Piper Sandler Companies (PIPR) 29 Apr 222022 Q1 Earnings call transcript

Good morning and welcome to the Piper Sandler Companies' Conference Call to discuss the financial results for the First Quarter of 2022.

During the question-and-answer session Securities industry professionals may ask questions of management. The company has asked that I remind you that statements on this call are not historical or current facts, including statements about beliefs and expectations are forward-looking statements that involve inherent risks and uncertainties. Factors that could cause actual results to differ materially from those anticipated are identified in the company's earnings release and reports on the file with the SEC, which are available on the company's website at www.pipersandler.com and on the SEC website at www.sec.gov. This call will also include statements regarding certain non-GAAP financial measures. be of addition accordance financial should substitute and with measures measures for performance non-GAAP considered to in not GAAP. The prepared in for financial to of directly refer the earnings measure. issued Please company's comparable GAAP these to measures today non-GAAP the most release reconciliation website release company's available on is SEC the earnings the Investor at The page website. Relations on the and

your to As call. you to turn like now I a would Abraham, reminder, this Mr. call call Mr. over is may Abraham. being begin recorded. And Chad the

thank our Good us. am and joining morning, you President I here for our Schoneman, and with CFO. Deb Tim Carter,

We expectations will markets diversified strong up experienced prepared continues continued policy. monetary for Ukraine, including quickly and Financial the during model to uncertainty generate then in the quarter, tightening and our of go open backdrop, through this a our challenging increased the and Despite questions. and call changing results. business inflation, for resilient war remarks persistent

constructive market activity underwriting advisory was equity remained the and a verticals and business While of quarter. the was our highlight soft industry, our product during industry conditions across across many

During XX.X%, the adjusted financing, margin XXXX, first we that of net generated performances to brokerage our delivered and EPS pleased I report operating $X.XX. am and businesses. million, $XXX strong quarter revenues of debt adjusted across of a we advisory,

during $XXX to quarter Turning investment corporate of corporate investment banking, the first million total revenues of we banking generated XXXX.

which our driven generated Our banking of M&A business, XX% results were by advisory our revenues. investment

execute quarter, in for rising revenues. completed Clients our debt capital $XX financing corporate corporate banking of of quick advisory XX% debt of $X the We had raising to revenues, total during Our advisory, a successful includes which billion million rates. debt quarter, anticipation generating debt deals clients. business, XX and raises over financing investment and of capital were or

during generating and larger on XX% performance. Turning to and quarter during to continues be larger of The average driver trend advising revenues absolute to year-over-year, services, of advisory relative million of with transactions Services advisory the strong, by advisory quarter. during transactions transactions a $XX reflects XX on key growth. value our the bank completed increased $XXX billion. the aggregate transaction advisory fees advised and U.S. our an closed largest which M&A than of quarter four Group, We the that five Performance was Financial led more

diversified verticals our growth. all industry services, addition, In power, chemicals, healthcare, industrial and recorded and year-over-year and energy

advisory pipelines equity Our continued private to with robust. be clients

from record growth PE continue We and expect high market our levels as sponsor deploy. engage of additional catalyst An amounts for companies maintain to to to activity firms portfolio of leading in strong remain capital and power energy activity and our deal is gas both benefit and franchise. Oil sectors activity experiencing to The through they increased team most are recent energy believe traditional activity well has are positioned down renewed new and cycle, interest persevered we and and levels. in sectors. the increasing

M&A verticals. be we and and first this strong, first remain rate, revenues year. ahead, our this of pipelines across a if for backdrop, the of are half maintain half, anticipate to of XXXX, remains good similar of activity year advisory expect half With Looking this for half to the we to first all industry pipelines second lead close the revenues to supportive, our and the market compared conditions we could high increased

concerns, corporate equity down investor and cautious drop the unprecedented markets. to shut After was pause driven years of the risks a a outlook, Turning unexpected. market more largely financing, activity, and not valuations capital have in volatility, two geopolitical economic by

