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StoneX Group Inc. Reports Fiscal 2021 Fourth Quarter Financial Results

·17-min read

Quarterly Operating Revenues of $390.1 million, up 14%

Quarterly Net Income of $7.3 million, ROE of 3.2%

Annual Net Income of $116.3 million, ROE of 13.9%

NEW YORK, Nov. 29, 2021 (GLOBE NEWSWIRE) -- StoneX Group Inc. (the “Company”; NASDAQ: SNEX), a diversified global brokerage and financial services firm providing execution, risk management and advisory services, market intelligence and clearing services across multiple asset classes and markets around the world, today announced its financial results for the fiscal year 2021 fourth quarter ended September 30, 2021.

Sean M. O’Connor, CEO of StoneX Group Inc., stated, “Although our fourth quarter earnings were below our long-term target, we were pleased to see that for the fiscal year we achieved record operating revenues and a 13.9% ROE. Last year included the significant non-recurring gain on our acquisition of Gain Capital Holdings, Inc. (“Gain”), adjusting for that we saw that our core operating performance exceeded fiscal 2020, with adjusted net income up 24% and an adjusted ROE of 14.9%."

StoneX Group Inc. Summary Financials

Consolidated financial statements for the Company will be included in our Annual Report on Form 10-K to be filed with the Securities and Exchange Commission (“SEC”). The Annual Report on Form 10-K will also be made available on the Company’s website at www.stonex.com.

Three Months Ended September 30,

Year Ended September 30,

(Unaudited) (in millions, except share and per share amounts)

2021

2020

%
Change

2021

2020

%
Change

Revenues:

Sales of physical commodities

$

11,487.9

$

13,959.8

(18

)

%

$

40,961.6

$

52,899.2

(23

)

%

Principal gains, net

191.3

180.2

6

%

892.0

622.2

43

%

Commission and clearing fees

114.0

103.7

10

%

487.2

403.6

21

%

Consulting, management, and account fees

23.6

20.4

16

%

91.0

83.7

9

%

Interest income

30.0

20.8

44

%

102.4

130.9

(22

)

%

Total revenues

11,846.8

14,284.9

(17

)

%

42,534.2

54,139.6

(21

)

%

Cost of sales of physical commodities

11,456.7

13,942.8

(18

)

%

40,861.1

52,831.3

(23

)

%

Operating revenues

390.1

342.1

14

%

1,673.1

1,308.3

28

%

Transaction-based clearing expenses

64.4

57.1

13

%

271.7

222.5

22

%

Introducing broker commissions

39.7

34.0

17

%

160.5

113.8

41

%

Interest expense

14.1

10.0

41

%

49.6

80.4

(38

)

%

Interest expense on corporate funding

10.2

14.8

(31

)

%

41.3

23.6

75

%

Net operating revenues

261.7

226.2

16

%

1,150.0

868.0

32

%

Compensation and other expenses:

Variable compensation and benefits

85.0

81.1

5

%

377.7

296.8

27

%

Fixed compensation and benefits

78.2

64.4

21

%

301.4

221.9

36

%

Trading systems and market information

15.9

12.9

23

%

58.8

46.3

27

%

Professional fees

13.1

13.4

(2

)

%

40.9

30.2

35

%

Non-trading technology and support

13.2

9.6

38

%

46.0

28.4

62

%

Occupancy and equipment rental

8.4

8.2

2

%

34.2

23.5

46

%

Selling and marketing

9.9

6.1

62

%

33.3

12.2

173

%

Travel and business development

1.7

0.5

240

%

4.5

8.9

(49

)

%

Communications

2.3

2.2

5

%

9.3

7.0

33

%

Depreciation and amortization

9.8

7.2

36

%

36.5

19.7

85

%

Bad debts, net of recoveries and impairment

6.7

12.5

(46

)

%

10.4

18.7

(44

)

%

Other

12.4

10.0

24

%

46.3

29.6

56

%

Total compensation and other expenses

256.6

228.1

12

%

999.3

743.2

34

%

Gain on acquisitions and other gains (losses)

(0.2

)

81.8

n/m

3.4

81.9

(96

)

%

Income before tax

4.9

79.9

(94

)

%

154.1

206.7

(25

)

%

Income tax (benefit) expense

(2.4

)

2.5

(196

)

