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SNEX StoneX

Participants
Sean O’Connor President, Chief Executive Officer
Bill Dunaway Chief Financial Officer
Dan Fannon Jefferies
Call transcript
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Operator

Good day and thank you for standing by. Welcome to the StoneX Group Inc. Q4 fiscal year 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. during on you your question press need a one star, telephone. ask this will session, to To Please be advised that today’s conference is being recorded.

any like conference require I Financial Officer. today, you further ahead. press Chief please If go star, Bill would Dunaway, now to to over the Please hand your speaker assistance, zero.

Bill Dunaway

press is results fiscal Dunaway. closed to quarter release quarter XXXX. the the market our September morning. fiscal ended to conference call and discussions This which a XXXX. website Good our at XX, our is quarterly refer Bill My our earnings of slide year we release available results. issued www.stonex.com, on we’ll fourth a as and our yesterday, name on for fourth this call as well Welcome of reporting presentation for our After

the live be to You view webcast presentation. The will need of on and onto available will our conclusion. the sign the in to archive after an call’s presentation also order webcast the website

required discussion the Before with should as XX-K involve should our of detailed the and conjunction getting contain in as underway, of we are notes XXXX statements statements the and the unknown be XXXX. the taken of and Section thereto, forward-looking This Section with risks following filed to advise uncertainties in that Securities the known statements Securities and SEC. Form within the meaning forward-looking These note SEC. well and XX(e) recent of and XX(a) discussion may Act of filings Exchange financial participants most the all you with are Act

are forward-looking future assurances not results The materially company’s not forward-looking company no that assumptions obligation forward-looking the Sean or guarantees upon now O’Connor, its actual events results can the company’s implied I’ll to result be any statements as With undertakes company’s statements. believes performance. no based company the are any otherwise. reasonable the new cautioned there Readers to regarding from or future revise update the a CEO. whether and that, or information, forward-looking its business conditions, publicly are by turn market expressed will statements over any of future call differ Although statements of

Sean O’Connor

for call. Bill. QX, XXXX and fiscal our long-term thanks results morning In everyone quarter our expectations our earnings our were fourth joining ROE Thanks below Good and target.

conditions generally fiscal During volatility the less with quarter, tailwind the or in a ago, September quarters market year beneficial less of were a prior earlier than even than in year.

our As in ROE continue always term we and term you most our the I to close was annual long pleased see to a company to have franchise, taken grow know, XX%. long of [indiscernible] we our and manage view how of very results target that

wasn’t results, non-recurring Gain impact and last an and up operating of quarter, Capital experienced year-to-date client against respectively for well the Slide due share be overall volumes $X.X an driven earnings up for either. the now XX.X% comparing the to up volatility operating board, adjusted performance aggregate Holdings. XX% Interest and the revenues X, client year. up as ago ROE back fiscal in interest were operating XXXX income environment. better OTC revenues growth, due declined. of derivatives that, which both ago Before against a prior year year-ago that rate increases the for significant in product XX%, results, deck fiscal fiscal starting into balances, quarterly slightly derivatives the we’re and up year’s I although want markets higher from wrapping and now the to FX both average, a our by client capture, the of a to in speaks of the last CFDs, strong client year our and to get areas reduced the the it revenue I $XXX.X of are particularly XX% XXXX with both we metrics Starting off quarter. us and we quarter stands XX% This Adjusting for this from XX% On core on gain versus actually where of year revenue and gains, should market securities higher the operating securities also on quarter at with quarter versus immediately strong market preceding being clearing the product earnings year were versus one float in growth up and Volume discussion ago since up engagement, were comparing increase offset billion, adjusted a and especially ago, in a commodity increased as enhanced with year with listed the versus increases million, and XX% a all that post-COVID standout across ago. by fiscal was saw a volumes included results acquisition the note of with current year noted

which in revenue volume enhanced reduced securities by increase increases in listed for post Also volatility down capture, revenue Strong the Volume derivatives fiscal ago, we lower against listed the Slide the that were X volatility COVID due were to year, declined were we’re business. exceptional given across metrics speaks partially and engagement. revenue the at results Turning is XXXX up to and really client as derivatives a good offset market where result Gain capture board, There experienced across our the acquisition. especially XX% volatility board, in again revenues where full double-digit operating except versus in comparing disruption. product increases slightly, increases the were with the tailwind. heightened looking for to revenues a notable year a

