StoneX Group (NASDAQ:SNEX) reported third-quarter financial results on Thursday. The transcript from the company's third-quarter earnings call has been provided below.

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The full earnings call is available at https://edge.media-server.com/mmc/p/pfq2dprd/

Summary

StoneX Group Inc. reported a 47% increase in total net operating revenues to $719.7 million and a 102% rise in net income to $127.9 million for Q3 FY26.

Strong performance was noted in the Commercial and Institutional segments with significant contributions from the R.J. O'Brien and Benchmark acquisitions.

The company highlighted a strategic partnership with Shinhan Bank, enhancing its Payments segment, which saw a 12% increase in net operating revenue.

StoneX completed a 3-for-2 stock split and reported a return on equity of 18.4%, above its 15% target.

The firm is optimistic about future growth, focusing on expanding its Global Prime Services and leveraging recent acquisitions for cross-selling opportunities.

Full Transcript

OPERATOR

Good day, and thank you for standing by. Welcome to the StoneX Group Inc. Q3 FY26 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentations, there will be a question-and-answer session. To ask a question during the session, you need to press star 1-1 on your telephone, and you will hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Please be advised 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, Bill.

Bill Dunaway, CFO

Good morning, and welcome to our earnings conference call for our quarter ended June 30, 2026, our third quarter of fiscal 2026. After the market closed yesterday, we issued a press release reporting our results for the quarter, and this press 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-Q 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 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 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. With that, I'll now turn the call over to Philip Smith, the company's Chief Executive Officer, for a brief introduction.

Philip Smith — Chief Executive

Thank you, Bill. Good morning, everyone, and thank you for joining our third quarter earnings call for fiscal year 2026. Whilst there's been a moderation in volatility this quarter, I'm pleased to report our third quarter results: total net operating revenues of $719.7 million were up 47% versus the prior year, alongside net income of $127.9 million, up 102% year on year. We also recorded a diluted EPS of $1 per share, an 85% increase versus the previous year, taking our year-to-date EPS to $3.49 per share, up 82% against prior year.

This quarter was driven by strong performance across our Commercial and Institutional segments which reported a 90% and 56% increase, respectively, in net operating revenue year on year, underscoring our increasing relevance to a diverse set of clients. In the Commercial segment, strong performance in our global hedging business helped drive this quarter's results and, pleasingly, net operating revenue across all our products recorded double-digit growth, partly driven by the impact of the R.J. O'Brien and Benchmark acquisitions as well as organic growth. This included listed derivatives up 62% to $68.6 million, OTC derivatives up 73% to $101.9 million, and physical contracts up 162% to $87.4 million. In the Institutional segment, we recorded our highest ever volumes in securities with average daily volume up 33% versus last year, driven by the exceptional performances in our equities market-making business, a segment which we had highlighted last quarter, with growth in both ADRs as well as U.S. listed equities. Also bolstering our Institutional segment, the acquired business of The Benchmark Company contributed $29.5 million in net operating revenues for the quarter, their best quarterly performance to date. In the Payments segment, we reported a 12% increase in net operating revenue and a 20% increase in ADV year on year to a record $96 million. In addition, we recorded the highest number of transactions going through the platform this quarter, validating our continued investment in proprietary technology and reinforcing our belief that the platform can support significantly higher volumes without material increases to our expense base.

This scalability positions us to support large financial institutions like Shinhan Bank, where we recently announced a strategic partnership with one of South Korea's oldest and systemically important banks to leverage our global network for complex cross-border payments. Lastly, I wanted to give an update on the progress of R.J. O'Brien. The U.S. FCM consolidation work remains on track to be substantially completed later this fiscal year. We completed the vast majority of R.J. O'Brien's remaining U.S.-based client migration this quarter and, as of the end of the quarter, hold nearly $13 billion in required client assets, further strengthening our position as the number one non-bank FCM in the United States. More broadly, and as anticipated, volatility moderated from the exceptional levels of the second quarter. Even so, client activity remains strong, supported by continued client engagement and pockets of elevated volatility, resulting in nearly all of our products delivering double-digit growth, reflecting the strength of our diversified business model, the investments we have made across our platform, and the scale of the ecosystem we have built. Now I will turn over to Bill for a more detailed discussion on our financials this quarter. Over to you, Bill.

Bill Dunaway, CFO

Thank you, Philip. I'll start with slide number five in the deck. Just a reminder: in July we completed a 3-for-2 split of our common stock and our shares began to trade on a split-adjusted basis at the market open on July 20, 2026. Because the stock split was effective prior to our release of the Q3 financial statements, all per-share metrics on this call will be on a split-adjusted basis. As Philip noted, we delivered strong third quarter results, generating net income of 127.9 million, an increase of 102% compared with the prior year.

