StoneX Group - Q1 2026

Transcript

Operator (participant)

Hello, and thank you for standing by. Welcome to StoneX Group Inc. first quarter, fiscal year 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. I would now like to hand the call over to Bill Dunaway. Sir, you may begin.

Bill Dunaway (CFO)

Good morning and welcome to our earnings conference call for our quarter-ended December 31st, 2025, our first quarter of fiscal 2026. After the market closed yesterday, we issued a press release reporting our results for the quarter, and this press release is available on our website at www.stonex.com as well as a slide presentation which we will refer to during this call. The presentation and an archive of the webcast will also be available on our website after the call's conclusion. Before getting underway, we are required to advise you and all participants should note that the following discussion should be considered in conjunction with the most recent financial statements and notes thereto as well as the Form 10-Q filed with the SEC.

This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether a result of new information, future events, or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.

With that, I will now turn the call over to Philip Smith, the company's Chief Executive Officer, for a brief introduction.

Philip Smith (CEO)

Thank you, Bill. Good morning, everyone, and thank you for joining our first quarter earnings call for fiscal 2026. I'm very pleased to report a very strong start to our fiscal year, reporting record net operating revenues, net income, and EPS, which showcases the power and the scale of the ecosystem we have built at StoneX and of which we are incredibly proud of. We play a vital role in the global financial and physical markets by serving a wide and diverse range of clients. Our platform enables clients to access multiple markets, giving them the flexibility and choice they need to pursue opportunities and/or mitigate risk wherever they arise. This broad market access positions us with several avenues for growth, as demonstrated by our performance this quarter.

When conditions shift from one market to another, we have the breadth of products and services to support our clients' needs wherever they arise. This diversification is a core strength of our business model. Bill will go into more detail around our financials, but I would like to highlight a few areas that help drive our record results: record listed derivatives volumes and average client equity, significantly enhanced by the acquisition of R.J. O'Brien. Record commercial performance driven by an exceptional performance in global metals, and in particular in our precious metals business, which generated $75 million in segment income this quarter, which is $24 million more than it did in the entire financial year 2025.

This was an exceptional quarter whereby our global footprint, the depth of our product vertical, and our logistics expertise in being able to move physical metal globally in order to take full advantage of locational discounts and premiums being second to only the largest two global bullion banks allowed StoneX to record its best revenue quarter ever. To remind you of the deep dive into metals we provided in our Q2 earnings call last year, our unique precious metals vertical includes the following: StoneX is a leading OTC liquidity provider in all precious metals. StoneX is uniquely positioned as the only non-bank participant in setting the gold, silver, platinum, and palladium daily price benchmarks. StoneX is the number one non-bank FCM providing access to futures contracts on exchange for all metals.

StoneX is a wholesale and retail service producer of small bars and coins direct to consumers under our StoneX Bullion platform or to third-party companies themselves servicing direct to consumers. StoneX is one of the largest wholesale physical bullion businesses moving metal across jurisdictions efficiently to satisfy locational shortages and oversupply of material. StoneX owns a recently CME-accredited vault, which now has in excess of $1.2 billion worth of metal in custody after only a couple of quarters of operations, providing vaulting, storage, and custody services. Of course, StoneX owns a London Good Delivery silver recycling and refining facility providing investment-grade products into the bullion market from recycled material. Together, these products and capabilities produce a truly unique ecosystem in the metals market.

In addition, our institutional segment reported a record quarter, which was enhanced by the addition of R.J. O'Brien's institutional business as well as the investment banking, equity research, and institutional sales and trading Benchmark. This was in addition to record revenues reported on legacy StoneX equities, fixed income, and prime service business lines, underscoring the true value of our ecosystem. Finally, we also saw record payments average daily volume to start off the fiscal year. Bill will now cover our financials in more detail. So over to you, Bill.

Bill Dunaway (CFO)

Thank you, Philip. I will begin with a financial overview for the quarter and will be starting on slide 4 in the slide deck. First quarter net income came in at a record $139 million with diluted earnings per share of $2.50. This represented 63% growth in net income. However, earnings per share grew at a 48% rate due to the additional shares outstanding as compared to the prior year, primarily related to the issuance of approximately 3.1 million shares for the acquisition of R.J. O'Brien during the immediately preceding quarter. Net income and diluted earnings per share were up 62% and 59% respectively versus the immediately preceding fourth quarter of fiscal 2025. This represented a 22.5% ROE despite a 70% increase in book value over the last 2 years.

