StoneX Group Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the fourth quarter full year 2024 StoneX Group 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 the session, you will 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 like now to turn the conference over to Bill Dunaway, Chief Financial Officer. Sir, please go ahead.

Good morning. Welcome to our earnings conference call for our fourth quarter ended September 30th, 2024. After the market closed yesterday, we issued a press release reporting our results for the fourth 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 in our discussion of our quarterly and full fiscal year 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-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 2024 fourth quarter earnings call. Starting on slide three of the earnings deck, the fourth quarter of fiscal 2024 was a record result for us, with net income of $76.7 million and alluded earnings per share of 2.3%. versus the comparative period a year ago, we were up 51 percent in net income and 48 percent in EPS. And as compared to the immediately preceding quarter, these measures were up 24 percent and 23 percent respectively. This represented an 18.5 percent ROE on stated book and a 19.4 percent ROE on tangible book value, despite a 21 percent increase in book value over the last year and a 60 percent increase over the last two years. We had record operating revenues of $920.1 million, up 18% versus the prior year. Just a reminder, 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 nets off interest expense as well as introducing broker commissions and clearing costs, were up 13% versus a year ago, but down 3% versus the record achieved in the immediately preceding quarter. Total compensation and other expenses were up 8% for the quarter, with variable compensation up 7%, in line with net operating revenue growth rate. Fixed compensation and related costs were up 14% versus a year ago, but were down 4% compared to the immediately preceding quarter. This strong finish to our fiscal years resulted in record full-year operating results for the third year in a row, which we believe validates our strategy and underscores the robust earnings potential of our franchise. Our full-year operating revenues were $3.4 billion, up 18% versus the prior year. Net income was a record $260.8 million, up 9%, with adjusted net income of $264.2 million, up 18%. EPS was $7.96 per share, up 7%. The return on equity for the year was 16.9% on stated book and 17.8% on tangible book value. We ended the 2024 fiscal year with book value per share of $53.62, 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. Generally speaking, the market environment in the fourth quarter was similar to what it has been for most of the fiscal year, with generally low volatility, some exceptions periodically in some of our products, which negatively impacted revenue capture in most of our product areas, except for foreign exchange and CFDs. As we all know, volatility can change quickly, and indeed recent events have proved this out, and we are hopeful that we may see better market conditions ahead. However, we continue to see good client engagement and market share capture as evidenced by increased volumes across all of our products. The earnings power from our enhanced client footprint should be even more evident with improved trading conditions. For the fourth quarter, we saw solid revenue gains of 20% in listed derivatives with strong volume growth of 46%, offset by a 15% reduction in contract rates. Both factors were driven by institutional segment, which continued to make gains with large institutional clients. In addition, the commercial segment increased both volumes and rate per contract as compared to the prior year. OTC derivatives revenue was down 23%, largely due to revenue capture being down 26%, offset by slightly higher volumes, which were up 4%. Securities revenue was up 34%, with volumes up 34%, and partially offset by 3% decline in rate per million. Over the last few years, we have seen the business mix switch to higher volume, lower margin products, although the impact of this on revenue capture has now flattened out. Payments revenue was down 11%, a theme we have seen over the last couple of quarters due to much tighter spreads in several of our key payments corridors, with rate per million down 20%. However, on a positive note, volumes were up 13%, which was the third consecutive quarter year-over-year of volume growth. FX and CFD's revenues were up 7% due to gains in both volumes and spread capture. Our interest and fee income earned on our aggregate client floats, including both listed derivative client equity and our money market FDIC suite balances, increased 10% versus the prior year as we achieved higher interest rates on those balances, but was partially offset by 2% decline in these balances versus the prior year. Turning to slide five and looking at the same data over the full fiscal year for 2024, we again see good revenue growth in listed derivatives, securities, FX, and CFDs, while revenue was down for OTC derivatives, payments, and physical commodities. Volumes were up across the board for all products, with the exception of FX and CFDs. On a long-term basis, this is an important indicator for us when it comes to measuring client engagement and market penetration. However, revenue capture is largely a function of market conditions, and we can again see a mixed picture as market volatility generally retraced to lower levels compared to the prior year, with the exception of FX and CFDs, which experienced a significant increase in rate per million, up 32% versus the prior year. In addition, we continue to see the effect of a change in product mix on the securities rate per million with increased volumes in lower margin products. Turning out slide six, our segment summary, just to touch on the highlights before Bill gets into more details. For the quarter, segment operating revenues were up 18% and segment income was up 9% versus the prior year. All segments were up in both revenue and income except for payments, with institutional being the positive outlier. Our commercial segment had a relatively flat quarter in both operating revenues and segment income. Stronger listed revenue, listed derivative revenue was largely offset by lower OTC derivative revenue. Operating revenues and segment income were down 20 and 29% respectively versus the immediately prior record quarter. As I noted earlier, institutional segment had a record quarter in both operating revenues and segment income, with increases over the prior year of 30% and 41% respectively, in particular driven by increases in equity market making, derivative, and interest income. On a sequential basis, operating revenues were up 9%, and segment income was up 24%. Self-directed retail had operating revenues up 13%, and a 6% increase in segment income. On a sequential basis, both operating revenues and segment income were up 8% and segment income up 8% again, demonstrating operational leverage inherent in the self-directed platform. In our payment segments, operating revenues down 10% and segment income was down 23%, principally due to the tighter FX spreads in several of our key payment corridors. On a sequential basis, operating revenues were down 5% and segment income was down 12%. For the fiscal year as a whole, the summary was commercial and payment segments were roughly flat for the year in both operating revenue as well as segment income, while institutional was up and self-directed retail was up significantly. As mentioned, the commercial segment was roughly flat with stronger results from listed derivatives and interest being offset by lower revenues from OTC derivatives and physical commodities. Our institutional segment grew operating revenues at 30% and segment income 22%, with all products showing gains, with the exception of FX. Self-directed retail was a standout, with operating revenues up 19%, driving 160% increase in segment income. Again, clearly demonstrating the operational leverage we have in a self-directed platform. The most significant factor here was better revenue capture as we benefited from improved internalization of spreads and a diversification of products traded. Payment segment operating revenues down 1%, but up slightly in segment income in what has been the toughest market conditions we've had in many years for this business. Turning 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 accounting treatment related to the gain and CDI acquisitions, as discussed in our prior filing, and which appear in the reconciliation provided in the appendix of the 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 63% over this period for a 28% CAGR. Our adjusted pre-tax income is likewise grown at an 11% CAGR. On the right-hand side, you can see our trailing 12-month adjusted net income in the bars, which is up 23% over the last two years for an 11% CAGR. The dotted line represents our ROE, which has remained constantly above our 15% target, even though our capital has grown by 60% over this period. The bottom half of the slide sets out our long-term performance, both measured in terms of shareholders' return, the bottom left-hand graph, which shows we have significantly outperformed both indices shown, as well as our financial performance on the bottom right-hand graph, which shows we have grown our stockholders' equity, operating revenue, and market capitalization at nearly 30% CAGR for the last 21 years. With that, I'll hand you over to Bill Dunaway. Bill.

