Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Piper Sandler Companies' conference call to discuss the financial results for the first quarter of 2023.

During the question-and-answer session, securities industry professionals may ask questions with management.

The company will make forward-looking statements on this call that are not historical or current facts, including statements about beliefs and expectations and 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.pipersandler.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 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

is As recorded. this call being reminder, a

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

Chad Abraham

Good for talk to our Thanks morning, with first be great everyone. It's us. joining results. you about to quarter

am President; CFO. our I Deb with here Schoneman, and Tim our Carter,

$X.XX. Despite volatility Bank rate inflation, and generated million, to platform of of rapid stress during diversified increases $XXX market system continues banking that on lack the reduce of first a a XX.X% XXXX, overall and led activity. Persistent our net confidence margin to revenues of Central adjusted operating the quarter EPS adjusted

benefits rely adversely Although, stable bank volatility business, extended conditions. other turmoil inflection a confidence delaying point has market constructive uncertainty outlook. the conditions on businesses, better to more The levels, further it and our impacts reduced market and our equity brokerage which

enhances adding mixed capabilities our sectors, against and products new our ability strong banking. of the across groups first investment total to corporate platform That said, we to advisory last and lower diversify during conditions. quarter banking quarter revenues year, continue generated Turning revenue. clients. Scaling to of investment $XXX economic of industry corporate first XXXX, results We from our the million down driven by deliver

transactions M&A decreased billion. and energy healthcare services completed challenges year-over-year, under $XXX contributions as number Despite performance of revenues M&A teams. with continuing for transactions led by and announced reflective financial the groups the XX consumer during our and advisory and debt the two advisor Sector power and of our was we $X quarter maintained markets. services, quarter the this, in advisory to the solid our Specific million U.S. position on from

XXXX, in team restructuring assignments. revenues. year with to The with In collaboration strong, addition, of driving this restructuring our record market-leading started two is this win our positioned us group high-profile combined and record following year quarterly industry groups strong a quality

During on These we of our of the substantially advised demonstrate the Signature capabilities quarter, the sale advisory and both of assignments Bank. first and and the Valley FDIC deposits Bank market-leading all services Silicon expertise. financial restructuring loans

our debt towards for but the economic half conditions, on outlook improvements. and The M&A and difficult depend deal which timelines by conversion uncertainties pipeline. near-term of driven remains remain will financing of We sustained cautiously market to impact that soft, XXXX, optimistic second continue the

Turning to corporate financing.

market in financings clients. the in equity raising for from in during billion financing corporate year preferred remains pause and XX the revenues first concerns below debt We quarter. increased historic banking a ago, activity Commercial increased late of over levels. volatility year-over-year. completed our financings We a equity resulting XXXX, $XX $X up financings equity generated Although overall of quarter million

additional contributions with long financial historical standards. by have and shut period Equity markets over was Activity power. from for capital sector, a for largely quarters, and in concentrated down us five services healthcare the energy been

progress through financing ahead, as As we look to activities we build expect we XXXX.

finishing Turning in coverage. the the subsector remain history. to added at managing out investment We banking directors, our managing We building headcount. most on our XXX focused director quarter MDs, XX

our managing be directors was priority, across adding continues of our industry XX new large teams. XXXX Development a own promote product and talent class, a to and

services, overtime. new We and and and driving to our asset three revenues critical strategic real also our coverage is to our in Adding talent management goals managing estate. broadening incremental platform hired directors to quarter, key the MD healthcare wealth during

markets we to remain see clients focused and We continue a grow further the our term. market highly share we our objectives. our are to to activity our increase and positioned accelerate expect significant navigate clients, the When uniquely to landscape. and that helping economic over We their stabilize, clients of levels dynamic opportunity on franchise earnings we meet to from advise believe long sponsor we both power strategic

adding focused strategic industry on competencies. increasing our remain our fee consistently goals, expanding size reach overtime, transaction and We scaling market groups, share and and MDs

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

Deb Schoneman

Thanks, Chad.