$XX XXXX, million of we revenues, debt for generated quarter the of financing financing primarily corporate clients. During first

headcount consecutive growth Directors we net quarter representing MD Turning our to quarter investment at banking, of basis. Managing Managing Director the a finished on XXth headcount, XXX

our own resonate efforts and be Our priorities. the our Both to continue marketplace. the success of in recruiting continued development and to momentum talent

to and growth long-term for invest platform. strengthen to our continue We

During acquisition we closed new the all partners. the welcome like of our Cornerstone quarter, I'd and of to on

Sandler the are as of part team. you have excited to We Piper

pending across addition, numerous to the to we to that finance share our market focused the In continue market our I and of to can capabilities. the and to earnings second flow, and quarter environments expect our XXXX. grow markets elevating of remain we and expand call see we public businesses. over Stamford ebb platform capacity on the acquisition but turn that, close brokerage With Deb opportunities of will platform discuss We recognize in

rates the driven last quarter financing was by I'll to from a specialty volatility on to year-over-year nominal by outperform Chad. We interest both finance market begin during the Higher issuance the ago, as public fewer down space $XX in an started able the The flat sectors, year quarter of with business. We decline year quarter. on revenues Market update finance diversification rate of billion, as approximately refinancing. issuance. executing year. our Thanks, interest contributed million sector increased our of in governmental benefit. well municipal the first continues compared to $XX and to drive the were with during business, offerings XX% the public specialty

example we hotel for a million of $XXX expertise, issuer, our partnering governmental with local Texas As raised entity. a an

the to capabilities underwrite in debt. the Our one nation transaction our Highlighting ranked a for for market. complex distribution distribution XXXX, more exceptional sector, as expertise in we underwriter allowed non-rated combined hospitality number a with the tax challenging capabilities, our in exempt us

XXXX expect we to to from levels. governmental ahead, Looking issuance moderate continue

strong, execution of is XXXX, backlog our market sector specialty on in financing be dependent this our will very backlog conditions. of While

and volumes. to brokerage, the markets first Turning equity elevated in equity saw quarter volatility

adds our quarterly record acquisition and of of addition closed volumes research. million macro and Our to Cornerstone the equity quantitative professionals brokerage XX Macro platform. publishing analysts high increased $XX on quality thematic February over Cornerstone Macro XX producing X. Cornerstone generated specializing The benefiting the revenues thought-leading in of including from business research

combined premier repositioned been well clients on across clients X.X has trading the sought touch shares feedback high Team team opportunities trust portfolios of and to execute Cornerstone addition, platform, on to billion see capabilities. Strategy Integration consistently advice volatility, cross sell provides we clients derivative XXXX trading our gotten they In and has capabilities Options Macro's We of strategy expertise approximately With investors. our franchise. efficiently. institutional clients periods from the and the traded quickly trade heightened our In to quarter during execution of as and behalf our fantastic.

a March. for market to our us significant base the cash transacting cross time in portion client number clients increase breadth continue to We all our executed a valuable of on with us allows clients a impact in reached high basis of an no of and The resulting trades, differentiator. monthly

fixed an quarter, began quarter fixed tightening. period Reserve to the rate strong generated Clients products work first the of yields to expectations income client invested compared and lead Federal years quarter of XXXX, volatility. of as inventories done from future have sidelines. few significantly through rate up income and us capital in activity. to rising X% our first effort activity The Lastly, enticed The the free fourth reflects $XX turning last interest and XXXX. shorter for market shorten the their to the off interest we experienced portfolios over December rates of of was securities revenues dated with our well million, business, work this March XX. to risk in drove reduce The across duration. we investors treasury inflation in increased market in of XX-year repositioning XX treasury has This versus which XX% the further served yields higher advice Client increase

lending began to offer opportunities on our as adjusted purchases, attractive yields risk bank clients relative investments addition, In to increased basis. their bond a

tech transactions. Our took advantage municipal municipal swap rates executed central clients of and higher

near-term a to Our remain volatile constructive. us environment. as outlook position increased are capabilities and navigate Inflation and driving engagement higher our clients they client assist to continues yields

will to and call update our financial Tim the on I capital turn over Now review provide an use. to results

