Q1 2025 Marex Group PLC Earnings Call
Okay.
Speaker Change: Good day and that gives us something by welcome to the <unk> Q1, 'twenty five earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
striking: Don't have an automated message advising Johan does raise to withdraw your question. Please press star one on one again please be advised that today's conference is being recorded I would now like turn the conference over to your first speaker today I didn't striking head of Investor Relations. Please go ahead.
Speaker Change: Good morning, everyone and thanks for joining us today for <unk> first quarter 2025 earnings conference call.
striking: Speaking today.
Robert: Our group, Chief Executive Officer, and Robert <unk>, Chief Financial Officer.
Speaker Change: After Ann and Rob have made their formal remarks, we will open the call to questions.
Speaker Change: 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.
Speaker Change: Actual results could differ materially from those anticipated in these forward looking statements.
Speaker Change: The risk factors that may affect results are referred to in <unk> press release issued today.
Speaker Change: The forward looking statements made today are as of the date of this call and <unk> does not undertake any obligation to update these forward looking statements.
Finally, the speakers may refer to certain adjusted or non <unk> financial measures on this call.
Speaker Change: A reconciliation schedule of the non <unk> financial measures to the most directly comparable <unk> measures is also available in the press release issued today.
Speaker Change: A copy of today's press release, and Investor presentation may be obtained by visiting the Investor Relations page of the website at <unk> Dot com.
Ian: I'll now hand, the call over to Ian.
Ian: Good morning, and welcome to our first quarter 2025 earnings call.
Ian: This was a strong first quarter performance with adjusted profit before tax of $96 million at the top end of the preliminary range, we published at our Investor Day, and subsequently with our F. One filing.
Ian: We've had a very busy few weeks since the end of the quarter. We hosted our inaugural Investor Day on April 2nd had a highly successful equity offering on April 17, and a well received debt offering on may 1st.
Ian: This has provided us with many opportunities to engage with our investors both existing and many new ones.
Ian: We are very appreciative of the engagement, we have experienced I would particularly like to thank our major long term investors many of whom came to our Investor day in New York for their ongoing support.
Ian: Based on our interactions with investors. It does feel as though there is increasing recognition understanding and acceptance of the power of the Marin platform to deliver strong and reliable results through the cycle.
Ian: So with that let's turn to the performance highlights on slide four.
Ian: We delivered a strong first quarter driven by robust client activity and what was a favorable operating environment for our business.
Ian: Exchange volumes in Q1 were up 15% year on year and up 12% versus the fourth quarter.
Ian: And there was a goldilocks level of volatility across many asset classes, which we're able to monetize it.
Ian: Adjusted PBT was up 42% with strong revenue growth as Rob will discuss later and all of our business segments AG.
Ian: The agency execution was a particular standout with continued growth in prime services.
Ian: And our energy business also performed strongly.
Ian: At the start of April there was a period, which included some very high volume days typically two to three times the average level for the first quarter.
Ian: We were able to process. These heightened volumes successfully on our platform confirming the operational resilience of the firm and the scalability of our platform.
Ian: We also managed our risk well remaining in close dialogue with our clients and added materially to our liquidity position maintaining record levels of surplus.
Ian: This liquidity surpluses further increased with a $500 million senior notes issuance that we executed in early may as we continue to extend and diversify our funding sources.
Ian: There is a funding cost which impacts net interest income. This is very valuable insurance from our perspective in this type of environment and this is a trade off that we are willing to make to mitigate our risk.
Ian: At the end of March we completed the <unk> acquisition and expect Hamilton quarter also close later this quarter.
Ian: We successfully executed on our second equity follow on transactions since our IPO and we're extremely pleased with the response, which reflected very strong support from the market.
Ian: And we have increased our dividend of <unk> 15 per share for the first quarter of 2025 from 14th per quarter in 2024 post our IPO.
Ian: On page five we have laid out the key metrics that we use to assess our performance growth margins and returns productivity and quality of earnings.
Ian: Revenues grew 28% to $467 million, while our margin increased to 21% delivering adjusted PBT of $96 million up 42%.
Ian: <unk> return on equity was 29% up six percentage points year over year.
Ian: Our Sharpe ratio of monthly adjusted profits was 5%, reflecting the quality and resilience of our earnings and the relatively tight distribution of daily profitability.
Ian: We also track outperformance versus overall exchange volumes, which are publicly available.
Ian: We recognize this relationship is directional rather than determinative as volumes are only one driver of revenues, albeit an important one and it does provide a very useful lens on our business.
