Marex (MRX) Q2 2025 Earnings Call Transcript

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DATE

Wednesday, August 13, 2025 at 9:00 a.m. ET

CALL PARTICIPANTS

Group Chief Executive Officer — Ian Lowitt

Group Chief Financial Officer — Rob Irvin

Chief Strategy Officer — Paolo Tonucci

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RISKS

Market Making Revenue Decline-- Market making revenue fell 17% to $57 million in Q2 2025, due to a challenging agricultural environment from tariff announcements and elevated prices.

Hedging Solutions Revenue Drop-- Hedging solutions revenue decreased by 15% to $20 million in Q2 2025, with management citing "tariff uncertainty" leading to a reduction and shortening of client hedging activity.

Interest Rate Sensitivity-- Ian Lowitt noted that a we do recognize that in all likelihood, there will be rate reductions, and I think the impact of rate reductions, as we described, is relatively modest—about $20 million of PBT for a 100 basis point move. So we expect some level of headwinds from that, but we think that we can offset those through the remaining growth that we see around the franchise.

TAKEAWAYS

Adjusted Profit Before Tax-- Adjusted profit before tax rose 16% year over year to $106 million, and increased 10% sequentially from the previous quarter (non-IFRS).

Revenue-- Revenue climbed 18% to $500 million in Q2 2025, First-half 2025 revenue rose 23% to $967 million.

Margin Expansion-- Adjusted margin for the first half of 2025 expanded to 21%, up from 20.2% in the first half of 2024; Adjusted margin held stable at 21.3% in Q2 2025.

EPS-- Adjusted basic EPS reached $1.08 per share in Q2 2025, up 13% year on year.

Return on Equity-- Adjusted return on equity remained high at 31.4% in Q2 2025.

Clearing Segment-- Clearing revenue increased 12% to $139 million in Q2 2025; Adjusted PBT for clearing grew 2% to $71 million, as margins decreased to 51% in Q2 2025.

Agency & Execution-- Agency and execution delivered record revenues, up 59% to $261 million in Q2 2025; Securities revenue grew 80% to $169 million in Q2 2025; Energy revenue rose 31% to $92 million in Q2 2025; Adjusted profit before tax more than tripled, as margins rose to 26% in Q2 2025.

Market Making Segment-- Market making revenue fell 17% to $57 million in Q2 2025; Metals posted $41 million in revenue in Q2 2025 (second-best quarter for metals), while agriculture saw a $9 million revenue reduction in Q2 2025 due to tariff announcements and elevated prices.

Solutions Segment-- Solutions revenue dropped 9% to $41 million in Q2 2025; Hedging solutions revenue decreased 15% to $20 million. Financial products revenue remained stable at $21 million in Q2 2025.

Net Interest Income-- Net interest income was $35 million in Q2 2025, down $31 million from the prior year amid rising interest expense from increased structured note balances and recent debt issuances.

Liquidity and Funding-- Surplus liquidity reached $2 billion above the regulatory minimum at the end of Q2 2025; $500 million in senior notes were issued in May 2025, Total funding rose to $5.7 billion from $3.8 billion at year-end.

Free Cash Flow-- Net cash increased by $779 million in H1 2025.

Public Float-- Shareholder overhang was reduced, with pre-IPO private equity holders now at 17% of issued shares, down from 64% at IPO as of mid-April 2025, approximately fifteen months post-IPO.

Acquisition Performance-- The Cowen Prime Brokerage integration drove significant revenue, with an H1 2025 run rate well above $200 million compared to $85 million pre-acquisition. Arna, which closed at the end of Q1, is performing as forecasted at around 50% above pre-acquisition levels; $150 million in aggregate M&A premium paid over three years produced nearly $150 million profit after tax on a run rate basis.

Operational Resilience-- Marex Group plc processed record April volumes successfully, confirming operational scalability.

Dividend-- Quarterly dividend announced at $0.15 per share, payable September 11.

Short Seller Report Rebuttal-- CEO Lowitt stated, "There are no off-balance sheet entities at Marex Group plc Ordinary Shares." and clarified, "all of our activity is consolidated in our reporting and in our public financials."

SUMMARY

Management reported record adjusted profit before tax in Q2 2025, with both the agency and execution and securities divisions delivering notable revenue gains and margin expansion. New and existing acquisitions materially contributed to top-line growth, with Cowen Prime Brokerage and Arna highlighted for exceeding post-acquisition expectations. The balance sheet was strengthened through significant new debt issuances, leading to record surplus liquidity and an expanded funding profile to support further M&A and client activity. A significant reduction in private equity shareholding improved public float and increased daily trading volumes, further supported by Russell index inclusion as of June 2025. Management stated they reviewed and rebutted the allegations raised in a recent short seller report with their audit committee, addressing several of them publicly, emphasizing full audit oversight and transparency, while ongoing headwinds in agriculture market making and interest rate exposure were identified as areas of active monitoring.

Fitch updated its outlook on Marex Group plc to positive in May 2025, citing strong earnings and franchise diversification.

Prime services—especially synthetic swaps and financing—saw customer additions and contributed to margin improvement across agency and execution.

Marex Group plc stated its pipeline contains six or seven live M&A transactions, with the largest being WinterFlood; most are Europe-focused and under the £100 million size of WinterFlood.

Operational indicators suggest July activity levels were comparable to Q2 2025, despite reported market softness in some asset classes.

The company expects no significant share dilution above 1%, barring a potential buyback, which is not currently planned but may be considered in the future, as stated by management.

INDUSTRY GLOSSARY

Structured Note: A financial instrument combining traditional debt with embedded derivatives, frequently used to customize exposure or hedge risk for institutional clients.

VAR (Value at Risk): A quantitative risk metric estimating the maximum daily loss over a specific period with a stated confidence level.

Prime Services: A suite of services—including financing, clearing, and execution—offered to institutional investors, often leveraged by hedge funds and asset managers.

Agency and Execution: Services enabling clients to transact and clear securities and derivatives, either on an agency basis or as principal.

Full Conference Call Transcript

Ian Lowitt, Group CEO, and Rob Irvin, Group CFO. 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. Risk factors that may affect results are referred to in Marex Group plc Ordinary Shares' press release issued today. The forward-looking statements made today are as of the date of this call.

