INTL FCStone Achieves Record Revenues for Q1 FY 2018

Despite improved revenues, the company recorded a negative quarterly net income, due to a $20.9 million tax charge.

INTL FCStone Inc, a global provider of financial services, published its financial results for the first quarter of fiscal year 2018. The results are indicative of improving performance for the company to start the year.

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INTL FCStone provides an assortment of financial services, including execution technology, risk management tools, and clearing services, aimed at institutional clients. The company has recorded a successful first quarter to the fiscal year, highlighted by an all-time quarterly high for operating revenues, which reached $212.6 million. The figure signifies an increase of 15% YoY, up from $185.5 million, for Q1 FY 2017.

Similarly, net operating revenues were in line with the above figures, coming in at $130.3 million, or a YoY rise of 14% from last year’s Q1 levels of $114.3 million. Meanwhile, the company did see increased operating expenses, although at a lower percentage increase than seen in the revenues column.

The company’s operating expenses are composed of several components, including transaction-based clearing expenses, interest expense, and introducing broker commissions, which contribute to the overall revenues of the company.

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US Tax Cuts and Jobs Act Affects Numbers

In line with operating revenues marking a new quarterly record high, the company’s pre-tax income showed an even stronger percentage improvement. Income before taxes came in at $18.6 million, up an impressive 121% YoY, from $8.4 million in Q1 FY 2017. However, with an income tax expense figure of $25.5 million, INTL FCStone’s Net Income actually recorded an overall loss of $6.9 million during the quarter.

The high tax expense was skewed by the recently implemented US Tax Cuts and Jobs Act of 2017, which led to a charge to the company in the amount of $20.9 million, of the total $25.5 million tax expense. According to the company’s statement in the matter, the tax charge reduce the overall earnings per share (EPS) by $1.12, leading to a net loss of EPS to the amount of -$0.37.

Statement from CEO

In a statement related to the quarterly financial results, CEO of INTL FCStone Inc., Sean M. O’Connor, said: “This was one of our strongest first quarters, off the back of revenue growth across all segments of our business, despite continued low volatility during the quarter.  Overall operating revenues were again a record, up 15% overall and expenses were held to a 5% increase resulting in a very strong 121% increase in pre-tax earnings. We achieved standout results from our Commercial Hedging segment which increased segment income 37%, as well as Clearing and Execution Services which was up 84%.”

Mr. O’Connor continued: “The recent tax legislation resulted in a charge of $20.9 million to earnings, which was largely offset, from a cash flows standpoint, against our deferred tax assets. The impact of this tax charge was approximately $1.12 per share. The new tax regime in the U.S. will have a small positive tax rate impact on our current activities, however the after-tax earnings on our over $3.0 billion in interest rate sensitive balances in the U.S. will benefit from a significantly lower tax charge, in the event that there is an increase in short term rates.”

 

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