Q4 2019 Earnings Call
[music] good morning, and welcome to the Pepper stainless companies conference calls to discuss the financial muscle.
For the fourth quarter and full year of 2019.
During the question and answer session securities industry professionals mask questions of management.
The company has asked I remind you that statements on this call that are not historical or current facts, including statements about beliefs and expectations are forward looking statements that involve inherent risks and uncertainties.
Factors that could cause actual results to differ materially from those anticipated identified in the Companys earnings release and reports on file with the FCC.
Which are available on the company's website www Dot Piper Sandler Dot com and on the FCC website at Www Dot that's easy Dot Gov.
This call will also include statements regarding certain non-GAAP financial measures.
non-GAAP measures should be considered in addition to no substitute for measures of financial performance prepared in accordance with gap.
Please refer to the Companys earnings release issued today for a reconciliation of these non-GAAP financial measures to most comparable GAAP measure.
The earnings release is available on the Investor Relations page of the company's website or at the FCC website.
As a reminder, this call is being recorded.
Now I'd like to turn the call over to Mr. chat Abraham Mr. Abraham you may begin your call.
Good morning, everyone I'm here with Dep showing them in our President Tim Carter, our CFO , we would like to thank you for joining us to discuss the financial results for the fourth quarter and full year of 2019.
After our remarks, we will open up the call for questions.
Reflecting on the year, we generated record revenues and earnings and completed a number of strategic actions in 2019 was a year of growth and transformation.
It's very fitting that 2020 marks the firm's hundred 25th anniversary.
Our history is one filled with growth in change.
The most recent being our new name Piper Sandler companies.
Our dedication to serving the best interests of clients employees shareholders and the communities, where we live in work has been the foundation of our success.
I'm excited to celebrate or 125th anniversary with clients and colleagues well executing on our future strategic priorities.
Let me begin by providing a summary of the strategic activities that shape 2019, and our goals for 2020 and beyond.
[music] in early August we closed on the acquisition of Weedon in company, which significantly enhances the scale of our equity brokerage business by upgrading or trading capabilities and broadening our client base.
In late September we closed on the sale of advisory research, our traditional asset management business.
This business no longer fit with our strategic vision and the sale was the best course of action for our clients employees and shareholders.
Finally early in July we announced the acquisition of Sandler O'neill. The acquisition closed on January 3rd of this year.
Sandler adds to leading investment banking firm focused on the financial services industry to our growing investment banking platform.
I look forward to working with John Doyle, and Jimmy done and the fantastic team they lead.
In 2020, we look to build on the record financial results achieved in 2019.
Sandler successfully closed we now look forward to providing clients access to the full breadth of our combined capabilities.
Both wiedeman Sandler where market leaders, who chose to partner with us.
Part of our continued growth will include selectively adding partners, who share our client centric culture, and who can leverage the Piper Sandler platform to better serve clients.
[music] development in retention of our own talent provides the most profitable growth and we continue to invest in the development of our future leaders.
Next let me provide some overall comments on our financial results for 2019, and an update on our advisory and equity capital markets business does.
In Q4, we generated 276 million of adjusted net revenues and $2.89 Vps. Both quarterly records are strong finish to the year led to adjusted revenues of 824 million for 2019, and he asked of $7.36 also records.
Turning now to advisory services.
Advisory generated quarterly revenues of 144 million.
Oh, 35% from Q3, and 12% from a year ago corridor.
Q4 advisory revenues were led by our market, leading health care franchise with strong contributions from consumer technology and industrials.
For the year Advisory revenues were 441 million up 12%, reflecting strong broad based performance.
Our health care consumer and industrial teams, all performed well generating record or near record results.
We advised on 178 transactions during the year up from 170 in 2018.
We continue to focus on elevating our platform.
Leveraging our brand to win larger deals and enhancing our value proposition to clients by providing more products in deep sector expertise.
This is reflected in our median fee increasing 16% from year ago driving increased revenues.
Growing and broadening advisory services has been a longstanding focus for us.
Our revenues have more than doubled in the last five years, reflecting strong market share gains.
These results are a function of internal development.
Selective hiring.
And corporate development activities.
We previously discussed Remixing the business towards capital light variable cost businesses such as advisory.
