SNEX - Earnings call transcript Q2 2022

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Operator

Welcome to StoneX Group's Second Quarter Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After the speakers’ presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Bill Dunaway, Chief Financial Officer, please go ahead.

Bill Dunaway

morning. Good Bill is Dunaway. name My to conference quarter for second earnings March Welcome XX, call ended XXXX. our our After the of market reporting closed yesterday, we issued for second our a our fiscal quarter XXXX. results press release on our presentation, in results. slide will our This report of we is website www.stonex.com quarterly as which this as on to our at refer discussion a well call year-to-date available and

the and to sign will of You the order presentation. to available to be call's our webcast in on after view will an The on presentation need webcast live the the archive also website conclusion.

well are Before recent the XXA getting forward-looking most taken with of with filed underway, the and XXE to This Securities Form we should conjunction the the which These amended. in the required financial Act Section of note within in statements participants may Exchange unknown XX-Q and SEC. following be are Section as Securities of discussion contain statements and detailed as filings SEC. all forward-looking as of and our the risks should and XXXX the statements you known discussion notes with the uncertainties, involve as amended XXXX advise and meaning Act of thereto

Readers Sean guarantees the I'll performance. that forward-looking Company's turn any that, results by statements call no or undertakes Company not Although or conditions, new whether expressed business actual future as the forward-looking reasonable cautioned and obligation that statements. now differ Company over a there assurances any results forward-looking otherwise. are of future revise materially Company's not information, any implied can With that the of CEO. will its assumptions statements. believes Company's forward-looking to the market or upon are from update based result O’Connor regarding its events statements the future be to The publicly no are

Sean O’Connor

Good thanks second morning, for and call. our fiscal earnings Bill. quarter XXXX Thanks, everyone, joining

generally What volatility, there, during geopolitical came financial Ukraine, turn and markets. market time significant anticipated inflation response business the not our from more favorable had QX contemplated last our in conditions Russian too. as the we call, added uncertainty the which for which the fed commodity especially invasion of market mentioned I shock, is As the and

mentioned, As volatility previously are revenue a moderate for have good a rates. number we market certainly interest decent conditions provides Extreme times volatility ideal of of market short-term opportunities. us level and

a However, charge. also to liquidity stress our generally potentially on leads higher, clients, debt to which bad leads

positive net ensure management approach still are when we a shareholders and that our line. bottom results market see Our for is events, risk to our the these extreme

Our team the has become now reacted. situations, had experienced exceptionally process, pleased which DNA. over has I into shoulder and people and office risk shoulder standing a front we our operational implemented management running risk to StoneX We was time many problems. with and how such potential have team robust embedded towards

conditions. management well our before adjust market occurs, starts continually all we clients risk are on onboarded set test client stress and Our positions as for accordingly and process elements we of and ten portfolios now any changing crisis

the And and want with. deal they again, of and with is course they opportunities a these do sure Not their recalibrate to they and market make and taking clients mitigation provide extreme are the rethink they where understand once have conditions associated job events. only to type deal larger clients Our who liquidity clients banks, our risks, immediate risks of also market these sufficient reside. cause revenue but to assets to navigate plan the

for is result the set record period. earnings, record we we As to a previous such the we experienced in following quarter core business seeing prior number The we transition of a are clients to best their situations, year operational looking achieved in us.

XX.X% for and was previous our book book XX% against a comparing tangible on actually we're the ROE basis. So quarter value stated record. on

quarterly earnings XX.X% share. and achieved of stated a On an Our earnings basis, book we share. $XX or ROE per per or on $X.XX year-to-date $X.XX of million were $XXX.X Million

environment over with that sporadic positive We our for the both provide tailwinds the or continue drivers the its for positive so the us and year will interest market next volatility withdraws and some fed market direct business. rates to increase, believe support as for

all X, our up the XX% starting for Turning now. with slide now the prior as down Operating until metrics physical on X%. was basis, the key securities, increases products in increase, revenues against contracts. Transaction with the were period, the operating and all securities double fact, for revenues to a strong quarter which except On deck both comparing operating well record basis. and volumes year-to-date as areas result up year-to-date Slide the for digits in was remember were product except which quarter number in for

capture days pandemic. COVID ever being quarter which increased of five In significantly and onset periods. securities, which the the XX% days and initial CFD period to down and date, FX have for products except counts declined in busiest fact, the the year the we respectively terms contracts, Revenue of X% in marginally of volatility, most three our of XX% two during both for was other transactional in