Ian: Volumes on exchange don't capture OTC or other off exchange activity such as Prime services, which are included in our revenues and explain for example, the outperformance in our agency and execution segment in Securities This quarter.
Ian: While we're attentive to the quarterly numbers, we typically focus on the longer term time period, which has less noise in it from.
Ian: On this basis, it's apparent that we continue to gain share and are growing faster than the market, which itself is growing at a healthy rate as you can see on the next slide.
Slide seven shows the growth in exchange volumes in our markets since 2021.
Ian: This growth accelerated in Q1, reflecting the strong operating environment this quarter.
Ian: As I said at the Investor Day. This growth is above what we would've expected at IPO and is underpinned by secular trends.
Ian: These secular trends include growing demand for listed derivatives due to increased receptivity to this as a hedging tool globally.
There is also increasing demand from producers and consumers of energy in commodities to hedge out their exposures on a recurring basis.
Ian: The ongoing expansion of the financial product market is presenting us with significant opportunity to grow and diversify our firm.
Ian: We're also in a world of macroeconomic uncertainty and geopolitical unpredictability that you see playing out everyday.
Ian: This is an attractive market backdrop for us with high exchange volumes, not just an individual asset classes, but across most asset classes simultaneously.
Ian: In addition to exchange volumes another important driver of outperformance is volatility.
Ian: What's interesting about the data is that it shows volatility has been declining somewhat over the last three years during which time period, we have grown our profits materially.
Ian: We have set up the firm to generate reliable earnings growth across the cycle through servicing client flow and gaining share while also being able to capture upside in periods of unusual volatility.
Ian: These volatility spikes tend to be quite short dated drop in only a few weeks before reverting to more normalized levels.
Ian: Although we might see a 5% to 10% earnings benefit from higher volatility in a particular quarter as we did for example in Q2 last year.
Ian: Over a full year period, they are less visible.
Ian: The key point here is we are not reliant on these elevated periods of volatility to deliver profit growth and we are proud of our track record of delivering sequential growth through a variety of market environments.
Ian: A quick word on our recent equity and debt issuance activity before I hand over to Rob.
Rob: The secondary offering in mid April was a standout success at over eight times oversubscription notwithstanding the tough market backdrop at the time to be able to accomplish this in such a volatile market environment, where the VIX and the mid Thirty's is something we're extremely proud of.
Rob: What in many new investors and saw continued participation from existing shareholders further improving the quality of our share register and demonstrating our increased credibility as a public company.
Rob: Our free float has increased from 38% at IPO to nearly 70% in a year.
Rob: Our average daily trading volume has also increased from less than $10 million in the six months post IPO.
Rob: Two mid teens between the first and second follow on and is now at over $40 million.
Rob: Support from the market is also reflected in our $500 million.
Rob: U S dollar issuance of senior notes that we executed intra day on May one.
Rob: This demonstrated further the market's comfort with <unk> as an issuer and our ability to support our growth as a public company.
Rob: With that I'll hand over to Rob to take you through the financials in more detail. Thanks.
Rob: Thanks, Ian and good morning, everyone.
Speaker Change: As Ian said, we had another strong quarter in line with our published preliminary range Q1 revenue grew 28% to $467 million with strong growth across all business segments.
Speaker Change: Total costs increased 26% to $365 million.
Speaker Change: Front office costs were up 23% with dominantly, reflecting higher compensation costs on strong revenue performance across the group.
Speaker Change: Controlling support costs were up 33%, primarily driven by investments in technology to support automation and business growth. We also continue to make investments in our finance risk and compliance functions to support our controlled growth and development as a public company.
Speaker Change: This included specific investments relating to recent acquisitions and our compliance with Sarbanes Oxley.
Speaker Change: Adjusted profit before tax grew 42% to $96 million, while margins expanded 200 basis points to 21%, reflecting margin improvement in agency and execution.
Speaker Change: Nonoperating adjustments were a gain of $1 $7 million this quarter due to a bargain purchase gain of $3 4 million on thoughts and great limited adjust.
Speaker Change: Adjusted return on equity rose to 30%, while adjusted diluted EPS was <unk> 91 per share.
Speaker Change: 32% year over year.
Speaker Change: Now looking at our first quarter performance by business compared to Q1 2024.
Speaker Change: Clearing revenues grew 18% to $119 million driven by growth in net interest income as higher average balances more than offset lower average fed fund rates.
Speaker Change: Net commission income was $1 $7 million lower as positive performance in energy and metals was offset by lower client activity and agricultural which experienced high volatility in Q1 2024 compared to this quarter agency execution revenue grew 42%.