We had operating revenues of just over $1.4 billion, up 52% versus the prior year and up 20% versus the immediately preceding quarter. As a reminder, our operating revenues include not only interest and fee income earned on our client balances but also carried interest that is related to our fixed income trading activities. Net operating revenues, which nets off interest expense, including that which is associated with our fixed income trading activities as well as introducing broker commissions and clearing fees, were up 47% versus a year ago and 24% versus the immediately preceding quarter. Total fixed compensation and other expenses were up $75.6 million or 31% versus the prior year quarter. $44.4 million of this is attributable to the acquisition of RJO and Benchmark during the fourth quarter of fiscal 2025.

Total fixed compensation and other expenses were up 10% or $29.4 million versus the immediately preceding quarter, with $12 million of this change attributable to the acquisitions of RJO and Benchmark, each of which were only in the immediately preceding quarter for 2 months. Fixed compensation and benefits was up 17% versus a year ago and up 2% or $2.4 million versus the immediately preceding quarter. The increase versus the immediately preceding quarter includes $5.3 million attributable to the acquisition of RJO and Benchmark, partially offset by lower PTO benefit costs and higher participation in our employee-elected deferred compensation plan, which is part of our restricted stock plan. Professional fees increased $13.8 million versus the prior year, primarily as a result of higher legal fees related to our defense in various legal matters, including fees related to the BTIG matter associated with the commencement of the arbitration this quarter.

They were up $5.9 million versus the immediately preceding quarter, which included $8 million of investment banking advisory fees paid out in connection with the acquisition of RJO. The acquisitions of R.J. O'Brien and Benchmark contributed $28.5 million and $4.6 million in pre-tax net income, excluding acquired intangible amortization respectively for the quarter. Looking at our results with a longer-term lens, our trailing 12-month results show operating revenues were up 28%. Net income was a record $359.8 million, up 30%, with diluted earnings per share of $6.70 and an ROE of 16.9% for the trailing 12-month period, above our target of 15%. We ended the first quarter of fiscal 2026 with a book value per share of $48.17.

Turning to slide 5 in the earnings deck, which compares quarterly operating revenues by product as well as key operating metrics versus a year ago, we experienced growth across all products with the exception of FX CFDs and payments. Transactional volumes were up across all of our product offerings with the exception of FX CFDs, and spread and rate capture increased in all of our products with the exception of payments, down 10%, and FX CFDs, which declined 30%. Just touching on a few key highlights for the fourth quarter, we saw operating revenues derived from listed contracts increasing $157.3 million or 141% versus the prior year, primarily due to the acquisition of RJO, which contributed $130.7 million, as well as strong growth in base metals activity and LME markets, which increased $12.7 million versus the prior year. Listed derivative operating revenues increased 30% versus the immediately preceding quarter.

Operating revenues derived from OTC derivatives increased 72% versus the prior year, driven by increased client activity in Brazilian and European markets. This also represented an 8% increase versus the immediately preceding quarter. As Philip noted earlier, we had a record performance in our physical business, with operating revenues derived from physical contracts increasing 69% versus the prior year, primarily driven by an $83.9 million increase in precious metals operating revenues, partially offset by a $19.8 million decrease in physical, agricultural, and energy revenues. Operating revenues derived from physical contracts were up 138% versus the immediately preceding quarter. Securities operating revenues were up 43% as volumes were up 22%, and the rate per million increased 35% versus the prior year, with the improvement driven by strong growth in both equities and fixed income.

Payments revenues were down 4% versus the prior year quarter but up 7% versus the immediately preceding quarter, primarily due to an increase in the average daily volume. FX CFD revenues were down 30% versus a near-record prior year quarter, resulting from a 4% decline in average daily volume, primarily in institutional markets, and a 30% decline in rate per million, primarily driven by lower spread retention in our self-directed business, particularly in non-FX markets. FX CFD revenues were up 24% versus the immediately preceding quarter. Our interest and fee income earned on aggregate client float, including both listed derivative client equity and money market FDIC sweep balances, increased $66.1 million or 61% versus the prior year, with the acquisition of RJO contributing $63.8 million. Average client equity and average money market FDIC sweep client balances increased 100% and 5% respectively.

