Good day, and thank you for standing by. Welcome to the StoneX Group Inc. Q3 Fiscal 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bill Dunaway, CFO. Please go ahead.

Good morning, and welcome to our earnings conference call for our quarter ended June 30, 2025, our third fiscal quarter. After the market closed yesterday, we issued a press release reporting our results for the quarter, and this release is available on our website at www.stonex.com as well as a slide presentation, which we will refer to during this call. 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 considered in conjunction with the most recent financial statements filed and notes thereto as well as the Form 10-Q to be filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC. Although the company believes that forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there could 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. I'll begin with the financial overview of the quarter and we will be starting with Slide #4 in the slide deck. Third quarter net income came in at $63.4 million with diluted earnings per share of $1.22, which represents 2% net income growth, but a…

Thanks, Bill. Good morning, everyone. So I'm starting here on Slide 11. As you no doubt saw, we closed the RJO and the Benchmark acquisition after the close of business last Thursday, July 31. We have covered a lot of the background of this transaction in both a separate call and during last quarter's earnings call, but perhaps just a quick refresh on both given that we are now fully in execution mode. RJO is the largest and most consequential transaction we have ever undertaken. We believe that this is a transformational transaction that positions StoneX as a market leader in global derivatives and reinforces our position as an integral part of the global financial market infrastructure. With institutional great global market access, end-to-end clearing and execution capabilities, [Technical Difficulty] franchise. It supports our goal of becoming the counterparty of choice for clients across all asset classes, embedding our integrated offering into long-term trusted relationships. R.J. O'Brien has been a leading FCM in the industry with a stellar reputation and culture matching our own. And while we are active in the same derivative markets, we have a limited amount of customer overlap. RJO segments its business into commercial, introducing brokers, institutional and retail. The commercial segment consists of large commodity clients, similar in nature to those in our own commercial segment and this accounted for approximately 11% of RJO revenues in 2024. We believe that StoneX has the best-in-class toolkit to provide additional services to these clients, including our extensive OTC and structured product capabilities as well as our physical and logistics servicing capabilities, allowing us to provide additional value-added services. RJO is the best-in-class service provider to introducing brokers in the listed derivative industry, providing these IBs with execution and clearing they need to service their clients. RJO has…

Thank you, Sean. Today, we are pleased to highlight another cornerstone of our global infrastructure, custody and clearing. This business is a critical enabler for our clients' trading, financing and investment strategies delivering secure, scalable and integrated post-trade solutions across our global footprint. With the breadth of capabilities and the scale of our offering, we believe it is important to dedicate time today to highlight the strength, performance and strategy of this business area. Please refer to Slide 14 in the deck. Custody and clearing is core to the StoneX ecosystem. StoneX's custody and clearing platform delivers a comprehensive suite of services to institutional clients across the Americas, EMEA and APAC regions. Anchored by our self-clearing capabilities, enhanced through strategic custodian partnerships and powered by advanced infrastructure, we are trusted by a wide spectrum of market participants from hedge funds, mutual funds and proprietary trading firms to ETF issuers, family offices, introducing brokers and corporate clients. Our global team operates from key centers, including Birmingham, New York, Chicago, London, Dublin, Sao Paulo, Buenos Aires, Singapore and Hong Kong, ensuring continuous coverage and access across time zones and asset classes. Let me summarize the key services we deliver across our platform. In the U.S., we provide fully self-cleared equities, options and fixed income alongside futures and commodities clearing across all major exchanges. We support 1940 Act funds through the trading and custody of derivatives for actively managed ETFs and mutual funds. Our securities lending and margin financing programs enable clients to realize enhanced income opportunities and optimize capital efficiency. Internationally, in EMEA and APAC, we provide cross-border clearing and settlement, multicurrency collateral management and segregated custody for institutional managers. In Q4, we will broaden our digital asset custody capabilities to include regulated custody for cryptocurrencies, tokenized securities, stable coins and real-world…