Marex Group plc Ordinary Shares does not undertake any obligation to update their forward-looking statements. Finally, the speakers may refer to certain adjusted or non-IFRS financial measures on this call. A reference reconciliation schedule of non-IFRS financial measures to the most directly comparable IFRS measure is also available in Marex Group plc Ordinary Shares' earnings release issued today. A copy of today's release and investor presentation may be obtained by visiting the Investor Relations page of the website at marex.com. I will now turn the call over to Ian.

Ian Lowitt: Good morning, and welcome to our second quarter 2025 earnings call. In the first six months of the year, we generated $960 million of revenue and $203 million of adjusted profit before tax, up 27% on the first half of last year. Our second quarter was yet another record, with adjusted profit before tax of $106 million, up 16% year on year, and up 10% sequentially on a record first quarter. These are terrific results, and I'm delighted with the performance, which reinforces our belief that we have built a platform that generates high-quality, diversified earnings and is set up to deliver growth across a range of market environments.

While the second quarter had, as I will discuss later in my remarks, some positive factors, the operating environment was more varied. So being able to outperform last year's very strong quarter is heartening. These results validate our strategy and the way we are executing.

Those of you who have followed our earnings calls and our Investor Day will know I have cited the acquisition of Cowen Prime Brokerage as potentially the most significant acquisition we have made to date. I remain positive about the opportunity even when the business had a slow start in 2024. Prime is proving a huge success for us. This is a business which had $85 million of revenue at Cowen, and now on the Marex Group plc Ordinary Shares platform, is running well above $200 million of revenue on an H1 run rate basis. Our clearing business also continues to perform strongly as we grew our balances, adding new clients and increasing activity with existing clients.

Our success with larger, more financials-focused clients continues to drive higher clearing volumes. We continue to execute on our growth strategy while realizing the benefits of previous bolt-on acquisitions. Arna, which closed at the end of Q1, is running as forecasted at around 50% above pre-acquisition levels as the anticipated day-one synergies were captured. I'll be talking later in my remarks about the cumulative effect of all of our acquisitions, which is considerable. And we are confident we will see more opportunities with an attractive M&A pipeline in the second half of the year. We proactively managed our risk, remaining in close dialogue with our clients, through periods of uncertainty and elevated volatility, ensuring minimal losses in the quarter.

Critically, we strengthened our liquidity position through the quarter, with a $500 million senior notes issuance that we executed in early May, as we continue to extend and diversify our funding sources. We held a record level of liquidity at the end of the quarter, with $2 billion of surplus versus the regulatory requirement. We also completed our second successful equity follow-on transaction in mid-April. The residual position held by our pre-IPO private equity shareholders is now just 17%, down from 64% at the IPO. Increasing the public float was an important strategic goal, and we have been successful at this. On slide five, we have laid out some of the key metrics that we use to assess our performance.

Second quarter revenues grew 18% to $500 million, delivering adjusted PBT of $106 million. Revenue in the first six months of the year grew 23% to $967 million while margins expanded to 21%. Revenues per front office FTE increased to $1.5 million on an annualized basis, reflecting the significant effort our businesses have made to improve our productivity at the desk level as we invest in growing each of our segments.

I had hoped coming into this week to be able to focus my remarks entirely on the success the firm was enjoying as we have continued to execute our strategy. On Tuesday of last week, a short seller report was published. The allegations in the report, if true, were serious, and out of respect to the market, I want to spend some time providing a response before we move on to the detailed financials in Rob's section. I've been a vocal advocate of the benefits of being a public company. On earnings calls, I've shared how I see the listing as having improved our brand, raised awareness about our firm, enabling us to win more business.

It provides the currency for acquisitions and compensation paid in stock aligned staff, investors, and indeed all stakeholders. Part of being a public company, though, is investors can short your stock. And indeed, people can publish reports about your firm, with no requirement to be accurate. As unpleasant as it is to be the focus of a short report, I accept that it is a part of the way the market operates, and while this imposes a cost on good companies like Marex Group plc Ordinary Shares, it is part of the ecosystem which ensures markets function well. We have analyzed the report thoroughly and can rebut all of the allegations.

While I won't go point by point through every rebuttal, I do want to address several of the allegations. It is simply untrue that the two Luxembourg entities stated in the report are off-balance sheet. There are no off-balance sheet entities at Marex Group plc Ordinary Shares. And all of our activity is consolidated in our reporting and in our public financials. All activity, including that booked in the Luxembourg entity, is reviewed by our accountants Deloitte. The Luxembourg entity, VPF, was not created by Marex Group plc Ordinary Shares but acquired in 2020 as part of our acquisition of BIP, a market maker in listed equity futures and options.

This is the only activity that was booked in BPF, which operated from 2020 to 2023, or its replacement entity, Marex Fund. It is important also to appreciate, in addition to the limited purpose of the entity, what a small entity this is. While the local Luxembourg reporting requirements present derivative longs and shorts with a single counterparty on a gross basis, on the face of the balance sheet, IFRS accounting would report these net. On that basis, the net asset value in the fund is currently $2 million, and it has a VAR of around $100,000. The maximum NAV over the past three years was $8 million. We have never booked any OTC transactions in the entity as asserted.

It is simply a way the equity options market maker faces the exchange. It is also untrue that the acquisition of BIP was not approved by the board as asserted in the report. It was. The transaction was presented, reviewed, and explicitly approved by the board. Anything else would indicate a failure of governance. The original VPF fund was audited by who remained the auditor of the fund after being acquired by Marex Group plc Ordinary Shares. When we chose to dissolve the original entity and replace it with the new Marex Fund, we had Deloitte, who are the auditors for the entire firm, also audit this very small fund.

Marex Group plc Ordinary Shares' management initiated a discussion with Deloitte, and we agreed together with Deloitte that we would not be renewed as statutory auditors for the fund, which resulted, as is required technically when one is changing auditors, in a resignation filing with the Luxembourg company's register. We have since reappointed as the auditor for statutory reporting purposes of the Marex Fund, given their prior experience. However, Deloitte remains the auditors of the group into which the fund is consolidated, and they have full access to the financial records. Acquisitions have been an important driver of growth for the firm. One consequence of that is complex consolidation accounting.