For the current quarter, RJO contributed $5.8 billion in average client equity. Turning to slide number 6, this depicts a waterfall by product of net operating revenues for both the prior year quarter to the current one as well as the same trailing 12-month periods. Just a reminder, net operating revenues represents operating revenues less introducing broker commissions, transaction-based clearing expenses, and interest expense. For the quarter, net operating revenues increased 47%, principally coming from listed derivatives and physical contracts, up $68.4 million and $58.3 million respectively. In addition, securities and OTC derivatives added $55.7 million and $26.5 million respectively versus the prior year. On a net basis, interest and fee income on client balances increased $38.1 million, with RJO contributing $37.3 million. As noted earlier, primarily due to the decline in rate per million, we saw FX CFDs net operating revenues decline $30.8 million versus the prior year.

Looking at the bottom graph for the trailing 12-month periods, securities has the largest increase, up $175.9 million versus the prior year, driven by a 23% increase in average daily volumes and 23% increase in rate per million. In addition, listed derivatives and interest and fee income increased $115.2 million and $54.9 million respectively, primarily as a result of the acquisition of R.J. O'Brien as well as strong growth in LME base metals markets. Physical contracts net operating revenues added $57.9 million versus the prior fiscal year, while OTC derivatives also added $38.8 million off of strong growth in Brazilian and European markets. Finally, FX CFDs net operating revenues declined $60 million versus the prior year. Moving on to slide number seven, I'll do a quick review of our segment performance.

Our commercial segment's net operating revenues increased 65%, primarily resulting from 56% and 72% growth in listed and OTC derivatives respectively. In addition, physical contracts increased 75%, while net interest and fee income increased 50%. The growth in listed derivative and interest income were primarily driven by the acquisition of RJO as well as in the case of listed derivative volumes, base metal markets on the LME. Segment income increased 72% versus the prior year, while on a sequential basis, net operating revenues were up 50% and segment income was up 61%. Our institutional segment also saw record net operating revenues and segment income with growth of 86% and 78% respectively. The growth in net operating revenues was principally driven by a $54.9 million increase in securities revenues.

In addition, listed derivatives and interest and fee income increased $47.5 million and $21.5 million respectively, primarily driven by the acquisition of RJO. On a sequential basis, net operating revenues and segment income were up 11% and 4% respectively. In our self-directed retail segment, net operating revenues declined 34% and segment income was down 67%, driven by the 41% decline in rate per million captured in FX CFD contracts, partially offset by the 13% increase in average daily volumes. On a sequential basis, net operating revenues were up 25% and segment income increased 26% in this segment. In our payments segment, net operating revenues were down 3% and segment income decreased 1%. Average daily volume was up 11% versus the prior year, while rate per million was down 10%. Versus the immediately preceding quarter, payments net operating revenues increased 10% while segment income increased 13%.

Moving on to slide 8, looking at segment performance for the trailing 12 months, we saw strong growth in our institutional segment with net operating revenues up 54% and segment income increasing 60%. Our commercial payments segments added 14% and 4% in segment income respectively. Our self-directed retail segment income decreased 35%. Finally, moving on to slide 9, which depicts our interest and fee income earned on client balances by quarter, as well as a table which shows the annualized interest rate sensitivity for a change in short-term interest rates. The interest and fee income net of interest paid to clients and the effective interest rate swaps increased $38.1 million to $115.5 million in the current period. And as noted, the acquisition of R.J. O'Brien contributed $37.3 million in net interest in the current quarter.

During the first quarter of fiscal 2026, we entered into $1.2 billion in fixed rate SOFR swaps to hedge our aggregate interest rate exposure. The swaps have a duration of two years and an average rate of 3.32%. These swaps, as well as the additional average client assets from the RJO acquisition, are reflected in the interest rate sensitivity table on this slide. As shown, we now estimate 100 basis point change in short-term interest rates, either up or down, would result in a change to net income by $43.2 million or $0.80 per share on an annualized basis. On a final note, before I turn it back to Philip, on February 3rd, our board of directors approved a 3-for-2 stock split of its common stock.

The stock split will be effected as a stock dividend entitling each stockholder of record to receive one additional share of common stock for every two shares owned. Additional shares issued as the result of the stock dividend will be distributed after the close of trading on March 20th, 2026, to stockholders of record at the close of business on March 10th, 2026. Cash will be distributed in lieu of fractional shares based on the opening price of a share of common stock on March 11th, 2026. Trading is expected to begin on a stock split-adjusted basis at the market open on March 23rd, 2026. With that, I will hand you back to Philip for an update on the RJO integration as well as a product spotlight on our global hedging business. Thank you, Bill.

