StoneX Group Inc.

Good day and thank you for standing by. Welcome to the StoneX Group Inc. Q4 Fiscal Year 2023 Earnings 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Bill Dunaway, CFO. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for our fourth quarter ended September 30th, 2023. After the market closed yesterday, we issued a press release reporting our results for our fourth fiscal quarter of 2023. This release is available on our website at www.stonex.com, as well as a slide presentation, which we'll refer to on this call and our discussions of our quarterly and year-to-date results. The presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we're 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 to be 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 can 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 2023 fourth quarter earnings call. During the fourth quarter of fiscal 2023, we saw strong 33% growth in operational revenues, despite generally moderating volatility, although we did see some really sharp moves in the interest rate markets. The extent and speed of the interest rate increases over the last 18 months is nothing short of historic and has resulted in the general repricing of risk and financial assets across the board. While it would appear that the trajectory of interest rates may be flattening, I do not think we have seen the full force and brunt of these historic moves manifest themselves yet, and there's likely to be some further dislocation and financial stress as a result. This was a solid fourth quarter for us and a truly exceptional and another record-setting year for the company overall, validating our strategy and demonstrating the earnings power of our franchise. For the fourth quarter, we recorded operating revenues of $778 million, up 33% versus the prior year. Net operating revenues were up 4%, and compensation and other expenses were up 3% from a year ago, resulting in pre-tax income of $75.4 million, up 14% versus the prior year, which was a strong comparable quarter for us. Despite the increase in pre-tax income, a much higher effective tax rate, 32.8% versus 21.2% in the prior year quarter, driven by discrete items and year-end adjustments in each period, resulted in a 3% decline in net income to $50.7 million and a diluted EPS of $2.36 and an ROE of 15%. For the full year's results, the tax rates are relatively comparable at 26.2% for fiscal 23 compared to 25.3% in the prior year. Turning now to slide three in the earnings deck, listed derivatives operating revenues were down 2%, largely due to a 3% volume decrease versus a year ago. Listed derivatives in our commercial segment volumes were up 21%, Higher on the institutional side, the volumes, and this is a much higher volume business, were down 9%, leading to the overall contract volume decline. OTC derivatives operating revenues were up 22% off the back of strong volumes. Securities operating revenue was the most significant contributor, up 70%, although this number somewhat distorted due to the much higher interest rates in our fixed income business. Carried interest on fixed income position is reflected in operating revenues, while the offsetting interest expense to finance these positions is not. The RPM, the rate per million numbers, have been adjusted to reflect this offsetting expense. Net operating revenue for the fourth quarter for securities declined 15%, primarily as a result of the rate per million declining 45% due to lower volatility and tougher market conditions in the equity business, as well as a lower margin product mix in both equities and fixed income. Both of these mentioned in previous calls. FX and CFD operating revenues were down 3%, with a higher RPM being offset by a lower ADV, impacted by tougher new client acquisition environments internationally. Global payments operating revenues were up 21% due to a higher RPM versus the prior year quarter. Interest and fee revenues were up 110% versus a year ago as we compared to a lower rate environment in the prior year. IFDIC suite balances were down 40% as clients moved into higher yielding alternatives, although our client funds on the derivative side were relatively unchanged. Moving on to slide four, for the fiscal year as a whole, it was generally a very similar picture. Listed derivatives operating revenues were down 3%, largely due to a 4% decrease in average rate per contracts, largely coming from our commercial segments. OTC derivatives operating revenues were up 11% off the back of strong volumes, which were up 20%, although the rate per contract declined 7%. Physical contracts operating revenues were up 26% versus the year-ago period, primarily as a result of the CDI acquisition at the beginning of the fiscal year, as well as the growth in our biodiesel feedstock business. Securities operating revenue was again the most significant contributor, up 74%, although again distorted because of higher interest rates, as I mentioned earlier. Net operating revenues in securities transactions declined 11% versus the prior year, as an increase of 52% in ADV was more than offset by a 40% decline in revenue capture. FX and CFD operating revenues were down 23%, versus the very strong results a year ago with ADV down 10 and rate per million down 12%. Global