PIPR - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Piper Jaffray Companies Conference Call to discuss the Financial Results for the Third Quarter of 2019.

During the question-and-answers 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 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.

is As a reminder, being recorded. this call

to Chad begin I'd like turn Abraham. your Abraham, now, over Mr. the And to may Mr. you call. call

Chad Abraham

here Schoneman, joining Third to Jaffray's our for I'm to Tim with remarks, our CFO. like for and Quarter Piper everyone. would Carter, After call our questions. thank we morning, Good the Deb XXXX. Financial Results discuss the will President; of the We open for you call up

by equity significantly scale the our acquisition Let our broadens the earlier we client providing capabilities, we announced our early on which year. for the color early more closed will on an integration trading trading Company, the enhances activities, upgrades update and on this financial base & strategic the business. In platform. provide August, equity results Deb of sales combined Weeden me of and and begin

$XX will of our September, and Tim sale with business Advisory In The cash the shareholders. approximately disposition. with on was for business. of best sale the the and sale the strategic employees our action clients', net on we of more million. recognized details, gain course proceeds provide we Management late vision regarding no generates traditional Asset closed our Research, fit sale This longer believe a

capabilities, and our that Sandler deep firm, we together combination capital-raising equity differentiated to our expand a will within and the quarter, services across business client focused broadest to middle the fixed TheStreet. the with investment industry, We income in of will be leading the and elevate advisory FIG research franchise Finally, announced excited coverage our as believe our banking market, relationships platform. third businesses, it bring on transformative banking pending growing financial the add the with our platform on investment We're early O'Neill. acquisition

Sandler's expectations of incremental market $XXX for given comfortable our we current with and approximately from the conditions, tracking estimate Sandler. annual remain million XXXX results the our revenues are to year of

signed have employee with We agreements in employment place, all including partners.

integration earlier this we closed and in debt and $XXX cash finance Our on the million approval efforts regulatory portion a process, are to of in consideration. month,

provide sector to expected Sandler, shares is leader Tim expertise. are will the partner relating Sandler the to disposition client-centric the of acquisition industry with market a additional that with leading in January which our XXXX. ARI We acquisition, information deep excited approach, close and of to Weeden,

income update is year. provide generated Markets Equity million are margin in QX of flat the on On adjusted and from adjusted basis, Let to and up last up We $X.XX. recorded of We revenues an up revenues QX, Advisory year-to-date XX%. generated of X% last and businesses. our and results our pretax Capital and QX a from adjusted adjusted me next and our adjusted XX% $XXX EPS year-to-date softer $XXX for quarter a year million XX% a

our strong, finish pipeline. on year We solid expect the to based

sectors, the industrials current quarter quarter Turning of team, The led million period. now the revenues and $XXX grow their Both their The continue slightly our Advisory expanding Advisory team. by by to the reach followed of from leading platform year-ago respective to strength of by different closely our teams organically ECM. quarter. each in is exhibited down sectors. our strong diversity was consumer within were by

up Advisory by health our care year-to-date the adjusted this million revenues team, industrials team. continued prior was total quarter QX led XX% and of our are revenues. franchise. Energy led Reflecting represent was by noted momentum, year from QX Simmons and XX% of industry-leading our $XXX by as

increase us organic allowed growth share, and platform our banking industry are on execution diverse has our initiatives Our relative market down that to generally to year-over-year. metrics,

from from a has and strategic median a We're value winning as Our larger clients, fee, increase also We've consistently an in enhancing products per increasing by expertise. had deep XX% providing we our ago. up brand benefited year in focus sector marketplace. revenues to and our by leverage deals a proposition to Advisory more win competitive business deal, on our

to the financing due valuations, in attractive demand conducive low to Market PE market middle conditions investors, and economic from growth. transactions, for M&A rates remain solid

which to our the strong we deals, verticals, believe year. industry several for us pipeline a large set well Our will across up including is finish strong

share negatively Equity performance to million we in The after-market quarter. impacted We generated by some the weak of believe market relative revenues $XX are financing under been has and volatility of future. our the our that grow high-profile market of activity overall and in the IPOs. franchise, can in ECM IB strength penetrated

Deb, call brokerage to finance discuss turn to now will over and public I the businesses. our

Deb Schoneman

Thanks, Chad.

me update brokerage with equity on Let our begin an business.

despite The move and but continued global third higher, market volatility, trade concerns tensions. saw quarter growth to equity

