INTL FCStone Inc. (NASDAQ:INTL) Q2 2018 Earnings Conference Call - Final Transcript

May 09, 2018 • 09:00 am ET

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INTL FCStone Inc. (NASDAQ:INTL) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Executive
Sean O'Connor

not tangible equity. Tangible equity being the way a lot of other financial companies report the statistic. Using tangible equity reduce these numbers by around three percentage points. The market environment we're operating has become increasingly positive for us over the last four to six quarters with interest rates increasing and volatility slowly and sporadically increasing to more normal levels as the Fed withdraws from the capital markets. During the time to review, we certainly benefited from a spike in equity volatility around the Vics issue, which positively impacted our equities and futures hearing activities.

Also we've benefited from higher interest rates on our $3 billion plus of customer flows. Clearly more extremes spice us as we saw in the Vics are not sustainable, but it does seem that's moderately higher volatility has crept back into many of the asset classes such as metals and agricultural commodities offer best as political and other concerns. We think this is a more normal situation, which is sustained will continue to be beneficial for us. We achieved very good growth in segment income in all of our operating segments. Some brief highlights; commercial hedging segment which is our largest increase segment income impressive 48% from a year ago and was up 31% sequentially with strong growth in both futures in OTC revenues and revenue capture in the OTC business aided by increased volatility.

Global payment segment income increased 15% from a year ago that was down 7% sequentially due to seasonality with the December quarter always being our strongest for the payments business. In the current quarter payment volumes were flat that revenue per payment increased by 9%. This normally was discussed last quarter and was due to very high volume but low value client favorably changing the way that process the payments with us.

We have seen spread compression in some of our key markets in Africa to reduce the demand for dollars. After nearly three years we received an upgraded regulated commission in Brazil along us to better facilitate clients flow into and out of this important market. This happened late in the quarter that has significantly boosted our Brazil payments revenues. The security segment income increased 9% from a year ago and was up 60% sequentially. This quarter's result is driven by an 81% increase in operating revenues from our equity business largely due to the increased volatility in the banks.

I would like to highlight that this revenue increases was up the back of a 35% increase in volume as well as a 17% increase in revenue capture which highlights impact of volatility on both volumes and spreads in businesses where we act as a trader in facilitating client orders. Physical commodity segment income increased 44% from a year ago and was up nearly fourfold sequentially. This was off the back of a 53% increase in precious metals revenues and 22% increase in the agricultural and energy activity.

Appearing an execution services segment income increased an 61% from a