SNEX - NASDAQ

Good day, and thank you for standing by. Welcome to the StoneX Group Inc. first quarter fiscal year 2025 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 ask a question during the session, you will need to press star one one on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I will now turn the conference over to your first speaker today, Bill Dunaway, Chief Financial Officer. Please go ahead.

Good morning. My name is Bill Dunaway. Welcome to our earnings conference call for the quarter ended December 31, 2024, our first quarter of fiscal 2025. After the market closed yesterday, we issued a press release reporting our results for the quarter, and this release as well as a slide presentation which we will refer to on this call, are available on our website at www.stonex.com. 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 that all participants should note that the following discussions should be considered in conjunction with the most recent financial statements and notes thereto included in 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. 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 expected 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 Executive Vice Chairman, for a brief intro.

Thanks, Bill. Good morning, everyone, and thanks for joining us on this 2025 first quarter earnings call. I'm very pleased to report that we continue to build on the momentum we developed during 2024, with another record quarter to start fiscal 2025. Our second record quarter in a row. We have a different format for the earnings call this time, based on feedback we received from some of you over the last couple of quarters. As always, please let us know if you have suggestions for us on the format and content of our earnings call and investor relations steps. So back to you, Bill.

Thank you, Sean. I'll be starting with slide number four in the slide deck. And as Sean just noted, it was a strong start to fiscal 2025, with first quarter net income coming in at $85.1 million and diluted earnings per share of $2.54, which represents 23% and 19% growth over the prior year quarter. In addition, these measures were up 11% and 9% versus our immediately preceding record fourth quarter. This represented a 19.5% ROE despite a 51% increase in book value over the last two years. We had record operating revenues of $944.3 million, up 20% versus the prior year and up 3% versus the immediately preceding quarter. As a reminder, our operating revenues include not only interest and fees income earned on our client balances, but also carried interest that is related to our fixed income trading activities. Net operating revenues, which nets off interest expense, including that which is associated with our fixed income trading activities, as well as introducing broker commissions and clearing fees, were up 17% versus a year ago and 8% versus the record achieved in the immediately preceding quarter. Total compensation and expenses were up 17% versus the prior year quarter and 7% versus the immediately preceding quarter. Variable compensation was up 9% versus the prior year, less than the growth rate of net operating revenues. Fixed compensation and related costs were up 24% versus a year ago and up 6% or $7.1 million versus the immediately preceding quarter. The current quarter includes $5.8 million in fixed compensation expense related to a departing executive officer. Excluding variable compensation and the charges related to the departing executive officer, total compensation and other expenses were up 2% versus the immediately preceding quarter. It is of note that the income before tax for the first quarter of fiscal 2025 includes gains of $5.7 million related to class action settlements received, which are included in other gains. Looking at it from a longer standpoint, our trailing twelve months results show operating revenues up 18%, net income of $276.8 million, up 20%, with earnings per share of $8.37 and an ROE of 17% for the trailing twelve-month period. We ended the first quarter of fiscal 2025 with a book value per share of $5.48. Next, turning to slide number five in the earnings deck, which compares quarterly operating revenues by product as well as key operating metrics versus a year ago. While in the first quarter of fiscal 2025, volatility continued to be generally low, with the exception of a select few products, we saw continued growth in client engagement, represented by an increase in transactional volumes across all of our product offerings, as well as very strong growth in operating revenues derived from physical contracts. The spread capture continued to be challenged in certain areas, particularly in OTC derivatives and payments due to diminished volatility and market conditions. Our recent events have shown that this can change rapidly, so we can hopefully see that we may see better market conditions in the future. Just touching on a few key highlights for the quarter, we saw operating revenues derived from physical contracts up 80% versus the prior year, off the back of strong growth in both our precious metals and our physical ag and energy businesses, most notably in cotton and cocoa. FX CFD revenues were up 32% due to both a 7% increase in average daily volume as well as a 22% increase in RPM, driven by improved spread retention and product mix. Securities revenues were up 27% with volumes up 40%, which was partially offset by a 20% decline in rate per million due to continued growth in lower spread products such as US treasuries and US listed equities combined with diminished market volatility. Payments revenues were down a modest 4% versus a record year ago quarter, but up 20% versus the immediately preceding quarter. OTC derivatives revenues were down 18%, largely due to revenue capture being down 22%. Our interest and fee income earned on our aggregate client float, including both listed derivative client equity and money market FDIC sweep balances, increased 9% versus the prior year, primarily driven by growth in client balances. Turning to slide six, this depicts a waterfall by product net operating revenues from both the prior year quarter to the current one as well as the same for the trailing twelve-month period. Just a reminder, net operating revenues represent operating revenues less introducing broker commissions, clearing fees, and interest expense.