of demand, finance increased business municipal During rates, financing quarter higher XXXX, and the of year-over-year. significantly weak rate has declined industry. the first investor issuance million down across revenues, municipal generated public nominal our $XX interest With volatility

by public the our of more impacted first quarter last negatively in This as $XX Market last business issuance slowest the declined to decade. volume was of finance a represented from issuance relative new year. High ago, approximately one and performance year sectors. relative the a even high quarter the XX% in yield quarters approximately during yield billion, our specialty roughly meaningful component XX% down of is

for look we of and fund stability pipeline ahead, from our a period but large is we increase municipal to levels. rate current As interest issuance needed diverse, believe sustained and inflows is

Our were however, share as equity Macro Equity volumes of drove it and for from Market saw during volatility lower last $XX brokerage performance. of volatility addition up of business gains year-over-year. elevated first Cornerstone first the was revenues overall markets our of strong million, XXXX year. the the March, quarter generated relative a quarterly quarter bright spot, and

to efficiently. further and We trading should see fee our gains traded business and this we continued they our for capabilities. set to and volatility, execution in quarter behalf cross-sell to opportunity With and clients during trade help ability execute consistently overtime, shares and clients, market periods clients, continuing to reposition of our of a quickly X.X and which share less billion In increase declining portfolios client volatility. heightened trust products on as mitigate premier broad our expertise the research votes brand pool

income. to fixed Moving

challenging with to large conditions the down sidelines. quarter during last first most kept the For million, swings. Market year. Uncertainty compared were we quarter, first the rates of interest direction fixed generated of $XX revenues the income clients interest largely on on quarter the XXXX, of rates of in

our as among was and centric as expensive bank evaluate the funding clients their relative of remain also slow, to capital depository on by new treasuries, building municipal clients and municipal bonds our continue was a on particularly among basis lack supply. liquidity subdued, position. driven Activity focused to Trading compared

were and results. relative they to The entity breadth end product provided value as and relationships found yield resiliency in active public of the Insurance client of our level some of our clients curve. capabilities short companies the

strategies derivative in drove increase clients hedging Advising activity. an on

expect near-term However, to outlook the challenging. we remain

group, our during and non-agency broadening we the credit. seasoned build fixed income talented we professionals capabilities, and trading Like in structured help hired our our focused and on investment primarily platform, distribution out quarter, banking five remained to

Our recruiting continue to pipeline and market see robust expanding our reach. we is opportunities

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

Tim Carter

Deb. Thanks,

comments corresponding and my should be not our reminder, for financial GAAP a a results, financial substitute As will adjusted which in addition the non-GAAP on focused measures. to be considered

generated our from net the revenues of $XXX investment highlight, quarter million the fourth their uncertain to XX% and business be manage and largely fixed solid kept strongest year. generated record. of XX% and to the conditions. have XXXX, brokerage a reflect last remained quarterly XXXX on We the second for to and Market banking Equity continues income results generating clients conditions from conditions, market of of current first on Despite revenues sidelines. first quarter the quarter continue we tough down

Turning to operating expenses and margin.

last quarters both compensation of elevated fourth slightly ratio for the from XXXX quarter the and of Our lower by first year, first net revenues. was XX.X%, driven

ratio be to recruiting to be retention, will QX employee maintain compensation levels, compensation investment on dependent balance continue outlook, which We our expect of around but levels we be and margins. a our our operating managing opportunities could philosophy current accelerate. on opportunities, Based to of

expenses. deal of focus the primarily deal the and reimbursed below $XX year, quarter because last Stanford the of Non-compensation DBO to certain XXXX, to our X% our as costs, Non-compensation costs compared timing reimbursed from benefited were of expenses, slightly first managing the platform. excluding of our expenses for we increased expectations Macro, quarter Cornerstone additions and expenses, first excluding of on million,