up to billion, now as well imposed growth up rate Interest $X were over earnings margin client both aggregate balances. Due a new experienced the we securities client strongly start year the from earning and see to increases. on side list due XX% average should in both as rates as gain. accelerating at to as respectively. derivatives ago year float balances exchanges on up on interest Our of client the versus the XX% And ago. market periods share XX% volatility system. versus the higher a There due higher well for were clearing Revenue Interest hikes across XX% board, are by to stands starting strong up the and now revenues volume operating Strong XX% And records float ended board three increases work Versus the down were rate average up both global the digit global way in payments board, product the increases across contracts, revenues up being the versus the physical for was were quarter. prior except and months them. prior OTC capture our to for December marginally except which immediately client immediately was through start And marginally prior were their payments, the quarter which XX. across double and XX%. down.

and trailing the except Moving operating for XXst, ended basis, at versus a digit to X XXXX. months physical up looking March across product XX-month There which contracts, XX XX% increases were unchanged. period revenues on derivatives, board board and same trading Slide the the our which derivatives, the revenues metrics up double modestly. performance increases were was up in record for were across and however X% OTC only prior Revenue Strong up and in volume securities and of securities, in a CFTs. the except listed declined was FX was in capture listed which

on float and interest earned XX%. balances up was average up Our XX% client client was

incentive the XX% four three retail. X quarterly accounting Turning record. payments achieved slightly the We Most and its several immediately costs, variable notably, record other last versus expenses of adjusted I've information fixed behind quarter, fixed of prior operating as commercial a and calls for costs the an touched our increased segments, was and We compensation the earnings impact again the which the on $XXX.X prior a basis, the also Global compensation which prior includes discuss of game high is to Slide and the and compensation transaction. but ongoing up strategic the Total quarter. institutional of revenues summary which expenses up X%. were as on over system for trading this later over a period, initiatives reported, on non-trading recorded million revenues increased quarter. XX% will year result compensation, to market other technology including due record call. costs of will Other

I spend Our times we are XXX% and over while represents $XX.X selling B flex digital is and when operating effective. X.X% operating not the activity were variable, a above of due X% slightly costs of on trading it marketing although our to marketing XX-month revenues. market the year is market earlier. debts Bad This prior heightened stress mentioned it basis, of up million more during revenue targets, technically the

that much So very in target. line with

or earnings were $X.XX, million representing per share Our XX.X% a diluted ROE. $XX net

summary adjusted basis. an the million XX net up trading of our period months, million are prior $XXX for $X.X the revenues at on comparable and XX% the income Looking was $XXX.X

Our adjusted was an training for $X.XX months reported basis. EPS on the a for XX XX.X% XX.X% or ROE

than similar increase. quarterly Our the and time. immediately billion-dollar eclipsed of the shareholder XX% quarter quarter value EPS per We earnings $XX.X were a share prior showing first ended for benchmark with million or with book $XX.XX the up higher equity the

were was sequential revenues operating highlights were the summary, into versus results, up our XX%. Retail and income to segment records. records. income growth XX% and which is segment was the for to gets showed Slide and operating operating increased The good which quarter Aggregates standouts XX%. year. our payments XX%. quarter new segment basis, XX% Global on segment, income, revenue Turning segment XX% more segment just increased and revenue, X, up a XX% On income, operating up X%. operating both revenues segment up before Bill up last for the detail. is touch revenues record up up new segment and commercial income XX% XX%, the XX% segment and Also, were Institutional revenue both

lower to versus the was income period. down segment revenue However, comparable due capture X%

take we much months, the are grow the across of we digit down how the which for These results. we But with XX%. XX For growth repeatedly, as manage we is the the same view see franchise. board, quarterly segment, security trailing in Company double except our and said long-term a strong

results rather As to in best longer specific quarters as way is trailing term such, at we the gauge XX such performance, isolation. our the taken months, progress to look believe than and

X, numbers related appear the the adjusted our treatment GAIN servings last financial accounting in which our prior and page out deck. as filings to performance, the Slide reconciliation to on sets for provided these trailing have the disclosed in XX-month the acquisition of Turning been

graph bars side, If trailing at on operating represent blue our revenues nine the XX-month you over quarters. last left-hand the the look the

a see, strongly this and smooth remarkably As you upward can trend. has been

steadily and capabilities. As our we footprint have expanded

Our are up XX% annual this compound revenues XX% growth. or over period

income, XX% adjusted XX% has likewise, at pre-tax Our grown for figure. significantly a

that, XX% see adjusted Bill right-hand I'll over results. With net yellow the can bars, this compound Bill? Dunaway XX% which financial in hand growth over to side, discussion the up On for the you a of income is rate. period for annual a you

