StoneX Group Inc.

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 2024 second quarter earnings call. The second quarter of fiscal 2024 was a solid result for us with earnings up 27% and EPS up 25% versus the prior year period. The current quarter includes a $9.1 million or approximately $0.20 per share unrealized loss on derivative position used to hedge our gold inventory. We don't elect hedge accounting on these inventories, so these losses will be reversed when this inventory is sold. For the six months to date, we recorded earnings of $122.2 million, or $3.76 per share. Excluding acquisition gains in the prior period relating to CDI, this represents an increase of 29% for the year-to-date period. Turning to slide three and a summary of our second quarter and trailing 12-month results, We recorded operating revenues of $818.2 million, up 16% versus the prior year. Our operating revenues include not only interest earned on our client floats, but also carried interest that is related to our fixed income trading activities. Net operating revenues, which nets off interest expense, as well as introducing broker commissions and clearing costs, were up 6% versus the year-ago number, and relatively flat versus the immediately prior quarter. Total compensation and other expenses were up 4% for the quarter with variable compensation up 2%, which was below the net operating revenue growth rate of 6%. Fixed compensation and related costs were flat versus a year ago and were up 15% compared to the immediately prior quarter. The prior year amount included a severance amount in the amount of $12.1 million versus $1.1 million in the current quarter. Net income was $53.1 million for the current period, up 27% over the prior year quarter, over 23% down on the immediately preceding quarter. This represents a 14.8% ROE on tangible and a 14% ROE on stated book value, which, as a reminder, has increased 53% over the last two years, with both measures close to our long-term target of 15%. We recorded diluted EPS of $1.63, up 25% over the prior year. Looking now on a 12-month trading basis, our operating revenues were up 28% versus the prior 12-month period, and adjusted net income was $247.9 million, up 21%. EPS came in at $7.50, up 8%. We ended our second quarter in 2024 with book value per share of $48.74, up 21% versus a year ago. Turning to slide four in the earnings deck, which compares quarterly operating revenues by product versus a year ago, In aggregate, our operating revenues were up 16%, with securities and FX CFDs showing strong gains, up 37% and 30% respectively, partially offset by physical contracts, which were down 15%, primarily due to the gold inventory item I mentioned earlier. OTC operating revenues were down 8%, while listed derivatives and payments were relatively flat. We experienced robust volume growth in listed derivatives, up 29%, and security is up 30%. However, OTC derivatives and payment volumes are down 6% and 2% versus the prior year, respectively. While FX and CFD volumes declined 23%, we experienced a significant increase in our revenue capture and rate per million, which was up 67%. primarily due to increased client activity in gold, oil and index products as opposed to the relatively higher volume but lower spread FX contracts. Outside of that, with the exception of payments rate per million which grew modestly, we generally saw lower revenue capture versus the prior year with OTC rate per contract declining due to lower agricultural commodity volatility and lower rate per contract enlisted derivatives, which was primarily due to an increase in volumes from the institutional side of our business relative to the higher rate per million commercial side of our business. Securities-related operating revenue was up 37%, although this number is somewhat distorted due to a much higher interest income in our fixed income business. Carried interest in fixed income is reflected in operating revenues, while the offsetting interest expense to finance these positions is not. The rate per million numbers have been adjusted to reflect this offsetting expense. Securities continues its trend of strong increase in volumes and a decrease in revenue capture as we continue to see strong growth in lower margin products. Our aggregate client float, which includes both listed derivative client equity and our money market FDIC sweep balances, declined 17% versus relatively high levels experienced in the prior year. Despite this, interest and fee income on these balances increased by 1% to $104.2 million due to us capturing higher interest rates in the current period. Turning now to slide five and looking at the same data over the trailing 12 months, we again see strong double-digit growth across most of our products with the exception of listed derivatives, which was up 2% and physical contracts up 1% versus the prior year. Again, securities-related revenues were up significantly, but part of that is also due to the carried interest component I just mentioned. Volumes which were up across the board except for FX TFDs which were down 17% and payments down 1% are typically an important indicator for us on a long-term basis when it comes to measuring client engagement and market penetration. However, we are still somewhat subject to overall market activity. Revenue capture is largely a function of the market conditions and again we can see a mixed picture as market volatility generally retrace the lower levels as compared to the prior year with the obvious exception of FX and CFDs which experience a significant increase in rate per million revenue capture up 33% versus the prior year. In addition, we continue to see the effects