Q4 2020 Stonex Group Inc Earnings Call
During the last couple of calls. We have warned on the potential longer-term impacts of the market volatility in the form of increased liquidity stress on our clients and indeed. We saw a higher level of bad death as a result in the fog lights of this was concentrated around the energy sector which experienced both significant dislocation and significant prices during the quarter. We had a bad debt of 6.8 million dollars Club impact of a seven point six million dollar write-down of certain physical energy inventories are fourth-quarter results reflect a record in terms of net earnings and Thursday. Yes, largely due to the accounting for the game transaction. We achieve net earnings of 77.4 million for the quarter or $3.90 per share which equates to 42.5% are a week.
When you agreed to the game transaction in February, we anticipate we anticipated the purchase consideration and closing of around tangible Book value, but we could not have foreseen the coming impact on COVID-19 me make sure ordering market conditions allowed going to achieve record results for the March and June quarters, which in aggregate were about ninety-two million dollars and which increased the tangible Book value by a similar amount in simplistic terms, the bargain purchase game. We have recorded represents the accumulated earnings from gain Capital which ended up accruing to Thursday next year holders.
I believe the
Best way to look at our quarterly results. It's the break out the impact of the acquisition accounting which we viewers including the eighty one point eight million dollars bargain purchase game seven point seven million dollars of related transaction expenses as well as 5.7 million dollar impairment of the Stone Age capitalized software now rendered Surplus as a result of the acquisition in averaging this is approximately $17 after tax earnings for the quarter executing is aggregate acquisition items and before any bad debt charges and inventory write-downs wage earlier was approximately twenty six million dollars pre tax for the quarter this pre-tax number also includes six million dollars of increased variable compensation, which was also Prime you related to the acquisition of game.
I have no results achieved record at every level operating revenues Rose 18% to 1.3 billion our net earnings reached 169.6 million or $8.61 per share representing an r o e of 24.9% If we again exclude the aggregated impact of the acquisition amount mentioned above on our annual earnings recordings were around a hundred million dollars posts tax, which is in itself is a record and amounts to an RO we have about 15.4% on average capital.
The combination of our record operating results and our m&a activity has allowed us to significantly increase our Equity Capital which now stands at more than $765 million dollars wage increase our book value per share, which is now close to $40. We have now compounded our Equity Capital at around 30% Annually for the last Seventeen years and our book value for sure. It's slightly below average number of the same. These are extraordinary results and I'm very proud of our teams achievements our focus on r o e and compounding our Capital has always been a Cornerstone of our approach as it allows us to create an internally generated Capital Runway to support our continued growth.
In addition as a result of the game transaction, we successfully completed a 350 million dollar bond issue. This is our first entry in the institution debt markets and issue with signal is oversubscribed and it's been trading well in the secondary Market. This was an important step for our organization as it gives us access to another source of capital should we needed for either growth or acquisitions?
Of course all of this continues to take place within the context of COVID-19. So I'll take some time here to discuss what we see is the likely impacts of the pandemic go forward and how we responding to it off as I mentioned on the last call. I believe that there's still a rough road ahead of us. Although now light at the end of the tunnel with successful vaccines a large number of businesses have a big and small package deal with the courtesy. It's all the issues for many Industries are being disrupted and reformatted permanently.
in terms of operation
Since not much has changed since last quarter. We have remained focused on serving our clients while protecting the safety of our employees vendors and other stakeholders more than 95% of our employees are still working from home as opposed to the office and I'll business continues to function effectively. Although many of us. Look forward to return to the office environment.
We have also moved all of our clients events to a virtual format and we're very encouraged with the level of Engagement and in fact and Effectiveness we've achieved so perhaps virtual events will be part of our new normal depending subsides the unprecedented fiscal and monetary response to it has clearly supported and possibly even distorted the financial markets. They're fairly significant significant extent long as these excesses were clear out of the system. There's likely to be ongoing repercussions and perhaps the system volatility as a result one of the drivers of profitability for our business and our industry off the interest carry receive an applied float currently upload stanza just listed five billion, which I mentioned earlier which is nearly double what it was eighteen months ago while the earnings power of this boat is now constrained a song by zero interest rates. The impact of lower rates are now business is somewhat offset by higher than normal volatility and the fact we aren't Diversified across our client segments and wide range of products. Yep.
This is we offer. However this operating environments likely to pose difficulties for the industry at large especially for the less Diversified and smaller businesses and is likely to more consolidation consistent with our strategy and recent practice. We aim to benefit directly from the spawn solidation either directly through Acquisitions and T Myers or indirectly by assisting clients looking to move to more stable institutions are increased client float is a good indication of our current client base and increase market share and we believe this position does TJ for the long term.