Bill Dunaway

I'll income Slide quarter. covered statement quarter for second which consolidated X, Thank the shows consolidated number be Sean of for XXXX. the the of fiscal you, highlights our with Sean. starting many

in costs expense just X% related primarily transactions. business, as and due period, to lending to on our our Variable of and retail year in million to the client with to higher operating head volumes the as $XX.X management facilities Transaction to up the versus in to due based derivative prior gross period So Introducing and activity in XX% increases represented few versus a our and to period. were the discussion. million I expenses as in salary activities, in revenues the fixed listed $X net Fixed immediately $XX.X year, increases highlight versus compensation of $XX.X to versus current increased were operating clearing borrowing the as in broker wealth then listed well commissions, increased well revenues net current financing segment the prior in million. businesses. higher compared the will subsidiaries. of due benefit compared to year and short-term up year were FX net up due $X prior derivative move to million the $XX.X Interest period the compared in million to funding year. prior as increased we which XX% X% principally XX% primarily current $XX.X an in increase count, million $XX.X expenses million million average the an of cost to prior securities increased OTC revenues prior preceding compensation related operating to year And increased quarter. Other increase the increased as on increased

increased to in and in selling expenses and the marketing extent digital fees to increase compared in and related marketing meeting. our increased in an increase selling in to prior marketing business, bi-annual relates $X.X strategy The cost sales global year to million $X.X million. lesser a professional primarily our retail and As FX

and information market and million million support expand non-trading our $X.X of systems million to and to digital increase software. amortization increased $X.X relates primarily trading $X.X our part addition, an initiative Depreciation as offerings. increased increase In in developed internally technology and and

the $X.X compared Finally, prior year. to we business see increases travel as have started in and development, to increasing million

of expense million prior As year bad recorded $XXX,XXX in for $XX.X mentioned earlier, the we debt Sean versus the period. quarter

period, settlement, fiscal the class $XX million immediately on gain During $X.X over is antitrust a consolidated the for the action Net the XX% the represented as foreign and statement. the a another XXXX increase and over income which income preceding reflected second was of exchange prior XX% current year we quarter received increase quarter. million

quarter Finally, the share per was as we value with out share, $XX.XX $XX.XX share per asset ago. to year compared the close net per a

LME performance Slide increase were The million $XX.X the the information compared metals. year million as derivative energy versus physical primarily commodity XX% average operating a million million million preceding in of contract, rate metals comparable commercial quarter, our Moving was revenues OTC as transactions and provide revenues commodities, prior year in this derivative X, up $XX.X result in quarter revenues quarter segments. quarter some in in million strong in the agricultural result as prior quarter, of period a with operating of number commodity I'll OTT prior volatility decrease strong contract, particularly a result on a physical revenues a year well operating strong adding the the for revenues increased $XX.X precious heightened and to prior for $XX.X XX% year segment per segment year $X.X versus increases the on the prior and as a global immediately versus agricultural a average within derivative $XX.X revenues, as in per by markets. which a as had listed operating Operating energy rate of decline metals. a result versus million Driven performance and respectively. XX% result a volumes as $X.X being declined $X.X from precious of record million to

charge an principally as increase increased and in million for an quarters in in million XX% on year increase Finally, the client $XX.X versus respectively. viewed interest on income client earned $X.X Segment XX% increase interest balances period, average as preceding was the customers equity, certain X%, balances. margin well of year over the prior prior as this to

more number operating as versus benefiting FX revenues segment by driven and which RPM heightened a a securities primarily year, RPM. our million Moving million was wider increased modest client the from $XX.X to were $X.X compensation than current million well the income driven primarily market a expenses half million in $X.X $X on bad institutional increases increases result The and fixed variable as were versus preceding of and trading related income X% prior the quarter, derivative expense, the million increased increase year. depreciation a on fees in a $XX.X operating non-variable to the securities professional in segment Institutional and in operating and quarter average increase of million decline increase $X.X period. interest equity Slide result one revenues, information, as $X derivative Sean million, as million increases million $X.X of in increased a as earned XX a mentioned well Segment to a in respectively, primarily respectively interest increases as enlisted primarily million to versus balances segment on year, rates. compared revenues. year, a million revenues, short expense, increased increase quarter. the prior $X prior in prior pandemic in and as as revenues as offset and decline $XX.X listed systems transactions increase period increase The volatility driven amortization, related million primarily XX% to $X.X as in as securities direct result compared in $XX.X million to debt expenses daily declined markets. term by increase than in in has million well revenues declined related well in client digital the in revenues volume due global operating a initiatives. average increase prior COVID operating $XX million the and by FX in widespread in was by preceding was increase volatility in respectively The spreads first more immediately compensation of our and the $X.X versus $X.X million as year in Securities-Related offset by non-variable the part to immediately prior a and calls, XX% XX%