This performance translated into a return on equity of 18.4%, significantly above our 15% ROE target despite a 77% increase in book value over the last two years. On a tangible book value basis, we achieved a return on tangible equity of 25% for the quarter, while third quarter net income was 27% lower than the record earnings reported in the immediately preceding second quarter. Our results continue to reflect the strength, scale, and diversity of our business.

We had operating revenues of approximately 1.47 billion, up 43% versus the prior year. As a reminder, our operating revenues include not only interest and fees earned on our client balances, but also carried interest that is related to our fixed income trading activities. Net operating revenues, which nets off interest expense, including that which is associated with our fixed income trading activities as well as introducing broker commissions and clearing fees, were up 231.4 million or 47% versus a year ago, while down 13% versus the immediately preceding quarter.

Total fixed compensation and other expenses were up 58.1 million or 22% versus the prior year quarter, with 48.5 million of this attributable to the acquisitions made over the last 12 months, most notably R.J. O'Brien and Benchmark. This increase was partially offset by an 18 million decrease in professional fees, largely due to the recovery of legal fees through insurance and reduced legal defense costs related to the BTIG matter. Total fixed compensation and other expenses, excluding bad debt expense, were down 7% or 23.2 million versus the immediately preceding quarter.

Fixed compensation and benefits were up 21% versus a year ago, primarily as a result of the acquisitions noted and include 4.2 million in severance and retention costs. Fixed compensation and benefits were down 6% or 8.9 million versus the immediately preceding quarter, driven by a 6.9 million decline in severance and retention costs, a decrease in back-office and administrative salaries, along with a decrease in payroll taxes. Moving on, I've mentioned the acquisitions over the last 12 months and wanted to touch on the revenue contribution for two of them, R.J. O'Brien and Benchmark. The acquisition of R.J. O'Brien contributed 78.8 million in net operating revenues for the quarter, net of unrealized negative mark-to-market adjustment on their investment portfolio and exchange common stock of 9.8 million, while Benchmark contributed 29.5 million for the third quarter. As Philip noted, their best performance to date. Looking at it from a longer standpoint, our trailing twelve month results show operating revenues were up 48% to nearly 5.7 billion.

Net income was a record 526.9 million, up 77% with diluted earnings per share of 4.19 and an ROE of 20.8% for the trailing twelve month period. For the third quarter, our average client equity and FDIC sweep balances were 16.2 billion, up 108% versus the prior year and up 7% versus the immediately preceding quarter. Finally, we ended the third quarter of fiscal 2026 with a book value per share of 23.70. Turning to slide number six in the earnings deck, which compares quarterly operating revenues by product as well as key operating metrics versus a year ago, we experienced operating revenue growth across all products versus the prior year with the exception of FX and CFDs, down 19%. Transactional volumes were up across all of our product offerings with the exception of FX CFDs, down 12%, and the spread and rate capture increased in listed derivatives and securities while OTC derivatives, payments, and FX CFDs declined. Just touching on a few key highlights for the third quarter, we saw operating revenues derived from listed derivatives increase 157.9 million or 125% versus the prior year, primarily due to the acquisition of R.J. O'Brien, which contributed 132.3 million, as well as a 10.4 million increase in base metals listed derivative revenues on LME markets versus the prior year. Listed derivative operating revenues decreased 11% versus the immediately preceding quarter. Operating revenues derived from OTC derivatives increased 73% versus the prior year, driven by an 89% increase in OTC derivative contract volumes. This significant increase in client activity was most prevalent in agricultural, renewable fuel, and soft commodity markets, as well as continued increasing volumes associated with our automated trading platforms which have allowed for more efficient processing and hedging of OTC transactions. OTC derivative operating revenues declined 15% versus the immediately preceding quarter, which had benefited from the widening of spreads in the immediately preceding quarter due to the onset of the U.S.–Iran conflict. We had another strong performance in our physical business with operating revenues derived from physical contracts increasing 106% versus the prior year, primarily driven by a 40.5 million increase in precious metals operating revenues as well as an 18.7 million increase in physical supply and trading operating revenues.

Operating revenues derived from physical contracts declined 39% versus an immediately preceding record second quarter, which was highlighted by extremely strong performance in precious metals. Securities operating revenues were up 24% as average daily volumes increased 33% versus the prior year and the average rate per million increased 9%. The increase in ADV was driven by strong performance in equities, both in ADRs and U.S.-listed markets, while the increase in rate per million was driven by improved spread capture in fixed income markets.