Philip Smith (CEO)

Moving to slide 11, and as Bill mentioned, this is the first quarter of our combined and consolidated operations of StoneX and R.J. O'Brien. On last quarter's call, we provided a detailed overview of the integration process and reiterated our confidence in achieving the synergy set out in our initial announcement. The transaction has transformed StoneX into the leading non-bank player in this space. And now, five months into that integration, we are seeing increased cross-sell opportunities due to our scale and breadth of offering, which I will touch on later. In terms of integration, this remains firmly on track and continues to follow the sequence we outlined last quarter. As a reminder, this includes the consolidation of our non-U.S. entities. We stated this will be completed in quarter two, 2026.

As an update, we have migrated the business and assets of the largest subset of these entities, the R.J. O'Brien U.K. entity, into the StoneX U.K. entity successfully in the first week of January. I expect the others to follow our execution and integration plan we set out previously. The U.K. consolidation has released $20 million in capital. The consolidation of the U.S. entities remains on track and is targeted to be completed by the end of the fiscal year. We are working hard to ensure a smooth and seamless transition for clients as we have prioritized revenue protection and continuity for clients of R.J. O'Brien. All in all, the integration remains on track, and we remain confident in achieving the synergies we set out at announcement and are making strong progress in providing a holistic, integrated offering to clients across StoneX and R.J. O'Brien.

Now moving to slide 13. As done in previous earnings calls, we think it's helpful to go a little deeper into a specific business area. I wanted to spend some time going over our global hedging business, which forms part of our commercial segment and was recently reorganized to globalize what was a more fragmented regional set of businesses. This is a business that is core to StoneX's history and legacy of working with commercial clients to hedge and mitigate their risk exposure, going back nearly 50 years and represents approximately 60% of the segment income for the commercial segment for the last 12 months. We have built a deep presence in North America, Latin America, EMEA, and are rapidly growing in Asia-Pacific.

We have always worked towards a North Star of connecting clients to markets, which help them manage the risks they face in their businesses with transparent access and risk management tools for our clients. On this slide, you will see the breadth of our global hedging and risk management offering. We provide deep market access across more than 40 derivative exchanges worldwide, combined with an ability to deliver customized OTC and structured products, which means we can create tailored hedging solutions which closely align with our clients' risk management needs. Our leading market intelligence offering and digital platforms are core differentiators for us. They give clients market insight supported by teams with real boots-on-the-ground experience across global markets.

These combined efforts and capabilities allow us to serve a diverse range of clients at all parts of the supply chain, shown on the right-hand side of the page, from farmers, producers, and cooperatives to merchants, global traders, industrial end users, as well as energy and resource extractors. In short, by operating across all parts of the supply chain, StoneX becomes a critical partner connecting markets, clients, and flows in a way few others can. On the next slide, being slide 14, I wanted to expand on what I think makes us unique in this space. With the acquisition of R.J. O'Brien, we became the largest non-bank FCM in the United States, and eighth overall, which gives us scale and flexibility that very few firms can match in clearing and execution of listed derivatives.

Furthermore, with our registered swap dealer, we can offer bespoke OTC solutions to address clients' needs through margin relief, financing, and/or access to customized structured products. In addition, in collaboration with our physical businesses, our risk management consultants have the ability to embed hedging strategies within physical contracts in order to provide enhanced price risk mitigation to the clients. Another key differentiator is our people and experience. We have hundreds of risk management consultants around the globe who work directly with clients, building hedging strategies that help them manage exposure and optimize their financial results. Through this work, we've earned a long-standing reputation as a trusted partner, one that clients rely on to help them navigate uncertainty and make confident decisions during volatile market conditions. We do this through the support of market-leading technology tailored to the commercial segment.

This includes StoneX Hedge, automated order management, merchandising, and origination platform integration into clients' ERP systems. Through this platform, clients have hedged in excess of 1 billion bushels, and we look forward to growing this further. StoneX Plus, leading dairy market platform for the delivery of market intelligence, pricing, and trade data. OTC trading, aka SPOC, web trading platform for customizable structured products and OTC trading across multiple commodities. We also spend a great deal of time, effort, and resources assisting and educating our clients and the market at large through hedge schools, professional programs, product seminars, market outlooks, expos, conferences, and joint events with exchanges.