as a is increase added reach Moving Operating $XX.X volatility compared period. million operating physical primarily versus as and versus the which million increased next on and increased Closing settlement. year, million out driven during depreciation in segment volume action the increased discussion segment Segment earlier. receiving a related million the expansion metals information, to revenues period. the operating the increase increase the increase segment the the as primarily previously immediately $X.X prior and increase X% added out a prior and mentioned the expenses, partially million increased decline, XX% a global immediate a however in next and in revenues the year. $X.X of average year $XX.X by to the compared to result versus by the $XX.X in prior $XX.X and Operating of slide, the a versus is revenues revenues operating $X.X retail $XX.X in preceding income versus year driven in in primarily XX% financial $X.X increased of in from direct million of In an increases the to quarter, mentioned on a year increase in markets. $XX.X heightened particularly a as and our precious the to result increased selling year million primarily is payments operating the the ADV period. systems XX% revenues the income million prior year, result Non-variable transactions $X.X million XX% $XXX,XXX as increase RPM prior per payment trade revenues global quarter FX offset CFD revenues operating well prior $XXX,XXX revenues $X.X of increase our current non-variable market by as million as the as security and and million result versus marketing expenses the versus by slide a retail versus million primarily This and and in in prior million settlement I daily increase amortization in class rate strong Segment $X.X in income million offerings. segment

However, the decline versus preceding quarter. X% the immediately

have between operating Moving bridge for operating Slide the segments, of quarter our period are our on number or XX, in revenues segments. the the million represents to first current the period last year. change current year $XXX.X I a across operating for operating revenues to $XX.X covered XX% which revenues the in of prior over million overall

improved is million and The However, UK prior overhead is next current year Slide the a revenues million $XX.X number increase XX unallocated increase result of $X.X increase as on the of subsidiaries related million increase a million period. $X.X a and in quarter I selling revenues. variable a $X.X capital's professional gained in million negative and a to increase $X fees, FX the including million increase depreciation income and of to compensation the income $XX.X of in variance net the $X increase million $X.X performance, amortization, $XX.X $X.X internal fixed represents in expenses. in decline a million in related of as a technology million in non-trading marketing GAIN benefits an well the expenses, operations in in of bridge support mentioned just unallocated period. $X.X from The and as merger XXXX related million to in primarily unallocated decline pre-tax pre-tax second overhead compensation in and million in

quarter, current increased balances that in interest rate in term late XX, and Slide X on these increase basis period. well invested client annualized basis a XX short crop the our on balances change moving term to associated points The points depicts earned shows as the earnings rates basis for Finally, in sensitivity points as by number XX occurred quarter. increase average a fed which client rates table, for the which industry short in

as will increase subsequent hike the So as basis point of in yesterday's be effect start well quarters. that XX to seen

million, As Sean noted to net increase with we point share the increase interest per a basis. it for noted XX rates client increase balances a an table on like With discussion. in to turn in hundred earlier, $X.XX would would our I estimate that, basis short in annualized strategy the back term income by

Sean O’Connor

Bill. Thanks,

are Turning now we to Slide that up the on. which XX, sets objectives focused strategic management as high-level

I repeating are have new think the before, those this but slide included for We call. it's worth to that

liquidity keep is and objective us is clients. more client forms This to markets, expanding the to to continually more our to of capabilities products cornerstone which financial primary offering access to objective, our grow We ecosystem geography, want our will and sources and diversifying diversify more If clients growing relevant make Our by we while base. more of platform. be as which relevant attractive to our this easier. to segment we next market more our have by client that traffic as and commercial, ensure ecosystems, institutional, generate are course becomes of client want to well are obviously enhanced. our We base retail we across and base

client continue and efficiencies digitize, increased to to increase digitize to in business we scalabilities, as As engagement. our operational will which as we well need internal revenue drive

more offer expand a digital ecosystem, is market. digital opportunity us. clients environment, we we for for total to every access addressable our our As an client anywhere ways massively In

support going has proven is to when are supported believe a the projects we have of in undertaking with quarters I've acquisitions. we strategy disciplined allows potential to growing appropriately Our create I'm simple in successful markets well be we more capital business not regulatory focused us price, XX the granular or last capital a internal to given view earnings six and consistent to as years our as and capital the approaching various need through the This needs over is considering our capital on business. segments. to all we This be so runway been deliver again. them to for go and effective over when