Thank you, Sean. I'll be starting on slide number eight, which summarizes our consolidated income statement for the fourth quarter of fiscal 24. Sean covered many of the consolidated highlights related to the operating revenues for the quarter, so I'll just mention one item and then cover off consolidated expense fluctuations and then finish with a segment discussion. Operating revenues for the current quarter were unfavorably impacted by $4.5 million in unrealized losses on derivative positions related to inventories carried at cost will record a realized gain on the sale of these inventories in the upcoming quarter. Similar in nature, the prior year quarter was unfavorably impacted in the amount of $200,000. Moving on to consolidated expenses, transaction-based clearing expenses increased 25% to $85.5 million in the current period as a result of increases in listed derivative and securities volumes as compared to the prior year. Introducing broker commissions increased 7% to $42 million in the current period. Interest expense increased $70.3 million versus the prior year, primarily as a result of the $68.6 million increase in interest expense related to our institutional fixed income business, as well as a $7.3 million increase in interest expense related to securities lending activities. Interest paid on client balances on deposit declined $7.7 million as compared to the prior year. Interest expense on corporate funding increased $1 million versus the prior year, principally due to incremental interest from our March 1, 2024 issuance of senior secured notes due 2031. That issuance, which allowed us to extend our debt maturity profile and increase our long-term capital, was a refinancing of our senior secured notes, which were due 2025. Interest expense on corporate funding decreased $9.8 million versus the immediately preceding quarter, which included incremental interest expense on the defeasement period following the notes due 2025, as well as a loss on the extinguishment of debt related to the write-off of unamortized original issue discount and deferred financing costs of these notes. Variable compensation increased $7.9 million versus the prior year and represented 26% of net operating revenues in the current period compared to 28% of net operating revenues in the prior year period. Fixed compensation increased $14 million or 14% versus the prior year, which was driven by non-variable salaries increasing 9.8% or 12%, principally resulting from a 10% increase in headcount, resulting from an expansion of our capabilities among our business lines as well as in support areas to facilitate our business growth, as well as annual merit increases. Additional employee benefits increased $3.2 million or 14% versus the prior year. Fixed compensation decreased 4% versus the immediately preceding quarter, which included severance and acceleration of share base and long-term incentive compensation related to departure of an executive officer. Other fixed expenses increased $10.4 million as compared to the prior year, principally driven by a $5.9 million increase in depreciation and amortization, primarily due to the amortization of capitalized internally developed software. a $3.3 million increase in occupancy and equipment rental, principally driven by acquisition of additional space in London and the continued build-out of our offshore presence in India, a $2.9 million increase in non-trading technology and support, and a $1.8 million increase in trading systems and market information. These were partially offset by a $1.2 million decrease in professional fees, primarily due to the recovery of certain legal fees under an insurance policy. Compared to the immediately preceding quarter, other fixed expenses decreased $700,000, principally driven by a $5.3 million decrease in professional fees, partially offset by a $5 million increase in amortization as previously discussed. Finally, to close out the discussion of expenses, we had a favorable variance in bad debts, net of recoveries of $5.7 million versus the prior year, with bad debts being relatively flat with the immediately preceding quarters. The prior year quarter and immediately preceding quarter included other gains of $1.9 million and $1.8 million, respectively, related to proceeds received in class action settlements. Net income for the fourth quarter of fiscal 24 was $76.7 million, which represents an increase of 51% versus the prior year. Net income increased 24% versus the immediately preceding quarter. Now moving on to slide number nine, I'll provide some more information on our operating segments. Operating revenues in our commercial segment increased $3.3 million versus the prior year, but declined 51%.

There's been a record quarterly performance for that segment.

The increase versus the prior year was principally driven by an $11.7 million increase in listed derivatives operating revenues, driven by improved performance in agricultural and LME markets. In addition, interest earned by client balances increased $2 million as compared to the prior year, due to higher interest rates realized on the client balance. Operating revenues from physical transactions increased 2.4 million, despite 3.7 million in losses on derivative positions related to inventories carried at cost described previously, principally as a result of a strong performance in precious metals. Finally, operating revenues from OTC derivatives declined 13.7 million as compared to the prior year, primarily due to a 25% decline in OTC average rate per contract, due to diminished commodity volatility, which is partially offset by modest growth in OTC volumes.

