes. Operating revenues from physical transactions increased $13.6 million compared to the prior year period, primarily as a result of a $13.1 million increase in precious metals operating revenues. Finally, interest earned on client balances increased $7.2 million versus the prior year as a result of a 45% increase in average client equity, as well as an increase in short-term interest rates following Fed actions. Segment income was $72.5 million for the period, an increase over the prior year and preceding quarter of 20% and 3%, respectively. Moving on to slide number 10, operating revenues in our institutional segment increased $36.1 million versus the prior year. primarily driven by an $18.6 million increase in securities operating revenues compared to the prior year period as the result of 128% increase in the average daily volume of security transactions, which was partially offset by a 48% decline in securities rate per million. The increase in securities ADV was primarily driven by significant increase in volumes in debt capital markets, most notably in U.S. treasuries as a result of new hires in this business combined with rapidly changing rate environment related to the recent actual and anticipated Fed actions to curb inflation, and to a lesser extent in volatility in equity markets driven by increased market share and volatility. The decline in rate per million was primarily a result of product mix traded, most notably the increase in U.S. Treasury volumes. In addition, operating revenues increased $8 million and $4.2 million in listed derivative and FX products, respectively, driven by continued volatility in global markets. Finally, interest earned on client balances increased 6.9 million versus the prior year as a result of a 63% increase in average client equity, as well as an increase in short-term interest rates following recent Fed actions. Segment income increased 3% to 47.7 million in the current period as a result of the 15.3 million increase in net operating revenues, which were partially offset by a $10.5 million increase in variable compensation. and a $3.6 million increase in non-variable direct expenses versus the prior year. The increase in non-variable expenses is primarily due to a $2.5 million increase in fixed compensation and benefits, a $1.2 million increase in trading system market information, and a $900,000 increase in travel and business development, which is partially offset by a million dollar favorable variance in bad debt. Segment income declined $2.3 million versus immediately preceding second quarter. Moving on to the next slide, operating revenues in our retail segment added $30.8 million versus the prior year, which was primarily driven by a $30.8 million increase in FX and CFD revenues as a result of a 12% and 47% increase in ADV and RPM as compared to the prior year as a result of heightened volatility in FX markets. Operating revenues for security transactions declined $1.1 million, while operating revenues from retail physical precious metals were flat with the prior year period. Operating revenues in the retail segment declined 11.5 million versus the immediately preceding quarter. Segment income increased 20.3 million versus the prior year, primarily as a result of the increase in operating revenues. The increase was partially offset by a $9.5 million increase in non-variable direct expenses as compared to the prior year, primarily driven by a $5 million increase in selling and marketing, a $1.3 million increase in depreciation and amortization, a $700,000 increase in professional fees, and a $600,000 increase in travel and business development. Segment income declined 19.2 million versus the immediately preceding record second quarter of fiscal 2022, which included the receipt of the 6.4 million from the class action settlement I mentioned earlier. Closing out the segment discussion on the next slide, operating revenues and global payments added 9.3 million versus the prior year, driven by a 20% increase in average daily volume and 9% increase in the rate per million as compared to the prior year. Non-variable expenses increased $2.8 million, and it's primarily related to the expansion of our payment offerings. Segment income increased 21% to $24.6 million in the current period, and also represented a 3% increase versus the immediately preceding quarter. Moving on to slide number 13, which represents a bridge between operating revenues for the first quarter of last year to the current period across our operating segments. Overall operating revenues were $528.8 million in the current period, up $97.3 million, or 23% over the prior year. I've covered the changes in operating revenues for our segments. However, the $3.1 million increase in revenues in unallocated overhead is primarily related to positive variance in foreign currency revaluation versus the prior year period, which was partially offset by a mark-to-market loss on exchange shares held for clearing purposes in the current period. The next slide, number 14, represents a bridge from 2021 third quarter pre-tax income of 46 million to pre-tax income of 70.9 million in the current period. The negative variance in unallocated over of 13 million is primarily driven by the increase in unallocated expenses, including a $5.1 million increase in variable compensation as a result of improved performance, a $3 million increase in non-trading technology and support, a $1.8 million increase in professional fees, $1.6 million increase in selling and marketing expenses, and a million-dollar increase in depreciation and amortization. These increases were partially offset by a $1.4 million decrease in fixed compensation and benefits. Finally, moving on to slide number 15, which depicts our average invested client balances and associated earnings by quarter, as well as a table which shows the annualized interest rate sensitivity for changes in short-term interest rates. Their interest rate earned on these client balances increased 41 basis points to 69 basis points for the current period, as the full effect of recent Fed rate hikes during the period will start to be more fully reflected during the fourth quarter of fiscal 2022. As noted in the table, with an increase in client balances noted earlier, we estimate a 100 basis point increase in short-term interest rates would increase net income by $31 million or $1.53 per share on an annualized basis. With that, I'd like to turn it back to Sean for a strategy discussion.

