Good morning ladies and gentlemen and welcome to the INTL FCStone Q1 Fiscal Year 2016 Earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time. If anyone should require operator assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference, Mr. Bill Dunaway, Chief Financial Officer. Sir, you may begin.

Good morning. My name is Bill Dunaway, CFO of INTL FCStone. Welcome to our earnings conference call for our fiscal first quarter ending December 31, 2015. After the market closed yesterday, we issued a press release reporting our results for the fiscal first quarter. This release is available on our website at www.intlfcstone.com, as well as a slide presentation which we will refer to on this call in our discussions of our quarterly results. You will need to sign on to the live webcast in order to view the presentation. Both the presentation and an archive of the webcast will also be available on our website after the call’s conclusion. Before getting underway, we’re required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto, as well as the Form 10-Q filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27(a) of the Securities Exchange Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934. 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 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. Sean O’Connor: Thanks Bill, and good…

Thank you, Sean. I’d like to start my discussion with a review of the quarterly results. I’ll be referring to slides and the information we have made available as part of the webcast, specifically starting with Slide No. 3, which represents a bridge between operating revenues for the first quarter of last year to the current year fiscal first quarter. As noted on the slide, first quarter revenues were $151.3 million, which represents a 10% increase as compared to the $137.5 million in the prior year. Looking at the performance in our operating segments, the most notable change was a $31.6 million or 184% increase in securities segment operating revenues. The largest driver of this increase within this segment was the performance of our debt trading business, which added $26.3 million in operating revenues versus the prior year. There were two main drivers of this performance, with the first being the acquisition of GX Clarke & Company at the beginning of our second fiscal quarter of 2015, which added $12.8 million in incremental operating revenues. In addition, strong performance in our Argentina debt trading business resulted in an $11.9 million increase in operating revenue primarily as a result of hedging gains realized and overall market volatility following the devaluation of the Argentine peso. Also within our securities segment, these market conditions in Argentina drove a $3.5 million increase in asset management operating revenues. The other driver of our increase in operating revenues was our global payment segment, which added $3.1 million in incremental revenues to $18.3 million, albeit this was down from the outstanding performance achieved in the fourth fiscal quarter of 2015, which was driven by strong spreads in the global foreign exchange markets. An increase in payments from financial institutions drove transactional volumes to increase 39%; however our…

[Operator instructions] Our first question comes from Ali Mogharabi from Singular Research. Your line is open.

Hi guys. I’m actually sitting in for Jeremy Hellman. I’m looking at global payments volume - it increased nicely again, but the revenue per trade was down in the quarter year-over-year, so I was wondering, do you see that going forward, or do you see that reversing, as it did actually in Q4? Sean O’Connor: Well, I think we’ve pretty consistently been telling people for probably the better part of six quarters now that we anticipate that the revenue per contract or per trade in global currencies will decline at a steady rate, the reason for this being that as we get more of the bank transactions onboarded, these tend to be smaller in size than our traditional NGO segment, and the result of that is we make less per trade. We did have an anomaly, which I think we discussed last time in the fourth quarter, that Q4 it actually went up. I think I was pretty clear and signaled to everyone that that was an anomaly. That was really a result of the kind of dislocation we’re seeing in some of our key markets, where the spreads in the currencies really blew out. It was good for us, but not a sustainable situation. So in summary, I think you should assume that we will see a small but steady decline in transaction per trade on the global currency side--global payments side, sorry. Does that make sense?

Thanks. Absolutely, that’s very helpful. Then regarding overall, what are your thoughts about the uncertainty, of course which is macro driven, and the overall volatility we’ve been seeing in the markets? Do you expect that to continue throughout 2016? I guess I’m just trying to figure out what you guys--again, what you guys expect and what are you planning for, maybe possibly additional acquisitions and so forth. If you could provide any color on those, that’d be great. Sean O’Connor: Okay, well let me start off with my thoughts on market volatility. These are longer range kind of thoughts, and clearly quarter-to-quarter or month-to-month, you can have aberrations up or down, I guess. But my thought is we are heading for a period of increased volatility generally in all asset classes, which I think will go on for a long time. The reason for that is twofold. One, from a very macro point of view, the central bank intervention that we’ve seen over the last seven or eight years has had one of its purposes to reduce volatility in financial markets. As the Fed and perhaps some of the other central banks eventually start pulling out of the markets, that is going to cause volatility to increase, and I think that’s what we’re seeing here in the U.S. We haven’t experience that yet in Europe or in Japan, but I think as that situation normalizes, and it’s just started in the U.S. and may take a long time, that is going to drive volatility higher, so that’s the first point. The second point I would make is regulations that have been implemented over the last five or seven years have had the effect of taking out a pretty large portion of the risk capital that used to support the markets.…

