Marex Group plc

Good morning, everyone, and thanks for joining us today for Marek's first quarter 2025 earnings conference call. Speaking today are Ian Lowitz, Group Chief Executive Officer, and Rob Irvin, Group Chief Financial Officer. After Ian and Rob have made their formal remarks, we will open the call to questions. Before we begin, I would like to remind everyone that certain matters discussed in today's conference call are forward-looking statements relating to future events management's plans and objectives for the business, and the future financial performance of the company that are subject to risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are referred to in Marek's press release issued today. The forward-looking statements made today are as of the date of this call, and Marek does not undertake any obligation to update these forward-looking statements. Finally, the speakers may refer to certain adjusted or non-IFRS financial measures on this call. A reconciliation schedule of the non-IFRS financial measures to the most directly comparable IFRS measures is also available in the press release issued today. A copy of today's press release and investor presentation may be obtained by visiting the investor relations page of the website at marix.com. I'll now hand the call over to Ian.

Good morning and welcome to our first quarter 2025 earnings call. This was a strong first quarter performance with adjusted profit before tax of $96 million at the top end of the preliminary range we published at our investor day and subsequently with our F1 filing. We've had a very busy few weeks since the end of the quarter. We hosted our inaugural investor day on April 2nd, had a highly successful equity offering on April 17th, and a well-received debt offering on May 1st. This has provided us with many opportunities to engage with our investors, both existing and many new ones. We are very appreciative of the engagement we have experienced and would particularly like to thank our major long-term investors, many of whom came to our Invest Today in New York for their ongoing support. Based on our interactions with investors, it does feel as though there is increasing recognition, understanding, and acceptance of the power of the MARIX platform to deliver strong and reliable results through the cycle. So with that, let's turn to the performance highlights on slide four. We delivered a strong first quarter driven by robust client activity in what was a favorable operating environment for our business. Exchange volumes in Q1 were up 15% year-on-year and up 12% versus the fourth quarter. And there was a Goldilocks level of volatility across many asset classes, which we were able to monetize. Adjusted PBT was up 42% with strong revenue growth, as Rob will discuss later, in all of our business segments. Agency execution was a particular standout with continued growth in prime services. And our energy business also performed strongly. At the start of April, there was a period which included some very high volume days, typically two to three times the average level for the first quarter. We were able to process these heightened volumes successfully on our platform, confirming the operational resilience of the firm and the scalability of our platform. We also managed our risk well, remaining in close dialogue with our clients, and added materially to our liquidity position, maintaining record levels of surplus. This liquidity surplus has further increased with the $500 million senior notes issuance that we executed in early May, as we continue to extend and diversify our funding sources. Although there is a funding cost which impacts net interest income, This is very valuable insurance from our perspective in this type of environment, and this is a trade-off that we are willing to make to mitigate our risk. At the end of March, we completed the honor acquisition and expect Hamilton Court to also close later this quarter. We successfully executed on our second equity follow-on transaction since our IPO, and we're extremely pleased with the response, which reflected very strong support from the market. And we have increased our dividend to 15 cents per share for the first quarter of 2025 from 14 cents per quarter in 2024 post our IPO. On page five, we've laid out the key metrics that we use to assess our performance, growth, margins and returns, productivity, and quality of earnings. Revenues grew 28% to $467 million, while our margin increased to 21%. delivering adjusted PBT of $96 million, up 42%. Reported return on equity was 29%, up six percentage points year over year. Our Sharpe ratio of monthly adjusted profits was five, reflecting the quality and resilience of our earnings and the relatively tight distribution of daily profitability. We also track our performance versus overall exchange volumes, which are publicly available. We recognize this relationship is directional rather than determinative, as volumes are only one driver of revenues, albeit an important one, and it does provide a very useful lens on our business. Volumes on exchange don't capture OTC or other off-exchange