StoneX(US:SNEX)2024-08-06 21:46Part I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited financial statements show total assets increased, while Q3 net income and diluted EPS decreased, and operating cash flow turned positive Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Total assets | $25,930.8 | $21,938.7 | | Total liabilities | $24,323.0 | $20,559.6 | | Total stockholders' equity | $1,607.8 | $1,379.1 | Condensed Consolidated Income Statement Highlights (in millions, except EPS) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenues | $913.7 | $776.9 | $2,516.1 | $2,136.1 | | Net Income | $61.9 | $69.5 | $184.1 | $187.8 | | Diluted EPS | $1.88 | $2.17 | $5.64 | $5.88 | Condensed Consolidated Cash Flow Highlights (Nine Months Ended June 30, in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $314.3 | $(394.8) | | Net cash used in investing activities | $(45.0) | $(38.9) | | Net cash provided by/(used in) financing activities | $74.2 | $(87.6) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, fair value measurements, derivative activities, credit facilities, and legal proceedings - The company operates a global financial services network connecting over 54,000 commercial, institutional, and payments clients and over 400,000 retail clients in more than 180 countries to the global market ecosystem20 Fair Value of Assets and Liabilities (June 30, 2024, in millions) | Category | Level 1 | Level 2 | Level 3 | Total at Fair Value | | :--- | :--- | :--- | :--- | :--- | | Total assets at fair value | $9,712.4 | $7,718.5 | $2.8 | $10,336.2 | | Total liabilities at fair value | $7,860.8 | $3,120.6 | $2.8 | $3,962.4 | Gross Fair Value of Derivative Contracts (in millions) | Date | Assets | Liabilities | | :--- | :--- | :--- | | June 30, 2024 | $7,914.6 | $7,740.3 | | September 30, 2023 | $8,200.3 | $8,017.3 | - On March 1, 2024, the company issued $550 million of 7.875% Senior Secured Notes due 2031, partly using proceeds to extinguish the 8.625% Senior Secured Notes due 2025, resulting in a $3.7 million loss on extinguishment of debt6667 - The company is involved in a legal dispute with BTIG, which filed a complaint alleging theft of trade secrets, and has received related subpoenas from the DOJ and SEC, with which it is cooperating79 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported strong client engagement and revenue growth, though net income declined due to higher expenses, while maintaining a strong liquidity position Q3 2024 vs. Q3 2023 Performance Highlights (in millions) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Operating Revenues | $913.7 | $776.9 | 18% | | Net Operating Revenues | $468.5 | $435.9 | 7% | | Net Income | $61.9 | $69.5 | (11)% | | Diluted EPS | $1.88 | $2.17 | (13)% | - Operating revenues from securities transactions increased 37% to $374.0 million in Q3 2024, driven by a 37% rise in average daily volume (ADV), although the rate per million (RPM) declined 9% due to tighter spreads and product mix changes119 - Non-variable expenses (excluding bad debts) rose by $36.6 million year-over-year, driven by higher fixed compensation, professional fees, and technology costs, including $4.5 million in severance and accelerated compensation for a departing executive110 - The company maintains a strong liquidity position with total equity of $1.6 billion, $227.8 million in loans under credit facilities, and $542.8 million in senior secured borrowings as of June 30, 2024112186 Segment Information Segment analysis shows strong income growth in Institutional, Commercial, and Retail segments in Q3 2024, with Payments income slightly declining Segment Income (Q3 2024 vs Q3 2023, in millions) | Segment | Q3 2024 Income | Q3 2023 Income | % Change | | :--- | :--- | :--- | :--- | | Commercial | $125.7 | $117.0 | 7% | | Institutional | $62.2 | $45.1 | 38% | | Retail | $27.6 | $17.2 | 60% | | Payments | $28.2 | $28.6 | (1)% | | Total Segment Income | $243.7 | $207.9 | 17% | - The Commercial segment's operating revenue from listed derivatives grew 26%, driven by a 17% increase in contract volumes and a 10% rise in average rate per contract, primarily from LME base metals markets150151 - The Institutional segment's operating revenue from securities increased 40% due to a 37% rise in ADV, although securities RPM declined 9%157 - The Retail segment's operating revenue from FX/CFD contracts increased 8%, driven by an 8% rise in RPM, while ADV remained flat167 - The Payments segment's operating revenue declined 4%, driven by a 13% decrease in RPM, which was partially offset by a 6% increase in ADV174 Liquidity, Financial Condition and Capital Resources The company maintains strong liquidity with $1.6 billion in equity, new senior secured notes, and committed credit facilities, with positive operating cash flow - As of June 30, 2024, the company had total equity of $1,607.8 million, outstanding loans of $227.8 million, and $542.8 million in senior secured notes186 - The company issued $550 million of 7.875% Senior Secured Notes due 2031 and used the proceeds to extinguish its 8.625% Senior Secured Notes due 2025190191 - The company has five committed bank credit facilities totaling $1,125.0 million, of which $140.0 million was outstanding as of June 30, 2024, with all financial covenants met193 Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market, credit, interest rate, and foreign currency risks, managed through diversification, position limits, and potential hedging - Market risk is mitigated through diversification, position limits, capital allocation based on risk, and daily monitoring of positions209 - The company estimates that an immediate 25 basis point decrease in short-term interest rates would result in approximately $5.2 million less in annual net income213 - The company is exposed to foreign currency risk from assets and liabilities denominated in currencies other than the functional currency of its subsidiaries and may use hedging transactions to mitigate this risk215 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal controls over financial reporting - As of June 30, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective in providing reasonable assurance that their objectives were met216 - No changes in internal controls over financial reporting occurred during the quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting216 Part II. OTHER INFORMATION Legal Proceedings The company is involved in various legal actions, notably a civil complaint from BTIG alleging trade secret theft, with related DOJ and SEC subpoenas - The company is defending against a civil complaint filed by BTIG on November 13, 2023, alleging theft of trade secrets by former BTIG employees now at StoneX, and has also received related subpoenas from the DOJ and SEC79217 Risk Factors No material changes to risk factors have occurred since September 30, 2023, with detailed information available in the Annual Report on Form 10-K - No material changes to risk factors have occurred since the fiscal year ended September 30, 2023, with detailed information available in the company's Annual Report on Form 10-K218 Unregistered Sales of Equity Securities and Use of Proceeds The Board authorized a repurchase program for up to 1.5 million shares, though no shares were repurchased under this program in Q3 2024 Common Stock Repurchase Activity (Q3 2024) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | | :--- | :--- | :--- | :--- | | April 2024 | 10,837 | $71.56 | — | | May 2024 | 94 | $72.60 | — | | June 2024 | 4,165 | $71.02 | — | | Total | 15,096 | $71.42 | — | Other Information Chief Governance and Legal Officer Diego Rotsztain terminated a Rule 10b5-1 trading arrangement on June 6, 2024 - On June 6, 2024, Diego Rotsztain, Chief Governance and Legal Officer, terminated a Rule 10b5-1 trading arrangement that was previously adopted on December 31, 2023222 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL data files