Sean O'Connor - CEO Bill Dunaway - CFO

Greg Eisen - Singular Research Christopher Hillary - Roubaix Capital

Good morning. My name is Bill Dunaway, CFO of INTL FCStone.

Welcome to our earnings conference call for our fiscal fourth quarter ended September 30, 2016. After the market closed yesterday we issued a press release reporting our results for the fiscal fourth quarter.

This release is available on our website www.intlfcstone.com, as well as a slide presentation which we will refer to on this call in our discussions of our quarterly and year-to-date results. You'll need to sign on to the live webcast in order to view the presentation.

But the presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we're required to advise you and all participants 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-K filed with the SEC.

This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties which are detailed on 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 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.

Thanks, Bill. Good morning, everyone and welcome to our FY '16 fourth quarter earnings call.

The general market environment has changed for us in ways that were unforeseen and unanticipated, starting with the unexpected Brexit vote, followed by the surprise U.S. presidential vote, has led to possibly more favorable conditions for our business.

It would seem that in the U.S. anyway, markets have become more optimistic and interest rates reacted accordingly which over time should have a material and direct impact on our earnings.

In addition, the withdrawal of the Fed from the markets, combined with the less predictable political playing field, should increase overall volatility which is also a favorable development for us. Finally, higher commodity prices are also a welcome development.

So overall, although not evident throughout the Q4 under review here, market conditions would seem to have improved for our business overall. Just as in 2015, Q4 was again the best quarter of the year for us.

We achieved earnings of $16.8 million which was down 20% against last year's record result and EPS of $0.90 per diluted share, down 17%. The EPS was down relatively less than earnings due to the impact of share buybacks in the early part of the fiscal year.

Just as in 2015, our Q4 results had some unusual nonoperating items. This year we recorded a $6.2 million nontaxable gain on the acquisition of the Sterne Agee business as a result of us having acquired the businesses at an effective discount to the asset value received.

In the year ago Q4, we also realized an after-tax mark-to-market gain of $4.2 million in the treasuries held in our interest rate program versus an after-tax loss of $2.2 million in the current quarter. So, there was a swing of $6.4 million on the bottom line between the two quarters for this factor alone.

In addition and as mentioned last year, in the 2015 Q4 results, we benefited from some exceptional market conditions in the global payments business which were not repeated in the current fiscal year. Some quick highlights for the quarter.

Bill, of course, will provide more detail in his section later. Firstly, global payments segment income for the quarter was down 29% despite transactions having increased some 52%.

This is reflective of the exceptional trading conditions in the prior year, where spreads in some of our key markets had widened dramatically. Commercial hedging segment income was down 29% due largely to reduced OTC and structured product activity.

Physical commodities has been restructured over the last two years and recorded an impressive turnaround, with precious metals being the star performer, aided by a mark-to-market reversal from the third quarter. And the clearing and execution segment income was up due to the Sterne Agee acquisition.

Now looking at the year overall, we set a new record for operating revenue, surpassing last year's record, aided by the inclusion of the Sterne Agee business for three months. We also set a new diluted EPS record of $2.90, narrowly beating last year's record due to share buybacks.

Our ROE was 13.2% on not as strong result but slightly below last year's 15% mainly due to an increase in our underlying capital and slightly below our 15% target. We believe that over the last two years we've been best in class by this ROE metric.

For the year overall, segment income was up 71% in the securities business, driven by our fixed income and rate activities domestically and also our fixed income activities in Latin America. Physical commodities segment income was up 129% with a record performance in precious metals and much improved prospects for the ag business going forward.

Global payments segment income was down 8% despite transaction volumes being up 37%, due largely to the unusual market conditions experienced in the prior year, as I mentioned before. And then, finally, commercial hedging segment income was down 20% due mainly to lower OTC revenues.

Now dealing with some strategic items, during the quarter we closed the Sterne Agee acquisition which we mentioned in the last call. This completes our product and service offering by adding a securities clearing capability which now places us in the unique position as a mid-size firm being able to clear and execute in all major asset classes for our customers.