Deb. Thanks,

results. delivered a of quarter adjusted results focused reminder, quarter driven capital revenues businesses. generated record our million revenues will our advisory to XX% primarily by $XXX results which first my success, level of model. fourth highlights XXXX in operating a year, Net low diversified firm's our financial equity Despite equity decreased last for decreased these quarter be history brokerage from of on we and due the activity. XXXX, net from reflect We the we of second first As and the XX% quarter comments strong the environment, historically of the and from challenging capital believe raising first markets non-GAAP strongest

Turning to operating expenses and margin.

and compensation full from quarter for Our first of in XXXX, lower was shift XX.X% business resulting a the XXXX, ratio mix. XX% for revenues year to compared of the

end of of expenses, $XX compared excluding We X%, continue growth. year basis full guided near for Non-compensation deal to be the million range. we business as well for quarter our to on expenses increased of to first included as addition ratio costs the XX% excluding focused travel the profitability. fourth which XXXX, as on to expect were as expansion, reimbursed resulting from deal non-compensation of low to and expenses investing costs XX%, with quarter expenses, increased the higher as Cornerstone at a XXXX Non-compensation year remain variable costs expense, compensation our our related excluding Compared revenues quarter fees to deal reimbursed ago, platform. increased had well the Macro professional associated decreased

excess operating seventh During This million margin of with an of consecutive operating of the generated first income quarter XXXX, an $XX in represents margin XX.X%. of quarter we and XX%. operating

million the first tax XXXX, price. which related quarter to vesting rate prices restricted a tax for Our the benefit the adjusted higher included $X.X was stock of grant date than XX.X%

impact full rate will of XX% the excluding our to targeted from adjusted to We expect our XX%, stock vestings. continue range tax within year be

of EPS $X.XX. we generated the XXXX, net $XX first income diluted of During million quarter and was

on with our me drive committed to total remain to Let returning to returns. We finish capital. update shareholders capital an

$XXX for offset through of stock, dilution We pursuant This grants, of we stock includes million acquisition XXX,XXX which returned million more repurchased and XX the shareholders million repurchase the approximately authorization. from dividends paid. $XXX our aggregate first than Cornerstone. to During our an stock repurchased share of annual quarter shares the of to buybacks of common and XXXX, common

active on an opportunistic We will to continue repurchasing shares basis. be

through to and of quarterly an paid also per our or $X.XX our dividends. We special aggregate $XX million share shareholders

of results. today, quarterly with Overall, paid to a of we June addition, the are XX. quarter on Board May shareholders pleased close cash approved In of as $X.XX on business first XX record be share dividend our the of per to

resilient Our be durable. and diversified continues business to

in can on deliver progress call growth our the remain now the make long-term. and to Thanks, to and continue open shareholder value confident strategy ability over long-term for and questions. our We up grow we

first Ryan Securities. Your Devin question from of Instructions] the [Operator line comes - JMP

Your open. line is

great, How morning, Hey you? are good everyone.

Devin, hi.

want M&A a advisory in little business. just First to dig on question, bit the

which really volatility. the You doesn't is the market great despite sound expectations outlook appreciate have changed like some of much,

or with any have assuming there so maybe maybe are energy, on kind or better? a areas from bit kind that? then decisions, or sponsors things commodities slowed little for sector those any I'm just kind curious, all at kind pace? you about activity kind as last a just diversification that areas kind guys have talk of on just are expectation others maybe perspective, Our seeing slowed, that are delaying kind the you're on Does valuations or just of that the pullback? curious, of you stronger are So continue So certain have slowing hand, you just of tech or imply any not doing the kind flavor piece have kind guide is, And the of of and things items? nice maybe come or normalize of of seeing of making other

relative Yes, while are of I sponsor that we in stock and gone about especially on that up strong would away, price first business certainly four of for that is Devon. this have just part our question year, would feel say new deals, first by a your advisory, the really that handful have sort the pace. to months deals impacted public say, to thanks, ones we I most quite of signing good the

very in market we're just sectors, financials. been larger But think that we're I across sectors, in strong yes but much we're could tougher not, winning frankly, talked traditional industry both of count. script, transactions. energy the it very, has was do and sponsor time years, strong acknowledge into offset our to this right comes and new banks. We we with energy might And, seeing had that's business quite great. the of in obviously sort even affect a area larger to for long slightly couple certainly our of not a that. this just one QX, which was some I continues ultimately specifically, our volatility those think we with if of When start business now, mandates, it a a lower year, year deal

tougher but in continues the insurance strong, with the transaction And smaller private end the larger practice just of get softer still broadened to little then, year, valuations trickling us. is our like really highlighted pace over technology and the probably year, we've for towards of think asset financials quite And just certainly, good you've that's software. and yes, the which same last in I management areas into of some to Some start and be a well. might healthcare consumer. year other transactions And is that's the the in of area as markets as advisory

great. Okay, Thanks, Chad.