For the quarter,

net operating revenues increased 17% with the largest gains coming from physical contracts up $35.1 million and FX CFDs up $24.1 million, while interest and fee income on client balances increased $14.4 million. Looking at the bottom of the graph for the trailing twelve-month period, it shows a slightly different picture with large increases coming from interest and fee income, securities, and FX CFD contracts, which represents well the diversity of the StoneX model. Moving on to slide number seven, I'll do a quick review of our segment performance. All segments were up in both net operating revenue and segment income with the exception of payments, which I noted earlier was modestly down from a record prior year quarter. In addition, we saw margin expansion across all segments with very strong results in our self-directed retail segment. Our commercial segment grew net operating revenue 16%, primarily driven by the strong performance in physical contracts. This is partially offset by lower OTC derivative revenues, segment income was up 17%. On a sequential basis, net operating revenues were up 13% and segment income was up 15%. Our institutional segment saw net operating revenues and segment income growth of 17% and 20% respectively. The growth in net operating revenues was principally driven by a $4.3 million increase in revenue and a $17.2 million increase in interest and fee income earned on client balances. Partially offsetting the net operating revenue growth, non-variable fixed expenses increased 17%, however, that was a 10% decline versus the immediately preceding quarter. On a sequential basis, both net operating revenues and segment income were relatively flat.

Self-directed retail had a record quarter

with net operating revenues up 41% and segment income up 98%, which demonstrates the operating leverage in this business. This is primarily driven by increases in average daily volume and rate per million in the FX CFD contracts. On a sequential basis, net operating revenues were up 24% and segment income was up 91%. In our payments segment, net operating revenues were down 5% and segment income was down 3%, principally due to tighter FX spreads in several of our key payment corridors. Average daily volume was up 12%. On a sequential basis, net operating revenues were up 21% and segment income up 38%. Next, moving on to slide number eight. Looking at our segment performance for the trailing twelve months, we saw strong growth in our institutional segment with net operating revenues up 22% and segment income increasing 26%. In addition, our self-directed retail segment increased net operating revenue and segment income by 25% and 87% respectively. Our commercial and payment segments were relatively flat on a segment income basis. Finally, moving on to slide number nine, which depicts our interest fees earned on client balances by quarter, as well as the table which shows the annualized interest rate for a change in short-term interest rate. The interest and fee income net of interest paid to clients and the effective interest rate loss increased $14.4 million to $77.4 million in the current period. This represents a $6 million decline in the immediately preceding quarter, as we're starting to feel the effects of the Fed backing off the reduced short-term rate.

As noted in the table,

we estimate a 100 basis point change in short-term interest rates either up or down would result in a change to net income by $27.7 million or $0.78 per share on an annualized basis. On a final note, before I turn it back to Sean for a strategy update, yesterday, our board of directors approved a three-for-two stock split of its common stock. The stock split will be effected as a stock dividend, entitling each stockholder of record to receive one additional share of common stock for every two shares owned. Additional shares issued as a result of the stock dividend will be distributed after the close of trading on March 21, 2025, to stockholders of record at the close of business on March 11, 2025. Cash will be distributed in lieu of fractional shares based on the open price of its share of common stock on March 12, 2025. Trading is expected to begin on a stock split adjusted basis on the market open on March 24. With that, I will hand you back to Sean.