Our million, business, on up periods, platform. of of equity prior months brokerage by driven generated to our both the Weeden meaningfully revenues compared two $XX of

combined increase we which The acquisition in to back-office a substantial accounts, and provide our August our serves combined fully volume, opportunity clients. The operations. liquidity to a products coverage, greater this allows base to X,XXX in closed integrated the have Weeden our and us us of platform and trading expanded on client cross-sell increase approximately across gives XX% X systems

our to and deep corporate sector Our increased increases and more both buy-side a broad with trading capabilities valuable products clients. combined relevance makes us of suite market and expertise

quarter invest analysts, strategically addition tech research announced the top-ranked in two to senior continue we of and on addition, during differentiated software. In focusing the

excess business and operating of capitalize driven equity revenues an $XXX to the We of On an in base. expanded basis, million, providing by in cost a in breadth the synergies. high-quality we inclusive annual meaningful we of Sandler, expect collaborating market brokerage front of to leverage as a resources be on we us, share client significant team, bring to that have firm products opportunity full believe

of brokerage the QX year, approximately income quarter, market Year-to-date, XX% public X% from we ago. debt municipal up Turning from last lower finance underwriting and from million in year $XX businesses, generated fixed are rates. volumes from XX% up benefiting a revenue to and financing interest our

strong Our as we of year-to-date breadth XX%, revenues have increased capitalize relative reflecting the performance and strengths our on franchise.

execute specialization and continue senior in sectors. offerings larger interest low yields debt driven in should expect project our finance of revenues activity Demand muni to taxable for QX. by our increase, and We our a we fee strong some higher as offerings and this living specialty financing in strong refinancing is on drive our rate environment to

makes a Our the share talent natural public finance for commitment market best led destination us and to looking expertise serve has market clients. time in and their over increasing to

the the We based underwriters top top par on XX ranking volume are one on three, in municipal active based value of of in market, debt the most and deals.

to four the A adding key tenet states Nebraska, that are our we Consistent growth number senior which we expand market is another the with leader. a the of bankers strategy, leader. are strategy market where in hiring of in state announced of we

income Nebraska, growth. X% this income at on quarter hired senior we with well, revenues treasury sequentially bankers X.X% ending dropping during X.X%, our Against quarter, the volatile the and Colorado, about before million, investors as under backdrop, XX, worry of year-ago performed up brokerage XX% over to $XX the XX% slowing fixed period. In markets, fixed with the nine this In June yields in total, at the have Pennsylvania presence were expanding XX and Ohio. we year, year

with Results outlook by allowed offering, and of to an decline capture look were client driven a in for investors advantage demand further client a us this taxable for focus volume. discrete breadth rates. our The yields, products strong as on of to take verticals product

trading expect moderate third and fixed these quarter results. from results We strong income sales to

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

Tim Carter

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

However, let results. highlight impacting first GAAP few a me items our

operations $X.XX results net common per we includes In GAAP operations business. on amounts the gain which Research. Management diluted Advisory discontinued of from related $XX.X share, the sale Asset our Our traditional discontinued of of or million, our quarter, include recorded income a to

QX restructuring of Weeden benefits, of costs and of consist incurred severance transaction we million in acquisition the $X.X costs to addition, related the These charges, Sandler. restructuring acquisition In of lease pending related and and professional integration fees.

quarter We the expect fourth to half the XXXX and of and incur with associated costs integration in in additional restructuring first acquisitions. these

revenues Revenues on lower Turning were now results. our by revenues. basis equity financial offset quarter higher as were the of to institutional $XXX adjusted financing a million in year-over-year consistent brokerage

of As results, QX Deb include from revenue discussed, two our months Weeden.

$XX million. XX% most and the for contributions Compared of quarter, to quarter broad-based with were the margin an profits our up XX% operating of generated operating revenues of across businesses. We produced sequential

year-over-year Our quarter $X.XX increased $X.XX per driven on operating revenues in diluted share and basis, from EPS up by $X.XX year-to-date XXXX for down of a per sequentially. the higher On higher share is and $X.XX basis of margin. a $X.XX EPS a

income On source Expense to and important in to expect illustrating us leverage been of continue the generating the a business. has scale up decline, we operating on our non-comp for the business, XX% pre-tax revenues X% basis, ratio year-to-date a in growth as margin. an was discipline additional leverage we

