PIPR - Earnings call 3 2023 | Piper Sandler Companies

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Operator

Good morning, and welcome to the Piper Sandler Companies conference call to discuss the financial results for the third quarter of 2023.During the question-and-answer session, securities industry professionals may ask questions of 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 ww.sec.gov.This call will also include statements regarding certain non-GAAP financial measures. The non-GAAP measures should be considered in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. Please refer to the company's earnings release issued today for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure. available and Investor a at call being is the page reminder, release is website company's the recorded. earnings on Relations the of this The SEC website.As Mr. turn call to like I'd now, over And to the Chad Abraham. Mr. Abraham, you call. your may begin

Chad Abraham

third today conditions Good our talk challenging continued with Schoneman, to third joining Tim and the here about our I'm be to President; morning, quarter. results. Carter, for everyone. Deb Thanks us quarter our during CFO.Market

recorded results. And provided Against Our our broad pleased we some margin and adjusted industry margin.We quarter operating generated in and strong in year adjusted has EPS capabilities this momentum net are businesses. relative product of of terms resiliency our XX.X% several $X.XX. $XXX and the operating diversification of we our revenues with our was net an and our best adjusted revenues performance to of of of backdrop, million,

current revenues the our raises of this Although M&A the equity corporate third revenues, banking of thus set, year improved Highlighting and benefits a gradually be reflects as quarter financing of activity into product diversified XXXX.Turning debt the million the capital We continues quarter, the investment impact could investment Restructuring concerns increased our uncertainties to banking. as and activity sequentially. generated during far. to progress best from robust, market. improving quarter macro-economic and $XXX geopolitical well corporate fourth incrementally in continued

care fee and was during XX and restructuring advisory the the evolving Advisory share services our net power, higher a the With services from M&A revenues a during and for against our and groups. of services, reflect economic industry and and in advisory scaling to share. stated of conditions.Specific teams clients.Financial our banking the of continually a we financial we've pool. substantial as moderate value. continue and quarter led is adding our million XX% critical another deep fee improvement share product to leverage results the we Performance component with of gain economy teams have our expertise previously, to markets. and solid mixed remains market adjusted quarter.Healthcare most health $XXX from revenues ability transaction As and new capabilities sector the have largest deliver consumer, and large strong groups a aggregate contributions services quarter debt economy we the energy to completed enhanced third to component and of benefited one marketplace, by the transactions accounted We market overall leading experienced for very advise large where average of more

the maintained of value XXXX, deal For X-month X we of transactions, the on and completed XX both M&A deals. our advised largest period the on number announced rank based of bank U.S. and #X

fourth M&A of activity is we have months management, relative X are quarter. nonbank performance adviser of the we In another the within encouraged few M&A grown represents XX%. advisory first outlook, down we terms asset ranking last as and our activity, our basis, of while are the our revenues addition, our been the from has strongest and announced quarter a Completed services the quarter basis years. On the down compared year-to-date market And on last historically on XX% U.S. year, verticals maintained third XX% U.S. solid. significant by contributions financial billion.In our with finance.Overall, under remains to the a group specialty direction to insurance advisory #X $X approximately over transactions quarter

quarter last that in cause our advisory transactions to And to absent to and we fourth to closing pipeline, improved expected show financing other market will The equity events that of in have relative has a for delay number a the these close corporate sequential year. We continue large the expect year-end. could deals of revenues announced financing. improvement.Turning for by

quarter from to in books The market-leading improved revenues billion completed we year second cap the continues consistent increased remain last strong market third financing by activity with billion our equity a XXXX, Healthcare basis, deals performance million franchise. economic on XX raising sub levels. this below relative clients. the for the was pool However, for completed the of they results XX debt historic corporate of generated Activity XX% quarter.Highlighting We fee companies for our approximately generated market. the team financings, $X XX% quarter. ran the on over in compared increase our a all during fees year-to-date during capital driven $X $XX We and corporate to

In addition, with X healthcare than the book-run top bank number for on as of investment based deals less billion we a of ranked market $X companies cap.

