INTL FCStone 2014 Annual Report Download - page 56

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INTL FCSTONE INC. Form 10K40
PART II
ITEM 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Global Payments
We provide global payment solutions to banks and commercial
businesses as well as charities and non-governmental organizations
and government organizations. We offer payments services in
more than 150 countries, which we believe is more than any
other payments solution provider, and provide competitive
and transparent pricing. rough our technology platform,
full-service electronic execution capability and commitment to
customer service, we believe we are able to provide simple and
fast execution, ensuring delivery of funds in any of these countries
quickly through our global network of correspondent banks. In
this business, we primarily act as a principal in buying and selling
foreign currencies on a spot basis. We derive revenue from the
difference between the purchase and sale prices.
We believe our clients value our ability to provide exchange rates
that are significantly more competitive than those offered by large
international banks, a competitive advantage that stems from
our years of foreign exchange expertise focused on smaller, less
liquid currencies. Additionally, as a member of SWIFT (Society
for Worldwide Interbank Financial Telecommunication), we
are able to offer our services to large money center and global
banks seeking more competitive international payments services.
e following table provides the financial performance and selected data for Global Payments for the periods indicated.
(in millions)
Year Ended September 30,
2014 % Change 2013 % Change 2012
Operating revenues $ 55.4 35% $ 40.9 5% $ 39.0
Transaction-based clearing expenses 2.6 (7)% 2.8 33% 2.1
Introducing broker commissions 4.3 378% 0.9 —% 0.9
Interest expense 0.3 (40)% 0.5 (44)% 0.9
Net operating revenues 48.2 31% 36.7 5% 35.1
Variable direct compensation and benefits 10.6 22% 8.7 12% 7.8
Net contribution 37.6 34% 28.0 3% 27.3
Non-variable direct expenses 9.3 24% 7.5 32% 5.7
Segment income $ 28.3 38% $ 20.5 (5)% $ 21.6
Selected data:
Global payments (number of trades, 000’s) 191.5 36% 140.8 16% 121.7
Average revenue per trade $ 289.30 —% $ 290.48 (9)% $ 320.46
For information about the assets of this segment, see Note 22 to the Consolidated Financial Statements.
Year Ended September 30, 2014 Compared to
Year Ended September 30, 2013
Operating revenues increased 35% to $55.4 million in fiscal 2014
compared to $40.9 million in fiscal 2013. e operating revenue
growth was driven by a 36% increase in the volume of trades while
the average revenue per trade remained relatively unchanged. We
continue to benefit from an increase in the number of clients
transacting, including financial institutions, as well as our ability
to offer an electronic transaction order system to our clients.
Segment income increased 38% to $28.3 million in fiscal 2014
compared to $20.5 million in fiscal 2013. e increase primarily
resulted from the higher operating revenues partially offset by a
$1.3 million increase in non-variable compensation and benefits.
Variable expenses expressed as a percentage of operating revenues
increased to 32% in fiscal 2014 compared to 30% in fiscal
2013, primarily as a result of an increase in introducing broker
commissions due to new customer revenue mix.
Year Ended September 30, 2013 Compared to
Year Ended September 30, 2012
Operating revenues increased 5% to $40.9 million in fiscal 2013
compared to $39.0 million in fiscal 2012. e increase was
driven by a 16% increase in the volume of trades partially offset
by a 9% decrease in the average revenue per trade. e volume
increase was driven by an increase in financial institutions and
other customers utilizing our electronic transaction order system.
Segment income decreased 5% to $20.5 million in fiscal 2013
compared to $21.6 million in fiscal 2012, primarily as a result
of an $0.8 million increase in non-variable compensation and
benefits as well as an increase in trade system costs and depreciation
related to the implementation of our electronic transaction order
system. Variable expenses expressed as a percentage of operating
revenues increased to 30% in fiscal 2013 compared to 28% in
fiscal 2012, primarily as a result of an increase in transaction-
based clearing expenses.