PIPR - Earnings call transcript Q1 2018

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Operator

Good morning and welcome to the Piper Jaffray Companies’ conference call to discuss the financial results for the first quarter of 2018.

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 website at www.piperjaffray.com and on the SEC website at www.sec.gov. This call also includes 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 comparable today measure. release these Please financial GAAP company’s reconciliation non-GAAP the a of issued to measures the to for earnings company’s release earning the on at the Relations page the The or Investor SEC available of is website website.

being As reminder, this recorded. call is

call. Mr. turn Now over Abraham. may call to Chad the Abraham, I’d begin your like Mr. to you

Chad Abraham

Schoneman, our thank Good and I’m the morning Revenue with Deb in our we results to everyone. our levels Carter, like call Jaffray’s below and quarter. recent you President, CFO, the Piper here Tim joining first string for came quarters. to of would discuss for strong

equity factors Clearly raising of other business include results. we these grow the capital and These factors business and by offset our making the that to businesses. ongoing the for inherent markets revenue. not municipal in in variability the reflected major the are was related historically strength Our of advisory franchise are impacted strength our investments challenging

long-term Our trending level direction. the revenue right is in

quarter like reaffirm First shareholders. to our revenue we even this LTM the now period, delivering the LTM prior advisory row I’d revenues and million higher also million for banking of year X% quarter multiple seventh a our were for revenues have the across exceeded as investment quarter, commitment than total lighter in $XXX sectors. with several $XXX durable industry franchises value to of

on with discuss our financial the Deb an advisory Tim how results. hand capital our for including our carefully then the overview we to perspectives provide costs returns continue new experienced a the some to over generating in business we lines. revenues I’ll equity the businesses, strong markets will recognition of impact revenue the of of our lower financials, quarter, rules review finish the to With and shareholders. managed call rest

call for questions. the open then will up We

Our quarter. in spot million for the quarter. were healthcare capital was bright this book strongest team ECM quarter three constructive in business periods the of during almost The the robust firm the Overall, $XX business of quarter despite the transactions raising XX our run Markets completed in by volatility. concentrated Revenue years. was biotech throughout area. of most the healthcare represented led

While way deals volatility attribute been as for sequentially XX% quarter. position. didn’t it both $XXX down as discussion to advisory time has the where transaction over it the sequential track market an our much business our conditions cycle. fluctuate disrupted the number are business, over business can back our business reach raising. advisory are pipelines strong, we market share few are M&A gain will feel or we and compared our much activity million a longer compared a up that We revenues frame a constructive, to to ago. to assess We judge levels basis, remain maintain years significantly this of market performance that our was subject years, year. LTM of to confident a over The On and quarter as of much these nature XX% year the as levels uneven where or up market, quarter. the down past capital We from was looking of over the business results in size of advisory meaningfully, By of the and few or comparison

strong of the capital Complementing expanded $X energy the commitments of good addition receptivity business. and We impact our a the by in industrials growth. forward our deepen group you number our also product investment we two expansion it to business market-leading will of quarter. platform, to gain diversified with billion look an been as We the platform A primarily of significant backed major this banking has over this initiative focused our to is on Finance in momentum in the example are advisory. franchises our represents the building year. drive believe strategic This continue by us give consumer. broaden invest formation and we years product important the banking announced this to past we our now updating We’ve during which in in of of MDs will early XX% and as to advisory results investment in the half and have on believe clients. relationships is initiative to new back important positive healthcare, We another traction. growth a group, solid we this Piper Initial debt addition Jaffray the on

to I will businesses. turn of discuss to call Deb over our rest the the Now

Deb Schoneman

Thanks Chad.