%

37.8

37.1

2

%

Net income

$

7.3

$

77.4

(91

)

%

$

116.3

$

169.6

(31

)

%

Earnings per share:

Basic

$

0.37

$

4.00

(91

)

%

$

5.90

$

8.78

(33

)

%

Diluted

$

0.36

$

3.90

(91

)

%

$

5.74

$

8.61

(33

)

%

Weighted-average number of common shares outstanding:

Basic

19,214,912

18,867,530

2

%

19,130,643

18,824,328

2

%

Diluted

19,759,984

19,358,907

2

%

19,678,168

19,180,479

3

%

n/m = not meaningful to present as a percentage

The following table presents our consolidated operating revenues by segment for the periods indicated.

Three Months Ended September 30,

Year Ended September 30,

(in millions)

2021

2020

% Change

2021

2020

% Change

Segment operating revenues represented by:

Commercial

$

132.7

$

107.8

23

%

$

534.8

$

431.5

24

%

Institutional

138.3

136.2

2

%

668.4

624.1

7

%

Retail

86.4

68.5

26

%

348.0

140.0

149

%

Global Payments

34.4

29.2

18

%

137.3

117.4

17

%

Corporate Unallocated

3.0

3.1

(3

)

%

1.7

14.6

(88

)

%

Eliminations

(4.7

)

(2.7

)

74

%

(17.1

)

(19.3

)

(11

)

%

Operating revenues

$

390.1

$

342.1

14

%

$

1,673.1

$

1,308.3

28

%

The following table presents our consolidated income by segment for the periods indicated.

Three Months Ended September 30,

Year Ended September 30,

(in millions)

2021

2020

% Change

2021

2020

% Change

Segment income represented by:

Commercial

$

44.1

$

34.3

29

%

$

192.2

$

141.9

35

%

Institutional

24.4

22.4

9

%

167.7

152.9

10

%

Retail

11.9

18.0

(34

)

%

67.8

31.7

114

%

Global Payments

18.4

16.6

11

%

78.5

68.6

14

%

Total segment income

$

98.8

$

91.3

8

%

$

506.2

$

395.1

28

%

Reconciliation of segment income to income before tax:

Segment income

$

98.8

$

91.3

8

%

$

506.2

$

395.1

28

%

Net costs not allocated to operating segments

(93.7

)

(93.2

)

1

%

(355.5

)

(270.3

)

32

%

Gain on acquisitions and other gains (losses)

(0.2

)

81.8

n/m

3.4

81.9

(96

)

%

Income before tax

$

4.9

$

79.9

(94

)

%

$

154.1

$

206.7

(25

)

%

Key Operating Metrics

The tables below present a disaggregation of consolidated operating revenues and select operating data and metrics used by management in evaluating our performance, for the periods indicated.

All $ amounts are U.S. dollar or U.S. dollar equivalents

Three Months Ended September 30,

Year Ended September 30,

2021

2020

% Change

2021

2020

% Change

Operating Revenues (in millions):

Listed derivatives

$

89.7

$

82.6

9

%

$

387.6

$

328.5

18

%

OTC derivatives

34.4

22.6

52

%

143.4

111.2

29

%

Securities

112.1

100.8

11

%

533.6

458.3

16

%

FX / Contract For Difference (“CFD”) contracts

55.7

48.6

15

%

242.0

66.9

262

%

Global payments

33.3

28.4

17

%

133.8

114.6

17

%

Physical contracts

42.1

39.2

7

%

152.6

122.4

25

%

Interest / fees earned on client balances

7.9

4.8

65

%

26.0

42.7

(39

)%

Other

16.6

14.7

13

%

69.5

68.4

2

%

Corporate Unallocated

3.0

3.1

(3

)%

1.7

14.6

(88

)%

Eliminations

(4.7

)

(2.7

)

74

%

(17.1

)

(19.3

)

(11

)%

$

390.1

$

342.1

14

%

$

1,673.1

$

1,308.3

28

%

Volumes and Other Select Data (all $ amounts are U.S. dollar or U.S. dollar equivalents):

Listed derivatives (contracts, 000’s)

36,004

35,353

2

%

146,101

154,652

(6

)%

Listed derivatives, average rate per contract (1)

$

2.41

$

2.24

8

%

$

2.55

$

1.98

29

%

Average client equity - listed derivatives (millions)