For the third year in a row advisory revenues represented over 50% of our total revenues a trend we expect will continue.
We're excited to at Sandler to our platform a market leader in the financial services industry.
Sandler is also an advisory let franchise with approximately 50% of revenues generated by advisory services.
The combination significantly elevates, our advisory practice with market leadership in healthcare financial services consumer in energy and we expect to be in the top three of all U.S. investment banks in terms of deal flow.
Trade tensions geopolitical risks and the U.S. presidential election create headline risks for 2020.
However conditions for M&A in the middle market remain conducive to transactions due to demand from p. investors attractive valuations low financing rates and continued solid economic growth.
Our pipeline is relatively strong across our industry verticals, albeit back half weighted again as we reload from the strong Q4.
Turning to E C M.
Equity financing activity finished the year very strong what Q4 revenues of 43 million driven by or health care team.
For the quarter, we raised 3.9 billion in capital for our clients and were Bookrunner on 76% of transactions.
For the full year, we generated 105 million in equity financing revenues down 14% from 2018, reflecting challenges in the cyclical energy sector and the impact of the federal government shutdown in early 2019.
Looking forward to 2020, the combination with Sandler as a market leading franchise to our capital markets offerings and expands our platform. Its financial services represents a large and broad fee pool from a corporate capital raising perspective.
We previously set a long term goal of growing annual advisory in corporate financing revenues to 750 million.
With the addition of Sandler we should be close to achieving that goal.
We see continued growth over the medium term by adding talent in certain sub sectors to broaden our industry teams and continuing to increase banker productivity.
We also see an opportunity to capitalize on the strength of our U.S. franchises by expanding in Europe .
As a result, our new goal is to grow advisory in corporate financing to over $1 billion of combined annual revenues over the next several years.
I will now turn the call over to adapt to discuss our public finance and brokerage businesses.
Thanks, Chad, let me begin with an update on our equity brokerage business.
Equity markets in the fourth quarter saw low volatility and volumes. There were few catalyst motivating clients to trade as markets continued to advance higher despite global growth concerns and trade tension.
Our equity brokerage business generated revenues of 32 nine for the quarter, an 89 nine for the year meaningfully compared to the prior period driven by the addition of leading to our platform.
On an annual basis inclusive of Sandler we expect equity brokerage revenues to be approximately 130 million, providing meaningful operating leverage in the business as we capitalize on cost synergies.
With a comprehensive suite of products.
One of the largest client base as a domestically focused brokers and a high quality research franchise covering 875 stocks. We believe that we have a significant market share opportunity in front of us as participants consolidate toward larger broader and higher quality providers.
Turning to our public finance business. That's financing finished the year very strong with 31 million of revenues for the fourth quarter up 37% from Q3 and 13% from year ago.
We benefited from a surge of new issuance volume in the market as clients took advantage of low rate.
In addition, we completed several higher spreads financings as demand remains strong for high yield muni offerings in this lower interest rate environment.
For the full year, we generated 86 nine of debt financing revenues up 17% from a slow 2018.
Market conditions significantly improved as the year progressed, driven by low rates and investor demand.
Increase issuance for 2019 was driven by a pickup in refunding activity, especially taxable refinancings and an increase in new money issuance.
We expect the debt financing momentum we experienced in 2019 to carry over into 2020 with another strong year of market issuance.
Our pipeline a solid with several higher spread financings in the backlog as always our ability to execute on our backlog is contingent on market conditions.
Investors value the tax exempt feature of municipals and differentiated high credit quality this asset class, making it a valuable component of our product capabilities.
Our commitment and expertise in the public finance market has led to increasing market share overtime and makes us a natural destination for talent looking to best serve their clients.
In 2019, we added nine senior bankers, expanding our presence in Nebraska, Colorado, Pennsylvania and Ohio.
We are what are the most active municipal debt underwriters in the market ranking in the top 10 based on par value and top three based on volume of deal.
In the fixed income market yields normalized in the fourth quarter as a yield curve steepens easing concerns about an inverted curve.
The 210 spread expanded from five basis points at September 30 to 34 basis points at year end.
For the quarter, we generated fixed income brokerage revenues of 25 million consistent with Q3 and up 73% over the very challenging year ago period.