In addition to clearing, we acquired an independent wealth management firm which is a significant clearing customer of the clearing business and has over 500 independent advisors. I am pleased to report that the integration is proceeding well and that we're ahead of schedule.

We had originally estimated that the overall business was on a run rate loss of around $3 million to $4 million pre-tax per annum. For the three months since we've acquired the business, we've recorded a pre-tax loss of only $200,000 which is well below what we anticipated and we're now more confident that this business will be accretive for FY '17.

Longer term we remain optimistic that this will be a meaningful contributor to our overall earnings. In the last call we also mentioned that we had reached agreement to acquire the ICAP oils trading business which is a leading European, Middle East and African franchise providing voice execution in crude and distillers to large well-known customers.

This transaction was approved and closed October 1 and should be fully transitioned over to our platform later this month. The business consists of 36 professionals located mainly in London, but also Singapore, over 200 customers and we estimate should generate close to $30 million in incremental revenue annually.

This business has segment income margins of close to 40% and does not require any meaningful regulatory capital or technology infrastructure. This acquisition should provide an immediate boost to both income and ROE.

The total acquisition price was $6 million. And, in addition, some additional compensation was paid to the employees for the first two years per our agreement with them.

We believe that these costs should all be covered within the first year of pretax earnings. The acquisition of the Sterne Agee clearing business has increased the customer balances we hold by approximately $1.3 billion on top of the segregated funds we hold for futures clients of around $2.1 billion.

So, in total, a 65% increase in our customer balances. While we earn a carry on the securities balances, the linkage to interest rates is slightly different to that from the stake funds.

We have included a slide in our earnings deck which quantifies the impact of interest rates on our earnings over time. Around 50% of any interest rate increase would be realized fairly quickly through the earnings and the balance over time as our interest rate program rolls over and adjusts to higher rates.

Bill will take you through the slide, but at current asset levels, 100 basis point rate increased should boost earnings by some $27 million pre-tax or 3.9% in ROE terms. Furthermore, it is worth noting that the recent changing market conditions have caused the dollar to appreciate fairly dramatically.

This has had a positive impact for us by lowering our effective non-dollar-denominated costs, primarily in London, but also in Singapore, Brazil and Argentina. Applying the current exchange rates retroactively to our overseas cost base would yield about a $5 million pretax savings.

Most of our non-U.S. earnings are in U.S.

dollars so there's not a commensurate decrease in our dollar-denominated revenues. So, with that, I will hand you over to Bill Dunaway for a discussion of our financial results.

Bill?

Thank you, Sean. I would like to start my discussion with a review of the quarterly results.

I will be referring to slides and the information we have made available as part of the webcast, specifically starting with slide number 3 which represents a bridge between operating revenues for the fourth quarter of last year to the current year fiscal fourth quarter. As noted on the slide, fourth quarter operating revenues were $178.6 million which is relatively flat with the prior year.

Looking at the performance in our operating segment, the most notable change was a $23.5 million or 75% increase in our clearing and execution services segment. This is primarily related to the acquisition of the Sterne Agee correspondent securities clearing and independent wealth management businesses which Sean touched on which added an incremental $24.1 million.

The second largest increase in operating revenues was in our physical commodities segment which added $9 million or 148% versus the prior year. This was a result of a $6.5 million increase in our precious metals business combined with a $2.5 million increase in our physical ag and energy businesses.

The precious metals business benefited from the reversal of a third quarter unrealized loss on derivative positions held against inventories carried at the lower of cost or market in our non-broker-dealer subsidiaries. These gains in operating revenues were offset by declines in commercial hedging, global payments and securities.

Commercial hedging operating revenues decreased $13 million due to declines in both exchange-traded as well as OTC revenues. Exchange-traded revenues declined 12% or $4 million due to weaker LME, energy and renewable fuels revenues.

