Piper Sandler Companies Q2 FY2025 earnings call

• Market conditions shifted positively mid-May with equity markets recovering, boosting client engagement across businesses.
• Advisory revenues were strong, led by Services and Industrials group, with a robust pipeline of transactions.
• Corporate financing was impacted by sector-specific factors, but pipeline remains strong.
• Public finance had strong second quarter but expected to moderate in third quarter.
• Brokerage saw growth in equity brokerage, while fixed income had strong performance but anticipated softening.
• Talent: 182 managing directors, with 5 new hires to strengthen expertise, offset by some reductions in force.
• Announced acquisition of G Squared Capital Partners, a boutique investment bank specializing in government services and defense technology, expected to close in third quarter 2025.

Advisory: Second quarter adjusted net revenues were $206 million, up 12% year-over-year, driven by broad products and higher average fees. First half advisory revenues were $423 million, up 24% year-over-year, with growth from M&A and non-M&A (debt advisory, private capital advisory, restructuring). Corporate Financing: Second quarter revenues were $35 million, down 31% from the year ago period. The economic fee pool for companies with sub-$5 billion market cap decreased 19% year-over-year in the first half, with biopharma down 61%. Public Finance: Second quarter municipal financing revenues were $42 million, up 66% year-over-year, driven by favorable market conditions. Brokerage: Second quarter equity brokerage revenues were $58 million, up 12% year-over-year, with 2.9 billion shares traded. Fixed Income: Second quarter revenues were $54 million, up 21% from the first quarter and 37% from the year ago period, but expected to soften in the third quarter.

• Advisory revenues expected to be largely consistent in third quarter.
• Public finance revenues expected to moderate in third quarter.
• Fixed income revenues anticipated to soften in third quarter.
• Board approved a $0.05 increase to quarterly cash dividend to $0.70 per share, payable September 12.
• Acquisition of G Squared Capital Partners expected to close in third quarter 2025.

• Macro environment uncertainties impacting business performance.
• Sector-specific factors affecting corporate financing, particularly in biopharma.
• Volatility in fixed income trading affecting activity with nondepository clients.
• Dependence on market conditions for IPO and advisory activities, especially in biotech.

Q: Good morning, everyone. First question on consolidation in the depository space. Obviously, the Sandler team has been active in the nonbank space over the last few years, which is good. But starting to see some bank M&A finally, and you guys are obviously starting to participate in that as well. I just want to get a sense of how you would frame what a more normal bank consolidation market could mean for revenue for Piper? And then just in terms of what you're seeing the timing? Do you think that there's revenues potentially for this year ramping? Or is this much more of a 2026 story and how you would frame that piece as well?

A: Yes. I do think the conditions have continued to improve for depository M&A obviously. Credit has been pretty good. There's capital available if that needs to be part of transactions. We're definitely seeing proof of regulatory approvals being quicker, yes. And I would say our pace of announcements has increased kind of across the spectrum, the small deals, a few of the larger deals. I do think some of these will -- some of the stuff because it's closing faster will close later in the year, but I still think we'll feel a lot of this impact next year. But conversations are good. And it's -- honestly, it's hard to -- besides the fact that a lot of the bank stock prices haven't recovered quite as much. it's hard to imagine much of the other criteria being a lot better.

Q: Got it. Okay. And then a follow-up here on Aviditi and just kind of the private capital solutions. So almost 1 year post closing, It'd be great just to hear about how that business is enhancing connectivity with clients now that you've kind of been connected for some time in the go-to-market, I'm sure, kind of pretty well developed right now. So can you just talk about how it's improving connectivity with clients. And then is there more that you can do there, meaning if you added a lot more resources or are there any capabilities you're learning you still might need to add for your sponsor clients?

A: Yes, I would say, honestly, that transaction has worked out sort of exactly as we had hoped. Just as a reminder, they've got a couple of large parts of the business, actually a few parts of the business, but new fund and existing fund raising and then obviously, the secondary market, they were heavily weighted sort of new capital raising, we did recently announced a significant hire to help just with more teams helping on the secondary side. I think what I've been really pleasantly surprised with is just the depth of relationships when you're raising money for a particular fund you're dealing with the senior partners, the decision makers, and I think that helps across all types of transactions. It helps us tell our story about our debt advisory business. It helps us on sell-side M&A. So relative to other things we've done, I think we've had quite a bit of pickup. And certainly, quicker than other things in terms of the bankers really locking on to this as an opportunity. So I think our timing was good. Transactions are picking up. And frankly, the results have been pretty good. So we're very pleased with how that's going.