we delivering these some next the in However, and progress be of excellent will new to many three continue make milestones months. hit in six capabilities, to of which our launched

focused would I our summarize think client initiatives follows. as I

Firstly, digitizing our we leverage offerings high base expertise payments GAIN that our transaction. typically access we agricultural producers of acquired to of broader a to approach, smaller support happening touch in doing a This advantage with cannot clients some and serve so the the amongst farmers' initiatives. is where with are looking platform, globally, to commercial, smaller other access small are looking we

our we products something out retail which of acquired we GAIN. expanding and capabilities, to include more when is Secondly, our laid platform

Our leverage investment is internationally together and platform. currently to traditional trading be offer as enhancement more securities a equities being retail significantly will well one cash to with be and feature offer soon significant products platform and crypto enhanced products FX speculative assets. offering rebranded will domestically This on as

out to client a good continue products keep technology expanding narrowly We of make commercial more and groups, focused, customers. this them our is StoneHedge to and customized stickier. Third, example want with target embedded to those brand capabilities. roll our to large solutions to

the dramatically have our in expanded U.S. capabilities We securities

income so side, equity the classes. and Over continue we last and the cover asset almost years do on all fixed where now to five

Stocks. out the market to for are Based US course includes global additional team make to electronic at with equity This now these and a leverage that all as US are see in we investments in can into also capability And our due making largely we more will capabilities revenue. segment, domestic of investments in rolling You the believe moment. business securities increase reduce costs continue our fixed institutional looking they

made And market. hires precious global physical is US inroad have security local payments team team the the into our in building side made good has some currency excellent metals on capabilities massive We capabilities pay UK The the metals and in expanding precious the for this Singapore. have progress the made core recently key

beta The can to number some have we three which these but our you of of in in a rolled as to be large form released So flight, as some of clients, these for projects worked pretty is base should to good see, all next most client have be started fully broad many launched limited have exciting. of time. news, on nine been in some out groups to months, of and which the and initiatives

As a market was to passed higher, in December, raise by ago had start would the the interest last months. that basis late three our when call funds thus market move the we call we rates year-end. hundred interest this mentioned, rate signalling in fed points to months rate about The expectation fed started probability the coming for of a

very time there's now risks while growing. we dramatically are a all around As points, at basis recession data still the know expectations uncertainty this changed inflation lot US now showing that the high same with XXX of around where will with settle

there's We fairly no it thought in ago. float. is as may months a certainty should going up faster anticipate on look growing starting certain final We'll outcome be three the like, yields longer-term that what the to also While than average will to that close client we and in QX, we rise to curve start attention yield in see pay our where to our yield lock earned on attractive continue float. rates steady possible

refinance debt. started have we the and company Finally, restructure our holding process to

term support our joining parent several now as additional facility existing new for capital renewal remaining debt bank our to of $XXX banks also three have expanding structure. as turn to in from million the well the under years syndicate, with the lenders, million $XXX closed from who level capacity will our while the facility attention We more our

the to $X.XX of which through stated show of and longer-term quarter six-month also our XX% our growth have as book for Let's strong steady earnings products at on operational of move achieved trailing EPS was and compound annual to ever million, months, slightly and with diluted our XX all is revenues million the results conditions XX. XX.X%. When XX%. we earnings an continue across and $XXX.X market best anomalies, of rate our of an of growing we've all $X.XX, ROE our quarterly This This had strongest viewed the a and ROE Again, segments. EPS is earnings results final client Slide a trajectory evens to dilated with at date $XX XX.X%. good and such period period lens, upward excellent the performance six-month adjusted

as to a in or these provides we up, with market which market This engagement. growth base strong see underlying scalability heightened associated make our business as platforms by increasing interest client rates platforms, that while to profitability. our more the accelerate integrate platforms to type, are our combined we see volatility trading our discussed, continue tightly engaging behind in these number start some seeing volumes our overall for will year we we the which assets, launched, up client clients financial and next just and with client so. puts will we're should our it initially ecosystem them growth and interact tailwind for with of actively We further digital and speaks standing This costs growth a being client and with increased real client increased technology to margins a year, to offering bringing

us. space in and and financial comprehensive market, monetize these certain client of have niche a unique opportunities. lots demonstrated remains front capabilities, our shares, need good have addressable relationships We very we with but market where large now to of areas ecosystem of in a certainly have and already We segments white market

team. one will be last constant for said, thing always we time, StoneX the As

best providing continue better footprint ecosystem to Operator, you. ourselves questions. dedicate growing are any them service the financial ready if growth our we markets. We global are the to there client world, and access financial around serving by the to Thank with

Operator

Jefferies. question [Operator comes Daniel first Fannon with Our from Instructions]

Daniel Fannon

talk first hoping there's health I quarter moves kind about was you your engagement, volatility activity, negative base of some levels that the predicting of the any wondering sustainability or to impact all and could Obviously of is metrics. customer but that those future and of about occurred thinking of through customer if your in flow just given the base. and hard the to something of do is some extreme volumes

Sean O’Connor

Yes.