Thanks, Bill. Turning now to slide 16, which sets out the high-level strategic objectives that we are focused on. We have included the slide before, and I've gone through it in detail on the last call, so I won't repeat it all again. Over the last six quarters or so, I've given a fairly granular view of the various projects we are undertaking in our segments, and I'm not going to go through them all again this time. However, we continue to make excellent progress and hit our milestones in delivering many of these capabilities, some of which will be launched in the next three to six months. However, some highlights. As mentioned above, our securities business is expanding and changing its product mix as we leverage our long-standing institutional relationships into broader product offerings. On the equity side, we have now launched our electronic market-making platform to internalize and spread onto domestic NMS equities while providing best execution. This is an area dominated by a limited number of large players, and our broker-dealer clients are interested in having alternative outlets for execution of these trades. We have already enabled a limited number of clients in a limited number of names, and all of these clients have been using us to execute foreign and unlisted stocks for a long time. We are very pleased with the results and the performance of our platform, and this is already accretive to the cost incurred. We'll be ramping this up steadily over time, increasing the number of clients and the number of stocks we make market things. We believe that this is a very large opportunity for us. On the fixed income side, we have steadily been diversifying into different fixed income asset classes, many of which are higher volume and lower margins, such as T-bills and treasuries, but also high-yield emerging market and structured products. This strategy has really paid off for us and provided resiliency to our revenues as the interest rate environment has changed. We have noticed a change in perception of institutional investments as well as talents. in that we are now seen as a growing and successful fixed income franchise that can compete with Tier 1 players. We've made some crucial hires from larger players, and we've seen increased client adoption. On the payment side, we've made some key hires to develop the local currency pay-in business in Brazil, and will thereafter do this in Colombia. This will allow us to provide an end-to-end payment service for our large existing corporate clients that have large in-country client bases. We can provide them an efficient way to get dollars into the country, as well as collect local payments from local clients to remit back to head office. This will be a unique offering for these large corporate clients. StoneX One, our U.S.-based self-directed platform for individuals, is live and being used by employees. This is a multi-asset platform aligned trading in equities and equity options, as well as listed derivatives. We'll be launching this platform in the upcoming quarter to a limited number of clients, and Ryan Park from there, utilizing our digital marketing team. We'll also soon add crypto, FX, and physical gold, making this a unique cross-asset class, self-directed execution capability. All of the trading flow will be directed to our electronic market-making platform, and where appropriate, we'll be able to internalize spreads. As you can probably tell, we have a number of very exciting projects close to being launched. Let's move on to slide 17. This was a nonetheless strong quarter with good market conditions and excellent results across all products and all client segments. We achieved earnings of $49.1 million, diluted EPS of $2.37, and ROE on stated book of just over 19%. This was also the best nine-month period we've ever had, with earnings for the nine-month period being $154.8 million, a diluted EPS of $7.52 for an ROE of 21.92%. Now, we're performing to view through a slightly longer lens, pressures from the 12 years, which opens up with these. Our results continue to show steady and strong upward trajectory, growing our revenues at a 24% TAGA, and growing our adjusted earnings at a 23% CAGR. We continue to see strong growth in client trading volumes and client assets, which speaks to growth in our underlying client base and client engagement. This, combined with heightened market volatility and increasing interest rates, put the real tailwind behind our business for the next year or so. This year, we will see a number of digital platforms being launched, which will more tightly integrate our offerings by client side, make it more engaging for clients to interact with our financial ecosystem. We are initially seeing increased costs associated with bringing and standing up these platforms. As we actively start to market these platforms to clients, we should further accelerate our growth with the scalability that technology provides to increase margins and overall profitability. We continue to invest in the ecosystem, expanding our products, our capacities, and our talent. have a unique and comprehensive financial ecosystem with a very large addressable market in front of us. While we have good market share in certain niche segments of the market, lots of white space remains in areas where we already have client relationships and demonstrable capabilities and now need to monetize these opportunities. One thing is always constant for the Stonex team, we continue to dedicate ourselves to better serving our growing client footprint around the world by providing them with the best financial ecosystem and the best service to access global financial markets. So with that, operator, let's open the line and see if we have any questions.

Great. Thank you. At this time, we will conduct the question and answer portion of our session. And as a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.