$XX our non-compensation the operating million, our million the for our the $XX reflected expenses of XX% third Weeden. compensation target which to ratio million low-end at regards expenses, range of was estimate of $XX of two from to Quarterly for expenses XX%. incremental In below XX.X% of quarter quarter, to months were

quarter tax was adjusted XX%. rate for Our the

full XX%, the We estimated range continued of XX% to vestings. excludes which maintain our tax rate to impact stock of year

issuance pending we long-term consideration. of capital, X% to million of balance at the of on us capital, capital sheet in this acquisition from notes allow acquisition and October, cash the years. maturing of raise, $XXX million raised before years, million has debt notes a of remains a four in proceeds ARI. $XXX Sandler The the portion blended with PEMCO maturing debt two will excess the rate private debt to cash to our modest. leverage of our No Turning a sale deploy finance $XX including to In of

strength sheet reflects generation of balance our from our of acquisition Sandler and level earnings. The cash the the financial

We to opportunistic continuing will XX% of while our of growth returning further excess XX% policy earnings in maintaining generation dividend to the be we towards stock. expect back more to of our opportunities, non-GAAP addition increase Sandler, and shareholders, buying of which can redeploy capital,

year-to-date This a returned per $XX of dividend out includes basis, special our the share shareholders share annual per On cash through paid $X.XX $X.XX the first to million, quarter. aggregate was an or we've that of in dividends.

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

guidance Providing by up of model. number like guidance some high-level difficult. in finish strategic cyclical a future business me a shifts is made Let providing our in ours we as business

our be the it mix, given provide thought our into change However, business additional operations. in go we insights would prudent forward to

expected million For XXXX, $XXX is revenues. to total of approximately Sandler add

Weeden will and also brokerage Based million on current to business benefit platform expect on full of We being a for outlook – our Sandler, the be equity year. we inclusive of Weeden our business. the $XXX

expect allows business lower mix, which to with to us levels we the business. This comp consistent Weeden. financial the the adding XX% forward, be offsets Management of to XX%. flexibility level ratio Removing had of investing ratio the a also current ratio our our Going range compensation in Asset benefit compensation the from lower in continue from

non-compensation Weeden in in non-comps expenses. $XX a levels, per of We range increase to $XX in QX QX Sandler XXXX full expenses the expect and from to estimate be of the quarter year million million of will reflecting Weeden. a quarter, reflecting We currently that full

XXXX, the which vary non-comp may Non-comps dependent principally update be Sandler level period on guidance in our amount to integration. will depending from on deal into deal-related of activity. after expenses, greater the the we visibility We of period will have

back to a like call to comments. Chad for I'd Q&A, few additional to going Before the turn

Chad Abraham

and future. Thanks, firm. employee partners, behalf of will my excited the market cornerstone Tim. our enduring more The about Weeden two enhance Sandler the On have of been addition of never leaders With cycles. Building grow to relationships, products, our our Weeden durability we our franchises meaningful and opportunities expertise position the Sandler in will significantly and strengthen market client platform, both present complementary and of our scale business combined marketplace. through remains and

And up call now, questions. open let's for the Thanks.

Operator

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

Devin Ryan

everyone. Great. Good morning,

Chad Abraham

Devin. Hi,

Deb Schoneman

morning. Good

Devin Ryan

sponsors like broadly, question saying. the more First in few that from Sandler given I'm your potential thinking sound given it base commentary announcement, from forward kind that just now a opportunities kind there customer that assuming we're kind just financial they're you're any relationships of you're financial maybe anything today to about strong removed there's sector? the the months about synergies and transaction. curious And And an whether update made? that doesn't with around how been thinking guidance just given do how maybe here the of feedback just what you're more revenue you here around of

Chad Abraham

Devin. I the I announced mean, take parts. Yes. that has think than the Maybe, in probably expected. transaction I'll in July Thanks, fantastic I just since couple more of we a feedback even frankly been

Just certain bankers think and mean, we sponsor have are depositories a not and while business. the brand excited, I sponsor so very I we do the of do bigger particularly the at the I of business we're heavily think group, I high their and quality that's bigger because think producers recognized have a sponsor-driven. parts Sandler, And

relative certainly just excited in of part sort others we a financial both Board just to just can't a be that. technologies wait business various started transactions about being ways parts do I sponsor January. going seen bigger other And get is think platform of There's then just insurance to future members have great we of opportunities, relative and to to and think other we're the where with relationships potential synergy. We

together opportunity can in income, with And one that think think regular to just fixed than more one I going then case knew in but an we was to two we business excited clients. even more is income, there ways I and started to regards transactions we've grow specifically think fixed plus frankly and as we're about work be on with to

