StoneX Group Q2 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

Key Takeaways

  • Operating revenues rose 29% YoY to $704.4 m in Q2, with record 12-month revenues of $2.5 b (+36%) and net income up 49% to $219.7 m; Q2 EPS was $1.95.
  • Product volumes increased in most lines—securities ADV +65%, physical +33%—while FX/CFDs fell 10% and listed derivatives were flat, amid a shift to lower-margin, higher-volume trading.
  • Interest and fee income on client balances surged 894% YoY to $103.4 m as client float climbed 22% to $8.6 b and short-term rates rose, though financing costs also increased.
  • A $14.6 m retirement and reorganization charge (mainly in Global Payments) reduced Q2 EPS by ~$0.50 but is expected to be recovered over 18–24 months via lower variable compensation.
  • Segment results were mixed: commercial segment income +47% YoY, institutional revenues +79% (income +12%), retail revenues down 35%, and global payments revenues +21% despite income down 33% on restructuring charges.
AI Generated. May Contain Errors.
Earnings Conference Call
StoneX Group Q2 2023
00:00 / 00:00

There are 4 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Stonex Group Q2 Financial Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To answer a question during the

Speaker 1

session.

Operator

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, CFO, Bill Dunaway. Please go ahead.

Speaker 2

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for our Q2 ended March 31, 2023. After the market closed yesterday, we issued a press release reporting our results for the 2nd fiscal quarter of 2023. This release is available on our website at www.stonex.com as well as a slide presentation, which We'll refer to on this call in our discussions of our quarterly and year to date results.

Speaker 2

You will need to sign on to the live webcast in order to view the presentation. 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 Vince 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.

Speaker 2

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'll now turn the call over to Sean O'Connor, the company's CEO.

Speaker 1

Thanks, Bill. Good morning, everyone, and thanks for joining our fiscal 2023 Q2 earnings call. In the Q2 of fiscal 2023, we continued to experience strong volume growth across all of our product offerings. However, while volatility continued to be moderately elevated in both financial and physical markets, it was significantly diminished Compared to the 3 months ended March 31, 2022, the prior year period reflected the effects of the Russian invasion of Ukraine, which resulted in significant widening of spreads in many key markets in which our clients transact, making this a tough comparable quarter for us. Turning first to Slide 3 in the earnings deck, which compares quarterly operating revenues by product versus a year ago.

Speaker 1

Product volumes were up except for FX and CFDs, which were down 10% and listed derivatives down marginally. The outlier here was securities, which was up 65% as we continue to push further into lower margin higher volume products. Revenue capture was down except for Global Payments, due largely to the exceptional conditions in the prior quarter as a result of the Ukraine situation. Revenue capture was up in all products except securities versus the immediately preceding quarter. Physical revenues were up a strong 33% due to good results from the ags biofuels business as well as precious metals activities.

Speaker 1

Securities operating revenues were up 65%. As mentioned last time, our operating revenues in fixed income trading Get boosted by higher carried interest on our positions, but we also incur related interest expense on financing these same securities, which results in the gross up on the income statement. We now net off the interest in the rate per million metrics. On this basis, securities ADV increased 65%, while the rate per million declined 49% to $2.82 Versus the immediately prior quarter, ADV was up 36% and the rate per million was down 33%. The decline in rate per million versus the prior year was due to the continued push by equity and fixed income groups into lower margin, but higher volume products, as well as tougher trading conditions on the equity side, which made it hard for us to internalize spreads.

Speaker 1

On the security side, this is definitely a tough quarter for equities. But on the other hand, the Fixed Income Group did exceptionally well, having one of their best quarters. Global Payments had another strong quarter, Recording revenues up 21% with volumes up 16% and revenue capture up 2%. Our FX CSD revenue was down 38%, largely due to tougher market conditions versus the exceptionally positive conditions in the prior quarter, which resulted in volumes being down 10% and revenue captured being down 31% versus a year ago. Versus the immediately prior quarter, ADV was up 5% and rate per million was up 14%, so an improvement over our Q1.

Speaker 1

Interest and fee income on client balances was $103,400,000 up 894 percent As we realized the impact of the cumulus interest rate increases off the back of a 22% increase in total client float, which now stands at around $8,600,000,000 Interest and fee income was up 20% over Q1, Even though our client float reduced 12% as clients on the FDIC suite started buying interest rates products to maximize yield, We also started to see some pressure to pay out higher rates to our clients on their funds. Moving to Slide 4, which shows the same data for the trailing 12 months. Over this longer period and despite more challenging comparisons now coming to bear, We realized strong revenue growth across all products except listed in OTC derivatives, which were up only single digits. Securities was up 57% Due somewhat to the accounting impact of interest mentioned earlier and physical contracts were up 41%. We have generally seen increases in volumes across The Board, while revenue capture is starting to become more challenging generally.