Speaker Change: <unk> to $240 million driven by growth in all asset classes.
Speaker Change: <unk> revenue grew 59% to $151 million. The most significant contribution came from the continued build out of our prime services offering including growth in security based swaps.
Speaker Change: Energy revenue grew 20% to $88 million, reflecting the combination of record volumes strong demand for our environmental was offering and the benefit of acquisitions.
Speaker Change: Adjusted profit before tax more than doubled in this segment as margins improved from 13% to 24%.
Speaker Change: This was driven by the benefit from restructuring as well as growth in higher margin activity, particularly in prime services.
Speaker Change: Market, making revenue grew 27% to $53 million with growth in all asset classes.
Speaker Change: <unk> revenues doubled while Mexico revenue growth was more muted at 6% due to the uncertainty arising from the potential implementation of global tariffs on base metals.
Speaker Change: Average daily var or value at risk remained low at $3 $4 million as we continue to manage our market risk well with 92% of trading days and 100% of weeks positive in the quarter.
Speaker Change: Solutions revenue grew 9% to $45 million against a very tough first quarter comparative as the business continued to benefit from the expanded sales team and Onboarding of new clients financial products grew 41% to $31 million driven by structured notes balance growth.
Speaker Change: Hedging solutions decreased 27% to $14 million also reflecting higher volatility in parts of the AG market in Q1 2024.
Speaker Change: Average balances in the first quarter increased to $17 $1 billion.
Speaker Change: Up from 11 $3 billion, a year ago, driven by growth in client balances and our increased liquidity position.
Speaker Change: Instead, we intensely hold high levels of liquidity to support our businesses and clients through volatile market Eva based cost us more from a funding perspective as was the case this quarter.
Speaker Change: Net interest income was $53 4 million compared.
Speaker Change: Compared to $35 6 million in Q1 last year, reflecting the significant step up in average balances including growth in Prime services. Despite a lower average fed fund rate.
Speaker Change: NII reduced by $9 million versus the fourth quarter driven by several items.
Speaker Change: First higher.
Speaker Change: Interest expense, reflecting the full quarter's impact of the $600 million U S. Dollar notes issued in late October 2024, and increased structured notes issuance.
Speaker Change: This meant our liquidity position was very strong at the start of April.
Speaker Change: Second the impact of average fed funds decreasing by 35 basis points.
Speaker Change: Third the re pricing of fixed term investments at lower rates.
Speaker Change: These factors were partially offset by $1 $6 billion growth in average balances.
Speaker Change: The fed funds forward curve is currently implying 2% to three rate cuts by year end and as before we are giving you our illustrative rate sensitivity.
Speaker Change: In the case at 100 basis points decrease in rate across the full year would reduce adjusted profit before tax by around $20 million.
Speaker Change: This is of course, assuming a static balance sheet and ignoring any future growth directions, we might take.
Speaker Change: We have a rolling hedge program in place, which causes a modest drag to NII each day and offers US protection if rates were to fall below the current fed funds curve.
Speaker Change: Turning now to our balance sheet and strong capital and liquidity position on the next two slides before I hand back to Ian to conclude.
As a reminder, on this slide you can see that 80% of our balance sheet consists of high quality liquid asset, which support client activity.
Speaker Change: As we net all assets and liabilities by times activity, we are less than the corporate balance sheet that carries corporate cash and other assets against liabilities, including our structured notes portfolio and senior note issuance.
Speaker Change: Actual assets remained broadly stable at $24 4 billion as at the end of March as did our residual assets of $5 1 billion.
Speaker Change: We manage our capital and liquidity risk very prudently as reflected in the headroom that we maintain above minimum requirements to ensure we are well positioned in periods of market stress.
Speaker Change: During the first quarter in particular, we have very high levels of liquidity, which as I mentioned before had an impact on NII.
Speaker Change: The end of Q1 2025 total funding was $4 3 billion up from $3 $8 billion at year end with $1 2 billion of surplus to support our day to day operations.
Speaker Change: Our structured night program remains a core source of funding for us and we further extended our funding maturity profile with our $500 million U S. Dollar senior debt issuance earlier. This month, taking this into account our liquidity surplus over our regulatory minimum as of last week stood at $1 6 billion.
Speaker Change: This also supports our investment grade credit ratings from S&P and Fitch.
Speaker Change: Last month Fitch updated its rating outlook for <unk> from stable to positive to reflect our strong earnings and diversification of our franchise.