Devin Ryan

Chad. that Appreciate

some So, might guess, start get any have to is and results? do come in when that show to too takeaway there's manifest more potentially early specific to include Or around here, to the of the I some numbers but through guidance? sense this you of

Chad Abraham

banking synergies. -- enough we'll one revenue quarters definitely or going mean Obviously, business we to see we're it's predict out. think hard some I own Yes. two to our

project So, their we're to going be and predict how conservative we business. with

definitely we numbers about deal on revenue think the synergies. But But cautious be we're announced yes, there when specific we be going to like that. will projecting

Devin Ryan

That makes Yes. sense.

Just on advisory A the commentary strong. so looking it's pipeline. Good it. to I still for the Appreciate the here, hear follow-up heard context.

in larger level a middle end M&A tone the seen just sound the have in kind months. modest you're industry change We at of at much spectrum softening the It market. recent doesn't the in like of seeing

filling here have the more you just backlog you'll little year better it of is whether terms trending a that change And cadence So, pace given the announcements? probably been up at Can are a especially the possible? back back maybe the half kind give new of there's of has completions? the been context notable around same been in deals whether it's how that completed, of in any being

Chad Abraham

that that's and that with a sort the big like environment question grow. last just And certainly some macro of that would seems that I with a the deals four six very while part Yes, things changes of obviously, say, affect macro also trade anticipate to we and quarters, because acknowledge can to market we think everybody's election for mind environment. it other we potential the continue execution, it's small volatility we're and and we market with Brexit the and on

new Granted announcements. we really sort transactions of haven't new big with have but a the just seen a in it's our dynamics, growth tougher market material decline to rate,

and frankly, And this signed good we're a closed off quarter new just start transactions with to transactions.

And at here. that our about we're a the macro, of the short-term market I least cautious about prospects is and we're optimistic So, still think pretty middle function volumes. while

Devin Ryan

Okay, terrific.

can us forward about Or the around I guess just the the last the anything around range? color more quarter at one Just specific there moving Tim. to decline. ratio expenses give any more will for I on Is you non-compensation heard think the that non-comps commentary fourth in least?

Tim Carter

Yes, Devin.

the to to back talked I fourth QX. at the think, that of the still specific it level we kind end goes I about quarter guess of

sort range the last million to I we appropriate sort of Weeden about quarter With for the the QX. talked of quarter is that full $XX million think that of $XX the

and talked projecting decline then non-comp terms the some sort with we've XXXX absolute the is. provide out of this That in about modest Sandler ratio. And range dollar both should Weeden, for yes what of

that time. from see expect that direction continue to be -- to that margin we'll So, will we'll move in but a standpoint, helpful over

Devin Ryan

lot Yes, Thanks guys. a okay. Terrific.

Deb Schoneman

you. Thank

Operator

question next Buckingham from comes Walsh Your of the of line Chris Research Group.

Chris Walsh

Hey good morning.

Chad Abraham

Good morning Chris.

Tim Carter

Chris. Hey

Chris Walsh

in Was expecting XXXX. So, $XXX I that heard prepared brokerage say think million remarks, around guys you I revenues to correct? you're trend in that equity

Deb Schoneman

of Inclusive correct. That's Yes. Sandler.

Chris Walsh

Okay.

Weeden of the and are come Weeden as kind pulling of revenue just that So, to things? you the majority synergies integrate from side the Sandler apart expecting you to of

Deb Schoneman

I... Actually

Chris Walsh

guess look to couple per blended to trading kind of of over three no a the a number contextualize I businesses revenue XXXX? XXX day of assuming just as years for kind that average synergies for imply I all at last

Deb Schoneman

Yes.

obviously, couple overall market conditions in me take a business in Let those that we're just One, make and projections. of the parts. we when trends looking at

Sandler both we in Secondly, coverage account obviously at into well. there's -- meaningful obviously as take which we're account overlap. And particular to there's research with overlap looking have

really comfortable so trends in into the $XXX million conditions, factors that account account into are level that all business, with. taking overlap, overlap, the and that And those market we're research go

Chris Walsh

got it. helpful. Okay, That's

Chad Abraham

I just Weeden to parts we when complicated pulling why picture given from hasn't on we announced we be people really wanted more Chris And specific we changed which would three and just we're first could. give Yes. would this best a we the together is recognize guidance add little we thought

Chris Walsh

Awesome.

