Q4 2020 Piper Sandler Companies Earnings Call
Good morning, and welcome to the Piper Sandler Company's conference call to discuss the financial results for the fourth quarter and full year of 2020.
During the question and answer session Securities industry professionals may ask questions of management.
The company has asked that 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 that are anticipated alright identified in the Companys earnings release and reports on file with the SEC.
Which are available on the Companys web site at the.
Www Dot Piper Sandler Dot com and on the SEC website at Www Dot FCC Dot Gov.
This call will also include statements regarding certain non-GAAP financial measures. The non-GAAP measure should be considered in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. Please.
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.
The earnings release is available on the Investor Relations page of the companies website and ask the SEC website.
As a reminder, this call is being recorded.
And now I'd like to turn the call over to Mr. Chad Abraham.
As for Abraham you May begin your call.
Good morning, everyone.
Thank you for joining our fourth quarter and full year 2020 call.
I am here with Deb, Schoneman, our president and Tim Carter our CFO.
We will go through our prepared remarks, and then open up the call for questions.
Reflecting on the year.
From the global pandemic and its impact on the economy and workers.
Two of watershed movement and racial justice to of polarized election.
2020 has brought more changed than many could have imagined.
Through all of this my employee partners remained focused on serving our clients and I could not be more proud of their dedication and resiliency.
Our business is heavily influenced by economic conditions in the financial markets too.
2020 was the roller coaster with equity markets Notching, all time highs in February before plunging 34%.
And then rapidly rebounding with broad indices again, setting all time highs by year end.
Volatility was extreme during March and April and remained elevated for much of the year in both equity and fixed income markets.
Against this backdrop on a full year basis, we generated over $1 billion in revenues and more than $10 of adjusted EPS.
Both for the first time in our history.
Beyond this record performance.
We also moved our business forward through a number of strategic actions during the year.
Our record results demonstrate the strength and diversification of our business.
And our deep client relationships.
Despite the challenges and maybe in part because of them too.
2020 was a year of tremendous growth and transformation for us.
Highlighting the year.
We closed on the combination with Sandler O'neil and became Piper Sandler companies.
We grew market share in all of our business lines.
We underwrote a record number of ex debt financings.
We help clients navigate extreme volatility and executed record equity volumes.
We raised a record level of par value for clients in the municipal negotiated market and completed the second most transactions nationwide.
We more than doubled our fixed income business by providing differentiated advice to clients navigating the changing markets.
We invested in our advisory business by completing the acquisition of the Valence group in April 2020 to expand our industry coverage, while strengthening our European presence.
We acquired Trs advisors on December 31 of restructuring advisory firm to broaden our investment banking product capabilities.
We increased our investment banking managing director head count by 68% to 100 to 138.
Through focused investments, namely Sandler and valence as well as internal development.
And we rapidly transitioned to a remote working environment, while closing and integrating three acquisitions.
Demonstrating the best in class service, our corporate support departments continued to provide.
Next let me provide some comments on our overall financial results before turning to corporate investment banking.
During the fourth quarter, we generated $400 million of adjusted net revenues and $4 17 of adjusted EPS.
Both quarterly records.
Our strong finish to the year led to adjusted net revenues of $1 2 billion for 2020.
And operating margin of 23%.
And adjusted EPS of $10 in <unk>.
All records.
Key drivers of our success in 2020 include a record year from our market, leading health care investment banking franchise.
Significant contributions from the financial services group.
Remarkable performances from both trading businesses and a record year from our public finance franchise.
In addition to benefiting from favorable markets in 2020, our strong relative performance was particularly encouraging.
A key component of our value proposition is consistent and profitable market share growth anchored by our leading franchises and relentless focus on serving clients.
Both our revenue and earnings growth since 2011 illustrate our success.
We have increased revenues in eight of the last nine years and grown adjusted EPS at a compounded annual growth rate of 32%.
Another key component of our value proposition is the strength and durability of our platform.
Through our combination with Sandler we knew we were partnering with the market leader.
But what has been equally impressive is the resiliency of the franchise during challenging markets during.