Ian: Our strong capital generation meant we were able to announced an increased quarterly dividend of <unk> 15 per share for the first quarter of 2025 payable to shareholders on the 10th of June and now I'll hand back to Ian.
Ian: Thanks, Rob.
Ian: So in conclusion. This was a strong quarter it wasn't above normal operating environment with higher levels of activity and volumes that we were able to convert into revenue and profit growth.
Ian: Second quarter has started well we saw higher volumes in early April which tested the operational resilience of our infrastructure before they reverted to more normalized levels in the second half of the month.
Ian: As far as the rest of the year is concerned we see a lot of momentum and are excited about our future, but remain sanguine about the risks and how the environment might change.
Ian: We've laid on a lot of extra liquidity to protect the firm better cost obviously, but that is one that we believe is well worth paying.
Ian: Rates are expected to continue to fall, which will impact net interest income, but as we saw in the first quarter.
Ian: To deliver very strong results notwithstanding this impact.
Ian: We continue to evaluate many M&A opportunities and are maintaining our strict discipline as you would expect us to we have passed on select deals where we felt we were unable or unlikely to meet our return hurdles, but are confident that there will be many transactions, which will in fact meet our return targets.
Ian: Through a combination of organic and inorganic initiatives, we expect to be able to deliver continued structural growth, which offset macro headwinds.
Ian: We've had a great start to the year are aware of the challenges and are very confident about the position of the franchise and our opportunity set with that I'll ask the operator to open the call for your questions.
Ian: Thank you to ask a question.
Ian: Star one on one on your telephone and wait for you.
Ian: Name to be announced to install your question. Please press star one on one again, please standby, while we compile the Q&A roster.
Ian: Thank you we will now go to our first question.
Benjamin: And the first question comes from the line of Benjamin <unk> from Barclays. Please go ahead.
Benjamin: Hi, good morning, and thank you for taking my questions.
Speaker Change: Ian I was wondering if perhaps to start if we could come back to the prime business.
Speaker Change: Trying to think through I mean can you unpack a little bit more detail what is going on there thats changed just kind of looking at the last five six quarters of revenues. It looks like there's been a step function higher in both the last couple of quarters. So just trying to think through like are we at a new run rate is there more upside like how much is sort of environmentally.
Speaker Change: We are kind of benefiting you right now.
Speaker Change: It looks like your profit margin in the agency execution segment also stepped up quite a bit is that something that we should see more of or are we kind of at the right level in like the low low to mid twenties.
Ben: Well thanks Ben.
Ben: Giving you sort of my perspective, and then Paolo runs their businesses with us and I think he can sort of add additional sort of points. There I mean, I think with regard to sort of prime services. There are a couple of things.
Ben: Worth, noting one is.
Ben: But as we described previously we always felt that this was starting to be a hugely important part of the strategic.
Ben: Strategic plan of the firm.
Ben: It represented a really important.
Ben: Lever of growth for Us I.
Ben: I think as we also shared it was a little bit slower than we expected in the sense that integrating it and making it part of merricks and reversing.
Ben: Some of the issues that had arisen while it was for sale as part of TD, just took a little bit longer than we thought.
Ben: And so it was sort of a bit slower in 2024, then we would have expected, but we've definitely seen a rally.
Ben: Nice pickup in that in the fourth quarter and Thats extended.
Ben: To the first quarter.
Ben: In terms of the expectation with regard to the run rate I think there was a certain amount of unmet demand, which we have now captured and I think that that has elevated the level I don't think that it represents a peak, but I do think that.
Ben: The growth rate will probably slow from what we've experienced over the last two quarters.
Ben: I certainly have an expectation that over the long term this will continue to represent.
Ben: It's a really important opportunity for us, but I would say similarly with regard to securities.
Ben: Agency execution segment, which you asked about.
Ben: We have been flagging for a while but we did believe that there was a real opportunity.
Ben: True.
Ben: <unk> margins in that.
Ben: <unk> as a result of the restructuring and integration of the acquisitions that we've done in that in that place in that space.
Ben: I think palo is going to be sort of too modest to sort of play more of a credit there, but he really does deserve and the team a lot of credit for the work that they've done.
Ben: To improve the margins and the profitability of that particular.
Ben: In a business and again I think that there has been a.
Ben: Next to which.
Ben: It's not going to maintain at the same pace, but I don't believe were absolutely sort of the limit but.
Ben: Out of margin expansion, we would expect there will be less than the expansion. We've seen today do you want to add.
Ben: Yes.
Speaker Change: Thanks Ben.
Ben: I had a couple of points.
