ewsba.se
Chief Financial Officer — William Dunaway
William Dunaway: Good morning, and welcome to our earnings conference call for our quarter ended 03/31/2026.
Philip Smith: Good morning, everyone, and thank you for joining our second quarter earnings call for fiscal year 2026. I am very pleased to report a consecutive record quarter, including record net operating revenues, net income, and EPS. This was driven by strong performance across all four operating segments, highlighting our depth and breadth of product offering and capabilities within the unique StoneX Group Inc. ecosystem. It also reflects the continued progress of integrating RJ O’Brien, which remains on track to be substantially completed later this fiscal year with no change to expected synergies and efficiencies, making StoneX Group Inc. the largest non-bank FCM in the United States.
Despite the geopolitical uncertainty, nearly all of our products reported double-digit growth driven by higher volatility and increased demand for our services. This has included delivering another record quarter for listed derivatives, with volumes approaching 100 million contracts, and average client equity approaching $14 billion, reflecting the expanded scale of the platform following the RJ O’Brien acquisition. Record OTC derivatives volume, transacting over 1.5 million contracts, a 68% increase year-over-year. As a reminder, we offer customizable OTC contracts to customers, giving them the benefit of a look-alike option or swap or structured product to more closely address their risk management needs, whilst we benefit from typically higher rate capture when compared to traditional listed derivatives.
We reported record securities average daily volume of over $12 billion driven by strong performance across both our equities and fixed income franchises. We will touch on our equities business later today, but we believe we have one of the most diverse equity market ecosystems covering execution, market making, custody and clearing, prime brokerage, as well as equity capital markets and research offerings, which we acquired through the Benchmark acquisition last year. Alongside our securities and derivatives records, we also reported record operating revenues derived from physical contracts, which underscores our continuing global relevance in the physical space within the commodities market over consecutive quarters.
Turning to payments, we recorded our second highest ADV of $92 million following the record set last quarter, with year-on-year growth of 19%. This performance reflects continued engagement from institutional counterparties using our cross-border payment solution. Lastly, we saw FX/CFD volumes grow by 3% year-over-year, and the revenue capture of $103 per million, up by 6%, reflecting the higher market volatility seen in this quarter. We continue to set records across our key metrics but are mindful that the geopolitical landscape remains complex, and disciplined risk management will remain at the heart of our business as we continue to service our clients' business needs and activities.
As our company scales, processing ever higher volumes, growing our client base, and improving our offering to clients, I wanted to spend a couple of moments touching on one of our strategic initiatives regarding the use of AI. We are seeing the deployment of AI evolving from isolated experimental use to now serving as an enterprise force multiplier that enhances operational efficiency across our organization. What started out as a useful development tool for our programmers has now grown into utilizing AI agents across client support, internal operations, and platform development.
Within payments, we mentioned our Xpay system in previous calls, which was a proprietary-built platform, and within this, we have developed AI-assisted automation to help with settlement instruction repair, validation, and reconciliation designed to reduce manual intervention and improve our straight-through processing rates. Alongside this, we are developing an AI chatbot to aid client services with client queries, document translation, and compliance-related tasks. We are also applying AI to further improve the productivity of our software developers through the design of support agents for AgenTeq development.
This should culminate in: one, accelerated development, shortening the time from a proof of concept to a functioning prototype; two, enhanced agility and innovation, automating testing and delivery of iterative improvements, which should lead to innovation; and three, business solutions, ultimately leading to the delivery of working solutions for our commercial teams that are responsive to our clients' needs. Such an example of this was the development of a feature which we estimated would have taken the team without AI approximately two to four times longer to design, test, and launch.
This is the sizable step change we hope to replicate across the organization, whilst ensuring we operate within a standardized framework and remain cognizant of local regulations, controls, and governance. It is a promising start, and we see opportunities to leverage technology further to develop products and services faster, meet our clients' needs, and optimize our resources to continue to deliver strong financial performance. With that, I will now turn it over to William, who will go through this quarter's financial results.
William Dunaway: Thank you, Philip. I will begin with a financial overview for the quarter, and we will be starting with slide number five in the slide deck. Just as a reminder, our Board of Directors approved a three-for-two split of our common stock, and our shares began to trade on a split-adjusted basis at the market open on 03/23/2026. All per-share metrics on this call will be on a split-adjusted basis. Second quarter net income came in at a record $1.743 billion with diluted earnings per share of $2.07.