Securities operating revenues were up 3% versus the immediately preceding quarter. Payment revenues increased 13% versus the prior year quarter due to a strong 20% increase in ADV, partially offset by lower RPM. Payments revenues were up 6% versus the immediately preceding quarter. FX CFD revenues were down 19% versus a strong prior year quarter, which had benefited from heightened client activity, most notably in FX markets following Liberation Day tariff announcements, with ADV and rate per million declining 12% and 8% respectively.

FX CFD revenues declined 9% versus the immediately preceding quarter. Our interest and fee income earned on our aggregate client float, including both listed derivative client equity and money market and FDIC sweep balances, increased 66.1 million or 64% versus the prior year, with the acquisition of R.J. O'Brien contributing 56.9 million. Average client equity increased 129% as R.J. O'Brien contributed 6.6 billion in average client equity for the quarter, and the average money market and FDIC sweep client balances declined 2%.

Moving on to slide number seven, I'll do a quick review of our segment performance. Our Commercial segment increased net operating revenues 90% versus the prior year, primarily resulting from the performance in our physical businesses, which increased 54.1 million, and OTC derivatives, which added 43.1 million. In addition, as a result of the increase in legacy client activity as well as the acquisition of R.J. O'Brien, listed derivatives and net interest income increased 26.3 million and 31.7 million respectively versus the prior year.

Segment income increased 119% versus the prior year, while on a sequential basis net operating revenues were down 20% and segment income was down 26% off the record second quarter performance. Our Institutional segment also saw strong growth in net operating revenues and segment income, up 56% and 49% respectively. The growth in net operating revenues was principally driven by a 45 million increase in securities revenues. In addition, listed derivatives and interest and fee income increased 38 million and 6.2 million respectively, primarily driven by the acquisition of R.J. O'Brien. Also, other net operating revenues increased 24.6 million, with the acquisition of Benchmark contributing 29.5 million, which was partially offset by declines in legacy activities. On a sequential basis, net operating revenues declined 1%. However, segment income increased 7%. In our Self-Directed Retail segment, net operating revenues decreased 17% and segment income was down 36%. These decreases were driven by a 27% decrease in average daily volumes in FX CFD contracts, which was partially offset by an 11% increase in rate per million captured.

On a sequential basis, net operating revenues declined 11% and segment income decreased 18%. In this segment, our Payments segment net operating revenues were up 12% and segment income increased 22%. Average daily volume was up 20% versus the prior year while rate per million was down 7%. Versus the immediately preceding quarter, Payments net operating revenues increased 7% and segment income increased 8%. Moving on to slide number eight, looking at segment performance for the trailing 12 months, we saw strong growth in our Commercial and Institutional segments, with net operating revenues up 74% and 68% respectively and segment income increasing 92% and 59% respectively. Our Payments segment added 6% in net operating revenues and 17% in segment income. Our Self-Directed Retail segment reported a 20% decline in net operating revenues and a 39% decline in segment income. Finally, moving on to slide number nine, which depicts our interest and fee earned on client balances by quarter as well as a table which shows the annualized interest rate sensitivity for a change in short-term interest rates.

The interest and fee income, net of interest paid to clients and the effect of interest rate swaps, increased 38 million to 111.9 million in the current period, with the acquisition of R.J. O'Brien contributing 30 million in net interest in the current quarter. On a sequential basis, interest and fee income, net of interest paid to clients and the effect of interest rate swaps, increased 4.2 million as the average client equity and FDIC sweep client balances increased 7% during the third quarter of fiscal '26.

We entered into an additional 750 million in fixed-rate SOFR swaps to hedge our aggregate interest rate exposure, which brings our aggregate swap position to 2.55 billion with an average duration of approximately 1.5 years and an average rate of 3.51%. These swaps are reflected in the interest rate sensitivity table on this slide. As shown, we now estimate a 100 basis point change in short-term interest rates either up or down would result in a change to net income by 46.9 million or 0.38 per share on an annualized basis.

With that, I will hand you back to Philip for a product spotlight on our Global Prime Services business.

Philip Smith — Chief Executive

Thank you, Bill. As we do each quarter and turning to slide 11, we'd like to spotlight one of the business lines driving our growth, and this quarter I'll turn to our Global Prime Services. Our Prime Services is a global, fully integrated prime brokerage platform operating from London, Singapore, Atlanta, New York, and Park City, Utah. From essentially a standing start in 2018, we now serve more than 700 accounts globally with over $16 billion in client balances on the platform, generating nearly $140 million in net operating revenue in the last 12 months.