I stress work you the sure when mentioned see in my to stresses and at that We to clients fully them. come that obviously being on are handle our do prepared volatility as into that. see we not debts for So hard clients translates obviously liquidity prepared bad clients. make remarks, able But extreme

certain So some we to of a of see our a out wash clients. extent,

see that You a can $XX bad we in had off. debt our numbers, write million

these think damage So as I over some a volatility I part, system. said, good comes always time take. that up and Because time. really will very obviously we synced they Because large elevated of have hope client I the risks understand that's ourselves our we type clients And we be sure a to our period any clear right? situations. think think from clients clients fallout, made honestly, they with mitigate that evidence of long But in risk I management we want for there's these

the market think off clients have largely, don't a on in extreme of anticipate because would our say really volatility able huge I on think them obviously came activity, side well. the elevated commodities. fall I most of in ongoing conditions dependent the we given weather saw, I commodity to were I very the well done prices So through that's Many general base of storm. but client

I So factor. a significant think don't that's

think going of dictating out are sort get kind clients. of those significant, think more revenues forward the will what conditions I in I market of

we see financial is market to broker the they're. clients health a clearer up of start want of this, of a kind the like They rattles I'd picking every of everyone point make, worry up make about I did or the which to up little is What my to second end comments in sort we This market time sometimes. we've prepared bit. The seen lot share. go

that's few are sort in one tier public. of of second space the We the

and we So typically most competitors. capital have than our more of

So become bit an we easy choice. a of

biggest We also financial ecosystem. have the

we a come that's their us So a business across And want customers what helpful. of credible to counterparty. move always lot and to perceive to do very find to be they more

smaller business, to secondly, reassess as have higher typically to then well. get pushed and from the sort And out. they before. focus oftentimes little sort this their bit seen we we've the of perspective start banks value see seen on a when approach they which their that the of as And clients clients get means the and rattled happening kind been of volatility that's So

a us, this So customer is for good for opportunity acquisition.

the onset maybe I at we up if increased which happened float not the definitely think you think of happened that, and up a XXXX, I going COVID, I at went in shares. what think and same quarter quite post the to and extent, sort what up looked of lot we'll And we'll if the volumes but in in was back of March up some see you picked look definitely market market our of share that same, increased client in significantly. see showed showed

positive So on on I a think is I the would balance client net for this say us side.

end and potential market client up think potential. that more going we'll How clients conditions gets forward. more depends unlocked on with I

there or So and any if comments. see I'll further answers stop if Bill your has question, that

Daniel Fannon

helpful. back associated a I And went negative, that statement debt WCI no, just Yes, when super to and were some effect the bad your lagged think with on guess if income repercussions of that's I that. the

So if the it of that. think handful was widespread? want insurance for about Is breadth across potential quarter to clients? the Just of Is what recovery? it occurred the a about you there think in

Sean O’Connor

effect. hard of the the to thing The out clients their kind chain. third predict COVID that event, sort and certainly and is would that one We a there delayed becomes defaults, second So goes Yes. but of be they in have performed, of initial which stressed derivatives become right? if anticipated have clients the

to dislocation I same people highlighted so on and much you to roll to quarter, we lag very listen the on think post my there think debt. potentially that of the was that see in this out chains just We if how be was thing would that our comments sort that the would a hard March there supply I don't effect bad know today. call,

bad think sort mean, I I of I of sort good I is debts derivative second probability risk just zero. we being of that. it things, this very tail these to a lower. of can't seen think and a is feel third say the less of about a of relating we've of predict the there but volatility So hard to

see pretty depends of we think do good Now, obviously extreme we on are. I generally another what state But forward volatility speaking, about or and feel going it not? we happens where

typically debts, you an we we to conservatism debts, potential always discount from side or the the, clients through But decide bad we know, err very on try but anything, of clients and through tenuous. how they that we typically, recoveries review sometimes view. try Some of to analysis come Obviously, if weak recoveries and take we accounting bad to we for us GAAP are we of back. have believe or we when a to conservative pay take go those

