Good day, and thank you for standing by. Welcome to the StoneX Group Inc. Q4 FY 2025 earnings conference call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bill Dunaway, CFO. Please go ahead, sir.

Good morning, and welcome to our earnings conference call for our quarter ended September 30, 2025, our fourth fiscal quarter. After the market closed yesterday, we issued a press release reporting our results for the fourth quarter and the full fiscal year. 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 are required to advise you and all participants should note that the following discussion should be considered in conjunction with the most recent financial statements and notes thereto as well as the Form 10-K 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 and which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied for 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. With that, I'll begin with the financial overview for the quarter and we'll be starting with Slide #4 in the slide deck. Fourth quarter net income came in at a record $85.7 million with diluted earnings per share…

Thanks, Bill, and good morning, everyone. It is very gratifying to see that we've achieved yet another record financial result in what is a long string of record performances. We have managed to exceed our ROE targets despite our stockholders' equity increasing by 72% over the last 2 years. It is no easy feat to continuously compound at a high rate when you're reinvesting 100% of your capital. something we have managed to do for decades now. Turning to Slide 11 in the deck. As you are aware, over roughly the last 20 years, we've been active in the M&A market. especially following the financial crisis, having now completed over 30 acquisitions during this time. During the COVID pandemic and the years immediately following, our facility was notably limited on the M&A front. The prevailing market conditions at that time were characterized by bubble-like valuations based on peak earnings for most companies active in our space as well. We chose to focus on organic opportunities and to wait for valuation demands to become more rational. 2025 was our almost active year ever with us completing 6 transactions culminating in the acquisition of R.J. O'Brien, our largest ever and one we believe will be transformational for the organization. I thought it might be useful here to review our M&A approach, something that a lot of investors have asked me in calls over the last few years. We are very opportunistic around acquisitions. As an old M&A banker, I'm acutely aware that most transactions don't succeed for the simple reason that buyers are often desperate, maybe for a growth strategy, maybe a new strategy overall, new talent. And as a result, they tend to overpay. We pride ourselves on being very disciplined and we can afford to be disciplined because we have…

Thank you, Sean. For those I haven't met, I'm Abbey Perkins. I've been with StoneX for 9 years and in finance for over 2 decades. For the past 5 years, I've served on the Executive Committee and until recently, I was the Chief Information Officer overseeing infrastructure, IT services, procurement and cybersecurity. As Sean mentioned, I stepped into a new role leading our M&A integration efforts with the primary focus on the R.J. O'Brien initiative. This is where I'm spending the majority of my time and energy today. So to get started, please turn to Slide 16. We remain very excited by the potential value creation for StoneX from the R.J. O'Brien transaction our most transformative acquisition of 2025 and the largest one we have done in terms of deal size. As we noted in the announcement, the acquisition rationale rests on 4 pillars. First is the transformational nature of the acquisition and the significant scale we have added as a result. With this combination, we are now the largest non-bank U.S. FCM by client assets and one of the largest FCMs globally. We are seeing a positive trend in growth in balances with RJO's average client equity increasing from $5.5 billion to $5.8 billion since close principally due to inflows from ID and institutional clients. This increase has helped drive our combined client equity balances to the highest ever at $13.7 billion at the end of September. In addition, during the trailing 12 months ended September 30, 2025, RJO cleared 156 million derivative contracts, which will now be consolidated on a single combined infrastructure, so truly achieving substantial scale. And ultimately, we know that the long-term transformative value will rest on the quality of the RJO clients and its people and both have exceeded StoneX leadership's expectations. Our second…

Operator. Did we lose Abbey operator?

It looks like we lost her, but she still connected, sir.

Okay. Let's give it a second and see if he reconnects. Otherwise, I can finish up her comments. All right. Operator, I'll carry on. Okay.

All right. Sir, go ahead.

Okay. So I think Abbey was talking about where we are with the IBs, so I will just follow on from there. So we've introduced many of our brokers and end clients, our OTC and physical capabilities. Many of them have asked for the necessary paperwork, are going through the paperwork and many of them have signed up with our swap dealer and our physical entity. So very encouraging signs there. People don't do the paperwork if they don't see an opportunity. On the metal side, we see clients expanding the business they have with us into new products. On the negative side, there was always a risk of some revenue attrition, either due to revenue producers leaving or due to the fact that there was client duplication. At the time of evaluating the deal. This was a key consideration for us. And our view was that the client overlap was limited and thus the risk of revenue attrition was not material. We're happy to report at this stage, the overall attrition is limited. So overall, we're tracking very well against all of the metrics related to the integration of RJO. In summary, we continue to believe as a management team that the RJO transaction will prove to be transformational for StoneX and this expanded group of clients as the integration of our collective client focus, the ability to leverage our combined scale and the complementary product expertise positions us as the leading franchise around the globe. We are highly encouraged by the early results and are pleased with and grateful to our teams affecting this work. We remain focused on executing with discipline and precision that have become the hallmarks of StoneX. In the end, the common thread across all our acquisitions is the exceptional collaboration between company leadership…

[Operator Instructions]. Our first question from the line of Jeff Schmitt.