of the change in product mix and the securities rate per million with increased volumes in lower margin products. Turning now to slide six, our segment summary, just to touch on a few brief highlights before Bill gets into more detail. For the quarter, segment operating revenues were up 15% and segment income was up 14% versus the prior year. Our commercial segment was down 17% in segment income, off the back of a 9% decrease in operating revenues. On a sequential basis, operating revenues were up 1% and segment income was down 2%. Our institutional segment realized a 28% increase in operating revenues which translated into a 10% increase in segment income. On a sequential basis, operating revenues were up 6% and segment income was down 6%. Retail was a standout this quarter with operating revenues up 30% driven by the much improved revenue capture I mentioned earlier. This growth in operating revenues combined with declines in fixed expenses led to $28.4 million increase in segment income to $33.2 million in the current period versus $4.8 million a year ago. On a sequential basis, revenues were up 10% and segment income increased 16%. In our payments business, operating revenues were down 1% while segment income was up 55%, principally due to the prior year including a severance charge of $10 million. Operating revenues were down 19% and segment income down 30% versus the record immediately prior quarter. On a trading 12-month basis, we had double-digit operating revenue gains for our commercial, institutional, and payment segment, while our retail segment operating revenues increased 5%. We saw growth in segment income across all of our segments versus the prior year trailing 12-month period, led by the retail segment, which was up 127%, followed by payments with a 24% growth. Turning now to slide seven, which sets out at the top of the page our trailing 12-month financial performance over the last nine quarters. These numbers have been adjusted for the accounting treatment related to the gain in CDI acquisitions as disclosed in our prior filings and which appear in the reconciliation provided in the appendix of this earnings deck. On the left-hand side, the bars represent our trailing 12-month operating revenues over the last nine quarters. As you can see, this has been a smooth and strongly upward 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, also at a 32% CAGR. On the right-hand side, you can see our adjusted net income in the bars, which is up 63% over the two years for a 28% CAGR. The dotted line represents our adjusted ROE, which has remained solidly above our 15% target, even though our capital has grown by 53% over this period. On the bottom half of the slide, we set out our long-term performance, both measured in stockholders' return from the bottom left graph, in which we have significantly outperformed both indices shown, as well as our financial performance on the bottom right-hand graph. which shows that we have grown our stockholders' equity, operating revenue, and market capitalization at nearly 30% CAGR for the last 21 years. With that, I will hand over to Bill Dunaway for a more detailed discussion of the financial results. Bill?

Thank you, Sean. I'll be starting with slide number eight, which summarizes our consolidated income statement for the second quarter of fiscal 24. Sean covered many of the consolidated highlights relating to operating revenues for the quarter, so I will just cover the consolidated expense fluctuations and then move on to a segment discussion. Transaction-based clearing expenses increased 13% to $78.5 million in the current period as a result of the increases in listed derivative and security volumes as compared to the prior year. Introducing broker commissions were relatively flat with the prior year at $42 million in the current period. Interest expense increased $80.5 million versus the prior year, primarily as a result of the $78.6 million increase in interest expense related to our institutional fixed income business, as well as the $5.7 million increase in interest expense related to securities lending activities. Both of these were due to increases in short-term interest rates, and in addition, in the case of the fixed income business, increased volumes. Interest paid on client balances on deposit declined $5.8 million as compared to the prior year due to declines in average client flow. Interest expense on corporate funding increased $1.3 million versus the prior year as a result of the incremental issuance of our senior secured borrowings, partially offset by lower average borrowings on our revolving credit facility. I will expand on this topic later on this call when I cover the new note issuance. Variable compensation increased $1.9 million versus the prior year and represented 29% of net operating revenues in the current period compared to 30% in the net operating revenues in the prior year. This decline in variable compensation as a percentage of net operating revenues is a result of the increase in net interest and fee income earned on client balances as compared to the prior year as this revenue is typically not included in variable compensation payouts as well as the increase in net operating revenues in our retail segment, which has incrementally lower levels of variable compensation associated with it. Fixed compensation was flat versus the prior year. However, the current period includes $1.1 million in severance costs versus $12.1 million in the prior year. Offsetting this decline in severance cost was an 8.1 million or 12% increase in non-variable salaries due to a 13% increase in headcount resulting from an expansion of our capabilities among our