For the full year, we produced 95 million of revenues, a 40% increase from 2018.
A combination of conducive market conditions, increasing client activity and strong execution drove a very successful year for our fixed income franchise.
It's important to note we achieved these results in a lower risk profile and with reduced head count and cost base driving a meaningful increase in the returns for this business.
Looking to 2020, we're excited by the opportunities the combination with Sandler presents given the complementary products and expertise.
Now I will turn the call over to Tim to review, our financial results and provide an update on capital you.
Thanks, Dan.
My comments will be focused on our adjusted non-GAAP financial results. However, let me first highlight a few items impacting our GAAP results.
Our GAAP results include amounts related to the discontinued operations of advisory research, our traditional asset management business.
For the year, we recorded net income from discontinued operations of 23.8 million or one dollar and 65 cents per diluted common share which included a gain on the sale of this business.
In addition, we incurred restructuring and integration costs of 1.8 million in Q4, and 14.3 million for the full year related to the acquisitions of Sandler and we.
These cost consisted of severance benefits.
Contract termination costs and transaction related professional fees.
We expect to occur additional restructuring and integration costs in the first half of 2020 associated with Sandler acquisition.
Turning to our adjusted financial results, we achieved record revenues of 276 million for the fourth quarter 2019, and 824 million for the full year.
Q4 revenues increased 36% sequentially with strong performances across investment banking, but especially in equity capital markets, which finished the year very strong with 43 million of revenues the highest quarterly level in over a decade.
Compared to the year ago period quarterly revenues were up 29% with increases across all of our business lines.
For the year revenues increased 12% driven by growth in advisory services and an increase in fixed income brokerage revenues, which rebounded 40% from the depressed 2018 levels.
We produced an operating margin of 20.4% for the fourth quarter generating pre tax profits, a 56 million and diluted EPS of $2.89 illustrating the operating leverage in the business at higher revenue levels.
For the year pre tax profits were 136 million an increase of 26% from 2018.
By maintaining cost discipline, we were able to grow profits at twice the rate of revenues.
This growth was 16.6% operating margin for the year, a meaningful expansion from 14.7% in 2018.
On a year to date basis, EPS was $7.36 an increase of 29% from 2018, driven by higher revenues and a higher operating margin.
Turning to operating expenses, our compensation ratio of 61.2% for the quarter was below our target range of 62% to 63%.
Robust revenues in the quarter enabled us to leverage fixed compensation costs in the business.
For the full year, our comp ratio was 62% at the low end diversity that range given our focus on corporate development activities. In 2019, we did fewer senior investment banking hires which drove our comp ratio to the lower end of the range.
Quarterly Noncomp expenses of 51 million were elevated due to increased deal related expenses driven by higher investment banking revenues.
For the year Noncomp expenses were 176 million.
Although non comps averaged 44 million per quarter, they trended higher in the second half of the year given the addition of we'd into our platform.
We continue to carefully manage noncomp expenses as these costs are an important source of operating leverage.
Our adjusted tax rate was 26.3% for the quarter and 22.1% for the full year.
The lower annual tax rate was the result of a 5.1 million dollar tax benefit from restricted stock awards vesting that values greater than the grant price.
Excluding this tax benefit our adjusted tax rate was 25.9% for the year.
Over the past few years, we've recorded the tax benefit resulting from restricted stock awards vesting that values greater than they are granted price.
However, this is dependent on the share price at best in relative to the grant date price and can result in either a tax benefit or additional tax expense.
For 2020, we did not expect to generate a tax benefit at the same levels as the past few years.
And our current share price, we're projecting no tax benefit related to the awards vest in in the first quarter 2020.
Also given the recent changes to our business related to corporate development and strategic activities, we expect our tax rate in 2020 to increase.
As such we are updating our full year estimated tax rate guidance to a range of 26% to 28%.
Turning to capital our goal is to maximize shareholder value. This includes maintaining our dividend policy of returning 30% to 50% of non-GAAP earnings to our shareholders repurchasing shares and on an opportunistic basis and to offset the dilution from stock Vestings and deploying capital towards high quality acquisition.
And to accelerate growth in the business.