Thanks, Bill. In our prior earnings call covering the full fiscal year 2024 results, I reviewed our overall corporate strategy in some detail. So I'll not repeat all of that each quarter but rather focus on any significant updates or developments that we believe are noteworthy. As you no doubt saw, there was an announcement late last year about some management changes so perhaps that's a good place to start. So turning to slide eleven. It's been twenty-two years since I took the position in what is now StoneX, and became CEO. From humble beginnings, just ten people and less than ten million dollars in equity have grown into a financial franchise of nearly five thousand employees and over three billion dollars in revenue and market capitalization. These achievements are really a testament to the incredible team at StoneX whose hard work has made this journey possible and provided me with an experience beyond my wildest dreams. Leading this company has been an enormous privilege and one for which I am deeply grateful. However, I believe that the time had come to start the transition to the next generation of exceptionally capable leaders. Out of the fast-moving industry, and it's important that at every level, we are bringing in new talent and moving our proven leaders into new areas to look at things in new ways. We have constantly done this throughout the organization and it is part of our success. Changes are always best done from a position of strength. When things are going well, when you have momentum behind you, and a very strong bench in position and ready to go, with this in mind, I was pleased that late last year we announced that Philip Smith and Charles Lyons have taken on day-to-day leadership of StoneX as CEO and President, respectively. With these changes, I have transitioned to the role of Executive Vice Chairman, remaining a full-time employee member of the executive committee, and with a focus on strategy. Philip, Charles, and I have worked together for twenty years, and I have complete confidence in their ability to build on our track record of success. I've asked Philip and Charles to join us today on the call to introduce themselves to you. Perhaps they can each give you a little background on themselves. Philip and Charles, over to you guys.

Good morning. Thank you, Sean. I'm Philip Smith. Previously Chief Executive of Europe, Middle East, and Africa. I've been with StoneX since 2004, following the acquisition of Global Currencies Limited, a UK-based emerging market foreign exchange provider, which today you know as our payment segment. This UK-based business has been the foundation upon which we have successfully built out the full StoneX product offering in London over the last twenty years. I am both humbled and excited to be appointed the Group Chief Executive for StoneX. In politics, one might say I've climbed to the top of the greasy pole, but I see this as being given a huge opportunity to continue on the adventure that is StoneX. This is a company like no other, with a successful track record like no other, and all that is down to the leadership of Sean O'Connor, a mentor for whom I've worked since 2004. I have poured my heart and soul into the success of this company, and feel a huge level of excitement for the opportunities that lay ahead. The disciplined approach to expanding the StoneX ecosystem geography, by product, or by acquisitions of teams and businesses has resulted in StoneX being the premier financial services firm that it is today. We shall continue along these successful lines each and every day to ensure we maintain our relevance to our clients, our counterparties, and the broader market. Like Sean, I too have worked with Charles since 2004 and have a huge amount of respect and friendship. I view this next phase of the management of StoneX with excitement and enthusiasm. Thank you.

Thank you, Philip and Sean. Good morning, all. I'm Charles Lyons.

I started my career at StoneX in 1999 after college as my first job and have worked at StoneX my entire career. I began working on the international equity market-making desk eventually helping to lead the growing equity trading business through business expansion, acquisitions, and new product growth. Over the years, my role has expanded to oversee securities clearing, fixed income trading, equity derivatives, prime brokerage, outsourced trading, wealth management, and self-directed trading. I've also helped to manage our derivatives and FX activities, both exchange-traded and over-the-counter. My role has evolved over the years, and my recent focus has been working with our technology operations, trading, and risk teams, which are all critical to ensuring that we are well-positioned to maximize the incredible opportunity in front of us at StoneX. It is an overwhelming privilege to continue serving the teams, clients, and shareholders of the organization focusing on developing and deploying our group strategy for future success. Thank you very much.