Some examples of these activities just in the last quarter include our participation in the ADPI, the American Dairy Products Institute, co-hosted with the CME, the Dairy Purchasing and Risk Management Seminar, Brazil's National Association of Cotton Exporters, the Global Cattle Connect webinar, online events bringing together experts from across the globe to discuss trends shaping the future of the cattle industry, representing StoneX Brazil, North America, and Australia. We do hundreds of events like this every year, reinforcing our integral role within the industry and form a very important component of our global hedging business with dedicated resources and teams supporting this globally. Our market intelligence platform is rooted in our employees' expertise, enabling us to deliver cutting-edge research based on data and insights from specialists on the ground.

We have further broadened our reach by expanding our digital content through podcasts, videos, and white papers, ensuring clients can access market insight whenever and wherever they need through our mobile app. Turning to slide 15, we outline how we continue to strengthen this business and deepen the value we deliver to clients. First, we continue to expand our ecosystem by growing the number of OTC products we offer and deepening the links between this financial hedging business and our existing physical sales and trading business. We have begun to enter new markets such as power and electricity in Australia, carbon in Europe, and other environmental markets, which we believe will not only diversify our client base but capture more wallet share. Secondly, we continue to grow and diversify our client base.

This includes extending our commercial introducing broker network, largely inherited from R.J. O'Brien, expanding our geographical footprint with new locations in Madrid and Paris, and extending our OTC offering further into the adjacent markets like meat and dairy, where our expertise can help unlock new client segments. And thirdly, we are actively digitizing the business. This includes advancing our ERP integrations with clients to further embed StoneX into their operational workflow, expanding functionality with our farmer-focused mobile apps such as Farm Advantage, etc., and utilizing AI to significantly increase broker capacity and automate tasks. These actions not only improve efficiency but strengthen client engagement and reduce friction onto our platform. Taken together, these pillars position StoneX to continue expanding market share, deepen client relationships, and increase margins, all while building a more interconnected, more digital, and more scalable global hedging franchise. Moving on to the final slide, slide 16.

This was another consecutive record quarter highlighting the strength of our diversified business. We achieved earnings of $139 million, a diluted EPS of $2.50, and an ROE of 22.5%, which represents a 32.4% return on tangible book equity. Our earnings and diluted EPS were up 63% and 48% respectively. We remain well-positioned to capitalize on current market volatility due to our diverse offerings combined with our fortress balance sheet. Our assets under management and custody continue to grow as we are increasingly seen as the largest alternative to banks and an easily accessible ecosystem for banks as well. Our unique ecosystem captures clients across multiple touchpoints, and we continue to dedicate ourselves to better serve our growing client footprint. The enormous total addressable market still available to StoneX will continue to power growth in the years to come.

We are very proud of the StoneX team for their steadfast commitment to clients throughout challenging market conditions, and we remain focused on providing the industry's most robust and comprehensive financial ecosystem. Operator, please open the lines for questions.

Operator (participant)

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one-one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one-one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeff Schmitt with William Blair. Your line is open.

Jeff Schmitt (Research Analyst Financial Services and Technology)

Hi. Good morning. In the physical trading business, obviously a really strong quarter there due to precious metals. How much of that strength came from cross-selling RJO clients, or was that really kind of mainly volatility-driven? And then just curious how that business is trending here in January, February with gold not at all-time highs pulling back.

Philip Smith (CEO)

Hi. This is Philip. There was limited upside from the precious metals revenues and volumes from traditional R.J. O'Brien client base. So I think a lot of it was primarily driven on the fact that we saw a heightened level of interest in this space, both in a wholesale and also in a retail level. Now, you'll recall in 2019, we purchased a company called Coininvest, which we subsequently rebranded as StoneX Bullion. That was our direct-to-consumer retail trading platform. That has exceeded our expectations. And I think it's fair to say that when it was purchased, it was making probably $1.5 million a year. They've achieved that in a single day recently. So I think that's been a transformational expansion of our ecosystem because it gives us that ability to go directly to consumers.

And at the same time, the wholesale business is also supplying physical material and refined products, mint-produced coins and small bars, to other B2C companies, which themselves have been benefiting from the recent uptick in interest from a retail level. At the same time, the disconnect that we often see in these markets and have seen for many years where there is a physical price disconnect between jurisdictional country A and country B. Because of our ability to move physical gold around the world sufficiently, we can take advantage of that. In 2001, we saw that exact situation occur where there was a significant shortage of silver in India. India is not the easiest places for people to move gold into, but we have been probably one of the number one in India's importer of gold and silver in India for several years.

