Raymond James Financial, Inc.

Good evening, and welcome to Raymond James Financial's Fiscal Fourth Quarter and Fiscal 2025 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 Chief Executive Officer Paul Shukri and Chief Financial Officer Butch Orlog. The presentation being reviewed today is available on our 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 future or conditional verbs such as may, will, could, should, and would as well as any other statements that necessarily depend 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 10-Q and Forms 8-K, which are available on our website. Now, I'm happy to turn the call over to CEO, Paul Shugry. Paul?

Thank you, Christy. Good evening. Thank you all for joining us. I'm very pleased to report record results for both the fiscal fourth quarter and fiscal year 2025 this evening. And while the financial results are critically important, it's more than just numbers to us. It's the deep personal relationships our advisors, bankers, and associates have with their clients, which is the foundation to providing tailored financial advice. It's the longstanding values of the firm, always putting clients first, making decisions for the long term, having integrity, and valuing independence, which guide all of the decisions that we make. These values, the personal relationships, and the differentiated financial advice across our diverse and complementary businesses contributed to our fifth consecutive year of record revenues and record net income in very different market environments. As we look ahead, many of our key business drivers also ended the year at record levels, including record client assets of $1.73 trillion, a record number of financial advisors of 8,943, record trailing 12 production for recruited financial advisors of $407 million, and record net bank loans of $51.6 billion. We also have healthy pipelines for growth, including strong levels of advisor commitments to join over the coming year and strong investment banking pipelines. And importantly, we have the regulatory capital capacity and plenty of liquidity to support this growth. Throughout the fiscal year, we have continued to develop and maintain industry-leading technology for our financial advisors. once again making significant investments of approximately $1 billion in technology. These investments include strategic AI initiatives designed to improve advisor efficiency and support regulatory oversight with an emphasis on enhancing the advisor and client experience. We filled new technology positions of chief AI officer and head of AI strategy to lead our development and implementation which includes bringing experience, talent, and fresh perspectives. During the year, we earned the highest ranking for investor satisfaction among those working with a dedicated financial advisor or team of advisors. Importantly, we were also recognized as the most trusted company among advised investors in wealth management in the J.D. Power 2025 U.S. Investor Satisfaction Study. In response to growing demand for private investment product alternatives for ultra-high net worth clients, we further developed the firm's private capital raising expertise and brought in bespoke private investment alternatives for such clients. I'm proud of our many accomplishments this year and believe we are well positioned to continue to invest in our business, our people, and technology to drive growth across all our businesses. Turning to our financial results for the quarter, The firm's values-based, client-focused approach continues to generate steady performance. Quarterly net revenues of $3.7 billion grew 8 percent over the prior year quarter and 10 percent over the preceding quarter. Pre-tax income of $731 million declined 4 percent compared to the year-ago quarter and increased 30 percent from the preceding quarter. For fiscal 2025, we generated record net revenues of $14.1 billion, representing 10 percent growth, and record pre-tax income of $2.71 billion, up 3 percent over fiscal 2024. These strong results are attributable to our diverse and complementary businesses anchored by the private client group and augmented with the capital markets, asset management, and bank segments. Across our businesses, we continue to achieve success retaining and recruiting financial professionals who provide high-quality advice to their clients. In the private client group, we ended the quarter with a record $1.6 trillion of client assets under administration, representing year-over-year growth of 11%. We had an outstanding year recruiting high-quality advisors onto our platform, a testament to our unique service-first culture, comprehensive capabilities, and strong balance sheet. In fiscal year 2025, we had record recruiting results of financial advisors to our domestic independent contractor and employee channels, with recruiting trailing 12-month production at their previous firms totaling $407 million, reflecting a 21 percent increase over last year's previous record. These recruited advisors had approximately $58 billion of client assets at their previous firms, also surpassing last year's record. Including assets