Speaker 1

Turning to Slide 5 and the summary of our Q2 and trailing 12 month results. Again, just to remind everyone, we're comparing against our best one of our best ever quarters a year ago. We recorded operating revenues of 704,400,000 Up 29% versus the prior year and up 8% from the preceding quarter. Our operating revenues are boosted by interest both on the client float and also Embedded in our fixed income trading mentioned earlier. Net operating revenue, which nets off interest expense as well as introducing broker commissions and clearing class was flat versus a year ago.

Speaker 1

During the quarter, we incurred $14,600,000 of retirement and reorganization charges, the bulk of which relates to the Global Payments segment. These costs will be recovered over the next 18 to 24 months through lower variable compensation. Total compensation and other expenses was up 7% for the quarter with variable compensation down 2% and fixed compensation up 33%, substantially due to the restructuring charges mentioned earlier. Fixed compensation, which includes the retirement and reorganization charges, was up $13,100,000 or 16% versus the prior year, With non variable salaries increasing $10,700,000 compared to the prior year as a result of a 15% increase in headcount related to our ongoing initiatives to digitize and expand our product offering as well as an annual merit increases. Versus the immediately preceding quarter, fixed compensation, again excluding the retirement and reorganization charges, was up $15,500,000 or 19%.

Speaker 1

This was driven by increased payroll taxes and 401 related expenses of around $4,000,000 related The start of the new calendar year. Accruals for paid time off increased $2,200,000 as employees increased their remaining accruals in the prior period utilize the remaining accruals in the prior period and the current period returned to more normalized levels. In addition, we a decline in deferred compensation of $4,000,000 versus the preceding quarter. Excluding all of these items, fixed compensation was up 7% on the preceding quarter, reflecting annual merit increases and some incremental new hires. We recorded $1.95 in EPS for the quarter and the charges mentioned earlier had an impact of around $0.50 on EPS.

Speaker 1

Without these charges, our EPS would have been roughly similar to Q1 when excluding the acquisition gain on CDI. Our ROE was 13.8% And the charges noted earlier impacted this by roughly 3.4%. Looking at the summary for the trailing 12 months. Operating revenues were a record $2,500,000,000 up 36% over the prior trailing 12 month period. Our net income was a record $219,700,000 up 49%.

Speaker 1

Our diluted EPS was $10.43 for the trailing 12 months, up 45%. ROE was 19.5% Despite equity increasing 45% over the last 2 years, our average yield on our client float was 3.79 basis points for prior year quarter. Our book value per share increased $3.15 during the quarter, Significantly larger than our reported EPS due to positive changes in other comprehensive income to close at $60.32 up 21% versus a year ago. Turning now to Slide 6, our segment summary and just to touch on Some of the highlights before Bill gets into more detail. For the quarter, segment operating revenue was up 30% and segment income was down 5% Due to the exceptional results a year ago and also due to the restructuring charges mentioned earlier, our commercial client segment was up 47% income off the back of a 20 percent increase in operating revenues with strong performances in precious metals and also the effect of higher interest rates.

Speaker 1

Versus the immediately preceding quarter, segment revenues were up 21% and segment income was up 24%. Our institutional segment realized a 79% increase in revenues, which translated into a 12% increase in segment income. The disparity in those two growth numbers is due to revenue being increased by the interest carry on fixed income. The fixed income Our business, as mentioned earlier, had one of their best quarters and the Equity business experienced a much more challenging one, while the list of derivatives business and securities clearing were boosted by interest Versus the preceding quarter, segment revenue was up 6% and segment income was down 10%. Retail had another difficult quarter with continued challenging market conditions, especially when compared to the exceptional results a year ago.

Speaker 1

Operating revenue was down 35%, but up 11% versus the preceding quarter. Segment income swung to a profit of $4,800,000 versus a loss of $4,200,000 in the preceding quarter, but was still down 89% from a year ago. Global Payments revenue was up 21% and segment income was down 33%, due largely to the bulk of the reorganization charges being charged here. Segment income would have exceeded last year's without these charges. For the trailing 12 months, we have segments Operating revenue and segment income up double digits except for retail, which was down.