derivatives, Some of this as increased later. this commercial its actively to most we capture clients. More offering re-priced to increase our competitive is sector. by for relatively more our volume revenue margin listed due [Indiscernible] institutional institutional on our higher product, XX%

rates. interest were down prior reduce listed and Fed derivatives the up and as in securities interest both and clearing XX%; growth, earnings float strong year prior incorporated client average the to fee experienced action significantly a period Our however, to XX%

were prior have franchise for built. in functions recent to future largely and our months Slide the a the to to of as Gain revenues up that earnings, reported quarter, impact summary adjusted due recorded the million, of technology overheads on an three and XX% now well up foster so costs Gain, the of and acquisition $XXX.X accounting the XXXX X quarter and investments associated versus we XX% Turning August prior support we support two of in included as of the both operating removing were for year’s the basis, Aggregate and as year. growth only

largest adjusted X.X%. versus was to at modest and compared CFDs, prior accounting securities, $XX the earnings and in mentioned both quarterly drove gains million revenues of operating quarter in earnings although non-recurring the treatment Gain, were treatment contracts. earlier. or still As pre-tax up quarter, preceding declines $X.X million, immediately FX, On a which in the ROE the Gain only a overall XX% the acquisition were due $X.XX, were decline income. EPS physical XX%, an The the derivatives which payments, the of global was good basis, largely Listed $XX prior very quarter. over down our excluding These diluted offset performance were and year down versus to or declines down of below OTC XX% down million, Net ago in significantly accounting by target were million XX%. $XX.X derivatives or were down XX%

however, significant year. our being year, Looking acquisition a summary for new income a fiscal for revenues was Net of was fiscal XX% up Gain record a the at net $X.X operating the billion, the were for XX%; income $XXX.X $XXX.X this. contributor down up adjusted and record, core our million, operating and million, our new results XX% to

year diluted consideration XXXX, although an of the the EPS our these EPS by would $X.XX and reduced $X.XX related adjustments reduced EPS was have for increase year $X.XX the the EPS the reported diluted $X.XX, by Our After $X.XX. versus for XX%. adjustments, XXXX year approximately been current of acquisition adjusted EPS Gain to prior

year. adjusted Our reported and an ROE for was the on basis XX.X% fiscal was XX.X%

always float and we seem results, Reflecting short rates and income. that bottom look $XX $X.XX performance at We results, business adds our or net interest on quarterly rather look immaterial it way the cycles. this on overall to that interest should basis XXXX our have the our for line. managed point potentially operating shareholders in of earnings Although the in million revenues, the we XXX may to believe number for straight term drops long at financial increase than context estimate through same the our term

results, our the adjusted best company, our XXXX which the extremely with Looking of I’m core earnings reflect performance. pleased at

and of and we significantly we footprint. We we diversity client had scale have at effectively two XX% it ROE, than capital around both deployed and grown our have years target ago more have our the

earnings have a against revenue XXXX volatility XX% on growth growth very line significant XX% and we challenging delivered tailwinds. comparison, enjoyed We top when adjusted an basis

have were synergies, year in anticipated, other other We any on retail acquisition. did and Gain terms the of much in high some priced, first being increase year. line contributions revenues most although of to and expectations activity, in small more as volatile fund the cost our growth yield delivered count The of this high bottom take than modest results the quarters net both the in QX share with platform the without delivered although its we options Gain delivered debt on

term In expense not to we exacerbated we however concerning related interest earnings how given and business volatility year, this on how quarterly long higher addition, fiscal is our notes yield this high the focus results. run

segment for revenue, and Turning gets revenues segment, down the and payments before XX% to the a XX%. segment up revenues summary, in XX% basis revenue up detail, and showed commercial operating X% touch income operating sequential just although XX%, quarter. was segment ago. Retail on into global revenues up XX%. which segment and and and were down more versus XX% the were our is income our That up good segment briefly operating highlights segment had aggregate XX% The income quarter down for operating income Slide up operating a on growth segment XX% to was were up standouts year X, which said, the Bill

you For across given hand a very pleasing Dunaway back the year to - I’ll growth income the and more now overall, With operating to period. for strong that, Bill? in board detailed saw that, Bill comparable segment revenue both the tough see we discussion. especially