Our relative weighting towards each of these levers is dependent on a number of factors included in the market environment and our performance in the near term we are more biased towards investing in the business.
In regards to dividends the board approved the special cash dividends of 75 cents per share should be paid alongside the first quarter dividend.
When combined with the one dollar and 50 cents of regular quarterly dividends total dividends for fiscal 2019 will be $2.25 per share.
This represents approximately 33% of our adjusted net income for 2019.
The board also approved a quarterly dividend of 37, and a half cents per share to be paid on March 13, 2020 to shareholders of record as of the close of business on March 2nd 2020.
In 2019, we repurchased 50.6 million or 702000 shares of common stock at an average price of $72.09 per share.
In total we returned 86 million to shareholders in 2019 through dividends and share repurchases.
These amounts are in addition to deploying capital towards the Sandler and we've been acquisitions.
We enter 2020 in a strong capital position with only a modest level of data on the balance sheet, we maintain the financial flexibility to continue returning capital to shareholders, while investing in the business.
Let me finish by reiterating some of the high level guidance. We provided in Q3 regarding our go forward operations with a full year of both weedon and Sandler in our results.
We continue to projected Sandler will add approximately 300 million of revenues in 2020.
Going forward, we expect our compensation ratio to be consistent with current levels in the range of 62% to 63%.
This level gives us the flexibility to continue investing in the business.
Non comps may vary from period to period, depending on the amount of deal related expenses.
We're adjusting our non compensation guidance to exclude the more variable deal related expenses in 2020, we estimate noncomp expenses, excluding deal related expenses to range from 53 to 57 million per quarter.
We have revised this range to include office space consolidation costs in 2020.
These office moves will generate savings in future periods and will allow us to integrate the teams across platforms and drive more connectivity in synergy amongst our employee partners.
In regards to deal related expenses. These expenses should generally be viewed as a function of banking revenues.
Based on historical experience, we estimate that deal related expenses will represent approximately 3.5% to 4% of investment banking revenues.
Before going to today I'd like to turn the call back to chat for a few additional comments.
Thanks, Tim.
Let me close by thanking all my employee partners for their hard work and dedication and congratulating them on a record year and also welcoming our new employee partners from Sandler.
The new Piper Sandler has an enviable market position and financial profile.
Our market leadership sector expertise and broad product capabilities are unparalleled in the middle market.
With over 1 billion of annual revenues strong margins modest leverage and limited incremental operating capital needs.
We are nicely positioned to generate profits to further propel our growth and shareholder returns.
Thanks, and now let's open up the call for questions.
Thank you the floor is now open for questions. If you wish to ask a question at this time simply press Star then the number one on your telephone keypad.
If at any point. Your question has been answered and you wish to remove yourself from the Q press the turnkey.
Our first question comes from line of Devin Ryan of JMP Securities.
Great. Good morning, guys how are you.
Hi, David.
Congratulations on the nicest ended the year.
So first question just on the Sandler deal. So I know, you're still expecting $300 million revenue contribution.
At the moment and I'm just curious how that.
Number compares to what the actual kind of 2019 level was.
And it seems like business.
Vertical starting on a pretty good note here. So I'm just trying to just some context on maybe some areas that might be lower relative to last year as it seems about the implication.
For the 300 million, maybe you're leaving yourself some room for upside, but just trying to think about the moving parts there.
Yes, yes, sure I can take that yes, and their had another good year in 2019.
We had disclosed in January .
The revenues from the last few years, they had their third year in a row with revenues north of 300 million.
Obviously that was the target we gave in July when we announced the deal we still feel very comfortable.
With the guidance that we expected will add.
300 million of revenues.
Relative to some of the their business segments. They had another strong advisory year.
And I would say like our business and others. We've seen on the street, a really strong finish to fixed income as well.
And.
Yes, I think it's true.
I've got a good backlog good pipeline I think like our business just looking at some of the announced deals and projected closing dates I think they like us will be more back half weighted than that first half weighted but yeah. We expect another strong here.
Terrific. Thanks, Chad.
And then maybe follow up for you Tim on the capital commentary and appreciate the detail on it sounds like the philosophy is pretty.