Speaker 1

We have said repeatedly, we take a long term view in how we manage the company and grow our franchise. And as such, we believe that the best way to gauge our results and progress is to look at longer term performance, such as trailing 12 month results rather than specific quarters taken in isolation. Turning to Slide 7, which sets out our trailing 12 month financial These numbers have been adjusted for the accounting treatment related to the gain in the CDI acquisition as disclosed in our prior filings and which appear in the reconciliation provided in the appendix of this earnings deck. On the left hand side, the bars represent trailing 12 month operating revenue over the last 9 quarters. As you can see, this has been a smooth and strongly upward trend as we have steadily expanded our footprint and capabilities.

Speaker 1

Our operating revenues are up 63% over this period for a 28% CAGR. Our adjusted pretax income, Likewise has grown significantly at a 25% CAGR. Our pretax earnings This quarter due to the reorganization charges mentioned earlier. On the right hand side, you can see the adjusted debt income with the bars, which is up 62% over the last 2 years for a 27% CAGR. The dotted line represents our ROE, which has remained above our 15 And the target even though our capital has grown by 45% over this period.

Speaker 1

With that, I'll hand you over to Bill Dunaway for a discussion I'll see financial results in more detail. Bill, over to you.

Speaker 2

Thank you, Sean. I'll be starting on Slide number 8, which shows our consolidated income statement for the Q2 of fiscal 2023. Sean covered many of the consolidated highlights of the quarter, so I'll highlight a few and then move on to a segment discussion. Transaction based clearing expenses declined 10% to $69,200,000 in the current period, principally due to lower fees The ADRs as well as the decline in FX CFD contracts, average daily volume and listed derivative contract volumes. Introducing broker commissions declined 2% to $42,200,000 in the current period, principally due to declines in our independent wealth management and retail FX and CSD businesses.

Speaker 2

Interest expense increased $164,600,000 versus the prior year, primarily as a result of the $117,000,000 increase in expense related to our institutional fixed income business and a $36,600,000 increase in interest Pay to client balances on deposit as a result of a significant increase in short term interest rates. Interest expense on corporate funding increased $4,300,000 Variable compensation declined $2,300,000 versus the prior year due to the decline in net operating revenues as well as a change in product mix and represented 30% of net operating revenues in the current period compared to 31% of net operating revenues in the prior year period. Sean covered earlier on this call the fluctuations in fixed compensation, so I'll move on to other fixed expenses, which increased $6,500,000 as compared to the prior year to $106,400,000 However, this is a $3,800,000 decline versus immediately preceding quarter. As compared to the prior year, non trading technology and support increased $3,400,000 due to software implementations and ongoing support. Travel and Business Development increased $2,800,000 Depreciation and amortization increased $1,800,000 due to incremental depreciation related to internally developed software, as well as higher amortization of leasehold improvements and intangibles acquired.

Speaker 2

And finally, occupancy and equipment rental increased $1,800,000 as compared to prior year. Offsetting these increases, professional fees declined $2,500,000 as compared to the prior year, principally due to lower legal fees. Bad debt expense, net of recoveries, declined $9,300,000 to $3,000,000 in the current period versus $12,300,000 in the prior year period. The prior year comparable period includes a $6,400,000 other gain related to a foreign exchange antitrust class action settlement received, While the immediately preceding quarter includes the $23,500,000 gain on the acquisition of CDI. Net income for the Q2 of fiscal It is a 46% decline versus the immediately preceding quarter, which included the gain on the acquisition of CDI I just noted.

Speaker 2

Moving on to Slide number 9, I'll provide some more information on our operating segments. Our Commercial segment added $36,000,000 in operating revenues versus the prior year and $37,700,000 compared to the immediately preceding quarter. This increase was driven by a $37,100,000 increase in interest earned client balances as a result of the significant increase in short term rate. Average client equity declined a modest 2% versus the prior year. In addition, operating revenues from physical transactions increased $14,700,000 compared to the prior year as a result of growth in both physical ag and energy and precious metals activities.

Speaker 2

These increases were partially offset by $12,000,000 $4,500,000 declines in operating revenues derived from listed and OTC derivatives respectively, with the prior year being a very strong performance as Sean noted earlier, versus the immediately preceding quarter listed in OTC derivative revenues increased 7.2 and $15,400,000 respectively. Fixed compensation and benefits increased $3,300,000 versus the prior year Other fixed expenses increased $2,600,000 including increases in selling and marketing, travel and business development and depreciation and amortization. Bad debt expense declined $7,400,000 as compared to the prior year. Segment income was $102,900,000 for the period, an increase over the prior year period and preceding quarters of 47% 24% respectively. Moving on to Slide number 10, operating revenues The institutional segment increased $159,700,000 versus the prior year, primarily driven by $101,500,000 increase in securities operating revenues compared to the prior year as a result of the 65% increase in average daily volume of security transactions as well as the increase in interest rates.