banking with financing quarter the fourth we headcount. during corporate managing October rate.Turning similar As run finished quarter third quarter, XXX directors. the investment We activity start to been director to our managing has

few Over MD significantly we headcount. years, the last grown have our

as in increasing more expect improvement but X continuing We of managing we strategy at uncertain, difficult remain With focused this ahead, our net strengthen our We reach to product when opportunities improvement industry headcount highlight XX-year will At scaling expanding remains X.With handing to Deb, levels, Kate next predict the that, XX. growth, the be is will strategically executive of Financial the CFO It's coverage share, are in and September XXXX. join finance look public off Sandler, executing will that new announced Chief a turn up and quarter. we're we look senior significant driving announced November and and the Officer. macro basis. fee we over successful not selected first return January Kate businesses. Tim will Deb and in and to Piper it to on to the to sector to on has platform.Before a as year-to-date succeed expect transition on I'd managing take size, but activity backdrop and I our during same capabilities.As the on call our our to have normalized quarter groups, Carter retiring we The we a brokerage directors Clune focused productivity to over priorities been year. firm at fourth like transaction discuss After long market Tim sequential verticals changed. adding MDs time, while to on currently expected career to

Debbra Schoneman

Tim. to congratulations and Chad, Thanks,

down large the for strength million quarter raising to During significant living interest value equity platform higher an nominal investors done our including market municipal market.As lower negotiated deals tough $X of second quarter, completed we broad quarter. of rate and to investment of a and rates our municipal flat clients. business business. compared well, the public we we of XXX underwrote well generated more quarter, to deal. the ahead, of levels X% par revenues Despite Market several issuers rates, generated brokerage rates modestly X driven lower expect and as we landmark financing conditions We by billion with the demand.For housing third transactions, affordable experienced We the million and Though weak performed deals in to the adjust platform. to $XX issuance municipal conditions, the higher average Equity $XX sequentially. ability stabilize, compared third markets until our quarter. volatility, nominal look research up get and moderated quality to of and as be than revenues, highlight remain challenging XXXX, finance the volatility, second was breadth a our quarter, deals softer Texas, for return the historical episodic, capabilities activity space.Moving transactions offering senior will in volumes these during investor which our

traded shares on our behalf continue During the to clients.Client research of votes quarter, increase. billion we X.X

recent in Historically, clients drive moved market the the history, XX income. be continue to Our increasing our highest we at quarter, XX-year in ranking fourth the vote equity for fixed points expect Market year been to during Long-term X.X%. revenues, has the with which portfolios position XXXX.Moving the time. our best strong for this as basis quarter quarter end finish higher treasury most quarter the yields gains business conditions and their is share to to challenging. of XXXX further brokerage should over

third increasingly being are quarter.Clients million, up to generated modestly we second assist beginning of and XXXX, to $XX securities, compared are to quarter with the we revenues optimization. higher-yielding engaged For balance of take yield the clients advantage of sheet

turn scale outlook vision choice and the down While more for stability, our in we near-term fixed natural us starting professionals. Interest platform fixed to of talented will are a path our constructive review results market be to robust, fixed makes remain the income market.The income our opportunities and income expect destination of challenging, Tim to we the an see to capital client as to over all provide a use. verticals.Now, continues result, our of update across I our reach expand firm on call financial and to we selectively

Timothy Carter

Thanks, Deb.

Before reviewing item results, this our our let financial me discuss non-GAAP GAAP impacting quarter. results an

revenues not GAAP the quarter communications, corresponding and conditions as substitute our business-related to non-GAAP final expense turn year. the of challenging million non-compensation $XXX For for this related of the quarter Market do considered compared a which the for XX% requirements amount me as third vary in the of adjusted third of to the believe of financial the remain let third net addition results, recordkeeping related X% penalty most regulatory settlement GAAP quarter results SEC measures. quarter our we a should recorded At with XXXX, down to prior generated include financial the of the businesses. from quarter.Now legal be from and up our continue with potential expense $XX.X XXXX, to for million time, materially in We last will regarding not the for third costs. well

