StoneX Group Inc.

Good day, and thank you for standing by. Welcome to the 2024 Third Quarter StoneX Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill Dunaway, CFO. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for our third quarter ended June 30th, 2024. After the market closed yesterday, we issued a press release reporting our results for our third fiscal quarter of 2024. This release 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. 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-Q file with the SEC. This discussion may contain forward-looking statements with 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 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 the call. Starting on slide three of the earnings deck, The third quarter of fiscal 2024 was a solid result for us, with net income of $61.9 million and EPS of $1.88 per diluted share. This represented a 15.7% ROE on stated book and 16.5 ROE on tangible book value, despite a 19% increase in book value over the year and a 54% increase in book value over the last two years. versus the comparative year ago period, which was a record quarter for us, where we're down 11% in net income and 13% in EPS. On a consecutive quarterly basis, our earnings were up 17% and our diluted EPS was up 15%. We had record operating revenues of 913.7 million, up 18% versus the prior year. Our operating revenues include not only interest earned on our client float, but also carried interest that is related to our fixed income trading activities. Net operating revenues, which net off interest expense as well as introducing broker commission and clearing costs, were also a record and up 7% versus a year ago and up 11% versus the immediately prior quarter. Total compensation and other expenses were up 12% for the quarter with variable compensation up 8%, which is in line with net operating revenue growth. Fixed compensation and related costs were up 22% versus a year ago, and were up 6% compared to the immediately prior quarter, due in large part to severance costs relating to an executive officer. For the nine months to date, we recorded earnings of 184.1 million, or $5.64 per share, down slightly versus the comparative period. On a trailing 12-month basis, our operating revenues were 3.3 billion, up 21% versus the prior 12-month period, and adjusted net income was $238.9 million, up 6%, with EPS of $7.21 per diluted share, down 4%. We ended our third quarter 2024 with book value just over $50, $50.65, up 19% versus a year ago. Now turning to slide four in the earnings deck, which compares quarterly operating revenues by product versus a year ago. Generally speaking, the market environment was difficult for us with extremely low volatility. In fact, the VIX was close to all-time lows during much of the quarter, which never negatively impacted revenue capture in most of our products. Low volatility and the resulting tough trading environment have characterized most of this fiscal year. This market complacency has been difficult to understand given the current geopolitical tensions, the election cycle here in the US and in many other countries, as well as the uncertain economic situation. As we know, volatility can change quickly, and indeed recent events over the last couple of days have proved this out, and we are hopeful we may see better market conditions ahead. However, we continue to see good client engagement and market share increases, as evidenced by generally increased volumes across most of our products. The earnings power related to our enhanced client footprint should be evidenced with improved trading conditions. For the quarter, we saw strong revenue gains in listed derivatives with both our institutional segments seeing strong volume growth of 41%, as we saw market gains with large institutional clients, offset by a 17% reduction in contract rates. Our commercial segments saw a 17% increase in volumes and a 10% increase in contract rates. Securities revenue was up 37%, with volumes up 37%, rate per million down 9%. FX and CFD revenues were up 6% due to small gains in both volumes and spread capture. OTC revenue was down 8%, largely due to volumes being down 10% versus a record prior year period. Payments revenue was down 5% due to a lower revenue capture as a result of tighter spreads in most of our key payment corridors. Physical revenues were down 17% versus last year's very strong quarter, due largely to a decline in our renewable fuels business. Our aggregate client float, which includes both listed derivative client equity and our money market and FDIC suite balances, declined 10% versus the prior year. Despite this, interest and fee income on these client balances increased 26%, to 115.9 million due to us capturing a higher interest rate in the current period versus the year-ago period. Turning to slide five and looking at the same data of the trailing 12 months, we can again see good revenue growth across most of our products with the exception of physical contracts. Volumes were up across the board except for FX and CFDs, which were down 12%. Again, on a long-term basis, this is an important indicator for us when it comes to measuring client engagement and market penetration. Michael Bresalier, Revenue captures largely a function of market conditions and again we see a mixed picture as market volatility generally retrace to lower levels compared to the prior year, with the exception of FX and CFDs which experienced a higher increase in rate per million up 34% versus the prior year. Michael Bresalier, In addition, we continue to see the effect of the change in product mix and securities revenue capture with increased volumes in lower margin products. Turning now to slide six, our segment summary, and just to touch on a few highlights before Bill gets into more details. For the quarter, segment operating revenues were up 18% and segment income was up 17% versus the prior year quarter. All segments were up both in terms of revenues and income, except for payments, which was marginally lower. Our commercial segment had a record quarter in both operating revenues and segment income. with segment income up 7% off the back of a 4% increase in operating revenues, with increased revenues in listed derivatives and interest offsetting the lower OTC and physical revenues. On a sequential basis, operating revenues and segment income were up 31% and 47% respectively. Our institutional segment realized a 34% increase in operating revenues, which translated into a 38% increase in segment income. off the back of a strong increase in securities revenues and interest income. On a sequential basis, operating revenues were up 10% and segment income was up 1%. Retail was again a standoff this quarter, with operating revenues up 5%, driving a 60% increase in segment income, highlighting operational leverage we have in this digital offering. On a sequential basis, operating revenues were down 6% and segment income decreased 17%. In our payment segments, operating revenues were down 4% and segment income was down 1%, primarily due to tighter FX spreads in our key payment corridors. Operating revenues were up 4% and segment income was up 15% versus the immediately prior quarter. On a trailing 12-month basis, we had operating revenue gains and segment income gains across the board. Retail was, again, the standoff with segment income up 209%. followed by institutional up 17% and payments up 19%. Turning now to slide seven, which sets out at the top of the page, our trailing 12-month financial performance over the last eight quarters. These numbers have been adjusted for the accounting treatment related to the gain in CDI acquisition as disclosed in our prior filings, and which appears in the reconciliation provided in the appendix of this earnings step. 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 72% over this period for a 31% compound average growth rate. Our adjusted pre-tax income has likewise grown significantly at a 22% CAGR. On the right-hand side, you can see our adjusted net income in the bars, which is up 40% over the last two years for an 18% CAGR. The dotted line on the right-hand side represents our adjusted ROE, which has remained above our 15% target, even though our capital has grown 54% over this period. The bottom half of the slide sets out our long-term performance, both measured in stockholders' return which is the bottom left graph, in which we have significantly outperformed both index shown, as well as our financial performance on the right-hand graph, which shows we have grown our stockholder equity, operating revenue, and market capitalization at nearly 30% compound growth rate over the last 21 years. With that, I'll hand you over to Bill Dunaway for a discussion of the financial results. Bill, over to you.