This represented 143% growth in net income; however, earnings per share grew at a 120% rate due to additional shares outstanding as compared to the prior year, primarily related to the issuance of approximately 3.1 million shares related to the acquisition of RJ O’Brien during the [inaudible]. Net income and diluted earnings per share were up 25–24%, respectively, versus our immediately preceding [inaudible]. This represented a 26.5% return on equity despite a 75% increase in book value over the last two years. On a tangible book basis, this equates to a 37% return on tangible equity for the quarter.
We had operating revenues of approximately $1.6 billion, up 64% versus the prior year and up 9% versus the immediately preceding quarter. 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 net 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 70% versus a year ago and 14% versus the immediately preceding quarter.
Total fixed compensation and other expenses were up 44% versus the prior year quarter, with $56.9 million of this attributable to acquisitions made over the last twelve months, most notably RJ O’Brien and Benchmark. Also contributing to this increase as compared to the prior year, bad debt expense increased $12.3 million, primarily within our commercial segment, which, despite this, had a second consecutive record quarter. Total fixed compensation and other expenses, excluding bad debt expense, were up 5% or $16.4 million versus the immediately preceding quarter. Fixed compensation and benefits were up 32% versus a year ago and up 13%, or $18.7 million, versus the immediately preceding quarter.
The increase versus the immediately preceding quarter included a $10 million increase in employee benefits, most notably payroll taxes, paid time off benefit costs, and retirement costs, which is typical as we start a new calendar year, as well as $8.5 million in higher severance and retention costs, including costs associated with a formal collective redundancy consolidation process for UK-based employees following the integration of certain RJ O’Brien entities, as well as severance and retention costs for certain US-based positions relating to ongoing integration activities. These increases were partially offset by higher purchase participation on our employee-elected deferred compensation plan, which is part of our restricted stock plan.
Professional fees increased $1.9 million versus the prior year, primarily as a result of higher legal fees related to our defense in various legal matters, net of recoveries. They were down $14.4 million versus the immediately preceding quarter, which included significant legal costs incurred related to the BTIG arbitration matter. During the second quarter, we received the final arbitration award from the FINRA arbitration panel adjudicating the claims between us and BTIG. The panel awarded us $1 million in compensatory damages and awarded BTIG $2.9 million in damages. These amounts were offset, and we made a net payment of $1.9 million during March 2026.
On 05/04/2026, we made an immaterial payment to fully and finally resolve all differences with BTIG, and no additional claims between the parties remain. The conclusion of the BTIG litigation, along with the resolution of the option sellers arbitrations and settlement of the patent case inherited through the acquisition of GAIN Capital, marked the end of the large-scale litigation matters that have resulted in heightened legal expenditures over the last five years, most notably the last twenty-four months. Moving on, I had mentioned the acquisitions over the last twelve months and wanted to touch on the contribution of the most notable one, RJ O’Brien.
Excluding amortization of acquired intangibles and a $7.7 million negative mark-to-market adjustment on their investment portfolio, RJ O’Brien contributed $35 million in pre-tax net income for the quarter, a nice improvement over the immediately preceding first quarter. Looking at our results from a longer standpoint, our trailing twelve months results show operating revenues up 40%. Net income was a record $462.4 million, up 57%, with diluted earnings per share of $5.60 and a return on equity of 19.8% for the trailing twelve-month period, above our target of 15%. For the second quarter, our average client equity and FDIC sweep balances were $15.2 billion, up 91% versus the prior year and up 4% versus the immediately preceding quarter.
Finally, we ended the [inaudible] with a book value per share of $34.16. 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. Transactional volumes were up across all of our product offerings, and spread and rate capture increased in all products with the exception of securities, down 3%, and payments, down 7%.
Just touching on a few highlights for the fourth quarter, we saw operating revenues derived from listed derivatives increase $189.4 million, or 148%, versus the prior year, primarily due to the acquisition of RJ O’Brien, which contributed $151.7 million, as well as strong growth in base metals activities in LME markets, which increased $20.2 million versus the prior year. Listed derivative operating revenues increased 18% versus the immediately preceding quarter. Operating revenues derived from OTC derivatives increased 98% versus the prior year, driven by increased client activity and a widening of spreads, most prevalent in agricultural and energy markets, including renewable fuels, driven by heightened volatility as a result of the onset and continuation of the US–Iran conflict.