Hey, Bill, it's Sean. If I could just interrupt you. Your audio is going in and out a little bit, so I don't know if it's your headset or you want to turn it to the phone. Okay. I'm sorry about that. Okay.

Fixed compensation and benefits increased 1.8 million versus the prior year, primarily due to increased headcount, but decreased 2.6 million versus the immediately preceding quarter. primarily due to decreased employee benefits and severance costs. Other fixed expenses increased 600,000 versus the prior year, but were down 2.4 million versus the immediately preceding quarter, with the decline versus the immediately preceding quarter being driven by a decline in professional fees. Partially offsetting these increases, we had a positive variance in bad debts, net of recoveries of 7.6 million compared to the prior year. segment income with $89.2 million for the period, an increase of 1% versus the prior year period, but declining 29% versus the immediately preceding quarter. As a reminder, in the first quarter of fiscal 24, 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've provided this allocation in each of our segments for the current period and and we'll continue to 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 $127.6 million versus the prior year, primarily driven by a $100.2 million increase in securities operating revenues compared to the prior year as a result of a 34% increase in the overall average daily volume of security transactions, most notably in equity markets, as well as higher interest income related to our fixed income dealing activities as a result of an increase in interest rates. Outside of our fixed income activities, interest and fee income earned on client balances, which is associated with our listed derivative and security clearing activities, increased 8.7 million versus the prior year, as a result of an increase in interest rates realized on these balances, which was partially offset by a 15% decline in average money market and FDIC sweep balances versus the prior year. Average client equity increased 1%. Interest and fee income earned on client balances was up 3.1 million versus the immediately preceding quarter. Interest expense increased 69.6 million versus the prior year with interest expense related to fixed income trading and securities lending activities increasing $68.6 and $7.3 million, respectively, while interest pay declined $9.8 million. Segment income increased 41% to $77.3 million in the current period, primarily as a result of the $43.7 million increase in net operating revenues, which was partially offset by $5.2 million increase in fixed compensation benefits, as well as a $5.5 million increase in other fixed expenses. As compared to the prior year, we had increases in professional fees, selling and marketing costs, trade systems and market information, and operations charges. Segment income increased 15.1 million versus the immediately preceding quarter. For the current period, the allocation of corporate costs to our institutional segment was 13.2 million. Moving to the next slide, operating revenues in our self-directed retail segment increased 11.9 million versus the prior year, driven by a $7 million increase in FX and CFD revenues as a result of a 7% increase in ADV and a 3% increase in rate per million as compared to the prior year. Operating revenues increased $8.1 million versus the immediately preceding quarter, driven by an 11% increase in ADV, partially offset by a modest decline in RPM. Segment income was $29.8 million in the current period, which represents a 6% increase over the prior year. This was the result of the 13% increase in operating revenues, partially offset by increases of $1.5 million and $2.9 million in fixed compensation and other fixed expenses, respectively, as compared to the prior year. The increase in fixed expenses as compared to the prior year is principally due to higher amortization of capitalized internally developed software and increased non-trading technology costs, partially offset by lower selling and marketing costs and other expenses. Segment income increased $2.2 million compared to the immediately preceding quarter, which also included a gain of $1.8 million related to the proceeds received in the class action settlement. For the current period, the allocation of corporate costs for our self-directed retail segment was $11.8 million. Closing out the segment discussion on the next slide, operating revenues in our payment segment declined 10% versus the prior year, despite a 13% increase in ADV. as the rate per million declined 20% as compared to the prior year. Segment income declined 23% to $24.8 million in the current period as the result of the decline in operating revenues, along with a $1.6 million increase in fixed compensation and benefits. Segment income decreased $3.4 million versus the immediately preceding quarter. For the current period, the allocation of corporate costs for our payment segment was $5.3 million.

And with that, I'd like to turn it back over to Sean. Thanks, Bill. Apologies, everyone, for the poor audio.