Deb Schoneman

is return to at margin all the solid and a as more and look majority came one side million And $XXX incorporated into ability good level. just from that the of at the cost the thing to is earn that we synergies, add Chris Weeden that maybe our I overall would

Chris Walsh

was saw count And We count. one from then period-end makes XQ. last me in totally it X% sequentially a sense. just share up tick Yes, Okay. share

Just and closes -- as of like year what in Sandler guess share back into I XQ count then are your part for expectations the the XXXX?

Tim Carter

Yes. Chris that. I'll take

wouldn't much of I change expect really QX. count in in So, a share

the We above comes share structure for so the in deal have outstanding and Sandler -- as won't of shares count. current of of there go talked XX% our about issuing we the actually

in acquisition. do the X.X in Sandler the another can million of terms math shares X.X So, at you coming that million close time we sort of

Chad Abraham

while been on managing Sandler of and with pretty Yes. And past or Chris certainly Weeden transactions the busy with window. pretty XXX,XXX we've I we've XXX,XXX advisory would add and out shares, in just number ticked obviously that up focused been locked and it's a and certain

focused we're that Tim and managing on guidance. right think sort I So, gives of the

share You good for to number that current XX% can next year. that's a count add and number

Chris Walsh

Chad, Thanks Okay. thanks Tim.

Operator

[Operator Mike Your comes Securities. line of next Northland question of Grondahl Instructions] from the

Mike Grondahl

Congratulations everyone.

Deb Schoneman

Thanks Mike.

Mike Grondahl

you First question, called you What which QX your gut industrial, business, on for it's tell the energy, see QX of to think going is out that QX? healthcare, you QX kind I really diversity. win? so to Advisory good group do mean does

Chad Abraham

gone Yes, I think Mike obviously deals. and on signed I mean good pretty visibility announced we've

and expected is healthcare some QX. our got we've transactions largest business for So, nice

So, my healthcare. gut is

that point fact organic progress industrials really our that made with and knows growth to healthcare largest consumer we've we think relative everybody business, made business. fantastic I the but some our is both

Mike Grondahl

good it's see Yes, the to Great. diversity.

a -- little share been doing seems what bit out a rates it little that of of guys income, there? tailwinds benefiting than like kind maybe to from you fixed are take you of in have also highlight other tailwind. bit just Secondly, Can a kind a market just nice lower of

Deb Schoneman

volatility really the whether it's the particular, of side, we're in that to and And definitely the market been clients is its some think great money tailwinds rates there's the managing. overall Yes, I into putting which driving something especially -- taxable on not Mike and I a question is work. rates think level in or

those public what thing those to sure RIAs the we're just managers client are focus I and in And is been we on our money primary verticals. client in products value that doing, would line specifically and that say, we're focused entities adding with on banks, we've the be making analytics, different focused focusing both and verticals it on that, that

Mike Grondahl

the Got and it, expand distribution would one of are maybe equity your not, you or was of Weeden lastly, they deal the whether then secondaries. deals guys what on highlights IPOs

distribution difference? has Has deals like, Do had seeing handful you came noticeable you made a of you've -- what Or that a in it where is are there? and helped? feel

Chad Abraham

there. specific Yeah. of on Mike, couple I still have pretty would transactions. with base. a couple can definitely days I I of -- specific say, expanded that it's -- anecdotes optimistic We're early still account

that acknowledge was also of ECM. the of sort with August on we first think September months and pretty results these couple slow I our

So, the of want overstate to that. impact don't revenue I

of yet. are clients. And we base. to still shown selling -- benefit it's we we But account it think We do that hasn't But we to all going have that up are believe, clients. do expanded quantifiably our

Mike Grondahl

it. got it, Got

Okay. Hey! lot. Thanks a

Deb Schoneman

thanks, And Mike.

Operator

Mr. There I'll the are you over Abraham, call no closing for to further remarks. questions. turn

Chad Abraham

strong the operator. everybody. Thanks, We year. Thanks to in forward Okay. are positioned finish again well we to that early a XXXX. Have believe We a for day. you updating great much look very

Operator

concludes today's This call. conference

now disconnect. may You

Piper Sandler Companies (PIPR) 1 Nov 192019 Q3 Earnings call transcript