Marex Group plc Ordinary Shares Q2 FY2025 earnings call

Financial Performance

• First half of 2025 generated $967 million revenue and $203 million Adjusted Profit Before Tax, up 27% y-o-y. Second quarter Adjusted Profit Before Tax was $106 million, up 16% y-o-y.

Acquisitions

• Cowen's prime brokerage is a success, with revenue on Marex platform running above $200 million H1 run rate. Aarna acquisition added ~$7 million revenue in Q2. Anticipation of Winterflood acquisition to transform equity U.K. market-making.

Liquidity and Funding

• $500 million senior notes issuance in May, record liquidity position with $2 billion surplus. Successful equity follow-on transaction increased public float to 17% from 64% post-IPO.

Response to Short Seller Report

• Addressed allegations about off-balance sheet entities, acquisition governance, and accounting consolidation, affirming transparency and compliance with audits and regulatory requirements.

Clearing revenues grew 12% to $139 million in Q2, with adjusted profit before tax up 2% to $71 million. Agency and Execution was a record quarter with revenues up 59% to $261 million, adjusted profit before tax more than tripling to $69 million. Market Making revenue declined 17% to $57 million. First half revenue was $967 million, up 23% y-o-y, with margins expanding to 21%. Clearing revenue grew 15% y-o-y, Agency and Execution saw 50% revenue growth, while Market Making was broadly flat compared to last year.

Forward-Looking

• Expect continued growth through organic and inorganic initiatives. Anticipate maintaining strong margins and growth via diversified segments and market share gains. Winterflood acquisition expected to contribute to future performance.

Short Seller Impact

• Addressed allegations in short report, rebutted all claims and emphasized firm's transparency and compliance. Impact on clients was modest with balances flat and some large clients extending mandates.### Market Volatility
• Need to manage risks, especially client leverage in Prime services, but overall client risk remains low, with client leverage below 50% and industry averages.

Q: About free cash flow and cash performance A: Ian explained cash flow details, including adjustments for non-cash items, acquisitions, and working capital. Mentioned cash PBT adjustments and impact of fair value of derivatives.

Q: Expense synergies from acquisitions A: Most synergies captured, with revenue synergies from future acquisitions more likely than cost synergies. Hamilton Court and Winterflood acquisitions discussed.

Q: Sustainability of business performance A: Confident in continued growth through diversified segments and market share gains, offsetting market softness in some areas. July performance at levels comparable to second quarter.

Q: Net interest income and allocation A: Rob explained interest income and expense changes, linked to debt issuance and liquidity management. Interest income up marginally, interest expense up due to debt issuance.

Q: Inorganic opportunities pipeline A: Paolo discussed mix of acquisitions, including Winterflood and smaller deals in various geographies and product sets. ~50% of transactions in financials/securities part of business.

Q: Capital management and buybacks A: Prioritizing float increase, but buybacks could be considered as float grows. Private equity residual shareholding down to 17%.

Q: Feedback from clients on short report A: Impact on clients was modest, with balances flat and some large clients extending mandates. Conversations with counterparts showed minimal retrenchment.

Q: Market Making segment in ags A: Tariff-related and liquidity issues in ags, but diversified business offsets impacts. Strong performance in metals and energy offset ags slowdown.

Q: Clearing balances and future growth A: Strong pipeline, but growth consistent with first half average. Clearing revenues grew 12% in Q2, driven by client balances and volumes.

Q: Share count and potential dilution A: Share count expected to remain consistent with minimal dilution. No significant share option plans leading to more than 1% dilution.

Q: Interest in RJ O'Brien A: Considered, but not a cultural fit, better suited for others. Conversations didn't lead to a deal, but open to suitable large transactions if fit and value creation assured.

Q: Agency and Execution margins and front office costs A: Paolo discussed sustainable margins in Agency and Execution, with room for improvement through scale and mix shifts. Front office costs managed through productivity and mix changes.