business lines as well as in support areas to facilitate this business growth. Fixed compensation increased 15% versus the immediately preceding quarter. Within this increase in fixed compensation, non-variable salaries increased a relatively modest $2.6 million, primarily related to annual merit increases. In addition, we saw seasonally driven increases in payroll taxes, retirement and paid time off accrual expenses of $6.1 million. In addition, share-based compensation expense increased $1.8 million. and a reduction of deferred compensation increased overall non-variable compensation by $3.1 million as compared to the immediately preceding first fiscal quarter of 2024. Other fixed expenses increased $16.5 million as compared to the prior year, including an $8 million increase in professional fees, primarily due to an increase in legal fees, as well as a $3 million increase in occupancy and equipment rental, principally driven by an acquisition of additional space in London and India. as well as a $1.3 million accelerated charge related to the consolidation of our offices in London. In addition, selling and marketing and travel and business development combined were up $2.7 million as compared to the prior year, primarily driven by approximately $4 million in expenses related to our biannual global sales summit, which was also partially offset by lower direct marketing costs in our retail segment. Compared to the immediately preceding quarter, other fixed expenses increased $14.8 million, principally driven by a $5.9 million increase in occupancy and equipment rental due to the additional space acquired and accelerated charges I just mentioned, as well as the fact the immediately preceding quarter included a one-time $3.3 million property tax refund. Finally, to close out the discussion of expenses, we had favorable variances in bad debts. Net of recoveries of $3.4 million and $100,000 versus the prior year and immediately preceding quarters, respectively. The other gain of $6.9 million in the current quarter is the class action settlement received in the commodity exchange, gold futures, and options trading matter. Net income for the quarter of fiscal 2024 was $53.1 million, which represents a 27% increase versus the prior year. Net income declined 23% versus a very strong result in the immediately preceding quarter. Moving on to slide number nine, I'll provide some information on our operating segments. Operating revenues in our commercial segment declined 19.6 million in operating revenues versus the prior year. However, increased 2.1 million versus the immediately preceding quarter. The decline versus the prior year was principally driven by an $8 million decline in operating revenues from physical contracts due to an $8.5 million loss on derivative positions used to hedge our gold inventory, as Sean mentioned earlier. The remainder of this unrealized loss relates to our retail segment. In addition, operating revenues from listed and OTC derivatives declined $1.9 million and $4.9 million, respectively, as compared to the prior year. The listed derivative decline was due to lower spreads in LME products as compared to the prior year, which more than offset the 12% increase in listed contract volumes. The OTC decline was primarily due to a decline in activity in Brazilian markets due to lower agricultural volatility. Finally, interest earned on client balances declined $5.3 million as compared to the prior year as a result of a 15% decline in average client equity resulting from reduced market requirements driven by the lower cut monthly volatility. Fixed compensation and benefits increased $200,000 versus the prior year and $1 million versus the immediately preceding quarter. Other fixed expenses increased $4.7 million versus the prior year but were relatively flat with the immediately preceding quarter. As compared to the prior year, we had increases in travel and business development, professional fees, depreciation and amortization, bank fees, and non-income taxes. We had a positive variance in bad debts, net of recoveries of 2.3 million as compared to the prior year, principally driven by decline in bad debts in our physical ag and energy business. Segment income was 85.6 million for the period, a decline of 17% versus the prior year period, and included the other gain related to the gold class action matter I mentioned earlier. Segment income decreased 2% versus the immediately preceding quarter. As a reminder, in the first quarter of fiscal 2024, we started to allocate a portion of our corporate expenses to each of our four operating segments, including costs associated with compliance, technology, credit and risk, human resources, and occupancy. We have provided this allocation in each of our segments for the current period and will continue to do so prospectively. However, we have not calculated similar allocations for previously reported periods. For the current period, this allocation of corporate costs for our commercial segment was $8.9 million. Moving on to slide number 10, operating revenues in our institutional segment increased to $100.9 million versus the prior year, primarily driven by an $88.1 million increase in securities operating revenues compared to the prior year period as a result of a 30% increase in the average daily volume of securities transactions as well as the increase in interest rates. The increase in securities ADV was driven by an increase in client volumes in both equity and fixed income markets. As Sean mentioned earlier, the increase in interest rates also led to a significant increase in securities-related interest expense for the period, which I will touch on momentarily. Interest