Prime has become one of the strongest growth stories in the firm, having grown at a 60% plus CAGR over the last seven years, and is one of the clearest examples of our ecosystem at work. The thesis was straightforward and is the same thesis that runs through everything StoneX does. We serve mid-market clients who need institutional-grade capabilities but have been historically underserved by the large global banks and broker-dealers. As bulge-bracket firms imposed return-on-capital and revenue minimums, we stepped in as the partner of choice, offering flexible, cost-effective, and scalable solutions combined with the risk discipline and balance sheet strength that institutional clients expect. Turning to the next slide, slide 12, we have built a modular platform designed specifically around the mid-market segment, drawing on the core infrastructure StoneX has developed across execution, clearing, custody, and finance, and of course backed by the StoneX balance sheet. Clients access the capabilities they need supported by the scale and stability of the broader franchise in the United States.

Our platform covers trading and financing across equities, fixed income, and options through both fully self-clearing and introducing-clearing models. Our hedge fund segment has grown steadily, with recent volatility driving increased engagement in options and futures strategies. Our investment in automation leaves us well-positioned for the rapid expansion in the ETF space, and our multi-custodian, multi-asset capabilities have gained meaningful traction with both single and multi-family offices.

Securities financing and lending are also central to our U.S. offering. We help clients finance and margin their positions and cover short sales, drawing on our own inventory and an extensive lending network to source hard-to-borrow securities. Our matchbook securities lending activities earn a spread-based return over $2 billion in balances, and we help clients earn incremental income via our securities lending desk. Outside the U.S., we have seen rapid growth since launching three years ago.

For hedge funds, institutional managers, and digital asset participants, we provide execution, custody, financing, and hedging across both equities and fixed income. A key differentiator is in fixed income where we offer repo financing at an individual security level rather than a blended portfolio rate, and that is underpinned by a U.K. custody solution that gives clients confidence their assets are held securely within a fully regulated framework.

For digital asset funds, we provide institutional-grade execution and custody across both crypto and traditional assets along with collateralized lending. Within the digital asset ecosystem, managers can hold fiat or fixed income collateral separately from their crypto exposure while financing their traditional assets on the same platform. Today, in addition to the digital assets we custody, Prime holds nearly $1.5 billion in traditional assets on behalf of those clients.

Lastly, StoneX existing relationships provide a natural cross-selling opportunity for Global Prime. This includes clients in our Commercial segment whose treasury function can leverage Prime's custody capabilities and earn a return on excess cash balances. On slide 13 you can see the results of these efforts. Since 2019, client balances have grown from less than $1 billion to more than $16 billion today, generating nearly $140 million of net operating revenue on a trailing 12 months basis.

The growth since inception has been rapid, with much of the growth coming in the last three years, with client assets growing at a CAGR of over 65% since 2023. This growth has been broad-based across the clients we serve, including hedge funds, ETF and mutual fund providers, and family offices. Despite this growth, our share of the addressable market remains relatively modest. We believe the combination of a large market opportunity, increasing demand for multi-asset prime service providers, and our disciplined approach to execution provides a substantial runway for growth.

On the next slide I will go through Prime's priorities and outlook. A core priority for StoneX is to remain relevant to our clients through the products we offer, the markets we operate in, and the depth of relationships we build. For Global Prime, this means the following. First, we are extending our financing suite to include U.S. equity swaps, fixed income total return swaps, and fixed income prime brokerage capabilities we've always proven in EMEA and are now bringing to the United States.

We are also investing in capabilities that span global markets. Our outsourced trading business, where we provide clients with a fully embedded trading desk, has recently expanded into Asia where early momentum is being built. Second, we are growing the client base organically, inorganically through M&A, and by engaging funds earlier in their life cycle. Our prime consultancy business, which includes capital introduction, helps us build relationships with emerging managers as they launch and scale their funds, creating an early entry point into the relationship.

Lastly, as we finalize the integration of Benchmark and R.J. O'Brien, we expect significant cross-sell opportunities through clients who are beginning their relationship with StoneX. Finally, we are focused on making the platform more valuable for clients who choose to do more business with StoneX. Through cross-product margining and collateral relief, integrated coverage teams, and consolidated reporting, we are making it easier for clients to access the full breadth of the ecosystem through a single relationship.

This is evidenced by clients engaging with us across multiple capabilities from the beginning, and in some cases we have clients on board across seven products simultaneously. We believe these initiatives will drive greater client engagement, strengthen retention, and create a compounding opportunity to deepen relationships over time. Turning to the last slide of the section, slide 15, the most important point I want to leave with you is that Global Prime Services does not sit in isolation.

It is the connective tissue of the StoneX ecosystem. Prime brings together custody, financing, execution, and hedging capabilities that often form the foundation of a client relationship. From there, those same clients can access a broader range of products and capabilities across our ecosystem, whether through FX payments, clearing, market making, and other products and services. As clients engage more, relationships deepen, wallet share expands, and the client becomes stickier.