Next looking at the game acquisition. I'll spare you all the recap of the transaction rationale and the benefits which we've discussed at length in Prior calls. And as I believed results so far speak for themselves as I mentioned earlier this transaction closed during our fourth quarter, although integration efforts started much earlier than that and most of the central functions have now been merched may have some of the key regulatory approvals. We need to consolidate legal entities in the UK, which will allow us to realize the significant portion of the capital cities for this transaction. We have made good progress on integrating capabilities and trading flows. We appropriate but we still in the early stages of that process and there's much yet to do in all we're very pleased with our progress at every level and we believe that this acquisition brings a new dimension to our business increasing our diversification and allowing us to scale up at a time and we doing so maybe more important than ever.
Of course. Mentioned that game brings. Companies its retail business which represents a new client segments for us. This is prompted us to reassess how we present our financial information. So better off the company we are today and the company we want to become over the last ten years. We have grown tremendously not only in terms of the breadth and depth of our Global presence and product offering but also our club place we connect our clients to Global Market ecosystem across asset classes through institutional grade digital platforms and vertically integrated clearing execution type of service and deep expertise the acquisition of gain accelerated our pursuit of the strategy with the addition of two new highly recognized and highly trafficked portals for connecting to the markets off thousands of new products as well as a significant new retail client segments as such we have now segmented our business based on full client types.
Commercial clients represent corporations and other typically small and medium-sized businesses who transact with us to address hedging and other commercial needs institutional clients and financial institutions head hedge funds and other typically financial industry focused companies that look to us for liquidity execution and clearing and related services off until clients are comprised mainly of the Legacy gain client base, but also include retailing clients of the independent broker-dealers. We service through our wealth management business and Retail investors to use utilize our online physical.
Precious metals trading platform of Global Payments clients comprised Banks non-government organizations Charities and other users of our global payment services.
You manage our business by deploying a wide range of trading platforms products and services that we offer across these client segments in our earnings release and other disclosures in addition to providing you are Consolidated operating results. You will see operating results from each of these distinct business segments. In addition. We have provided for each of these segments of break out of the operating Revenue by the following product catalog listed derivatives OTC over-the-counter derivatives and Structured Products Securities FX and contracts with different Source efes, patience and physical transactions. We have also provided transactional metrics on the same basis. These operating metrics should provide accurate picture of our engagement with each of our clients lights off.
We have provided five quarters of historic results of this new format with the new metrics to facilitate an apples-to-apples comparison. We should note that the game results in only been included in the current quarter for six months and consequently, the retail segment will become more significant as the game results included very forward will go through these segments in more details that some quick highlights nearly all of our lifetimes actual volumes increased for the quarter and for the year overall most volumes are up 20% or more annually due to the increased Market volatility as a result of covert and also due to market share gains evidence by increased client float in terms of the segment operating revenues all of our segments show growth across the board. Both of the courts are and for the overall
Looking at segment income the quarterly breakup demonstrates how evenly distributed our business is through these client segments bearing in mind that retail only has gain revenues for two months.
on an annual basis the standout performer is our institutional business, which has been transformed over the last five years nearly doubling its segment income for the market conditions as well as the rollout of new products and capabilities during the
In terms of the product operating revenues, we have to stand out what's up operating revenues from physical transactions was up 55% driven by record results in the precious metals. And despite the inventory markdown in Energy Products, uh, I mentioned earlier and the FX and cfd categories of that significantly as well. Largely due to the first time inclusion of the game business for 18 months of the quarter on an annual basis Securities operating revenues were up 39% along with physical and effects and cfd operating Revenue growth of 65% off and 270% respectively.
interest earnings on
Find declined by 78% for the quarter and $0.49 for the year during the quarter. We also completed a rebranding of the company with a forward-looking name that you think life captures the essence of our company's future and in the process, we rid ourselves of perhaps. What was the worst corporate name ever? Although the rebound was a much larger larger undertaking them realized we cannot find me say that we are so next.
commercial institutional retail and Global Payments
With that I will hand you over to Bill Dunaway for discussion of the financial results bill.
Thank you son. I was starting with slide number 3 which shows our performance over the last five fiscal quarters?