Ben: On the first.
Ben: Question around sort of prime brokerage as Ian said it took some time to sort of reverse the negative momentum, but we have we have consciously added.
Ben: <unk> capability and that takes a little bit of time and I think that there are some important extensions products, particularly.
Ben: Some of the synthetic.
Ben: <unk> offerings that we now have really only came online in late in the third quarter and into the fourth quarter and.
Ben: That sort of allowed us to increase the volume of activity across.
Ben: Very.
Ben: A very large number of clients.
Ben: It's.
Ben: Now feels as though that is quite stable I think that it will grow from here.
Ben: A much more modest rate somewhere in the sort of high single digits might be sort of low double digits as opposed to the very rapid growth that we saw between the second between the third quarter to fourth quarter and into the first quarter and then as we sort of we talked about consistently our margin target.
Ben: For agency execution was in the mid <unk> and we didn't.
Ben: We expect to get there as quickly as we have but we always expected that we would be able to get there through some combination of.
Ben: Capabilities.
Ben: And.
Ben: Restructuring some of our businesses.
Ben: We're close to our target levels, we might see some improvement.
Hope to have some improvement, but we're not going to see these.
Ben: These are the.
Ben: Large percentage increases again.
Ben: <unk>.
Ben: It will be much more modest.
Ben: Alright, all very helpful.
Ben: Maybe just a quick follow up on <unk>, which closed at the end of March I'm, assuming there was very little contribution if any in the quarter. So any just sort of modeling help you could provide.
Ben: The revenue show up what are the sort of what's the P&L profile look like.
Ben: And in terms of kind of cross sell in the middle East.
Ben: Sort of the timeline for when you think you can start to execute on some of those opportunities. Thank you.
Ben: So with regard to honor its close to absolutely at the end of the quarter. So youre seeing almost no contribution in the quarter from our now I think that.
Ben: It's performed in April.
Ben: At the levels that we had anticipated so we've seen some of the sort of day, one synergies, we anticipated sort of coming through and it's certainly performing consistently with all of those expectations.
Ben: What has been heartening with regard to that is we have now had.
Ben: A couple of the sort of marquee accounts in Abu Dhabi reach out to become clients of the firm, which previously we'd been in discussions with them, but not having in Abu Dhabi.
Ben: Entity had prevented us from.
Ben: Being able to onboard those so it's still very very early days with regard to.
The cross sell and the addition of new clients because of the Abu Dhabi presence, but certainly for the first month.
Ben: Being extremely well Rob can you just talk about whether it's going to turn up turn.
Ben: Turn off in our clearing segment going forward.
Ben: Alright, Thank you very much.
Pat: Thanks Pat.
Ben: Thanks Keith.
Ben: Your next question comes from the line of Kyle Voigt from <unk>. Please go ahead.
Kyle Voigt: Hey, good morning, everyone, maybe if I could just start on the clearing commissions.
Kyle Voigt: I hear your point about an AG volatility kind of pulling back a bit on a year over year basis, but even sell at CME, we saw over 20% growth in AG volumes in <unk> and I think even you disclosed 27% growth in total cleared futures volumes in the quarter. So I was just wondering if you could provide a bit more color on the <unk>.
Speaker Change: Urgent between your cleared volume growth and the commission revenue growth was there anything to note from a pricing perspective that you were seeing in the quarter, whether thats competition related.
Kyle Voigt: Product mix.
Kyle Voigt: And then if you can just provide a bit more color on what we're seeing in the market on the AG side versus what Youre seeing and what Youre, telling us in terms of your AG business on the clearing front.
Kyle Voigt: Product mix related as well.
Kyle Voigt: Yes.
Kyle Voigt: The number of things you are asking about.
Kyle Voigt: I think around AG.
Kyle Voigt: And Youll recall that the first quarter of last year was a sort of unusually.
Kyle Voigt: Positive environment, particularly around cocoa, but also with a bunch of the other.
Kyle Voigt: Sort of agricultural products, so I think that.
Kyle Voigt: A big.
Kyle Voigt: That was sort of genuinely.
Kyle Voigt: Unusual environment that I think we were able to do particularly well with.
Kyle Voigt: What we're seeing is.
Kyle Voigt: At the moment is not.
Kyle Voigt: Pricing pressure or anything of that time, we are seeing it as we saw in metals. It has some amount of people sitting on the sidelines.
Kyle Voigt: Around some of the agricultural products as.
Kyle Voigt: As well as some of the metals products, where people are just sort of onshore power.
Kyle Voigt: So going to play out it's actually.
