PIPER SANDLER COMPANIES Q4 FY2024 earnings call

Management Statement and Operational Highlights

• The firm had a strong Q4 2024, representing the best quarter of 2024 and second-highest quarterly revenues on record. Adjusted net revenues were $499 million, with a 24.4% operating margin and adjusted EPS of $4.80. Full-year adjusted net revenues were $1.5 billion, with a 19.7% operating margin and adjusted EPS of $12.69.
• 2024 saw 16% revenue growth compared to 2023, with all businesses contributing. Advisory services accounted for over half of firmwide net revenues for the fourth consecutive year.
• Corporate Investment Banking had strong performance in advisory services and corporate financing. Advisory services generated $809 million in revenues for the year, up 14% from 2023. Corporate financing revenues were $174 million for the year, a 33% increase from 2023.
• The firm acquired Aviditi Advisors and returned $140 million to shareholders through dividends and share repurchases.
• Public Finance had a robust fourth quarter with $41 million in revenues, up 15% sequentially. Equity Brokerage had record revenues in Q4 and full-year 2024. Fixed Income saw $56 million in Q4 revenues, up 16% sequentially.

Segment Performance

• Corporate Investment Banking: Q4 2024 revenues were $332 million, with full-year 2024 revenues at $983 million, a 17% increase from 2023. Advisory services in Q4 2024 generated $280 million, up 49% sequentially, and full-year advisory revenues were $809 million, a 14% increase from 2023. Corporate financing in Q4 2024 was $53 million, with full-year $174 million, a 33% increase from 2023.
• Public Finance: Q4 2024 revenues were $41 million, up 15% sequentially and 40% from the prior year quarter. Full-year 2024 public finance revenues were $123 million, a 47% increase from 2023.
• Equity Brokerage: Q4 2024 equity brokerage revenues were $61 million, a quarterly record, with full-year 2024 revenues at $215 million, also a record.
• Fixed Income: Q4 2024 fixed income revenues were $56 million, up 16% sequentially and 17% from the year-ago period. Full-year 2024 fixed income revenues were $186 million, a 11% increase from 2023.

Guidance

• Expect advisory revenues to grow in 2025 with seasonality similar to 2024.
• Public finance market conditions and issuance volumes are expected to remain favorable in 2025.
• Expect equity brokerage revenues to be similar to 2024 in 2025.
• Anticipate clients to be more active in fixed income in 2025 as the yield curve normalizes, with a goal to grow annual fixed income revenues to $300 million.
• Non-compensation expenses for 2025 are expected to range from $65 million to $67 million per quarter, excluding reimbursed deal costs, driven by factors like office relocation, inflation, and increased business activity.

Risks

• Regulatory uncertainties in sectors such as financial services and healthcare could impact business operations.
• Market conditions may continue to cause deal elongation and valuation disparities in the advisory business, affecting transaction volumes and fees.
• Uncertainties in capital allocation and shareholder returns, including potential impacts from regulatory changes or market volatility.

Question and Answer

• Q: Brendan O'Brien asks about headwinds in financial services and healthcare and trends in the advisory business. A: Chad Abraham states sectors are improving, with advisory business showing slow, steady improvement across sectors.
• Q: James Yaro inquires about the ECM business outlook and acquisitions. A: Chad Abraham mentions ECM improved, with IPO market showing early signs of improvement, and acquisitions outlook positive due to realistic revenue outlooks and strong performance.
• Q: Brian Fitzgerald asks about the evolution of the fixed income business. A: Deb Schoneman discusses talent investment, focus on structured products and securitizations, municipal franchise expansion, and electronic trading in fixed income.
• Q: Mike Grondahl asks about top priorities for 2025. A: Chad Abraham highlights expanding industry teams, leveraging Managing Directors across products, and fixed income growth; Deb Schoneman adds fixed income talent build and continued focus on strategic areas like municipals and structured products.