noted at outset call, Chad some quarter. markets faced the challenging we of this As the

in First, our address and finance equity income will public I business. exposure the markets relative to experienced we fixed brokerage discuss will challenges then how municipal our impacted some the our businesses, I

dramatic are fixed XXXX. new in interrelated, in impacted that activity we the forward the by end expected areas pulled at XXXX reform at major which which One finance included occur of public income, half in activity issuance outcome For and a surge XXXX. tax first both would the enacted of was to have of end

sorted when is of the demand during the with for for new fit securities out investment insurance portfolios new investors was activity period market when Typically tax the set these for general focus market investing tax the public XXXX. market. remained second year, to rates. finance market would low, activity issuance to a Activity half while issuance $XX single This see market We the issuance new cap also meet in expect we activity the as for of stronger amplified December The back quarter. the subdued much only yield investors unfavorable issuance a our QX. issuers entire billion up to also impact This tax created companies. the was an results improving of absorb. includes progresses the middle overhang begin concentrated record or especially state demand. curve. in dramatically while exempt ever. market reduced on how We the in rates reform, like of capital to to for largest low. to context, picks to obligation securities various of The sidelined new levels response banks were secondary institutional expect conditions for would like a raising large their as come by flat overhang the first surge broader bonds, This they issuances the with into also market gradually hit start With and year $XX For assessed investor interest month secondary low in billion

dynamics, Given volume light these saw market we opportunities. trading few both and

risk minimizing focus capital, market quarter to this conditions and Our reducing market profits. where in were more conducive last trading turned in contrast to to generating

revenue vehicles. the volatility XX% our quarter by about managers, was of client Lower spikes too II, dominated have equity was We business, early active but however, we judgment our through activity the participate larger of believe impact passive definitive $XX We down to quarter; experienced not more is on a banks base, may largely brokerage be million expected managers by in feel activity make which still trade volumes would also bouts influenced in on the year-over-year. periods. much MiFID and single the we it for trading most the volatile MiFID quarter. to which attract the volume drove in of asset to for Turning active given as venues, the during based a the the ETFs, electronic introduction of did

relationships. We steps in strengthen client the position our continued taking and to improve our market

making outflows as year-over-year flows we management, mostly were Net experienced up are sequentially the was buy MLPs. flat vote due was with Finishing side market ranks was in business the reduction stable the declines significant on value in for asset asset period. clients. to due down progress We our the in move The continue in to and the quarter. flat up AUM Revenue essentially XXXX. to we of XX% the

results. to the to will Now go call Tim the turn over through I financial

Tim Carter

our Thanks Deb. be on My comments based adjusted results. non-GAAP will

XXXX quarter, we these equity XX.X% expenses year. net in this against notably a This comments, spend on prior Both revenues the This used has the level improve is we rules. our would order would slightly compared LTM non-comp we XX expenses to is collateral over recognition effect ratios up Despite now contributed months. non-comp only of if expect adjusted and Even proper new vesting periods decline down to the of that would our move as compared to The revenues prior return year. how has presented ROE change from presentation of deal but the of on eliminate of costs discuss old of to also in the no to this the capital. an to deal-related and the them of the This awards, adopted focus managing absolute XX.X% a minute performance, Following some operating margin. from current of and excess through I periods In to effect we benefit the the and last our would expenses our a income. ratio adjusted lower on as on of XX.X% levels expense and Chad operating our new cost on operating on adjusted major rules we the deal we impact track tax under an generating to no increasing restricted expenses comp the longer Deb’s increasing revenue has basis. on present stock related context, in have revenue a performance revenue. of ROE produced like

generally past and expenses. levels the non-comp absolute the comp for Over target year, ratio provided for we ranges

some ratio little the new comp to about range. impacted $XX XX% we range came to would was federal the new XX% XX% Tax be period. and law. On for $XX per QX two million into comparison revised our non-comp favorably XX% tax comp million $X.X was expenses cost the non-comp effectively so Our comp came items. a ratio quarter fall ago last on range would to our fall into under in as revised were the our and quarter’s context, tax this target for and under guidance expense of the With additional for discipline, ratio to quarter. expenses earnings range an call, be a $XX non-comp year expenses estimated To million below fell context and down over million, between for in by to expenses rate reporting within apples-to-apples non-comp our our this the provide XX.X%

benefit greater recorded million than restricted to their we vesting $X date tax price. grant stock related a at First, prices

expect can capital on to rate discussed, now appropriate tax tax in as the interest range. larger income earnings. below in of response Finishing quarter our exempt quarter, result tax that we was income an recognize Excluding basis capital our our to lack that of returns our rate opportunities our XX% rate our tax in pre-tax annual market representing fall we’ve and this we reduced from to conditions adjusted of benefit, fluctuate This to range. business a estimated portion up to on on the but capital. fixed usage, generate XX% XX% We