recruited into our RIA and custody services division, we recruited total client assets over the past 12 months of nearly $63 billion across all of our platforms. Quarterly domestic net new assets were nearly $18 billion this quarter, representing a 5% annualized growth rate. We ended the fiscal year with a record number of financial advisors, 2 percent higher than the prior year and a reflection of solid advisor retention as well as strong recruiting results. Based on a robust advisor recruiting pipeline and strong level of commitments to join in the coming quarters, we continue to be optimistic about our momentum and growth. Our best of both worlds value proposition where we offer a unique combination of an advisor and client-focused culture, coupled with leading technology and solutions, continues to resonate with advisors across all of our affiliation options. Additionally, our strong balance sheet and commitment to independence is proving to be a differentiator for advisors evaluating alternatives. To continue retaining and attracting the best advisors, we continue to make investments in our platform and offerings. For example, our private wealth advisor program offers education, training, and accreditation, along with enhanced capabilities and product solutions. This enables advisors to meet the needs of their most sophisticated clients and create significant value for our advisors who progress through this rigorous program. We continue to make investments and implement solutions to automate and streamline processes, which in turn frees associates and advisors to do what they do best. which is to engage in human-to-human and deepened personal relationships, add more value, and importantly, have more capacity to grow their businesses by attracting new clients. The capital market segment delivered strong results in the fourth quarter, achieving revenues that represented the third highest level on record, surpassed only by those observed during the pandemic period. This strength demonstrates the potential resulting from the strategic investments we have made in this segment over the past few years. And the fourth quarter results were underpinned by solid performance throughout all of our capital markets businesses. Looking ahead, the investment banking pipeline remains strong. We are confident that we are well positioned with motivated buyers and sellers, along with deep expertise across the industries we cover. We remain committed to continuing to enhance the platform by broadening and deepening our capabilities, whether through strategic hiring or acquisitions. For example, over the past two years, we've hired a number of experienced public finance investment bankers, which provided us growth opportunities across a number of domestic markets. We began to realize the returns of some of those investments as evidenced by our fourth quarter results. As it pertains to acquisitions, we recently announced the acquisition of Greensledge, a boutique investment bank recognized for its expertise in structured credit and securitizations in a transaction we anticipate to close later this fiscal year. Notably, Greensledge differentiates itself with deep relationships and expertise while operating on a balance sheet light model. In the asset management segment, Net inflows into managed fee-based programs in the private client group were strong during the quarter, annualizing at over 7%, and reflect the complementary impact of being able to offer high-quality investment alternatives to our financial advisors, as well as growth resulting from our successful recruiting efforts. In the bank segment, loans ended the quarter at a record $51.6 billion, primarily reflecting robust 22% annual growth in securities-based lending balances, yet another synergistic impact from our growing private client group business, as we are able to deploy our strong balance sheet in support of the clients. Importantly, the credit quality of the loan portfolio remains strong. Turning to capital deployment, our longstanding priorities have remained unchanged, and that starts with investing in growth, first organically and complemented with strategic acquisitions. We continue to pursue acquisition opportunities that meet our criteria of being a strong cultural fit, a good strategic fit, and add valuations that would generate attractive returns for our shareholders. As we continue to pursue both organic and inorganic growth opportunities, we also maintain our share repurchase program to effectively manage capital levels. As outlined in recent quarters, our capital deployment strategy is to repurchase shares on a consistent basis at a level which, barring new developments, should keep our Tier 1 leverage ratio from growing beyond current levels. We continue to operate that guidance this quarter as we repurchase $350 million of common stock at an average share price of $166. We ended the quarter with a Tier 1 leverage ratio of 13.1%. In fiscal 2025, we returned capital of over $1.5 billion through common dividends and share repurchases. Now, I'll turn the call over to Butch Orlog to review our financial results in detail. Butch?

