Raymond James Financial, Inc.

Good evening, and welcome to Raymond James Financial's Fiscal 2025 First Quarter Earnings Call. This call is being recorded and will be available for replay on the company's Investor Relations website. I'm Christy Waugh, Senior Vice President of Investor Relations. Thank you for joining us. With me on the call today are Chair and Chief Executive Officer Paul Riley, President Paul Shukri, and Chief Financial Officer Butch Orlong. The presentation being reviewed today is available on Raymond James' Investor Relations website. Following the prepared remarks, the operator will open the line for questions. Calling your attention to slide two. Please note that certain statements made during this call may constitute forward-looking statements. These statements include, but are not limited to, information concerning future strategic objectives, business prospects, financial results, industry or market conditions, anticipated timing and benefits of our acquisitions, and our level of success in integrating acquired businesses, anticipated results of litigation and regulatory developments, and general economic conditions. In addition, words such as believes, expects, anticipates, intends, plans, estimates, projects, forecasts, and the future or conditional verbs such as may, will, could, should, and would, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Please note that there can be no assurance that actual results will not differ materially from those expressed in these statements. We urge you to consider the risks described in our most recent Form 10-K and subsequent Forms 8-K, which are available on our website. Now, I'm happy to turn the call over to Chair and CEO Paul Riley. Paul?

Thank you, Christy. Good evening. Thank you for joining us today. As we begin my 61st and final earnings call as CEO, I want to take a moment to thank you all. These quarterly conversations have always been constructive, and the dialogue has helped inform our investors and shareholders, and I'm sure they have appreciated it over the years. I'm excited for the future. I believe Paul Shukri and his leadership team will deliver leading results when he takes over next month. following our annual meeting. He, along with the leadership team, bring both deep experience and a commitment to our culture and how it translates to our performance. The board and I have great confidence in their collective abilities and believe the future is very bright. I'm not riding off to the sunset, though. As Executive Chairman, I will be supporting Paul when he needs it, just as Tom James supported me when he handed me the reins 15 years ago. The continuity of experience and counsel are important components of any transition. With that, let's get into the fiscal first quarter. We achieved strong results in the quarter. We generated record net revenues and the second highest net income, showcasing the strength of our diverse and complementary businesses. We ended the period with quarter-end record levels of PCG assets and fee-based accounts and a very healthy pipeline. With ample capital and funding, we remain well-positioned to continue to invest in our business, our people, and technology to help drive growth across all our businesses. Beginning on slide four, the firm reported record net revenues of $3.54 billion for the first fiscal quarter. with net income available to common shareholders amounting to $599 million, slightly below the previous quarter's record, resulting in record earnings per diluted share of $2.86. Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $614 million, or $2.93 per diluted share, We generated strong returns for the quarter with annualized return on common equity of 20.4% and annualized adjusted return on tangible common equity of 24.6%. A great result, particularly given our strong capital base. Moving to slide five, total client assets under administration increased 14% year-over-year to $1.56 trillion. Sequentially, client assets were negatively impacted by foreign exchange rates and by one large departure we previously discussed. Private client group assets and fee-based accounts were up to a quarter in record of $877 billion, and financial assets under management were nearly unchanged at $244 billion. Over time, Net new assets is primarily driven by our ongoing efforts in retaining and recruiting high-quality financial advisors. Domestic net new assets during the quarter equal $14 billion, representing a 4% annualized growth rate on the beginning of the period domestic PCG assets. As we described on our last earnings call, Impacting this quarter's performance was the departure of primarily one large branch in our independent contractor division. The impact was approximately $5 billion of AUA. Adjusting for those assets, domestic net new asset growth in the quarter would have been approximately 5.4%, a strong result. Over the prior 12 months, we recruited financial advisors with