Getting this accounting right is important, and we and our auditors spend a lot of time on this. The report asserts that some of this is hard to follow, which is true. And also that MCML and EDNF entity is not consolidated. Those of you who have followed the firm will recall that when we acquired EDNF, one of the key structural elements of the transaction was ensuring we were not exposed to the ongoing liabilities of the UK entity ED and F Mann Capital Markets Limited or MCML, which we knew was liable for an FCA fine and ongoing litigation with various European taxing authorities.

It was precisely to avoid this that we structured the UK purchase as an asset purchase. In short, we do not need to consolidate because we never bought this entity. The report also alleges that the firm's market-making revenue in capital markets must be overstated because revenues in the segment have grown while volumes have declined. Within Market Making and Capital Markets, we include not just the equity option market making, which uses the Luxembourg fund, but also other businesses including our corporate bond market making, stock loan, and various other activities. This activity has grown over time together with the firm. The volume cited in the report applied only to the exchange-traded component of this broad set of activities.

This is disclosed. So there's no mystery here. We removed this volume KPI in 2025 as we believed it was no longer a useful comparison to our revenue.

The broader business is growing, and a subset of it, ironically, the equity option market making, which uses the Luxembourg entities, and is being wound down as it is no longer competitive given new entrants in the marketplace, is declining. The report draws attention to how cash flow is accounted for. It is true that we include the proceeds of our structured note issuance in operating cash flow as well as the proceeds of our debt issuance. This follows IFRS accounting and is completely consistent with how other large financial institutions report cash flow.

We fully disclose this, highlighting this as a row as well as in a footnote, so analysts who have a different view of where on the cash flow statement they want to see these items can make those adjustments. But for the avoidance of doubt, this debate is about where on the cash flow statement cash is reflected, not a debate about the total level of cash, which is the same no matter where one counts the subcomponents. The report notes that our structured notes are cash consumptive in part. This is true because some of the proceeds are required for hedges on the embedded investment return. There is, again, no mystery in that.

Part of the benefit of being a public company is the number of eyes on the firm. Our auditors, Deloitte, have had to audit us to a very high standard consistent with us being listed. We have had an unqualified audit opinion on our financial statements from Deloitte in each of the ten years they have audited us. In addition to the rating agencies, S&P and Fitch, our regulators, and the exchanges we are members of all engage with us actively and review and audit our activity.

We reviewed the short report with our audit committee, which includes very seasoned financial professionals, including our board member who is the retired CFO of CME, who is also on the Financial Accounting Standards Advisory Council of the FASB. We examined the allegations on a point-by-point basis, and the audit committee is completely comfortable with our rebuttal. I'd like to thank our investors, our debt holders, and our clients who have engaged with us over the past week. You all completely understandably took the allegations seriously but were open to hear our response and listened with an open mind and were convinced. We can now return to the main purpose of our call, our earnings. Rob?

Rob Irvin: Thanks, Ian, and good morning, everyone. As Ian said, we are really pleased with the strength of our performance in the first half of the year. With $967 million of revenue and $203 million of adjusted profit before tax in the first half of the year, this reflects the strength and scale of our business. On an adjusted basis, first-half margins increased to 21%, up from 20.2% last year, reflecting margin expansion in agency and execution as we built out our prime services business and the benefits from restructuring some of our desks. The second quarter was perhaps more noteworthy than the first given the more varied market environment that we experienced.

Q2 revenue of $500 million was 18% ahead of last year. Strong growth in agency and execution, steady progression in clearing, more than offset softer performances in hedging and investment solutions and market making, demonstrating the value of our diversified model. Total reported costs grew 16%, broadly in line with revenues. Front office costs were up 21%, reflecting strong revenue performance and continued investments in future growth. Control and support costs were up 16%, primarily driven by investments in support functions, which included investments relating to recent acquisitions and our compliance with Sarbanes-Oxley. Margins were broadly stable versus the second quarter of last year at 21.3%, delivering adjusted PBT of $106 million, up 16% versus Q2 of last year.

Our adjusted return on equity remained very strong at 31.4%, all of which meant we delivered an adjusted basic EPS of $1.08 per share, up 13% year on year. Focusing now on our segmental performance in Q2. Clearing revenues grew 12% to $139 million, as we grew both client balances and volumes whilst managing risk well amid elevated volatility. We also saw a contribution from the recently closed acquisition of Arna this quarter, adding around $7 million of revenues. Adjusted profit before tax grew 2% to $71 million, as margins decreased to 51%, reflecting continued investment in the business as we expanded into new geographies, including Abu Dhabi, APAC, and South America.

Q2 was a record quarter for agency and execution as we grew revenues 59% to $261 million. Security revenues grew 80% to $169 million, primarily driven by the continued expansion of our prime services offering, including growth in security-based swaps, and Ian will say more about this shortly. Securities also benefited from growth in all asset classes from an increase in transaction volumes. Energy revenues grew 31% to $92 million, reflecting the combination of record volumes, strong demand for our environmental offerings, and continued expansion of large desks in oil and energy.

Adjusted profit before tax more than tripled to $69 million as margins improved from 14% to 26%, driven by improvements in productivity as well as growth in higher-margin activity, notably in prime services. Market making revenue declined 17% to $57 million compared to an exceptionally strong performance in Q2 last year. We saw heightened market activity across copper, aluminum, and nickel. However, this represented a small increase on the first quarter despite a mixed environment by asset class, as we benefited from diversification across the business. Metals posted its second-best quarter on record with revenues of $41 million, supported by continued strength in precious metals, partially offset by continued tariff uncertainty on base metals.

Energy also performed strongly, benefiting from the market volatility, driving increased revenues across all energy desks. This is a challenging environment for agriculture, with revenues down $9 million due to tariff announcements and elevated prices, notably in cocoa and coffee, which reduced market liquidity. Solutions revenues reduced by 9% to $41 million, challenging market conditions, notably the volatility that followed the announcements of US tariffs in April. Hedging solutions revenue fell by 15% to $20 million as tariff uncertainty led to an overall reduction and shortening of duration in client hedging activity before recovering towards the end of the quarter.

Financial products revenue was broadly stable at $21 million as tariff announcements in April caused an initial slowdown in client activity, which has subsequently normalized. Margins reduced to 15% due to investment in our new, more scalable technology platform, which will position us well for future growth.

