Piper Sandler Companies (PIPR) 28 Oct 222022 Q3 Earnings call transcript

Good morning, and welcome to the Piper Sandler Companies conference call to discuss the Financial Results for the Third 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 that 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 file with the SEC, which are available on the company's Web site at www.pipersandler.com and on the SEC Web site at www.sec.gov. This call will also include statements regarding certain non-GAAP financial measures. be measures addition in of GAAP. should a and accordance measures for substitute financial non-GAAP considered to in not with The performance prepared refer most directly today GAAP measure. release these Please financial comparable company's reconciliation non-GAAP the a of issued to measures the to for earnings The is the available Investor the page of earnings website website. and release company's at on Relations the SEC

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

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

will call prepared for We remarks the open up our through questions. and go then

face the delivered Piper Sandler during While to solid economy global headwinds, the continues results third quarter.

diversified and perform our results continues I've equities the with stated I'm pleased achieved business well in we've our business. before, to model particularly As

franchise scale on remain and established closed made XXXX, large priority financing completed corporate our a landscape, technology track enhances acquisition and multiple producers brokerage focused cap point, businesses, forward the market DBO's clients number our on we our three their firm. and to moved large which technology of credibility sponsor on working that we advisory both transactions. profile senior and provides While DBO our also leading we record of through us increasing our with DBO within Partners, practice. in clients adding our objectives. given technology senior banking with in on both investment far roughly has doubles acquisitions market cap high additional of the in scale and expansion. Thus growing To business one October, share number have and hires, remains product sector

DBO and In addition, the partner equity excited Sandler clients. highly DBO We're a practice important to complementary advisory welcome to family. general team the our is to increasingly private Piper that adds

Turning financial results. to our

million, $XXX revenues adjusted margin we a of $X.XX. and generated quarter of third adjusted diluted XXXX, the EPS XX.X% During net of operating

revenues During months diluted billion, the nine an XX.X% first of EPS net margin adjusted we operating of $X.XX. recorded of $X adjusted XXXX, and

although the the Our year earnings by have prior compared period, made investments driven capacity to reflect several increased we our of exceptional years. platform, over results, the last lower the

review increased investment million business last services. year. X% from Next, let me of banking $XXX quarter with quarter third Advisory XXXX the declined advisory and corporate the our beginning sequentially of third during strong revenues XX% of

as on Our transactions revenues improved quarter compared with second the more we advised fees. to larger

time was transaction Performance business diversified However, sectors. quarter our market impact continues during the volatility across lines. to

team and Our had quarter benefiting Energy this and Power from a space. in activity interest particularly strong increased renewed

deals reflect broadly, More continue healthcare In months number $X M&A on addition, two Piper and a meaningful adviser revenues under number for our financial from of US Sandler during based this to billion our announced of services nine transactions the first was contributions teams. the year.

XXXX across advisory pipelines strong, and of remain prior the Our quarters. two expect fourth be to quarter stronger the we than verticals

of impacted being challenging more environment. increasingly conversion the However, market is pipelines by these

XX% of increase last of third the million third during $XX financing an corporate quarter year. generated to Turning revenues of the quarter compared and We quarter XXXX, of from XX% financing. the down prior to

we a the serving the market equity shut, when sequential remain during more deals quarter, XX the improved a on August was bookrunner XX. in largely we underwrote brief Although markets on as Overall, driven capital window equity basis, by accommodating.

the the to challenging. preferred completed financial conditions and We performance companies. services remain continue during market for quarter, improved also raises capital several debt Despite

capital or of in require conditions. as the market will advantage we coming that However, opportunities activity window to expect increased clients stable quarters, capital more markets access take

the most inclusive now have Turning XXX headcount, acquisition, DBO our the Director Investment directors, of to Banking managing we history. Managing in

to in we market resonate priorities. marketplace, have our remain focused question to during of that and initiatives. us. business efforts had the years, enthusiastic that and Client confident years. and closing, an I shareholders. which growth that no challenged over about relative remain our front to a our call to brokerage our In to discuss continue has market our impact past strength term our strong, executing the control success the position public be the environment is drive the momentum value on put the ability opportunities to the recruiting finance and conditions asset of we're own remains there both and coming company prices continue development in our engagement and can deliver talent should growth Deb will and that, navigate the and businesses. said, in With We've That transformed in market on model factors on in activity. significantly of five am we turn long Our I