During 2020 Sandler outperformed our expectations and registered one of their most successful years.
Their broad product capabilities combined with deep client relationships and sector expertise continue to drive strong and consistent performance across market cycles.
Turning now to our corporate investment banking results.
We generated total corporate investment banking revenues, including advisory services, and corporate financing of $256 million in the fourth quarter of 2020.
Up 45% sequentially.
Revenues of $739 million for 2020 were up 35% year over year, driven by our market, leading healthcare and financial services franchises.
The breadth of our product expertise and the multiple ways. We can assist clients is demonstrated in our full year revenue mix.
During 2020.
M&A activity generated 44% of revenues.
Equity financings contributed 36%.
And debt and capital advisory engagements produced 20% of total corporate investment banking revenues.
Specific to advisory services, we generated 169 million of revenues during the fourth quarter of 2020.
Up sharply from the third quarter.
For us activity was led by our financial services and healthcare groups and included strong contributions from diversified industrials energy and consumer.
In addition, we saw the benefits of increased CEO and boardroom confidence.
And more clarity on a post pandemic outlook.
Advisory services revenues of $443 million for 2020 were in line with 2019.
Despite M&A activity slowing appreciably during the second and third quarters of 2020 as.
As pandemic uncertainty put many engagements on Hulu.
Our revenues for the year benefited from the addition of the financial services group.
The team retained their number one ranking in bank M&A based on the number of announced deals in the U S. During 2020.
And advised on six of the 10 largest bank mergers announced during the year.
With market leadership in health care financial services, consumer and energy, where we are the number two investment bank in terms of U S deal activity in the middle market.
The conditions for M&A in the market are strong.
Optimism for the rollout of Covid, 19, vaccines and of possible and to the pandemic has fuelled many businesses to reposition for a post pandemic landscape.
Demand from <unk> investors, and Spacs attractive valuations low financing rates, increasing CEO confidence and an expectation of continued economic growth has accelerated the pace of M&A activity.
Our pipeline is strong across our industry verticals.
Turning to corporate financing, our momentum continued and we generated $87 million of revenues in the fourth quarter of 2020, and a record $295 million of revenue for the full year.
Up 181% over 2019.
Our results were driven primarily by equity financing activity, which continued at a torrid pace during the fourth quarter as market valuations hit peak levels and investor demand remains strong.
In total we completed 137 equity financings during 2020, raising $62 billion of capital.
For us equity financing activity during the year was concentrated in the health care sector.
Our health care team had a standout year delivering record revenues underwriting 96 transactions and raising $20 billion of equity capital for clients.
In addition, we ranked in the top five for investment banks based on the number of book run Ipos and follow ons for sub $5 billion market cap companies in health care.
In recent years, we have made significant strides to build our capital markets leadership to complement our market, leading healthcare M&A platform.
The reputation and strength of this team positioned us nicely for the influx of health care companies looking to raise equity capital in 2020.
Our financial services Group was also very active in the capital markets. During the year, completing 58 debt and preferred stock offerings for banks and other financial services companies raising $17 billion of capital.
Looking forward to 2021, we're already off to a strong start and we expect equity and debt capital raising activity to remain strong, albeit at reduced levels from 2020.
Lastly, I want to emphasize our focus on investing in and growing our corporate investment banking platform.
When we announced the Sandler acquisition in July of 2019, our goal was to grow annual corporate investment banking revenues to $750 million.
In 2020, we recorded close to $740 million.
Our overall investment banking managing director head count the finished the year at 138.
Driven primarily by the additions of Sandler and valence.
We have a strong pipeline of new hires and the strength of our platform makes us the destination of choice for talented professionals.
In addition on December 31.
We closed on the acquisition of Trs advisors and independent restructuring firm.
Trs advisors was founded by Todd Snyder of veteran banker with 30 years of restructuring experience.
Todd will lead our combined restructuring and special situations practice, consisting of 20 professionals, including seven managing directors.
We see synergistic opportunities to assist clients in many of our industry verticals.
Especially energy and consumer which have seen significant changes to business models.