Looking $XX guidance to previously deal ahead, costs, non-compensation our expenses, to we around quarter. provided reimbursed per expect excluding our of million be closer

quarter first million generated the and we operating operating demonstrating adjusted of of platform. XXXX, $XX margin income the XX.X%, diversified an of resiliency During of our

tax for reduced $XX was quarter, tax expense to million restricted by the income in For related adjusted tax which vestings, a net income resulted the quarter. benefits of current stock adjusted benefit

rate XX%. was first these benefits, Excluding adjusted quarter tax our

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

the made the long-term EPS great net XXXX, the income of last $XX years to power few quarter increase $X.XX. of During our million of of generated over strides We've platform. first earnings and diluted we

up, believe challenging the we results market business. reflect continue position strength this quarter expanded markets our are a we in our open to benefits to of diversified and of more Although realize the conditions, once

capital with Let update me finish allocation. an on

quarter dividends common repurchased the which our During grants. this million, and paid. shares offset stock through count of XXX,XXX share We aggregate from first of annual year's $XX dilution to XXXX, returned shareholders buybacks stock $XXX we million the more of an approximately or than

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

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

With open for up that, we'll the questions. call

Operator

with Securities. Instructions] you. go from Please ahead. And [Operator we'll take first question Devin JMP Thank our Ryan

Devin Ryan

good everyone. morning Thanks, and

Chad Abraham

Hey, Devin.

Tim Carter

Hey, Devin.

Deb Schoneman

Good morning.

Devin Ryan

appreciate let of get [indiscernible] uncertain more the think a today, maybe start I year Hey. but just the relative sense moment pretty business. things trigger the around back in just like again? stuff on to you a where mandates, little advisory M&A of maybe what Maybe just the up a But maybe just or on of the pipeline And business, appreciate dialog slowly, be me are the also will bit get active here to then, speed to pipeline sponsor kind are side in of dialogs just ago? point moving color market. the how we're

Chad Abraham

QX obviously, quarters was last Yeah. I slower mean, year. the advisory number than the QX and

and on much of a the you that was with do into that with banks. active but definitely quite just how was with in year, say more contemplating stuff which going the had the transactions. period a Not things March started, -- we QX number. stuff started it's half of been even in then volatility Some long QX last of that I ran April, of What and say, I would in would smaller a launching time, we've bit of back to

the of in going by encouraged taken certainly meet know, the that least sort of on to all some are of at early deals you launches Now on get right? so of expectations that pace cycle going the far. to and feedback But price? some financing of it's sponsors you were Are to to the new

Although, I that's that acknowledge early.

Devin Ryan

it. Okay, on got just bit the Maybe side of of stress. wake I'll more banking the little bank a kind recent broadly more dig in financials and

to So, are here a this need might in you needed be terms potentially strategic out assuming seeing capital term of challenged to of maybe M&A going kind through to navigate be other demand space, advice Or types I'm of capital or industry? bank that still play moment raising but for building to in pretty still just maybe uncertain the intermediate the what's happen? -- pipeline kind that's your raising going of of in

Chad Abraham

banks' are would seeing little term, spur to I all more time know bit I that some mean, stuck this in close. And and lots where to phase advisory we're a this activity, tougher start. the but of people Yeah. it is regulatory take obviously, we're frozen. it's of been obviously, then, quarters. going definitely that's I sort environment, report takes going to to we longer think time say

what it's -- guidance but to think are of more expected, we what what out need going more sort I capital see regulatorily a expect here, doing. peers shakes I think we're other little raising, certainly to

mean, general, the quarter that's would but a long for in of to it's next to make view bit business, term I take or we quite So, two. not in going big impact time. going this say a depository to be little good our turmoil I going as

Devin Ryan

Got it.

Okay, here on that's I'll close business. helpful. the restructuring And just out

and some there. there capability. You another out days that team had sounds been and nice the of you've building had hire over couple momentum last It like you've

of that size, possible if So, and a getting just much little if and years? see that the opportunity for particularly cycle, as be an rates we're maybe stay next but just couple grow bit How [indiscernible] in today, business scale, whitespace appetite of you also ahead? a of into then, you the to where are extended the could kind higher restructuring here interest moment

Chad Abraham

Yes.

be that to on a us overall we've this of year. still take a small off scale. made, into expect we reminder, that's a of small certainly just team business Really -- restructuring end to So, we're couple and the grown another it's impact going impact with We absolutely of hires for advisory it's point of make for an XXXX a grow. base, at and starting that where it small had pretty say much years happy We've team. see off us We starting the the the more advisory some into the will but inflection a but to going absolutely TRS. would the base business continue to really got very a total line, we it's but got to in to record and starting it see with line. transactions, growing revenues, us. we're where But our size I of

Devin Ryan

Got it.

will I people Great. I back queue. got of hop let a the Thanks. ask. but Okay. more, in couple other

Chad Abraham

Great.