with the us third begin XXXX. an refinancing weaken the municipal essentially market quarter quarter seen outflows. fund experienced XX% approximately the declined $XX the volatility the investor for issuance second XX% issues I'll a billion, on to of rate business. significant activity and as We've to has the revenues Higher $XX particular, activity from impacted interest update come financing during with nominal Chad. the of down quarter, rates Thanks, finance down municipal during In increased million market demand halt. market. quarter of XXXX. We second negatively number our and from Overall public generated of

year, market. we by business. an During issues billion our $X.X municipal in of the governmental XX on the of aggregate with a issues for ranked as number this this led underwrote two Activity was underwriter based negotiated and of us quarter value number par third

quarter of similar current sentiment. to we based upon and ahead, conditions XXXX investor be quarter market to fourth the the expect Looking third

market specialty of this experience allow backlog could Our we and financings is pipeline. sector execution for of significant, upside conditions if

Turning to experience during and Equity brokerage. to third continue quarter. equity volatility volumes the elevated markets

Cornerstone broad our addition to touch, platform. brokerage trading, equity all derivatives, the was our algo the million, of generating increased trading $XX and robust Performance record generated our volumes platform. program of Our Macro business elevated high the activity highlighting with during from and revenues quarterly benefiting quarter

and client share client under category been fourth research and the across votes on based of We largest mid-cap We platform companies platforms experiencing base active have our one the market are US the in rank maintained largest coverage. as strong and metrics momentum increasing.

addition, clients. market leading combined In full us suite of our macro research attractive make franchise, for capabilities, with trading destination our an

expect across platform. driven share XXXX We sell continue relationships gains to by finish perspective, positioning the and strong, portfolios client XXXX. continued to cross volatility, pursue opportunities their an clients and to deepen for From we outlook products market

the well as aggressive business. pricing became rate resulting Reserve increased a as Inflation quarter, for our to turning yield conditions market monetary elevated Market begun in tightening. volatility an by in fixed remained Lastly, income and driven curve. has and Federal has the recession, inverted expectations challenging tightening extremely during further

this the million, For second client $XX down a third quarter revenues of of from quarter XXXX, generated as dynamics fixed XX% muted have strong we significantly market year income activity.

Our depository relative deposit lower reasonably our an client lending. Activity municipal securities. bank soft, in activity given solid combined centric in by levels among the particularly driven municipal increase clients value was with has been

outlook stabilization challenging our business interest predict, income for term, the near at benefit term rate is to the will from difficult long and rates. While fixed higher over

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

Thanks, Deb.

revenues quarter of $X corporate investment our the financial of third As part be corporate quarter XXXX, $XXX a as prior solid down results. reminder, the period revenues third XXXX driven for nine of my generated from performances adjusted corporate due net on million for of which non-GAAP comments We lower focused will the revenues across year the by as Net to investment to from banking the revenues for activity, as quarter, well second XX% fixed and investment X% higher revenues. income totaled banking equity investment from financing increase income financing brokerage. Net net billion, offset brokerage the in equity XXXX revenues. in banking decreased municipal year and corporate Compared municipal banking benefited revenues lower and the fixed decreased activity. record by first lower offset months quarter ago revenues

Turning expenses to and margin. operating

the compensation months our in outlook, expect third second for year well XXXX. line ratio with first on of the our of this was Our the current of XX.X% as compensation we the as the for nine XXXX Based ratio quarter be quarter Non-compensation for full second $XX deal expectations. quarter this of of year-to-date and current XXXX the our year to ratio level. expenses, third were expenses, compensation year excluding with reimbursed quarter near consistent million, the to flat compared

income XX.X%. During margin the operating quarter, generated operating an of third $XX we million and of

with For income $XXX an operating of XXXX, totaled XX.X%. million margin of nine the first months operating

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

period year-to-date the for rate tax adjusted XX.X%. the benefit, tax this Excluding was