This also represented an 89% increase versus the immediately preceding quarter. We had strong performance in our physical business, with operating revenues derived from physical contracts increasing 162% versus the prior year, primarily driven by a $116.1 million increase in precious metals operating revenues. Operating revenues derived from physical contracts were up 21% versus a record immediately preceding quarter. Securities operating revenues were up 38% as volumes were up 35%, partially offset by a 3% decline in the rate per million captured versus the prior year, the improvement driven by growth in US equity volumes as well as an increase in overall client activity driven by the onset and continuation of the US–Iran conflict.
Payment revenues increased 14% versus the prior year quarter due to a strong 19% increase in average daily volume, partially offset by a lower rate per million. Payment revenues were down 2% versus the immediately preceding quarter. FX/CFD revenues were up 9% versus the prior year quarter, resulting from a 3% increase in average daily volume and a 6% increase in rate per million, each of which were primarily driven by improved performance in our self-directed business. FX and CFD revenues were up 13% versus the immediately preceding quarter.
Our interest and fee income earned on our aggregate client float, including both listed derivatives client equity and money market FDIC sweep balances, increased $54.8 million, or 54%, versus the prior year, with the acquisition of RJ O’Brien contributing $53.9 million. Average client equity increased 110% as RJ O’Brien contributed $6.4 billion in average client equity for the current quarter, while the average money market FDIC sweep client balances declined 7%. Turning to slide number seven, this depicts a waterfall by product of net operating revenues from both the prior year quarter to the current one, as well as the same for the trailing twelve-month periods.
Just a reminder, net operating revenues represent operating revenues less introducing broker commissions, transaction-based clearing expenses, and interest expense. For the quarter, net operating revenues increased 70%, principally coming from listed derivatives and physical contracts, up $84.6 million and $116 million, respectively. In addition, we had a very strong quarter in OTC derivatives, which nearly doubled, adding $58.8 million versus the prior year. Net operating revenues from securities also added $36.9 million. On a net basis, interest and fee income on client balances increased $33.2 million, with RJ O’Brien contributing $30.3 million.
Looking at the bottom graph for the trailing twelve-month period, listed derivatives had the largest increase, up $187.7 million, primarily as a result of the acquisition of RJ O’Brien as well as strong growth in LME base metal markets. Securities was up $180.6 million versus the prior year, driven by a 27% increase in average daily volume and a 17% increase in rate per million. Physical contracts net operating revenues added $162.1 million versus the prior fiscal year, primarily driven by strong performance in precious metals. OTC derivatives added $90.4 million off of strong performance in agricultural and energy markets, including renewable fuels. Interest and fee income increased $87.6 million, primarily as a result of the acquisition of RJ O’Brien.
Moving on to slide number eight, I will do a quick review of our segment performance. Our Commercial segment saw record net operating revenues, an increase of 111%, primarily resulting from 529–8% increases in listed and OTC derivatives, respectively. In addition, physical contracts increased 239%, while net interest income and fee income increased 55%. The growth in listed derivatives and interest income were primarily driven by the acquisition of RJ O’Brien, as well as in base metal markets on the LME. Segment income was another record, increasing 101% versus the prior year. On a sequential basis, net operating revenues were up 30%, and segment income was up 36%.
Our Institutional segment also saw strong growth in net operating revenues and segment income, up 65–40%, respectively. The growth in net operating revenues was principally driven by a $33.3 million increase in securities revenues. In addition, listed derivatives and interest and fee income increased $60.4 million and $14 million, respectively, primarily driven by the acquisition of RJ O’Brien. On a sequential basis, net operating revenues and segment income declined 3–13%, respectively. In our Self-Directed Retail segment, net operating revenues increased 15%, and segment income was up 40%, which demonstrates the strong operating leverage in this segment.
This growth was driven by a 9% increase in rate per million captured in FX/CFD contracts along with a 3% increase in average daily volumes. On a sequential basis, net operating revenues were up 18%, and segment income increased 65%. Our Payments segment net operating revenues were up 10% and segment income increased 30%. Average daily volume was up 19% versus the prior year, while rate per million was down 7%. Versus the immediately preceding quarter, Payments net operating revenues decreased 3%, while segment income decreased 6%.