So moving on to Slide 17. This quarter continued a series of quarters exhibiting year-on-year growth and was one that showcased the diversity and resilience of our business, with significant growth in our institutional segment and especially in equity trading, offset weakness in our commercial business due to diminished volatility and tariff-related uncertainties. This resulted in modest gross in net income versus the prior year despite $8.9 million acquisition-related charges in the current quarter, which are related to roughly $0.12 in EPS. We achieved earnings of $63.4 million and diluted EPS of $1.22, down very slightly versus the prior year due to additional shares outstanding. We were down versus our strong immediately preceding second quarter although excluding the acquisition-related charges, the results were roughly comparable. The addition of RJO and Benchmark, we believe, will be significantly accretive to our earnings and our franchise generally, and we believe these acquisitions will further accelerate our current growth trajectory. This is a very exciting time for us as we now move forward with what are significant and transformational acquisitions for StoneX. We are now positioned as a global counterparty of choice for clients looking to execute, clear and custody financial assets across the spectrum. We are now even better positioned to capitalize on the ongoing industry transformation driven by regulatory changes and market consolidation, which will continue to create significant opportunities for StoneX to expand its market share and will provide a substantial runway for growth. Our ecosystem, which is unparalleled, is underpinned by a fortress balance sheet, broad capabilities and diverse offerings enables us to deliver innovative solutions that provide clients with access to markets, expands their market reach and creates long-term value. One thing will always be consistent for the StoneX team. We will continue to dedicate ourselves to better serve our growing client footprint around the world by providing them with the best financial ecosystem and the best client service to access the global financial markets. The executive team and I are extremely proud of the talented StoneX team who continue to propel us to new heights. Operator, time for questions. Let's open the line.

[Operator Instructions] Our first question comes from the line of Jeff Schmitt with William Blair.

Could you maybe go into more detail on the weakness in the commercial segment just in terms of trading volumes. Were you surprised to see hedging activity down? I mean I think volatility was still up more than you typically see in a quarter. So just curious what your thoughts were?

Well, obviously, the segment you're talking about, just to be clear, is the commercial segment, which are sort of real companies looking to hedge their risk, primarily commodity risk. So when one is talking about volatility, you sort of have to pass it out to the underlying sort of verticals. Metals volatility is sometimes different from grains volatility and so on. The real reason, if you just look at the analysis in the slides there, where we set out our ADVs and the revenue sort of by product type, physical business was really hurt. And that was largely driven by the sort of tariff uncertainty. So that's the lion's share of it. The second part of it was the OTC business, and while the OTC business was strong, our revenue capture was down largely due to a lack of volatility. And that business is primarily focused on the ag sector. So I would say the 2 things that drove that weakness were lack of volatility in the ag space, which hurt us on the OTC side with rate capture. And then on the physical side, it was a difficult quarter for us just given all the uncertainty here, you're talking about people moving commodities across cross borders and so tariffs becomes very important in that role. So Bill, do you want to add anything? I think that covers it, but anything else, Bill?

Yes, I know. I think that was well said, Sean. I think that the tariff uncertainty just the lack of transparency as to what will eventually happen kind of drove that. And also, we had some additional interest expense moving metals around the globe that dampened the performance in the quarter. And I think you touched on it, I think, while there was a lot of volatility in certain markets, the key agricultural and soft markets that we do a lot of OTC and a lot of listed derivatives particularly in the Americas remains kind of dampened during that quarter. So it kind of drove down that overall spread captures.

I would say the one other factor to mention as well, Jeff, was there are a couple of mandates relating to sort of renewable fuels and things like that have sort of elapsed or close to elapsing. And I think there's a lot of uncertainty as to what the new administration is going to do. So that was also a complicating factor for us there.

Okay. That's helpful. And then any updates you could provide on revenue synergies for RJO now that it's closed? And maybe if you could refresh us on what you see is the biggest opportunities there in terms of cross-selling now that you've had more time with the company?

Yes. So as we said previously, it was difficult for us to with a high degree of certainty, quantify the revenue synergies because up until closing, we just weren't able to get access to sort of clients and find revenues and who the clients were, which, obviously, we need to make that assessment. We only got hold of that information yesterday. So as of yet, aren't any smarter than we were when we last spoke. But I think we continue to believe and I certainly personally believe, based on the sort of high-level conversations we've had with the team, understand -- with RJO team, understanding the RJO capabilities, looking at sort of how we interface with similar type customers and the revenue we can generate from our expanded toolkit. My sort of starting point is, I think the revenue synergies over time will be multiples of the cost synergies. I continue to believe that. I think the synergies really start on the commercial segments. Now even though the RJO Commercial segment is only 11% of revenues, in their IB segment, they have a lot of IBs that have commercial clients. So within the IB segment, there is a big pool of commercial clients. And those are the clients where we know we have the best toolkit in the business. Not only can we do futures, which is all that RJO does, but we can do OTC, we can do structured products, we can help people with margin relief, we can help them with physical, we could help them on logistics. So we have very good empirical evidence that our commercial clients use us for a lot of those services and that expands both our touch points with the clients and the revenue. So that's kind of one big chunk of the revenue synergies and probably the biggest piece of it. And then secondly, they have a very strong interest rate franchise where they are dealing with institutional clients, mainly banks, helping them hedge their interest rate exposure. And in our fixed income business, we are actually trading with some of those same counterparties actually executing the trades on the underlying cash instruments. By bringing both of those 2 things together, I think we'll have a much more powerful offering. And of course, we'll be able to offer those services mutually to the clients that we don't both cover. So I think that's the sort of second big piece of revenue synergies. So between those 2, I think that's going to add up to a fairly material number. But we will update you as we start to do more work on that, but I guess our working assumption, we highlighted sort of 3 months ago hasn't changed. And I think if anything has been validated through the conversations we've had, but we now need to put more work into that. Anything else?