Over-the-counter revenues declined 35% or $9.4 million, driven by lower Latin American agricultural volume as well as the effect of lower energy prices and volatility. Global payments segment operating revenues declined 25% or $6.2 million versus a record prior-year quarter which benefited from higher-than-normal spreads in that business.

On a positive note, however, we continue to see an increase in the number of payments made, with the number of payments made increasing 52% versus the prior-year period. Moving on to slide number 4 which represents a bridge from fourth quarter pretax income in 2015 to the current period, overall pre-tax income declined 34% to $19.2 million in the fourth quarter of 2016.

The $23.5 million increase in clearing and execution services operating revenues I mentioned earlier was mostly offset by an increase in introducing broker commissions related to the independent wealth management business acquired from Sterne Agee, ultimately leading to an $800,000 of increase in pretax income in this segment. Physical commodities pretax income increased $9.1 million as compared to a breakeven result in the prior year which included a $2.8 million bad debt in the physical ag and energy business.

Similar to the discussion of operating revenues, pretax income in the commercial hedging and global payments declined, $5.8 million and $4.4 million, respectively. As shown in the table and our press release, the $10.8 million negative variance in corporate unallocated overhead was due to fluctuations in the unrealized gains and losses on our investments in our interest rate management program in which we're investing our customer margin balances in U.S.

treasury notes and interest rate swaps. We normally hold these investments to their maturity; however, the mark-to-market fluctuations flow through our income statement on a quarterly basis.

The prior-year period included a pre-tax unrealized gain of $6.9 million, while the current period includes a $3.6 million unrealized loss, leading to a $10.5 million swing in profitability in corporate unallocated overhead. The bottom of slide number 9 of the presentation shows the after-tax effect of these unrealized gains and losses in this program by quarter.

Slide number 6 shows the interest income on the investments in our exchange-traded futures and options business which holds our investable customer balances and encompasses our interest rate management program. Excluding the mark-to-market fluctuations I just mentioned, the continued implementation of this program, an increase in short term rates and a 17% increase into customer deposits led to an underlying increase in interest income shown here of approximately $700,000 versus the prior year.

As Sean had mentioned, we've included a new slide in the deck which shows both our sensitivity to changes in short term interest rates. The top graph on this page depicts our average customer equity balances and includes the Sterne Agee margin money market fund and FDI suite balances on which they earn interest which are light blue and begin in the fourth quarter.

The dark blue represents the average customer equity in our FCM business, some of which is held in cash at banks and exchanges and, thus, is higher than the amount shown as invested in the treasury, securities and interest rate swaps in the previous slide. The bottom graph of this slide shows the pre-tax income sensitivity of changes in short term interest rates on the balances held in both the FCM and the Sterne Agee businesses and is based upon the balances held at the end of the fiscal year.

It is important to note, as Sean mentioned, that some of this change would be realized over time as the investments on the previous slide have a weighted average time to maturity of 15.3 months. As shown, we estimate a 100 basis point move in short term interest rates could add $27.7 million of pretax income or 3.9% in ROE terms based upon year-end balances.

Moving on to slide number 8, our quarterly financial dashboard, I'll just highlight a couple of items of note. Variable expenses represented 58.3% of our total expenses for the quarter, exceeding our target of keeping more than 50% of our total expenses variable in nature.

Non-variable expenses which are made up of both fixed expenses and bad debt expense, increased $8.1 million or 14%, driven by the acquisition of the Sterne Agee businesses. Net income from continuing operations for the fourth quarter was $16.8 million versus $21.1 million in the prior-year period which resulted in a 15.8% return on equity, exceeding our target of 15%.

The current period includes a $6.2 million bargain purchase gain realized on the acquisition of the Sterne Agee businesses, as Sean mentioned. Finally, in closing out the review of the quarterly results, our book value per share increased 11% to $23.53 per share.

We did not purchase any of our common stock during the fourth quarter. Next, I will move on to slide number 10 for a discussion of the year-to-date results.