and fee income earned on client balances increased 6.2 million versus the prior year as a result of the increase in short-term rates, which was partially offset by 17% and 24% declines in average client equity and average money market and FDIC client sweep balances, respectively, versus the prior year. Interest and fee incomes earned on client balances was up $4.9 million versus the immediately preceding quarter. The rise in short-term interest rates drove an $83.4 million increase in interest expense versus the prior year. Interest expense related to fixed income trading and securities lending activities increased $78.6 million and $5.7 million respectively as compared to the prior year, while interest paid to clients decreased $6 million due to the decline in client balances. Segment income increased 10% to $61.3 million in the current period, primarily as a result of the $11.9 million increase in net operating revenues, which was partially offset by a $4.3 million increase in fixed compensation and benefits, as well as a $4.9 million increase in other fixed expenses. The increase in other fixed expenses was primarily driven by a $4.1 million increase in professional fees and a $600,000 increase in trade systems and market information. These increases were partially offset by a $1.5 million favorable variance in bad debt expenses versus the prior year quarter. Segment income declined $3.9 million versus the immediately preceding quarter. For the current period, the allocation of corporate costs for our institutional segment was $13.3 million. Moving on to the next slide, operating revenues in our retail segment increased $23.4 million versus the prior year. driven by a $20.2 million increase in FX and CFD revenues as the result of an 82% increase in rate per million as compared to the prior year, which more than offset a 24% decline in FX and CFD average daily volume. The increase in RPM was primarily due to higher client activity in gold, oil, and index CFD products, which generally have a higher RPM in relation to FX products, while the decline in ADV was driven by lower FX market volatilities. Operating revenue increased 10% versus the immediately preceding quarter. Segment income was $33.2 million, which represents a 592% increase over the prior year period and a 16% increase compared to the immediately preceding quarter. This was a result of the 30% increase in operating revenues, as well as a $6.7 million decline in other fixed expenses as compared to the prior year. For the current period, the allocation of corporate costs for our retail segment was $12 million. Closing out the segment discussion on the next slide, operating revenues in our payment segment declined 1% versus the prior year, driven by a 1% decline in average daily volume, which more than offset a 3% increase in the rate per million as compared to the prior year. Segment income increased 55% to $24.6 million in the current period as a result of a $10.3 million decline in fixed compensation as the prior year included the $10 million of severed charges Sean mentioned earlier. Segment income decreased $10.4 million versus the immediately preceding record first quarter. For the current period, the allocation of corporate costs for our payment segment was $5.2 million. Finally, before passing it back to Sean for a strategy discussion, I wanted to give an update on long-term capital following our recent note offering. As Sean highlighted in the past, long-term capital is integral to the success of StoneX. As it supports our client activity and our regulated subsidiaries, and supports the growth of our franchise. Our fundamental focus is on compounding our internally generated equity, accessing capital markets in a thoughtful manner when appropriate, and deploying a centralized, disciplined approach to capital allocation in order to drive results for our stockholders. To that end, on March 1st, we issued $550 million of new seven-year secured notes, which allowed us to extend our debt maturity profile and bolster our liquidity. The proceeds of these notes were used to defuse our existing $348 million of senior secured notes, which were scheduled to mature in June of 2025, as well as to pay down existing borrowings on our revolving credit facility. The $348 million in senior secured notes will remain on our balance sheet, as well as $363 million in restricted cash, which represents principal plus accrued interest through June 15, 2024, as part of this defeasement, at which time we will call these notes at par. Ultimately, while having the new notes and previously issued notes both outstanding for three and a half months will result in incremental interest costs of approximately $900,000 per month, net of the interest earned on restricted cash, it will ultimately save us $4.5 million in call premium. For the new issuance, we're very pleased with how the process unfolded, with the issuance being nearly two and a half times oversubscribed and pricing at a much tighter spread to Treasuries at 377 basis points. as compared to our previous issuance done during the onset of COVID and ultimately an effective interest rate 155 basis points lower than that offering. Overall, this will be leveraged neutral for us while extending out our maturity profile by six years. Following this transaction, we are practically $2.1 million in long-term capital available to support our clients and our growth. Finally, we are pleased to announce that SP recently revised the rating outlook for StoneX, positive from stable, reflecting our focus on long-term capital, retained earnings, and diversified franchise. With that, I'll now like to turn it back over to Sean. Thanks, Phil.