Now looking at the first half performance by segment. Clearing revenue grew 15% on last year, driven by the same higher market volatility I mentioned for Q2, and the additions of new clients leading to higher volumes and client balances. Margins remained strong at 49%, albeit lower than last year, reflecting an increase in performance costs and investment as we expanded into new markets. Agency and execution was the strongest performer with a 50% increase in revenues and strong profit growth as margins expanded to 25%. This was driven by strong performance in all asset classes within securities, including particularly from our prime business and record volumes in energy.

Market making was broadly flat versus last year as the second quarter was more challenging for parts of the business compared to a very strong period for metals last year, as I previously mentioned. Hedging and investment solutions revenues were flat year on year, also reflecting a more challenging second quarter compared to the first. Make a few comments on our performance versus overall exchange volumes on slide 10. As we have said before, we recognize that the relationship between volumes and revenues is directional, hence why we provide both the standalone quarter and the longer-term trailing twelve-month view on the slide. There's also activity that flows through the revenue line that is not included in the volumes.

You can see this specifically in securities with an agency in execution, where volumes that we present only account for around a third of total revenues or half of revenues once you exclude Prime. Volumes on exchanges don't capture volumes from businesses such as equities, repos, prime services, and other OTC activities, which are part of our revenues and explain, for example, the outperformance in agency and execution this quarter. Viewed in aggregate, we continue to gain market share across our platform, and our performance continues to outpace the broader market, which itself continues to grow at a healthy rate. Now I'll cover net interest income.

Our NII for Q2 2025 was $35 million, down $31 million compared to Q2 2024. We think about NII and its two components parts. Firstly, interest income, which was $181 million for the quarter and broadly flat on Q2 2024. Although total average balances increased from $13.5 billion to $18 billion, this growth was broadly offset by a decrease of 100 bps in average Fed funds. Interest expense increased by $28 million to $147 million, as we had an additional $1.4 billion of average structured note balances and completed two senior debt issuances of $600 million in November 2024 and $500 million in May 2025.

This meant we had record levels of liquidity as we went through the second quarter and allows us to position the firm strongly to support our clients and grow organically. However, this does create a headwind to net interest income. As you can see, we've continued to evolve our NII disclosure and have split out our client balances from our house balances. Average clearing balances increased to $12.8 billion for the quarter, reflecting client growth and increased client activity.

Turning now to our balance sheet. A reminder, 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're left with a corporate balance sheet that carries corporate cash and other assets against group liabilities, including our notes portfolio and senior note issuance. Total assets increased to $31.2 billion at the end of June, driven by growth in client balances in clearing and growth in securities, which includes prime. Our debt securities have increased to $5.3 billion, enabling us to increase our liquidity and support future business growth.

We continue to manage our capital and liquidity risk prudently, maintaining significant headroom above minimum requirements to ensure we're well-positioned in periods of market stress. At the end of the second quarter, total funding was $5.7 billion, up from $3.8 billion at year-end, with $2 billion of surplus liquidity to support our day-to-day operations. Our structured note program remains a core source of funding for us, and we've further extended our funding maturity profile with a $500 million US dollar senior debt issuance in May. This also supports our investment-grade credit ratings from both S&P and Fitch.

In May, Fitch upgraded its rating outlook for Marex Group plc Ordinary Shares from stable to positive to reflect our strong earnings and diversification of our franchise. Finally, we announced again a quarterly dividend of 15¢ per share for 2025 to be paid to shareholders on September 11.

We have a proactive and involved risk management approach at Marex Group plc Ordinary Shares. In market making, we are a client flow-driven business and do not take a directional view on prices. However, we do carry a small level of inventory to source client demand and capture the trading spreads. We transitioned to a new consolidated group VAR model, and each of the businesses was moved across separately during the first half of the year on completion of the model validation and backtesting. On this basis, average daily VAR was $4 million in 2025 and remains at a very low relative level compared to the growth in the overall business.

Daily average revenue in market making increased by 15% versus 2024 to just over $900,000 per day, maintaining a 100% positive weeks and months during the first half. In terms of credit risk, we had a realized credit loss of $700,000, representing just 0.1% of revenues, and reflecting our proactive and disciplined approach to credit risk management.

Now I'll hand you back to Ian.

Ian Lowitt: Thanks, Rob. As you see on slide 16, we have grown our revenue over the past two quarters, and with expanding margins, profit has grown somewhat faster than revenues. Although average exchange volumes were similar to the first quarter, which were up around 12% on Q4 levels, the month-to-month picture was more varied in May and June, after very high levels of activity in April. And although average volatility using VIX to illustrate was up 27% on Q1, there was a sharp spike in April before normalizing as the quarter progressed. As I've said before, our business model is set up to capture upside in such periods of elevated volatility, not reliant on them to deliver our profit.

We presented a version of the slide that you see here at our Investor Day, and many of you have told us that this is a helpful way to depict the quality and consistency of our earnings. On the left-hand side of the slide, we show the consistent growth in our average monthly PBT and the relatively low variability in the distribution, driving a high Sharpe ratio of six for the first six months of the year. Our profitability is not a result of a few great months; it is quite stable. This was true in the second quarter as well, as our range of monthly profitability was relatively evenly split.

On the right-hand side of the chart, we show the distribution of our daily average profitability on a trailing twelve-month basis through June 30 this year versus last year. You can see the distribution has shifted to the right by around $400,000 for the trailing twelve months to June 2025, from around $1 million to $1.4 million. The left tail is very small and includes only five negative days. You can also see in the right tail how we have successfully captured market opportunities with more above-average profitability days.

Given the strong growth in agency and execution revenues and margins in the first six months of the year, we felt it was helpful to break out the growth drivers in more detail. First-half revenues of $500 million were up 50% year on year, driven by strong growth in both securities and energy. Adjusted PBT margin expanded to 25% from 13% in 2024. This reflects growth in higher-margin prime services becoming a larger portion of agency and execution, as well as more gradual improvements in the segment excluding prime. Our prime business is a great example of how a business can flourish as part of Marex Group plc Ordinary Shares.

We always believed we could improve the business, in particular, by moving from a prime of prime to doing more business on balance sheet, we could capture additional economics. It is this on-balance-sheet activity, including both securities and synthetic total return swaps, where we have seen real success. We have seen increased client demand for financing, which is an important component within Prime. We also have an outsourced trading business, creating a balanced business here. Across all parts of our Prime offering, we have continued to see a significant increase in clients and have a strong pipeline. As the business grows, we are not naive about the risks. The primary risk is client leverage, which we manage very carefully.