approximately $318 million of trailing 12-month production and $51 billion of client assets at their previous firms to our domestic independent contractor and employee channels. Including assets recruited into our RIA and custody services division, which we refer to as RCS, we recruited total client assets over the past 12 months of nearly $61 billion across all of our platforms. RCS finished the quarter with $188 billion of client assets under administration, up 28% year over year. Following the strong recruitment results we achieved in fiscal 2024, and in particular, the fiscal fourth quarter, our recruiting momentum continues to be strong under Jody Perry's leadership. Jody previously ran our ICD division and took the role to lead our firm-wide PCG recruiting. We remain optimistic about both the near-term and long-term growth given the pipeline of high-quality advisors and large teams. Overall, we remain focused on serving advisors across our multiple affiliation options. Despite our record high advisor satisfaction score, I have watched Paul Shukri continue to double down on our service capabilities during the transition period, believing we can continue to do more. Our robust technology capabilities and client-first values continue to enable us to retain and attract high-quality advisors, making Raymond James a destination of choice for advisors. Total Client's Domestic Cash Sweep and Enhanced Savings Program balances At the end of the quarter were $59.7 billion, reflecting a 3% increase over September 2024. Of note, suite balances grew 5% in the quarter. Bank loans grew 3% over the preceding quarter to a record $47.2 billion, primarily due to higher securities-based loans, which grew 4% in the quarter, as well as continued residential mortgage growth. Moving to slide six, private client group generated pre-tax income of $462 million on record quarterly net revenue of $2.55 billion. Results were bolstered by higher PCG assets under administration compared to the previous year due to a strong equity market and the addition of net new assets to the firm. Our capital market segment generated quarterly net revenues of $480 million and a pre-tax income of $74 million. Net revenues grew 42% year-over-year, driven primarily by higher M&A revenues. Results this quarter marked the second best for M&A revenues and the third best quarter for investment banking revenues. The asset management segment generated record pre-tax income of $125 million on record net revenues of $294 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation and net inflows into PCG fee-based accounts. The bank segment generated net revenues of $425 million and pre-tax income of $118 million. On a sequential basis, bank segment net interest income increased 1%, while net interest margin of 2.6% declined two basis points compared to the preceding quarter. And now I'll turn the call over to our CFO, Butch Orlog, to review the financial results in detail.

Butch? Thank you, Paul. Turning to slide eight, consolidated net revenues reached a record $3.54 billion in the first quarter, representing a 17% increase over the prior year and a 2% rise sequentially. asset management and related administrative fees grew to $1.74 billion, representing 24% growth over the prior year and 5% over the preceding quarter. PCG domestic fee-based assets grew to $877 billion, up 17% over the prior year and slightly above the preceding quarter. As we look ahead, Given two fewer billing days, asset management and related administrative fees are expected to decrease by approximately 2% in our fiscal second quarter. Brokerage revenues of $559 million grew 7% year over year, primarily due to higher brokerage revenues in PCG. I'll discuss account and service fees and net interest income shortly. Investment banking revenues of $325 million increased 80% year-over-year and 3% sequentially. Following a strong result in the preceding quarter, first quarter results continued to benefit from very strong M&A revenues, which grew 92% year-over-year and 10% sequentially. Other revenues declined $21 million sequentially primarily due to lower affordable housing investments business revenues, where we typically see a slowdown in the fiscal first quarter following its seasonal high in the preceding quarter. Moving to slide nine, clients' domestic cash sweep and enhanced savings program balances ended the quarter at $59.7 billion, up 3 percent compared to the preceding quarter, and representing 4.3% of domestic PCG client assets. So far in the fiscal second quarter, domestic cash suite balances have decreased by approximately $1.8 billion, primarily due to quarterly fee billings of nearly $1.6 billion. Turning to slide 10, combined net interest income and RJBDP fees from third-party banks was $673 million, down 1% compared to the preceding quarter. The bank segment net interest margin was down two basis points to 2.6% for the quarter, while the average yield on RJBDP balances