for being So some I written amounts fall of we recovery think is could the potential that think that they of of sort for below certain and the there amounts comfortable I of have off. some that sort threshold happen. But

on So I I it's possible, but think wouldn't it. rely

question, does So that answer Dan? your

Daniel Fannon

very Yep. That side in the a does. obviously fixed revenue shifting the cost environment. growth and good to And costs

run the think some income mentioned, expense spend, of levels, in through as this that kind you're for year of about think budget the of on, all statement about the curious half growth of you just year. some these investments is costs but but fixed second the of anticipate about the of fiscal of rates the these quite half second your if exit expense for should of in kind we initiatives focused continued I'm that that we we know or flow of margins, we pace all your So kind growth good, or trajectory or the

Sean O’Connor

general we some the give happen by to but during to hire as been Well, year up the this some people. Yes. I more maybe specific of initiatives comment, staffing just what envisage would inability can say comments, have impacted Bill, a you is of of the

So we that filled be we have positions would still lots behind available. thought and are of

to expense some overall a next at think of But incremental increased versus spend the So on I of percentages sort installed there a coming small base. that us think is kind I amounts it's quarters. our extent, two basis, potential current for of over

big think been have of payoff the by And capabilities of most that's embedded. see the see upgrading, there's in a can our we fixed large, big and and, side, platforms we, those in think certainly I there's know, new we a we into of been we productive costs, increase to on. a some teams that, invested can but been in areas. have to time expanded restrictions the of you and them new sort starting security of a before we we people see we last mean, maybe I on on And know, and investment largely want. as digital the with up a you mentioned on that hasn't really that couple as and brought shown quarters out I as of revenue lot so become and set takes market lot

think if have comments for specific So two on to I don't for us, those I Dan things any know you work more that. but will start Bill,

Bill Dunaway

Sean. Thanks, Sure.

non-variable comp So know, is we're touched at looking certainly non-variable expenses, on, you when Sean up. as the

that If in incremental but is I the think you're hiring certainly increase. $X.X as looking we'll that versus salary is really, see the growth about underlying on, is most Sean do recent that difficult. million quarter, it's some million $X.X true up market touched

et spike And higher we of of year. Right? retirement at little are guess, I those and our last successful a call, first we're year. we the reset. as everybody's is them, So the see in air. calendar beginning both I cycles employer think So and would is do in I whether actually of taxes this a But be the quarter know, kind may touched QX contributions the the the hiring payroll contributions, of in cetera, to up on

$X.X of those and mean, are quarter. million both kind up sequentially respectively I versus first the $X.X So

over would Sean's last down, conference, in $X.X strategy that year also, and out of other was every selling the good name Dan the we those both that more sales the floor and happens at about as right? big they of here so that looking related and Especially sequentially I of get have some volatility, see comments, flexes, spending you then, their of mentioned And had some know, conference. versus million more bit and global we first years, customer marketing to as And in up quarter. people couple touched that, and to be a space, some when to in up we was large we'll as our on trailing acquisition, retail maximums. So that order try reached there periods of spikes, quite our have

volume see of think do repeated. some that I of we'll million. $X timing higher wouldn't So to that you $X the sense? quarter, and was touch errors And on tune income have Does non elevated a see taxes see in those some about flow just because were were I of of trade QX the the like that of somewhat did the that current and because do incremental make to the bit other also probably I just some in but with think transactions But kind growth, that of we not that there's that and, are technically business. things variable, that

Daniel Fannon

that Yes, does.

multiple by several I about the to the the and out you Sean, terms talked you for that ones in for the about, is any the and larger term, which initiatives specifics of terms guess, longer in income immediacy then the statement them size seeing contribution or opportunity? And in roll contribution, been Okay. order you've to talking it immediate quarters, of of

Sean O’Connor

any to the of this next in light to think I going initiatives sort quarter, term is these I think don't of up notably. longer a opportunity. medium are incremental

you to can better show that and sort something to think quarters steady way. into think growth just up of we growth. And speed don't is show do our us it's will up incrementally think that, it's something. which or the margins next allow this couple don't of I better platform, sort of that our time. kind digitization I of going a over right, up But in model should I if

Daniel Fannon

Right.

business back you down compensation about discussion to and top kind the Should cloud benefits more in platform and the are occurs of the ultimately Okay. of legacy most As of time. for and brand, new of you as pay-out practices? And businesses, any variable businesses? additional accrue the and is operating ultimately the come around as you that benefits more other, house, gets shareholders of--to of scale think do in we more pay-outs there's pay-out the to there adjust your variable performance, the teams as over structure natural building get commission leverage in pays at the kind of the terms hiring returns