This slide demonstrates strong revenue growth in our securities segment which added $45.4 million in operating revenues, primarily in debt trading which increased $42.3 million over the prior year. The increase in debt trading was a result of the acquisition of GX Clarke, our institutional fixed-income dealer which had a strong quarter and, since it was acquired on January 1, 2015, only contributed operating revenues beginning in the second quarter of the prior fiscal year.

In addition, our Argentina debt trading business showed strong growth in FY '16, following the devaluation of the Argentina peso. The CES and physical commodity segments increased operating revenues $27.7 million and $13.5 million, respectively.

Similarly to the quarterly results, the increase in CES operating revenues was attributed to the Sterne acquisition, while in physical commodities the precious metals business added $9.7 million and the physical ag and energy business added $3.6 million. These increases were tempered by a $26.3 million decline in operating revenues in our commercial hedging segment as a result of a $28.8 million decline in OTC revenues, primarily in the Latin America agricultural market which were partially offset by an increase in interest income and exchange traded revenues.

The next slide, number 11 which represents a bridge from the pretax net income in the prior year-to-date period to the current year, overall pretax income declined $5.4 million to $72.7 million in FY '16. Similar to growth in operating revenues, the strongest performer was the securities segment, while physical commodities increased segment income by $7.5 million, both as a result of the increase in operating revenues and a $2.4 million decline in bad debt expense.

This growth was partially offset by weaker performance in commercial hedging. The overall gains in pretax income from our segments was partially offset by $23.3 million negative variance in unallocated overhead which is primarily incremental costs from the acquisitions GX Clarke and Sterne Agee, the expansion of our information technology department and an increase in meetings and hosted conferences.

In addition, the prior-year period included a pre-tax unrealized gain of $7 million related to our interest rate management program, while the current period showed a $700,000 unrealized loss, leading to a $7.7 million year-over-year swing in profitability in the corporate unallocated overhead. Finally, slide number 12 is our year-to-date dashboard.

I will highlight just a couple of metrics on this one. Net income from continuing operations has declined 2% versus the prior year-to-date period to $54.7 million which represented a 13.2% ROE for the current year-to-date results.

In addition, we've exceeded our internal target for the year-to-date period in average revenue per employee at $521,000 per employee in the current year. With that, I'd like to turn it back to Sean to wrap up.

Thanks, Bill. We have now delivered best-in-class financial performance for the last two years and look forward to potentially more favorable market conditions with higher interest rates, increased volatility and higher commodity prices generally.

We continue to see a competitive environment with consolidation of smaller players and larger banks shedding clients, all of which is favorable for us. We have acquired two meaningful businesses during the year which we believe will not only be earnings accretive but further expand our capabilities and presence in key markets.

We have now grown beyond our niche capabilities and stand poised to become a best-in-class franchise, offering our global customers high-quality execution both in high-touch and electronic, in-cycle market intelligence and post-trade clearing services in almost all markets and asset classes. This is a comprehensive array of products and services which should allow us to take advantage of the large and noticeable and as yet unfilled void in the market created by the demise of larger financial franchises during the crisis.

With that, I would like to turn it back to the operator and open the question-and-answer session. Sonya?

Congratulations on the results and the execution of these acquisitions. No sooner do you complete them then I ask what's next.

My question is, once you feel like you have digested what you have acquired, when you look at your overall business platform of what you have in place, where do you think you want to expand next? You have acquired a wealth management business in this Sterne Agee process and lots of players in wealth management like to add bulk.

They seem to just want to make them bigger and bigger. Is that something you want to add to?

And what should we expect out of that?

First of all, we're in a very interesting place in the market at the moment where there's lots of consolidation, lots of monoline businesses out there that are struggling. We tend to see a lot of these opportunities.

They come to us, they see us as a potential acquirer, so we see lots of opportunities all of the time. I don't think we have a target list of people we want to acquire and are willing to acquire them at any cost.

That is not how we work. What we see is a lot of opportunities coming across our desk.