But that ability was crucial in taking advantage of supplying to that market where there was significant premium available to us and premium distributors of that location. We do see that from time to time when there are shocks, there is an oversupply and unmet demand in specific areas. That ability to move material as quickly as possible is crucial in taking advantage of that fundamental inevitability. It was very little to do with private promises and acquisition and claims. Very much to do with the increased interest, both wholesale and retail level.

Jeff Schmitt (Research Analyst Financial Services and Technology)

Okay. Thank you. And then on the cost synergies, those appear to be on track, or maybe you're realizing them even faster than expected. As you dig into the RJO business, I guess, are you seeing any potential upside to the $50 million, or is it still kind of too early to tell?

Bill Dunaway (CFO)

Yeah, Jeff. I mean, at this point, I think that we're still kind of just confirming the 50. I mean, I think that it's coming along as we talked about last quarter. I think that we've seen some of the wins thus far. They'll continue to pick up throughout the rest of the fiscal year. The kind of milestones we have will be later this year. Over the summer, we will migrate the largest entities to combined. So kind of coming out of fiscal 2026, I think we'll probably be in a pretty good spot of having about 40 of them kind of in the run rate. And then going forward, we'll capture the rest over fiscal 2027. But I think we're still kind of affirming at this point that $50 million figure.

Jeff Schmitt (Research Analyst Financial Services and Technology)

Okay. Great. Then just one quick one on the institutional segment. The securities business there had a great quarter. You'd mentioned moving into U.S. stocks in the market maker business. I'm just curious how much of the mix that is. Then maybe if you could talk about that. The rate per million there, I know you've talked about that inflecting up, but are we at a point where we're at a better run rate there, or is there more upside to that? Thanks.

Philip Smith (CEO)

Yeah. I think that part of the business is still quite early stages in terms of its expansion. Most of the increase we've seen is very much across equities, market making, fixed income, and prime services. So as a subcomponent, we continue to grow in that space. That space has probably the least formal market of all areas, but it is one small step at a time. We continue to see growth, but not at the level and not at the level of maturity that you will see, say, in now our market making business for our unlisted ADRs, where we continue to be ranked number one and have been for the last 11 years. So we'd love to be in that situation for mainstream equities, but it's a big market, and we're not there yet. But we're very pleased with the progress made so far.

Jeff Schmitt (Research Analyst Financial Services and Technology)

Great. And is that rate per million? I mean, do you expect that to inflect up more, or are we at a point where maybe it's a better run rate?

Bill Dunaway (CFO)

Yeah. I mean, I think at this point, Jeff, it's probably kind of getting back to more of a run rate. I mean, it kind of really dipped as we moved into some of those stocks. And as our institutional sales and trading businesses picked up and some of the other the equity market making continued to perform, I think we've gotten this is obviously a high watermark, right? We're 320-ish, and we were a year ago to I'd say a year ago, we were kind of at the low inflection point. I think somewhere in this 300, a little over 300 range is probably a more normalized rate for us now going forward.

Jeff Schmitt (Research Analyst Financial Services and Technology)

Okay. Great. Thank you.

Operator (participant)

Thank you. Please stand by for our next question. Our next question comes from the line of Dan Fannon with Jefferies. Your line is open.

Daniel Fannon (Managing Director and EquityResearch Analyst)

Thanks. Good morning. Just wanted to follow up on the environment. And obviously, you've seen a lot of movement in the underlying, whether it's gold, silver, all this stuff. So I was just curious about the health of the customer kind of post-quarter, if there's been any changes in losses or as you just think about activity levels still being good and just the environment being constructive versus maybe this at points in time we've seen bad volatility. And so just want to understand if this is still a constructive environment for you guys.

Philip Smith (CEO)

Yeah. I think we've discussed this previously. I mean, we obviously benefit from increased volatility in the markets across most user products within the StoneX ecosystem. But when it reaches a point of extreme volatility, that stress can become heightened and more of a concern for our underlying clients. I think the closeness of the relationship helps us through that. We obviously don't want our clients to get into a situation where such positions or such transactions put them in a hazardous situation. I think identifying concerns and talking to our clients, speaking with them on a daily basis, and just walking them through how they are hedging their positions, but at the same time, ensuring they have sufficient liquidity to stay at the table and to not be forced into taking off their hedges. It's an engagement exercise. We obviously like the volatility.

We don't like extreme volatility because of that potential negative impact on our clients. But that's been the case for many years for us.