QX. year, the quarter. After board to to also quarterly in related dividend Together XXXX capital taking returned through In $XX adjusted to last payout regular of be about per account this million year shareholders our we updated to return adjusted fiscal of cash policy net paid special we We earnings, dividends. our share during XX% income. to a $X.XX and shareholders on XXXX, a dividend, dividend our ratio with which paid between dividends was the out XX% declared continue into November based of

per on June on we share In to a as of be shareholders the May addition, of XX. record XX paid today of business of $X.XXX quarterly declared close to dividend

open Finally, may We opportunities markets emerge corporate for questions. to choppy otherwise. we now explore call up the or development continue in that can

Operator

Your comes the line first Dai instructions] KBW. [Operator of with question from Ann

Ann Dai

taking Hi, good Thanks morning. for questions. my

and market months, in last conversations completely just basis, just Chad, the a middle apply the the Chad. of or to that If for business given over expectations understand framework you about XX and talked you’re your for we activity the M&A business can there. volatility term us longer think a engagement next to in couple seeing of I sense about current general the one for given the early it you level that relative the that. on First years business give environment evaluating the

Chad Abraham

down has of advisory was been business where thanks and Yes, first Ann. pretty the on our business back advisory quarter, a Obviously steep been. year-over-year years you the trajectory our just last in if go we’ve to couple

our team Frankly, so advisory are out it ever positioned for term We a about in are markets as our business we as if has we good, pipelines that to is think so longer the constructive. optimistic continue well that of think continued look couple I are growth years, been, segment.

Ann Dai

you. Maybe on the think but side appreciate we if the about moving muni trajectory up quarter Okay, of thank year expected issuance things, trends for back if it to perspective the over on year, the just and you there, your had to quarter, describe your over on you maybe helpful. in then be characterize year-over-year given business, middle issuers, that’d potential very your with how and conversations ongoing expectation that color market

Deb Schoneman

take I’ll that one, Yes, Ann.

spoke overall was market do and quarter at look we even than more issuance XX% seeing, pretty and expect as throughout business the we - down our know, the obviously XX%. was that meaningfully the picking down and earlier year. see call first we’re you that that, middle will year-over-year, As up, significantly activity improve here, the we what That said, that to in over

the that being when could year-over-year. a basis the you So XX% take XX%, be full-year context so we quarter would down you on market look somewhere much, first of when down expect

Ann Dai

helpful. very Okay,

gains the fixed quarter-over-quarter. income release for earnings the year-over-year things, trading the of about--I you that you talked adding of on to size or metrics the component talked you side in think some about to Moving us? Could trading of

Deb Schoneman

We sequential in we If the to related quarter really fourth year, the in year trading you vast saw was work from of look that pretty quarter quarter of those capital relative at first gains, inventory of a put that some out of this to we majority change trading back gains. to losses first in our the very and with profits. gave to significant play this and the just trading quarter municipal decline fourth saw modest had as

that’s taken down are the of year, from down we have the If significantly, we first inventory you at decrease. where look in to XX% and we where end that were look continue to the quarter, we at something

return As market appropriate we in have taking opportunities this on current some see committed inventory that capital, an of are out. and we the generate to to been

level so does here, last same year, XX% ability that lower were but drive exactly is us the ultimately of opportunity couple near what to historically, average expect overall out we forward we this we for So the to if revenues going lessen look saw would likely saw XX% at the quarter relative the that we in second improve years. the the would quarters revenue to term to maybe over

Ann Dai

in that the appreciate in point To were excess terms reducing and with a yourself longer, had your some at I helpful. that very do color. just see inclination That’s some comment at on time, good these if capital to find amount your point, of we endure bit you’ve business, in conditions to what for what’s market if you a capital that that situation? capital for of

Tim Carter

Ann, this Maybe take Tim. that. is I’ll

thinking about perspective. do it think grow business and as from is look to first the to how for capital, it deploy that about to think opportunities that we we excess I continue can

the policy give to business. dividend think priority our it to the us Given dividend to to range to ways higher potentially perspective I opportunities look to of would provide we from well, range, some opportunity the would where fall go for look and as grow invest is the first our a end that but within

Chad Abraham

grow platform, opportunities strength growing position Ann, and see or the work, given hope the to put capital I just continue development of for would of ways to to teams those to just some investment add that either think opportunities, opportunities capital of we’d find to platform I with that, banking the platforms. relative so and we the corporate to banking

Ann Dai

I’ll stop in it. back Got later. there Thank jump you. I’ll and

Deb Schoneman

Ann. Thanks

Operator

the Your next Securities. line Ryan with of question is JMP Devin from

Devin Ryan

Great, good morning everyone.