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

XXXX, generated totaled million quarter we net net third million a of and During was income the income $X.XX. and of basis, diluted diluted EPS $XXX EPS year-to-date $X.XX. On of $XX

me update on Let capital. an with finish

generate while buybacks shareholder business to cash returns to corporate levels significant model. to and continue dividends of through We share deploy development, maintaining drive capital-light our

long build We capabilities DBO platform and Partners. Partners Macro, Cornerstone out through year the the our capital term have Stamford during of drive acquisitions to deployed and growth

common the repurchased the than an shareholders On our $XXX during During we we approximately XXX,XXX $XX a million this count XXXX, offset dilution acquisitions. stock shares million. of quarter year. grants share approximately million million, our have Combined third of our and more with dividends aggregate stock annual or months basis, which of $XXX this paid, common year's stock repurchased of returned to nine of we the or first shares from X.X have year-to-date

on quarterly open the shareholders to stop today, questions. there the December I'm to the for XXrd. of Board of a business close going be on In paid $X.XX to approved and as per November of dividend share Xth cash With record of call that, up addition,

our Instructions] with from Wolfe question Chubak Steven will first [Operator take We Research.

Steven. for is filling in This Brendan

conditions M&A quarter. So overall have same start, narrowing. seeing take they've in of the sequential environment. of at just sounds your measured Based bit you this noted conditions overall you expectations commentary, some are the seller at financing it to like on that advisory seen your some time, more pickup suggest buyer and a little the on would that in improvement in improvement business the least But your one a peers

see to last wanted get as sense to today to a quarter. you how environment just the So relative

I a small I longer, of think we passage still they're are get trend we at that's market’s difficult Maybe done, mean here. that of getting couple we've not close, much seller up. with announced, as things to it the longer and say, had taking the honest, from larger a -- Financing just to see line be mean, Deals we of I seen tough. can pickup. and market. continue I has would be sort just I get expectations buyer changed. into sequential mean a pretty to fees closed. to same, more longer time, the QX as we But start view of of to sort

And is then on quite impressive. momentum business, trading equity there your

skewed believe only Cornerstone the revenues While growth acquisition, actually year-on-year to obviously by are I see of names one the comps they're quarter-on-quarter.

just want for you get run than acquisition the or view to a seeing going driven rate synergies whether has as So greater overall sense forward? your you're share the whether that what Cornerstone previously gains to impacts and anticipated, these business the on from

that that of the of platform you with just but it's I mean, end the the At Cornerstone, which the clearly, seeing the overall built. really of we've announced, benefits, we're combination day,

built So having and trading together. we've time that come those the platform over

macro just happening seeing that's out for collaboration more we're access clients, and value, to our between of to these a liquidity and our ability and trading, from insight getting stock, there what is views, this add teams our -- we're lot relative doing So clients. single the it's where corporate

to And agree us is Cornerstone by tailwind. little in been board. think additionally giving helped I the So this has I we're would relative more which a marketplace, positive the volatility on that a coming of

business it's going and we where going, good So forward. about feel the

next from our with Ryan question take will Securities. JMP Devin We

less fixed with you Michael noted actually Devin. off among for point obviously we thinking sequentially jumping about should current as start and depositories depository good wanted is the muted standing have is that going excess This be forward? there brokerage. bit I down Revenue liquidity? income activity quite environment clients. a or How down this in here Falco could business Is to another in leg be quarter a

No had what is, we've bottom one I we which this quarter. market, upward. line business. what would see into biggest that, lot the softness is there's of month, as say probably look The start rates quarter, we driving visibility the thing seeing though, into more we that's the term in been and that's sign significant in which of volatility necessarily in so same far move had third been been the the uncertainty is near a actually from stopping in that

So less yes, some would as some that second now you as well business the liquidity verticals maybe say increase been seen of know, and they we banks significant is loan as for depositories, not those, had strength depositories, part offsetting on as in other in a quarter which we demand. our client that I QX. have, seen saw in had you unions in credit the case much has

step to about when the the So other just yield to I we rates. uncertainty here to curve thing and products inverted again, I at end advantage verticals confident if platform would and with add, so the out of to conducive continuing mean, and feel we this think see continue as I in just work back a that. we somewhat get that dealing the the doing guess receptive build they're market, day, we take and in that are And client more the business, of

And growing priority. a bit. little remains then the business maybe advisory shifting a Obviously, gears

right You additional middle a some earlier in us for a capacity than month. assuming sector And this the well top level appetite? your seeing market about advisory you geographic still now for it's what better market the consolidation And maybe and closed Can then priorities for what sale. are that expansion firms well. ago, there from hearing talk We're remind here? DBO time for and as the of potentially what's you are year are as M&A