Daniel Fannon (Managing Director and EquityResearch Analyst)

Understood. Then just on the R.J. O'Brien deal, in the context of what you see as the kind of most near-term kind of cross-sale opportunity in the context of some of the there weren't numbers that were outlined when the deal was announced, but obviously, you've talked about multiples in size versus the expense synergies. So just want to, again, if you could reprioritize kind of where you see those opportunities and what we should see as we think about the next couple of quarters.

Philip Smith (CEO)

Well, I mean, it's a sort of dual approach in terms of we have the integration process itself. And as we said, we've begun that with the U.K. entities. That's been completed. We're seeing the schedule and timelines for further integration and building up to the largest part of it in the U.S. That is a big part of the potential cross-sale. Because don't forget, until such time as we kind of consolidate the entities, there's still a case of repapering with other legal entities within the StoneX Group. There's still an education process in many areas. So we talk about comparing, and while we didn't specify the potential revenue expectations from cross-selling, we do anticipate based upon looking at our OTC, as an example, revenues versus our exchange-traded derivatives revenue and how that's morphed over the years and the revenue attributable to the OTC side of the product.

We can then superimpose that onto a lot of the RJO revenue. It's not a guarantee. It's not a certainty. There's work to be done. There's education exercises to be done. We have to help all the RJO employees to sort of be confident enough and be able to engage with the clients. And most importantly, make sure that it is the right thing for all the clients involved. We talk about some simple wins in that R.J. O'Brien across the entire organization did not have the ability to offer foreign exchange. That's a relatively mainstream vanilla product for us within StoneX. So things like that, we are gradually introducing more and more capability to across the organization. And even before the integration is completed, we're trying our best to ensure that we can get as much capability and products in front of our incoming R.J. O'Brien clients as possible.

But it's lots we've had a lot of small wins that have built up, and we continue to encourage this, and we work with it, and we circulate internally some success stories. But we're not at the point to be able to say, "Here you go. We reckon it is this about so far." But we continue to be very optimistic about the potential there.

Daniel Fannon (Managing Director and EquityResearch Analyst)

Understood. Okay. And then, Bill, just in the context of the expenses and since this is a full quarter with both the last couple of acquisitions in there, as we think about the run rate and the kind of go-forward, anything to normalize based on integration or other things from an expense perspective or areas where you think the growth and/or movement at a line item level might be most?

Bill Dunaway (CFO)

I mean, I think we'll see, as you see every year, right? Our Q2 is the start of the calendar year, right? So we'll see a tick-up in non-variable compensation kind of related to the annual merit increases, kind of all the taxes and benefits and all those kind of things reset. So we'll see a tick-up from there. But I don't think there's other line items, Dan, that we would expect to materially change other than as we see some of the synergies come through, we should see, hopefully, some downtrend on that non-variable comp line as well as some of the tech spend and on the longer term is where you'll start to see some occupancy, etc.

But most notably here, start of the calendar year will be kind of there will be a bit of a tick-up on the non-variable compensation line.

Daniel Fannon (Managing Director and EquityResearch Analyst)

Got it. Okay. Thank you.

Operator (participant)

Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. Please stand by for our next question. Our next question comes from the line of Lucas Jaeger with Liberty One Investment Management. Your line is open.

Lukas Jaeger (Junior Investment Analyst)

Hi. Good morning. Can you hear me okay?

Philip Smith (CEO)

Yes. Good morning. We can hear you, Lukas.

Lukas Jaeger (Junior Investment Analyst)

Good morning. Okay. So longtime listener, first-time caller. I have a question in regards to sort of the pre-existing business of StoneX, not really focused on the R.J. O'Brien and Benchmark acquisitions. This time last year, some of the discussion was within the securities business and sort of this sort of client group in the active ETF space sort of adding an additional piece of growth. And I guess I'm just sort of further looking for a discussion on some client groups that are going to come into the pre-existing StoneX client business that will kind of show sustained interest within sort of your risk management contracts and trading services. Thanks so much.

Philip Smith (CEO)

Not quite clear in terms of the question there, but from an institutional perspective, we do see a big sort of sizable shift in terms of the client space in the regional banks in the U.S., for example, where what we're seeing now is that if you turn up to one of the regional banks knocking on their door and saying, "I'd like to talk to you about this particular product," they're not interested. What they are becoming very interested in with us is at the multitude and the breadth and depth of our product offering. So we're suddenly seeing some dividends coming through with regards to our ecosystem, which we talk about on a near-constant basis and very proud of. But it's now becoming a big distinction between us when talking to new and potential clients just in the regional community bank space in the United States.