Thanks, guys. I am very excited and confident that Philip and Charles have the experience, skills, the internal support, and, most of all, the passion to continue our amazing strategy. Moving on to highlight a few strategy updates, we just last week closed the acquisition of Oktop Finance, a leading fixed-income trading firm in Paris with experience in bond and convertible securities, debt capital markets, and credit research. Oktop has a footprint of over five hundred clients, including banks, insurance companies, debt funds, mutual funds, and wealth managers. The acquisition provides us with broad access into the EU institutional markets we believe we'll be able to significantly enhance and grow the Oktop product. We have already been working closely with Oktop while we were waiting for regulatory approval and have collaborated on a number of successful capital markets mandates, validating the rationale and fit with StoneX. In early December 2024, we received approval from the Central Bank of Ireland as a virtual asset service provider, allowing us to operate a digital asset business in Europe. As one of the first such approved entities, this will allow us to provide execution and custody services for digital assets which will be integrated into our suite of prime brokerage services, complementing our existing capabilities in equities, ETFs, futures, and treasuries. As I mentioned in the last call, during 2024, we saw the US Prime business grow by about 30%, as we were able to internalize capabilities and spreads from existing business lines. Some of this growth was fueled by growth in the ETF space. We offer a unique custody and execution solution for the new wave of alt ETFs being launched. Strong momentum continued into Q1 with record revenues for that business. Early in the quarter, we completed our acquisition of JBR Recovery, a silver recycling company in the UK, one of only two companies accredited by the London Bullion Market for good delivery silver to the London Bullion Markets, giving us reliable access to metal while internalizing the refining margin and facilitating responsible reuse and recycling of secondary or waste materials. We are also launching our own CME-approved vault in New York, which will allow our clients to deliver and receive physical gold in settlements of derivative contracts as well as allow us to hold precious metals for our end clients. We believe that this should be approved by the CME in Q2. The last six quarters or so have seen growing earnings momentum for our business despite declining volatilities over that period and more recently declining interest rates. We remain very optimistic about our trajectory and our ability to sustain it for the medium to long term. Our diversified businesses have to offset some of the market headwinds. And we have an enormous addressable market in front of us. While it is difficult to be precise, we believe that we have single-digit market share in certain niche markets where we have traditionally focused. But in the broader financial markets where we now compete, our market share barely rises to a single percentage point. We believe that our growth strategy is underpinned by the following: obstructive market dynamics driven by regulation that would enable us to capture market share from larger banks, leveraging our geographic footprint to expand into markets where we are underrepresented, adding new products and services to our ecosystem, the white space, to create new revenue streams, cross-selling our existing ecosystem of products and services to our growing client base, and scaling our self-directed offering to broaden our addressable market and overcoming the limitations of a high-touch approach and geographic reach. We decided based on the feedback received, it might be informative for us to focus on one of our businesses each quarter and to give you perhaps a deeper dive into what we're doing at StoneX. So we'll start that this quarter, and Philip will be kicking us off with payments. Philip, over to you.