In that sense, Prime is not only a growing business in its own right, but also a driver of growth across the broader StoneX platform, with the value of the ecosystem compounding as clients do more business with us over time. Now to close, this was another strong quarter in spite of the moderation in volatility, with net income of $127.9 million and diluted EPS of $1. Trailing 12 months net income was $526.9 million, up 77% versus the prior year. Our return on equity for the quarter was 18.4% and on the trailing 12 months 20.8%, both well above our 15% target.

On a tangible book value basis, return on tangible equity was 25% for the third quarter and 28.7% on a trailing 12 month basis, with book value per share of $23.70, up 576 or 32% versus the prior year. Our performance to date reflects the power and scale of the ecosystem we have built at StoneX and the compounding effect of the investments we have made in technology, people, and products. We continue to see a significant total addressable market ahead of us, and we remain excited about the growth prospects of the company and the continued expansion of that ecosystem.

With that, operator, would you kindly open the line for questions?

OPERATOR

Thank you. At this time we will conduct the question-and-answer session. As a reminder, to ask a question, you need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Dan Fannin from Jefferies. Please go ahead.

Dan Fannin, Analyst at Jefferies

Thanks. Good morning. Good morning, Philip. Wanted to just follow up on the comments around just the physicals market, which has been so strong for you year to date. Just wanting to get a little bit more color around the underlying activity. What's driving that? We've also read about Project Vaults, if that is—curious if that is something that, which the government's doing, is having an impact on kind of the growth of that business.

Philip Smith — Chief Executive

Yeah, sure, Dan. So our physical business, as you know, separated between metals and non-metals, and it's very much precious metals versus non-precious metals, more on the commodities, agricultural, and as such. So we've seen over the last, I guess the last two quarters, where the precious metals physical business has just outperformed and done incredibly well and exceeded expectations. And a lot of it was driven by just dislocations in various markets between location A and location B, and I think I went into that in quite a lot of detail in the last two earnings calls.

With regards to domestic and non-metals business, that physical business continues to grow. We continue to build out market share, and very much as we set out when we made certain acquisitions such as CDI, which put us into the physical cotton business, and very much into the expansion into physical coffee and physical cocoa. These are areas where our financial business is very strong and our client base is very deep. And when we look to expand into those areas, we do take a certain level of comfort in the fact that we are then extending the product offering, extending the ecosystem within that space, but from a very strong position within our financial space. And where we had continued success in building out those businesses is where we've been able to work very closely with our financial business, our financial-based clients, and being able to offer them the additional level of service. That's been crucial in terms of our build-out of our physical business, which we continue to strive to add more and more products, more and more capabilities to, and it becomes more of a unique ecosystem for our clients.

Where some clients will be very eager to operate in the physical space, they want the hedging capability. We have the ability to embed optionality into physical contracts. That's a pretty fairly unique product offering in this space because we have that strong financial business, the strong OTC business, and an increasingly strong physical business. Bringing those together I think makes a very formidable product line for us, and something we want to highlight in a couple of quarters' time, where we've brought together various parts of the business that we've acquired, we've built out organically new initiatives, and we want to highlight that as a separate division which is increasingly becoming part of a more and more relevant business line for us.

Dan Fannin, Analyst at Jefferies

Understood, that's helpful. And so then wanted to follow up on some of the comments around the RJO integration. I think the commentary obviously is that it's going well. Curious if you could put some numbers around where you are on the cost synergy side and then at the time of the deal you announced multiple or greater revenue synergy potential over time versus the expense synergies outlined. So curious if there's been any early attribution you could attribute to the revenue synergies.

Bill Dunaway, CFO

Sure. Thanks, Dan. I'll take the first one. I'll let Philip handle the second one. So on the cost synergy side, as I mentioned on the last call, we kind of were exiting Q2 with about $32 million-ish run rate on an annualized basis of the cost savings. We expect to be—or we're exiting Q3 here with something closer to $37–38 million. Still targeting kind of what we talked about last quarter by the end of the fiscal year—so end of next quarter—to be mid-$40s, $45–46 million run rate, and by, you know, probably end of first quarter be at the $50 we originally announced.

So tracking well from where we were last quarter, continue to see that grow here in Q3.

Philip Smith — Chief Executive

And I think when we last spoke last quarter, we were saying this Q3 was a very important quarter with regards to the integration port. This was when the large integration process of the U.S. FCM was going to happen. And that did happen, that has been completed, and we are now able to start looking at the business more holistically, looking at the clients, being able to really go deeper into the cross-selling capability. Now from the moment we announced the deal, even before closing, there was a lot of interaction between StoneX Group and R.J. O'Brien that continued into closing, that continued into the integration, and there are early success stories of where increased capability that we can provide from StoneX Group to R.J. O'Brien clients, who are now StoneX Group clients, we've seen that. We've seen the benefit of it, we've seen an increased level of momentum, and we continue to be very positive about the outcome. Now, as I said in previous conversations, there are certain products that we can offer to customers on day one: increased capability, access to platforms, access to physical products, physical programs that will assist our clients immediately.

