Good day and thank you for standing by. Welcome to the StoneX Group First Quarter Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Dunaway, CFO. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for our first quarter ended December 31, 2023. After the market closed yesterday, we issued a press release reporting our results for the first 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 discussions of our quarterly results. The presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we are required to advise you and all participants should note that the following discussion should be taken in conjunction with the most recent financial statements and notes thereto as well as the Form 10-Q 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 will now turn the call over to Sean O’Connor, the company's CEO. Sean O’Connor: Thanks, Bill. Good morning, everyone and thanks for joining our fiscal 2024, First quarter earnings call. The first…

Thank you, Sean. I'll be starting with Slide number 8 which summarizes our consolidated income statement for the first quarter of fiscal 2024. Sean covered many of the consolidated highlights for the quarter, so I will just cover a few other points and then move on to a segment discussion. Transaction-based clearing expenses increased 10% to $74.3 million in the first quarter of fiscal 2024 as a result of the increase in listed derivatives and securities volumes as compared to the prior year. Introducing broker commissions increased 6% to $39.1 million in the current period, principally due to increased activity in our commercial segment, both in listed derivatives as well as a result of the CDI acquisition which was effective October 31, 2022. Interest expense increased $81.7 million versus the prior year, primarily as a result of the $75.8 million increase in interest expense related to our institutional fixed income business as well as a $6.7 million increase in interest expense related to securities lending activities, both of which were due to significant increase in short-term interest rates. And in addition, in the case of the fixed income business, increased volumes. Despite the increase in short-term rates, interest paid declines on deposits, declined $200,000 as compared to the prior year due to declines in average client flow [ph]. In addition, interest expense on corporate funding declined $1.2 million versus the prior year as a result of lower average borrowings, partially offset by higher interest rates. Variable compensation increased $3.4 million versus the prior year and represented 29% of net operating revenues in the current period compared to 31% of the net operating revenues in the prior year period. This decline in variable compensation as a percentage of net operating revenues as a result of the increase in net interest and…

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

To start, I was hoping we could -- the retail FX business, the fee per million there or RPM was record. So can you just talk about what's happening in that business and as level is probably not sustainable but what's a reasonable outlook for that number? Sean O’Connor: Well, the way we look at it internally is we have a rate per million and revenue capture target that we believe is somewhat sustainable through the cycles. It depends, obviously, on 2 things. It depends, firstly, on sort of market volatility. And it also depends a little bit on the business mix. Obviously, foreign exchange is a pretty big part of that business but we also trade indices, we trade commodities, we trade gold, we trade lots of things. And they obviously have very -- there's a decently wide disparity between the rate per million all of those products. That said, I mean, we shoot for something around $85, $90 in terms of rate per million through the cycle. And from memory, I don't hold me to this but I think we've been down as low as sort of in the low 50s and we've been as high as sort of $140. So there is quite a wide range. And we knew that when we looked at the gained business what was that almost 4 years ago now, that there was some inherent volatility in how their business worked and the revenue capture that came out of that. But I think the portfolio within our sort of broad and more diversified business, you don't feel that volatility quite as much as gained business as well as a stand-alone business but there is some inherent volatility in that. Bill, I don't know if you have any data points there, I just don't have it in front of me.

Yes. No. I mean it's -- obviously, we've been averaging well north of that here the last 3 quarters. It's just been very good performance. We think here over that time period. And obviously, comparing to what was the low point post the acquisition again in the prior year quarter. We've seen that steadily creep up and been good here in the last 3 quarters. Sean O’Connor: Yes. I would say, Dan, though, that I think we all realize we are sort of trading at the top of the range here. I don't think that, that is sustainable long term. I think this business does tend to even out over periods. I mean it's great that we've had 2 or 3 quarters in a row where we've been sort of at the upper end but it's likely to settle. It's going to be reversion to the mean graph [ph] we anticipate.

Understood. Okay. And then just following up on just the interest income and kind of thinking about the -- understanding the chart and about the sensitivity of rates. But I believe you have swaps that are rolling off as well, Bill. So could you talk about just kind of the dynamics as we think about the rest of this year and what some of the positives and negatives associated with your interest income and what that could look like?