Thank you, Sean, and good morning to all listening in. As Sean mentioned, I'll be providing a deeper dive into our payments business, which is a business near and dear to my heart. That is where I began my career thirty years ago this year. Firstly, a high-level overview on slide thirteen. This business started out as a specialized foreign exchange trading firm where we sought to help clients obtain better execution in emerging and frontier currencies not well served by larger banks. This ended up becoming a payments capability facilitating clients who are looking to get local currency into a local bank account efficiently and effectively. StoneX has, over the last twenty years, developed what we believe to be the largest correspondent banking network of any nonbank financial institution in the world, which allows us to seamlessly deliver local currency into local bank accounts in over one hundred and eighty countries. We have successfully disrupted the traditional payments channels which were highly inefficient and opaque throughout the non-G20 markets. We believe StoneX payments is the premier gateway to the global payments ecosystem facilitating seamless cross-border transactions across a vast array of currencies. Engineered as a world-class API-driven solution, it combines advanced automation with superior execution capabilities and transparency, ensuring efficiency, security, and reliable payment processing for enterprises worldwide. As you can see from the slide, we provide access to one hundred and forty currencies in one hundred and eighty countries, which is effectively every country except those that are sanctioned. This service is provided to over two thousand active clients. We achieved this with a network of over three hundred and eighty-five correspondent banks in-country and over four hundred staff located around the world. Turning to slide fourteen. This helps explain who we serve, with our clients split between four segments: international development organizations, financial institutions, corporates, and educational institutions. So starting with international development organizations, this is made up of charitable nonprofits, NGOs, and supranational agencies all of whom are sending funds around the world funding their global field operations, or directly paying vendors and supplier invoices. In the last quarter, this segment represented approximately forty percent of the revenue generated. Financial institutions. These are the eighty-plus global commercial banks, central banks, credit unions, as well as regional and community banks who use the payments capability of StoneX to satisfy the demands of their banking and commercial client base worldwide. This segment now also includes six nonbank financial institutions who offer StoneX payment services to their underlying corporate clients. And in the last quarter, this segment represented approximately fifty-five percent of the revenue generated. Corporates and universities, I put together being the two smallest segments, are areas we are actively expanding into. With over twenty thousand commercial clients within the overall StoneX Group, we are leveraging that client base to cross-sell our payments capability. We've also spent the last few quarters enhancing our client-facing platform and hiring specialist teams to launch the payments capability of StoneX to universities and colleges globally, where we believe there is a meaningful opportunity to add value. As a true last-mile payment provider. From an organic growth perspective, we're proud to report that in the last four quarters, StoneX added one hundred and thirty-four IDEO clients, seven banks and financial institutions, and thirty-nine corporates and universities. And we see a robust pipeline growing well into our new fiscal year. Among the recent additions to our client base, you will find esteemed organizations such as NatWest Bank, MUFG, and Visa. We also continue to expand our correspondent banking network of over three hundred and eighty-five banks, which enables us to navigate market conditions prudently, without the risk of concentration or revenue dependence on any specific payment corridors. By region, in the last four quarters, we added nine new correspondent banks in APAC, eleven in EMEA, and nine in the Americas. We believe that our brand, our balance sheet, our formidable track record as a provider to some of the world's largest institutions, and our expertise in connecting to high and low-value clearing systems around the world allows us to dynamically manage our infrastructure and add or replace endpoints with great efficiency to meet our client demands. Moving to slide fifteen, this sets out our annual financial performance for the payment segment since 2019. It is worth reminding our investors that over the last twenty years, we have seen consistent double-digit year-on-year revenue growth in this product line with 2024 seeing the first year-on-year decline albeit by one percent. The first financial quarter is historically a strong quarter for us due to the calendar year-end seasonality of funding from our IDEO client base and large corporate flows that come through our FI clients. This is reflected in the Q1 2025 revenue of $58.1 million which represents our second strongest quarter in the history of this business. It is a 20% increase in operating revenue on the immediately preceding quarter and a 4% decrease year-on-year which in itself was an all-time record quarter, albeit in an outlier period of volatility and emerging market dislocation that has normalized in 2024. We saw a 12% increase in average daily volume year-on-year to $84 million, an increase of nearly 100% from 2020. And whilst our revenue per million contracted by approximately 17% year-on-year, the underlying revenue was boosted by a 15% year-on-year growth in our transaction volumes of payments processed. This growth was driven consistently across both our international development organizations and our financial institution segment. We believe the overall US dollar strength particularly in the November and December months, also drove more demand than we've seen previously in the customary seasonality of these segments. Of the one hundred and forty currencies we provide to our clients, we saw healthy geographical diversification across our top corridors, with noteworthy demand in key Central Asian, Sub-Saharan African, and Latin American markets. Whilst we do expect subsequent quarters to normalize in terms of volume, we have seen a strong start to the calendar year in January with several new clients working towards their first transactions with us. Moving to slide sixteen. We can highlight some of the current strategic initiatives for the payments business. We start with building our ecosystem. The payments technology journey which began in earnest in 2022 when we embarked on a significant overhaul and an in-house rebuild of our entire front-to-back StoneX payments technology stack. This included client-facing platforms, trading, and risk management modules, and a bespoke core payments engine built from scratch, patent pending. This large increase in payment processing capacity will take us from millions of payments per year to millions of payments per month. This has allowed us to eliminate vendor dependencies and service our clients from an in-house platform that is optimized for the future of payments rather than beholden to the off-the-shelf limitations of the past. With this significant increase in the payment capability, the start of the StoneX system, our investment in technology has also extended to include machine learning to enhance data validation which improves efficiency, and driving delivery speeds whilst also reducing errors in payment settlement data. Moving on to growing and diversifying our client base. Whilst we have long focused on the value of providing world-class FX payout solutions and infrastructure, we're now actively facilitating FX repatriations and pay-ins as demanded by our growing client base. In Brazil, which is one of our largest payment corridors and where we possess an FX banking license, our clients benefit from the ability to seamlessly process both pay-ins and payouts in local currency at scale. As an example of this capability, we recently completed an integration with Amazon to be their cross-border payment provider for sellers in Brazil. We were also recently granted a similar license in Colombia where we launched our services in mid-2024, and have already onboarded over two hundred clients locally. We believe that our legacy expertise in global FX liquidity management, treasury, and cross-border money movement, presents a compelling case for expanding aggressively into bidirectional omnichannel payment processing, particularly in the emerging markets we specialize in. We intend to continue to execute on this strategy exploring both organic and inorganic options to attain new capacities and market share. Moving on to digitizing our business. We often find that whilst the top-tier banks and FIs have scope and budget for sophisticated product development, and integrations with our market-leading APIs, there are tiers of institutions that do not possess their own front-end applications for cross-border payments or streamlined workflows in all one hundred and forty currencies that we can offer. To further penetrate this market, we have launched a low-touch plug-and-play white-label instance of our web-based connect payments platform, which will allow tier two and tier three financial institutions to easily integrate with us and supplement their existing online banking functionality with competitive cross-border payments in one hundred and forty currencies. In a similar vein, we have launched a partnership with Fiserv, who is a leading provider of core banking technology solutions to hundreds of banking institutions of all shapes and sizes. In conjunction with Fiserv's payment exchange APIs, community banks, credit unions, and other bank users of the system will have the opportunity to directly leverage StoneX's institutional-grade infrastructure, resulting in improved global reach, ultra-competitive pricing for their clients, and robust transparency in their cross-border payment life cycles. These opportunities represent hundreds of new clients that will not have to deal with the inconvenience of new integrations to launch enhanced services for their underlying clients. In summary, having achieved the second-best financial performance for a quarter on record in Q1, with our strategic focus and investments to target the areas I've just covered, such as increasing our payment processing capability more than tenfold and extensive investment in technology, you add all these initiatives with client onboarding currently at an all-time high, with the enormous total addressable market in terms of opportunity ahead of us, and I strongly believe that StoneX is well-positioned to see significant growth in this business line for many, many more years to come. Thank you, Sean.