Kyle Voigt: It will be evident.
Kyle Voigt: In market, making and the agricultural products were.
Kyle Voigt: The open interest has been declining.
Kyle Voigt: Those products.
Kyle Voigt: Broadly the reason that you want to have a diversified business is because there will be periods, where.
Kyle Voigt: Individual asset classes performed well in other asset classes are.
Kyle Voigt: <unk> seen less activity in that.
Kyle Voigt: That's the power of sort of broadening out so I think thats.
Kyle Voigt: That's really the story as I see it and if there is something you want to add on so the one thing I would say within the press release the contracts cleared as the trailing 12 months if not the quarter only so if you actually look in the slides slide six you'll see that our volumes are up 17%.
Kyle Voigt: Very much in line with our revenues.
Speaker Change: Understood. Thank you for clarifying just a follow up on the 500 million notes issuance in may.
Kyle Voigt: We feel comfortable.
Speaker Change: No.
Speaker Change: Yes.
Speaker Change: Under this year.
Speaker Change: How should we see a need for additional funding.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And we feel very comfortable with our.
Speaker Change: Liquidity position.
Speaker Change: Okay.
Speaker Change: Alright.
Speaker Change: Hi.
Speaker Change: Certainly.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Thanks, guys.
Speaker Change: I mean.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Various points.
Speaker Change: In the course of April and I suspect there will be other weeks, where it will fail.
Speaker Change: Yes sort of less benign so.
Speaker Change: Given that as a <unk>.
Speaker Change: Basic backdrop it seemed to us.
Speaker Change: Et cetera.
Speaker Change: The amount of liquidity.
Speaker Change: Yes.
Speaker Change: As you'll be aware.
Speaker Change: Sure.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Because we had.
Speaker Change: Yes.
Speaker Change: Information.
Speaker Change: Okay.
Speaker Change: We're able to.
Speaker Change: Thank you operator format.
Speaker Change: Typically.
Speaker Change: Mark.
Speaker Change: That was a driver of the timing and why we wanted to do it.
Speaker Change: Okay.
Speaker Change: Do you have an opportunity.
Speaker Change: Put it in a business like ours.
Speaker Change: All right.
Speaker Change: Provide us with sort of two things one is sort of insurance in the event that the market.
Speaker Change: Good.
Speaker Change: Much better.
Speaker Change: And we have to support.
Speaker Change: Additional liquidity, particularly around carrying.
Speaker Change: What it also does is it supports ongoing growth of the franchise.
Speaker Change: Our ability to add clients and to continue to support that so whether it.
Speaker Change: Because.
Speaker Change: The royalties.
Speaker Change: Sort of a volatile place that we need more liquidity to support the existing peering or it turns out to be offense, where it gives us ability to annualize or increase of our business. We do with clients. So we feel that that added liquidity.
Speaker Change: It's very valuable.
Speaker Change: Okay.
Speaker Change: Two.
Speaker Change: So the issue again.
Speaker Change: Yes, I want to say.
Speaker Change: Because if you have opportunities.
Speaker Change: Growth firm and as a company I think you typically do take us.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The next question.
Speaker Change: Perfect.
Speaker Change: Please go ahead.
Speaker Change: Good morning, I have a question on client clearing balances.
Speaker Change: You've now grown those advertisers.
Speaker Change: 10% sequentially in each of the last two quarters can you speak.
Speaker Change: Okay.
Speaker Change: And the first quarter and then from a modeling perspective.
Speaker Change: Can you give us maybe.
Speaker Change: Are those balances ended the quarter.
Speaker Change: And how they trended in the second quarter some of them.
Speaker Change: <unk> seen how.
Speaker Change: That might have an impact.
Speaker Change: Yes.
Speaker Change: What type.
Speaker Change: Total balances we describe.
Speaker Change: It's made up.
Speaker Change: Three things first of all.
Speaker Change: Cash.
Speaker Change: Secondly.
Speaker Change: And thirdly it would.
Speaker Change: The balance is related with our clients.
Speaker Change: What we saw in the first quarter.
Speaker Change: Obviously.
Speaker Change: So.
Speaker Change: There has been an increase in liquidity, but we will see.
Speaker Change: Growth in clearing and within our prime business.
Speaker Change: And in terms of the second quarter.
Speaker Change: She has held up well.
Speaker Change: In April obviously, it's still very early days.
Speaker Change: Right.
Speaker Change: So follow up items.
Speaker Change: And G&A.
Speaker Change: As shown here.
Speaker Change: We have experienced.