Well, I had one on your longer-term plans of the retail segment. And sort of where are you at in that process of building that out, adding additional products, kind of transforming that beyond an FX broker?

Okay. Well, I'm going to -- I'll give you a quick overview here, and then I'm going to pass off to Charles because this is near and dear to his heart. But I think as we said a couple of times, we acquired GAIN, which gave us this tremendous platform, which was really trading cash settled derivatives, right? They called sort of CFDs everywhere. But they really just mimic derivative contracts and they're all sort of cash settled. So you don't have to deal with exchanges and clearing houses. So the platform is pretty simple. And the offering was pretty simple, right? Those derivatives cover lots of different asset classes, but GAIN never got involved beyond that. And one of the opportunities we saw when we acquired GAIN was we're very active in trading all of those underlying asset classes, and we have all the infrastructure to handle that, which GAIN didn't have. We can clear those asset classes. We can custody those assets. So the idea was always to change that to a multi-asset class offering to look something a little more like, say, an interactive brokers. And it's been a challenge because we sort of went straight into COVID, the business did extremely well. But I'll hand over to Charles and maybe he can give you some thoughts on sort of where we stand. Charles, do you want to take that?

Sure. And I think it's a fair point around the COVID times where certainly had some challenges on just making sure that we were able to keep the business operating at a very high level through an integration. So I think that was sort of 4 years ago was our main focus. And since then, we've laid out a road map for not only a technology, but also for laying the groundwork for product expansion. And part of the reason why we had been so methodical about it, it's incredibly important as you build out listed derivatives as well as securities, cash securities, funds and our full securities offering that we make sure that it's scalable and it's appropriate for the user base. So we are undergoing an infrastructural rebuilding that is going to be completed sort of towards the end of the year in our fiscal Q2. That will enable us to bring on the retail clients into the security spectrum over time, starting at that point. So that's going to be the time line. We are already offering some derivatives products on the future side, which we see as a really growing space, and we'll continue to grow that out next quarter. And so you'll see that happening over the next fiscal year through fiscal '26 which starts in a month. You'll start seeing that happen in stages, and we'll keep you updated and informed as those products roll out.

[Operator Instructions] Our next question comes from the line of Dan Fannon with Jefferies LLC.

I wanted to follow up on R.J. O'Brien. And just the -- if we think about -- obviously, you've only closed it for a week here, but just the priorities over the first 3, 6, kind of 9 months in terms of what we should be expecting from an update as this integration unfolds?

Well, we'll certainly be updating you with a sort of a more detailed synergy timetable. We have done a lot of work on that previously, but obviously needed to fine-tune that once we could access sort of the information we didn't have originally. So we'll be able to provide that to you. And I think we'll also start giving you some better indications perhaps of revenue synergies. So that's the plan. So I think when we next talk, we might have some more information for you on that, but we still feel pretty good about our aggregate revenue -- sorry, our aggregate cost synergy number. As I said in my part of the call, the -- what we have agreed is the focus initially is going to be on the international side of R.J. O'Brien. We tend to have larger entities than they do. And I think we can quickly absorb that business and realize those synergies. That's about 40% to 45% of the total synergies, and we think we can achieve that pretty quickly. So I think we're going to have some nice quick wins there. We'll then move our attention -- well, we'll do both of these at the same time. But the U.S. integration is going to take longer. There's -- it's a much bigger business, many more clients. We got to make sure that this is a seamless process for clients. We've got to make sure all those touch points that their systems have with their books and record system, we deal with appropriately. So when we combine the businesses onto one system, we don't have any fallout. So that's more like a 9- to 12-month process. So what I'm anticipating is we'll see something like 40% to 50% of these synergies pretty quickly and then the rest will come kind of in the back end of 2026 is sort of how we're thinking about it now. But we'll give you a clearer update in due course.