Consistent but clearly the business can be throwing off a lot of cash here and I'm just trying to think about any additional capital needs of the business.
Moving forward, whether there'll be opportunities.
And your fixed income with the combined franchises spent more time thinking about.
Opportunities there or more to do you on the financing side I'm just trying to think about any other areas within the business that could actually consume capital.
Relative to maybe what you're running at previously.
Yes sure Devin.
I think you're right in terms, how we continue to think about it it's it's really consistent.
With what we've talked about before I don't think.
The additional capital within the business.
Changes really all that much.
With the with the Sandler acquisition I think you know the capital that we have deployed in the various businesses I think remains fairly consistent going forward I think we've got some ability to leverage.
The combined platforms from that perspective, but.
For us it it's going to continue to you know to obviously return capital through the dividend, which we very much expect.
You know to do and then look for other ways to invest in the business from a from a corporate development perspective.
And then continue to look opportunistically at that share buybacks, but that's that's probably though.
The last priority here at least in the near term, yes, Devin It's Chad I would just add we we continued to be active and I think just given the growth of the platform continue to be Sean.
Interesting opportunities on the corporate development side.
Clearly.
Our integration with Sandler has gone well I mean, frankly, the especially the integration on the investment banking side, just given there were so little overlap that was pretty seamless and we're off to the races. So.
I think it's unlikely we would do something large.
But you know very likely will continue to look at tuck in acquisitions, or boutiques, especially where theres very little overlap and.
It gives us some market leadership in some sub verticals.
Terrific, maybe just and on that point.
Highlighted that billion dollars plus advisory financing target. It seems like you guys are your while on the way there so maybe just.
Kind of outline the path you see to that and.
Yes, I believe that would be all organic and then except there are kind of M&A opportunities just maybe update us on some of those verticals that.
I will like.
More sense to buy versus build organically.
And you had maybe.
And on any other areas outside of investment banking that could be complementary.
Manically to the business has your thinking about kind of the overall corporate development.
Yeah, Yeah, I would take that I mean for us we like to have sort of these internal targets of where we think we're going to take the banking business and I just think back to.
10 years ago, when we had a $150 million banking business, we really felt.
We could drive that to 500 million, we've now had.
Three years sort of in and around that range and as we've said many times that came from about half organic and half.
Corporate development.
I think a year ago, we sort of set a new goal that we could do 750 million I think we thought that would take several years through smaller acquisitions and.
Organic growth obviously.
We're very happy to partner with Sandler that probably launch death.
Right to that 750, Mark and so you know now we've just got this billion dollar target for.
Financing at M&A over the next few years and I would say that will be a combination of continued organic growth as we've said in energy even in healthcare even in our strongest places there are.
Sub verticals for organic growth, we talked a lot about the opportunity to do more in fintech with the combination of our software platform and.
And Sandlers financial services platform, but I think also in that goal would be some smaller boutiques smaller team lift outs like we talked about so I think it's a combination of those and then your your last question is we'd still be very open to opportunistic acquisitions or team lift outs.
In.
Our public finance space and some of our specialty areas.
And then I would also just add where the combination we're seeing some great early signs in fixed income obviously, the integration and fixed income in equities is a little harder.
Then banking since we are already in some of those businesses, but I don't think it's out of the question that we could look to more corporate development in fixed income down the road as well.
Great. Thanks for all the color taken all my questions.
Thanks.
Our next question comes from one of Chris Walsh of Wolfe Research.
Hey, guys good morning, Hi, Chris.
Congrats on the quarter.
Thank you.
First one I just wanted to touch on was that you see I'm outlook.
Big step up and for Q based on all the commentary from the Universal's that have already reported it seems like the outlook. There is still fairly bullish and there might be clients that are trying to pull forward some of their equity raises in front of the U.S. selection.
Well just looking for any color on what you're seeing amongst your client base.
Yeah. So so.
And take that we are we are definitely off to a better start this year in January.
Admittedly, we had a crazy low bar with the government shutdown last year, but I would say, we're seeing very much the same thing.
I think the first half will be quite active and I do think that you know there are people that are going to try to stay away from October and November with the election, and if they were going to finance around that time, you know they will try to do it sooner but.
It's really hard to predict how that will impact the second half but.