How are early cross-selling efforts with RJO clients going? I know it's pretty early innings, but anything that's kind of standing out there -- and then when can we expect your estimate, I guess, on -- for revenue synergies overall.

So on the revenue synergies, I think it's going about as well as we expected. Obviously, this takes a lot of education. I think it takes time for people to understand the products. make sure that the products are suitable for their clients. They obviously -- people are always -- and we've gone through this 30 times. So we know how this works, right? So oftentimes, the relationship people are reluctant to open up a relationship to new people, to products, they're not certain of. So this just takes a lot of education. I think there's been a tremendous amount of interest from RJO in learning about all the new products we have. So they're being engaged. And I think in certain parts of RJO, there's been tremendous uptick. I mean we already have people -- on the fixed income side, going together to meetings, pitching products together, the actual transactions happening that are generating revenue. I think, as I said with IBs, we have a ton of IBs who asked for documentation. A bunch of them have signed the documentation. I think a couple of trades have happened. So all of those things are all very encouraging, and I think sort of validate our thought that this is going to provide us with a big boost. In terms of putting out a hard estimate, as Abbey said in her comments, it's really, really hard to do that because this stuff becomes really hard to track. If someone does more treasury business with us because they sort of like the fact we can do something with them on the RJO side. How do we measure that if they are really a customer, right? So it becomes pretty arbitrary to sort of measure this, so we can report back on the…

I think you summarized it, Sean very well, and we'll -- I think we'll continue to just try to point out kind of the overall growth from RJO here over these next couple of quarters and we'll be able to demonstrate some of that growth that Sean is talking about.

Yes. Okay. That makes sense. And then it looks like there was still some weakness in precious metals trading in the quarter. Did that improve after gold was officially exempted from tariffs in September? And maybe how did you see that trend in October and November?

Yes. So we had a lot of people -- well, the people we normally speak to shareholders and you guys asking us sort of last quarter, what happened on the commercial side because, obviously, it was a reasonably big delta. And it was really affected by 3 things, right you had just low volatility in the ag space generally, which has sort of continued into this quarter. Metals, notwithstanding. But if you look at the ag side, it's been pretty muted general tariffs have sort of disrupted the underlying commercial flows. So people don't know or I'm sure whether they should export what the prices should they hold on to their product. So those kind of disruptions just lead to sort of lack of hedging. And then on the margin, one of the biggest factors was our precious metals business because of the dislocation in the CME metals price, we started to impute a value for tariffs. Now obviously, everyone around the world, including us, used to use the CME derivative contract as the most liquid contract is the best way to hedge your precious metals. But if you were delivering precious metals to someone in Europe, you now had an ineffective hedge because the hedge was imputing a percentage of tariffs being imposed. And if you completed that transaction, you would have to close your hedge out at a loss. So that created a lot of dislocation in the market. Our way of handling that was to deliver our metal into the CME and in that way, we had an effective hedge effectively because you can deliver metal into a contract. But what it meant is a lot of additional costs for us because we had to hold on to that metal for a good number of days. We had to ship that metal, that cost money. And all of that significantly eroded the profitability of that business. Now it was better than what we would have taken as a loss on the hedge, so it was economic to do that. That has led to the precious metals business in Q3 being so close to breakeven, right, when it's generally a pretty profitable business for us. That carried on into this quarter. Obviously, the business sort of adjusted. So the impact was not as great as it was in Q3, and we are now not using the CME hedge. So we now have the flexibility. And in fact, it's now given us an opportunity to take advantage of those dislocations. So what was a negative is starting now to turn into a positive. So that's the story behind the metals. So it was sort of much worse in Q3. It was better in Q4 and I think you'll see in Q1 that it's actually turned into a pretty positive environment for us. So I think that's sort of gone full circle for us. Does that help?