Speaker 2

The increase in securities ADV was driven by an increase in volumes in both equity and fixed income markets. As Sean mentioned earlier, the increase in interest rates also led to significant The increase in securities related interest expense for the period, which I'll touch on momentarily. Interest and fee income earned on client balances increased The rise in short term rates drove $156,000,000 increase in interest expense versus the prior year. Interest expense related to fixed income trading and securities lending activities increased $117,500,000 $3,400,000 respectively as compared to the prior year And the immediately preceding quarter, while interest paid to clients increased 32,600,000 Segment income increased 12 percent to $55,800,000 in the current period as a result of the $5,100,000 increase in net operating revenues. Fixed compensation and benefits increased $2,200,000 versus the prior year as we build out our product offering, while other fixed expenses increased $1,000,000 Bad debt expense declined $2,000,000 as compared to the prior year period.

Speaker 2

Segment income declined $6,200,000 versus the immediately Moving on to the next slide, operating revenues in our Retail segment declined $41,400,000 versus the prior year, which was primarily driven by $37,500,000 decrease in FX and CFD revenues as a result of a 26% decline in rate per million as well as a 22% decline and FX CFD ADV as compared to the prior year. Operating revenues from securities transaction declined 3,600,000 Operating revenues in the Retail segment increased $8,100,000 versus the immediately preceding quarter. Segment income declined 89 to $4,800,000 in the current period, primarily as a result of the decline in operating revenues. We moved retail marketing employees to our central marketing department, which drove the $3,200,000 decline in fixed compensation and benefits. These costs were then allocated back to the Retail segment through an allocation process, which partially drove the $5,100,000 increase in other fixed expenses as compared to the prior year.

Speaker 2

In addition, we saw a $900,000 increase in depreciation amortization of $600,000 increase in non technology and sport and a $500,000 increase in travel and business development. Closing out the segment on the next slide, operating revenues in Global Payments increased $8,800,000 versus the prior year, driven by a compared to the prior year, primarily driven by the reorganization costs Sean noted earlier, as well as incremental hires related to the build out of the payment offerings. Segment income was $15,900,000 in the current period and represents a 33% 51% declines versus the prior year and immediately preceding quarters respectively. Moving on to Slide number 13, which represents a bridge between operating revenues for the Q1 of Q2 of last year to the current period across our operating segments. Overall operating revenues were $704,400,000 in the current period, up 159.7% or 29% over the prior year.

Speaker 2

I've covered the changes in the operating segments for our segment operating revenues for our segments. However, a $3,400,000 negative variance in revenues and unallocated overhead is Primarily related to the outcome of the elimination of Central Treasury activities between business segments and corporate. The next slide number 14 represents a bridge from 2022 second quarter pre tax income of $87,400,000 to pre tax income of $57,500,000 in the current period. The negative variance in unallocated overhead of $19,800,000 was partially driven by the $3,400,000 negative variance in revenues I just noted, as well as a $2,500,000 increase in variable compensation and a $12,400,000 increase in fixed compensation and benefits, which was partially due to the movement of the retail marketing team in the central department as I touched on earlier. In addition, we saw a $4,300,000 increase in interest on corporate funding, a $1,700,000 increase in occupancy and equipment rental and a $1,800,000 increase in non trading technology and support.

Speaker 2

These increases were partially offset by a $2,600,000 decline in professional fees, an increase in central as well as an increase in central allocations of the operating segments, particularly retail. Finally, moving on to Slide number 15, which depicts our interest and fees earned on client balances by quarter, as well as a table which shows the annualized interest rate sensitivity for a change in short term interest rates. The interest and fee income net of interest paid to clients and the effective Trade swaps increased $43,200,000 to $54,600,000 in the current period as compared to $11,400,000 in the prior year. As noted in the table, we estimate 100 basis point change in short term interest rates either up or down would result in a change to net income of $21,000,000 or 1 point 2 per share on an annualized basis. With that, I would like to turn it back over to Sean.

Speaker 1

Thanks, Bill. Let's move to the final slide, Slide number 16. We achieved another set of very good core operating results with moderating market conditions offset by higher interest earnings on our client float. This quarter, we are comparing against a very strong quarter a year ago and also had significant reorganization charges, which should be recovered with lower variable compensation over time. For the quarter, we recorded EPS of $1.95 and an ROE of 13.8%.