It shown we followed the trail performance in our fiscal second and third quarters with a record seventy seven point four million in net income in the fourth quarter of 2020. This represents a return on Equity of $40 off half percent and diluted earnings per share of $3 and $90 for the quarter and $8.61 for the fiscal year is Sean noted the fourth quarter results included 81.8 million dollar gain, a position of game Capital was closed on August 1st and is of note that says gain of non-taxable in the court room. There's no corresponding income tax provision recorded for this item in the quarter.
Moving on to slide number for which represents the bridge between operating revenues for the fourth quarter of last year to the current. Across our new operating segments.
Sean discussed earlier overall operating revenues or 342.1 million in the current period of fifty five point two million or 19% over the prior-year.
The largest increase in operating revenues was in our retail segment which added 48.1 million versus the prior-year which is primarily driven by the incremental 42.9 million f x and CSC revenue from the gain acess in addition our retail physical gold business, which is the coin investment business acquired in 2019 added three million in operating revenues as a result of increased customer demand for South Koreans in bars.
Our institutional segment added 3.2 million in operating revenues versus the prior-year as a 19% increase in listed derivatives volumes added eight point six million in operating revenues versus the prior-year month and a 26% increase in average daily volume of Securities transactions want to do a thirteen Point 1 million increase in operating revenues in the segment.
These increases were partially offset by a ten point seven million dollar decline in interest in fee income on client balances and a $7 decline in Securities lending revenues in the segment as a result of the sharp teeth. I'm in short-term interest rate.
The commercial segment added two point seven million in operating revenues versus the prior-year within the segment operating revenues from physical transactions increased 10.8 million primarily as a result of our operating performance and precious metals due to strong customer demand in a widening of spread this increase in physical transaction revenues is none of a 7.6 million our inventory write-down of certain NGO inventory which pursuing legal action to recover from our supplier for for which there is substantial uncertainty of collection.
Could derivative operating revenues were relatively flat with the prior-year wild CC revenues declined two point six million primarily as a result of a 13% decline in the average rate per contract job in addition interested in a client balances in this segment declined 75% or 5.3 million as a result of the significant decline in short-term interest rate.
Finally operating revenues in Global Payments added 2.4 million versus the prior-year during by an increase in the rate per million earned as compared to the prior-year which was partially offset by a 5% decline in the average daily volume related to global economic slowdown as a result of the COVID-19 pandemic.
The next slide number five represents a bridge from 2019 fourth-quarter pre-tax income of 34.1 million to pre-tax income of 79.9 million in the current.
The addition of getting capital and the strong performance in retail precious metals drove the 15 and 1/2 million dollar increase in retail segment revenues versus the prior-year Global Payments segment in coming down to 1.9 million versus the prior-year primary related to the increase in operating Revenue.
Institutional sector income added nine hundred thousand versus the prior-year as a result of growth and operating Revenue as well as a 27 and 1/2 million dollar decline in interest expense as a result of the decline in a short-term rate. This is partially offset by increases in variable, clearing and compensation expenses a 3.3 million dollar increase in six compensation and benefits due to growth initiatives and a 5.8 million dollar increase in bad debts and in Paramount.
Like many incoming our commercial segment declined 14.4 million as compared to the prior-year as a result of the various and bad after the pyramid as compared to the prior-year.
Finally positive variance and get it over at a 41.9 million include the net increase in games on Acquisitions of 81.7 million, which is partially offset by an 11.8 million dollar increase in interest. Primarily the new newly-issued notes.
A 5.7 million dollar increase in variable compensation including two point 1 million related to gain a 9.1 million dollar increase in six compensation and other expenses related to gain and a 7.7 million dollar increase or seven point seven million and acquisition-related Investment Banking and legal fees Sean noted earlier.
Moving on the flight number 6E our quarterly Financial dashboard. I will highlight just a couple of items in the note.
Variable expenses represented 53.9% of our total expenses for the quarter above our internal Target of TV more than 50% of our total expenses variable in nature, but down from the wage 1.9% in the prior year primarily as a result of the various in bad debts and environment and the acquisition of gain capital.
We reported net income of seventy seven point four million in the fourth quarter as compared to twenty seven point two million in the prior year the quarterly results yielded a 42.5% return on Equity. Well above the target of 15% our total assets increased 36% versus the prior-year primarily due to strong growth in client balances as well as the gain acquisition, which also led to a 33% increase in the average number of employees.
finally
Closing out the review of the quarterly results are book value per share increased $8.46 to close out the quarter at $39.61 per share.