We continue to see opportunities in certain sectors to broaden and deepen our industry teams through strategic hires or tuck in acquisitions as.
As well as to growth banker productivity.
We also believe there is an opportunity to capitalize on the strength of our U S franchises by expanding in Europe.
As a result over the next several years, we now see a clear path to grow annual corporate investment banking revenues to over $1 billion.
Now I will turn the call over to Deb 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, so the elevated volatility and volume.
Market indices traded higher driven by optimism and COVID-19 vaccine results and an economic recovery.
Client activity increase with positioning before and after election results in November.
Our equity brokerage business generated revenues of $40 million for the quarter up 18% sequentially and $161 million for the year up meaningfully compared to the prior periods.
Entering 2020, we were confident there was a significant market share opportunity in front of us as buy side participants consolidate research spend and trading towards the larger broader and higher quality providers.
Our acquisition of Weeden positioned us well for this trend and our thesis has played out as anticipated driving market share and revenue gains.
We traded of 11 6 billion shares up 149% over 2019 as clients continue to seek our trusted relationships and our reputation for premier trade execution.
2020 revenues were up 84% year over year the.
A number of clients trading the <unk> reached an all time high in December.
The breadth of our client base allowed us to cross the significant portion of executed cash trade, resulting in no market impact for our clients.
The collaboration within our entire platform to get the best results for our clients is the valuable differentiator.
Our client retention two of the Weeden and Sandler combination has been exceptionally high and our vote ranked with institutional clients has improved significantly we are capturing mind and market share.
The increased scale of the platform has driven efficiencies in our cost structure and profitability of significantly higher.
In addition to our trading capabilities the quality of our research and specialized equity sales force are key differentiators for us in supporting a record equity financing activity.
For context, we are ranked number one in terms of breath as the.
Non cap and mid cap coverage and have over 920 stocks under coverage. Our sales force is ranked number one in the healthcare financials and consumer sectors.
As we look forward to 2021, while the market while it is likely to be down our goal is to maintain our momentum.
We believe there's additional opportunity for market share gains as we continue to demonstrate the full capabilities of our platform and the buy side continues to consolidate towards high quality firms with scale.
Our success is resonating externally and our growth opportunities are robust.
Turning to municipal financing.
Our public finance business finished the year strong with $40 million of revenues for the fourth quarter of 2020 up 51% from the third quarter and 28% from a year ago.
We continue to benefit from strong new issuance in the governmental space as clients took advantage of low rates. In addition, we completed several higher fee financing and our specialty sectors as demand for high yield municipal offerings returned.
For the full year, we generated $120 million of municipal financing revenue up 44% from 2019.
Low interest rates combined with strong investor demand drove record market issuance of 475 million, 5% higher than the previous peak set in 2017.
Taxable issuance in particular was significantly higher in 2020, comprising 30% of new issuance volume relative to 15% in 2019.
The increase was driven by a decline in treasury yields, allowing for taxable advanced refunding to be an attractive refinancing option.
Against this market backdrop, we executed well and took the meaningful market share.
Our strong relative performance is the result of our consistent focus over the last decade of steadily building this business.
For a total of municipal negotiated issuance of $19 1 billion for 2020 was up 55% year over year relative to the market, which was up 17%.
In this market, we ranked second based on number of deals nationwide.
Our outstanding performance in 2020 was driven by a combination of strong governmental issuance, especially in school districts, where we have market leadership and the investments we have made last year to strengthen our presence in Nebraska, Colorado and Pennsylvania.
As we look ahead to 2021, we expect issuance to moderate some of it from record levels, particularly on the governmental side of our significant presence in the specialty segment of the market should help offset this decrease as high yield investor demand has meaningfully improved in.
In addition, we have taken a number of key steps in our business to retain momentum in 2021.
In Q4, we made significant hires in Colorado, adding a team and special district financing.
Lastly, turning to our fixed income business.
Although yields rose slightly late in the fourth quarter, causing some steepening of the curve rates still remain at historic lows. We continued to help clients invest in a low rate environment within the market flush with liquidity by seeking any available yield curve spread opportunities that are attractive on a risk adjusted basis for our clients.