Thanks, Philip. And maybe next quarter, we'll hear from Charles, and he can cover some of the exciting things that he's working on in the securities area. Let's move on to the final slide, number seventeen. This was another record quarter for us with broad-based strength across most of our products and segments. We achieved earnings of $85.1 million, a diluted EPS of $2.54, and an ROE of stated book of 19.5%. Our earnings and EPS were up 23% and 19%, respectively. Looking ahead, we continue to be well-positioned to capitalize on the ongoing industry transformation driven by regulatory changes and market consolidation. These shifts not only create significant opportunities for StoneX to expand market share, but also provide a substantial runway for growth. Our ecosystem underpinned by broad and diverse offerings enables us to deliver innovative solutions that simplify client operations, expand their market reach, and create long-term value. Central to our strategy is the disciplined use of capital supported by a fortress balance sheet. Over the past decade, we have tripled shareholder funds, acquired more than fifteen businesses, expanded our client footprint, primarily financed organically through retained earnings and the remark. We anticipate our recent acquisitions combined with selective access to capital markets continue to drive meaningful growth and further strengthen our position in the market. The evolving regulatory landscape, shifting market dynamics, and our increasingly recognized ecosystem along with the prospect of improved market volatility, despite declining interest rates still provide a favorable environment for our business. As we continue to move forward, we remain committed to expanding the client base in both new and existing markets while deepening client relationships through effective cross-selling strategies. The thing that will always be constant for the StoneX team is to dedicate ourselves to better serve our growing client footprint around the world by providing them with the best financial ecosystem and client services to access the global financial markets. We're all extremely proud of the talented team who continue to propel us to new and record heights. So with that, operator, let's open the line and see if we have any questions.

Thank you. And as a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. One moment for our first question. Our first question comes from the line of Dan Fannon from Jefferies. Your line is open.

Thanks. Good morning, gentlemen.

Thanks, Dan. Just to just morning, Dan.

Good. I appreciate the additional color this quarter. I guess to start just looking at the results, the physical contracts, you know, continued to have a record quarter. Could you talk about what drove that revenue and I guess maybe the sustainability of that result?

Bill, do you want to handle that?

Am I on mute? My apologies, Sean. Thank you. Dan, the key drivers there were kind of threefold this quarter. It was a combination of precious metals, which you know, had a fair amount of volatility around, you know, proposed tariffs, that might occur in the first quarter of fiscal 2025 for us, as well as just really good client activity. So strong activity there. And then in addition, the acquisition of CDI two years ago continues to grow. They've expanded into coffee as well a bit, but really, they did quite a bit of new business into the first quarter. So really nice strong performance there. And then finally, as you've seen, the cocoa prices have been quite volatile over the last probably twelve months, which has led to a lot of client activity, and that business has really grown for us. You know, as far as sustainability, you know, there's a lot of continued noise around tariffs and the precious metal state. So it's sort of interesting how that plays out. You know, could be volatility, the upside or downside for us. So, you know, that remains to be seen, but you know, I think that the cocoa business, it seems like volatility is staying around there. And the cotton business, you know, it's a really nice acquisition we did that continues to, I would say, probably outperform what we originally expected of it.