Deb Schoneman

Good morning.

Devin Ryan

past market reducing outlook to I know so the the just of kind want I fixed given years, further environment, positioning some want that the several current temporary volatility some over of on balance move make to Maybe sure moving the just income follow of of clarify to there. in there’s Is weather I brokerage. trading up repositioning strategic to just there, de-emphasize I understand sheet the of a to here, that or the the been that the inventory commentary due just is just forward? more

Deb Schoneman

a looking opportunity; of say businesses. balance something to the that would the and environment take to I and our of but use that continue market agency sheet current just really I latter. is it mean, where we basis almost strategically, move it’s towards steps, causing Devin, definitely more we to us significant pretty business see on it’s are the types really some as is more don’t day-to-day advisory less

Devin Ryan

Got That’s as compare, just year strong, expectation you commentary is building helpful. and kind its Then growth outlook But what think think the is to the can M&A some following or it a some there’s there, see full even how to a the pipeline own like next of up the over market of the just several or on other were it right gaining of you pipeline or does also I of about ago, you it, you any end is kind on current year? today, perspective about Is where understand on platform okay. gains, solid now. you share when that it just framed us to the give can, think if years business, momentum, maybe looking etc. relative based holding the

Chad Abraham

our I would pipeline I remains say, said, strong. like Devin,

four pretty at I over advisory was the last of you think balanced look if blend revenue year, quarters. our

is we really said, conditions prior in well. years. the think deals like very a strong, in are But conversation, product the has the more I debt--the is I little new the see a year be very as close, back certainly probably to feel revenue about Like adding think so been half the and think very pickup I to teams it debt good that. weighted, this I back-end positioned

Devin Ryan

Got it.

that’s banking helpful. have year-to-date, individuals and and just those curious Then environment, at the people looking if onto you us of investment many several just Thanks. in the and conversations recruiting quarters? come know for how Okay, with teams, just some can to going. you’re how your next I respect are senior remind just expectations the platform I’m

Chad Abraham

in MD put think I the going obviously so we’ve sort we’re the that. headcount--and first to relative just this release, this Yes, time is to track of

are remind the we some external XXs, six few of gives several at experienced evolution back making takes moves some a and be we’ve growth, natural couple in so of to growth some I years, had of folks, XX. We had years, with Just heavy say that hires, MDs really currently five, going handful with a on significant certain a to would focused and in promotions, us of productivity. then segments. some MDs, there

and MDs, external I got plan year. few great of think few to to that and hires is look we’ve the at base a a adding every continue promotions

I promotions we first think and few in in someone those added quarter, had industrials. the we

Devin Ryan

it. Got

on live or corporate front? I Okay, interesting Tim that the conversations here, mentioned. seller flow now, there that look you What the expectations? like think great. of development situations were just and that going Then on remains on, one flavor around kind are are that guys having right does any opportunities What’s of but here I the part strategy now? always know

Chad Abraham

platform me with We strength last like has really especially in awareness the the that the investment on we would the feels certainly of of I Obviously added grown. and of the of platform, to with the opportunities. the investment that, couple and banking the that banking guidance and because should it but create we strength the I opportunities think years products much think too of evolution the franchise, give just pace of we’ve don’t marketplace, have position

Devin Ryan

item recognition guidance the into that think expenses? Chad. expense deal-related in think expense Okay, is the non-comp for that Maybe terrific. one to this side, Tim. or should revenue specific but Thanks level the could going of costs good and commentary side, here some the Appreciate quarter maybe about how on back it, forward, is the a Is the that--we new about from around pretty impact. we

Tim Carter

within from an Devin, of on thought on $XX low the quarterly so in about that; perspective end basis we’ve that million maybe sort but this range, annual to of that range. a it’s million is $XX the

Devin Ryan

Okay, very guys. Thanks it helpful. there. I’ll leave

Deb Schoneman

Thanks Devin.