For the first quarter, we generated fixed income revenues of $53 million flat on a sequential basis.
Activity rest of robust across all of our client verticals, especially among our financial services clients as they reposition heading into 2021.
For the full year, we produced $196 million of revenues benefiting from the combination with Sandler.
Heightened volatility robust client activity strong execution and deep relationships drove a very successful year for our fixed income franchise.
From an outlet perspective in 2021, we anticipate less volatility, which should drive lower bid ask spreads and reduced volume notwithstanding less robust market conditions, we aim to retain the tremendous momentum in our fixed income business by providing differentiated advice and analytics tailored to defer.
Non client vertical.
Serving those clients with product expertise that goes far beyond traditional banks to include derivatives loan strategies and securitization.
We also provide clients with access to the breadth of our new issue of taxable and tax exempt products.
In addition, we believe we are in the early innings of realizing synergies driven by the standard of combination.
We see opportunities to increase productivity by capitalizing on our expanded client base and successfully cross selling the unique product and strategic capabilities of those firms.
Now I will turn the call over to Tim to review, our financial results and provide an update on capital use.
Thanks Deb as a reminder, my comments will be focused on our adjusted non-GAAP financial results.
We generated revenues of 400 million for the fourth quarter of 2020 up 34% sequentially driven by a significant rebound in advisory services combined with strong contributions from each of our business lines.
For the full year 2020, we generated net revenues of $1 2 billion up 50% over 2019, reflecting the investments we have made through our acquisitions as well as the market leadership and scale, we have achieved in many of our businesses.
Turning to operating expenses are.
Our compensation ratio for the fourth quarter of 2020 was 59, 5% lower compared to prior quarters, resulting from our strong performance.
On a full year basis, our comp ratio was 61, 9%.
We continue to manage compensation levels, while considering the investments employee retention and business outlook.
Looking ahead to 2021, we expect our compensation ratio to be near 62% based on our current market outlook and strong pipeline of growth opportunities.
Non compensation expenses, excluding reimburse deal expenses of $45 million for the fourth quarter of 2020 continue to reflect the pause on travel and entertainment.
On a full year basis, excluding reimburse deal expenses non comp costs were $183 million up 21% over 2019 due to the addition of our acquisitions, which was offset in part by the decline in travel.
We continue to be disciplined in managing our expenses as they are of significant driver of operating leverage.
We anticipate that some of the operational changes we have adopted this year, including how we engage with clients in certain areas of our business are sustainable going forward.
Looking to 2021, we expect non comp expenses to gradually increase from current quarterly levels. As we anticipate travel will begin to resume in the second half of the year.
We estimate our 2021 non comp expenses, excluding reimburse deal expenses will average approximately $48 million to $50 million per quarter.
Now turning to operating margin and income.
For the fourth quarter of 2020, we generated record operating income of $109 million, representing a 27, 2% operating margin, reflecting the leverage in our model at higher revenue levels.
For the full year of 2020 operating income of $250 million increased 81% compared to 2019.
Our operating margin for the year was 23% of meaningful expansion from 16, 7% in 2019, driven by the increased scale of our platform. The successful integration of our acquisitions and the benefit of lower travel and entertainment expenses.
We continue to demonstrate our ability to drive operating margin expansion as we grow our revenues.
Our adjusted tax rate was 29, 4% for the fourth quarter of 2020, and 26, 2% on a full year basis.
We continue to expect our full year adjusted tax rate will be within our targeted range of 26% to 28% going forward.
For the fourth quarter of 2020, we generated net income of $75 million and diluted EPS of $4 17.
Up sequentially and year over year, driven by higher revenues and an increased margin.
Net income of $178 million for the full year of 2020 increased 67, 2% and diluted EPS of $10 <unk> increased 36% compared to 2019, demonstrating the accretive impact of our acquisitions and strategic use of capital.
The scale and operating leverage of our platform and capital light trading approach allows us to generate significant levels of excess cash from operations.
Let me now turn to capital and dividends or.