with third-party banks decreased 22 basis points to 3.12%. primarily due to the two 25 basis point Fed rate cuts that occurred during the quarter, as well as the 50 basis point rate cut that occurred late in the preceding quarter. Based on current rates and quarter end balances, net of second quarter fee billings, we would expect the aggregate of NII and RJBDP third party fees to be down 2 to 3 percent in the fiscal second quarter, in large part driven by two fewer billing days. Keep in mind, there are many variables that will impact actual results, including any rate actions during the upcoming quarter and factors impacting our balance sheet, including loan and deposit balances. Turning to consolidated expenses on slide 11, Compensation expense was $2.27 billion, and the total compensation ratio for the quarter was 64.2%. Excluding acquisition-related compensation expenses, the adjusted compensation ratio was 64%. As a reminder, the impact of salary increases arising from our annual cycle and effective on January 1st along with the reset of payroll taxes at the beginning of the calendar year, will each be reflected in our fiscal second quarter compensation expense. Non-compensation expenses of $516 million decreased 5% sequentially, largely due to a lower bank loan provision for credit losses and a decrease in professional fees. For the fiscal year, We expect non-compensation expenses, excluding the bank loan loss provision for credit losses, unexpected legal and regulatory items, and non-GAAP adjustments presented in our non-GAAP financial measures to be approximately $2.1 billion, representing about 10% growth over the same adjusted non-compensation figure for the prior year. Importantly, we will continue to invest to support growth across the business while maintaining discipline over controllable expenses. As such, the majority of this projected increase reflects our continued investment in leading technology supporting our financial advisors, as well as our expectations for overall growth in the business, which drives, for example, higher sub-advisory fees, FDIC insurance premiums, and recruiting costs. Slide 12 shows the pre-tax margin trend over the past five quarters. This quarter, we generated a pre-tax margin of 21.2%, an adjusted pre-tax margin of 21.7%, achieving our target of 20% plus margin. On slide 13, At quarter end, our total assets were $82.3 billion, a 1% sequential decline. Liquidity and capital each remained very strong. RJF corporate cash at the parent ended the quarter at $2.3 billion, well above our $1.2 billion target. With a Tier 1 leverage ratio of 13%, and total capital ratio of 25%, we remain well capitalized. Our capital levels provide significant flexibility to continue being opportunistic and investing growth. The effective tax rate for the quarter was 19.9%, reflecting a tax benefit recognized for share-based compensation that vested during the period. For fiscal 2025, we still estimate our effective tax rate to be approximately 24 to 25 percent. Slide 14 provides a summary of our capital actions over the past five quarters. In December, the Board of Directors increased the quarterly cash dividend on common shares 11 percent to 50 cents per share and authorized common stock repurchases of up to $1.5 billion, replacing the previous authorization. During the quarter, the firm repurchased 310,000 shares of common stock for $50 million at an average price of $161 per share. As of January 24th, approximately $1.45 billion remained under the Board's approved common stock repurchase authorization. Going forward, we expect to continue to offset share-based compensation dilution and will be opportunistic with incremental share repurchases. Given our present capital and liquidity levels, we remain committed to maintain capital levels in line with our stated targets. Lastly, on slide 15, we provide key credit metrics for our bank segment. The credit quality of the loan portfolio remain solid. Non-performing assets remain low at 26 basis points of bank segment assets. And criticized loans as a percentage of total loans held for investment ended the quarter at 1.26%. The bank allowance for credit losses as a percentage of total loans held for investment ended the quarter at 95 basis points, down four basis points from the prior quarter. The allowance percentage has trended lower largely due to a loan mix shift toward more securities-based loans and residential mortgages, which carry lower allowance levels and now account for 36 percent and 20 percent, respectively, of the total bank loan portfolio balances. The bank loan balance for credit losses on corporate loans as a percentage of corporate loans held for investment was 1.93 percent, down six basis points from the preceding quarter. We believe our allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may impact our loan portfolios. Now, I'll turn the call over to Paul Shukri to discuss our outlook. Paul? Thank you, Butch.