Speaker Change: Rubbing off franchise growing customer about it.
Speaker Change: Continue throughout the rest of this year.
Speaker Change: Yes, I mean, I think the thing.
Speaker Change: We do have.
Speaker Change: So robust.
Speaker Change: Pipeline.
Doug: Thanks, Doug.
Speaker Change: So we're bringing on.
Speaker Change: Thanks, Eric.
Speaker Change: So yes.
Speaker Change: And I think we've discussed with you.
Speaker Change: Yes.
Speaker Change: A long lead time.
Speaker Change: A lot of work to get it.
Speaker Change: Clients in.
Speaker Change: Great.
Speaker Change: Once somebody's declaring clientele.
Speaker Change: Sticky relationships. It does involve a lot of web two.
Speaker Change: To get them onto the platform.
Speaker Change: It means that we actually do.
Speaker Change: Quite good visibility too.
Speaker Change: It's coming off the platform.
Speaker Change: But thats remains extremely robust.
Speaker Change: Historic trends.
Speaker Change: I think right.
Speaker Change: How much activity or existing clients are going to do.
Speaker Change: Topical anywhere else, but it's just because you don't quite know.
Speaker Change: The market opportunity is going to be.
Speaker Change: All of them.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: It's not a continue at least the current level of uncertainty.
Speaker Change: We've seen.
Speaker Change: Some increases so both of those.
Speaker Change: So that does.
Speaker Change: Seem to be.
Speaker Change: Consistent with history.
Speaker Change: Okay.
Speaker Change: A follow up.
Speaker Change: M&A.
Speaker Change: Update us just on the appetite overall appetite what conversations have been like with potential targets and it's been a few months now thank.
Speaker Change: Thank you announced the deal I'm wondering how we should think about <unk>.
Speaker Change: M&A throughout the rest of the year.
Speaker Change: Yes, I think that.
Speaker Change: Okay.
Speaker Change: We continue to be very active looking at.
Speaker Change: Potential acquisitions, we're in conversation with a number of potential acquisitions.
Speaker Change: As Richard indicated in the in the commentary. We also are very disciplined and if we can't sort of generate our target of 20% Roe.
Speaker Change: At the end of the first year then.
Speaker Change: Something has to be sort of stupid super strategic for us to proceed with it and so I think what youre seeing is.
Speaker Change: The impact of our discipline, but it's not it's not really slowing down and it's not the case that our appetite has declined if anything I think it's probably gone up.
Speaker Change: For acquisitions and I would also say that.
Speaker Change: We're pretty excited about the state of things that we're looking at but that one.
Speaker Change: One thing that is important to us.
Speaker Change: Believe important to our investors is that we remain disciplined and know what you're doing.
Speaker Change: Yes.
Speaker Change: Just to say that I mean.
Speaker Change: By their nature.
Speaker Change: Timing of signing and closing.
Speaker Change: He is not going to be completely smooth.
Speaker Change: We would never expect to.
Speaker Change: Do you have sort of an announcement every quarter, even if over the course of <unk>.
Speaker Change: Year, we would hope to have four or five acquisitions. So I know, we've not announced anything it doesn't mean that we have not been working.
Speaker Change: On quite a few opportunities and I would hope that we will be at a point, where we can we can have some.
Speaker Change: Agreed transactions in the next.
Speaker Change: In the next few weeks or months.
Speaker Change: Okay I appreciate the color that's it for me.
Okay.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you wish to ask a question. Please press star one on your telephone keypad that is star one to ask a question.
Speaker Change: We will now go to the next question.
Alex: And your next question comes from the line of Alex <unk> from UBS. Please go ahead.
Speaker Change: Yes, Hey, good morning, everyone.
Speaker Change: I wanted to ask about the environment. So far this quarter. This is a topic that's been coming up obviously on some of the other calls this quarter, but it's really this question of what has happened to client health.
Speaker Change: Et cetera, So obviously a lot of good volatility and good for you, but also theres always a worry that things turn bad and it sounds like your business has held up pretty well, but just wondering is there anything underneath that you can point to where there were certain client segments with outsized losses or anything as we wake up in a month or two and see.
Speaker Change: Hey, something.
Speaker Change: There was something that hurt us in the future or do you think everything was pretty pretty pretty normal.
Speaker Change: Yes.
Speaker Change: I mean I was.
Speaker Change: Streaming pleased with.
Speaker Change: The recent bout of volatility was sort of absorbed within our particular client set.
Speaker Change: As I sort of reflect on why that is I think that.