activity, such as prime services, which are included in our revenues, and explain, for example, the outperformance in our agency and execution segment in securities this quarter. While we're attentive to the quarterly numbers, we typically focus on the longer term time period, which has less noise in it. On this basis, it's apparent that we continue to gain share and are growing faster than the market, which itself is growing at a healthy rate, as you can see on the next slide. Slide seven shows the growth in exchange volumes in our markets since 2021. This growth accelerated in Q1, reflecting the strong operating environment this quarter. As I said at the investor day, this growth is above what we would have expected at IPO and is underpinned by secular trends. These secular trends include growing demand for listed derivatives due to increased receptivity to this as a hedging tool globally. There is also increasing demand from producers and consumers of energy and commodities to hedge out their exposures on a recurring basis. And the ongoing expansion of the financial product market is presenting us with significant opportunity to grow and diversify our firm. We're also in a world of macroeconomic uncertainty and geopolitical unpredictability that you see playing out every day. This is an attractive market backdrop for us with high exchange volumes, not just in individual asset classes, but across most asset classes simultaneously. In addition to exchange volumes, another important driver of our performance is volatility. What's interesting about the data is that it shows volatility has been declining somewhat over the last three years, during which time period we have grown our profits materially. We have set up the firm to generate reliable earnings growth across the cycle through service inclined flow and gaining share, while also being able to capture upside in periods of unusual volatility. These volatility spikes tend to be quite short-dated, often only a few weeks, before reverting to more normalized levels. Although we might see a 5% to 10% earnings benefit from higher volatility in a particular quarter, as we did, for example, in Q2 last year, over a four-year period, they are less visible. The key point here is we are not reliant on these elevated periods of volatility to deliver profit growth, and we are proud of our track record of delivering sequential growth through a variety of market environments. A quick word on our recent equity and debt issuance activity before I hand over to Rob. The secondary offering in mid-April was a standout success at over eight times over subscription, notwithstanding the tough market backdrop at the time. To be able to accomplish this in such a volatile market environment with a VIX in the mid-30s is something we're extremely proud of. We brought in many new investors and saw continued participation from existing shareholders, further improving the quality of our share register and demonstrating our increased credibility as a public company. Our free flow has increased from 38% at IPO to nearly 70% in a year. Our average daily trading volume has also increased from less than $10 million in the six months post-IPO to mid-teens between the first and second follow-on, and it's now at over $40 million. Support from the market is also reflected in our $500 million U.S. dollar issuance of senior notes that we executed intraday on May 1st. This demonstrated further the market's comfort with Marex as an issuer and our ability to support our growth as a public company. With that, I'll hand over to Rob to take you through the financials in more detail.

Thanks, Ian, and good morning, everyone. As Ian said, we had another strong quarter in line with our published preliminary range. Q1 revenue grew 28% to $467 million, with strong growth across all business segments. Total costs increased 26% to $365 million. Front office costs were up 23%, predominantly reflecting higher compensation costs on strong revenue performance across the group. Control and support costs were up 33%, primarily driven by investments in technology to support automation and business growth. We also continue to make investments in our finance, risk and compliance functions to support our controlled growth and development as a public company. This included specific investments relating to recent acquisitions and our compliance with Sarbanes-Oxley. Adjusted profit before tax grew 42% to $96 million, while margins expanded 200 basis points to 21%, reflecting margin improvement in agency and execution. Non-operating adjustments were a gain of $1.7 million this quarter, due to an arguing purchase gain of $3.4 million on Dalton Group Limited. Adjusted return on equity rose to 30%, while adjusted diluted EPS was $0.91 per share, up 32% year over year. Now looking at our first quarter performance by business compared to Q1 2024. Clearing revenue grew 18% to $119 million, driven by growth in net interest income, as higher average balances more than offset lower average fed fund rates. Net commission income was $1.7 million lower, as positive performance in energy and metals was offset by