Sean O’Connor

So I that. on would have couple comments a

us now force with I can of that been a time anymore. where attract And what out who it money do has positive very very talented for for pulling to people napkin are a a to make think we people, their we compensation proven well want over us. don't of because work to lot powerful, work come bulge big having company small the the bracket us. that back is our transparent we allow who way very banks we've for when cash banks people a they people compensation do a It's out the plan of allowed were on us,

with IT from see units, that think So small, going be do digitization, of the have careful will business been with I this, But that of over that, What very problematic. successful costs happen of teams forced, the need because got been technology happened us. and obviously when the move do to businesses have really benefit to I is into because have your think there's time. think that, they're has potentially, the have value. could be as what digitized, you we sort pushed no that these which this been has costs spend because I willing want for to the you're franchise point away meddling I I we've think do don't get we really to people the

plans up picking cost been their to compensation adjusted cost. have the So central not picking IT up from really

of end So bonus are bonus kind low of and that's the sort we you who particularly as up sales business change. people technology, digitize I salary people major and on a our trading up end and with and been who you flat think more just more compensated, less compensated. are commission And end, with

leverage from I some we coming as So operational see digitize, real should we think that.

business, XX% of people of are GAIN and the basically example, So and coders if you that proportion, people look They're of significant salary sort and XX, bonus. a at who business like maintain build they're the on in side very the for fixed the platform.

So I migrate is the our that the we will get high and scalability than all And our what slowly bit business. greater leverage significantly way. business we is that a from touch institutional will little operational think get happen from businesses what

target the problem have I I to a on We've of I the mean, way our of banks. don't which that side. any is compensation going ratio, XX% very So a happen. we competitors our is think carefully. as compensation investment measure set below we cost and what's think

ROEs current I generate plan shown for right our can investors. our think has it the

and generate I I think leverage problem, digitize time we've more think but change So operational as a will got more. don't over we sort it of

I is happen. going make That what think sense. to that's

Daniel Fannon

opportunity, Yep. more That potential in you're seeing of terms an for disruption occurring? terms share M business as of lastly, kind it ads? presenting and also gains landscape bolt should of Is we about of it acquisition, any from does. some organically. some share in And the just me, of type you of then the current that mentioned, the a fashion itself versus the fallout Or just customer and gains that's and on ads in think

Sean O’Connor

so lot increases of the we're work grow inbounds and that. are And in to situation I think sort known business. to in and do market, default well, our a always hard is Yes, would say we seeing of of a our organically organic I we becoming lot

said, starts everyone once I easier right when to you the base, that a through of of movement in always go my that. place. grab they're some to And volatility, As client to becomes wonder prepared in seems period a it in remarks increase if there's

I I our that'll a pretty growth. So numbers. it's environment think up show think And in for organic positive

In terms of acquisitions.

going I me, And is and little response M&A scripted been right. add of the landscape I overvalued have I market Zoom, someone my you, is even quarter, very tripped. And of that at have the seen enticed that Dan, the to those where a a that, SPAC to are to an of buy just Many we acquisitions. rolled are high alternatives. in asked historically have disciplined be that's value people for of of or up people. mean, a last over. mean, and competing of excesses want be a said them before multiples can historic putting value to. was I something, that's deep lot of and we buyers think environment were round mean against or I so not we've quarter I where just and bit, I businesses we of so right. lot earnings look of mindset lot well Netflix on sort changed we sort the might Having think think market ended the SPACs the it. overvalued mean, taking everywhere, haven't sort record for

sorts the shareholders these suffered on or that time events, sort side, who there So through traumatic then of some market. of go are some those I you end when in up itself in will reasonable price run And other out with not the of maybe the interested that excesses trauma are either of people expectations. who businesses. business being mean, could it so take before reflects models more holding

changed. landscape's the think I So

this acquisitions, point. becoming potentially be at that's but it's bit the think see nothing to of interest I a we there's little more conducive to at moment clear, material any just

So it. right at look business. the if grow right price, to continue are opportunity And organically to the comes with our available always we will we

Operator

like questions. session. closing conference there the further for time, This turn answer no this concludes management the remarks. question At to to would are I back over

Sean O’Connor

thanks I very attendance you All time. everyone. forward today. look speaking right. Well, And to appreciate Thanks months’ much. your in three to

Operator

Thank concluded. now is for today's conference The you presentation. attending

now may disconnect. You

StoneX (SNEX) 7 May 222022 Q2 Earnings call transcript