Valence Sandler lot verticals. had and adding and We're I mean those we've really a obviously, of Simmons success, excited about and really with DBO.

been like and to It's big internally I just software our tech build that's frankly, tougher from the that's a platform. M&A market. time partners the priority from Obviously, internal it's we a think the in sector. leadership. But when

best I is boutique, the had about investment What say things So when would a of XXXX. record difficult. more are is in concur the we've would every every done a little things some much I bank market pretty

setting a like little That the expectations. in I seller takes some time just on XXXX. of think reality buyer is more in clients our

You see our priorities in We're challenges are low in the at in tech Europe. geographically, we underpenetrated stretch think things need be to business. year good say time I Stamford the interested were the market the to to and expect looking the to not be going relative very areas, boutiques. as still we're I Again, at, for we're But be next even business too as there's consumer, to other really added transactions. some banks middle say, market given we of fruit Europe, hanging healthcare, just in same. is in but we far, still that building would to our our financials, Partners. obviously, a good healthcare in the big financials and would us

there estate, looked in example. we bigger there all organization collaboratively estate just things all real going are for look we things finance the estate, and in business in at an the vertical, us. to services more more real we of real spaces can to and to then financial a can as across more white we we're is there the Europe. And just grow We've the do still public build in do with continue and So do

Sachs. question We take next James will with Yaro our from Goldman

of that seen going I dialogues? impact an significantly then expected hikes Maybe Chad. is the than rates your year. absolute would How think is much I'll level into think factored of people forward? you, start more earlier faster you sort pace M&A there And a of activity with client We've this in rate

much to of biggest it the mean relative more on our a would rates. obviously I I -- say various depends deals. business, with obviously, the in finance some so lines to the business lot sponsor of lines it's expensive business one

you longer it's if think set still expectations. on I it but a time, while those to takes financing, over okay look a

debt I of of that changed would in rates have space Financial one other quite we those So and is frankly, doing the financials. lot sub certainly, were example, Obviously, bit. Services, deals a areas in say, a bank

Part And that prompt people to financial then affected possible. of be, the is equity more business. question will that's that services, which so capital will raise markets,

will going, very higher much if outcome. question a the be rates Deb's I once There to where per be are it's be public here, in And will will be an of get is that it's very helped, think the -- understanding. certain a parts we Obviously, absolute rates will higher sort certainly, income. for parts a believe, how different impacted. So there to to also going you do had that saw fast tough get while I clients business fixed It's taken term other I for think rate good bigger long of of income, fixed finance run just from is we people and trying reset. the be do sort those results. like comments, stable, to that's

ball mine. crystal as good your as is So

maybe market about we lower should over activity just business we sort how Is for of think turned term? KPIs recover? sort volatility? on Is driven to us -- to of it in if think And how level rates to that sort muni what's the drivers expect focusing long sort that long And near absolute the over would term? of is about key the any of or or that just Deb, term, the financing. with the way helping you of there the

business. it's think number more of over many would opportunities. the actually had side, of two really I'd the parts, into refinancing it with break years, James. I last helped grade years I been investment So That governmental on the say,

on market to versus just issue at look dynamics new just So being refinancing. able

So I say, where I we year have the really, had new probably is year-over-year. flat to think, offset new seen, this issue would year-to-date money helped

It's decline a the So a all had as been mentioned there been previously, come I there. hasn't halt. to refinancing has pretty that, much

new many the too done where that's still rates that projects. times, they in And new to get with matter. money, So don't deals significantly, there's can long up the business, -- I think go rates really as as as don't

I impacted particular, you side, high care, areas the right that's much in really health muni flows to these the just is but impacted would liquidity have can rates. And whether flows. the cetera, is, I flows, there's by yield special mentioned, And at thing would deals high in say it’s those done say district because across challenging of yield board, made the On the I look education, now that more being specialty again, by its stability just Chad get marketplace. et are guess not as last

think environment had -- on So about with drawing if we're deals, increase these very board. situations the market you in a very and and quickly it's thinking been we've so to we've back clients you're one market then different and now rates where working environment,

do think I just right going rates to now, it's is there. help stuck But out stability So significantly. in