Bill Dunaway

well our expenses a I’ll for the starting ’XX. consolidated the our in fiscal months as a a derivative highlights No. operating higher X, and statement few then listed in in so the million Thank $XX.X just in Gain you our many I’ll period, to the of acquired as Sean. covered income highlight XX% clearing costs Transaction-based markets current equity the of revenues Sean quarter, quarter Slide capital were business of increase which onto segment, discussion. related three effective to cost with full segment up XXXX. be move August business, shows the fourth of primarily consolidated commercial for X,

In prior term issuance result operating incremental short principally of the to with compared to office the as well lower year operating million activities. as senior versus incentives growth versus due performance. the the to XX% broker of of compensation as the the compensation to related independent a were $X.X secured versus a subsidiaries employees’ benefit the financing current used incremental management of increased a year prior the expense revenues acquisition. net $X.X including period $X.X and an month prior prior company bridge related of result in versus the million notes by financing costs addition, prior lending decrease variable period the Gain Gain, increase to and prior Variable activity listed our was the year on of they as increased and million compensation salary headcount related of year principally an a primarily on in net commissions year derivatives. administrative $XX.X percentage the million of The corporate period. facilities $XX.X with our primarily revenues, expense funding operating increased and compensation. Interest in net XX% in borrowings XX% higher as Gain represented and up period to decreased increased average for of fees the prior year Fixed impacted along costs overall versus wealth $X.X securities of at as are increased in back Interest million million primarily year revenues

year, acquisition million intangibles the fixed compensation principally of the in expense an included month most in by attributable and Gain, $X.X amortization, of includes prior driven Additionally, severance Other $XXX,XXX notably marketing incremental information, increased $XX.X million The severance including amortization fixed acquired. costs. in of year market current $XXX,XXX the and costs. in prior expenses period versus incremental selling period to among costs,

be the result the of charge to and versus to In was primarily within the and of of Bad included versus businesses. futures fees, period as energy year versus developed client debts and physical business physical prior ag with of the of fixed in addition, The system and $X.X the impairments considered debt professional year impairment software. trading flat period included prior relating seeing prior following acquisition other costs, within increase and the a which million increases deficits year $X.X technology Gain. of versus and depreciation million, year, expenses deficits of duplicative business year the non-recurring relatively current non-trading software internally million the travel an Bad energy ag primarily and prior $X.X development, declined million capitalized prior institutional client the expense the options $X.X developed also

of Sean by fixed the Slide losses the XXXX noted quarterly some tax related of of included income things. the We $X.X results The million some despite assets. the fiscal As quarter million on gain result was for $X.X acquisition. includes an to income This fourth a on No. quarter. quarter modest prior current an million benefit $XX.X the of year disposal fiscal couple recorded X, for having of of pre-tax

U.K., to tax due XXXX decrease for re-measurement represented fourth First year a a tax was effective and and fiscal the to fiscal projected declined in full was the deferred for income million preceding a mix was asset in corporate change Net third end of was the future the of XX% as the all, third over that worldwide quarter. secondly end year million XX% compared of to full the a for the increases the the there versus $X.X to quarter, quarter. tax prior decrease projected what our related fiscal of the XX.X% XX.X% income quarter and immediately over $X.X year at at

share closed we asset net year with of value out $XX.XX Finally, the ago. $XX.XX compared a share as to per quarter per

a segments. million result a I’ll declined derivative XX% operating year contract quarter, provide The energy added X, lower segment derivative by prior physical positions increased of $X.X in a information in $XX.X values commercial commodity the market, prior include primary on driven operating a in driver the Operating a average the No. a Slide was Within year which revenues by contracts increase revenues, XXXX, and million listed loss of in increase markets. decline ag a operating segment. prior increased $XXX,XXX onto result to revenues volatility held for the compared the the as derivative and Moving XX% customer was OTC precious million loss a the of to quarter $XX.X prior were nature. physical agricultural transactions in for revenues versus million revenues compared operating was from operating X% commercial energy in increased up $XXX,XXX million of quarter the year the per segment, unrealized the commodity at as declined versus derivative revenues $XX.X physical prior primarily or some third third a the revenues. inventories on contract similar quarter and and our driven increase period in result $X.X as current of $XX.X volatility preceding where revenues versus unrealized year. in million of offset a the increase immediately OTC partially operating carried million rate as metals which primarily period this volumes physical included of million revenues Operating by overall against OTC a which mix. versus cost derivative $XX.X decline the $XX.X year in in

