PIPR - Earnings call transcript Q3 2018

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Operator

Good morning and welcome to the Piper Jaffray Companies’ conference call to discuss the financial results for the third 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 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 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 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 earnings the on at the Relations page the The or Investor SEC available of is website website.

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

Chad Abraham

to morning, CFO. market call I'll levels for rest handing our a open an achieved use. Deb call up on the remarks from and like then in Schoneman, the Carter, you will of we'll of Tim Good were for and the questions. XXXX. equity strategies. Jaffray’s advisory to closing strategic XXXX. up in here first line. some acumen the to President; we our of important Her be I'll our the the Deb our Board joining follow quarter review will update and two over before Piper I'd on by everyone. with start provide And our business I’m results and to Tim the XXXX financial of her like off capital third discuss our and experience Directors. and we congratulating returning for call Revenues the quarter to for as to levels our make execute Deb to XX% on growth approximately comments discuss appointment would the quarters we capital thank on of businesses with

finish confidence, expect year. in businesses, strong and to CEO US conditions advisory and by remain engagement to our generally a gain financing a momentum We to conducive the economy ample continue driven Market in banking million ago second the quarter We completed represent revenues best the transactions year o XX $X.X availability. an value billion. aggregate period. only enterprise second our to $XXX of advisory quarter Advisory with of strong record,

were from healthcare led results industrials Our contributions by third and with strong team, energy, our quarter consumer team. our

end been the Our robust significant already million the fees. financing advisory pipeline the activity announced. have transactions, We into we year remains several franchise. Equity of healthcare $XX some of strong especially ECM which generated maintain in heading industry with where quarter sector an in in leading remains the

Our third of straight revenues over quarter million. $XX revenue

share industry key in a XX% We During the verticals the November leading quarter, to to fourth win more book we're we may deals. on elections mandates reputation uncertainty. focus the slow financing equity those we relationships in and somewhat market as our recent over market our volatility of and as continue additional XX price quarter to and create book on anticipate higher deals run and deals leverage increasing We're runner economics.

a application managing We continue is software Expansion we penetration on sector growth hire focused and our director team strengthen opportunity and focus banking capabilities. with to software driven in of our product the the strengthened group our quarter to technology organic broaden us, companies. of technology our banking our third for on in an franchises

early leading Additionally, industry consumer our banking announced quarter director managing the within the hiring of in a fourth team. we

count hires, to from the we've year. our banking these investment grown at beginning the MD With of XX XX up

and our centric marketplace. choice us in advice the culture performance, a of of our client destination make financial platform strong diversity Our of resources, and the

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

Deb Schoneman

Thanks Chad.

selectively adding basis. face returns costs conditions these on and to continue a and opportunities. while equity deliver debt to continue challenging critical where in brokerage are financing, market increase to manage banking overall businesses franchises to talent businesses trading strategies we The carefully our alignment to with and further we combined the sales Our and our see headwinds; capital, appropriate

Our We QX which quarter, negatively summer X% see was brokerage X% down slowdown revenues a of sequentially revenues. year-over-year. business and which the trading equity typically impacts volumes for million with $XX generated lower clients

discussed trade when As execution paid is last participants services is a at sea in how overall transition research for the quarter shrinking. and market time pool we

are with executing transition same by through trades. put maintaining we expectations. are We reducing At risk time, managing clients an this payment in capital on dialogue active our the at

two I senior adding further expertise sector. opportunities. Talent in where see energy we quarter, earlier, third are we we the bolstering in research As selectively this noted In analysts hired

the XX% debt our and continue of quarter, a to the public brokerage improve the of revenue to an quarter finance in third increase to income we after sequential Turning slow financing from generated $XX year. million fixed start we businesses, as

of issuance market still while basis. new has to down law Although XX% XXXX, issuance year-to-date in on XX% rates is refunding. our local and and government activity diminished the on to state begun impact decline has increased to tax increased money offset refunding in have municipal a had interest has Higher not sector. it normalize, The refunding changes sufficiently the most a decline and activity has

sectors our some helps However, specialty offset the has to in performance declines. of those

as a finance QX. spreads. depressed and this expect our quarter of recorded QX to low we robust pipeline strongest remains be curve of slightly million business. trading in relative We interest and revenues business volumes flattening but year quarter brokerage public yield rates Our $XX remain Marketing down this rising the and and challenging from

beginning allocation optimize scaled be to balances carefully Inventory been environment. costs to capital market have to focused the continue reflect from the return. We current the on year back and of managing

as believe the to asset management, downward pressure conditions to of continue put We Finishing business. expect with adjusts up down will trended these rates. on in challenging this market our revenues through end We appreciation. started improved sequential conditions to market as the margin to that partially we interest AUM rising on year Revenues year the persist client and during the bottom the the market cost line. quarter operating increased rebalancing as outflows efforts modestly reduction earlier hit were in a quarter upset basis our with in the created

over our call the go to through turn I'll results Tim to more financial in detail. Now