Overall client risk remains low, and the client leverage at which we operate is below 50% and below industry averages. Turning now to our M&A activity in the first half on slide 19. Acquisitions are part of the firm's DNA. We believe we have a differentiated ability to source, negotiate, close, integrate, and capture synergies from acquisitions, where we add new capabilities, clients, and products to our platform. We have an impressive track record. What perhaps is underappreciated, though, is in aggregate how much these acquisitions, all of which are relatively modest in the amount of premium paid, can deliver in terms of growth and earnings.

The advantage of a number of smaller acquisitions is diversification and how they strengthen the firm more broadly. The concern with a number of smaller acquisitions is it adds complexity, which needs to be managed, but more relevant, it may, in aggregate, not have a material impact. But as you see, over three years, we have paid an aggregate of around $150 million in premium, and the profit after tax contribution is nearly $150 million on a run rate basis, largely but not exclusively as a result of the success with Cowen. This is around 30% of profits before considering our unallocated corporate center.

As you know, we recently announced the expected acquisition of WinterFlood, which is not included in these numbers but will contribute to our performance in 2026 and beyond. This deal gives us an opportunity to transform our existing Equity UK market-making business, which is currently small with around $10 million of run rate revenues and a margin in the low to mid-teens. WinterFlood makes around $100 million of revenue and is essentially breakeven. We are confident we can run the consolidated business at a margin above what we do currently in our smaller Marex Group plc Ordinary Shares business.

So we expect to materially improve its profitability by scaling the business, capturing efficiencies, and introducing broader products and services from our platform to a new set of clients. Before I conclude, a quick update on our shareholder overhang and trading liquidity. Following our successful secondary offering in mid-April and two subsequent smaller placings by our private equity shareholders, their residual shareholding is down to 17% of our issued share capital or around 12 million shares. To put this in perspective, this is around the same number of shares as the April follow-on transaction.

To be in this position some fifteen months post-IPO is remarkable, and we are grateful for the support our institutional shareholders have shown in helping us get to this stage. This has allowed our average trading volume to grow materially since this time last year, to now between $45 and $65 million per day. Our inclusion in the Russell indices at the annual reconstitution in June has also helped generate new demand for our stock, and we expect further index tracking flows to come as the increase in our free float is fully reflected in future.

So in conclusion, at the Investor Day, we said we expected to grow profits in a 10% to 20% range sustainably, with around 10% of this organic and the remainder from inorganic opportunities. In the first half, we delivered profit growth of 27%, somewhat below our ten-year average at 35%, but above our target range. We remain excited about the opportunities to continue to grow, adding new clients, and gaining market share. While we are aware of potential headwinds, rate reductions, we are maintaining record levels of surplus liquidity and managing our risk well, supporting our clients through periods of market volatility.

We were pleased that we were able to process the extremely high volume successfully on our platform in April, confirming the operational resilience of the firm and the scalability of our platform. We've had a great first half of the year and are very confident about the position of the franchise and our opportunity set. With that, I'd like to ask the operator to open the call for questions.

Operator: Thank you, sir. A question, please press 1 and 1 on your telephone and wait for your name to be announced. Once again, please press 11 on your telephone and wait for your name to be announced. We are now going to proceed with our first question. And the questions come from the line of Dan Fannon from Jefferies. Please ask your question. Your line is open.

Dan Fannon: Ian, wanted to follow-up on some of your comments and was hoping you could just clarify or state what your free cash flow was for the quarter as well as what it's been over the last twelve months.

Ian Lowitt: Sure, Dan. Thanks for the question. As you probably know, because this is a sort of half-year, we do file interim financial statements with the SEC, and the cash flow numbers are included in that particular filing. So I'll talk to cash flow for the first half, which is what the reported numbers are, as well as for 2024. As a financial services firm, we're obviously extremely focused on cash and liquidity management. In terms of the free cash flow that was created in the firm, the net cash increase in the firm in 2024 was almost $1 billion, and it increased in 2025 by $779 million to $3.329 billion. That's worth trying to just unpack that a little bit.

So as you try to understand what are the drivers of cash flow, you start with a reported PBT. So the reported PBT for 2025 was $202 million. The comparable number for 2024 was $296 million. Now the first set of adjustments you make to that is just to look at what are the elements of PBT that are noncash. In terms of this particular half-year, the two big components are the fair value of derivatives and then a number of other items. The fair value of derivatives is actually a loss this quarter of $84 million, and the other cash items are immaterial.

So actually, our cash PBT is $285 million, so $83 million higher than what it was in terms of reported PBT. In contrast to 2024, in 2024, the fair value of derivative was a gain of $188 million, and the other cash items were positive $73 million. So the cash version of reported PBT was $181 million. If you take those numbers and then reflect what are the taxes that are paid, what are the cash consumed through investments, to make acquisitions, and then for dividends, stock buybacks, things of that kind, what that gets you to from that $285 million is a reduction in terms of what the cash goes through, which is $47 million.

And that's consistent with the $51 million that we had in 2024. Then, of course, there are adjustments to working capital. So we're supporting clients through the activities that we do with them. We issue notes and debt, and then we utilize the cash to support our clients. And that increase in net working capital for 2025 is $733 million. So the total cash increase is $779 million, which includes the $47 million, which is the PBT adjusted for cash for all of our acquisitions, and for the dividends and the buybacks. And then an increase in working capital. And that's where we are.

The fair value of derivatives, that is important to appreciate, though, now is offset essentially against fair value adjustments that turn up in our working capital. So the fair value loss that we had that was included in the adjustment of PBT is offset by changes in the value of the structured notes and to the extent that hedges are conducted on exchange in changes in payables and receivables.

Rob Irvin: I think the only thing I'd add, Ian, is, Dan, as Ian said, we have filed unaudited accounts on the SEC website. But Deloitte did carry out a SAS 100 review of those to PCOB guidance.

Dan Fannon: Hopefully, that answered your question, Dan.

Dan Fannon: Yeah. That was very detailed. Appreciate all of that. And then just to follow-up, as we think about the remainder of this year, and also, I guess, into next, given the inorganic ads that you've made and you outlined in the deck, can you talk about expense synergies and realizations and just kind of what's left in terms of operational efficiencies that we could see coming out of the business, understanding also there's revenue upside, but thinking more around the cost would be helpful.

