StoneX Group Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended September 30, 2021. Although the request identifies 2021 Q4, this filing presents annual results; it does not provide a clear standalone fourth-quarter income statement or cash-flow summary.
Business context
StoneX operates a global financial-services network serving commercial, institutional and retail clients, plus global-payments customers. Its activities include trading and market-making, execution and clearing, risk-management services, physical commodities, retail forex and payments. The company reported more than 3,200 employees, over 45,000 commercial and institutional clients, and over 370,000 retail accounts across more than 180 countries.
Financial performance
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Total revenues | $42.53 billion | $54.14 billion | -21% |
| Operating revenues | $1.673 billion | $1.308 billion | +28% |
| Net operating revenues | $1.150 billion | $868.0 million | +32% |
| Income before tax | $154.1 million | $206.7 million | -25% |
| Net income | $116.3 million | $169.6 million | -31% |
| Diluted EPS | $5.74 | $8.61 | -33% |
| Net cash provided by operating activities | $2.123 billion | $1.951 billion | +$172.1 million |
Total revenue includes large gross physical-commodity sales and associated costs; operating revenue, which deducts physical-commodity cost of sales, is more useful for assessing the core revenue trend. Operating revenue growth reflected higher activity and volatility across derivatives, securities, payments and physical contracts, as well as a full year of Gain Capital results. The prior-year comparison included an $81.9 million acquisition gain, versus $3.4 million in FY2021, contributing to the decline in reported profit.
- Margins and expenses: Net operating revenues were $1.150 billion, while compensation and other expenses rose 34% to $999.3 million. Compensation and benefits were $679.1 million, or 40.6% of operating revenues, compared with 39.6% in FY2020. Variable expenses were 56% of total non-interest expenses, down from 59%.
- Interest: Interest income fell 22% to $102.4 million. Interest and fee income earned on client balances declined 39% to $26.0 million, despite growth in average client balances, primarily due to low short-term rates. Corporate funding interest expense increased 75% to $41.3 million.
- Segments: Segment income rose 28% to $506.2 million. Commercial segment income increased 35% to $192.2 million; Institutional rose 10% to $167.7 million; Retail rose 114% to $67.8 million, largely reflecting Gain; and Global Payments rose 14% to $78.5 million.
- Balance sheet and debt: Total assets were $18.84 billion and stockholders’ equity was $904.0 million. Total consolidated indebtedness was $755.6 million, including $336.9 million carrying value of 8.625% senior secured notes due 2025. The company had $806.4 million of committed credit facilities, with $385.1 million outstanding under those facilities.
- Liquidity and cash flow: Cash, segregated cash and cash equivalents totaled $6.510 billion, much of it client or regulatory-restricted funds and therefore not equivalent to unrestricted corporate cash. Operating cash flow included substantial client and trading-balance movements. Capital expenditures were $62.1 million; cash used in investing activities was $59.8 million.
Material changes and unusual items
- Retail FX/CFD operating revenue rose sharply, primarily because FY2021 included 259 trading days of Gain activity versus 43 post-acquisition days in FY2020.
- Securities average daily volume increased 61%, while securities revenue per million declined 28%, reflecting lower fixed-income spreads than in the prior year.
- Listed derivatives revenue increased 18%, supported by a 29% increase in average rate per contract despite a 6% decline in volume. OTC derivatives revenue increased 29%.
- The company acquired EncoreFx, renamed StoneX Payment Services Ltd., and acquired a majority stake in Chasing Returns Limited. The major Gain acquisition closed in July 2020.
- FY2021 included $7.7 million of severance costs, principally associated with departures of senior officers. A $3.3 million gain related to adjustments to Gain acquisition liabilities was also recorded.
- The company repurchased 185,366 shares for $11.7 million during FY2021. It has not paid cash dividends; credit agreements prohibit them.
Outlook, risks and contingencies
The filing provides no specific financial guidance or quantified earnings outlook. Management said it expects interest-related revenue to remain depressed unless market rates rise significantly, and intends to renew or replace credit facilities as they expire. It stated that operating cash flow, available cash and borrowing capacity are expected to meet future liquidity needs.
- Results are sensitive to market volatility, trading volumes, commodity prices, liquidity and short-term interest rates. Management estimated that an immediate 25-basis-point decrease in short-term rates would reduce annual pretax income by approximately $9.3 million.
- Trading as principal, OTC derivatives, margin calls, counterparty defaults and client deficits can generate losses or sudden funding needs. Cybersecurity, systems failures, evolving regulation, international operations and acquisition integration are additional disclosed risks.
- A third-party grain operator holding StoneX soybean inventory filed for Chapter 11 on September 29, 2021. StoneX held receipts for approximately 2.6 million bushels valued at $31.2 million at year-end; holdings increased to 2.8 million bushels by October 6. Management considered insurance coverage probable to cover potential shortfalls and recorded no estimated loss.
- OptionSellers-related client deficits produced a $28.9 million net receivable at year-end. StoneX recorded an $8.2 million allowance through its FY2021 opening retained-earnings CECL adjustment and continues collection and arbitration proceedings; clients have also brought arbitrations against the clearing subsidiary.
- StoneX reported effective internal control over financial reporting, and the auditor issued unqualified opinions on the financial statements and internal controls. The internal-control assessment excluded two small acquired businesses.
Investor verification checklist
- Confirm the standalone FY2021 fourth-quarter results separately; this 10-K’s summarized figures are annual.
- Assess earnings excluding the prior-year $81.9 million Gain acquisition gain, and distinguish recurring performance from acquisition-related effects and costs.
- Review unrestricted liquidity separately from client-segregated cash, facility maturities and renewal terms, and the cost and covenants of the 8.625% notes.
- Track short-term rates and client-balance income, securities spreads and activity, and the sustainability of volatility-driven revenue.
- Monitor recovery, insurance coverage and legal outcomes relating to the soybean inventory and OptionSellers receivables and arbitrations.