Our capital and liquidity is strong and our leverage is low we believe that our priorities for capital deployment remain aligned with our shareholders' interest.
Our primary objectives are to maintain our dividend policy of returning 30% to 50% of our non-GAAP earnings to shareholders on an annual basis.
To repurchase shares on an opportunistic basis in order to offset dilution from annual stock grants.
And to deploy capital towards acquisitions that accelerate growth.
While each of these levers of different advantages given our proven track record. We believe our shareholders will benefit most in the long term by us continuing to deploy capital towards growth initiatives.
With respect of dividends the board approved a special annual cash dividend of $1 85 per share related to our full year 2020 results.
When combined with the regular quarterly dividends paid during the year totaling $1 25.
The dividend for fiscal year, 2020 will be $3 10 per share of 38% increase year over year.
In addition, the board approved an increase to our quarterly dividend to <unk> 40 per share to be paid alongside the special annual dividend on March 12, 2021 to shareholders of record as of the close of business on March 3rd 2021.
Overall, we are pleased with our record 2020 performance the additions of Weeden and Sandler of added material scale and operating leverage to our business.
To conclude our business is exceptionally well positioned for growth and we are confident in our ability to deliver on our long term strategic objectives.
Thanks, and we can now open up the call for questions.
At this time I'd like to remind everyone in order to ask the question. Please press star followed by the number one on your telephone keypad and we'll pause for a moment, while we compile the Q&A roster.
And our first question comes from the line of Devin Ryan with JMP Securities Go ahead. Please your line is open.
Great Good morning, everyone.
Hey, Kevin good morning.
Maybe start here with the Crystal ball question for you.
I appreciate some of the outlook commentary.
I also understand that it was just terrific year for capital Raisings.
Equities and fixed income so with the high bar.
But also appreciating that this year of started on a pretty good note.
Can we think that the M&A advisory kind of acceleration can offset that or how would you how would you frame kind of of the potential for <unk>.
Deceleration in capital raising after such a great year versus your M&A re accelerating and then just kind of of the second part of that question.
What I'm getting at here is.
<unk> added a lot of capabilities on the advisory side.
I think you have free sandler of that.
The re Kellogg the normalized revenue levels around 400 of quarter of $50 million, but with sandler or in the balance of Trs is the way to think about kind of what the potential is in advisory and a more normalized.
Environment, assuming we're kind of moving back into something like that.
Yes, the Devin I think thats.
A great question and I guess I would I would start with advisory I think you're I think you're dead on.
Obviously throughout the year of Q2, and Q3 were really weak for us in advisory after an okay start in Q1, and a very strong finish, but I would still characterize sort of the total advisory results.
As suboptimal for sort of the platform.
We felt by combining sandler, adding valence the restructuring capability with Trs.
Frankly.
Many of our team is being down.
Somewhat for advisory So I think we're very optimistic that we could see some significant growth.
In the total advisory number as the year of growth and are really excited about the platform. The pipeline many of the good things going on there I do think per your question some of that will be offset with some very difficult comp.
Comparable for ECM.
The DCM business.
And both the brokerage businesses and even.
Public finance all of that being said.
The capital markets have started this year very strong in January.
But I think to see some of those results I mean, you'd have to have a crystal ball looking out this year to say hey is the most of the year are going to be strong and.
No Thats just hard to predict so I think youre looking at this the right way, we absolutely feel we've got.
A significant upside on the advisory business this year.
Okay.
Okay terrific and maybe we should just think about the the $1 billion plus investment banking overall is maybe the way to put it all together.
Kind of where you guys are going okay.
Maybe one here for for that just on the.
For the brokerage business clearly.
Great year, there as well and you guys are gaining market share and are benefiting from.
Some of the acquisitions as well in the fixed income business specifically.
Is it possible to kind of parse through the strength of of 2020 and how much was the elevated volume versus.
Just some of the unusual benefits of maybe market, making positioning given kind of big moves in markets I'm, assuming some of that may be difficult to repeat that.
The material versus unit volumes.
But that could be off a bit but.