And there are others where it does involve increased level of engagement and education and also awareness to make sure that products that we are now able to offer legacy R.J. O'Brien clients are correct and suitable for said clients. So it's an important process—which is why we repeat we never made any revenue synergies—because we didn't want to be bound by timeline expectations, ensuring that we didn't rush certain aspects of future revenue, which we feel and continue to feel very, very strongly about because of that suitability and ensuring that we're not doing, we're not moving too quickly for the sake of achieving a timeline that we set out to the market. But that momentum continues and, as the clients are now very much embedded in the StoneX Group system, we're able to leverage that at a greater rate, and we continue to mark lots of cards of wins along the way.

Dan Fannin, Analyst at Jefferies

Understood. And then, Bill, just to follow up on the quarter's results and if there were any one-timer, or where any kind of—some of the—in the income statement like professional fees looked low, if there were any benefits or things that we think about from a normalized basis going forward we should be aware of as we think about your fiscal fourth quarter.

Bill Dunaway, CFO

Sure. And we tried to point that out a bit. There's about a $12.5 million insurance recovery in professional fees net of some settlements. It's about $8.5 million, I would say, on a net basis for the quarter. So that would have been one. You know, we did talk about the synergies. There were also a little over $4 million of severance and retention in the quarter. So kind of netting those out versus synergies, I think those are probably the only two I would call out, Dan.

Dan Fannin, Analyst at Jefferies

Okay, thanks. I'll get back in the queue.

OPERATOR

One moment for our next question. Our next question comes from Jeff Schmidt from William Blair. Please go ahead. Jeff.

Jeff Schmidt, Analyst at William Blair

Hi, good morning. On the revenue synergies, I know you spent a lot of time, you know, getting to know RJO's derivative capabilities and going through their client list. But what are some of the takeaways you have from going through their books? And, you know, I think you just started your cross-selling efforts but for your OTC derivatives. So maybe if you can give us a sense on how long you think that could take.

Philip Smith — Chief Executive

That does seem to be the question everyone wants to know, isn't it? As I said, we've been able to achieve a lot of interaction between existing parts of R.J. O'Brien and StoneX Group even before the integration has been completed, very much increasing that awareness of what we have to offer. A lot of our—and I would say reiterate what I said before—is that we've had some very easy wins with regards to offering platforms and capabilities that perhaps sit in our physical business.

Now those are already being utilized across legacy R.J. O'Brien clients because they see it as an opportunity, and some of them would have liked to have been able to do that in-house. At R.J. O'Brien they didn't have the capability and, in some cases, didn't know there was an alternative or didn't know there was a product of such that would help them. That's been crucial in just increasing the awareness. Now you must remember R.J. O'Brien have 350 IBs who themselves have underlying clients.

So reaching out to the end client has been a process of integration, a process of awareness, and a process in which we have tried as actively and as deeply as possible to engage with those underlying clients and really demonstrate all the capabilities that are on offer now. Equally, things—as we said quite early on—things like foreign exchange provision, things like OTC, access to our physical hedging capability, access to physical contracts, things like—things that we sometimes take for granted.

It does have to have a, you know, a lead time of rollout. So we've not put any pressure on people to sell. This is, you know, we make this very clear. We don't want this to be seen as something that we are trying to force on people. It's all about increased awareness and education and highlighting all the capabilities. And, you know, I'm not saying that every single client of R.J. O'Brien, who traditionally traded futures to hedge their exposure, their risk mitigation in whatever product it might be, will automatically move to an OTC.

But the beauty of an OTC product is that we're able to custom make a hedge for our clients. That's what our client base does benefit from. They enjoy the personal suitability and targeting of specifically their product, their exposure, and themselves. And I think that's what makes a difference. But it takes time. And we've built out huge OTC businesses from scratch in parts of the world, in EMEA and APAC, where I would say five, six years ago our OTC capability was almost minimal.

That's now a big driving force of our expansion and our relevance to our clients. So we try to apply that same logic to all clients, regardless of whether they are legacy R.J. O'Brien or not. So that's very much the direction we're going, very much a strategy, and the RJO client base is part of that. But, you know, just like every other client who touches StoneX Group in one way, we want to ensure there's more that we can offer. And I think that's why I went into the, you know, the deep dive with our prime business, because that's an illustration where we've brought all the capabilities with an ecosystem into a single product offering, which I think is a distinction between us and many other participants in the market.