Ian Lowitt: Yeah. I think that in terms of the acquisitions that we described on that one particular slide, I think most of the synergies have really been captured. And as a general matter, I think most of the synergies we anticipate are revenue synergies from here rather than cost synergies. Hamilton Court, obviously, we closed quite recently. There, I think our expectation is revenue synergies more than cost synergies. Winter Flood, we haven't closed yet. And I suspect Winter Flood, driving up the margins will be a combination of revenue and costs.

But from our perspective, what's really important from these acquisitions is being able to forecast what the synergies are going to be, as was the case in Arnaud, although those were revenue synergies, and then capturing those, and I think we've been able to do that very successfully.

Dan Fannon: Great. Thank you.

Operator: We are now going to proceed with our next question. And the questions come from the line of Benjamin Budish from Barclays. Please ask your question.

Benjamin Budish: Hi, good morning and thank you for taking the question. Ian, maybe following up on the end of your prepared remarks around the sustainability of the business. Just looking into Q3, we kind of see exchange volumes around the board kind of softening just a little bit. It's mostly environmental and some very tough comps. I guess, where in your P&L, as we think about the back half of the year, do you think the kind of recent performance is most sustainable? I'm curious in particular about the securities business where you've seen some really phenomenal growth.

But where do you see the business being a little bit more resilient versus more susceptible, at least in the near term, to some market swings?

Ian Lowitt: Yeah. Look. I mean, I think that we thought about this a lot. I think we see strength in, frankly, every part of our business. Look. I mean, I don't think that we're anticipating the same level of growth throughout the securities business, but as we look at the set of things that are underway and the initiatives that are underway, we don't see that retreating, and we do see an opportunity to continue to grow. We've had a very strong July, so we're feeling good about the momentum in the franchise.

I mean, we do recognize that in all likelihood, there will be rate reductions, and I think that the impact of rate reductions, as we described, is relatively modest. It's something like $20 million of PBT for a 100 basis point move. So we expect some level of headwinds from that, but we think that we can offset those through the remaining growth that we see around the franchise. So we're actually, as I said in my remarks, pretty positive.

Benjamin Budish: Helpful. Maybe one follow-up, just a modeling question kind of in the weeds, but I'm curious if you could talk a little bit about the allocation of net interest expense, just the sort of mix looked a little bit different this quarter than it has in the past, sort of a higher expense allocation to the Solutions business. Lower corporate interest net corporate interest income despite higher cash balances. Curious if there's anything we need to I know it's a little bit hard from a modeling perspective, but if you could talk a little bit about what's going on there and how to think about that allocation would be helpful. Thank you.

Ian Lowitt: Rob, why don't you take that?

Rob Irvin: Yeah. Let me just sort of start off by talking about net interest income in the first quarter. Sorry, in the second quarter compared to the first quarter. So as you saw on the slides that we presented, our interest income was up marginally. Although rates were flat, we did have some balance growth. Interest expense, though, is up $21 million compared to the first quarter, reflecting $800 million worth of debt issuance. And as we said, this has positioned the firm well for growth. Given the market volatility that we saw in April, we thought it was an important thing to do. As I look at it, therefore, it meant I was long on liquidity.

So therefore, what I look to do is to optimize our liquidity across the group as much as I can, and we did deploy some of that additional liquidity into the business. And that's why house balances only went up by $0.1 billion on the chart that we've given out. The majority of the additional cash that we raised went to support some of our trading businesses, notably in capital markets and our business. I want to be really clear. These businesses are sort of self-funding typically, but we made a conscious decision to use house cash to support them.

So I think you are seeing a little bit of a change in perhaps how we've deployed some of that cash. At a high level, though, from a solutions perspective, the increase really in interest expense reflects the higher issued structured notes and any liquidity that they've used within the quarter. And in the corporate center, it's predominantly the headwinds from additional senior issuance.

Benjamin Budish: Alright. Thanks, Rob. Very helpful.

Operator: We are now going to proceed with our next question. And the questions come from the line of Alexander Blostein from Goldman Sachs. Please ask your question.

Alexander Blostein: Well, just maybe building on that last point, when we think about the NII trajectory from here off of this kind of $35 million quarterly run rate, I think the debt issue was those partial quarters, so presumably, there's a little bit of headwind into Q3. But you also talked about just growth in the business. So with rate cuts, maybe just give us a bit of a reset on how you're thinking about NII trajectory from here. And are there any other incremental debt you expect to issue for the deals that haven't closed yet?

Rob Irvin: Why don't I start, Alex? And I'm sure Ian can add. So as I sort of think about interest income for the rest of the year, I would obviously, you know, we all look at the forward curve, and I think it's currently predicting two to three cuts potentially by the end of the year. So, you know, I'd expect our interest income to be sort of broadly flat to where we are at the end of the second quarter because I think that, you know, we will be able to broadly offset those headwinds with additional balances.

I do think, though, that interest expense has probably peaked, and I think that going forward, you can expect to see two things. Obviously, the interest expense cost will go down as interest rates come down because it's all floating rate debt. And I also think we are beginning to see a little bit of compression on our debt spreads.

Ian Lowitt: Yeah. I mean, I think that we've been operating with very high liquidity. So this is Alex. And I don't think that in light of the size of those surpluses, which seems completely appropriate going into the environment we were in, that we'll look to see those increase. So I think that the second half of the year is about deploying some of that cash that we've raised to support our clients.

Alexander Blostein: Gotcha. Understood. So in other words, the $100 million plus pound payment for Winter Flood, you guys don't expect to issue any incremental liquidity. That's something you can fund with resources at this point.

Ian Lowitt: Absolutely.

Alexander Blostein: Gotcha. Okay. And then speaking of deals, maybe zooming out a little bit, you spoke to a fairly robust pipeline, I guess, and you guys continue to do more frequent deals, but also some of them tend to be a little larger. So when you assess the opportunity set, next six to twelve months when it comes to inorganic opportunities, what's roughly the makeup? What are some of the geographies and maybe product sets that comprise the more actionable items within that pipeline?

Paolo Tonucci: Perhaps I can cover that? It's Paolo Tonucci. In terms of the size of the acquisitions, the largest will be Winter Floods. We have probably six or seven that are sort of live transactions at the moment of varying size. But, I mean, nothing larger than Winter Floods. I would say, you know, 50% of the transactions are within the sort of financials or securities part of the business, so Winter Floods being sort of the most obvious. And then there are some other sort of smaller transactions that will add to that. They are not, I think this is just a function of where the opportunities exist. They are primarily in the UK and in Europe.