Speaker 1

Adjusting for the reorganization charges, Results would have been in line with the Q1 results, excluding the gain on the CDI acquisition. For the trailing 12 months, we recorded net income of $119,700,000 or $10.43 in EPS, equating to a 19.5% ROE on stated book. Our Book value is now $60.32 per share, up 21% versus a year ago. When our performances are viewed through a slightly longer term lens, such as trailing 12 months over the last 2 years, which evens out quarterly anomalies, Our results continue to show a strong upward trajectory, growing revenues at a 28% CAGR and adjusted earnings at a 27% CAGR. While trading conditions moderated towards the end of the quarter, we believe that our growing and diverse business and multiple earning drivers We continue to see strong growth in client trading volumes across asset classes And products as well as segments, which speaks to growth in our underlying client base and client engagement.

Speaker 1

We continue to invest in our financial ecosystem, We have a unique and broad financial ecosystem with a very large addressable market in front of us. Operator, let's see if we have any questions. I'm sure Dan is onto the line.

Operator

Perfect. Thank you. And at this time, we will conduct a question and answer session. Our first question comes from the line of Daniel Fannon from Jefferies LLC, your line is now open.

Speaker 3

Thanks. Good morning, guys.

Speaker 1

Hey, Dan. How are you?

Speaker 3

Doing well. Thanks. So I want to just follow-up on just the environment at a high level. You've Talked about higher volumes and lower spreads was kind of something is just kind of a takeaway for the quarter. But maybe as you think about The end markets, the healthier customer base kind of activity levels is you obviously have tough comps from how great things have been.

Speaker 3

But as you look underneath, does it feel the sustainability of activity levels is kind of was hoping to get a little more color around it knowing that you can't predict volumes, Generally, the trends seem like they're holding it up at least reasonably well.

Speaker 1

Okay. So I guess you sort of have to pass that question I mean, in terms of revenue capture, we obviously were comparing against a phenomenal quarter at year ago. Revenue capture was down versus that. I would say excluding that, if you look maybe over the last three quarters, I would say there are signs generally whether you look at the VIX or whether you look at volatility in sort of metals markets and elsewhere That volatility has declined generally over the last 2, 3 quarters. I think it's probably still somewhat elevated In general terms versus say 2019, but it's certainly nowhere near where it was a year ago.

Speaker 1

So It seems to be flattening out. Now we could be entering volatility can change fast, right? I mean, as we've seen with sort of the bank drama. And Dan, what's going on with all the Californian banks, I'd like to know. But anyway, I think we sort of may be flattening out there and We could see periods of higher volatility.

Speaker 1

So that's on the volatility side. On the volume side, We're certainly seeing continued strong volumes. I think we might, depending on the kind of economic Situation we think may transpire. We may also see that start to moderate slightly. I mean, if we go into A highly credit constrained environment and a recession, I think you probably got to say volumes aren't going to continue to increase at the same pace and all things We'll probably moderate a little bit.

Speaker 1

So that's my anticipation. I would say though, The other factor to take into account is just the competitive environment. I think we're making market share gains, right? I think banks are struggling. I think they're starting to again consider whether they should be in some of these businesses.

Speaker 1

We continue to see That's on boarding clients from banks. So even in a more moderated environment, we may still see some decent growth through market share gains. So I think it's a pretty good environment for us. And obviously, you've got interest rates at a high level. So I think all in all, this is a pretty good environment for us over the next Kind of 3 to 6 quarters.

Speaker 1

It obviously depends on sort of the overall economic conditions and how dire those get. Absent something really bad, I think it's going to be a decent run for us here. I mean, taking all those factors into account.

Speaker 3

That's helpful. Thank you. And then I guess just upon one of the areas where you are taking share is fixed income. Can you talk about your offerings, what you're doing there? You've hired some people, you've built this business organically.

Speaker 3

But Thinking about prospectively, are you allocating more dollars, resources to this to continue this trajectory?

Speaker 1

I don't think we're allocating more dollars in terms of sort of limits or inventory or whatever. I mean, this business has ramped Pretty fast over the last 5 years and seems to have sort of stabilized. What we are seeing is just a lot more volume. And we certainly are picking up a lot of market share in this business. I was just traveling for 2 weeks and I sit where the fixed income guys are.