I would agree generally we see pretty good climate here in the first half for easier.
And then just in terms of the sector mix I would assume that's fairly skewed toward health care.
Fair.
Yeah.
The entire sort a middle market fee pool, and SCM has continued to concentrate even more in health care.
Obviously, we're really strong at healthcare.
So that that's good for us, but even our SCM results were impacted we did much less energy.
DCM last year than we did.
The year before so I actually expect will do a little better in some of the other sectors. This year, but the lion share again will be healthcare and obviously, where we're really excited to add the financial services fee pool for SCM, because that's a fairly large people <unk>.
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And then just one last one on the advisory business is set at a higher number of transactions, but also an increase in meeting fees, which I think you said were up 16% over the course of 29 in the great. If you could just comment on the underlying drivers there that had been driving your median fee rate higher.
Yes, so our median fee rate went up.
You know, it's sometimes when you're looking at an average it can be driven by the bigger.
The bigger tickets, obviously here, we're talking about the median fee I would just say and this is true for our.
Outperformance in Q4, we had a couple of nice transactions.
Slightly north of 10 million, but.
The massive.
Are the biggest part of our revenue stream really just came from.
Fees two to 5 million, we just see more and more.
345 million dollar fees as our you know lots of our bankers are doing somewhat larger transaction. So I think all of that has helped.
We still do you know plenty of one and a half million dollar fees. So you know that that's in the sweet spot of the.
Middle market, but we're definitely just seeing more threes fours and fives on the advisory side.
Awesome. Thanks, Chad.
Our next question comes from lineup Michael Brown of KBW.
Hi, good morning, guys.
Right.
Right.
So.
For sure the color on the on the Sandler integration.
Just kind of wondering are you seeing any material changes and how you're viewing some of the synergy potential across the platforms.
And then specifically on on the expense side, how far along as integration I understand that on a couple of weeks.
Those are still kind of more redundancies I need to be eliminated and how should we think about how that path will play out through 2020.
Yes, I'll take the first stab at that obviously, we look at.
We look at synergies two ways what are the.
Revenue opportunities and then on the expense side I think relative to the revenue opportunities obviously, we haven't.
We're early days and we haven't sort of closed any of those transactions through cross referrals, but we're definitely seeing you know across.
Public finance and our various industry groups lots of collaboration.
Lots of relationships and so we do still thinking the long term, we'll see some.
Revenue pickup and as when we announced the deal in July relative to expenses.
This trend that Sandler already ran very efficient operating margins.
And while there are some opportunities for cost synergies sort of as planned and we're still sort of tracking those.
The transaction was never about.
Super huge cost synergies and there'll be things that go the other way.
We're actually looking now with some offices that we've got an ability to consolidate more quickly. So we may end up having some more double rent this year, but we feel really really good about the.
The combination how the early teams are working together.
Ultimately all over the long term we will get.
Some more cost synergies, but that wasn't the big driver here in the short term.
Great. Thank you and then.
The 17% to 19% targeted operating margin you hit Sixteensix this year.
Can you just remind us kind of whats the timeline that you expect to kind of achieved that.
See stammler integration.
Yes, Mike.
You're right I mean, we've we saw a pretty big expansion. This year I think just there's a lot of leverage that can be in the business that sort of these higher revenue levels.
As we look at it sort of going forward you know, we may not get to that targeted level in 2020, partly based on some of the some of the costs that we've talked about Chad mentioned sort of this occupancy piece that you know as we consolidate we've got some additional costs in 2020, so it made.
I get to that level.
In the in the near term, but there's a clear path to get.
To get to that level, you know evidenced by by sort of a leverage that you see in 2019, and obviously with the Sandler acquisition coming in at drive earnings nicely.
And you know is sort of in line with with with what we what we plan from an overall earnings accretion perspective.
Got it and I would just add I mean, when we announced that in July that was obviously based on you know sandler having really good margins.
Some opportunity to get some minimal expense synergies so.
So in our target was in the first couple of years, we could get to the bottom of that and it might take a couple more years to get to the top of that but we still very much believe on a combined basis, we can get to the top of that range.
Okay, great. Thank you for the color on that.
And just one more for modeling purposes, we think about the quarterly trajectory 2020.