But I expect that, you know, the times we sort of talked about before, we'll see more opportunities in the US and in Asia. We do have sort of interestingly a couple of sort of smaller acquisitions in Asia, which are sort of going to build out our profile. So quite a mix geographically, although, I mean, in terms of size, you know, they're typically smaller than the sort of £100 million or so Winter Floods transaction.

Alexander Blostein: Great. Alrighty. Thank you very much.

Paolo Tonucci: Thanks, Alex.

Operator: We are now going to proceed with our next question. And the question comes from the line of Bill Katz from TD Cowen. Please ask your question.

Bill Katz: Okay. Thank you very much for taking the question and the expanded commentary this quarter. So a question coming back to capital management at large now. Given that the liquidity in the shares is higher, given the cash flow of the company is stronger, and given where the stock is trading, particularly in light of recent events, how are you thinking through maybe just capital management priorities? Is there room here to potentially step into doing buybacks? And or working with the PE sponsors to potentially limit leakage into the market through buybacks versus maybe the deal backdrop? Thank you.

Ian Lowitt: Yes. Look, I mean, I think that our priority to date has been about increasing the float. And as a result, buybacks were not part of our capital plan. I mean, exactly to the points that you've raised, I think, now that we've got very substantial float, that becomes sort of less of an issue. To the extent that we can deploy capital in acquisitions, I think that's very desirable, and you've seen the impact of the acquisitions in driving value. So I think that to the extent that we still feel that we have really good acquisition opportunities, we're going to pursue those.

But I do think that we're now in a world where, as you say, I think buybacks become something that we can consider and perhaps should. And I think that it's definitely the case given the recent news out in the marketplace that the private equity shareholders would be likely to hold their positions, although, obviously, that's a decision for them.

Bill Katz: Okay. Just as a follow-up, maybe looking into should we look into the businesses a little bit? You'd mentioned that pretty optimistic on the prime side. Was wondering if you could talk a little bit about maybe quantifying the pipeline of opportunity there, is there any way to sort of unpack the margin of the prime business versus the residual business just to think through the incremental segment of upside. Margins overall. Thank you.

Paolo Tonucci: Bill, it's Paolo. I'll try and cover that. In terms of the progress and the opportunities, most of the impact has been by adding new clients and by adding products. And we're seeing a really good pipeline of new clients. So I think in the first half of the year, we added somewhere around 150 new Prime accounts. And when I look at the pipeline of clients going forward, it's probably stronger than it has been before. So we're adding a lot of clients.

I think that you will see continued growth in that business, not at the sort of rate that we saw in the past twelve months, but certainly somewhere in the sort of low double digits, perhaps high single, low double digits, and primarily, as I say, driven by additional clients. The other parts of the agency and execution business on the security side have also been growing strongly. And we have had more people, we've added more products and more capability. So I expect that we will be able to drive further growth.

I mean, every segment within the sort of financials part of the business has grown quite considerably, mid-teens to sort of 30% across the sort of non-prime segments, and as I say, we're investing some of the reorganizations at the desk level, starting to generate some good returns. Then I think, I'm very optimistic about the Winter Floods transaction. And I mean, just to reiterate Ian's point, I mean, we generate a mid-teens return of really a relatively small one might call it a subscale equity business, and Winter Floods is a great brand. It's a $100 million revenue business, and we feel confident that we'll be able to generate very good margins, at least comparable margins from that.

So overall across that part of I mean, obviously, that's market making, predominantly, and as opposed to just execution. But across the sort of financial parts of our business, I'm confident we'll see good growth.

Bill Katz: Thank you. Thanks, Bill.

Operator: We are now going to proceed with our next question. And the questions come from the line of Alex Graham from UBS. Please ask your question.

Alex Graham: Just wanted to follow-up on an earlier question on kind of the outlook for the remainder of the year and maybe be a little bit more specific about this quarter so far. You talked about July was strong, but that can mean a lot of different things. So when I look at kind of exchange volumes, I think metals are down 10% quarter to date versus the second quarter, energy down 20 securities markets mix. So maybe talk about how you're trending against those kind of KPIs or any reason why you would be outperforming some of what we're seeing in the market? Thank you.

Ian Lowitt: Yes. Look, I think that as we've sort of talked about before, there's sort of two things that go on. Right? Obviously, there's what's going on in the market and then what's going on with share. And as a result, you could grow as we have, faster than the market if you're gaining share. And in the event that markets are declining, you can actually continue to grow if the share gains offset those. And I think the other point is, we have a lot of growth levers inside the firm, which mean that even when some businesses are down, others are likely to be performing.

So when I sort of said July is strong, it's operating at levels that are comparable to the second quarter.

Alex Graham: Very good. And then thanks for obviously addressing the short report in all detail. Maybe one question related to that. I hope it's fair. But just wondering what kind of feedback you've gotten from clients because I'm sure they are watching this, and I think some of your large clients have taken you apart a lot over the years and as they onboarded. But this is financial services and a lot of it is built on trust. So just wondering, how those conversations have been or if any if you've seen any sort of change in activity or any lines being paused. Just wanted to get more detail there. Thanks.

Ian Lowitt: Yeah. No. It's a good question. I mean, look. I think the impact has been pretty modest. I mean, as I sort of indicated in my remarks, I mean, there have been active conversations with a very large number of counterparts. And people have been, I think, interested in what it is we have to say. There are a couple of data points, which I'm sure you track, Alex, which is what's going on with take balances in the US, which are reported on a daily basis. And what we see there is, our balances are essentially flat to where they were before the short sell came out. I mean, certainly rounds to an identical number.

And I think that's indicative of broadly what we're seeing in the firm. I mean, there is some very limited amount of retrenchment, but it is very limited and often post the engagement with the firm, people have brought balances back. And interestingly, two of the largest and most sophisticated hedge funds in the world have extended their clearing mandates with us just over the last week. So it clearly is something that we're putting a lot of time and effort against. But I think I'm pretty pleased with how muted that effect is. Our liquidity, which was always extremely strong, remains extremely strong. So there's zero issues there.

The amount of structured notes that we've had to buy back is absolutely trivial amount. So really, the impact to date has been extremely muted.