lower plant activity in agricultural, which experienced higher volatility in Q1 2024 compared to this quarter. Agency and execution revenue grew 42% to $240 million, driven by growth in all asset classes. Securities revenue grew 59% to $151 million. The most significant contribution came from the continued build-out of our prime services offering, including growth in security-based swaps. Energy revenue grew 20% to $88 million, reflecting the combination of record volumes strong demand for our environmental offering and the benefit of acquisitions. Adjusted profit before tax more than doubled in this segment as margins improved from 13% to 24%. This was driven by the benefit from restructuring as well as growth in higher margin activity, particularly in prime services. Market making revenue grew 27% to $53 million with growth in all asset classes. Security revenues doubled, while metals revenue growth was more muted at 6% due to the uncertainty arising from the potential implementation of global tariffs on base metals. Average daily VAR, or value at risk, remained low at $3.4 million as we continued to manage our market risk well with 92% of trading days and 100% of weeks positive in the quarter. Solutions revenue grew 9% to $45 million against a very tough first quarter comparative, as the business continued to benefit from the expanding sales team and onboarding of new clients. Financial products grew 41% to $31 million, driven by structured notes balance growth. Hedging solutions decreased 27% to $14 million, also reflecting higher volatility in parts of the ag markets in Q1 2024. Average balances in the first quarter increased to $17.1 billion, up from $11.3 billion a year ago, driven by growth in client balances and our increased liquidity position. As Ian said, we intentionally hold high levels of liquidity to support our businesses and clients through volatile markets, even if this costs us more from a funding perspective, as was the case this quarter. Net interest income was $53.4 million compared to $35.6 million in Q1 last year. reflecting the significant step up in average balances, including growth in prime services, despite a lower average Fed fund rate. NII reduced by $9 million versus the fourth quarter, driven by several items. First, higher interest expense, reflecting the full quarter's impact of the $600 million US dollar notes issued in late October 2024, and increased structured notes issuance. This meant our liquidity position was very strong at the start of April. Second, the impact of average Fed funds decreasing by 35 basis points. And third, the repricing of fixed-term investments at lower rates. These factors were partially offset by $1.6 billion growth in average balances. The Fed funds forward curve is currently implying two to three rate cuts by year end. And as before, we have given you our illustrative rate sensitivity. This indicates that 100 basis points decrease in rates across a full year would reduce adjusted profit before tax by around $20 million. This is, of course, assuming a static balance sheet and ignoring any future growth or actions we might take. We have a rolling hedge program in place, which causes a modest drag to NOI today and offers us protection if rates were to fall below the current Fed funds curve. Turning now to our balance sheet and strong capital and liquidity position on the next two slides before I hand back to Ian to conclude. As a reminder, on this slide you can see that 80% of our balance sheet consists of high quality liquid assets which support client activity. Once we net off assets and liabilities by client activity, we are left with a corporate balance sheet that carries corporate cash and other assets against group liabilities, including our structured notes portfolio and senior note issuance. Total assets remain broadly stable at $24.4 billion as at the end of March, as did our residual assets of $5.1 billion. We manage our capital and liquidity risk very prudently, as reflected in the headroom that we maintain above minimum requirements to ensure we're well positioned in periods of market stress. During the first quarter in particular, we held very high levels of liquidity, which, as I mentioned before, had an impact on NII. At the end of Q1 2025, total funding was $4.3 billion, up from $3.8 billion at year end, with $1.2 billion of surplus to support our day-to-day operations. Our structured note program remains a core source of funding for us, and we further extended our funding maturity profile with our $500 million senior debt issuance earlier this month. Taking this into account, our liquidity surplus over our regulatory minimum as of last week stood at $1.6 billion. This also supports our investment grade credit ratings from S&P and Fitch. Last month, Fitch updated its rating outlook for Marex from stable to positive to reflect our strong earnings and diversification of our franchise. Our strong capital generation meant we were able to announce an increased quarterly dividend of 15 cents per share for the first quarter of 2025, payable to shareholders on the 10th of June. And now I'll hand back to Ian.