prior customers year, $X.X well million increased versus equity $X increased in non-variable to in versus million primarily as increase Total XX% balances. professional $XX.X and market XX% margin and the as due on income prior on increase the client certain interest result as client an to year expenses average balances Segment interest million preceding the Finally, increase principally fees. the expense, debt period, over quarter prior the of was of increase bad and an period respectively. year information, an in for a charged XX%

revenues in $XX.X fixed variable in million $XXX,XXX businesses. securities quarter, our debts which in million million increase Interest million X% of a a the client rate Segment a $XXX,XXX rate decline in to $X.X due a of from immediately third contract in volumes. and compensation Moving result was to X% onto prior segment prior balances declined and an bad increased derivative added primarily as income in per in million securities period of transactions, by per the Slide revenues offset operating benefited preceding heightened revenues decline an $X.X impairments, prior versus decline result year. wider No. XX, primarily versus per year the increase fee spreads institutional million decline the of securities by average which a more million performance result versus Segment average a balances a which driven year operating $X.X the increase daily modestly by our benefiting from million. volume $X in in was a the driven pandemic. as volatility, the $X.X the income COVID $XX.X client and XX% in a a XX% declined the as in and part increase quarter partially in revenues securities in expenses. partially increased primarily operating in year, Listed million offset versus current to was offset The by than income strong X% increase prior due on XX% rate in increase increase

the onto and by year, primarily Moving the retail revenues an added driven in versus revenues FX the which $X.X our slide, segment million operating CFD was Gain next in increase acquisition. $XX.X prior million from

clients prior in and million income year. in and was the payments and million metals per daily direct activity wealth physical the acquisition This in Segment as added year. earned versus retail decrease driven despite driven result to in revenues businesses million the prior Segment compared global slide, the in prior by of compensation versus a expenses our increase the million as million Gain a management business. $X a NGO X% Our the revenues. increase and benefits XX% average by by non-variable growth year, $X.X revenues volume from as segment variable independent Gain. precious quarter increased $X.X payment was prior added year to versus continued to preceding $X.X Non-variable in The declined business increased growth related and Closing driven in well operating income expenses expansion operating primarily respectively decline third quarter. versus the a profitability preceding million of primarily million the our as immediately out in primarily on versus a as in next the offerings. and base. $XX.X result decline million of the increase current $X.X the rate acquired discussion is the income increased a of immediately Segment represented the increased X% operating XX% the period client the in $X.X our

result the across quarter or No. fourth the our were revenues year. between million for represents operating increase overall up current unallocated exchange the on from quarter in $XX.X bridge million non-trading platforms, operating gain the current increase operating segments, covered value and the I’ve the pre-tax slide, fourth acquisition. period, acquisition noted expenses and the negative million in support the revenues as prior the the foreign earlier, in year all $XX and $X.X Slide build-out of to million million support XX, pre-tax clearing a over XXXX last related acquisition severance held negative losses for Gain, $XX.X decline purposes. the bridge related well current the onto as period. expense of $XXX.X intangibles in XX% primarily in unallocated noted of XX segments, next the and overhead of income currency to is No. the the technology period operating a and of unallocated revenues our overhead our revenue variance million to gains of operating is an variance the of in for represents Gain the income revenues acquired Moving stock which decline in The the the in slide, variance primarily amortization related earlier, of the noted changes to however in to in previous $X.X of The of

balances for short-term which well the Finally sensitivity our moving and average invested onto depicts which change earnings by rate quarters, client associated as interest a Slide shows a No. table rates. annualized XX, as interest in

it at the increase the XXX per upon based turn for income discussion. or approximately current strategy net estimate would would in I to back we of $X.XX client short As noted Sean point a table, interest basis term bottom share, like million balances. a increase to With rates $XX.X that, by

Sean O’Connor

Bill. Thanks

XX, Turning update is that more given that be and high the of level management on, year-end, objectives to which progress projects are useful. most on focused a this but, I strategic would detailed ongoing thought these Slide unchanged summarizes