Alex Graham: Very helpful. Thank you.

Ian Lowitt: Thanks, Alex.

Operator: We are now going to proceed with our next question. Please stand by. The next question is coming from the line of Patrick Molley from Piper Sandler. Please ask your question.

Patrick Molley: Yes. Good morning. Thanks for taking the question. I had one on the market-making segment in the second quarter, specifically in ags. The revenues there flipped negative in the quarter. I think in your prepared remarks, you had said that there was some tariff-related impact, but just was hoping you could give a little bit more color on the dynamic there in the second quarter and whether some of those headwinds that you were facing have abated in the third quarter?

Paolo Tonucci: So thanks, Patrick. As I said in my prepared remarks, revenues were down on the back of the tariff announcements. And what we were actually seeing going on notably in cocoa and coffee was elevated prices, which significantly reduced market liquidity. So it was a much slower quarter for the business.

Ian Lowitt: Yeah. And I think I can say it sort of continued into this quarter as well. I mean, again, it's a benefit of a diversified business is even when you have a slowdown in one part of your market making, other parts can take up the slack. It's certainly in I sort of reflect on the second quarter, we had a pretty strong performance in metals. And we actually had a pretty strong performance in energy, and that offset to some extent the impact in ags. But I think you're seeing the impact in ags in a lot of places. I think you saw that in Cargill's announcement this week. You saw it, I think, in Stonix's announcement.

So this isn't something that's just affecting Marex Group plc Ordinary Shares. I think it's a more broad effect.

Patrick Molley: Okay. Thanks for that. And then maybe just the last one on clearing balances in the quarter is still up strong year over year but moderated a bit sequentially. So I was hoping you could just talk about how we should think about balanced growth from here throughout the rest of the year and where you'd expect that to kind of settle? Thanks.

Ian Lowitt: Again, I mean, I think that we have a pretty strong pipeline. You're never quite sure exactly when those close, but our pipeline is probably consistent with what you saw in the average for the first half of the year.

Patrick Molley: Alright. Great. Thank you.

Ian Lowitt: Thanks, Patrick.

Operator: We are now going to take one final question. And the questions come from the line of Carlos Gomez-Lopez from HSBC. Please ask your question.

Carlos Gomez-Lopez: Thank you so much for taking the question. First, I wanted to thank you for the increased disclosure and the improvement, especially in the share count that you show on page 16 of your earnings release or 25 of your presentation. You are now at 71.7 million shares at the end of the period. Can you remind us what we should expect for the share count to do over the next year or two years? Thank you.

Ian Lowitt: I mean, I think you should expect that to remain very consistent. Unless, to one of the earlier questions, we begin to buy back stock, which is not currently our plan. So I think what we've committed to was not increasing dilution by more than 1%. And so I don't think that would be the maximum amount, but we don't have any expectation of either diluting or at the moment of buying back stock, although that could adjust if we changed our view on how much capital we had and how we wanted to deploy it.

Carlos Gomez-Lopez: So that was my question. There are no particular share option plans or anything as that should lead us to have more than 1% dilution going forward from what you have today.

Ian Lowitt: No.

Carlos Gomez-Lopez: Okay. And if I could ask one last question, I imagine you obviously must have looked at RJ O'Brien. Was that too large a transaction for you, or is that a business that perhaps you could have been interested in?

Ian Lowitt: You know, I think it's a transaction that we would have been interested in. I think our view was it wasn't a great cultural fit for us. And I think that what we're excited about is what we're actually doing, which is a number of more modest acquisitions, which collectively are delivering very substantial increases to the earnings of the firm. And so it's less of a, we didn't want to do it. I mean, we did have some conversations. They didn't lead to anything. But I think it wasn't a great fit for us. It seems like it's a better fit for Stonix. And so they were the ones who did it.

But, I mean, it's not the case that we would not consider a transaction of that size if we felt it was the right fit for us and that we were highly confident that we could value for our shareholders if we pursued it.

Carlos Gomez-Lopez: Very clear. Thank you so much.

Operator: We are now going to take the last question. And the questions come from the line of Alex Kramm from UBS. Please ask your question.

Alex Kramm: Yes. Hey, again. Thanks for squeezing me in here for a follow-up. Just one quick one. I think someone asked earlier about margins and agency execution. I don't think you fully addressed that, so maybe you can just talk about the outlook there a little bit. I mean, seems like that's been doing really nice and improving nicely with the prime growth and just wondering if that's all that is. And then maybe talk about the front office cost. I think early last year, it was running, like, close to 80%, I guess, comp expense. We're in the mid-fifties now. So just curious how we should be thinking about the ceiling on, I guess, compensation expense and how that works.

Ultimately impact the margins? Thanks again.

Paolo Tonucci: Alex, it's Paolo again. I'll try and cover them to the margin point. We'd always said that in the agency and execution part of the business margins, we would be targeting margins of over 20% and hoping to get towards the mid-twenties, and we've obviously exceeded that. There has been a change in mix with a larger proportion of our profit coming from Prime and from some of the activities around that support of Prime and its clients as well as the clearing clients. So more coming through on, for example, repo and stock loan. So I think that these margins are sustainable.

I think there's room for some improvement because certainly within the composition of our desk, there are some that are still not quite at scale, and it takes a little bit of time for that to come through. There's some that are still generating bottom-line losses, so profit-level losses. I think there's room for some improvement, but I think we're sort of close to the optimal level. And certainly with the Prime business, as we talked about, as you know, it's a relatively high fixed-cost business. So the margin at the margin is high. And it's comparable to the clearing business.

So we are achieving margins on average that are comparable to clearing, and at the margin, it probably has a similar dynamic, some more than 50% margin at the margin.

Alex Kramm: Super helpful. Thanks, guys.

Ian Lowitt: Alright. Well, thanks, everybody. A lot of questions and a lot of materials. Apologize for the sound issues that we had at the outset. I guess these things sometimes happen. It's unfortunate. But thank you for remaining online with us, and we're obviously extremely pleased with the quarter. We're extremely pleased with the half-year. We really are excited about the prospects over the next period, and we feel that the strategy is the right strategy and that we're executing that strategy extremely well. So thank you all. And look forward to following up with some of you over the next couple of weeks.

Operator: This concludes today's conference call. Thank you all for joining. You may now disconnect your lines. Thank you, and have a great day.

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