Thank you, Paul. I'll begin on slide six. The firm reported net revenues of $3.7 billion for the fiscal fourth quarter. Net income available to common shareholders was $603 million with earnings per diluted share of $2.95. Excluding expenses related to acquisitions, adjusted net income available to common shareholders equaled $635 million, resulting in adjusted earnings per diluted share of $3.11, and our adjusted pre-tax margin was 20.7%. We generated annualized return on common equity of 19.6%, and annualized adjusted return on tangible common equity of 23.9%. Solid results for the quarter, particularly given our conservative capital base. Turning to slide seven, private client group generated pre-tax income of $416 million on record quarterly net revenues of $2.66 billion. Results were driven by higher PCG assets under administration compared to the previous year, the result of market appreciation, retention, and a consistent addition of net new assets. Pre-tax income declined year over year, primarily due to interest rate reductions totaling 125 basis points since September of 2024. Our capital markets segment generated quarterly net revenues of $513 million and a pre-tax income of $90 million. Net revenues grew 6% year-over-year, driven primarily by higher debt underwriting, strong growth in affordable housing investments business revenues, as well as solid improvements in both equity and fixed income brokerage revenues. Sequential results grew a robust 35%, largely due to higher M&A revenues, net underwriting, and affordable housing investments revenues. The asset management segment generated record pre-tax income of $132 million on net revenues of $314 million. Results were largely attributable to higher financial assets under management compared to the prior year quarter due to market appreciation over the 12-month period and strong net inflows into PCG fee-based accounts. We had strong net inflows of approximately $3.6 billion or 7.3% annualized growth rate into managed programs on our platform. The asset management segment generated record revenues and pre-tax income in the fiscal year. The bank segment generated net revenues of $459 million and pre-tax income of $133 million. On a sequential basis, the bank segment net interest income was up slightly, primarily driven by continued loan growth. The September 2025 rate cut had minimal effect on our fourth quarter. turning to consolidated revenues on slide eight. Fourth quarter net revenues grew 8% over the year-ago period and 10% sequentially. Asset management and related administrative fees of $1.88 billion grew 13% over the prior year and 8% over the preceding quarter. Record PCG fee-based assets equaled $1.01 trillion at quarter end up 15 percent year-over-year and 7 percent over the preceding quarter. As we look ahead, we expect fiscal first quarter 2026 asset management and related administrative fees to be higher by approximately 6.5 percent over the fourth quarter level, driven by higher PCG assets and fee-based accounts at quarter end. Brokerage revenues of $616 million grew 8 percent year-over-year, mainly due to higher PCG revenues. Investment banking revenues of $316 million were nearly flat with the year-ago quarter and increased 49 percent sequentially. The sequential increase was driven by significant increases in M&A and advisory revenues, along with robust results in debt underwriting, which were in part from large private placement transactions. where frequency and magnitude are unpredictable, as well as an increase in public finance activity in the quarter. Affordable housing investment results reported in other revenues grew $25 million sequentially in what is typically a seasonally strong fiscal fourth quarter, but also reflected a 19 percent increase in fiscal year revenues, demonstrating continued growth of the business. Moving to slide nine, clients' domestic cash sweep and enhanced savings program balances ended the quarter at $56.4 billion, up 2 percent over the preceding quarter, and representing 3.7 percent of domestic PCG client assets. Balances increased $2.2 billion, or 4 percent, in the month of September, growing nicely after fee billings had resulted in anticipated decreases earlier in the quarter. Based on October activity to date, domestic cash sweep and enhanced savings program balances have declined as anticipated given October's record quarterly fee billings of approximately $1.8 billion. Turning to slide 10, combined net interest income and RJBDP fees from third-party banks was $653 million down slightly from the prior quarter. Net interest margin in the bank segment decreased three basis points to 2.71 percent for the quarter. The average yield on RJBDP balances with third-party banks decreased five basis points to 2.91 percent, in part due to the impact of the September Fed interest rate cut. Based on current interest rate, including the full quarter impact of the September rate cut and quarter end balances net of the $1.8 billion fiscal first quarter fee billings, we would expect the aggregate of NII and RJBDP third-party fees in the first quarter to be approximately flat with the fourth quarter level. This is largely the result of the positive impact of a higher interest earning asset balance as of the September starting point. offsetting the full quarter impact of the September Fed rate action. Keep in mind, there are many variables which could influence