Moving on to slide number nine, looking at segment performance for the trailing twelve months, we saw strong growth in the Institutional segment with net operating revenues up 62% and segment income increasing 58%. Our Commercial and Payments segments added 48% and 11% in segment income, respectively. Our Self-Directed Retail segment income decreased 23%.
Finally, moving on to slide number ten, which depicts our interest and fees 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, interest and fee income net of interest paid to clients, and the effect of interest rate swaps increased $29.1 million to $103.6 million in the current period, and as noted, the acquisition of RJ O’Brien contributed $30.3 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 declined $7.8 million, primarily related to an $11.7 million mark-to-market adjustment on our investment portfolio.
During 2026, we entered into an additional $600 million in fixed-rate SOFR swaps to hedge our aggregate interest rate exposure, which brings our aggregate swap position to $1.8 billion with an average duration of approximately two years and an average rate of 3.38%. 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 $47.6 million, or $0.58 per share, on an annualized basis. With that, I will hand you back to Philip for our product spotlight on our global equities business.
Philip Smith: Thank you. Now turning to slide 12, I wanted to highlight another facet of our ecosystem and speak about our principal market-making business within our global equities business line. Our equities business operates as a global market intermediary built around agency execution, custody and clearing, market making, prime, as well as capital market services. We serve institutional clients, offering access to exchanges, liquidity, and clearing and custody infrastructure. We monetize client activity through commissions, spreads, and financing. Through the Benchmark acquisition, we further enhanced our relevance to customers with deep equity research and the ability to connect users through corporate and capital market services.
We have built an ecosystem that is designed to service clients across the full equities life cycle. On our next slide, slide 13, turning to equity market making specifically, it is important to recognize the scale and relevance of this business. We are a principal equities market maker providing liquidity and execution across a wide range of global securities. In 2025, StoneX Group Inc. ranked number one in over-the-counter American depositary receipts and foreign securities, a position we have held consistently since 2015, according to FINRA ORF data. We make markets in approximately 18,000 equities globally, and we ranked number one in over 1,500 individual securities.
This is supported by more than twenty years of experience, twenty-four-hour market coverage, and access to 120 global markets. For institutional clients, this matters because it translates into reliable liquidity, pricing, and execution, particularly in less liquid, international, or complex stocks. While this part of the business may be less visible than traditional listed securities, it plays a meaningful role in how institutional investors, asset managers, and retail broker-dealers access global equity markets with StoneX Group Inc. Moving on to the next slide, slide 14, what makes our market-making franchise different and succeed? Our entry into the highly competitive Reg NMS stock was built upon our leading OTC ADR franchise, market experience, and deep institutional relationships developed over decades.
This foundation has allowed us to scale into the listed space in a disciplined way. Second, market making at StoneX Group Inc. operates within a vertically integrated equities ecosystem. As already shown, it exists alongside clearing, custody, prime brokerage, research, and capital markets. It is all connected. This integration improves capital efficiency and allows us to serve clients more comprehensively. Third, we benefit from the aggregation of trading flow across a globally diversified client base that is institutional as well as self-directed retail. This aggregated, diverse flow allows us to provide deeper liquidity and more consistent pricing, supporting high-quality execution for our clients while managing risk and hedging more efficiently. Finally, technology is the real enabler.
Our proprietary electronic platforms are designed to support best execution and allow us to deliver tools focused on execution quality. The result of these factors are reflected in the growth you see here, with our Reg NMS market-making volumes growing at a compound annual rate of over 130% since 2022. We believe we are a fraction of the total addressable market, which is likely measured in trillions of dollars of notional volume. Lastly, turning to the priorities on slide 15 required to scale the market-making platform. First, we continue to streamline our operations by consolidating platforms, automating middle-office processes, and simplifying reporting and post-trade workflows. This improves operating efficiency and supports our operating margins as volume grows.
Second, we are deliberately deepening our market share, expanding our NMS wholesale market-making capabilities, growing outsourced trading relationships, and increasing our presence in ETFs and global options where client demand is rising. Third, we are strengthening our global reach and technology platform. This includes building a footprint in Asia Pacific, expanding sales coverage in the EMEA region, and continuing to invest in the core architecture that underpins our market-making platform. Overall, we expect to process higher volumes, expand our global reach, and continue to invest in a platform that is efficient and scalable, and supportive of high operating leverage.