Yes. Perfect. And if I could just slip in 1 quick one on the institutional -- on the institutional business that the RPC for listed derivatives jumped quite a bit. I'm just curious what drove that or how sustainable that is.

Do you want to take that Bill?

Sure. I'll take that. That would be the introduction, Jeff, of the RJO business. So when they came in, there's they were incrementally higher than what we were doing. So that's really kind of what's driving it up. I think they were incrementally about $1 higher on average on their institutional rate per contract than we were, so the combination of the 2 drove that up.

Sure. So it's kind of a business mix issue, I guess, between us and RJO.

Correct.

Our next question comes from the line of Dan Fannon with Jefferies.

Great. So I guess just sticking with the institutional business. So the other question is just on the security side. The rate per million also went up pretty significantly quarter-over-quarter. Just curious about the sustainability of that.

Bill, do you want to handle that?

Sure. I think we've seen -- Dan, I think we've kind of talked about this a bit last year, right, with some of the conditions that we saw in equity markets with some of the lower volatility and also kind of us expanding into more U.S. stocks that we kind of -- we expected to see a bit of a trough there and continue to increase from there. And we have seen that, right? The conditions have improved. And then the fixed income space as well, right, with that becoming a bit more volatile with the rates moving around, defend actions, I think we've started to see where last year, we kind of dipped as well when it came to the addition of more and more U.S. treasury activity. Now we're seeing spreads widen a bit in those markets. So we've seen a nice uptick both on the equity side as well as the fixed income and then also really nice contribution from our overall prime brokerage business on the security side contributing more and more revenue there, which is helpful.

I would say, Dan, one thing, and if you remember back over the last 2 years, we spoke about this a lot, as both the equities and the fixed income teams, and this started probably 3 years ago, expanded into sort of lower margin, but higher volume products. We saw a continual erosion of the rate per million, but an increase in revenue, right? Because we're doing lower margin business, a lot of it making money, but it was really affecting those numbers. And as that business ramped up, it continually sort of dragged down the higher margin that we saw previously. I think we've now got -- to I'm sort of -- I could be wrong here, but I think you've sort of got to a point where that business is now large enough that it sort of averaged out, so I think that sort of ongoing sort of slide as we built the business up, we've now sort of troughed out. And I think what's now going to affect it is sort of market conditions, right? So I think the sort of business mix argument as that adjusted over the last 3 years, I think, is sort of kind of close to the bottom and at the end now. And now, hopefully, that number reflects sort of a more keen view of the underlying market conditions available in the business. if that makes sense.

Yes. No, that's helpful. Just another question on the integration. I just want to make sure what I heard in the road map. So I think you said roughly $20 million has been realized in terms of the expense synergies and then, I guess, middle of Q2 of this year with the U.K., we should get I think another -- I just want to make sure what the next wave of and then you have the FCMs in the U.S. So can you just kind of walk through the amounts that kind of -- if you've already got $20 million, that maybe only $30 million left or you're raising the amount of synergies.

Yes, go ahead, Abby, you back with us.

I am -- thank you for your patience. The -- so we have achieved synergies from sort of natural movement and the ability to do some streamlining inside the organization. Right now, that annualized run rate is about $20 million going forward. We will then see the next uptick really in the spring time, a bit more that we expect from the U.K. combinations. We'll get capital synergies at that point as well. And then the dominance will come post the U.S. integrations, which are late Q4 2026. So you're talking sort of June, July, August time frame. Does that help, Dan?

Yes, but no change in the aggregate amount. Like I guess as you guys have gone in, do you think that $50 million is conservative? Do you think there will be more in the context of what you'll be able to save as a result of the combination?

No, go ahead, Abby. Sorry.

We're pretty comfortable with the $50 million. We are very focused on ensuring that we do client support with added flow. There is a big chunk of the organization that is not impacted within StoneX on this. So we're pretty comfortable with the $50 million right now.

Okay. Cool. And then just a follow-up for you, Bill. Just looking at the balances now from an interest rate sensitivity perspective, they're higher. And as you look into next year, obviously, you've got some rate cuts. Any thoughts on the hedging strategy or other things to do to limit the impact or fluctuation from rates and the movements there?