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carbon is another propelled an ESG global trading by Secondly, initiatives. market growing

are relationships that ESG exploring to and about also leverage our We new time. fundamental assist base for active take industry, I in interesting a in biodiesel opportunities priority the we better Certain little last assist initiatives space, marketing advantage. better bit and metals currently the initiatives. car opportunities us. this our green electric These is ways and a are markets providing are to to is impact energy spoke for and and provide us significant client for clients

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XXXX, largely During U.S. small, acquired services but licensed company. a we fully payments dormant

of digital will a potential Brazil, and which our approach large provide platforms payments which We see aim XXX,XXX market change similar our We licensing have and offer as we clients. to for are unmatched of ways all all nearly some XXXX, ease the expand for our to facilitate our we services. us. use payments completed clients and global commercial regulatory now control In of a XX,XXX our simplicity in on to retail will be process for to clients our have payments capability able a soon looking

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Operator

Dan from Fannon [Operator instructions] comes from line question Jefferies. the Our of first

Your is line open. now

Dan Fannon

Thanks, good morning gentlemen.

Sean O’Connor

Hi Dan.

Dan Fannon

Hi.

business just how you at little know, a and lowest about least several give a we think in was been I on was First, the color on a, in we This in I now. lowest--this as quarter you year-over-year, that business RPM volatility, more what mentioned should is back lower far securities could can for decline on as normalized see, the declining going the so that if but basis. more don’t the bit know quarters it’s

Sean O’Connor

what I conditions, highly say we to would dependent capture mean, like the it. be flow was on Obviously at terms to going last we would see, the very market say Okay. can I year probably where elevated was so the and the it’s above of you see forward. revenue hard on way prescriptive last was think low in we guidance volatility, giving But it’s on very quarter

time. those We’re ranges, probably somewhere would over two to narrow I think between in going

offering, more should could going aggregate a and more skew overall are can where I like to securities, looking see but into as see foreign lower large think the we to per market million, some share we’re rate also the new to expand and niche areas probably and where some have we result. our going drive the from we’re we areas that million, maybe segment moving per decent so rate of a revenue very in results, income

that, are that competitive. our more guidance probably entering going last say can think, to into reason. of year, move give that’s impact a I rate to As to our for and been start quarter tough you mentioned, areas space the areas we’ve to it’s on white and slightly beyond I we’ve million, the just so below the going we I as are would than to going we I would probably client leveraging have I don’t business more for track, trend, thing per historically, quarter better this which trend, say be been some but what be above for know to digitize, start in relationships last going of if is some this I some some but doing of we any was core

Dan Fannon

so the with spend, on was about mentioned, digital a you’re outside little the costs, other bit things, Okay, and other hoping that bad fixed that’s year, how a initiatives, been the even the some more business, quarter, lot several acceleration is and there next in but then investment costs, rates you’ve would of the I color but get helpful. fixed bit years, little for expenses, this to sequential year-over-year the helpful. on the comparisons debt, the you associated you think the on investments was in thinking Then kind a budget context new and around of just making there or pick-up there of any of of understand parts anything context of Gain, growth a of as about if of be some one-time an

Sean O’Connor

start I’ll can has. then Okay, up maybe and well Bill he follow comments with any

on push think us got here. factors couple a we’ve I

that. seeing years increase planning then do anticipate overhead, next and result for now captured increases saw we we’re as exercise, well spend. that, on Europe. delivered a way much and change all last the of two of four in some as that. that. increases to and so revenue of last facing. real I over we tend of think our see in is incremental place, think The generally will and regulatory off as Brexit of We’ve the in There third of run the after we There have be completed year, bakes are synergies your to, because to just flattening those big some infrastructure We growth hasn’t We’ve was things of over that a three our last lot so fill first the those starting instances, lot start rate see all anticipate so from is--really but your Gain with also in we a debt years, business, happened behind little to regulatory products I infrastructure you’ve two on QX right some doing to of Then saw say to a pushes some in making you factor so guess, the and some the have pretty for seen the that the of scalability revenues oversight year-on-year, there’s changes is had the on all we’ve the or in of in over grow significant and a increase the, so a far, we’re compliance, I budget three two obviously big I or excited for guess, there’s that capabilities. infrastructure like see Brexit XX% of think bit I and single had some basis offsets catch rates fixed mean, to backfill change, rate a changes. or regulatory some insignificant, growth new of that? to digits up of we the costs, regulatory I fill not exit has mean, major we’re put got fairly major years, sort bit, thus sure which push we then other thing Bill, technology expanding a our maybe new payoff some that, growth would stuff of significantly. and any been change, acquisition, anticipate is when either go-forward on and now us see when I debt the the you cost our some business run you over some would years, you or and - the a an we’re spend pretty was which on into But revenue on massive I environment I think honest new I mentioned, unless validation some in in expansion have not got comments I we some