Importantly, all of this is being done in a way that strengthens our broader equities ecosystem, making StoneX Group Inc. increasingly relevant to our clients across execution, liquidity, clearing and custody, prime services, research, and capital markets. Now to close out this presentation, this was a hugely pleasing quarter all around, highlighting record net income of $174.3 million, which is up 143% versus prior year, and diluted EPS of $2.07, up 120% versus prior year, and achieving an ROE for the quarter of 26.5%, 19.8% for the trailing twelve months ending 03/31/2026, and an ROE on tangible book value for the quarter of 37%, 25.9% for the trailing twelve months.
Book value per share of $34.16, up $8.43, or 33%, versus prior year. And results over the last two years have grown trailing twelve-month net operating revenues by 56%, or a 25% CAGR, and trailing twelve-month earnings by 91%, or nearly 38% CAGR. A more volatile economic backdrop has emerged, potentially surpassing levels of the past two years, but this environment plays into our strengths, as volatility continues to be a key driver of our business. We have seen significant growth in our client assets, average client funds, securities clearing, prime brokerage, and metals, which provide stable recurring income.
We believe our unique ecosystem, which offers extensive depth and breadth of product and a widespread geographical reach, combined with a significant total addressable market, will continue to power growth in the years to come. We naturally remain very excited about our future growth and continued expansion of our ecosystem. We will now open the call for questions.
Operator: Thank you. At this time, we will conduct a question and answer session. Please limit to one question and one follow-up. To ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Daniel Thomas Fannon from Jefferies. Daniel, your line is now open.
Daniel Thomas Fannon: Thanks. Good morning. The environment continues to be quite constructive, as you highlighted, and I was hoping to get a bit more context around the health of that. One of your peers highlighted a customer loss in, I think, January on the natural gas side. Hoping you could talk about just the good and bad volatility that you saw in the quarter, and then also give us an update here, given we are now in May, on what has happened as the quarter has ended. We have seen some of the exchange volumes also start to moderate—how that is translating across your business as well?
Philip Smith: Sure. So as we said in the Q1 Q&A, there was, surprisingly, very little in terms of credit losses. And we did remind the market that continued heightened levels of volatility, while positive from a revenue perspective, obviously do increase the chance of some credit losses. We work very closely with our clients each and every day to help mitigate that, because communication with our clients through these extremely volatile periods is, whilst unusual, important. We maintain that level of communication and ensure that we help our clients to minimize their own exposure and their own liquidity risks.
In light of the levels of volatility in the last two quarters, I think the level of credit losses we have provided for has been somewhat minimal. I would not say it was particularly unusual. It highlights the quality of our clients, and more relevantly, it highlights the interaction and engagement that we have with our clients. But as we have said very openly many times, with this level of increased volatility there should be an expected increased risk in credit losses that come with that heightened revenue generation.
Daniel Thomas Fannon: And then, just to follow up, on the current environment we are seeing in April, particularly in certain markets where volumes have moderated—whether that is metals or precious metals or other areas—can you give us an update in terms of how that business looks thus far to start fiscal third quarter?
William Dunaway: Certainly. We have had tremendous activity in the first couple of quarters, and last year, in the precious metals space. Listed derivatives, OTC—everything was really doing well with the volatility we saw here in the second quarter of the fiscal year. But we do see some moderation coming into April as we start the third quarter, just off where you saw it in Q2 from the standpoint of activity. That still said, overall it is a very good environment from the standpoint of interest rates and still an elevated volatility market in bonds.
Daniel Thomas Fannon: Got it. That makes sense. I am not used to being restricted by my number of questions on this call, but—feel free?
Philip Smith: Feel free. Go ahead, Dan. You are fine.
Daniel Thomas Fannon: I guess, William, you mentioned some of the costs associated with RJ O’Brien and severance and what we saw in the quarter. Can you update us on the synergies and, broadly at the highest level, how the integration is going? Clearly, the environment is good, but can you give a little bit more detail around what you are doing under the hood and how that is going?