It did. I appreciate that. Thanks. What about regarding acquisitions, any additional acquisitions? Is that still part of your strategy going forward? Sean O’Connor: Acquisitions has never been part of our strategy. It looks like it has, but it really hasn’t. We have never gone out and sort of said, we would like this business or we’d like to acquire this asset. We have a vision of what we want to be, and we want to be the premier financial services company serving midsize customers across all asset classes and in all markets, and we are building that. We opportunistically look at acquisitions that come across our desk, and if something fits that strategy and is priced correctly for our shareholders, we will seriously consider it. I think we are in a place where we’re starting to emerge as one of the larger, more profitable, potentially more dynamic midsized players, and as a result of that, we are being shown an awful lot of opportunities. But a lot of them don’t fit with our client-first, client-centric type approach. Some of them are just bad business models, and then some of them are just priced to the point where they make no sense for us to acquire them. So we will continue to evaluate opportunities, but don’t think that acquisitions are part of our strategy. Our strategy is to build our business, grow our client base, and control our costs. That’s our strategy. If something comes along that fits, we will look at it and plan according.

I appreciate that. Very helpful. Thanks.

Operator, do we have any other questions?

Once again ladies and gentlemen, if you would like to ask a question at this time, please press star, one on your touchtone telephone. One moment for questions. Our next question comes from Russell Mollen from Nine Ten Capital. Your line is open.

Hey, how are you guys doing? Sean O’Connor: Hey Russell, how are you?

Good. So my first question on GX Clarke, added $12.8 million operating revenue in the quarter. Did you say - I may have missed it - how much it added in operating income, or segment income in the quarter? Sean O’Connor: I don’t think we said that. Bill, do you have any guidance?

Sure, about pre-tax 3.1, after-tax 1.9.

Got it. Sean O’Connor: But this is the last quarter--well, we did the GX Clarke transaction January a year ago, so from next quarter on, it will be in the comparative every time.

Yes. Is the mark-to-market adjustment that occurred in the quarter, is that related to the inventory that’s carried in that business, or was it related--I couldn’t understand, was it related to the sort of interest rate management laddered program that you have? Sean O’Connor: It’s totally related to the interest rate laddered program. It has nothing to do with the GX Clarke business. That’s factored into their results, so the thing we were highlighting was just the interest rate management program.

Okay, so can you describe the interest rate program, how movements of rates have affected that over the last two quarters up and down? I guess I’m confused on the movements there. Sean O’Connor: Okay, so if you--I think the best proxy to look at if you wanted to sort of make some determination on that this mark-to-market impact could be, it’s probably to look at the two-year treasury because we run an average duration currently of about 22 months, so that’s probably the best proxy. So if you have a look at our September results, the two-year rate - and this is from memory, so I could be off a little bit - but the two-year note was trading around 80 basis points, and that’s--because we brought all those instruments in, and I think up until September probably the interest rate declined about 15, 20 basis points from close to 100, that gave rise to about a $4 million after-tax gain. Then, we went into the Fed tightening cycle and at the end of December, it was 102 basis points, and we are now sitting at about 74 basis points. So we’ve seen a total reversal of everything that’s happened over a three-quarter period.

Okay, that makes sense.

Russell, in the earnings release we put out yesterday, we kind of put something in there that shows a pre-tax and after-tax for the last five quarters. There’s only been a meaningful--

Yes, I saw that. Yes.

--quarters, and just to be clear, the GX Clarke business, their intent is not to hold any of that inventory to maturity. Those are trading assets of being an institutional fixed income dealer. This is solely related to the interest rate management program where our intention is to hold the swaps and the treasury notes to their ultimate maturity. So the average [indiscernible] is 20 months. Sean O’Connor: Yes, and I don’t think we’ve ever not done that since we’ve done this, so that is our intention.

Is the pick-up in the GX Clarke business, is the biggest factor there from acquisition just this volatility of the movement around of interest rates over the past year, or is it things you guys have done internally with that business that has allowed it to sort of pick up in revenue and profit? Sean O’Connor: Well, the GX Clarke business was always a very profitable business. It’s a great franchise, had done really well. I think we have indicated to you previously that they have outperformed our expectations and they’ve done a lot better than we thought. I don’t think that’s necessarily being driven by market volatility, although that helps. I honestly think just having clear direction - you know, they were for sale for a long period of time. I think putting that behind them, getting focus back on business, being able to recruit people, all of those sort of psychological factors I think had a big impact. Additionally, as we’re seeing in every one of our businesses, just continual retrenchment from the big banks from these market segments, and it’s kind of amazing in some areas how we’re able to step in where these banks just aren’t servicing the customers. It’s providing a really good runway for us, so I think those are kind of the factors that have affected GX Clarke more than necessarily market volatility, but market volatility for all our businesses does help, no doubt.