Bill, I think you need to switch out your headset immediately. So anyway, let me proceed. So slide 13 sets up the high-level strategic objectives that we are focused on. This approach and strategy has remained unchanged for 15 years and has served us well, and we've presented it before. Given that this is year-end, however, we thought we'd like to review this and prepare perhaps provide some examples of how we put the strategy into action during 2024. We remain in a very constructive industry environment, which aligns with our strategy, which is summarized on the slide. The comprehensive and significant response from the regulators around the world to the financial crisis resulted in massive increase in cost due to more complex processes and oversight, as well as dramatically increased capital requirements. This made it difficult for smaller firms and those with narrow product offerings to generate sufficient revenue to remain viable, given the cost and capital requirements, resulting in a fairly dramatic consolidation in our industry. The increased capital requirements, especially the Basel capital rules, which are punitive to trading operations, has forced banks to re-evaluate their strategy and focus on larger tier one clients. The large banks and aggregates still account for the majority share of market, but they are retreating. which has created significant opportunities for us. Both of these factors, the lower-end consolidation and the withdrawal by larger banks, has directly and positively impacted StoneX and has allowed us to post CAGRs close to 30% over the last 20 years. We still think there is a long way to go in this reordering of the market structure, and with our broad and unparalleled capabilities and product set, we are ideally placed to continue to take advantage and win market share. Additionally, starting several years ago, we started the process to reinvent our largely high-touch business and to become more digitized. Technology is an overwhelming force in our world and our industry, and if harnessed, can provide tremendous benefits to existing customers as we add more value and become embedded with them, allows us to dramatically expand our addressable market and to enhance our operating margins. This initiative gathered momentum with the acquisition of GAIN four years ago, which was a totally digital trading platform for active traders around the world. This platform was totally integrated with digital marketing and client journeys through onboarding to trading of thousands of products with settlement and execution of trades all automated, including the internalization of trading spreads. Although somewhat delayed by COVID, we have now started to leverage these digital assets and expertise throughout this StoneX franchise. We are now able to deliver our institutional-grade high-touch service in a digital self-service format to smaller clients and will no longer be constrained by our high-touch approach or by geographical reach. Every client everywhere is now a potential client for us. As we continue down this digitization journey, not only will we be able to scale, but we should see significant operating leverage. As already evidenced in what we have now renamed our self-directed retail segment, which we believe will serve to dramatically increase margins over time and allow StoneX to increasingly exhibit characteristics of a fintech-style company. First in our strategy, the first pillar there is building our ecosystem. We want to stay relevant to our clients existing and new by adding products and services to create the best financial ecosystem to connect them to the global financial markets. We continue to invest in our ecosystem by attracting talent, as well as investing in technology to expand our products and capabilities to better serve our clients. While these investments result in increased costs and expenditures, oftentimes well in advance of the ultimate benefits being achieved, they are essential to achieve the strategic objective. None of these projects in isolation will result in a significant change to our current growth trajectory, and certain of these initiatives may not be viable in the long run. However, in aggregate and over time, we believe that these initiatives will bend our growth curve upwards. In addition, because many of these are digital in nature, we should see operational leverage and scalability start to kick in, as well as a steady improvement in margins. In our precious metals business, we continue to expand our ecosystem and integrate into the global supply chain. During the year, we signed an agreement to acquire Silver Recycling in the UK, one of only two companies accredited by the LBMA for the delivery of good delivery silver to the London bullion markets, giving us a reliable access to metal while internalizing a refining margin and responsibly reusing and recycling secondary waste materials. We are also launching our own CME approved vault in New York, which will allow our clients to deliver and receive physical gold in settlement of derivative contracts, as well as hold precious metals inventory for our end clients. On the equity side, we continue to grow our electronic market making platform on the domestic NMS equities, leveraging our longstanding institutional relationships over 20 years from the international equity side. During fiscal 2024, we traded a record 118 billion shares. We believe that the ability to custody assets and provide prime brokerage solutions is the central and defining requirement for hedge funds, which then leads to execution and other revenue sources. Up until a few years ago, hedge funds were a new client segment opportunity for us because larger incumbent firms are not servicing mid-sized hedge funds appropriately. Over the last few years, we have expanded our U.S. prime brokerage capability into a global multi-asset class offering. Last year, we expanded in the U.K. to include repo financing and securities lending, as well as continued investment in our technology platforms across trading, regulatory reporting, middle and back office operations, all designed to augment client engagement and drive growth within our security and prime offerings. During 2024, we saw the U.S. prime business grow about 30%, In addition, we're able to internalize capabilities and spreads from our other existing business lines. Some of this growth was fueled by the growth in the ETF space, where we offer a unique custody and execution solution for the new wave of alternative ETFs being launched. Our outsourced trading business, part of our broader prime offering, continued to grow and receive some prestigious awards, such as Best Outsourced Solution from Hedge Fund Magazine and HedgeMeet. all signs of the growing awareness in the market of this capability. We believe our capabilities in this business, which is becoming a more integral part of our prime offering, are best in class. And during this year, we expand into credit and sell-side outsource trading, both of which are new approaches for the industry. The crypto market is now emerging as a regulated market, best served in the long term by well-capitalized and regulated firms such as Stonex. We have made some additional new hires for Stonex Digital on the execution site in the US. Our goal is to provide institutions with access to digital trading, custody, and services. To this end, we established the infrastructure to become a digital asset custodian in Ireland, and we are currently waiting for regulatory approval. Carbon trading is another growing market, and our primary role to date has been to provide our clients with access to select carbon trading instruments. We continue to make good incremental progress and have a small but growing revenue stream and client base in carbon trading. We continue to add new trading revenues and exchanges and products to our ecosystems to better serve our clients. StoneX recently became a member of the ASX exchange in Australia, the ABAXX for carbon trading and LNG in Singapore, and we now offer another 170 new listed products to our clients. In addition, we recently joined the Montreal Exchange, the TMX. Our Montreal office, which has traditionally offered commodity trading and risk management, has now expanded to offer broad expertise and listed products, including listed fixed income products. We continue to evaluate other potential trading venues. We have been expanding our capabilities and expertise in physical commodities to provide a comprehensive service from risk management to logistics and supply chain management to our clients. At the beginning of fiscal 2023, we acquired CDI, a physical cotton brokerage business based in Brazil and Switzerland, which now has almost doubled its gross revenue after its first year, validating the original thesis that clients see value in combining hedging services with the sale of physical commodities and the related logistical arrangements. In addition, many clients see value in embedding their hedges into a physical contract, which simplifies the accounting treatment. With this in mind, we are now offering the bundled service to coffee producers in Brazil and have seen some very encouraging early results. We are likely to see this approach expanding to other products and regions as clients clearly see the value out of this strategy where we are uniquely placed. We also acquired a small coffee team in Ethiopia, a big coffee producing country. Furthermore, we acquired a well-respected specialty coffee team in the U.S., focused on helping clients source specialty coffee from around the world. We continue to believe that there's a sizable opportunity for us to expand our self-directed offering to include all of the Stonex products and capabilities from CFDs to stocks, crypto, precious metals, coins, payments, futures, and foreign exchange. Doing this will dramatically expand the addressable market for our self-directed platform. We continue to offer new OTC products to address client needs, and have invested in our technology stack to do this faster and more effectively. We're now introducing dozens of new products every month, some of which are new and industry leading, which drives incremental