Philip Smith: If I maybe start, Dan, by just giving you an update in terms of what we set out from a timeline from an integration program perspective: we are on track. On the last call, we highlighted that targeting our non-US businesses and the integration that goes with those businesses was the priority and also a testing ground to ensure that the larger program of integration in the US is able to run more smoothly, based upon any issues that arose during the non-US integration process. Those have begun. This quarter we are currently in is an important quarter for us, and we have begun the process of the integration of our US FCMs.
It is on a much more gradual basis whereby we begin testing with some small groups of clients; we then have a second group, which has already occurred; and then we have a gradual buildup to the entirety of the FCM consolidation at the end of this month. It is an ongoing process. The timeline has not changed from where we set it out almost two quarters ago. In terms of the costs and the efficiencies, those are also on track, but I will let William highlight those in detail.
William Dunaway: Thanks, Philip. We touched on this a little bit last quarter, Dan. Within the quarter, coming out of last quarter, we talked about what the run-rate is. For the second quarter, we had just shy of $76.9 million worth of synergies that we saw in the numbers in Q2, and the exit run-rate coming out of Q2 at those same synergies is a little over $8 million per month. So we are at about a $32 million run-rate on an annualized basis. To reaffirm where our target is: our expectation is that we will be $50 million by the end of the process.
We think that coming out of Q2 we are probably around $32 million on an annualized basis, and we expect by the end of fiscal year to be closer to $45 million, and then we will have that remaining piece dribble in 2027.
Daniel Thomas Fannon: That is super helpful. Lastly, in the context of the hedge that you quantified, do you expect to do more as the year goes on, or is this the right amount in terms of interest-rate exposure you are looking to manage to?
William Dunaway: We talked about this when we first did the RJ O’Brien integration in that first quarter, and Sean had touched on it at the time. At that time, we had about $13 billion of the two combined portfolios, and roughly half of that is balances where we keep virtually most of the yield on those assets. That is the key one that we are trying to protect. This puts us at around $1.8 billion of swap coverage, and we have about $1.5 billion of duration that is going out twenty–twenty-four months of physical purchases of investments. We feel like we have a good start.
We will probably continue to look, where applicable, to still put in some floors there just to protect the downside on that where it is not shared on those balances, so we want to make sure that we are comfortable with the levels we are set at. It is still an active management program that we have in place. Hopefully, that gives you some guidelines of what we are looking to protect.
Daniel Thomas Fannon: That is helpful. I will get back in the queue. Thank you.
William Dunaway: And feel free, Jeffrey, if you have multiple questions as well.
Operator: Thank you. Your next question comes from the line of Jeffrey Paul Schmitt from William Blair. Jeffrey, your line is now open.
Jeffrey Paul Schmitt: Hi. Good morning, everyone. In the Commercial hedging business, could you give us a sense of the mix of that business? Obviously, strength was widespread, but how much is agricultural versus energy or renewables? And RJ O’Brien’s interest-rate business as well?
William Dunaway: The majority of the RJ O’Brien interest-rate business is actually in the Institutional segment because it is more institutional customers—looking to the big group and others—looking to manage their exposure. If we are looking on the Commercial side of listed derivatives, it is probably going to be more heavily weighted toward the energy and renewable fuels side. A lot of it was soybean oil and other inputs into renewable fuels. You can call that agriculture; you can call that renewable fuel. It is a little bit of both—it is inputs on the agricultural side, outputs on the energy side—but it is more so that.
I think we still saw a bit of a slow start to Q2 in the US row crops—corn, soybeans, wheat—but then we saw nice activity in the back half of the quarter. Really, the OTC market was the real standout with the best volume and best revenues we have seen historically in the OTC space, and with that volatility, I think those customized solutions that we can provide customers to really help capture margin and mitigate their risk showed their benefit in that quarter to clients, and we saw a lot of uptake in activity.
Philip Smith: I would only add that in Q1 we were slightly overshadowed by the success of the metals business in relation to everything else. But in Q2 there was a consistent level of increased activity and increased revenue across the board, which we do not always expect and should not expect, but it was pleasing to see that was evident. As William said, energy was very much the story of the quarter, but there was consistent growth in other areas as a result of increased volatility and also just increased activity from our clients across the board. That was good to see—very pleasing.
Jeffrey Paul Schmitt: That is helpful. Maybe do the same in the physical trading business. Is that mainly precious metals and gold in particular? What portion of mix is that? And where are you in terms of cross-selling with RJ O’Brien clients? I do not think they have that physical trading capability.