next our Securities. from question take Mike will We Grondahl with Northland

of Chad, understand strong, strong just in with means the you conversion advisory talks sort relative help the the what us kind being year's is a pipeline tough. release, think of time, like we the of comments but of should just third press about peak before continuation last October, it quarter? that area? to And what of pipeline advisory or on then secondly, October kind of any period Can

we advisory relative still as the pitching MD year, would say capacity is XXX -- much say QX? look of so I We're of are results we back launch five, like look get deals should longer, whole say, obviously, would When our and four, to the slate equity not built on still business. private taking just And we trying relative difficult. MDs. results the can years, then get other, this about sort I I business, in have them people but at are our advisory it's you six to we've still it's What last one count revenue few which pipeline, a more we we're to cautious. of to down, What now launches and levels mean, built or good maybe to putting start deal, clients are more a that should in used it's bidders hey, is close a

to it's what takes long in you financing So get relative I shutdowns periods nothing last XX of say the or harder, of where is would COVID, But the every the The or certainly M&A deal sponsors beginning five changed deal happened like pricing. for that. every has longer. years,

like quite of I would deals just think out closed, up advisory, we deals be They'll in quarters of seeing this expectations. of on, see sellers while not forever. good be bit will the going into a be wait QX. our it You're on be year. I continue lower that's for said it is in than And what QX line a one aren't what and pricing business in it normal could starting but won't script, more come say our the We Normally, and better a we And goes push the strong. would to we're quarter October. QX as -- just better the be advisory. longer the could than year environment, that's given usual to step But expect advisory the for

take our We KBW. next question Brown will from Michael with

have Evan to but filling of coming in just talking DBO is been them on platform. for Most the Hall asked, about the team This Mike.

there You capabilities? medium the noted Piper's relates and talk the potential GP it broader advisory the just practice in you bring. as about that Can term they to

introduced. some these obviously, equity sponsors sponsor excited bring cap even of large some mean, the to frankly, businesses what Obviously, hundreds competitors of some DBO relationships with on firms of for Yes, is has transactions, table guys things those we a besides other M&A private other history we're about our of with that. their working have doing clients, to get big I

was equity I their think mean, we're opportunities. still part in early selling the of private maybe GP. innings I of

be full continuation sales, folks of there these will up. there other will You vehicles more funds, the partial sales, can about set impact that think be

us So that, relationships and pretty talent a as big for there's the didn't has this sponsor really opportunity a of it's I expanded that we've some have. we just MD DBO our frankly, and think at base specialized capability

And we believe will our of as so can we the be where of private advisory continue total we're excited segment take parts business. equity about to one this biggest

follow-up We Ryan Devin a Securities. from will with JMP question take

This is Mike Devin for again.

Just over there Obviously, wanted we thinking should how revenue to as from but headcount aren't made you've lot ask and MD normal, of any lot you're banker moving of keeps added Are so normalized think earnings is and a of talent year, about XX% the side, especially XXXX frameworks I up acquisitions brokerage wasn't normal levels. more either. the aspects a higher? also XXXX the or XXXX have in so mind, last baseline on

the I least the look had team. part of -- the business, What we at just say we investment I obviously, is had way would haven't the at banking just DBO

like good -- We pretty year. this It's not Stamford year. of some the -- did did we middle we the hiring in haven't

MDs So all XXX it's not we've like had year. those

the good take times more at time. per our Obviously, you the while, the on MDs the least of at, were look kind investment time or thirds The of part, for we businesses, is banking New MD. as over per platform two $X look the which in that MD. we've a way I or million productivity million, we're products got million $X million, and grown averaging bigger doing platform to $X $X $X deals, million and

banking some long we're -- run we have least our think and relative a still But fixed the in we one at rates have pretty couple rate is where go. we're it's the So think of opportunity a income, open stabilize. on though the then there equities, first business, is to of certainly total quarters, better Obviously, think sort of don't trickle a is historical the than good view segment way ECM can even at that of below And it's run other means. sort business range when rate. term on to now with of you I a

next to we 'XX march it's year. pretty ECM saying going we'll or XXXX back did we're confident not but do this than business we're So to more that levels, year

Mr. you turn Thank at to for you. any I questions or further There no Abraham, additional conference this will are closing back remarks. time. the

our All you, everyone. and We right. to and operator, full a forward look you fourth results. day. year on great quarter updating Thank thanks, Have

may This call. you you for your Thank concludes now disconnect. today's participation, and