Jeff Schmidt, Analyst at William Blair

And then a question on the payments business. I mean, the RPM continues to decline there. It's fallen for a couple of years now. I think in the past you talked about a client mix shift having some impact, maybe moving into larger banks. But could you discuss what's driving that and how much farther do you think that can fall?

Philip Smith — Chief Executive

Well, if you go back to—I'm trying to remember when we did the deep dive on payments—it coincided with the launch of our proprietary system, XPay. And the key there was all about capacity. And you must remember that up until that point we were turning away business. We had many, many banks, payments companies wanting to move more business towards us, very much high-volume, low-value payments, and our system at the time did not have the capability, and so we were turning away business.

Once we rolled out XPay, as said, we increased the capacity, I don't know, 15-fold, and then allowed those banks, those FIs, those payments companies to use our payment channels, our rails, to get into the countries that they were lacking, but at a scale that they were not able to provide themselves—and prior to the rollout of XPay we were not able to provide. So that was a key driver for the need to build out a new system and also a desire to take on that business that the world was struggling with.

And so we've seen that growth. We continue to see a lot of large companies, large payment companies, increasing number of banks who have this flow and are now actively directing it to StoneX Group because we now have that capability and are able to provide it, provide that level of service as we do with the lower-volume, higher-value payments. So it increases that capability. And that's the reason why you're seeing the average—you know, the volume, the average daily volume—going up.

But you're also seeing the, you know, the revenue per trade going down. And we continue to expect that to be a trend in the, you know, for the foreseeable future. Yeah, that could be. Oh, sorry, Jeff. That could be over in the next few years. Go ahead.

Bill Dunaway, CFO

No, I was going to say you can kind of see what Philip's talking about. When you look at, you know, our first quarter of this fiscal year, that's when you really saw a big spike up in our volumes, and you did see a trend down a bit in the rate per million from a little over 10 to, you know, $9.9, $9,400 per million. But then you've seen that actually trend up, and the volumes have grown, which has been a nice trend during the fiscal year, going up, you know, sequentially for three quarters.

So it did kind of level-set shift down, as Philip said, as that system got rolled out. But now we're seeing it turn up a little bit. I don't think it's necessarily going to get to where it was, but it's—the volumes are growing quite fast, and it's nice to see the rate per million going up, and it was just shy of a record quarter. And which is the reason I say that is because, historically, in our payments business the Q1 has always been the high watermark in most years, and we were just shy of beating the Q1 high watermark from 2024.

So I think pleasing to see. I am hoping to have a deep dive in payments for our Q1 '27 call because it should coincide with quite a few initiatives and exciting opportunities that we want to throw out and bring together and highlight the strategy, which will probably be about three years after we last did the deep dive.

Jeff Schmidt, Analyst at William Blair

Okay, great. And then a question on client float. Obviously up a lot from the RJO deal, but what do you think that can grow at after the deal kind of annualizes or lapses, and then any changes in your investment strategy there? Are you increasing duration, using more swaps, anything like that?

Bill Dunaway, CFO

Yeah, I mean, you know, I think that, you know, post the deal, you know, I think you can certainly be growing those balances high single-digit percent. Right. The industry continues to grow and I think that we've got a compelling story being the largest non-bank U.S. FCM and continuing to grow obviously in the U.K. and Singapore as well. So definitely becoming more relevant there. And on the investment front, we're not really doing anything different than what we've kind of talked over the last nine months post-integration.

We are continuing to put in some levels. As I said in my remarks today, we did do about another three-quarters of a billion of two-year swaps to kind of average in this quarter to kind of put a floor. So overall we've got about two and a half billion of swaps out there at a little over 350 basis points, which puts a nice kind of floor for us on a piece of it. And then we're, you know, there's a little bit of duration we're taking but, you know, not a lot on the actual investment side.

You know, there's probably about a billion and a half there as well that we've got a little bit out on the curve but nothing more than two years. And so, you know, just trying to continue to maximize and make sure that we're earning, you know, a little bit of a premium over SOFR. You know, 10 or 15 basis points is kind of what we're targeting. So.

Jeff Schmidt, Analyst at William Blair

Yeah, okay. And just one last one, you know, I think the prepared remarks had mentioned greater adoption of your automated trading platform with regards to your OTC derivatives business. I don't know if that's a newer initiative or something you've been investing in. I was just curious why that was called out specifically.