$

4,164

$

3,331

25

%

$

3,842

$

2,765

39

%

Over-the-counter (“OTC”) derivatives (contracts, 000’s)

667

475

40

%

2,557

2,113

21

%

OTC derivatives, average rate per contract

$

51.25

$

47.34

8

%

$

55.70

$

52.19

7

%

Securities average daily volume (“ADV”) (millions)

$

3,040

$

1,681

81

%

$

2,776

$

1,729

61

%

Securities rate per million (“RPM”) (2)

$

427

$

727

(41

)%

$

610

$

845

(28

)%

Average money market / FDIC sweep client balances (millions)

$

1,592

$

1,320

21

%

$

1,471

$

1,130

30

%

FX / CFD contracts ADV (millions) (3)

$

11,063

$

9,586

15

%

$

10,636

$

9,679

10

%

FX / CFD contracts RPM

$

77

$

111

(31

)%

$

89

$

97

(8

)%

Global Payments ADV (millions)

$

54

$

42

29

%

$

54

$

45

20

%

Global Payments RPM

$

9,573

$

10,524

(9

)%

$

9,921

$

10,092

(2

)%


(1)

Give-up fees as well as cash and voice brokerage revenues are excluded from the calculation of listed derivatives, average rate per contract.

(2)

Interest income related to securities lending is excluded from the calculation of Securities RPM.

(3)

The ADV for the three months and year ended September 30, 2020 was reflective of the ADV of post-acquisition of Gain, and is calculated based on 43 trading days with the activities of Gain, acquired effective August 1, 2020. FX/CFD Contracts ADV from Gain is included in our Retail segment and our pre-existing FX activities, which are shown in our Institutional segment, had 260 trading days during the year ended September 30, 2020.

Operating Revenues

Operating revenues increased $48.0 million, or 14%, to $390.1 million in the three months ended September 30, 2021 compared to $342.1 million in the three months ended September 30, 2020. The table above displays operating revenues disaggregated across the key products we provide to our clients.

Operating revenues derived from listed derivatives increased $7.1 million, or 9%, to $89.7 million in the three months ended September 30, 2021 compared to $82.6 million in the three months ended September 30, 2020. This growth was primarily driven by an 8% increase in the average rate per contract, principally due to an increase in volume from commercial customers, with an overall increase of 2% in listed derivative contract volumes.

Operating revenues derived from OTC transactions increased $11.8 million, or 52%, to $34.4 million in the three months ended September 30, 2021 compared to $22.6 million in the three months ended September 30, 2020. This was the result of growth in OTC contract volumes and the average rate per contract of 40% and 8%, respectively in the three months ended September 30, 2021. This growth was principally driven by increased volatility in both agricultural and energy markets.

Operating revenue derived from securities transactions increased $11.3 million, or 11%, to $112.1 million in the three months ended September 30, 2021 compared to $100.8 million in the three months ended September 30, 2020. This growth was principally due to an 81% increase in ADV, which was partially offset by a 41% decline in the RPM as the prior year period benefited from wider spreads due to higher relative volatility driven in part by the COVID-19 pandemic.

Operating revenues derived from FX/CFD contracts increased $7.1 million, or 15% to $55.7 million in the three months ended September 30, 2021 compared to $48.6 million in the three months ended September 30, 2020, as a result of an incremental $8.9 million in FX/CFD contracts operating revenues in our Retail segment resulting from the acquisition of Gain, effective August 1, 2020, which was partially offset by lower FX operating revenues in our Institutional FX prime brokerage business.

Operating revenues from global payments increased $4.9 million, or 17%, to $33.3 million in the three months ended September 30, 2021 compared to $28.4 million in the three months ended September 30, 2020, principally driven by the net impact of a 29% increase in ADV and a 9% decline in RPM.

Operating revenues derived from physical contracts increased $2.9 million, or 7%, to $42.1 million in the three months ended September 30, 2021 compared to $39.2 million in the three months ended September 30, 2020. This increase was principally due to increases in agricultural and energy commodity and retail precious metals revenues, partially offset by the decline in commercial precious metals operating revenues. Operating revenues during the three months ended September 30, 2021 and 2020 include gains related to physical inventories, previously carried at the lower of cost or net realizable value, of $0.3 million and $3.0 million, respectively.