Tim Carter

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

of up to which experienced million, the consistent is a quarter in XXXX. to level XXXX, more we the for with was period, quarter compared current second compared the $XXX levels the record. ago year This down revenues were and Our

the expect to We in advisory driven fourth remain strong pipelines. revenues quarter finance by public our and

driven record revenues, well Our a as for a result my EPS our to the change quarter, a the our year but compared The $X.XX an lower the detail sequential ago was diluted year-over-year in advisory improvement a increase in the down fees. included more of I'll EPS non-compensation was in sequential as which than double lower were revenues, was quarter, Prior primarily large revenues. expenses. XX% period discuss in remarks. more EPS non expenses revenues on comp several due quarter year for to primarily in by decline for a basis. significant advisory later XX%

Non to longer under for XX%. Turning year this comp netted revenue. of expenses to decline the the the our third target quarter deal performance, new compared reflects adopted client the operating of XXXX XX.X%, with XX% of was quarter accounting was to increase no recognition ratio were quarter which ago our the slightly are in rules reimbursed The range below expenses. higher quarter and revenue $XX $XX the of rules. $X.X to primarily expenses million the period range due second related from reimburse our down costs. compared new million per included the million adoption revenue million comp deal $XX year related Again consistent to The which to with restructuring recognition impact to

of a expenses non to these carefully continue driver are manage as meaningful comp costs leverage. We operating

XX focused $X.XX Our quarter. points aggregate up adjusted lower attractive tax have basis, shareholders. levels. stock capital, tax the This returns that basis rate quarter, be a out vestings Finishing On rate share above of per million a was the benefit dividends our continue first year-to-date tax shareholders. per our on to as on for we generate the driving includes of of the to cash tax in an we year-to-date or paid from XX.X% share $XX we special $X.XX municipal average excluding returns our for less interest from inventory impact exempt was

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

the In $X.X of quarter, XX,XXX at price we average our an of dividends during repurchased shares million common $XX.XX addition or approximately stock cash to share. per

limited of million. levels expect of continue We of have reflective market flow levels reduced levels at trading to these remain the and current managing with Based levels. from to were opportunities we Inventory the inventory consistent reduced of end to down approximately $XXX QX be QX XXXX, but approximately activity. conditions, customer inventory the on XX% end

believe $XXX we capital the our million capital and strong of operations generation our level from initiatives. early off October. flow in of We our which given will paid current note matured our senior from Finally, growth cash fund majority and earnings, cash

the to back to also strength Given Q&A. of the the access will initiatives Chad growth debt call can our capital sheet, balance his fund turn for markets needed remarks over before now as I closing other we

Chad Abraham

but objectives. and well-positioned clients call pleased several in on over year. up million. but our we likely be is closing, our the it types the In to growing, years, momentum My strategic to for a started delivering has Tim. pullback. north remain that excited business foundation returned execute now We have The markets. markets, the last been are building the all we can Recent across firm look We we're continue have the focused in established year questions. to revenues Thanks strong the to levels $XXX to service finish upon volatility quality as has on a of of many slowly for partners parts of impacted open we healthy our

Operator

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

Devin Ryan

system are there's How clearly excess question periods on capital I fair Hey, in you my capital of be morning, a volatility. the Hi, first which here in by today, calculations good guys? the valuable so amount can everyone. guess of

stock opportunities or So if firm the float on thought the the and the here. you outweigh the in update seen kind the other stock. don't be to get opportunistic there's kind then M&A qualitative think helpful if there float a and any of today know acquire, the can sell-off to just and capital excess We've anything some so to kind quantitative price issue, there. could us of is of on be of sense what where for if of there's the for is would benefits sure of obviously I be the then stock you ways I'm repurchases kind you consideration

Tim Carter

good I'll that capital in Devin, a Yes. feel like we take are in position capital terms be We really do able to deploy. of to to having start.

we of like capital senior And to paying we're October. was in adequate overall look do got obviously, dividend in I dividend that us on of plenty level decision drove the mean, attractive continue bit certainly able think we've that's this then that a it buyback, disclosed the positioned some at I And indicates that do price as Obviously, development specifically that that provide front. continue And we corporate from ratio the amount pointed we and little We think to of piece I balanced feel obviously we've early over approach. continue haven't more. a I out weeks. I off that here business. We invest did will would the to We payout have of bias say a share the activities. from to an and want the of through part on perspective, it's last note way the that saw back. to levels is more in to the to to helps take to capital that become here And perspective be like the consistent that something of way to authorization back. you capital going structured It's think QX, investors come sort of of approach. a we to understand capital It other

Devin Ryan

Great, very thank much, you great color.

private big a that with to quite where larger In bit player, I activity. constructive think of are the are still kind you terms private spectrum than know of to cap hear M&A the feel of and good lot markets quite outlook, financial sponsor of I a of and just middle the the kind different end activity guys particularly

maybe on making experience I'm that have if curious be whether in from just markets public reasonable, than this more focused or decision remains equity strategic much a back the you companies just where are activity? to scenario bit volatility go you economy how So is other sponsor it particularly affected some influences volatility but your period. little normal public How the a or in how