Philip Smith — Chief Executive

No, it's nothing, it's not new, but I think it's fair to say it's been accelerated and improved, and the efficiencies achieved using AI to speed the upgrades and the increased capability and the increased efficiency from our platforms, that's something we are seeing across the board. And you're seeing it as a highlight in the OTC capability where our electronic swap matching platform has just been rolled out, and it has been rolled out over time, but the acceleration and the efficiency of the capability within the platform has really made a meaningful difference.

And a lot of that relates back to my announcement in the last quarter where we went from an AI perspective from sort of early adoption, experimenting, just playing around, to rolling out an enterprise-wide capability which is becoming increasingly core and central to our overall technology buildout. And, you know, that is a good example. You know, our swap platform is a good example where we're starting to see early wins on that. And, you know, we are, you know, similarly rolling out the capability to improve efficiency in your reconciliations and investigations and LC management, settlement instruction corrections, and, you know, technology platform and project acceleration. So, you know, a lot of that will be provided as a sort of post six months announcements in the next earnings call because I think we want to start demonstrating to our investors and the market what we've been able to achieve, whether it's cost savings, reduction in vendors, whether it's efficiency of technology, acceleration of rollout of new product capability, all of that. So that's the objective there in the next quarterly earnings.

Bill Dunaway, CFO

And I would just add, Jeff, one of the other nice things that's come out is if you looked back six, seven years ago in a lot of the structured products that were trading in OTC, those were phone conversations that were going on with our desk and the broker and the clients to kind of customize a solution and find out what it is. And now we have tools where customers can just be looking at live product pricing for structured products that fit the needs that they have.

So it's, you know, it's a much quicker execution, much more customizable, and gives them a great view. So those kind of things are another thing that's kind of driving that, those volume growth, and it makes, you know, expansion geographically that much easier because you're not feeding through to, you know, people to pricing transactions; you're able to offer it to more and more parts of our, you know, global footprint and the clients that sit throughout the globe.

Jeff Schmidt, Analyst at William Blair

Okay, thank you. That's all I had.

OPERATOR

One moment for our next question. Our next question comes from Dan Fannin from Jefferies. Please go ahead, Dan.

Dan Fannin, Analyst at Jefferies

Yeah, thanks for taking a follow-up. So just wanted to get your updated thoughts on M&A here currently and maybe the dialogue and or activities you see in the kind of back half of the calendar year. If you see that picking up for yourselves.

Philip Smith — Chief Executive

I think I've been asked that before and I think the response has been we are always looking at transactions. We are known as a consolidator, we're known as an acquirer in the markets. And we have stuck to very strict principles of the logic for adding to the StoneX ecosystem. And, you know, whether it expands our geographical footprint, whether it expands our product offering, or whether it brings us a book of clients that we didn't have before, and that doesn't stop.

And we, I think we said, you know, there's always half a dozen transactions that we're looking at. And I think I actually put it out there: almost business as usual is for us to be, you know, acquiring companies, sort of 10 to 30, 10 to $40 million in size that add to that increased capability. And I don't see that being anything other than almost business as usual. Now I think a lot of companies, a lot of small monoline business lines, maybe sole proprietors who are looking for an exit strategy, we are seen as an opportunity for those to extract value and bring a capability that will be added and hugely supplement the product offering across our entire ecosystem and at the same time give the entire capability that sits within StoneX to their clients to enhance the relationship, to make it deeper and more meaningful. So those, that will not change and that hasn't changed and we haven't seen any change of any sort, you know, from the beginning of the year to where we are today. And then we've obviously been able to demonstrate that even companies the size of R.J. O'Brien, which are, you know, the largest transaction we've ever completed, was able to be integrated as on time, on the timelines, within budget, and achieving the objectives that we set out on day one.

So I think we, you know, we now have a dedicated team, dedicated resources that continue to look at transactions, to make the acquisitions, to complete the acquisitions, and then most importantly, to complete the integration. And that's a key part of our business and DNA going forward. But, you know, we are not desperate. We don't go out, you know, trying to find, you know, gaps unless there's an obvious glaring gap in our ecosystem that we'd like to fill; we'd actively keep an eye out. But on the whole, we look at many, many transactions. We're very disciplined in our approach, and what we like and what will add to our ecosystem, we will look to see if we can achieve that.

Dan Fannin, Analyst at Jefferies

Great. Thanks for taking all my questions.

Philip Smith — Chief Executive

No problem.

OPERATOR

I am showing no further questions at this time. I would now like to turn it back to Philip for closing remarks.

Philip Smith — Chief Executive

Well, thank you all for your time. We're very pleased with our Q3 numbers and once again, a huge shout-out to all StoneX employees who have helped make this happen by continuing to provide a standout level of service, professionalism, and relevance to the market and our ever-increasing number of clients and customers and, of course, to each other. Thank you very much.

OPERATOR

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

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