Okay. Great. That's helpful. And then the retail business, you know, I feel like it's a kind of a broken record where quarter you continue to have really good results. The fee per or the RPM, you know, I think that might be a record, but can you talk to, you know, you've done a lot of things on the back end with the technology. You're broadening beyond just FX, I think, into this asset class or this offering. So again, sustainability of some of the results that you're putting up. Is this how would you characterize this quarter versus the outlook as we look out for this fiscal rest of this fiscal year?

I would say the driver you alluded to there, the revenue capture is, you know, honestly excellent, I mean, and much improved. I think what we've seen over probably six or eight quarters is a steady sort of improvement in our revenue capture in that business. And, you know, I think there's a lot of technology, a lot of expertise that's gone into that. And I would say, you know, we're probably close to being at the high watermark. I mean, we just can't keep squeezing more and more juice out of the orange. So, you know, that may fluctuate a little bit, and hopefully, with a slow upward bias, I would say. But, you know, we are really growing out the product suite there. I think sort of highlighted that in the last call. And, you know, I think we see our self-directed business becoming a broader-based business if we can keep that sort of revenue capture where it is, but expand into other products and other asset classes, that's where we're really going to see meaningful growth. Charles, I don't know if you have any comments on sort of revenue capture or anything you'd like to add.

I do. I mean, Dan, we've had a consistent focus on trying to stabilize and have consistency around those results. I think we've made improvements around some of the back end and not so much technology side, but just around the way that we think of how we operate, you know, in the space. But the mindset is to be able to produce consistent results. And to Sean's point, the future growth is going to be around how do we expand very thoughtfully and consistently the product that we offer and move into other spaces and continue to move into securities and other, you know, more mainstream spaces and add clients. So I think Sean said it right that we've, you know, put a lot of effort towards stabilizing that CTR and capture. Now it's going to come from new clients, new products.

Great. That's helpful. And then maybe one for Philip on the payment side. Understand the context of the growth, new customers. But can you talk just about the rates coming down year over year on quarter? The mix that you're seeing of transactions today vis-a-vis previous periods and how we should be thinking about that going forward versus, you know, what we've seen. Is that a downward trend or is, you know, consistently given the mix of business and how your outlook is?

Sure. I think the way to think about it is, you know, we have diversity of payment corridors, and we want to maintain as diverse a business, as diverse a revenue stream as possible. But there will always be moments and periods where dollar scarcity in certain payment corridors widens the spread. And, you know, whilst the volume has not necessarily increased, the profit per transaction increases significantly. We have no control over that. These are, you know, specific to countries, specific to regional disparities between central banks' directives and some commercial banks' follow-through, we struggle to predict and we would not want to be predicting such events reoccurring, but it does go through a cycle where, you know, certain corridors the dollar scarcity will happen on a regular basis, but you can't predict that regularity. I think the key thing is to ensure that we are maintaining an increase in volume because that's what we can control. We can't control the spread. And we can't control the dollar scarcity in specific regions or countries. But what we can do is just constantly be building out our capabilities, building out our increased client base, diversifying the client base itself, and trying to ensure that we're not in any way overexposed or over-concentrated in any particular corridor or any particular region where that widening of spread every certain period of time isn't distorting our numbers, our figures, too greatly. So that's our objective. We're very happy when there's a dollar scarcity, but we have no ability to build a business around that. All we can do is maintain increased volumes, that's providing a better service to our clients and providing access for more clients to utilize our ecosystem. So that's basically our objective and increasing our client base, increasing the volume that comes through our channels is what we control and what we're driving. If that helps.

Oh, that's helpful. Alright. Thanks for taking my questions.

Thank you. Again, that's star one one for questions. Star one one. Moment for any questions. And I'm not showing any further questions at this time. I would now like to turn it back to Sean O'Connor for any closing remarks.

Okay. Thanks, operator. Thanks, everyone, for joining us. Hopefully, you like the new format. If not, let us know. And, hopefully, you enjoyed getting to know Charles and Philip. So with that, let's close the call down and look forward to seeing you in three months' time. All.

Thanks, everyone.