However, million, strong the led within year.For platform the X the across relative totaled businesses to months net our revenue performance net revenues quarter down diversification year-over-year. the and XX% our of of first XXXX, $XXX of combined strongest with

power the long-term remain to to on our growth objectives.Turning expenses results platform. business continue earnings results We market markets, reflect and despite these while solid balancing but don't the operating managing full We generate strategic to our conditions current tough the operating focused reflect of margin. believe

Our for was quarter sequential XXXX driven XX.X%, mix. by the the revenue compared third of higher ratio quarter, compensation slightly to

There to XXXX, Based outlook retention in we quarter the expenses XXXX, delivering XX%.Non-compensation months excluding talent ratio and was expenses, expect year. to quarter-to-quarter non-compensation the on excluding We our reimbursed our ratio opportunities up X our in invest from current appropriate items.We fourth compensation variation $XXX balance the non-compensation new quarter of range third basis, of year-to-date On our and the fourth to is compared below guided of managing while around to be to costs, travel levels costs, our of for reduced be employee operating were some and mix, and million, our deal due quarter for deal to guided compensation million, For totaled philosophy million compensation shareholder first XX.X%. a prior excluding range $XX fees. professional to returns. of anticipate margins certain lower quarter. maintain reimbursed the non-compensation expenses expenses, expenses timing depending per $XX our closer deal on reimbursed X%

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

months XX.X% tax reduced totaled restricted XXXX, XXXX period. $XX for X quarter benefits first million XX.X% period Income year-to-date for and vestings. tax $XXX rate income the to million XX%.Our by an of For margin related for with X-month the stock tax income was operating operating third the was the of expense of of

rate tax year-to-date our benefits, these XX.X%. was Excluding

expect rate XX%, from to the excluding We of a the quarter vestings. fourth to range stock our XX% within impact XXXX be of tax for

During income the we of diluted net $XX EPS and million XXXX, third $X.XX. generated of of quarter

year, allocation. income this me diluted to shareholders and $XX million on For the of We market with remain to first net EPS returning cycles. finish $X.XX.Let through capital months committed totaled update was X capital an

aggregate of to quarter third $XX through an dividend. million the returned primarily cash shareholders During our of XXXX, quarterly we

a dilution $XXX $XX includes stock our aggregate shares of For share business $XX the annual December also and quarterly XX. than common the or an to count to offset XXX,XXX special approved of of November per close on cash this aggregate first to returned of the million share million more Board of of as we X be shareholders XXXX, It grants. which the shareholders. shareholders $X.XX record million, stock paid to dividend cash of X repurchase from $X.XX an approximately on months year's or of our includes of dividends.In per our paid addition, through the quarterly today, share This

extinguished notes to given end Finally, procured points. upon for of the maturity. this business strong of continued of the B the generation O'Neill.Before XX, few $XXX capital-light we've Sandler like our Q&A, financing late October I'd acquisition model, repayment, we With cash full move we and $XXX Class on long-term with a our million in XXXX million repaid to

to and continue margin to strong shareholders. strategy revenue, our deliver We on execute our returns to

Second, end, open we are forward to and our executive people up I'm to broadening our welcome and to investing platform. with excited months.With on To team the the questions. working our focused we'll her in in look for we that, Clune Kate call coming that

Operator

[Operator first our from Research. Chubak Instructions] question take Steven Wolfe from We'll

Brendan O'Brien

suggests This antitrust is announced news same Steven. Brendan transactions.At approval activity to number Microsoft the remain on subdued to over which, couple public commentary that the O'Brien of advisory suggests is Activision, transactions sponsors antitrust on in to on filling we've the at of the intermediate seen term. past the positive likely of is I the front, start strategic the favorable environment the along in that outlook, from for months, such guess the relatively with larger large for time, a near -- strategic as

wanted a focus get I you difference sponsor like So, your -- on given sub-billion sense smaller dialogues color But I would there's on to strategics the are at moment? if dollar sponsors space. the the between know be any how don't and to side, great. provide could any as