Deb Schoneman

Thanks.

Operator

And James from next the Sachs. we'll Yaro go take Please ahead. question Goldman with

James Yaro

questions. you're a A seeing. much morning, just quarter have and number Good you stronger could ratio comp here. expand opportunity peers of thanks start here? comp my see talked Maybe what business for hiring this ratio that higher discount it and do the could as up backdrop Does backdrop or about you impact to this put their like you with the hiring side drop? from better on from the And we being this the recruitment that your taking

Chad Abraham

spring consistent Yeah, last and we're mean MD added yeah, even can our headcount. you the seen groups. say, product of few and certainly of the But of things industry inflection quarters, fairly dialogs agree. another tougher certainly particular, would this number In last the to at point I have on. of I've more in our more opportunities with would months, see that couple even for in headcount, I I here more in teams, going We've hiring, our been

the comp a comp pretty some here, we I about of high think rate even comp will at rate -- be quarterly we're say, going would careful Could based on hiring. hiring if further. we're with look from and where will goes the it think it the rate accelerate the I we when basis go be to marginally, on do higher

the We a other heard a be we're rate that's So, basis, bit from peers. won't some higher, of seeing would I agree, to more relative but comments opportunity. take relative afraid to comp you've the and things

James Yaro

Okay, income. that's very just to fixed helpful. Maybe turning

by part the has the volatility, I do banking think think with second be positively? do the recent if in there impacted speak Maybe imagine the Or so to results inflect client to were improved what the just which would business you for far to part whether engagement not, timing stress. will I this quarter? market in of

Deb Schoneman

with and unions, has the their -- liquidity only I happening, particular not started think strong, we this James. that's and end Yeah, issue that banks been as now. XXXX, if was mean, been increasing of about you seeing the credit

in banks particular, reduction in activity. the seen So, have we

them those and asset-liability However, with with helping just conversations management hedge. banks around them helping

we rate has that. the there Interest much aren't have with is our there. is risk do market, been issue if they about -- liquidity derivatives in not The if and can active strategy there don't

it's second I would of And just a the Now, can see will that happen. primarily. can volatility things but pickup not we not those something need when guess, the I where to we yet quarter. I it turn in rates, in that say, seeing that are It's quickly, of predict one reduction

entities end and to like of overall, from really perspective. saw a the from client trading are to there advantage diversification our taking took try that do curve actually Related where at going help seeing things pause curve we're duration But some the clients the insurance companies what the a too, they public verticals, maybe out of go rates point of on as of understand to rest shorter and and we the strategies. some they want

James Yaro

Thank that's Okay, my questions. helpful. you very taking for

Deb Schoneman

you. Thank

Operator

with from ahead. Wolfe go take the we'll Research. Please next question Steven Chubak And

Brendan O'Brien

Brendan in morning. Good is This for Steven. O'Brien filling

a you conditions a just spreads, here? greater these So, we Want few and get on factors recovery, quarter? moment macro start narrowing from availability. you including clarity, to on your the peers we've from at where evolving how an side, number a that M&A different to see heard and about mark-to-market the more are bid-ask of needed them the advisory of financing to various were last relative And for talk

Chad Abraham

Yeah. confidence probably always going to they're there. list -- quarters the on seen we've before I CEO good for reflection next especially the own don't say, the of side people I feel macroenvironment think would look really business, strategic I couple And is have their just about point on top a to and transact. of for

So, some see for to pick-up you a definitely need going to lot macro improvement. of

financing I advisory market from see of maybe kind it on check, transactions, market, might I middle getting relative the and depends herein. Xx equity think getting to smaller see in we sponsors, and the maybe part And the the write do they're Xx. least were of green some in of debt shoots can a they bigger business. At we to leverage, our that the kind of if think relative they environment,

higher in market of But that amount And Higher so, market, and is ratio. -- it's to paying, on a do harder we open not transact. certainly it's sort of it's open, leverage At least see lower I just based lots middle just frozen, our financing. deals. is the would say to you're it a tougher it's on path

part third Brendan? your what And then, I was can't remember

Brendan O'Brien

spreads Bid-ask and valuation?

