StoneX Group Inc. (SNEX) Earnings

Management highlights

### Core Financial Performance - The quarter achieved net income of $127.9 million, diluted EPS of $1.00, trailing 12-month net income of $526.9 million (up 77% year-over-year) - Quarterly return on equity (ROE) was 18.4%, trailing 12-month ROE was 20.8%, both above the company's 15% target. Return on tangible equity was 25% for the quarter and 28.7% for the trailing 12-month period; book value per share hit $23.70, up 32% year-over-year. ### Global Prime Services Spotlight - Global Prime Services is a fully integrated prime brokerage platform launched from a standing start in 2018, now serving over 700 global accounts with $16 billion in client balances and $140 million in trailing 12-month net operating revenue, with a 60%+ compound annual growth rate (CAGR) over 7 years - The business targets underserved mid-market clients that bulge bracket banks have abandoned due to capital return and minimum revenue requirements, offering flexible, scalable, institutional-grade solutions with strong risk discipline and balance sheet strength - The modular platform leverages StoneX's existing core infrastructure across execution, clearing, custody and finance, with differentiated offerings including individual-security level repo financing for fixed income outside the U.S., and integrated digital asset and traditional asset custody and collateral services - Strategic priorities for the segment include: extending the financing suite to bring proven EMEA swap and fixed income prime brokerage capabilities to the U.S.; expanding outsourced trading into Asia; growing the client base organically, via M&A and early engagement with emerging fund managers via capital introduction services; leveraging cross-selling opportunities from the recent RJO and Benchmark acquisitions; improving client value via cross-product margining, collateral relief, integrated coverage and consolidated reporting to boost engagement and retention - Global Prime Services acts as connective tissue for the broader StoneX ecosystem, driving cross-selling across other business lines and increasing client stickiness as wallet share expands hedging, and increasing relevance to a broader client base. ### Recent Acquisitions and Integration Progress - The integration of R.J. O'Brien (RJO) completed the major U.S. FCM conversion in Q3 as planned, with cost synergy run-rate reaching $37-$38 million annualized exiting Q3, tracking to target - The Benchmark acquisition contributed to overall revenue growth, with integration nearly complete and cross-selling opportunities now being pursued ### Interest Rate Risk Management - The firm entered an additional $750 million in fixed-rate SOFR swaps in Q3, bringing the aggregate swap position to $2.55 billion, with an average duration of 1.5 years and an average rate of 3.51% - The firm now estimates a 100 basis point change in short-term interest rates would change annualized net income by $46.9 million (38 cents per share)

Guidance

- Cost synergies from the RJO acquisition are projected to reach a $45-$46 million annualized run-rate by the end of fiscal 26 (end of next quarter), and hit the originally announced $50 million annualized run-rate by the end of the first quarter of the next fiscal year, which matches prior targets - The trend of declining revenue per million in the payment segment is expected to continue for the foreseeable future, driven by the shift to higher-volume, lower-value payments enabled by the new XPAY platform; overall payment volumes are expected to continue growing rapidly, offsetting lower per-unit revenue - Post-RJO acquisition annualization, client float balances are expected to grow at a high single-digit percentage rate annually - StoneX will continue its disciplined M&A strategy, focusing on small-to-medium transactions (typically $10-$40 million in size) that expand geographic footprint, product offerings, or client base, consistent with its historical approach as a consolidator of niche financial services businesses - The firm will provide a full strategy deep dive on the payments business at the Q1 Fiscal 27 earnings call, aligned with the 3-year anniversary of the XPAY platform launch

Segment performance

Year-over-year (trailing 12 months): 1. Self-directed retail segment: Net operating revenues decreased 20%, segment income decreased 39%. In the most recent quarter, net operating revenues were down 17% year-over-year and 11% sequentially, with segment income down 36% year-over-year and 18% sequentially. This segment's revenue contribution was not explicitly stated, driven by a 27% drop in average daily FX CFD trading volumes, partially offset by an 11% increase in rate per million captured. 2. Payment segment: Net operating revenues increased 12% year-over-year (most recent quarter) and 6% for the trailing 12 months; segment income increased 22% year-over-quarter and 17% for the trailing 12 months. Average daily volume grew 20% year-over-year, while rate per million declined 7%. Sequentially, net operating revenues increased 7% and segment income increased 8%. 3. Commercial segment: Net operating revenues increased 74% year-over-year (trailing 12 months), segment income increased 92% year-over-year. 4. Institutional segment: Net operating revenues increased 68% year-over-year (trailing 12 months), segment income increased 59% year-over-year. Overall aggregate net operating revenues grew year-over-year driven by a $45 million increase in securities revenues, a $38 million increase in listed derivatives revenue, a $6.2 million increase in interest and fee income (driven primarily by the RJO acquisition), and a $24.6 million increase in other net operating revenues (with the Benchmark acquisition contributing $29.5 million, partially offset by declines in legacy activities). Sequentially, overall net operating revenues declined 1%, while total segment income increased 7%. Net interest and fee income after client payments and swap effects increased $38 million to $111.9 million in the quarter, with RJO contributing $30 million in net interest. Sequentially, this metric increased $4.2 million, driven by a 7% increase in average client equity and FDIC sweep client balances.

Risks & headwinds

No explicit discussion of material operational failures or new material risks was included in the call transcript. Management noted that RJO revenue synergy rollout is proceeding intentionally slowly to ensure client suitability, avoiding rushed rollout that could create client or reputational risk. The firm maintains active hedging of interest rate exposure to limit net income volatility from interest rate movements.

Analyst Q&A

• Q: What is driving growth in StoneX's physical commodity business, and has the U.S. government's Project Vault impacted this growth? /

  A: The physical business is split into precious metals and non-precious/agricultural commodities. Precious metals physical activity has outperformed expectations over the last two quarters due to market dislocations between geographic locations. The non-precious metals/agricultural business is growing as the firm leverages its existing strong client base in commodity financial services to extend into physical products, most notably cotton (via the CDI acquisition), coffee, and cocoa, expanding the StoneX ecosystem for existing clients. Project Vault was not mentioned as a material driver of growth. (311 characters)

• Q: Where does RJO integration stand on cost and revenue synergies? /

  A: Cost synergies have reached a $37-$38 million annualized run-rate exiting Q3, up from $32 million at the end of Q2, and remain on track to hit the $50 million target. The major U.S. FCM integration was completed successfully in Q3, so the firm is now beginning deeper cross-selling efforts. Early revenue synergy wins have already occurred, but the firm is rolling out new product offerings slowly to ensure client suitability, with no fixed timeline for full revenue synergy realization. (367 characters)

• Q: What is driving the continuing decline in rate per million in the payments segment, and how much further can it fall? /

  A: The decline is a result of the strategic shift to higher-volume, lower-value payments after the rollout of the proprietary XPAY platform, which increased capacity 15-fold and allowed the firm to accept large-volume business it previously turned away. While rate per million will not return to prior levels, the decline has leveled off recently after the initial shift, and total payment volumes are growing rapidly, driving overall segment revenue and income growth. (345 characters)

• Q: What is StoneX's current approach to M&A in the back half of the year? /

  A: M&A remains a core part of StoneX's business strategy, with the firm consistently evaluating half a dozen transactions, mostly in the $10 million to $40 million range, that add capability, geographic reach, or clients to the StoneX ecosystem. The firm maintains strict, disciplined criteria, and is not desperate to pursue transactions that do not fit its strategy. Small monoline businesses and owner-operated firms seeking exit are actively targeted, and the firm's successful integration of the large RJO acquisition confirms its ability to complete and integrate deals of varying sizes. (398 characters)