So that's where we're optimistic in terms of this could be another phenomenal uptick in terms of revenue that we're looking to benefit from, but also to be able to solidify the relationship we have with said banks. Because what we increasingly can see across all of our products is where we fit in, and I guess, in the level of priority or relevance from their perspective to us. We aspire to be a one-stop shop offering as much capability and product to as many clients as possible through a single avenue through to StoneX and our ecosystem. But it's starting to become a door opener in ways that perhaps we weren't necessarily expecting, just like we weren't expecting the growth in our build-out of our fixed income business in APAC to hit the ground so quickly and build so rapidly.

Because I don't think we fully understood the lack of alternatives, lack of service, and lack of localized dealing desks in that region. So there are a lot of areas where we're looking to expand our capability, but at the same time, sometimes it takes a while for us to really get the benefit of something perhaps we weren't necessarily expecting in the first place. And the introduction into those regional banks has demonstrated that.

So we will talk to household names in terms of regional community banks, but the fact that we're able to offer a multitude of fixed income products, we're able to offer them access to SWIFT, we're able to offer them payments, we're able to offer them overseas equities, ADRs, things like that, which you previously would be expecting them to be using multiple providers for, they can now do it in a single avenue. So that's where we see some sizable momentum coming down the track.

Lukas Jaeger (Junior Investment Analyst)

Perfect. Thank you. I appreciate the additional color. And despite my poor phrasing, you answered my question pretty well. So thank you so much. Moving on to sort of the FX and sort of CFD area of the business, I'm kind of just curious. So I saw that the rate per million is down around 30% compared to last year. And I was hoping to unpack sort of the reasons for that. My understanding would probably be that's largely because of some lower volatility. So I think the CVIX average from this period compared to the last period is down around 15%. But I'm wondering if you could further unpack that rate per million figure just so that I can understand it. Thanks so much.

Bill Dunaway (CFO)

Sure. I think I'll take that. So I mean, last year, just a reminder, that was probably the highest rate per million that we've seen out of the business since the acquisition of Gain Capital back in 2020. So we did still kind of see I mean, the FX space, both as a reminder, in the FX CFD space, we do that both on the institutional side as well as obviously the bigger piece of it's in the self-directed. But overall, I think we continue to see kind of the FX volatility being somewhat muted and not the greatest environment for us. And obviously, it benefited tremendously in our physical space and the commodity space from the movements in gold. But it proved to be a bit more challenging in that space on the retail side with the markets moving around. So a combination of everything.

So I would say that it's not the rate per million that we're seeing now isn't out of line with expectations. I think it was more last year was just such a bang-up quarter for us on the retail side with really strong spreads. So I would say that this is probably a bit more normalized environment, something in the, if you're looking at the self-directed retail, we were at 110. We've kind of averaged over the last four quarters around 116. And I would say so that it's not out of the realm of what the expectation is. It's just last year's comparable period of 185 was very strong.

Lukas Jaeger (Junior Investment Analyst)

That makes complete sense. I mean, that sort of falls with what the graphs on Bloomberg tell me. So I appreciate the additional color. Is there any particular currency pairings that that sort of self-directed client group is interested in, just as a follow-up question?

Philip Smith (CEO)

No, I don't think we can step that into the mix. It's not as easy to sort of simply say, "Yes, this is the pair that we find more interesting than others." I think what you'll find is that the volume going through certain currency pairs in Euro/Dollar is probably one of probably the largest currency pair that we trade. But it's market-driven. So our clients in the wholesale FX business will be looking to hedge, looking to hedge their exposure, looking to lock in forward rates. And our retail CFD business is much more of a looking to take advantage of market moves at a retail level. But it will vary. And it's not something we really publish, but you would expect currency pairs, and I include gold in those currency pairs because it trades like a currency where Dollar/Euro, Dollar/Gold, Dollar/Silver will be consistently high.

Lukas Jaeger (Junior Investment Analyst)

Makes sense. Thanks so much. I appreciate you guys for answering my questions.

Operator (participant)

Ladies and I show. no further questions in the queue. I would now like to turn the call back over to Philip for closing remarks.

Philip Smith (CEO)

Thank you, operator. A huge thank you to everyone who's connected to make one-on-one strategic decisions from the quarter. Thank you all.

Operator (participant)

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.