calculation of versus than year-to-date. of for we end dynamic. about and same down a the the it should we followup Piper stocks a interesting liquidity, because But appreciate maybe and year, the XX one to ton longer-term kind The on at here guess percent on when down the capital the capacity through attractiveness how perspective, at in time and haven't balance buybacks capital prospects kind I some specials more a over like stock long-term that XX% are float the the you buybacks of relative now and the an Just dynamic opportunity? of changed there's for as price stock seems of think where not I kind much, from the Tim. maybe new of dividends business that but that That's are of market return

Yes, Devin.

we here in first which the about I our right, dilution, were, offsetting we've quarter. always did think talked we

but sort So over and the what, think we've float little more want is, more been, we aggressive as the we've over that the mean, be we've year. that to improved typically done we the probably was bit than recognized I, But has of buyback. liquidity a that I that still opportunistic time. our always maybe piece, course view on of think

an back. So, continue I it think does opportunity buy to more give of to us

So, I we to as think on go active front we're be that going forward. to continue

view to be You mean, back. policy to generally yes, it does continue follow us these out the generation, more corporate I still capacity gives know, But of an think on based us active capital will levels development. to we at on XX%. give buy dividend we've set And obviously, it XX% I our is as opportunity to

Thanks That's guys. helpful. leave so I'll there. great. Okay, much, it

you. Thank

James from from Your Yaro the question next comes line of Goldman Sachs.

open. Your line is

they a financing, think that can some when for just thank the come down level in companies is capital? done it the try and you high? the of just raise my shoots far or and with really will sort morning, biotech industry, some but of still markets how need good example, so so green to Good of taking market on is Maybe until any then And second equity start volatility is capital need could you willingness I too you It's you think out terms the of much questions. quarter whether you're the business. long obviously in seeing deals as touch equity across a to get perhaps to maybe of lot that such

would James. say level a XX say the Yes, of down, pickup. down first few sort starting thanks, in we Yes, to again. you were really the through April up ECM volatility of relative haven't here April, at that's market and I the to VIX would and of weeks the days seen last April, the month I any first see sort of obviously spiked overall

these market your and would pickup want in anticipating not relative when say mean, pauses would certainly the low capital seen want couple haven't relative saying last case ECM. -- who five we we interest or periods is lot of But got of three, this ready, capital, to yet. we're that time, list when to I to a from lowest really that just when investors impossible than that second I say we of willing pretty companies but quarters. see And the to we've some a agree or in the markets, QX. we've a comment, that's not I say quarters if finance. So general, would that but happen, of I'm also raise companies couldn't backlog would it's they more but we've I got of knows seen rare don't that's And last four big renewed

So I think call it's that couple in of to turn going on. spec too early that to it's make the that next weeks

about more we past when I just counter clear. to fixed the an been entered very up, follow have area Maybe, asked income that's periods. business, Okay, trading economically could cyclicality recent of for which my leads has then the troubled me

do the pick hear with a rates, we to we stagflationary income high fixed your for if even interested how on to entered thoughts really rates? more ability recessionary versus did a So up period? with then And be think I'd interest you interest recession of about more whether environment enter actually perhaps a true low

our some say quite definitely Yes, the year. and higher though, activity, creating we fixed of highly so obviously, yield higher level rates, activity in end of the of we quarter where would of interest shape businesses, the I up were is, we do see that to curve thing volatility. rates saw the our we that interest in income one is from the also of picked it rate last just Part as at correlated

impacting So rates volatility, curve, markets to with rate the how better those business. drive lower we the drive Meaning, income fixed level. interest slope is have more to can the interest going combined is going if factors that to are a and higher

situation if happens rates we again. with your I So we about actually sort your enter of it second point answers around interest up a what end into to where think question, low second

income moved business, would our other a lot have say So thing clients work fixed client it. into with more advisory it we a financial our is definitely one centric with though, of I strategy, of about around

some, robust would more transactions with portfolios. clients as rebalance able are So we say to I see they

that's our So other income aspect the color on I I would fixed business. guess for add

clear. so that's you much. Thank Okay, very

you. thank Yes,

from Steven Your next question of Research. comes Chubak Wolfe from line the

Your line is open.