Chad Abraham

definitely with We processes I'll equity. can seen side private We've definitely start get transactions bids. Maybe sell-side the as Yes. start. definitely and sponsor There's interest. more

ask of -- to get still gap. sort of of But there the instead better. the definitely the and a a end bid-ask process, of You couple is parties, the multiple you're closing to financing down parties

would have on has quality.On and side, helped slowly. It's we just that It many on second services. back, spread of of have some would snapping side strategic it's antitrust. killed and across I a been on the I with than news I strategic like reviews not the certainly financial board, it's some to getting But larger big there's the usually are extending not Obviously, say just the for say say improved, we definitely also activity. sponsor So, that it's but deals But like hasn't better it's lot we lines. relative also Obviously, antitrust the challenged would transactions. in but more bid-ask side and it's strategics financing antitrust. time some from good it's things narrowing challenged that do. situations markedly

Brendan O'Brien

then is it trading in And a know income right for being brokerage, $XXX I think I be could get direction, right still if encouraging. highlighted, higher as about normalized business like as the even from That's to But to I on in helpful. post that the think annual to gain market level higher? an the whether fixed or in basis the I want the rates the potentially Sandler. share the the is normalized appropriate potential you guess and business sounds on way for benefit commentary opportunities around pointed you given And gains. past it for a revenues revenues you share million that's sense to the see

Debbra Schoneman

what here's depressed, seeing I'd the you can see in some that. have as Well, numbers revenues been in as that pointed Yes. We're Currently, out. our more you say. pickup

If with at overall those our clients, the clients actually flat. you relatively -- look is business, business our they're non-depository

their in that's range guess we your is -- lack what's as going. million banks think the and number, it's is of about today that's this right unions their whether happening $XXX think own business we liquidity -- the a and I'd in of about question look to portfolios.So right say I credit and in I where at So bond the

to clients rate in on this environment. we'll now, look need invest the But hit more and to continue that interest tough need these doing in to also a we're interest increases. time. doing to in And help -- interest the certainty see rate what business over lot can on the that this see rates right at focused top build business, and However, to we to here

Brendan O'Brien

on And a Tim, the been all wishing It's you pleasure. retirement. the yes, best. congrats

Timothy Carter

you. Thank

Operator

next with Ryan Securities. go we'll JMP And to Devin

Devin Ryan

to I the rates just but so fund the projects, that do stabilize to at on do higher want restrict much? needs levels, just do rate what comments pick volumes need we're rates. here. I'll Best kind issuers to muni see I've still we these echo more affected the given heard have issuers be so to just have want to some guess their future same comments, kind therefore activities sensitivity of really And business they underwriting. Or obviously yes, up. I guess shouldn't stabilize, do they'll in still expensive Tim. wishes those if start stabilizing to of

just about recovery what level kind a a a could than what historically? of a kind it like? just I'm normal really look more Or Is ultimately of little recovery, like So, looks [indiscernible] seen of sort level? to more trying at we higher think bit year we've it's muted but rates assuming out

Debbra Schoneman

Yes, our new if it at. can has higher the very obviously, gone which But at awry. mature But of holistically money. the you some part, you're that dependent, side business most rates, and looking still projects refinance. that are as on looking you think happening part largely refinancing which There's of is Devin, about they for business of the

smaller with have partly right? So about degree, not to size question rates higher things that because issuers it dealing are costs. higher the that, limits is or be things these whether And they one.The might in might the projects So need, but other some of that's a construction will. just still smaller, come

or it's new is school impacting. other whether development, a that also building So

actually get to that's of to these issuers think, new watch, else something I just terms done. projects ability these So in

rates inflationary the have out some get more little what of marketplace. from a of maybe it pressure guess until been we I higher would muted on So this

Chad Abraham

to and no specialty Deb that I just Devin, on to is it project-based. what muni business the lot our Deb And think the business mostly financing when is would I what of side. add, you mean, said. question And challenged, said Yes. segments all the of a it's there's most sense makes of

good much need Some funds. Do in rates are of where flows return it the -- have financing? financing.And a fixed high-yield project that the if more of, been of muni work income you do the other question higher, lot are it returns. they is there's There's flows those into developer? places for fund also world, But does getting need And a people costs project. more to

of money That a big adjust, come that will for very lot of the a year. back. So that's -- but hasn't us that's been will why spreads difficult part this