payments operating revenues were up 24% due to both a higher ADV and RPM. Interest and fee revenue was up 331% versus a year ago as we compare to a lower rate environment in the year prior. On an annual basis, our FDR sweep was down 25% as clients moved into higher yielding alternatives, while client funds on the derivative side were up 25%. Turning now to slide five and a summary of our fourth quarter and our full year fiscal results. We recorded operating revenues of $778 million, up 33% versus the prior year. Net operating revenue was up 4%, and this is after interest expense, including interest related to the fixed income trading mentioned earlier. Total compensation and other expenses were up 3% for the quarter. This resulted in net income of $50.7 million, down 3% from the year prior, and diluted EPS of $2.36, down 5%, and a 15% ROE. As I mentioned up front, there was a much higher tax charge this year, 32.8% versus 21.2%. On a pre-tax earnings basis, the quarterly results were up 14% versus the prior year quarter. The average client float was $7.8 billion, down 10% from a year ago and up 1% from the immediately prior quarter. Our financial results were boosted by higher interest and fee income on our client float as short-term rates increased over the period. Our average yield on our client float was 372 basis points for the year overall and 422 basis points for the fourth quarter. The yield on our client float was adversely affected by some interest rate swaps we entered into about two years ago, which will start rolling off in the coming quarters and should boost our yield, assuming, of course, no change in interest rates. In comparison with the immediately preceding quarter, our operating revenue was up modestly and net operating revenues were down 7%. Fixed compensation was up 2%, and variable compensation was down 14%, and net income was down 27%. Looking at the summary for the full fiscal year, this was a record year for us in almost every metric. Our operating revenues were a record $2.9 billion, up 38% over the prior year. Net income was a record $238.5 million, up 15%. Our diluted EPS was $11.18 for the full fiscal year, up 12%. Our ROE was 19.5%, despite equity having increased 53% over the last two years. We ended Q4 23 with a book value per share of $66.31, up $13.61 for the year, or 26% versus the year ago. Turning now to slide six, which is our segment summary, just to touch on a few highlights before Bill gets into more details. For the quarter segment, operating revenue was up 32%, and segment income was up 20%, with good performances across all of our client segments. In our commercial client segments, segment income was up 10% off the back of a 12% increase in operating revenues, with strong results from OTC derivatives and, of course, higher interest rates offset by lower physical commodities revenues. Our institutional segment realized a 65% increase in revenues, which translated into a 22% increase in segment income. Our foreign exchange business had a very good quarter, and of course we benefited from the positive impact of interest rates. This was offset by tougher environments and securities, particularly on the equity side. Despite operating revenues being down 9%, our retail segment delivered a 39% increase in segment income due to good revenue capture on the digital trading platform and 23% lower non-variable costs. Some of this cost reduction is as a result of certain functions, such as the digital marketing group, being moved to a central overhead to be leveraged throughout the entire organization. Global payments operating revenue was up 22%, and segment income was up 32%, driven by a 26% increase in revenue capture. For the full fiscal year, segment operating revenue was up 37%, and segment income was up 13%, with strong performance across all of our client segments, except retail, where segment income was down 60% against the exceptionally good prior year performance. These are solid results, but as we've said repeatedly, we take a long-term view in how we manage the company and grow our franchise. As such, we believe the best way to gauge our results and progress is to look at longer-term performance, such as trailing 12 months, rather than specific quarters taken in isolation. Turning to slide seven, which sets out our trailing 12-month financial performance by quarter, these numbers have been adjusted for the accounting treatment related to the gain and CDI acquisitions. as disclosed in our prior filings and which appear in the reconciliation provided on the last page of the earnings deck. On the left-hand side, the bars represent our trailing 12-month operating revenue over the last nine quarters. As you can see, this has been a smooth and strongly upwards trend as we have steadily expanded our footprint and capabilities. Our operating revenues are up 74% over this period for a 32% CAGR. Our adjusted pre-tax income likewise has grown significantly at a 37% CAGR. On the right-hand side, you can see our adjusted net income in the bar graphs, which is up 79% over the two years for a 34% CAGR. The dotted line represents our ROE, which has remained above our 15% target, even though our capital has grown by 53% over this period. With that, I'll hand you over to Bill Dunaway for a more detailed conversation.