Hi, good morning.

morning. Good

Good morning.

constructive today So on as you backdrop? to goal challenging in an the XX% pipeline achievable can see visibility operating nice was advisory give given above of I have this in you I some hoping the the as you see off wanted the the terms quarter. year, margin. to on question margin start to that what Op with the IV for you context just and the a offered outlook Certainly

Yes, hi. Tim I'll and anything. can take then that the first shot on add

know all QX I all in the obviously, diversification, we You feel also margin call, think the the said wasn't be we felt could the depressed we I low products, XX% And with somewhat of levels on QX sustainable. be even the But industry we can obtained we scale we in certainly think north like think groups, still revenue like here. XXs like XX%. we the feel I at

were so scale peak of somewhere You the certainly sense, half makes if where between where was, QX revenues in year. the back we into also know, our and

comp at feel XX thing on little there's XX in Steve, for I at add continue business, at what some be above revenue opportunities But only these XX or rate of a make is comp some sort us, levels spot talked north even the do impact to in year. little I have ratio revenue Yes, close not which would bit the my above to being here overall levels the XX, bit We bad for the given were like hires, and about. but to that mean could margin. and a that about the we and good maybe to business some feel a we to mix, full comments has in QX that think, obviously invest that, a so I we've of

some A know Okay, growth granted I or terms new of it's some driver, in that's had the sense and sustain you pipeline get maybe big or underpinning I least recruiting your confidence early some provided just in backdrop? And really that talent, of helpful just adds a current about of momentum, speaking color. revenue of of to at ability hiring strong want MD like, just as is to long-term five-year your the recruiting the environment, targets goals. hiring MD days is trends the levels, what given terms that guys still some to

of big hiring. of maybe organic to we targets want fold. to to said lifts, sort think acquisitions, half two then team Obviously, year our and go, Yes, six hit five, that of I where do we we have through

prices You XX say not couldn't QX, environment. term a we're for things we've with we've in know, in acquisition we done. we're environment. advisory close this that conversations and would have would to in last And and looked that as good get been look say the feel picked active at, also transactions but and obviously, not we're sort got the Stamford I that and up, and some the those going the long obviously of smaller quite on shown active in front, at in and deal the maybe quite boutiques I I was of this months, past, afraid those about to do not, like we've just

good that of we announcements we've gotten the been some and few those hires about the there some that some those in out a of QX. we'll and I add, tougher done So of side, would we've feel say momentum get spaces trying have But then recruiting seen aspect. on to we

staying those to to growing add the on we've that. And hit continue to long-term you're environment, the So do going I the us targets, targets. through and for got to external six add think we're seven MDs in teams, committed stay right a even hiring, so acquisitions net to year difficult this we're our to

just understand been significantly sheet, liquidity, bank manage be that rates lot that there's that to At a completely in strong relating income a to question more, inflated one great. what going need really that's time, same the of is depository to the where the the franchises, can earlier James' strong beneficial fixed activity. that is I excess driven business. this higher Fed really seen the has on If That's squeeze brokerage, firms in to have balance we've period

With expected outlook? the liquidity the fixed to the curious from just drain of I'm Fed expect that to amounts income how significant brokerage now you system, impact

think meaningful our on obviously is spot client which could of sheets. decline have a deposits side those those loan I we see part funds you liquidity that pick go, Yes, have overall less the ours, see base and and depository as up we on balance of you

things the focused of on expanding is the are very that client other One we verticals.

So I I would say financial is in other lines. our But some help strategy which to get ways do definitely was further fair and have mentioning leverage can to think at our, find assessment. you work I strategies that of happen again those trend, business earlier, a to group

right, really Thanks questions. that's helpful much so All taking for color. my

you. Thank

comes line Securities. Mike Grondahl of from question from Northland the next Your

line Your is open.