Interest and fee income earned on client balances, which is associated with our listed and OTC derivative, correspondent clearing, and independent wealth management product offerings, increased $3.1 million, or 65%, to $7.9 million in the three months ended September 30, 2021 compared to $4.8 million in the three months ended September 30, 2020. This was principally driven by an increase in average client equity and average FDIC sweep client balances of 25% and 21%, respectively.

Impact of the Gain on Acquisitions

The Company acquired Gain, effective August 1, 2020. The results of the three months ended September 30, 2020 included a gain of $81.8 million related to the acquisition. The results of the three months ended June 30, 2021 include a gain of $3.3 million related to the acquisition, due to an adjustment to the final liabilities assumed, resulting in an adjustment from the initially determined values as of August 1, 2020.

These gains on the acquisition are non-taxable, and accordingly there is no corresponding income tax provision amount recorded related to these gains. When evaluating the acquisition of Gain, along with the gains on acquisition recorded, management also considers the amortization expense related to the intangible assets identified and recorded as part of the gain, the net loss on the internal merger of the operations of Gain’s U.K. subsidiaries, acquisition related investment banking, legal, and financing fees incurred in fiscal 2020, and an impairment charge related to capitalized software not yet placed into service, which was determined to be replaced with a system acquired as part of the Gain transaction.

The following table presents income before tax, income tax (benefit) expense, and net income as reported in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The following table also presents adjusted income before tax, adjusted income tax (benefit) expense, and adjusted net income, which are non-GAAP measures. The “adjusted” non-GAAP measures reflect each item after removing the impact of the gains on acquisitions and related transaction costs and other expenses for the three months and fiscal years ended September 30, 2021 and 2020, respectively. Management believes that presenting our results excluding the gains on acquisitions and related transaction costs and other expenses is meaningful, as it increases the comparability of period-to-period results.

Three Months Ended September 30,

Year Ended September 30,

(in millions)

2021

2020

2021

2020

As reported, GAAP:

Income before tax

$

4.9

$

79.9

$

154.1

$

206.7

Income tax (benefit) expense

(2.4

)

2.5

37.8

37.1

Net income

$

7.3

$

77.4

$

116.3

$

169.6

Return on equity

3.2

%

42.5

%

13.9

%

24.9

%

Adjusted (non-GAAP)(a):

Adjusted income before tax

$

7.6

$

13.2

$

165.9

$

141.8

Adjusted income tax (benefit) expense

(2.0

)

7.0

41.6

42.1

Adjusted net income

$

9.6

$

6.2

$

124.3

$

99.7

Adjusted return on equity

4.2

%

3.4

%

14.9

%

14.6

%

(a) Adjusted income before tax, adjusted income tax (benefit) expense, adjusted net income, and adjusted return on equity are non-GAAP measures. A reconciliation between the GAAP and non-GAAP amounts listed above is provided in Appendix A.

Variable vs. Fixed Expenses
The table below sets forth our variable expenses and non-variable expenses as a percentage of total non-interest expenses for the periods indicated.

Three Months Ended September 30,

Year Ended September 30,

(in millions)

2021

% of
Total

2020

% of
Total

2021

% of
Total

2020

% of
Total

Variable compensation and benefits

$

85.0

23

%

$

81.1

25

%

$

377.7

26

%

$

296.8

27

%

Transaction-based clearing expenses

64.4

18

%

57.1

18

%

271.7

19

%

222.5

21

%

Introducing broker commissions

39.7

11

%

34.0

11

%

160.5

11

%

113.8

11

%

Total variable expenses

189.1

52

%

172.2

54

%

809.9

56

%

633.1

59

%

Fixed compensation and benefits

78.2

22

%

64.4

20

%

301.4

21

%

221.9

20

%

Other fixed expenses

86.7

24

%

70.1

22

%

309.8

22

%

205.8

19

%

Bad debts, net of recoveries and impairment

6.7

2

%

12.5

4

%

10.4

1

%

18.7

2

%

Total non-variable expenses

171.6

48

%

147.0

46

%

621.6

44

%

446.4

41

%

Total non-interest expenses

$

360.7

100

%

$

319.2

100

%

$

1,431.5

100

%

$

1,079.5

100

%

Our variable expenses include variable compensation paid to traders and risk management consultants, bonuses paid to operational, administrative, and executive employees, transaction-based clearing expenses and introducing broker commissions. We seek to make non-interest expenses variable to the greatest extent possible, and to keep our fixed costs as low as possible.