Philip Smith: No, they do not, and that was raised last quarter. There was a level of confusion whether a lot of that came from RJ O’Brien integration and cross-selling. The physical aspect is very much driven by our very successful precious metals business, but also our very successful non-metals business, which in areas of cocoa and coffee saw continued expansion and continued growth across the board. Unfortunately, within the physical space, there is still an overshadowing by the physical metals business. We saw Q1 showing record levels of transaction volume and net income attached to that physical metals business. Q2 overshadowed Q1—so continued growth and client activity.
As I said before, across multiple sub-products within our Commercial business, there was a broad level of increased activity and increased revenue. With regards to our OTC business, we highlighted a record level of OTC contracts. That is something where we look forward to greater participation from the RJ O’Brien integration post full integration in the US, where we are able to more easily offer OTC contracts, OTC products, and capabilities to the legacy RJ O’Brien client base. Until the integration happens, it is just slightly more cumbersome in terms of papering in different legal entities, and full integration will make that easier.
William Dunaway: And, Jeffrey, to your numerical question there: for a total of $190 million worth of physical contract operating revenues in Q2, about $150 million of that was precious. The rest was what we called physical agriculture and energy before—we are now calling it StoneX supply and trading—but that is more the agriculture and energy side of the business.
Jeffrey Paul Schmitt: Okay. Very helpful. Could you provide an update on the M&A environment and what inning you think we are in for industry consolidation? Are opportunities up versus a year ago? How are valuation expectations trending?
Philip Smith: Generally, we will always continue to see a certain level of small- to mid-size interest and M&A activity. We are known in the market as a consolidator. We are known as an expander of our ecosystem. That drives interest in people wanting to bring their business—either those who want an exit strategy or those who want to take their business to the next level and be part of a broader, more capable, expansive ecosystem that they can operate within at StoneX Group Inc.
We have mentioned previously that, on the whole, most of the acquisitions we have done end up, within a relatively short period of time, growing in multiples of where they were prior to becoming part of StoneX Group Inc. A lot of that is the heavy cost of business, heavy cost of regulation, and heavy cost of having a monoline business in certain areas where you do not have that diversity of revenue and the ability to utilize and access clients across multiple products. That is our benefit.
As a result, we get a near-constant level of interest in that small- to mid-size $10–$30 million range of businesses that we are very easily able to acquire, incorporate, and tack onto the ecosystem, and then start leveraging either the client capability, the geography expansion, or the product that those acquisitions provide us. It is important that we talk about our ecosystem all the time, and that is a huge driver of much of the M&A activity. It is something we probably do not talk enough about, because the way we operate our verticals and our products, we do not want any silos within our businesses.
Over the last ten to fifteen years, we have done a very good job of integrating multiple new products, new entities, and new capabilities that were previously on a standalone basis. Everything is becoming much more integrated, and that allows us to truly leverage those capabilities and have multiple-product initiatives, like we have seen with our FIG initiative, where we are bringing together all aspects of the company and heading in the same direction. That drives interest in us from an M&A perspective, and it drives interest that we have in other areas where we would like to continue that level of ecosystem expansion. I do not think the market has changed drastically.
We continue to have a lot of interest, and we do almost make small acquisitions on a very regular basis, which we probably do not promote as much because we are so used to that level of expansion. But we are always looking at transactions—always looking at potential expansion opportunities.
Jeffrey Paul Schmitt: Okay. Great. Thank you, everyone.
Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. Please hold while we compile the Q&A roster. This now concludes the question and answer session. I would now like to turn it back to Philip Smith for closing remarks.
Philip Smith: Thank you. In closing, I would just like to say a huge thank you to all the employees of StoneX Group Inc. for their vital contribution in achieving this record quarter. Working tirelessly every day with our clients through such heightened volatility market conditions is what we do, and StoneX Group Inc. employees do this incredibly well—a service for which I am hugely proud. This quarter, I feel, is a testament to that dedication and that service to our clients. So a huge thank you to all of our employees, and I look forward to seeing what Q3 brings. Thank you very much.
Operator: This does conclude the program, and you may now disconnect.
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StoneX (SNEX) Q2 2026 Earnings Transcript was originally published by The Motley Fool