Next I will move on to a discussion of the full fiscal year result and we'll refer to slide number 7 for the year operating revenues were were up two hundred two point two million or 18% and 1.3 billion all segments of our business reported increases in operating revenues as compared to the prior-year. The largest increase was in our institutional segment which added 109.1 million driven by strong growth home equity and debt Capital markets particularly during the height the periods of heightened volatility our second and third fiscal quarters, which was partially offset by a twenty six point four million dollar decline in interest in income earned on client balances.
Our retail segment added 61.8 million versus fiscal 2019 primarily as a result of the incremental operating revenues from the game acquisition as well as the increase in retail precious metals trading with the acquisition of quite invest in the third quarter of fiscal 2019.
Operating revenues in our commercial segment increased 27.1 million versus fiscal 2019 primarily driven by the strong Performance and Physical precious metals, which is partially offset by 14.5 million dollar decrease in interest income earned on client balances the results of the decline in short-term rates discussed earlier.
Our Global Payments segment added four point six million in operating revenues vs. Fiscal 2019.
Moving on to slide number eight pre-tax income increased 95.7 million to 206.7 million for the current year all segments increase segment income versus the prior-year except commercial segment, which declined 2.7 million.
The largest increase was in our institutional segment which added 64.3 million segment income driven by the strong operating Revenue growth noted on the previous slide partially offset by an eight point four million dollar increase in wage. That's an impairment.
Our retail segment added twenty five point three million in segments income while the Global Payments added 6.3 million both of which are driven by the operating Revenue growth noted earlier.
Like my income in our commercial segment declined primarily as a result of the variance in bad debts and impairment.
Finally the positive variance and unallocated overhead of 4.6 Mi and include the net increase in games and Acquisitions of 76.4 million, which was partially offset by twelve point six million dollar increase in wage primarily. The newly issued notes a twelve point seven million increase in variable compensation, including two point 1 million related to gain a nine point 1 million dollar increase in 6, other countries related to game and in nine point six million dollars of acquisition-related investment banking and legal fees Sean noted earlier as well as incremental costs related to other Acquisitions wage over the last two years in the build-out of various administrative departments.
I will finish
For the review of the year-to-date dashboard variable expenses are above our internal Target of exceeding fifty percent of total expenses coming in at 58.6% of total expenses. That income was 159.6 Million for the full fiscal year a 99% increase over the prior-year the return on equity for the year-to-date. Is 24.9% which is above our internal Target of 15% off with that I would now like to turn it back to Sean to wrap up.
Thanks Bill. Most people 2020 will likely go down as one of the worst years in memory. And in many ways it brought out the best in our company shining a spotlight on our dedicated and talented people a commitment to adding value to clients ability to manage risk and our disciplined approach to Acquisitions and expansion while the near-term operating environment May environment wage and just with lower volatility and lower interest rates. Our business has proven to be resilient and is more Diversified and better scale and with greater earnings power than ever before. I am certain that this environment also bring a reordering of our industry and with it opportunities to pick up valuable clients people and businesses that will allow us to continue to increase our market share and the value of our franchise remain Vigilant and cautious in our approach, but I'm optimistic that will emerge as a stronger and more substantial Global franchise than before.
We believe that the gain a position will be strongly accretive financially and strategically as well as provide us with intellectual assets to enhance our strategy enable us to achieve our goal of becoming a best-in-class financial services franchise connecting clients of the global markets ecosystems across asset classes and offering vertically-integrated execution and clearing and providing any unique blend of both platforms and high-touch activities in closing. I'd like to thank the entire so next team which now encompasses nearly three thousand people around the world for the amazing commitment to our club for your willingness to embrace challenges here.
Also to my exceptional and battle-hardened management team who quickly respond by running towards problems and not away from them. I am very proud of our franchise and certain you'll come through this period of unprecedented challenges stronger and better operator open the line and see if we have any questions.
As a reminder ladies and gentlemen to ask question. You would need to press star one on your telephone and to withdraw your question. Just press the pound key. Please send file. You can probably call Jack Frost.