Segment Results

Our business activities are managed as operating segments and organized into reportable segments consisting of Commercial, Institutional, Retail, and Global Payments.

The tables below present the financial performance, a disaggregation of operating revenues, and select operating data and metrics used by management in evaluating the performance of our segments, for the periods indicated. Additional information on the performance of our segments will be included in our Annual Report on Form 10-K to be filed with the SEC.

Commercial

Three Months Ended September 30,

Year Ended September 30,

(in millions)

2021

2020

% Change

2021

2020

% Change

Revenues:

Sales of physical commodities

$

10,940.9

$

13,863.8

(21

)%

$

39,420.3

$

52,593.9

(25

)%

Principal gains, net

58.5

51.5

14

%

245.5

194.1

26

%

Commission and clearing fees

42.1

35.8

18

%

178.3

140.1

27

%

Consulting, management and account fees

4.9

4.5

9

%

19.7

18.8

5

%

Interest income

6.4

2.7

137

%

20.2

23.2

(13

)%

Total revenues

11,052.8

13,958.3

(21

)%

39,884.0

52,970.1

(25

)%

Cost of sales of physical commodities

10,920.1

13,850.5

(21

)%

39,349.2

52,538.6

(25

)%

Operating revenues

132.7

107.8

23

%

534.8

431.5

24

%

Transaction-based clearing expenses

13.7

10.1

36

%

54.0

40.8

32

%

Introducing broker commissions

8.5

6.3

35

%

34.7

24.0

45

%

Interest expense

3.2

2.6

23

%

13.0

13.3

(2

)%

Net operating revenues

107.3

88.8

21

%

433.1

353.4

23

%

Variable direct compensation and benefits

33.1

27.7

19

%

133.4

111.2

20

%

Net contribution

74.2

61.1

21

%

299.7

242.2

24

%

Fixed compensation and benefits

12.6

12.3

2

%

49.9

48.5

3

%

Other fixed expenses

11.6

9.7

20

%

49.1

43.5

13

%

Bad debts, net of recoveries and impairment

5.9

4.8

23

%

8.5

8.3

2

%

Non-variable direct expenses

30.1

26.8

12

%

107.5

100.3

7

%

Segment income

$

44.1

$

34.3

29

%

$

192.2

$

141.9

35

%


Three Months Ended September 30,

Year Ended September 30,

(in millions)

2021

2020

% Change

2021

2020

% Change

Operating revenues (in millions):

Listed derivatives

$

53.7

$

43.2

24

%

$

223.5

$

176.9

26

%

OTC derivatives

34.5

22.6

53

%

143.4

111.0

29

%

Physical contracts

34.5

35.4

(3

)%

132.2

109.6

21

%

Interest / fees earned on client balances

4.9

1.9

158

%

14.6

14.5

1

%

Other

5.1

4.7

9

%

21.1

19.5

8

%

$

132.7

$

107.8

23

%

$

534.8

$

431.5

24

%

Select data (all $ amounts are U.S. dollar or U.S. dollar equivalents):

Listed derivatives (contracts, 000’s)

7,019

6,763

4

%

30,904

29,255

6

%

Listed derivatives, average rate per contract (1)

$

7.42

$

6.03

23

%

$

6.92

$

5.48

26

%

Average client equity - listed derivatives (millions)

$

1,791

$

1,112

61

%

$

1,648

$

1,019

62

%

Over-the-counter (“OTC”) derivatives (contracts, 000’s)

667

475

40

%

2,557

2,113

21

%

OTC derivatives, average rate per contract

$

51.25

$

47.34

8

%

$

55.70

$

52.19

7

%


(1)

Give-up fees as well as cash and voice brokerage revenues are excluded from the calculation of listed derivatives, average rate per contract.

Institutional

Three Months Ended September 30,

Year Ended September 30,

(in millions)

2021

2020

% Change

2021

2020

% Change

Revenues:

Sales of physical commodities

$

$

%

$

$

%

Principal gains, net

51.7

58.3

(11

)%

312.0

273.6

14

%

Commission and clearing fees

55.9

54.2

3

%

246.0

211.1

17

%

Consulting, management and account fees

4.2

4.4

(5

)%

18.0

23.3

(23

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