Speaker 1

And I came in and there are like 10 new people here. And they all come from firms who were competitors of ours who are not doing so well. I mean, we've got some People from Credit Suisse, we've got some people from other places. So we certainly seem to be attracting talent and we certainly seem to We're outperforming our competitors and TALES normally follows that, right? So I think the fixed income guys have done a phenomenal job.

Speaker 1

I do think, As we've said now for a couple of quarters, there's a lot of activity in the more commoditized product, We've seen just a lot of activity in T bills and in treasuries. And as all this turmoil is going on with the banking sector, that is Giving us a lot of volume. Now we're making money out of it, but in terms of rate per 1,000,000 revenue capture, it's a lot lower revenue capture than some of our other products. But Certainly, we're seeing very good results from our fixed income guys doing a great job. And I think we're becoming I definitely think in that area, we are showing market I think it's showing up with how clients perceive us.

Speaker 1

I think we're sort of stepping into the void created by some of these other banks who withdrawing. So So I definitely think there we're seeing lots of market share gains and enhancement of that franchise for us.

Speaker 3

Okay, that's helpful. And then just following up on the reorg and some of the expense items In the quarter, I think you said were mostly kind of global payments related, but why now? Kind of what Do we see this kind of flowing through other portions or segments of the business as you kind of go through this or just a little more context would be helpful?

Speaker 1

Yes. It's just strange how the stuff always seems to hit in 1 quarter and no matter how you sort of think it's going to be different. We've had a lot of people who have been with us for a long period of time who've helped grow our businesses. They were Very high highly paid people. A lot of them had taken a lot of their compensation in stock.

Speaker 1

A lot of them are sort of getting to their 60s and I think sort of post sort of a 3 tough year period during COVID, It sort of became time, I think, for some of these people to think about retirement. We had to start thinking about transitions. And so that's really what happened. So I think we feel very comfortable about it. I think we've got a good bench.

Speaker 1

But these people have done a fantastic job for us, helped us Built a great business, have built a great bench for Ivan, but at some point, people want to go do other things. And when that happens, particularly when people have a lot of stock, We typically, if someone retires, we vest all of their stock immediately because that deal with us and builds great business And that hit comes immediately, right? So that's really what happened. We in our precious metals business, our senior guy ran In fact, he was running the whole metals business. We've got a great person following up.

Speaker 1

They've been working on a transition for the better part of 2 years. The guy who headed up our precious metals activities in Asia and then the head of our global Payments business all sort of at the same time decided this was a good time for them to sort of move on. So we've got young talented people in this space, I feel very comfortable about it, but this is the cost to all of that, right? That cost will be recovered because we have modified The variable comp structures, I mean, all of our senior people were big draws out of the variable comp pool, Given that they started and they were here originally, and we've managed to skinny that up a little bit. So I think we've got a leaner comp structure going And we certainly will recover these costs pretty quickly.

Speaker 1

And then there'll be an enduring benefit from there on, right. So anyway, that's the story then.

Speaker 3

That's helpful. And then just in terms of all the disruption that's happening, do you have you Is M and A kind of moving up the priority list as you're seeing potential businesses or carve outs of other firms that maybe aren't doing as well that Or more attractive today?

Speaker 1

I would say we haven't really seen that yet. But definitely what we are seeing is a pickup in talent coming over, which for us is a little bit the same thing, right? In some ways, if you can pick up We just picked up a team of 5 fixed income traders, very competent team, well known in the market. When they come across and Generally speaking, can bring their clients with them. That's almost better than us making an acquisition at some level, right, because we don't have to pay for it.

Speaker 1

And We get a bunch of guys who come over, bring their business with them and sort of fit in seamlessly to our culture. So We're seeing a lot of that happening at the moment, which in some ways I think is a better and lower risk way to grow our business. And I think we're going to see more of that. There are obviously a lot of people out of Credit Suisse and other people looking. So I think it's a good environment for us to pick up talent.

Speaker 1

I think clients are also looking where to move to, so there's a good opportunity to pick up clients. So we're seeing that kind of, I guess, Opportunity rather than acquisitions, but I think you're right. At some point, there are going to be some acquisitions. I think this is a tough environment For some people in the financial markets, I mean, it's great for us, but some people are struggling and there should be some opportunities, but nothing I can Are there any other questions? Okay.

Speaker 1

It looks like we don't have any questions. So I'd like to thank everyone for joining us on the call. I'd like Thank all the great team members of Stonex for another great performance this quarter, and we look forward to speaking to all of you in 2 months' time. Thanks so much.

Operator

This does conclude the program. You may now disconnect. Thank you.

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