Our first question comes kind of Dan Fannon from Jefferies May begin, I think so. Good morning. Gentlemen. Hey, Diane, how are you? I'm good. Thank you. So to start just trying to normalize some of the noise as you put it in the quarter and thinking about, you know, kind of run rating where we are today, you know going into 2021 from an expense perspective. So you called out a few things. So I was hoping you could just reiterate what was kind of more one-time in nature in the quarter and the expenses. Maybe it's geography of where those charges or expenses were and then also update us on you know synergies and and things that have already been realized uh with with the game.
so that one in stock just at a high level and then I'll tell you the complicated part of the question over to Bill about that so I guess the way I think about you know the the quarterly earnings is and and I sort of try to lay that out a little bit as if you
if you think about disaggregating everything related to the acquisition right and and for the meanwhile I'll come back to ignore sort of bad debts as well as you know the variable compensation that largely kind of came this quarter as a indirect result of of the of the transaction I think you're getting down to you know something like a dollar twenty-five in EPS right now you you need to sort of take the view on I'm sort of bad there to charge you often you know that it is something that happens in our business but I think you know being a prince to tell people is when we see these exceptional volatility situations you know we met a lot of money but they also see an increase in our chargers and that's exactly what happened it happened in different quarters um so I think you sort of need to mobilize and I think in a lot of ways off
Annual results are probably a better reflection of sort of you know, how that works. And you know the way I think about it sort of the hangover after the party, right? Last quarter was the body and that's cool. We we had a little bit of The Hangover. So so I think that's how I would think about sort of the Run rate for our quarter, you know, obviously volatility was down for the entire quarter wage so much lower interest rates are not float and you know, it's you know, that's just how I think about the quarter on a stand-alone, but I don't know if you want to add any more detail to that song.
Sure, you know a couple of items that that Sean had constant as well as myself, you know in the quarter we did have seven point seven million dollars worth of investment banking in Bank fees related with both the acquisition and claimed the ones that had to be expensed as part of the note offering, you know, so that's all showing up and kind of unallocated overhead section of the of the finance office. So and then in addition related to the acquisition of gaining when we when we bought them and brought them on, you know, we evaluated their trade system and we had a software on our book or kind of a roll out of a system to be used for FX Prime brokerage and in some of our precious metals trading that we found to be duplicative wage. We we looked at games platform. We saw that you know, it would be the better choice, but you know, most of all because it'll be one system is so just adding another system and and in total that's about Five Points South
million now about 1.6 million of that is allocated to our commercial division, which is where the precious metals reside, but the
Lion's share that with being in the institutional segment where the FX are historical kind of FX Prime brokerage, you know, if that makes sense, you know other notable, I guess expense run rate et cetera, you know, we did have you know, a spike out that looks like in in corporate overheads, you know part of that is the 787-9. I just mentioned in the investment banking related fees, you know, we had roughly 12 million eleven twelve million dollars worth of increased interest expense related to you know, the the newly issued notes right being on for a full quarter. We had some of that last quarter and then you had a total of about 12.2 million of
Overhead expenses related to game coming on for the quarter of which two million dollars of what was variable in nature. Is that that kind of cover a few the proud the point you were looking for in? Yep. Yep, that's helpful. And I guess just on the game, you know kind of expensive though. Just sorry that just interject. I mean, I think it's it's probably less of a significant item. But you know, the other thing to think about is, you know, we suffered the full interest charged on the notes while we only have the earnings of gain for like two months, right? So, you know, we you know, you still going to adjust for that and we also have the ability to call and you know a hundred million of the notes coming up here soon. So, you know, those are also items just for I think
Right, right, and I guess in terms of synergies or or expense reductions associated with the game deal with there any anything there that you could point to and then also just walk in on maybe the accretion you see you highlighted it will be a creative and positive transmitted. But just any numbers around how you think that is trending that business versus your original expectation.
Okay, so, you know first thing we haven't even had gained in for a full quarter. So I think it's probably be best for us to report around some of these and cross may be in the December quarter when you know, we we realize some of those and I think if you remember at the time of the acquisition, we sort of broke up the synergies on the cost side and dash board buckets. Um one was the The Cost Containment I guess or cost refactoring that that gain he had in flight, but hadn't fully shown up in the numbers. So so that's fully shown up in the numbers now because you know, a lot of those actions were taken sort of in the March quarter and I fully into the cost base that we've assumed so that's be the Jeep because you know, we were highly confident that that would happen. So that part of what we indicated to the market, you know when we're doing. Yep.
the numbers I think is the
Could be largely achieved the second bucket is really coming out of you know, eliminating gain as a separate public company and rationalization of some of the operating entities, which is the longer. I mean, we we've certainly eliminated down as a public company, but we still are in the final stages. Now, I'm doing the legal entities and and that's going to sort of trigger both the capital synergies and the remainder of the cost synergies if that makes sense.
yep and if I could just follow up on the bad debt understanding you know the volatility that resulted was like it would I would have expected those charges or to occur more in the first half of the year or the first half of the calendar year then this quarter is it just the lag effect and as you talk about you know kind of the pain out there across you know that could be exhibited across multiple Industries is that you know kind of your view that you know bad debts given all this could still be a bit elevated as you think about looking ahead
So just the the bad day specifically are not I can't get to Grammy and let the emphasis client confidentiality and such but you know one portion of it related to trading accounts that was owned by an introducing broker and that was triggered when when energy went negative and that introducing product guarantees the performance of that client. So we took the charge immediately when that happened, but what we have to do is assess the validity of or the ability of that introducing broker to make good on the balance that introducing Brokers business has got impacted and therefore we have to reassess them to see of that introducing broker to you know to carry some of that bad day. They will pay us and and so that's what we did we trade that up and that was a consequence of just the wage.