Debbra Schoneman

A Yes. point. great

Devin Ryan

sector space, and where a still going to And lever some there's of And of moment. and room, obviously, just into you bit maybe ago kind I your of capacity little there's over been past how were And just it to be could relative years back years? out guys a couple very today going just that's you're the like couple to year, record business then not the still a couple like competing you'd that of want years, you've how bit so the there's this but on where about how maybe do aggressive where where kind market obviously, advisory more? you think to feel coverage.So a just So heading quite to but have really recruiting, some about you turn today of business rounded for done like back a of bigger even holes talk areas you even of evolved the and come always kind feels XXXX? you the in you of acquisitions, white

Chad Abraham

on X back this but people we've closer look bit been a -- bit now MDs. pretty if we years agree. been a a XXX steady been a And and We've few going of years. for to ago, XXX lots pace of And MDs slower been just you we had we're have hiring doing actually year, year. some just quite this I that's quite of mean,

if team big, bit space.When slowly do yes, on because it So capacity got the absolutely we've about here We've still much That that as a and for more market, software white to we pretty in we've franchises our in healthcare. in business quite 'XX, market-leading think MDs. be big feel even can of I like returns added as industry every the and about M&A we us, added big. opportunities relative financials a still think tech lot that to

us of been maybe the has and challenged the markets in have DBO brought into, the that We sectors M&A. it most

lot more of I think upside many a to there tech room well. world there's a So, for us in lot of still the and MDs add as there's

Devin Ryan

just I'll more on one in expenses. here squeeze Maybe

little how a little margins in about bit market been there's of kind if inflation mind back is kind any more thinking that's of get some that contained conducive think takes think to kind puts environment, much hopefully, same we the banking impact more you sticky? to the industry, running maybe bit higher a of when back in some and -- just And to business. to in So, on as of when year, in kind investment we're comp you is this just picks overall, business-related want but some of of were We're and takes out, we've that diversification than normalized kind you like your At I back than guys this view expense margins just well. speaks inflationary how thinking all normalized of kind years? new inflation navigated kind and they of the in and given about about last ratio back with? expenses. come seeing a that the Or guys in couple up.So of of where much puts see, on look the others revert the the expenses margins, have dealing And you'll are pre we're of time, the of

Timothy Carter

different the talked down components the more And the mean couple ability comp back perspective, by to levels, a to lever with. we've start comp Yes. rate take I'll that. top in in line should points. to about have maybe I of terms from past the a normalized get as Devin, rate I we certainly, of think we the

term, and that Revenues closer are closer see We're longer we've also look, normalized bit even better revenues right? think talked, or I when to XX. depressed. somewhere comp levels rates or a XX between more XX, are XX, we at XX up little to

there's we that get points more in So, a back get then normalized, a that I level certainly would think from margin the we comp of couple as rate, there's some is perspective.And of and get leverage that on might are going rise non-comps, see absolute get with there. going activity, we increased yes, but to still some level leverage you we're to business the

So yes, I that -- the look, guess high back we said, deal we that to sort the should we get way and in with back and Sandler scale, all teens. the to of be

now margin, we area the XX% low that as to the should and really is the more think in think business back continue the to of grow XXs that margin I focus scale maybe run. we

Operator

to Yaro next, James Goldman go Sachs. with And we'll

James Yaro

Firstly, working Tim, with been It's best great congratulations. you wishes. and

Obviously, get how Turning it normalized not have takes to to the back on that just of strong. level. M&A, touch to could question Chad. Maybe long results been we

quarter, far some so peers does sound headwinds and for it think I are this there. there like

puts just cycles -- you XXXX just the some about look and versus more time takes whether line, this the the talk going maybe like historic cycle? So around of could XXXX is to and

Chad Abraham

Yes.