Yes. I mean we'll continue to be active, Dan, like we have in the past, that's kind of looking out and trying to lock some of that in. We're taking a bit of a view right, that we may want to lock some in around that kind of 2-year window-ish. And this isn't anything new. We've kind of done this a couple of different times over the last 10 years. We've kind of viewed that 2-year 2-, 3-year window is kind of a good space for us. And so we will continue to kind of monitor that market and potentially go out on the curve a little bit with swaps, kind of almost like an insurance policy on this new group of assets that we've brought in, in order to kind of put a floor there. And then what we're excited about is just kind of bringing in the capabilities of RJO that's been more active on managing the portfolio and have seen to where they've been able to typically exceed kind of the 1-month treasury rate, which has kind of been our benchmark. So the combination of the 2 are trying to lock some in to keep a floor for us and incrementally increase kind of over that 1-month target, I think, is what we expect to do on a go-forward basis. We never will be hedging all of it or never be locking in all of it, but we will look to be active to try to put -- roll into some floors there that kind of protect us to the downside.

Got it. But you're not doing that currently that's the perspective?

That we've been -- look, we've been active in doing that since the integration, right? So there's -- we didn't have anything, any activity on it in the September quarter, but we have been starting to do some of that since then, modest amounts at this point. Just reflective in the sensitivity that we put out there.

I think they're not to be repetitive, but maybe just to sort of clarify Bill's comments, I guess, there are 2 ways to think about this, right? The one is all of our contractual arrangements with our clients in terms of how we pay interest are referenced off the 1 month or the 3-month T-bill rate. So that's the sort of benchmark rate. And typically, what we did is we invested that float in the one month or 3-month T-bill rate, right? What RJO was very good at and were sort of a market leader is they were more actively managing that money, and they were earning a spread to the 1 month and 3 months T-bill by going into floaters and things like that. So to the extent you can do that, 100% of that excess basis comes to us. So that can be quite impactful. Now that's not a huge amount of money. You're never going to make 75 basis points extra. But I think the target is somewhere around sort of 20 basis points potentially on some of that float. But on a $13 billion float, if we can add 15, 20 basis points on top of that base rate, which we get to keep 100% of, I mean, that can be quite meaningful. And then secondly is, do we try to protect ourselves by taking out swaps and taking some duration, protect ourselves against possible downside in the short-term rates. And when we took on RJO they had done that with -- I can't remember the amount, but it was sort of $1 billion or something of their float that had actually locked in to the 2-, 3-year range that we've taken that position on. And as Bill said, we are now starting to add to…

Great. That's very helpful. And just yes, it does. So lastly, just on the retail business, I know that volatility has been pretty subdued. But obviously, the fee per million or rate per million came in a lot. Anything else of note outside of just vol within that segment to think about on a kind of go-forward basis?

Well, I think this has come up a few times over the last maybe 2 years, I would say that we generally sort of budget and the way we look at the vol in this business, and I'm talking about the self-directed retail business is we look at a sort of a long-term average, right? Because the revenue capture number there can move around pretty materially. I mean, Bill, correct me if I'm wrong, but I think we are up at sort of $130 million in recent quarters as the high, right?

No, we actually have been as high as $185 million back in December, but that was December.

Oh my God.

That was an exceptional quarter. But if you go back a couple of years, we were $82.95 million range back in '23, '22.

So the long-term average range for us is sort of in the '80s, right? And I think over time, we've lifted that from, I think, in the game days, they were more like $75 million is what they use. And I think we've lifted that into the mid-80s, because of all the things we've chatted about, right? We're combining flow better, there's more internalization. All of that stuff is helping. But I don't think this is necessarily a bad revenue capture number. I think what's happening previously is we were outperforming a little bit on the revenue capture. So obviously, we'd like it to be a little bit higher than it is now, but this is sort of the long-term average. And so I don't think you should look at this and say, "Oh my god, what happened?" I think this is sort of the business as it sort of has performed over the long period. maybe slightly under trend. But I think we were significantly over trend when we were sort of reporting numbers $120 million and higher. I think that's sort of unsustainable. I don't know if that helps, but that's my thought on it. Any more questions?

I'm showing no further questions, and I would like to hand the conference back over to Sean O'Connor for closing remarks.

All right. Well, thanks, everyone. Thanks for your time. We appreciate it. We're very happy with the results that we have managed to deliver to all of you in 2025. And as you gather, I think we're all pretty excited about what's coming in 2026. We've had a busy year, a lot of great acquisitions Obviously, RJO, very significant. I think Abbey and her team have really got their arms around that. We feel really good with the way that's tracking up, but benchmark is also doing great and some of these other acquisitions are all sort of kicking in. So we're very excited about the prospects for 2026. Looking forward to that. And with that, all I can say is to those who celebrate and are in the states happy Thanksgiving and happy holidays to everyone. I guess, next time we speak to you will be in the new year. So thanks again.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.