revenue, as well as position StoneX as a leading innovator, focusing on adding value to our clients. We are a client-centric business, and we need to consistently work at growing our client footprint, the second pillar of our strategy. and growing our client footprint into new markets and expanding market share where we have existing clients. We will also seek to serve new client segments and channels. We have all the capabilities to service clients of all types and have a large addressable market in front of us with very low market penetration currently. Obviously, as we enhance our ecosystem, we are able to offer a more compelling value proposition to both our existing and potential clients. We have grown our client footprint significantly over the last 10 years, assisted by the positive industry environment outlined up front. We believe that our unique global financial ecosystem allows us to be the counterparty of choice and places us in a strong position to win market share. We have now leveraged the considerable marketing assets we have, especially on the digital side, to aggressively grow the StoneX brand and market awareness. Over the last year, we have seen a dramatic uptick in all marketing metrics. Unique visitors are up over 100%. Our Google rankings are up 2,000%. New leads generated have doubled, et cetera. Monthly searches for Stonix are up 14% compared to the prior year average, an indication of increased brand awareness and our growing interest in our digital touchpoints. Of course, the ultimate measure is the onboarding of new clients. And indeed, during 2024, we continued to stay in a very high level of new account onboarding. And in fact, Q3 was an all-time quarterly record for us in terms of client onboarding. In addition, we continue to actively market the Stonix brand and acquire clients through events that we host to educate our clients on how best to utilize the financial markets to add value to their business. We have a very good track record over the years of converting attendees to revenue-producing clients following these events. During the year, we hosted over 280 events and we attended well over 500 third-party events globally, continuing to spread the word of the StoneX franchise. A key part of our strategy is to build the best financial ecosystem so we can service most, if not all, of our client needs. This requires us to ensure we continue to cross-sell our capabilities to our existing clients to ensure that we are leveraging this ecosystem to broaden and deepen our relationships with our existing clients. This has now become deeply embedded in the Stonix culture and is something we now actively track and measure. Revenue from cross-sales has doubled in the last year, and of course, this is relatively high margin revenue. In many cases, our clients are now trading more than just one product or utilizing more than one of our capabilities. This is how the value of a true franchise gets monetized. During the year, we entered into agreement to acquire Octo Finances, a leading fixed income trading firm in Paris with expertise in bond and convertible securities, debt capital markets, and credit research. Octo has a client footprint of over 500 clients, including banks, insurance companies, debt funds, mutual funds, and wealth managers. We believe we'll be able to significantly enhance the Octo product offering while the acquisition provides us with broad access into the EU institutional market. As you've all noticed, we have changed our retail segment to retail and self-directed. As I mentioned earlier, we are looking to take our retail digital platform and expand its capabilities to include all of the Stonex products and capabilities. Together with our proven digital marketing team, this will allow us to expand our addressable market for all of these Stonex products globally. The self-directed retail platform is a powerful concept. allowing us to provide a curated list of products in bespoke ways to different sets of clients, while leveraging the ability to digitally market onboard service and execute the resulting trades effectively and efficiently. This is a multi-year project, but we have already started delivering on the potential in small and meaningful ways. On the agricultural side, our StoneX Plus offering, which utilizes the self-directed retail platform, has gathered momentum. reaching new clients and not traditionally serviced by our high-touch team. We now have over 300 active clients and strong and accelerating adoption, with many of these clients now large enough to warrant a high-touch relationship. Now that we have proven that this is a viable product, we are able to digitally market to hundreds of thousands of farmers around the world looking for risk management advice and the ability to hedge price risk. without the obvious constraints of our high-touch model or geographic reach. During the year, we established an office in Gift City in India to facilitate the trading of precious metals markets into this very important subcontinent. We also joined the local IIBX exchange, becoming the first international entity to be trading and self-clearing member of this exchange. Over time, we believe that our presence in Gift City will provide broader access for our other products and capabilities into the Indian subcontinent. We believe that the legacy introducing broker structure in the futures and securities business is an outdated model and will evolve as technology allows self-directed retail clients to effectively and efficiently trade directly with larger clearing and custodian firms without the need for an intermediary to provide the client service and onboarding. Indeed, this is one of the advantages we saw in acquiring GAIN four years ago to provide a self-directed offering to smaller clients. During the year, we facilitated a number of our introducing brokers to transition their clients directly to us, which provided us with an improved margin and the clients with a more effective and efficient solution. We believe this to be a long-term trend. We continue to invest and grow our EU presence post-Brexit with an expanding office in Frankfurt, to service our existing European-based clients and allowing us to more effectively market to new clients in Europe, which may not be adequately covered in a post-Brexit world. We have upgraded our regulatory presence in Germany with a full BaFin license and upgrade our EEX membership. Over the last few years, we dramatically expanded our product capability in Singapore, adding fixed income foreign exchange and commodity expertise, which should allow us to increase our market penetration in Asia. We have also expanded our licensing to facilitate a broader payments and securities offering. All of these initiatives have gathered momentum in the region, one where we are still underrepresented and represents a significant opportunity for us. Moving on to the third pillar of our strategy, we will not achieve the necessary growth and scale unless we continue to embrace technology to digitize our offering. It's not only enhanced client engagement, but increased scalability and margins. This initiative requires a rethink of our processes from front to bank, which has been underway for some years but is now accelerating. Many of the product initiatives mentioned above are digital in nature, so I'll not mention them again. But the advantage of the digital offering is they dramatically expand your addressable market so that every client everywhere is a potential client. It offers scalability and operational leverage to enhance margins. We increasingly use technology on the trading side. Many of our trading platforms are designed to aggregate trading and internalize spread so we can maximize the client revenue opportunity, provide a better price to our clients, and minimize our hedging costs. In this regard, we have made solid incremental process on combining flows. The broad diversification we have amongst client types makes internalization easier as there's a higher probability of offsetting trades. This is part of the reason we are seeing much higher revenue capture in the self-directed retail business over the last two years. We have also internalized some of the equity and index hedging arising from our self-directed flows, leading to higher margins and better capital treatment. Our electronic metals trading platform, PMX, has now become one of the market-leading execution venues, achieving a record daily notional trading volume of over $3.6 billion per day. We're also very active on Bloomberg FX Go, where we are ranked number one overall for all metal-related products. Our Stonehenge offering has achieved critical mass and is now the go-to solution for the large grain elevators of the Midwest. This offering provides our client with real-time enterprise solution to managing the incoming deliveries in multi-jurisdictional formats and to immediately hedge any resulting exposures. For the third straight year, we have doubled volumes on the platform and now have over 620 locations and 900 traders set up on the platform. This offering is a great example of how to use technology to provide a value add to our large commercial clients and to embed ourselves as a long-term partner in their business. We are now looking to expand this offering to include other commodity products and an expanded set of jurisdictions. During the year, we launched Loan Match, an innovative product platform that brings together increased transparency, liquidity, and lower transaction costs to the loan market. This platform allows institutional and bank clients to participate in open matching by entering orders on a confidential basis, which are then matched up and executed with pre-agreed costs. We continue to enhance our digital platform for OTC and structured products to allow commercial clients commercial hedging clients to run intricate scenarios that determine the best product for their needs and to get quotes instantly. Our risk management team has made significant strides and is able to more easily aggregate and analyze data with real-time monitoring to enhance risk monitoring across the entire organization. We have a number of projects underway.