Got it. The pick-up in corporate overhead in the quarter relative to last quarter, is that related to employee comp bonus from the end of the fiscal year from last year?

You had about--there was a pick-up in bad debt. There was some trail-over for variable comp, but then you also had variable comp related to the Argentina business, the executives down there running the business, they had a tremendous quarter down there, so there was a pick-up in some of the overhead there as well. Sean O’Connor: And also GX Clarke overhead as well, which wasn’t there a year ago.

Yeah, I think Russell, you were asking Q4 to Q1, right?

No, I was asking--hold on a second, let me--

If you’re going Q1 to Q1, then yes, GX Clarke, that’s about a $2.5 million of additional overhead. Sean O’Connor: And there was a $2 million provision as well.

But does that not get included in the segment overhead?

Not their legal and compliance and accounting - you know, all the kind of administrative functions are not necessarily included in segment income. Segment income is going to be all the front office revenue, front office expenses, and then the operations cost. So the people that are settling trades, making payments, everything related to doing that specific business is going to go into segment income, but they did bring with them a compliance team and an accounting team, more overhead related to the business. We’re slowly integrating that into our business.

Got it, okay. Yes, my question was related to Slide 4 from the presentation, where you’re showing--

Oh, okay.

--the changes of Q1 last year to Q1 this year, so--okay.

Okay, so that would be an incremental $2 million of bad debt increase, plus the roughly $2.5 million from GX Clarke, and then the remainder--you know, the biggest chunk of that is going to be the $6.7 million mark-to-market loss on the interest rate management program. That all flows through the corporate unallocated, because the real life cash interest, we pushed down to the segments on those customer segregated deposits in the program, but the mark-to-market fluctuations we just keep in corporate allocated because, like Sean had said, those are temporary fluctuations. We ultimately are looking to hold the investments long term, so we don’t want to view our judge our segments based upon temporary fluctuations in market prices related to something we’re going to hold to maturity.

Makes sense, got it. Thanks.

Our next question comes from Will Settle from Woodmont. Your line is open.

Thank you, good morning. First question, you put out a release in January about your statistics from international equities trading. Obviously it seems you’re gaining market share in that segment. Do you have kind of market share data in some of your other business lines? Your revenues are so volatile based on the environment, I’m just curious if you have good insight as to whether you’re taking share in a lot of your other business lines. Sean O’Connor: It’s really, really difficult for us to get clear, sort of auditable data from the exchanges or the markets we are active in, but we do internally try to track those as best we can, using what we consider to the best proxies. So internally, we look at that. Given that that is not an exact science, it’s not possible for us to make those public, and most indicators we’re looking at show us over the last 18 months, let’s say, having increased market share in almost every single one of our businesses. In some areas, we are a pretty dominant player, so for example the equities business you spoke about, which is the unlisted ADRs, so foreign companies that trade ADRs that aren’t listed on NASDAQ or the New York Stock Exchange. It’s been a business we’ve been in for a long time. That business, we’re probably by far the biggest in the market. We dominate people--and you can go look on the pink sheet volume stacks there, so that’s pretty easy to pick up. We’re bigger than Jefferies, we’re bigger than all the big investment banks, and we have a very large market share there. Some of the other areas, we may end up with sort of between 5 and 7% market share, but that may still make us a Tier 1 player just because the industry is so diverse and there’s lots of players in the industry, and fragmented. So anyway, we track it internally - that’s, I guess, the answer, but very hard for us to give that information publicly.

Okay. Next question, nice growth in the global payments, number of payments both year-over-year and sequentially. Is that just a continuation of, I guess, onboarding some of these recent big wins, or are you adding new clients as well, continue to add new clients? Sean O’Connor: We’re doing both. I think we’re sort of really focused on the big banks, just because the underlying pool of transactions there is so large, and to a certain extent we have good visibility on what’s there. As I said last time, we sort of feel we’re in the third inning of that, but we are also onboarding new customers, both on the NGO side, although our runway there is probably somewhat limited because we have such a huge market share in that space, but we’re also adding some sort of second and third tier banks, and also actually starting to deal with some payments companies that don’t have, despite their sexy front ends, really don’t have the capability to do anything internationally. So we are adding those customers. In aggregate, they are smaller than one of the top 10 banks in the world, but it’s all incremental, it’s all important, and we’re going after all of it.

Great. All right, thank you very much. Sean O’Connor: All right, thank you.

Once again ladies and gentlemen, if you would like to ask a question, please press star, one on your touchtone telephone. One moment for questions. Sean O’Connor: All right, Operator, it doesn’t look like we have any other questions, so let’s close the call. I’d like to thank everyone for participating, and we will speak to you all in three months’ time. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude our conference. You may all disconnect. Everyone have a great day.