Speaker Change: Although we had quite a lot of volatility what you didn't have was very substantial increase in prices in specific commodity.
Speaker Change: Which is what Youre seeing for example, the Ukrainian vision.
Speaker Change: Are some of the metals markets and it's those marketplaces, where you had very sizable.
Speaker Change: Movements in the price of commodity typically up that creates liquidity pressure for a particular client set because they own the physical physicals worth more but that hedging it with a financial instrument.
Speaker Change: The margin that the post on the financial instrument goes up but thats, great southern amount of liquidity pressure for them and interestingly. This bout of volatility didn't have that so we had been.
Speaker Change: And then experience a almost no missed margin call OLED.
Speaker Change: <unk> margin calls.
Speaker Change: And so.
Speaker Change: Okay.
Speaker Change: And I would say it was sort of a.
Speaker Change: Unusual in the sense that there was a lot of sort of volatility.
Speaker Change: The clients all appeared to be well.
Speaker Change: We're able to meet whatever sort of their requirements.
Speaker Change: I mean, I will say your question.
Speaker Change: Where are the losses.
Speaker Change: Did they just sort of sitting on retail balance sheets or are they actually.
Speaker Change: Youre going to get manifested in some financial institution.
Speaker Change: I mean, all I can say is that we're not seeing it in any of our clients at all and that the <unk>.
Speaker Change: <unk> of the clients has been.
Speaker Change: Terrific.
Speaker Change: We are hardly at all.
Speaker Change: Used margin multiplied at all I mean, there was sort of one client that we werent that familiar with and we added some marginal suppliers for a couple of weeks and then took them all so theres really been.
Speaker Change: Surprisingly little sort of client stress that has manifested itself.
Speaker Change: Through our franchise so.
Speaker Change: We're pleased to see that.
Speaker Change: Long may it continue.
Speaker Change: Alright, very good and then just quick follow up on the on the clearing segment I heard the answer obviously early.
Speaker Change: On a year over year basis, but even on a quarter over quarter basis. The business on the commission side seems to have lagged.
Speaker Change: Some of the expectations, we had given what's gone on the market, but maybe related to that if my numbers are right I think that the front office headcount was down as well and maybe even down the last couple of quarters. So just wondering is there.
The team set up left or are you deemphasizing certain markets just.
Speaker Change: I thought you were in growth mode. So just surprised to see that the front office personnel number came down so that's been a little bit of re mapping of head count, particularly in our AG business, which straddles both clearing and market, making so I think thats. What you are saying, Alex Yes, I mean, what I can say is there's no change.
Speaker Change: Our outlook with regard to the opportunity in clearing R. R.
Speaker Change: Our interest in investing in it and Theres been no loss of.
Speaker Change: Solid teams of producers over this period, so I think what you're just seeing is the yes.
Speaker Change: There is some unusual numbers in.
Speaker Change: Underlying the overall number when you sort of dig down a level inevitably.
Speaker Change: Any.
Speaker Change: Perfect type business.
Speaker Change: The overall business is performing extremely well its margins are extremely strong level of growth is one that.
Speaker Change: We're very pleased with and one which we continue to invest in and have.
Speaker Change: At a high confidence, we'll be able to continue to grow it has a great pipeline, where again, you're seeing sort of top clients looking to come onto the onto.
Speaker Change: Onto the platform and so in terms of all the.
Speaker Change: Now the real things that sort of drives the health of your franchise all of those.
Speaker Change: Are showing a very healthy franchise that is <unk>.
Speaker Change: Turning to grow and gain share.
Speaker Change: Alright, very good thanks, guys.
Alex: Thanks, Alex.
Speaker Change: Thank you.
Speaker Change: Currently no further questions I will hand, the call back for closing remarks.
Speaker Change: Well, thanks, everybody for joining us.
Speaker Change: As said there was a strong quarter, we've had a strong start to our second.
Speaker Change: Second quarter.
Speaker Change: We're very pleased with the reaction to.
Speaker Change: Our equity offering and our debt offering we're very pleased.
Speaker Change: Pleased with where the franchise is how it's performing the ability that we have to.
Speaker Change: The capabilities and clients that we acquire like the Cowen acquisition in <unk> and.
Speaker Change: And show how much more profitable that can become as part of the Max platform and so.
Speaker Change: We are.
Speaker Change: Extremely.
Speaker Change: Conference over the long term and very pleased with what we've accomplished.
Speaker Change: <unk>, which has been.
Speaker Change: Very strong start so thank you for your questions and we look forward to updating you at the half year.
Speaker Change: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
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