Chad Abraham

few at least or three valuation, bid-ask always quarters would that Yeah, takes quarters, say we're a into that. four spreads, I but we're

of their about. some year part private with market of feel entire don't the raising money. I some They equity, to I in, without of sides. best the are out out. them always been that's sell some So And some of the many Certainly, mean, they've some the start liquidity, on an go probably

transactions to the think spread, on a closer bid-ask seeing there. I again, lot So, we're

Brendan O'Brien

positively that steadily terms dialogs in That's activity seeing some great speak is pipelines seeing to And quarters in saw healthcare there peers color. you down they and into business? quarter and they're and the pivoting ECM that the Thanks Could you last see need believe to in we're heard for step of you finance I firms increased the that that. We've now, throughout the what out this prepared remarks, sizable from corporate five biotech business, momentum in your a as after fairly And of underwriting guess, you get year. capital the to inflect could given build pipelines beginning an this half. you're or back whether feel indicated from slowdown? raise build

Chad Abraham

year, corporate Yeah, saw ECM line. got frankly, so particular, was services. we've pieces financing days and in run the couple to relative first of the the rates to capital that go obviously us, going the a than for no after of with came got That back the say which, January, sort March. things then last same turmoil in some of with ECM, of the February the year. saw financial would We've we means, of we've the last a debt in were, first of but got screeching I halt raising, half -- good better January, market, half We kind that -- February. of in banks on by the XX certainly a with

So ECM March. that really for impacted

in where kind relative right April, I February. to were we're would back January, say we of

get see see We do are Okay market. path that gets? we these big small volatility continue but better, How mean, And in still stays to the transactions here. would to some expect done low that improvement especially fee throughout numbers, if healthcare. launching. We're getting pool can year. to relatively I continued a we

Brendan O'Brien

questions. Okay. taking Thanks my for

Operator

And ahead. from Grondahl Northland go Instructions] [Operator our Securities. next question we'll with Mike take Please

Mike Grondahl

going? questions acquisition guys. Partners' how the have But, DBO the is asked. been Chad, last A and of tech my investment update that fall, maybe lot thanks, an from there Hey, on

Chad Abraham

sort happy sectors. -- so four, with that pretty from obviously, Yeah, way dividing team. transactions from We're months perspective, we're a up fully how into much the accounts on five really from we're and -- the we Frankly, we're of, leadership that. we're integrated working

announcement we're So, I in tougher terms of Obviously, probably the relative we're where level. that of think one at. happy sectors to is

and how transactions. that's forward, the new sort really through And it's we're playing advisory to think of certainly back and of would work, on to the happy done that's when do long going deals our certainly big say, in half platform so, to have these impact before, pretty how going that's we terms a now business. in make going we've with not take, patient going And I to on business.

Mike Grondahl

several bunch Great. these to has plan? out of are nicely really And above performing acquisitions. that Any last in tuck-in a the others years, call there been

Chad Abraham

Yeah. is Frankly, volatility market business. was really our conducive performers with the was year, that obviously to quarter best TRS good I it depends the in. Obviously, had the a really is good environment the restructuring start that. the now last really one obviously, to the market, year to last good would year, continued for I we're on and good really this pretty of QX for mean, and end in stage Macro say, that. obviously, Cornerstone

of So those couple you. be give I'd examples would a probably

Mike Grondahl

Great. Good luck the rest of 'XX.

Deb Schoneman

Mike. Thanks,

Chad Abraham

you. Thank

Operator

I'll questions And to conference closing further no Mr. Abraham additional it appears the remarks. this at turn back are for any or there time.

Chad Abraham

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

Operator

concludes participation. you for today's this And call. Thank your

now disconnect. may You

Piper Sandler Companies (PIPR) 2 May 232023 Q1 Earnings call transcript