Sure. Yes. Thanks, Dan. I would say we did have some swaps that rolled off here in December. And I would anticipate that will probably give us somewhere in the neighborhood of 40 to 50 basis points in total of kind of increase if you're looking at the overall portfolio going forward, irrespective of what happens to the Fed decisions, obviously, would be -- we'll change that. But kind of those rolling off, we should see an uptick there based upon current level of interest rates. But obviously, it remains to be seen what happens with the Fed.

Right. Okay. And then just as we think about the securities business and fixed income area that you guys have been growing and having success in. Is there -- are you still hiring there? Should we think about this just what's been happening just a continuation of what you started in that business just scaling? Or when you think about investment, is there more people infrastructure, other things that are happening within that business as we think about this year? Sean O’Connor: I think there are probably two things happening in our fixed income business but in securities generally for us is, one, we continue to grow into sort of adjacent products. And I think fixed income has exemplified that probably over the last 2 years as we've expanded that product set. And Yes, I think we are looking to continue to expand and some of those areas are sort of beachheads at this moment and we want to expand them more fully. So we continue to hire people. I would say the other thing that's sort of exercising our minds is our securities businesses, both fixed income and equity are largely U.S. businesses. Trading products in the U.S. with U.S. clients. And what we're starting to do now is leverage that capability globally. And I think that's an enormous opportunity for us. I mean everyone across the world, trades the products we trade, they trade treasury, they trade mortgages, they trade high yield, they trade U.S. equities. And that for us is still pretty new territory. So we started to hire people. We have a team that we brought on about -- I think about 9 months ago, if I'm not mistaken. In Singapore, they've got off to a great start. I mean, it's still a very small business…

Okay. That's helpful. And then, I guess, building upon that a little bit in terms of future growth. And can you talk about the inorganic backdrop now for M&A and maybe how big of a -- I know you have a lot of organic growth that you're looking to build and been focused on but how do you think about complementing that with M&A as you think about the next kind of 1 to 2 years? Sean O’Connor: Yes. I think this comes up regularly on our earnings calls. And I think just some historical perspective, we seem to have done a couple of decent-sized M&A deals almost every year or so, with the exception of the COVID period. I mean, certainly, we did our largest acquisition being gained right at the start of COVID. But during COVID, pricing just became crazy to sort of peak earnings and peak multiples and that's not a good time to be a buyer of the business. So things -- we honestly didn't see anything that interested us. I would say the market is starting to normalize a bit now. We are seeing more opportunities but I'm not sure it's yet a very conducive environment for us. I mean we tend to be very disciplined around price. How we can add value to the acquisition. I mean buying a business at a fair price and not being able to do anything to change that business has done absolutely nothing for our shareholders. So we have to make sure we can acquire a business at attractive pricing that we can transform that business in some shape or form. And we just -- I think we're looking at more things now and I think there are more things coming through. But -- and some of them…

Yes. No, no, that is. And I guess just lastly for me, you have been operating above your long-term target of 15% ROE for some time. As the business scales and grows and diversifies, I mean do we think you're at a level where we can take that goal should be something above that given the business and how it looks today? Sean O’Connor: I remember about 10 or 15 years ago, probably, when we had a couple of years in a row when we were below 15% and I got asked the exact same question is, should you lower your long-term target because it doesn't look realistic. I would say to achieve a 15% ROE in our marketplace and in our sort of environment which is quite competitive over a long period of time, I think, is a compelling and a robust target to try and achieve. I think we've also said that there could be long stretches of time where we operate below that target and when we operate above that target because market environment can cause that to happen for periods of time. And I don't think it's helpful if we continually change our long-term target, either bringing it down when times are tough, or sort of putting it up when we sort of in a positive environment. So honestly, I prefer not to do that. I think we've embedded in our business and throughout our compensation structures and so on, there's mentality around, we have to do better than 15%. And I think it's a challenging target. I think our business is operating above trend a little bit at the moment. Interest rates, obviously, are constructive at the moment. I would say volatility is not anymore, it was. But to your point, there might be, at some point, sort of scale benefits compounded with technology that may cause us to think about raising that level at some point, if we think the sort of entire structure and the cost structure of the business has materially changed. But I'm not sure we want to do that anytime soon but it's something we should think about, I think.

[Operator Instructions] I'm showing no further questions at this time. I would like to turn the call back to Sean O’Connor for closing remarks. Sean O’Connor: Thank you. And thanks everyone for joining our first quarter conference call. We look forward to speaking to you in the next 3 months. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.