Hello.

We have a number of projects underway throughout many of our support areas to better utilize technology to create efficiency and scalability in our infrastructure, which over time should drive operational leverage. Probably the most significant of these is an organization-wide technology solution to better and more effectively manage clients onboarding and ongoing monitoring and maintenance of client data. This includes onboarding, KYC requirements, as well as the required periodic reviews of all our different types of clients in all our jurisdictions. This is going to be an enormous and overly manual process, complicated by different regulations in different jurisdictions and also for all of our various different types of clients. The technology solution will harmonize and simplify our approach globally and will be significantly more efficient with a lot of client self-service options. This project is well underway, and we're looking forward to seeing the first modules delivered in early 2025. We are in the late stages of a complete rework of our global payment system architecture, resulting in over 90% of our clients migrated to our new cloud-based system, which offers significantly higher SDP rates on payments. Our internally built XPay system will deliver an ability for payments at scale and will eliminate costly vendor-based solutions. Generally speaking, we continue to simplify technology stack and have retired a number of large vendor systems. Our IT teams continue to improve key metrics such as resiliency, latency, and security. Several years ago, we took a strategic decision to refact our cost base by utilizing best cost locations. This applies to both technology costs as well as operational accounting and other support functions. This has already had a significant impact on our cost structure, and our use of these locations will likely to continue to grow over time. We currently have around 550 staff in India and over 300 in Poland. As mentioned in previous calls, a core part of our systems architecture is the data lake, which allows us to normalize data from all our books and record systems to be accessed in one place. We continue to make excellent progress with this. In addition, we have now introduced StoneX ID for each of our individual clients globally, allowing us to more easily match up transactional and client data globally. We are also looking to centralize all market data into a data hub, which should dramatically decrease the cost associated with data, which, as we all know, continue to spiral. And finally, our business is supported by capital, and we need to underpin our growth with internally generated capital access capital markets when appropriate, and approach acquisitions in a disciplined manner. The most important thing we can do is to continue to create a capital runway for our continued growth. This is why one of the things we focus on is ROE and compounding our capital. It's interesting to note that 10 years ago, we had all over $300 million in stockholders' equity and only a slightly lower number of shares outstanding as we do now. over this 10-year period, we've more than tripled our own shareholders' funds, acquired 15 businesses, and significantly expanded our client footprint, all financed organically from retained earnings and the unbelievable power of compounding. During this growth, we have achieved our 15% ROE target, certainly not every year and every quarter, but on average over the period, we are pretty close. This has happened despite the investments made in technology and infrastructure, the cost of developing these new capabilities, the integration of a large number of acquisitions, and despite low interest rates for extended periods of time. Achieving our ROE targets will be an important metric for us, and we believe as we digitize our platform and scale that our margins and ROE should increase. Part of our strategy here is to make sure we selectively approach the capital markets when raising additional capital when the capital is appropriately priced. During the year, we successfully refinanced our senior secured notes that were issued as part of the acquisition of GAIN four years ago. We upsized the transaction from original $350 million to $550 million and extended the duration of our long-term capital stack at a yield spread significantly lower than our initial issuance. So finally, to wrap up, let's move to the final slide, number 14. This was another strong quarter, despite more difficult market conditions, with solid results across nearly all products and client segments. We achieved earnings of 76.7 million, a diluted EPS of $2.32, and an ROE on stated book of 18.5%. This quarter capped the best fiscal year in StoneX history, with earnings of 260.8 million, It diluted an EPS of $7.96 and an ROE of 16.9%. Our stated book value per share is now $53.62, up 21% from last year. We continue to see strong growth in our client base with record onboarding stats in Q3-24 and a high sustained level of client onboarding for several years now. This has been driven in part by the effect of increasing capital requirements being applied to trading activities at the larger banks under the Basel regime, as well as smaller players being squeezed out by higher regulatory costs. We believe that this constructive market environment, our unique and increasingly recognized ecosystem, combined with the outlook for generally improved market volatility, despite the prospect of declining interest rates, puts a tailwind behind our business for the next year or so. In fiscal 2025, we believe we will see accelerated cadence of delivery of our platforms, which will more tightly integrate our offering by client type and make it more engaging for clients to interact with our financial ecosystem. Our self-directed digital offering allows us the potential to massively expand our addressable market, targeting clients globally, which are too small or geographically remote for our current high-touch approach. We believe that this has the potential to both accelerate our revenue growth and drive our operating margins as a result of the leverage digital platform affords. We continue to invest in our financial ecosystem by expanding our products and capabilities and talents. We have a unique and comprehensive financial ecosystem with a very large addressable market in front of us, which should only increase the expansion of our self-directed offerings. While we have good market share in certain niche segments of the market, a lot of white space remains in areas where we already have client relationships and demonstrable capabilities, and we now need to monetize these opportunities. One thing we'll always be confident for the StoneX team, we'll continue to dedicate ourselves to better serve our growing client footprint around the world by providing them with the best financial ecosystem and the best client service to access the global financial markets. The executive team and I are extremely proud of the talented StoneX team and continue to propel us to new heights. On that final note, we can open for questions. Operator?