actual results, including any interest rate actions during the upcoming quarter and factors affecting our balance sheet, including changes in our loan and deposit balances. Turning to consolidated expenses on slide 11. Compensation expense was $2.39 billion, and the total compensation ratio for the quarter was 64.2%. Excluding acquisition-related compensation expenses, the adjusted compensation ratio was 64.0%, better than the 65% target level we shared at our investor day. In fiscal year 2025, adjusted compensation expense included the amortization of transition assistance provided to recruited advisors and other retention awards to existing advisors in the aggregate amount of $355 million, representing an increase of approximately 11 percent compared to fiscal 2024. Non-compensation expenses of $602 million increased 11 percent over the year-ago quarter. A large portion of these costs support firm-wide growth initiatives, such as advisor recruiting, professional fees associated with investment banking activity, and higher investment sub-advisory fee expense. For the fiscal year, consistent with our prior guidance, we achieved full-year non-compensation expenses of approximately $2.1 billion. excluding the bank loan provision for credit losses, unexpected legal and regulatory items, and non-GAAP adjustments presented in our non-GAAP financial measures. A strong result given our continued investments in technology as well as the higher growth-related costs we incurred. We remain committed to investing to support growth across the business while maintaining discipline over controllable expenses. On slide 12, we provide key credit metrics for our bank segment. We grew loans during the quarter by 3 percent, primarily in support of our clients, with this loan growth continuing to be led by our securities-based loans, which grew 22 percent, and residential mortgage loans, which grew 9 percent over the year. These two loan categories represent nearly 60 percent of our total loan book, reflecting 38 percent and 20 percent of the total. The credit quality of the loan portfolio remained strong. Criticized loans as a percentage of total loans held for investment were 1.28 percent at quarter end, and non-performing assets remained low at 29 basis points of bank segment assets. The bank loan allowance for credit losses as a percentage of total loans held for investment ended the quarter at 88 basis points. The bank loan allowance for credit losses on corporate loans as a percent of corporate loans held for investment was 1.88 percent. We believe the total allowance represents an appropriate reserve, but we continue to closely monitor economic factors that may affect our loan portfolios. Slide 13 represents the pre-tax margin trends for the past five quarters. highlighting the stability and strength of our diversified businesses in consistently achieving strong margins. During the fiscal fourth quarter, the adjusted pre-tax margin reached 20.7%. For the full fiscal year, we attained an adjusted pre-tax margin of 20%, successfully meeting our target margin objective. On slide 14, at quarter end, our total assets were $88.2 billion, a 4 percent sequential increase resulting primarily from loan growth and higher corporate cash balances. We continue to have strong levels of liquidity and capital. During the quarter, to take advantage of a favorable market environment reflecting very tight credit spreads and attractive benchmark yields, The firm issued $1.5 billion of senior notes with the mix of 10-year and 30-year maturities, as well as amending and extending the maturity of the revolving credit facility. These actions resulted in additional liquidity on hand for deployment in our growth and to meet client needs, as well as providing additional capacity in our committed borrowing facility should the need arise over the next five years. Our JF corporate cash at the parent ended the quarter at $3.7 billion, $2.5 billion over our target level of $1.2 billion, an increase over the prior quarter level resulting from the proceeds of the senior notes offering. Our capital levels provide significant flexibility to continue being opportunistic in our pursuit of strategic acquisitions and to invest in organic growth. with a Tier 1 leverage ratio of 13.1 percent and a total capital ratio of 24.1 percent, we remain well above regulatory requirements with approximately $2.6 billion of excess capital capacity to deploy before reaching our targeted Tier 1 capital ratio of 10 percent. The effective tax rate for the quarter was 17.4 percent reflecting the favorable impact of non-taxable corporate-owned life insurance gains and the favorable resolution of certain historical tax matters in the quarter. Looking ahead, we estimate our effective tax rate for fiscal 2026 to be approximately 24 to 25 percent. Slide 15 provides a summary of our capital actions over the past five quarters. Through the combination of common dividends paid and share repurchases, we returned over $450 million of capital to shareholders during the quarter and more than $1.5 billion over the fiscal year. Additionally, in other debt capital actions, in August, we utilized nearly $100 million of liquidity to redeem our outstanding subordinated notes. We maintain our long-term commitment to operating our businesses at capital levels consistent with established targets. I'll now turn the call back to Paul for some final remarks.