Chad Abraham

Chad. It's their confident I still the transact to to business, the business. clients good like business this. in think really when would Devin, pretty most talking Yes, take I own I'll CEOs economy, we're say of about the their feel they're

pace. So we the really impact haven't seen it

hasn't sticks I do eventually plenty say of of I think impact to we we it would certainly more have depends long ready mean it's queue on weeks sort how market months more have all several certainly us couple we this for if volatility. get airport, year far I what a end. the around. landscape, them or it land think and of so just that a middle matter deal volatility can the that at would with and done but I by now transactions

Devin Ryan

one recruiting. just Got And it, very okay, on helpful. then

trying kind that's number year as come there we how we you hiring would next do? think or like predict kind someone the of you essentially plans, so normalized curiously that is that guys can't like you a a it more the hiring think five kind about of what around just to a kind but you like future to about or the timing budget, to added in a senior and the of net look hiring like seems level somewhat relative a ramp that just what year-to-date, I basis come reasonable would to of I'm in should in. bankers but of just about would up that thinking kind revenues balanced for it's or do five of is to just investment people be of number, just takes the effectively be cost the to timing to that relative in of kind you're on

Chad Abraham

Yes.

final the or number end in even think will one for hire. our year I two

or six in So seven total.

like February. as ability to net not accomplish I basis. number we every little be hit we do have -- think year that wouldn't to It's productivity that us. number to number. really We're think that promotes quite a We're externally just function as to we number sort recruiting six a focused on as of MD bit but year, would sort that's last you're that on had for we this a would good of of internal I many right get laser have starting We've done a sacrifice we a quality, well process. target

Devin Ryan

thinking I and expense just persist from And last the more you then trajectory, the volatility of, through how question and about ratio. it, that's there's element flex okay, of great, you. kind Got the thank the compensation running just angle really here how think on if of in expenses are guys an know about investment expenses? does should we

more were likely being to or be to comps think So other would a some decline shift environment to that extent revenue were areas we or revenue to or challenged? to flex there there offset the would become environment say or the within non either flex of kind extent you may about should an

Tim Carter

things. to on first sort it, that likely on range hit business become the and end think do the does that we're we've end I'll of XX%, talking that been but I maybe but for I of this on low talked comp mix sort components Devin, also year mean Yes. the need. of the side about some about of investment you of that it dependent

There to of see do we thinking feels is range some that it manage XX% to level Again low some we that but the more year, a that an of perspective from from about think still I of we a basis, be want XX% on downturn. terms is in what feel ability like still might we investment that range. right to appropriate. this --from if go-forward So the end

towards the to end. it think non down again includes that on can think comp the that that the there's get if about sort that obviously still that can so expenses again that range, up on grossed ship some side, we low in I of slowdown of reimbursement the XX XX some deal on

I becomes of think pull we can play. into that there some that's always and level variability right

dynamic them bit. talked the The rate the all about other just little go down you if to tax a way I

the of at the given inventory. as now inventory go-forward benefit get sort in reduction tax the We about. end that's And top a that more that more exempt we've that and probably of had we are perspective appropriate from of level range talked we reduced the

ends tax high forward. up the probably at rate So range of end going our

Chad Abraham

Devin, I drives that is really of volatility, guess, I it's in And our relative add of the managed much very fixed in flexibility banking the to I history, you how just Chad. would contracts The one would sort we've points is thing do sort have. in say of what well. over comp invest

very few very, have We contracts. fixed

So always going a we're says, we army to that and very Banking that deals. people deliver are for my can pay production Scott focused like partner the volunteer sure we're on and making

comp So we revenues. variable can with fairly keep

Devin Ryan

about direction? maybe trying driver within know about a hoping just you're some think that drive in the nuance of and and assets that we in or flat --just business would It's this volatility business amount just Is it's seeing inventory on opportunistic. it in on heard because not then the there kind huge that. done quarter, flow have fixing is at kind business you for of And comment income being here that inventory. it. for to of of capital kind that but of is staying job around business guess managing I just a that I'm anything today appropriate you is guys for I feel else a Got of great. and the I or bigger of change market down. this the de-risking sneak kind or brokerage. in of are kind level of kind of just where really the ebb Thank you. nice business fixed the one And kind more the healthy picture that

Deb Schoneman

and Devin, see say will I Yes, continue is inventory however level time. that will level, see, we to it's be if down over this Relative a we to where at. to Deb. trying we're manage that we anything can

necessarily that focuses volatility that than and in to step not as flows. Relative where client to that And really We're is in more historically. show so the said us? marketplace in opportunistic seeing been significantly trying I the our more up be helping had maybe we

yield You think both rates and from very a flat a client There's rising perspective. uncertainty, curve. then

as not is what So not rates. driving I -- it's that really higher just activity think help business time will much over

plays where So time a that I as over market. out see think that's we healthier

Operator

And are At time. this questions this there time. no further at

Chad Abraham

Okay. We forward to look about Thanks weekend. has everybody talking you great I everybody. a to QX. hope

Operator

This conference concludes today's call.

You may disconnect. now

Chad Abraham	Chief Executive Officer
Deb Schoneman	President
Tim Carter	Chief Financial Officer
Devin Ryan	JMP Securities

Piper Sandler Companies (PIPR) 26 Oct 182018 Q3 Earnings call transcript