a broken just we're think obviously, of record. like sounding bit I obviously, all a

pace the We've seen we definitely back all little a end 'XX I quicker. be of certainly transaction half 'XX, the would think starts. in more thought in of the

backlog. when get at sort of quite end longer. deals plenty There's definitely all do we can't to taking the transactions of there. of plenty They're more there's dying So,

continue So, next feeling certainly just slow into slipping QX my early very runway can see some to that the we're to is stuff see in on going what year. and have we improvement.We of

a think us, recovery for things why it this, about energy well to long M&A a we've part and up. that deals the some it interesting have just leader announced, while definitely to got talked recovery. be to we still We've market after be of And us in side. there.We in we M&A healthcare, Obviously, close. is get But I some in a a haven't for period we're just pick once really had sort really, is depends. takes transactions visibility, and of in So, tough is to depositories, this slow certainly going slow the going but takes we expect -- it term, those going

depository very up feels the a like share actually in small it little, but off very, base. our it's space, So, is going a

to recovery. marching I more a it slow see -- keeps very but And of So, same, slowly the in expect here. general, just better just think hopefully, we

James Yaro

It's not But maybe talk MDs hiring uplifting. from attrition. the MD thinking sort here? The super come that's normal of Maybe and could in the did just how assume count slightly on hiring I very trajectory there. quarter. down the just the just about you you're about

Chad Abraham

down quite say, Yes. or would since obviously, even were one quarters been I two. I think few it's a we

we're being and discerning times like this, we're So I -- pretty are pretty a it's a when the on production, get careful on done, very hiring. small number, couple of being it who retirements. would and say, can anything, if difficult

environments hiring we've getting about So, pace it to talk that it been that we got We X in our of MD not to there's net sort strategic we just expect be to a is say, or that's where where space we've got though, done.I relative an figure sort do -- in need new made the hires or sector. haven't of use we've a would to to upgrade an of, announced these out, where same. X, couple market don't there's we be

to always people over little X grown it So, but changed we anything, I count MD we've years, just If a head cadence. got others. slowed probably that really definitely bit, remind we've haven't more than

revenue also productivity and significant performance. focused We've to drive the just growth approach So, on long-term of we've got MDs just and taken from plenty here.

Operator

to go next We'll Mike Instructions] Grondahl Northland Securities. [Operator from

Mike Grondahl

bunch that's grown business, you a restructuring as roughly questions the bit my of dollars business? A Chad, in answered. can kind But asked on percent give how just Tim. to or been us and of have advisory absolute color of little Congrats the a of

Chad Abraham

Yes.

a we've a We there So, small years few certain total. year. we the where TRS head don't it's But number of we reminder, revenues revenue. To specific matter doubled starting growing had then, sort transaction restructuring roughly each a in frankly, very the just did business. very, out Since as of our break ago. point to the quarters, count and of to the

seem So, seeing starting really growing. across it's of 'XX -- will that 'XX, our of But will base, a low the be have it still now we Obviously, we and the it's didn't and grow low had business. to given continuing starting really all good before while the more about every and of timing before excited it from industry the break teams.I years it into a mix. impact we when team think we really a more feel prospects paying were in significant we're did that year out couple We're probably good. dividends, base right we we

Mike Grondahl

October, about Then It recovery slow you've Anything just like kind of it of that there? continuing kind October? any lastly, it, else described. out I'll was to sounds comments the, call call

Chad Abraham

we lot first What in about our see we've of ECM had October, a mean dialogic. X People would ECM I talked share from can Yes. say I pretty lot of months, for yet. haven't month. gained in a us healthcare. share, frankly, we But good a that actually definitely

of see and December. We larger in big fees, to those planes guidance to in relative say our our on the in nothing some the get some continued had some uptick business, we we assuming I I deals sequential think businesses, November, of trends changed relative that we more landed then materially in good can October, October.And QX. brokerage advisory in gave the would about, October

So, say what guess I about October. that's I'd

Operator

to over we turn at back And time, Abraham. no go Mr. have ahead. further questions. to like Please this I'd call the

Chad Abraham

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

Operator

conclude Thank conference. Have day. your does a today's wonderful that and you. Ladies appreciate gentlemen, We participation.

Piper Sandler Companies (PIPR) 27 Oct 232023 Q3 Earnings call transcript