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. And to withdraw a question, please press star 11 again. And our first question will come from Dan Fannin with Jefferies. Your line is now open.

Thanks. Good morning, Sean and Bill. I'm doing well. Thanks. I guess to start, I've got several questions on the segments just in terms of the quarter and maybe the outlook, but really centered around capture rates. So starting with the commercial segment, can you expand upon what happened in the listed as well as the OTC segment to take the kind of lower fee per million in the quarter.

Bill, do you want to take that? Sorry, Dan, can you hear me? I can hear you. So, Dan, I guess the story with the commercial business was We had a tremendous quarter last quarter. That was a little bit driven by the LME. We had a good pop in volatility on the LME, and I think you saw that with some of our industry competitors. That obviously was a bit more muted this quarter. So that certainly had an impact on some of our revenue capture rates, particularly on the OTC side. So the OTC market was a tougher market for us, but very solid on the derivative side and, you know, feel good about sort of continued underlying growth. So I think that the noise you see maybe quarter to quarter is sort of a reflection of market conditions, you know, primarily the sort of LME sort of elevated conditions and then returning to normal.

Sorry, guys. Can you hear me?

Yeah, what happened, Bill?

Okay. I tried to switch to another headset and it didn't work, but you covered the question perfectly. Okay.

Is that onto your question, Dan?

Yes. So I guess we should look at last quarter as more of an abnormal level, and this quarter as more of a, I don't know what you'd call it, normalized?

Yeah, I would say less derivative, Dan. That was the highest that we've seen, right? And it came out of the LME business, as Sean touched on. So I would say last quarter was an anomaly, and I think if you looked historically in that commercial segment, you were at high fives, low sixes,

six and a half, and we had spiked up over seven in that June quarter, but I would expect it to be lower than that.

And the OTC, this is probably the low water mark that we've seen over the trailing, probably 12 to 15 quarters. And it was just, as John touched on, just a little bit more difficult market environment with lower volatility.

Okay, okay, that's helpful. And then similarly on the institutional segment, the listed derivatives, you know, also kind of seeing the rate per contract coming in. Does that just mix, or can you talk about what happened there?

Yeah, I think we're kind of very excited, actually, about our listed derivative business on the institutional side. And if you look at it sort of through a longer-term lens, I think the nature of that business has, you know, really transformed in many ways. You know, and even if you go back longer, I mean, the traditional business of FC Stone is, was really to sort of clear what they called the locals basically it was the floor traders that was the business they had so it was a bunch of small proprietary trading shops and the like and you know it was a good business and we did very well but that business has now transitioned into a truly institutional business and you know the scale of the business is completely different you know we're dealing with very large etfs you know funds very large institutions that are looking to access the derivative markets. And, you know, we're very pleased about that. That's the direction we want to move in. And I think the reason we accessing that market is, you know, for all the reasons I mentioned in the strategic section, the big banks aren't that interested in that business anymore. So the, you know, relatively large players are coming to us. They like our ecosystem. They love our service. So that business has changed. Now, when you're dealing with these very big customers, There's obviously a different sort of risk and different economics. On the risk side, a lot of these businesses are very low risk because they tend to sort of just be long only and they sort of leave a lot of cash with you. They're not sort of proprietary trading firms. but they are pretty demanding on the commission side. So, you know, you have to sort of probably accept a lower commission rate, but obviously the business is so much bigger. So I think we're seeing a little bit of a change, you know, both in sort of risk profile to a much more positive risk profile, a larger sort of, you know, customer base we'd really want, but it's sort of at a lower price point. So I would say that's the summary. Bill, do you agree with that? Yep, yep. Yeah, exactly right.

Okay, that's helpful. And then just on the payments business, you talked about just the market dynamics in the quarter. You're continuing to see a little bit of softness within that segment. There also was some potential inorganic activity with the cab payments transaction. So can you maybe tie those two together in terms of what the longer-term outlook in terms of igniting growth in the payment segment is?

