StoneX(US:SNEX)2024-02-07 18:11Financial Data and Key Metrics Changes - Operating revenues for the first quarter were $784.2 million, up 20% compared to the prior year, driven by interest on client float and fixed income trading [5][50] - Net operating revenues increased by 10% year-over-year and 4% sequentially [5] - Adjusted net income was $70 million, up 27% year-over-year and 34% sequentially [52] - The company achieved a return on equity (ROE) of 19.3% on stated book and 20.5% on tangible book, both exceeding the long-term target of 15% [50][79] Business Line Data and Key Metrics Changes - Retail segment operating revenues increased by 31%, leading to a segment income of $28.7 million compared to a loss of $4.2 million a year ago [6][28] - Commercial segment revenues rose by $16 million year-over-year but declined by $9.1 million sequentially [8] - Institutional segment operating revenues increased by $92.2 million, primarily due to a 47% increase in average daily volume of security transactions [76] - Payments segment revenues were up 9%, with segment income increasing by 8% [53][58] Market Data and Key Metrics Changes - Client floats, including listed derivative client equity and FDIC sweep balances, declined by 26% compared to record levels from the prior year [51] - Interest and fee income on client balances increased by 14% to $98.4 million due to higher interest rates [51] - The company experienced a 10% increase in transaction-based clearing expenses due to higher volumes in listed derivatives and securities [74] Company Strategy and Development Direction - The company aims to leverage its capabilities globally, expanding into international markets and adjacent products [83] - There is a focus on disciplined pricing for acquisitions, with a cautious approach to M&A in the current market environment [84] - The company continues to prioritize sustainable business growth and enhancing its legacy businesses [39] Management's Comments on Operating Environment and Future Outlook - Management noted that the business continues to generate superior long-term returns despite moderating market volatility [50] - There is an expectation of increased interest income due to swaps rolling off, potentially leading to a 40 to 50 basis points increase [82] - The company is optimistic about growth opportunities in international markets and product adjacencies [83] Other Important Information - The company reported a 32% compound annual growth rate (CAGR) in operating revenues over the last two years [12][24] - Fixed compensation increased by 20% year-over-year due to a 13% increase in headcount [55] Q&A Session Summary Question: Can you discuss the retail FX business and its fee per million? - Management indicated that the retail FX business has seen strong performance, with an average rate per million significantly above previous lows [32] Question: What is the outlook for the fixed income business? - Management noted that the fixed income business is performing better than peers, with ongoing hiring to support growth [34][43] Question: How does the company view M&A opportunities? - Management stated that while there are more opportunities emerging, the environment is not yet conducive for large acquisitions [84] Question: Is the company considering raising its long-term ROE target? - Management expressed that while the business is operating above the long-term target, they prefer not to adjust targets frequently [85]