Okay. That's helpful. And then just following up on your previous comments just around the commercial segment and the environment and the lingering impacts from tariffs. I guess as we start to get more clarity around the macro, are you seeing behavior change? Are you seeing clients being more active here as we've kind of gotten, I don't know, more clarity around certain things here as the quarter progressed and into July? Or is this something when we think about the overall backdrop, one that could continue to be more on the slower side?

Well, Dan, can you tell me what you think the administration is going to do in the next like 2 years. I think we're living in a very volatile environment from the administration point of view, and that's where a lot of this uncertainty starts, right? Obviously, they're attempting to rework a lot of the sort of global trade arrangements and this stuff is bumpy when it happens. So I think our clients are much like everyone else. They're trying to deal and react as things happen, but it's really hard to predict on a go-forward basis, when this is going to happen or when it's going to stop happening. So I think it's just a moment of uncertainty, and I think it's going to continue for some time. That uncertainty is generally good for most of our businesses because it creates volatility. It's not so great in the physical business because as I said in my remarks is, people are trying to move commodities across border. They're trying to figure out what are the costs and what are the tariff implications. So that part of our business is going to be a little bit challenged in that environment. But the rest of the trading business, the uncertainty, I think, is generally a good thing. Anyway, I'll stop there and see if Charles or Bill have anything to add?

No, I agree. I think, Sean part of -- there's a lot of different complexes. And for some, it's -- there's positive knock-on impacts. And for others, it creates sort of challenges around folks thinking about their logistics and so forth because we are dealing with end users often. And so uncertainty -- well, volatility is lumpy, but really, you want to see folks to be able to make a sort of future decisions around pricing. And when folks are reluctant to do that, you can see front-end volatility, but our clients really were very client-driven, client- centric and end user-centric in this space. So it's a much more difficult environment when they don't know what to do. We're starting to see a little more clarity coming through and kind of getting some deals done. But to Sean's point, it's very hard. The crystal ball doesn't really work in this type of environment.

Understood. That's helpful. And then just more broadly on the FCM business, banks have for years been pulling back and diverting resources elsewhere. But now obviously, regulatory environment seems to be changing for them with excess capital and more to come. Are you seeing any behavior changes by the largest financial institutions and looking to invest in this business more or allocate more capital or bring up risk profiles. Anything on the margin that's different than, say, a year ago?

Certainly, my conversations with clients and our guys, I don't think we've noticed any particular change, to be honest with you. And I think the banks, to a large extent, have sort of moved on and are doing different things now. I just don't think this is a strategic imperative for them. I mean, they'll obviously welcome the regulatory sort of posture being more positive. But I haven't yet seen them sort of rededicate themselves to these sort of activities. So it may happen. I kind of doubt it, but that's certainly the information I have, sort of no real change. But I don't know, Charles, do you think any different?

No, I mean, just like you, I have seen no evidence of any cost or change at all around the space, Dan.

Okay. Helpful. And then I guess, Bill, from a modeling perspective, the Benchmark business. Where is that going to show up? And I think I want to make sure you guys think that business is accretive as well just upon close in the first year. And any sense around numbers for that business would be helpful?

It's a lot smaller business, obviously, than RJO, right? So it's sort of a much lower threshold. But anyway, Bill, why don't you go ahead?

Yes, sure. Thanks, Sean. So I mean, the Benchmark business, obviously exciting and certainly Charles, once again can chime in here. He was integral in the business acquisition and the promise behind it. I think that is a business we'll be reporting, it fits in nicely in our institutional segment. So we'll slot that in there. And as far as like size, this is like Charles or Sean noted this is more of a single-digit million type of business, but I think something that we -- from a bottom line, but something that we're excited to grow and add to our capabilities.

Yes. Bill, I think that's fair, you'll see it in the securities segment of institutional. And we really think this is an opportunity for us to expand having coverage of strategic clients and really growing. And the team here really led this initiative with Mr. Messina to bring this business and did a terrific job. Rarely do you see the type of excitement and alignment. And once again, it's under 100 people. So it's not quite as large and complicated per se to move as RJO is, but you rarely see the type of alignment and excitement around a deal, as I've seen here. So real kudos to the team at Benchmark and our internal team for bringing that together. They've done a really nice job at the early stage here getting prepared.

I am showing no further questions at this time. I would like to turn it back to Sean O'Connor for closing remarks.

All right. Well, thanks, everyone, for taking the time to listen to our call. As you can tell, this is a really exciting stage for us. We have a busy rest of summer ahead of us, and we look forward to speaking to you again for our year-end results in early December. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.