Operator

Sumeet Our with Mody the question Sandler next comes O’Neill. from line of

Sumeet Mody

Good morning, guys.

April month pretty M&A strong been activity. the seems like has for it Regarding business, a European

in your plans forward? get that thoughts to are positioned and for any there, you on wanted moving expansion Just how guys geography future

Chad Abraham

Yes, do we’ve of to think I Europe, I would that some say in underweighted historically some be our market and and an continues been to peers boutiques, middle of the relative opportunity.

alleys, available, middle and we’ve would of focused headcount logical I sort which strength versus market, to As really Europe. technology, consumer, headcount but grown do think PE all around the especially competition, right that’s be healthcare, area an an sponsors, if think of for industrials. U.S. our MD opportunity, products relative that’s - the in expansion, it’s We power energy, now our industries just we’re underweighted

Sumeet Mody

clarity Thanks the great. appreciate brokerage, the the of and volume to on Then in equity volatility just that. for quarter. turning impact Okay,

how second up the color on give wondering feel a shaping you far, Just been just Can in. so little that? has month a quarter you guys

Deb Schoneman

say quarter. second first from not different I The quarter, that would is the

the part have what we most modest quarter. pickup few consistent but first for We’re areas, seen with maybe fairly in seeing some the in

Chad Abraham

for expectation That’s I down year. is--you pretty much for there the XX% know, we’re our quarter. our expectation the think obviously

Sumeet Mody

That’s for Okay, thanks. it me, great.

Deb Schoneman

you. Thank

Operator

have Ann a the with of You follow-up Dai KBW. question from line

Ann Dai

follow color I a longer discussion to there underwriting little wanted business over on term. just the on you. of get up what I’m type you thank platform the see the around more and opportunity back, bit

year, what talking that we the In impact in You are back mean? what half a so does mentioned size about? might business it thinking that have positive the on of

Chad Abraham

got product. partners of early were We faster a sort announced running. obviously in we say the our to QX is, frankly, debt talking pace deals about transaction Ann, that back bring relative Jaffray been we’ve thought. some lead In Obviously that obviously that’s able those have helping are much QX, and of of times. product--you’re of to flow that market sort commitments. Finance than middle our up Piper I we we’ve to expectations, would those

I take sizes We of matter long deal by do it transactions to back some planned a it where exclusive deals that those felt we’re think we a in probably think very would be then to I expected, for a to But little the where be end while say we have than on quarter, better for are so had the larger at it’s opportunity. we how we pipeline. commitment, that Obviously are of to continue close. deals going first the encouraged the and just the does for we for. I relative think the for revenues than half takes

Ann Dai

just then the term, opportunity of there? the and Okay, size what’s longer

Chad Abraham

I running that up to and be for know, north it’s us. transactions. fully think of opportunity We and think starting we that once You can $XX look ultimately we’re million close at revenue a

Ann Dai

you guess Deb, Okay, had talked this larger I book side, the a having quarter. deals about proportion ECM Maybe on for thank guys run you. of

Just wondering breakout quarter, the quarter a have or if you year-ago versus the ago. around that

Chad Abraham

we market quarter strong usually last see gain details the number in heavily the one we related in I we years. in we’ll strongest ECM biotech, back Ann, for strong to healthcare but it for a and strength. marketplace, our really and with us, market it’s said, are incredibly three quarters, in think transactions specific of the you to ECM a really the get strong versus of quarter on share, was that and which when quarter, have QX the we When an middle particularly QX. areas lot is happened what there was as of

Ann Dai

Thank Okay, color. you. great

Operator

other this no at time. are There questions

Chad Abraham

questions, are everybody. there day. Have great thanks if other Okay, a no

Operator

conference. joining for again you today’s This concludes Thank conference. today’s

now You disconnect. may

Piper Sandler Companies (PIPR) 27 Apr 182018 Q1 Earnings call transcript