When we see something that fits, adds real value to our capability set, adds a new customer base and on top of that if it is priced right to be attractive to our shareholders, then it merits serious consideration. I just want to be clear, we're not looking to acquire businesses and have a list of potential targets we want to go after.

We're a little bit more opportunistic on that side. I would say at this point there is -- I think we have most of the capability sets we think we need.

There was a gap on the securities clearing side. We had come to the conclusion that we were prepared to build that organically.

We had looked at a couple of opportunities. None of them were priced right for us.

And then, fortunately, the Sterne Agee acquisition came along, so we solved that problem. I think the things we would be looking for and would be interesting to us, the ICAP type opportunity that came to us which was a respected team of people with great relationships with clients, turnkey lift out and drop onto our platform type business.

Those opportunities we're always interested in. Anyone who can join us and expand our customer base, can bring us incremental revenues are always interesting to us.

I think a lot of those opportunities or the most interesting place for us for those opportunities, would probably be in Asia and Europe where we feel that we still have relatively low market share. So, as those opportunities come along, we will grab them.

And, again, obviously they have to be priced right and all of that good stuff. Turning on to the Stern Agee wealth management business, the wealth management business is the largest clients of the clearing business and was very intertwined with that clearing business.

The kind of transaction that we did with Stifel is they really wanted to sell that combined business. It wasn't a take-what-you-want type deal.

As you can see from our financials, that resulted in us driving pretty aggressive terms on the deal which I think were favorable to us. We have now ended up with a wealth management business.

We think it's a good business. It's an interesting part of the market.

I am not sure that we're going to necessarily be, like some others out there, driving for a consolidation of that business. I think we've got a nice business, it's profitable, we will incrementally grow that business.

I think that business could be interesting to other people who are bulking up this business. We've had a couple people call us on it.

For now, we just want to bed the business down and grow it. But it's obviously an interesting asset that came along with that acquisition and we need to decide how best to monetize that for our shareholders and the best alternative may be just running a great business and growing it organically and incrementally.

So, that's where we're in all of that. I hope that answers your question, by the way.

I think you did. If I could turn to your precious metals side of the physical commodities business, could you review that again and explain what drove the improvement, what drove the delta this quarter?

The first thing was, there was a little bit of a timing issue on a mark-to-market reversal that happened in the prior quarter. So you need to, when you're thinking about our precious metals business, just adjust for that.

That obviously doesn't affect the annual results. This is a business that we have had for a long time.

It's one of the legacy INTL businesses. If you go back seven, eight years ago, this was a business that probably was even making greater gross revenues that it is now.

And then we went through a tough patch with that market. Some of the key markets we're active in, like India and Vietnam, they changed some of the rules and we were very concentrated in those markets.

So, we really have to go through a restructuring of that business and diversifying our client base and expanding. We bought some more people on and they've, honestly, done a really great job on that.

This has been a long time coming for us. I think I have mentioned on prior calls that we were restructuring this business and we thought it was on the right track.

And I think now they have delivered on that promise. We have a nicely diversified business.

I think what we've also found -- and, honestly, we see this in all of our businesses -- the big banks that really dominated this business are starting to retrench. This business was dominated by some of the Swiss banks, Scotiabank.

We were the scrappy small player making inroads into their customer bases. And what's happened now is they've pulled away from the market a little bit, so it's allowed us to really make some nice inroads there.

And I don't think that's going to reverse. Banks all around the world are pulling out of the physical commodities business.

The way the regulators require you to put capital up against that business is pretty onerous for them. The other thing I would like to mention and it may be something we can discuss in our next quarter, we're developing some pretty nice technology solutions, we think, for our business.

I think the most obvious example of that is our global payments business which is now an almost no touch, almost a virtual exchange for payments. We have the same thing on our equity market-making desk which was developed 10 years ago.

We took a business that was pretty archaic and automated it. With 10 traders we can push out live executable prices on, like, 5,000 or 6,000 stock items.

We've got some great technology there. What's interesting is we've developed some pretty nice technology on the precious metals side.