Clear I kind of the back half waiting for investment banking.
Obviously with the integration of.
The brokerage business.
Certainly has a little bit of a different quarterly trajectory as well so any color there as to how you expect those revenues to flow through and then.
Is there any other seasonality we need to make sure we consider our modeling.
Yeah, maybe starting with equity that you were just speaking to with when one of the things as you probably know as we've seen more cyclicality that business historically as Seth.
Paid for research more in that maybe second half of the year.
Not perfectly clear what that will look like as we head into a new year with a combined platform, but clearly having a stronger execution platform and that commission management business there.
Likely we could see some less cyclicality, but but left to be played out and then maybe I would also just note on the public finance business is a business that historically has had.
Weak Q ones over the last number of years.
And we're feeling or feeling good about the the momentum were seeing carrying over from Q4 into Q1, so at that same level, but maybe.
More than we've seen historically.
And I would just say yet relative to the rest of the business I mean, if you go back 15, or 20 years, usually four out of the five years were stronger in the back half than the first half and that can be sometimes skewed based on some big transactions in a.
Q1, Q2, we feel very good about our visibility in the pipeline and we're off to a good start but.
Yeah, we're highly confident.
In the pipeline, but really do think it'll be the closures, maybe not the announced deals but the closures will be and the revenue recognition will be more back half weighted.
Okay, that's taking my question.
Thank you.
As a reminder, ladies and gentlemen, if you wish to ask a question simply press Star then the number one on your telephone keypad.
Our next question comes from like Mike Crandall of Northland Securities.
Hi, congratulations on the on the great year kind of transformational and also the strong fourth quarter.
Chad.
You talk about a 122 investment banking and B.
What is a rough range to think about that maybe one year from now in two years from now what would you like to get that as you make some tuck ins or contemplate some tuck ins.
Yes, no I think that.
I think that I think thats a good question I mean, when we we were kind of operating close to 90 M.D. is on our own.
Obviously with the.
Combination.
About half of our financial services team join the.
Sadler platform plus you add their Mds, so thats sort of why we used 122 that sort of as of January 3rd how many Mds. We had that number does not include our own organic promotion class, which we will announce in March which is.
Which has one of our.
Our junior classes. So you know I sort of expect and hope we could end.
In the high 120.
Maybe close to 130.
This year and yet we've sort of targeted.
You know to get to that.
Billion dollars, that's probably 150 or 160 M.D. number over the next.
345 years, and you know I would say probably that incremental 20 will come through a combination of organic tires and team lift outs and and.
And internal development.
Got it that's helpful.
Anything to call out I know, you're you did a lot of planning with Sandler before the close it's close less than a month, but but anything that you're really delighted with so far or maybe even a little bit pleasantly surprised with.
Yes, maybe I'll give you a couple of things I mean it yet.
The Sandler folks are Super Colo collaborative I think you can just tell from their called culture of how they run the business. The last 30 years, everybody thinks about driving revenue.
Ross Sorta silos or products it doesn't matter I mean, they're all sort of sharing.
Relationships already bringing us ideas and different vertical so.
I'm not I'm very optimistic.
About that and I would just say if theres sort of.
A little extra giddy up in our step it's just the opportunity in fixed income you know, we're seeing some very cool things across the combination of our two platforms that.
It's going to take awhile for us to see major upside on that revenue, but some of the stories are quite fun.
And just lastly on the fixed income side is it more.
Clients cross sell product.
Maybe just detailed that a little bit more for us on fixed income.
Yes fixing them from a client perspective.
We really saw minimal overlap unlikely the equity side of business as you think about bringing in both Sandler and we then so it's really more I would say in a combination of product and.
Analytics and expertise.
And on both sides those sandler at Piper historically had different expertise in different products call. It say municipals and some other taxable products on our side and and things like loan trading and derivatives products and some things that are more neat unique the in both cases, we can leverage that craft.
Our broader client platform.
Got it great and Hey, good luck in 2020.
Thanks, Mike.
And that was our final question I'd like to turn the floor back over to 10 Abraham for any additional for closing remarks.
Okay. Thanks, operator, we look forward to updating you again in April and hope everybody has a great day. Thank you very much.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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