Engine business they lost some of their clients. They're not as profitable as they were before and that only sort of became, you know here to us in the current quarter. The second part was a commercial customer that was involved in in physical energy and that business and and I think this is true in using the bank's, you know had to make revisions during the crisis. Unfortunately not allowed to do that. We have to wait until the problem actually crystallizes. Um, but you know, there was a customer who, you know got severely liquidity challenged and you know, they they had problems and they failed as a counterparty to us. So, you know in in the sort of commercial world, I think there is a lag effect, right? I mean in the trading world to close someone out you sort of immediately though where you are on the back side, you know people hang on and they try to work their way through their problems and you know, if if their business is significantly impaired it becomes in the quiddity and ultimately a solid key issue which is what happened for us. We don't think wage.
you know any more issues like that to deal with otherwise, obviously we would have you know, we would have done something now and and I think there was not only sort of volatility but there was also dislocation and I think particular energy side that sort of dislocation where you
Complained and WTI blow blew out and you know storage, uh, you know, storage locations with full and couldn't accept and you know, so it was just a very weird situation. So I thought that was like the course of that. Okay, that's helpful. Yes, it does and this is just last one for me given that we're over two-thirds of the way through the December quarter of any update just on kind of broad trends that you could talk about that happening that's happens, you know subsequent to your your engine, you know, kind of, you know, just anything there would be home.
I would just I mean I I guess we try to sort of lay some of it out, you know, our business can change really fast on the volatility side. I mean, it's really hard to try and you know volatility as an agent, but for us it's really hard for us to you know to understand how volatility my track up because it could change in a hobby. So I think you know just look at the big so you can see that come down significantly from where it is marked. It is still slightly elevated. Um, you know, I think there's a lot of um, you know, fiscal and monetary support which is some point has to be pulled out of the system or stopped and you know, how does that you know kind of give rise to volatility very hard to predict but you know, my guess would be I think volatility wage at least a somewhat elevated which I think is is good for us. But what we do know for sure probably and with greater confidence is that interest rates are lower right? So, I think we know that wage.
We know what the impact of that is and that's probably going to be an indicator or a factor that you know, you can predict with greater certainty and it's going to probably take a longer time to correct. So that's obviously a negative Crescent. I guess the question is how do those two factors interact and what's the net result of that? And then you've got a factor in you know mess of the interest we paying on the song high heeled boat, you know, how does gain add to that incrementally or not? And you know, if if you if you take the view that we pay down, you know and certainly life quality to do that a hundred million of the notes. Um, you know, that significantly reduces the interest cost of the acquisition and you know, if you look at what game is to produce to kind of cover the interest cost and provide an incremental return to do the sort of Legacy so next business, you know, it's it's not a lot and you know, you've got to sort of factor that in so I think those are the song
Key things you've got to think about in terms of the environment going forward. But you know, we have greater scale that we've ever been. I think you know, we, you know, just certain extent. I think if you just look at our gaap earnings reported for the year, I think that is a an accurate reflection of the earnings power of the combined companies because the adjustment the bargain purchase it's almost equal to the bottom-line earnings of games during that same. List the sort of fees we paid so, you know now that obviously was sort of an extraordinary, you know environment, but I think what it does point to is that the combined company has a tremendous earning power and you know during the covert situation know the hundred seventy billion dollars after that now I'm I'm not sure we going to do that in the current environment on the go forward basis, but you know, that's that's how I would think about it. Is that something
Thank you very much.
Once again, that's star one for questions are one one moment for questions.
And I'm not showing any questions on my end.
Okay. Well, thanks a lot. Thanks everyone for attending like to just take time to to wish everyone on the call you and your families happy holidays and the strange time space safe home and enjoy the time with your families if you can do it. Thanks very much, bye-bye.
Ladies and gentlemen, this concludes today's conference call and thank you for participating. You may not disconnect.
Thank you operator any other questions?