Bill Dunaway

versus guess Yes, was fourth about I through of of QX. it QX we QX, that spikiness fees million during million basis. there points, period basis a probably half we get see year-to-date script, through see a which through There’s in know, kind where dollars’ a one in but wouldn’t QX see a versus is a to a being little contingent higher, is QX run QX consideration million, tend We results in as so the quarter, about on acquisitions audit flowed the good were the particularly is just go-forward which up on the come of the bit. other in as - the for little portion we audit versus out but Overall QX, fees that, be, just it $X.X portion know, of professional to work--you overall will million only expect selling where the just that you that the fee smaller that you and done flexes which increased Gain severance point probably you costs probably worth of see the rate lower of marketing, the the few QX, that of QX. bit, with about some had and also a they million a I is my marketing work pointed Dan. Then there up a a $X.X as being dollar. that in business half deploy skews here

that on I three off fiscal the rate was aspect. a been year, the think it than what has our little of know, probably run higher you leveling in prior quarters so certainly historically,

Dan Fannon

Then longer how which could initiatives last quarter, weeks, that recent you thanks my volatility fiscal for helpful. and Okay, term, in taking trending you’ve this at more maybe I is little maybe but much first in context of and That’s maybe just are great. some given point. had the we’re know talked current the quarter We’ve just around about, into some if the the one, all characterize bit two questions, environment. months a

Sean O’Connor

more on our chip find on technology, we that in sorry, is much will StoneX over to we but legacy on people, to and right, become growth if the for what paying on costs are are more was little with. on a that because so guess costs. here, business, don’t start to start legacy spending as and is fixed, are relationship see than payouts you we brokers shift flip we’re cost wanted to deal more on getting Dan, those but a from much more so relative is be you would model, mute. your technology, time I will one to I of costs it’s thing to noticeable our more because have be real I spend obviously going variable tend of to those they side we’re fixed fixed money payouts now that much high not some mix it to bit higher of to incremental margins the incremental a more--and right, scalability, scalable,

make I the a business we something don’t to it’s--you see move Just needle Gain. Does in see trend but of. I our aware going think particularly be acquired that sense? you’re to we not know, quickly, it think since now, that’s

Dan Fannon

Yes, that does. Thank you.

Sean O’Connor

bouts say and our markets is you of both can its us. would good want right news deal opine position I is you’re are environment but of very speaking, generally Well we’re with endemic think things great markets, to day know It month a here. I be the and this of sort some is more to the can think normalization like of for move But you positive us, the formal quarter. know, COVID still you’re a which long what month, at business periodic to you still COVID didn’t in Fed’s not quickly. towards I The the the and a Obviously does feels move to now. quite remarks for going is have on normal on where provide of from to going volatility, now, to us in the say end way very up for day, my going normalization never us to that the to until sort have of I can end then long those right of path sort environment.

being the rates think talk talk pushed effect doesn’t see generally has good and there’s environment. start sometime pretty and quarter, there’s now us, mean inflation, pretty a I going That be a but positive environment our on up a for it’s some around all are think obviously interest line. every bottom we it dramatic will as that that soon, pretty real I that also--with to positive

us setting well. environment I for think up the is

pretty but for said, going bullish to quarter the how and that’s As the I’m think us. it’s hard out, facing about I current to play I market to better quarter know we’re is environment

Dan Fannon

Okay, thank you.

Sean O’Connor

Operator? All right. other questions, Any

Operator

time, I’m questions. further this no showing At

Sean O’Connor

and the right, thanks holidays. All everyone, well enjoy

you, be will Bye in to bye. We guess early speaking Thanks. February. I

Operator

today’s concludes for conference participating. call. This Thank you

may now disconnect. You