Piper Sandler Companies Q3 FY2025 earnings call

Management Statement and Operational Highlights

• The market environment improved in Q3 with equity markets at record highs and lower volatility, boosting equity underwriting. Piper Sandler achieved quarterly adjusted net revenues of $455 million, a 21.2% operating margin, and adjusted EPS of $3.82, all higher than the prior year.
• The company has achieved 8 consecutive quarters of year-over-year growth. Corporate Investment Banking generated $292 million in revenues, with advisory revenues up 13% y/y and 82 transactions completed. The Financial Services group led bank M&A activity, advising on 6 of the 10 largest bank mergers in Q3.
• Public Finance saw Q3 revenues of $39 million (up 8% y/y) and YTD revenues up 31%. Equity Brokerage had Q3 revenues of $54 million (down 7% from Q2) but YTD up 8%. Fixed Income had Q3 revenues of $56 million (consistent with Q2) and up 15% y/y.
• The company added 8 new managing directors to its technology group, closed the G Squared acquisition, and the Board approved a quarterly cash dividend of $0.70 per share, payable Dec 12.

Segment Performance

• Corporate Investment Banking: Quarterly adjusted net revenues were $455 million, with a 21.2% operating margin and adjusted EPS of $3.82. Advisory revenues for the quarter were $212 million, up 13% year-over-year as 82 transactions were completed. The Financial Services group led results, bolstered by bank M&A activity, with the firm advising on 6 of the 10 largest bank mergers closed in Q3. Debt capital markets advisory is on pace for a third consecutive record year.
• Public Finance: Third quarter 2025 revenues were $39 million, down from Q2 but up 8% year-over-year. The firm underwrote 133 municipal negotiated transactions, raising $6 billion in par value. YTD revenues increased 31% vs. a 12% market issuance growth in par value.
• Equity Brokerage: Third quarter 2025 revenues were $54 million, down 7% from Q2. YTD revenues are up 8%, with strength in derivatives and electronic trading.
• Fixed Income: Third quarter 2025 revenues were $56 million, consistent with Q2 and up 15% year-over-year. Activity was solid across most products and client verticals in anticipation of further rate cuts.

Guidance

• Expect advisory revenues for Q4 2025 to be similar to last year's Q4.
• Anticipate corporate financing revenues in Q4 2025 to moderate from the strong Q3 performance.
• The Board approved a quarterly cash dividend of $0.70 per share, payable Dec 12 to shareholders of record as of Nov 25.
• The pipeline remains strong and diverse across segments, with continued opportunities in various sectors.

Risks

• Government Shutdown Impact: Potential negative impact on Corporate Finance revenues if the shutdown persists, affecting transaction reviews and approvals.
• Stock Price Impact on Bank M&A: Concerns about depository stock prices derailing bank M&A momentum, which is a key driver of Corporate Investment Banking results.
• Uncertainty in Transactions: Government shutdown could delay IPO and follow-on activity, impacting financing revenues.

Question and Answer

• Q: Touch on the bank M&A environment, size of opportunity and key risks A: Chad notes the accelerated pace of bank M&A activity is expected to continue, but key risk is depository stock prices which could derail momentum.
• Q: Margin potential, thoughts on 20%+ margin A: Kate states they guide to 20%+ as a starting point and will look to enhance margins as opportunities present.
• Q: Risks to corporate financing from government shutdown A: Chad says the next 3-4 weeks could be painful, with potential impacts on revenues if the shutdown persists.
• Q: Tech sector build-out in investment banking A: Chad says the firm is halfway to its goal for the tech sector build-out, with long-term aspirations to grow it to a size comparable to financials and health care.
• Q: Outlook for M&A advisory, cadence of activity A: Chad mentions steady build of M&A activity throughout spring/summer/fall, strong in health care and private equity areas.
• Q: Fixed income brokerage drivers, normalization A: Deb says normalization tied to yield curve normalization, with correlation to bank M&A activity.
• Q: 2026 outlook for fixed income and municipal A: Deb states to watch yield curve normalization with rate cuts as key for '26 performance