Yeah, sure. So I think we have been a leading disruptor in the payments business. I mean, we help people get money into non-G20 countries. That was a very opaque part of the market where clients were paying sometimes five percentage points in spread to acquire Kenyan shilling or whatever it was. And a lot of times I didn't even know they were being charged that, right, because it was very hard to find the rates. And I think we went in and sort of professionalized that market, gave it transparency, became a super easy provider to banks and NGOs and people because they can come to one place and we could handle payments to 185 markets. We could do it at best execution. We could do it at spreads that were much lower. So we totally disrupted the sort of traditional correspondent banking market. And we dramatically lowered spreads in the process and I think established ourselves as sort of a meaningful participant in that market. I still think we've got a long way to go in terms of the addressable market, but I think we're sort of well-known in the business. So that's the business we're in, and I think there have been – you know, some other people who have, you know, sort of tried to follow in our footsteps. You know, certainly cab payments is one of those, as well as some others. And, you know, we know the cab payments folks. We really like what they've done. It's a business we've looked at previously. And we still think there's a lot of commercial rationale for us to combine with someone like cab payments. You know, the real issue at You know, the real issue we had recently was just sort of a value discussion around price. And as you saw, you know, they announced there was an earnings kind of warning during the process, which complicated matters. But we would still love to see if we could do something with those guys if we could. I think it would be very additive to our business. But we're also seeing an environment there where there's, just like a lot of the rest of our businesses, relatively sort of, benign market conditions. And as a result, spreads have contracted. And, you know, it never really lasts for long, but across the board, we've never seen sort of tighter spreads in all of the sort of key corridors we have. And that's somewhat, you know, to a certain extent, we've professionalized that market. We've made it more transparent. And, you know, there are other players in the market. So we sort of created that problem in a funny way. But, you know, our job is really to always provide our clients with best execution. You know, we can't influence margins in the market. We are sort of price takers, if you like. But what we can do is we can grow our footprints and we can grow our clients and we can service the hell out of our clients and we can, you know, build a better ecosystem for them that, you know, attracts more of their business. Those are the things we can control. And I would say as a common practice, seen through our results, I think what you're seeing is we're doing that well because our volumes are growing, our onboarding is high. You can see that in some of the stats. You know, what's tougher for us to deal with is the market environment where volatility is much more benign than it has been. And you're seeing that show up pretty much in every product with just lower revenue capture, right? And we are price paper on that. I don't think there's much we can do to influence, you know, spreads in the market. It is what it is, right? That's certainly the point with payment. To answer your second question, we have, I think, a lot of exciting ideas in the pipeline on our own payments business. We've recruited a bunch of new people. We're going after new market segments. We're looking at collaborations with other folks. I mean, I can't get into lots of detail on this stuff, but we certainly see a way for us to dramatically expand and diversify our client base. We certainly have a proven ecosystem. We have all the major banks in the world dealing with us. There's a lot more business we can get from them. So there are lots of levers we can pull and a lot of hard work ahead of us to to you know execute on all of those opportunities and you know hopefully at some point we get a little bit of help from the market and spreads kind of normalize a little bit they they're about as tight as we've ever seen them right now okay understood and then just on as we think about expenses and a lot of the commentary you gave around digitizing the business and the efficiencies that come with it as you look to the next year and your budget

And thinking about how we should think about, you know, kind of fixed cost growth and the balance of investment versus some of that digitization. How do you think about the longer term kind of growth of that fixed cost base?

Yeah, unfortunately, as you know, Dan, some of the stuff is you have to spend the money first before you can save it, right? So, you know, if you want to digitize, you have to build the infrastructure and the technology stack first. before you can start to see the back end savings. Now, part of the way through that, so we are, even though we continue to invest, I think we are now starting to see some real savings. Now, some of them maybe don't show up in absolute reductions, but what we're seeing is we're able to handle growth without any incremental costs. So we're seeing some scalability and some operational leverage starting to come in. I would say as a general point, and Bill, correct me if I'm wrong, I mean, we're looking for pretty flat sort of expense growth scenarios for the next year or two. I mean, I don't think it's going to come down, but I certainly think we'll be at or around sort of inflationary type increases. We're working very hard to do that. And that's hard to do when your business is growing and you're trying to expand, right? Because you're having to realize efficiency somewhere else to pay for those investments you continue to make in your business. So think that's the goal we have um you know it could be hard work to get there you've also got you know the regulators sort of are in business to increase your costs and and make things more difficult for you so you know we got a cost push from the regulators we got a cost push because we want to invest in our business and expand our ecosystem which we think is fundamental to our long-term success but the offset to that should be we should start to see some efficiencies and some operational leverage from some of the technology spend we've put in place already. So our hope is that that sort of nets out to a pretty small number. So would you agree with that?

Yep. Yep. Exactly on point. Yeah.

And then just in terms of the fourth quarter, just some of the expense, like the one time or non-recurring stuff looks like DNA was a bit high. Professional service is a little bit low. I don't know if that's just, you know, are those good jumping off points or, understanding the context of what you said earlier in terms of the marginal growth, but just on the line item basis, saw the severance number, but any other kind of one-time items to just be aware of?

Yeah, I would say the DNA, as you touched on, is probably on a run rate going forward is probably more in the high 14, maybe around 15 million on a quarterly basis.

There was some additional assets software put in service in Q4 and kind of mirroring up with policies around the world around that.

But I would say that's a touch high. And as we touched on, there was a little bit of insurance recovery on professional fees. So, you know, I think we came in at 14 and a half.

You know, it's probably, you know, at least in the immediate future, probably more, you know, 15, 16 million number.

Okay. Thanks for taking my questions. Of course. Thank you.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. Okay, I would now like to turn the call back to Sean O'Connor for closing remarks.

Well, thanks, everyone. Thanks for joining us again. I know it was a little bit of a long call. Hopefully, you stayed with us. Very pleased with the overall results, and as I said, thrilled with the Stonex team for all their hard work, and thanks to all our customers for trusting us with your business. And on a final note, just like to wish all of those in the U.S. happy Thanksgiving next week and happy holidays to everyone else. Thanks all.

This concludes today's conference call. Thank you for participating. You may now disconnect.