Release Date: November 19, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• StoneX Group Inc (NASDAQ:SNEX) reported a record net income of $76.7 million for Q4 2024, marking a 51% increase from the previous year.
• The company achieved record operating revenues of $920.1 million, up 18% compared to the prior year.
• Return on equity (ROE) was strong at 18.5% on stated book value and 19.4% on tangible book value.
• The self-directed retail segment showed significant growth with operating revenues up 13% and segment income up 6% sequentially.
• StoneX Group Inc (NASDAQ:SNEX) continues to expand its ecosystem, adding new products and capabilities, which is expected to drive future growth and operational leverage.

Negative Points

• Operating revenues from OTC derivatives declined by $13.7 million compared to the prior year, primarily due to a 20% decline in OTC average rate per contract.
• The payments segment saw a 10% decline in operating revenues and a 23% decrease in segment income due to tighter FX spreads in key corridors.
• Interest expense increased significantly by $70.3 million compared to the prior year, impacting overall profitability.
• The commercial segment experienced a 29% decline in segment income compared to the immediately preceding quarter.
• Market conditions were generally benign with low volatility, negatively impacting revenue capture across several product areas.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with SNEX.

Q: Can you expand upon what happened in the listed as well as the OTC segment to take the lower fee per million in the commercial segment this quarter? A: Sean O'Connor, CEO: The previous quarter was exceptional due to increased volatility in the LME, which positively impacted revenue capture rates. This quarter, conditions returned to normal, affecting OTC market performance. The listed derivatives side remained solid, but the OTC segment faced a tougher market environment with lower volatility.

Q: Regarding the institutional segment and listed derivatives, what caused the rate per contract to come in lower? A: Sean O'Connor, CEO: The institutional listed derivatives business has transformed, now serving larger institutional clients rather than smaller proprietary trading shops. This shift results in lower commission rates due to the scale and demands of these larger clients, but the business is more stable and has a positive risk profile.

Q: What is the outlook for the payments segment, considering current market dynamics and potential inorganic activities like the cab payments transaction? A: Sean O'Connor, CEO: The payments business has been a disruptor, providing transparency and lower spreads in non-G20 markets. Current market conditions have led to tighter spreads, but we see opportunities to expand our client base and enhance our ecosystem. The cab payments transaction is still of interest, but recent earnings warnings have complicated discussions.

Q: How should we think about fixed cost growth and the balance of investment versus efficiencies from digitization in the next year? A: Sean O'Connor, CEO: We aim for flat expense growth, focusing on inflationary increases. While investing in digitization requires upfront costs, we expect to see scalability and operational leverage, allowing us to handle growth without significant incremental costs.

Q: Were there any one-time or non-recurring expenses in the fourth quarter that should be noted? A: Bill Dunaway, CFO: Depreciation and amortization were slightly higher due to new software assets, and professional fees were lower due to an insurance recovery. These are not expected to recur at the same levels in the immediate future.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.