It's a very archaic business. It is still a call-around market over the phone.

We have developed some technology which we think could really change that market and we're in the process of actually launching that, as we speak. It is going through beta testing.

So, too early to say whether it will be successful, but I think we're now starting to find in these markets we're active in ways where we can be a little bit transformational and maybe even disruptive to the market. So, it will be interesting to see.

Watch the space and we will see how that works for the precious metals guys.

Can I just ask, you made in your press release in your remarks that the business conditions or the backdrop has improved quite a bit. Can you speak a bit more to that?

And on a more medium term note, can you also expand on the opportunities you see from the other players backing away from the market and in what ways we're going to see that manifest itself in the business over the next year or so?

Okay. It's a multi-level conversation.

I think the first and the most obvious change in macro conditions is interest rates. We just had the first increase yesterday -- sorry, the second increase -- in a decade in interest rates.

We've now given a slide in the deck which I think shows what interest rates could do for us. I think the Fed has been consistently wrong in their prediction of how interest rates are going to play out.

But if we had to take them at their word and three interest rate increases next year, it looks like, from our Q4 to the end of our fiscal year, we could see a 1% increase in interest rates. That adds close to 4% in ROE for us and is a significant tailwind for our business.

I think that's the first and most obvious the most easily quantifiable thing I can say to you. Obviously it depends on what your judgment is on interest rates.

But we essentially are a float business, so we have a big float in our business. So, that's the first thing I would say to you.

The second thing is, our business is driven by client activity and, best we can tell, client activity is pretty directly correlated to market volatility. And market volatility has been significantly dampened over the last eight years by incredible intervention by the central banks around the world.

It certainly looks like in the U.S. that phase has ended and that would probably argue for a higher and more normal level of volatility.

I think we have been in an abnormally low volatile type market. And I think if you layer on to that a very unpredictable political situation, I think there is likely to be more of and less volatility and that certainly has a direct impact on our revenues and earnings.

In terms of the competitive environment for us and I think this has been a theme we've touched on for the last three years, probably in every earnings conference call, we see in the mid-size financial space pretty strong and dramatic consolidation, particularly with the smaller players -- for a bunch of reasons. My thesis is I think it's very hard for small and mid-size monoline firms -- IE, firms that just focus on one particular market, they just do FX or they just do futures or whatever -- it's a really tough grind for those companies because the costs have gone up exponentially over the last 10 years, regulations have tightened, you need more capital.

It just becomes very hard to carry the freight if you're dealing in one business and you subscale. So a lot of those entities are consolidating.

The best facts I can give you is prior to the crisis, I think, I don't have the exact numbers to hand, but it was something like 230 FCM -- so, future commissioned merchants, we one of them -- there are now 70 and I think there's probably going to more like 30 or 40 in a year or two's time. So, that is pretty dramatic consolidation.

We're underneath the big banks in all of our activities. We're one of the top players in the mix here.

So, we're a big beneficiary of that consolidation. And, indeed, a lot of the acquisitions we have done over the last five years have been some of these businesses coming to us saying -- we would like to throw our lot in with you guys because this has become really tough.

The benefit we offer is we can leverage the capital in a more efficient way through the different business lines and we can leverage the infrastructure costs better through various business lines. So, that is certainly a big driver.

And then on the other side and this is pertinent to what I said about the precious metals business earlier, the big banks are also going through a tremendous change. With them having to allocate capital in more granular way to clients and clients' activities, they are generally retreating from small and mid-size clients which are the clients that suit us.

Almost a month doesn't go by where we don't find some massive offboarding of a section of clients from one of the big banks. And across every product line.

We've upgraded how we focus on sales and customer acquisition. We have good data now on how we're onboarding where the customers are coming from.

And our onboarding stats are higher than they have ever been. We know we organically are acquiring customers in this competitive environment for the reasons I've just mentioned.