And that just questions, Hey, on morning, income balance you're pickup little trading the about that? just us picking managing of guys. note one Stamford, are secondly, how bit if the how sheet, you there, you Two related talk a MDs with fixed environment just there? could kind to up good then you the can many and remind

on on Yes, been focus helping now, risks need very I'll something to saw now take the our lot the we years for more we significantly balance focused we we years sheet that as a of sheet. of the we this reducing And amount on business number the within boy take a to couple reduce as on our flow the first balance that significant, business scale really balance have one Sandler, there combined is grow us well ago saw sheet use. of with a and

less today. than may which our business, does So income in that thankfully, drove to net-net we're more it volatility have risk much having historically about fixed definitely worry

on and in practice, adding that. MDs the just of also Stamford we're a Mike in counter in for our three us adding to sort net but and little from business, smaller which acquisition is beverage bit reminder, was cyclical, QX great that a consumer food Yes, team a our Europe,

lot. a Thanks it. Got

Mike. Thanks

from of Your the Instructions] question line KBW. Michael comes from [Operator Brown next

Your line is open.

Great. Hey, morning, everyone. good

Mike. Hi

Good morning.

the the I wanted Chad, positive the So start here. health the on with advisory advisory, and just to of obviously backdrop given pipeline business current commentary

to the As strength periods pipeline, think that compare the strength of to about historical that periods? versus you does prior of help pipeline how frame that

in we Yes, pretty business, looks say, sectors, if looked I certain round of deals. it balanced in across industry I teams. a the bigger and would there's lot that, say larger anything more frankly last at The our like we year, would mean, get some the sponsor closing. more reminder, an get, it waited. sponsor more be a we as we trips I more large with billion get, QX had the incredible if dollar half deals. little a might just We anything back transactions very

volatility across our down, a we see So see the just sponsors. that's same acknowledge in QX. like, the get just sponsor the general, of and I at also running think difficult of this But made acknowledge it's a of going I those industry of to teams backdrop, hard businesses, very comp lot the longer comments very most be is much sustained. to sort kind in that's slow why we pace with But are could things the tougher

how a in quarter, deeper bit environment advisory this the in us financials has business? seemingly more a Okay, a on How pulse large within that to little that a through? dive M&A impacting banks really strong had you to your scrutiny great. rising we in from quick contribution give just check rate are bank And environment? if certainly perform on expected there has continues this really cap How of tighten of that the for still how mergers? and been accelerating Is bank then kind M&A? headwind we and that And regulatory that is could

Yes.

those touched comments. So on sort I of

far by QX. financials the know, was in advisory You strongest business

were So we second closed on will market related little a deals slow the transactions. bank very half in have four do transactions. five share we're that think some to -- of think the like also the I in and I But high slowdown And smaller in we that very, seeing general, definitely QX. largest some larger in around we the that is of bit feel the

then, asset insurance And at and pretty so in sectors, like pace management at a have we're really good still good are And and seeing I still those clip. said, augmented there. a and fintech and transactions those going frankly, of some

your management to regulatory bit transactions relative taking last are the So question, longer. quite teams that. think noticing I definitely environment the Certainly, a are all

good. larger pace we'll I the in think a pretty the slowdown. transactions, total general, see in But on is

Okay, $XX costs related great. T&E one think on way here. the the per right confirm I is the deal Tim, quarterly the about for Thanks, I is the to for million wanted million Chad quarter. year? guidance for quickly still for excluding that's and just to could Obviously, just XXXX squeeze in cadence non-comps to the if the rise $XX

mean Mike. the right we what on Yes, I level. based that's still see

to I maybe be. levels close normal travel think where to would those we're back

of low yeah, at for the that's I think in going the sort right QX, range but end, forward this So, year.

questions. Okay, my great. taking Thanks for

Thank you.

this there no At you. you time, more questions. phone are continue. Mr. Thank may Abraham,

like you environment Thank look I'd close second great how forward team operator. Have you, saying on you, and quarter. we through to by everyone, very difficult managed thank a our I'm to operating results. our day. the Okay, updating that during proud of quarter

This concludes call. conference today's

disconnect. now You may