I think what we've got going on at the moment is a positive competitive environment for client acquisition. And, in addition, for the first time we probably have a positive macroeconomic situation which is going to provide us a little bit of a tailwind which previously was, quite frankly, a headwind for us.

So, I think the winds have shifted around a little bit. I hope that answers your question.

And then just one more on the payments business where you've had the exceptional volume growth, do you think we're going to see, as you look into the upcoming fiscal year, do you think the interplay between volumes and your spread or your rates is going to become more favorable for profit growth?

I think that the global payments is an interesting thing to look at, because if you just look at the numbers as we have presented them, it doesn't look very attractive, if you look at the current year versus last year or the current quarter versus last year. I would urge you and I think we give you enough data points to do this, if you had to pluck out quarter by quarter just sequentially the growth in volume as well as the average revenue per trade, if you like, I think you'll see some very strong trends.

And then you will see a huge aberration in the trend a year ago. So, what you see is an explosive growth in underlying transactions.

And I think that's intact. And what you see is a decline in revenue per transaction, except for the Q3 last year and then the Q4 where actually the revenue per transaction increased.

So, if you look at that I think it becomes really clear the market aberration we had a year ago. And if you normalize for that, because I think that is not a repeatable event -- it may happen again at some point, but certainly I don't think it is repeatable in that scale -- I think you'll get a clearer picture of how the underlying trends are.

So, that's the first point. The second point is, we have signed up a number of very large financial institutions in the last couple of quarters.

We now have almost every large and mid-size banks, in the U.S. certainly and a lot of them in Europe, now doing payments through us.

As we said before, there's a long adoption cycle with these banks. I still think we're in the early innings of that.

So, I can foresee that volumes are going to continue to grow pretty strongly. In terms of the revenue per transaction, we had a big business mix change.

When we started accessing the banks, we dealt with non-for-profits and their transaction sizes were very big and we're moving to much smaller transactions. So, as that mix started to happen, we saw some pretty dramatic changes to the averages.

I would say now that at some point that flattens out because our volumes are now getting to the point where they're dominated by the bank flow and therefore eventually that slope of declining revenue per trade has to start to flatten out. And I think we're pretty close to that, maybe starting to flatten a little bit.

And obviously if the volumes still go up and we start to see a flattening out in the reduction in revenue per transaction, that's going to be a positive sign. I think this is a great business.

I think we're a leading disruptor to the correspondent banking system. We now have all the major players utilizing us.

That gives us a leadership position in that market which I think is very hard for anyone to challenge. I think this business is a very valuable property for us, both in terms of the earnings it's going to deliver over the medium term, as well as what I think the perceived value of this business is I hope that answers your question.

It does. In case there's not another question, I have one more.

You have a relatively meaningful share buyback authorization in place. Can you remind us how to think about how you're going to go about executing that going forward?

Yes. I think we've discussed this in the past before.

I think empirically, if you look at share buybacks, they have almost predominantly been bad -- IE, companies always overpay for their stock in the market and that just generally is not a good result for the shareholders. We have a pretty formulaic approach to buybacks.

We look at a book value metric. It's very much how Warren Buffet does his buybacks.

We will start buying back shares if we think it's going to be accretive on a book value per share basis in a two- to three-year window. If we can't see that buying back our stock is going to be accretive for our shareholders on that basic measurement, we're probably not inclined to buy our shares back.

Obviously, if you go back a year ago we were trading at around book value which that becomes very accretive, so that's when we bought shares back. Obviously now we're trading at something like twice book.

This would not be a time when we would be buying shares back. So, we're much more focused on book value per share and making that metric accretive than we're on an EPS per share.

And just to put it in context, Bill can probably give you the exact numbers, but we purchased around 2 million shares and I think the average price we paid is somewhere around $20 a share. If you had to mark that to market, we have created, I think, significant value for our shareholders through the buybacks and we want to make sure we continue to do that.

Does that make sense?

Okay. Thank you, everyone.

All I can say I guess is happy holidays to everyone. So, enjoy.

Thank you.