Could remain still relatively healthy so I'm, just trying to kind of think about the different components of it.
Net income brokerage business.
Yeah, I would say as you look at 2020, it was much less around positioning in any way and much more around just the the volumes in the business and things that were going well clients flushed with cash whether that was the other.
The refinancing of our prepaid is coming through our bank's net lending.
So a lot of that strength.
It really more driven by just what was happening in the marketplace, which I think as we look out at it again the crystal ball is how long those conducive market conditions will stay in place. The other thing I would say if we think about the combination with Sandler and what we had.
Hope to see with the two businesses coming together, we're really starting to see synergies we fully integrated those businesses.
And seeing the complementary nature of <unk>, whether it's the strong municipal debt legacy Piper had been.
The installed into banks or a lot of the products strength in corporates and mortgages as well as derivatives loan strategies et cetera being sold into the breadth of.
The legacy type of client base. So those synergies are also driving what we've seen is upside.
Okay terrific.
Alright, and then maybe just one here for Tim to close out on the capital position. So obviously exceed the.
Increase the dividend special so an aggregate $3 10.
And dividends over the course of the year.
But earnings I think ultimately you probably ended up much better than anyone could have imagined.
Six to nine months ago, and so I'd just love to get some thoughts around how you guys are feeling about the.
The excess capital position today.
Following some of these actions.
You are kind of coming out of 2020.
And then just.
Thinking about uses of capital obviously.
Acquisitions of taking up some of.
The capital you're going to continue the investment growth, but just kind of where you are because it would still seem that there is a pretty healthy kind of excess capital standing point at this point.
Yes, the Devin.
You're right, we continue to generate generate excess I think coming into 2020, we had we had certainly deployed.
Lot of that through weeden.
Sandler valence.
We were taking probably a more measured pace and how we were thinking about it we stayed at the lower end of our dividend payout ratio of this year, but it does put us in a good position.
To to be able to deploy across the.
The different levers that we talked about I think our bias continues to be to have capital to deploy in growth opportunities and that sort of at the top of the list. So we want to have the capital there to do that but certainly.
With the amount of cash and capital that we're generating you can see what we did with the the quarterly dividend starting to move that up.
The about where we ended in the the dividend payout range for.
For this year it could be it could be a little bit higher and then still thinking about opportunities to buy stock.
So in a good position want to deploy to to accretive growth opportunities.
It's the number one priority.
Alright.
Terrific I will leave it there and let someone else ask but I appreciate it and good to see the really strong end of the year.
Thanks, David.
And again as a reminder, if you'd like to ask a question. Please press star followed by the number one on your telephone keypad.
Our next question comes from the line of Michael Brown with <unk> W. Go ahead. Please your line is open.
Hey, good morning, Thanks for taking my questions.
Good day.
So I wanted to ask about advisory first.
So.
For the.
Strong fourth quarter result, and I just wanted to parse out the strength in the results there.
So I'd appreciate if you could just share some color about how much was really from the kind of pent up demand from from pre COVID-19.
And then just those deals kind of coming through and closing in the how much was really from the deals that came during the recovery in M&A that began in the summer and fall as we think about.
The maybe the split this quarter and then of course kind of the run rate.
We think about in the early part of 'twenty one year.
Yes, Mike.
That's the good question, we very much looked at that Andrew.
And maybe just first.
We frankly had strong advisory contribution across all of our industry teams.
Financial services was was by far the biggest advisory business in Q4, followed by healthcare.
And then frankly very good.
From our industrials and consumer and energy businesses.
Relative to how much was sort of pre pent up demand I would say, it's probably a little over half was related to deals that sort of restarted were in the queue finished but we definitely got some transactions done debt once things started to improve in August and September.
We got a bunch of stuff done in <unk>.
December so I think it was honestly some of both to drive that Q4 results.
Okay great.
And you've noted that the backlog is strong and so I just was curious if you could characterize that relative to prior periods and obviously with the acquisitions that that makes it a little bit challenging but is it better now than it was going into 2020, I think that was generally a period that was.
Obviously COVID-19.
The curve ball, but with the period that was expected to be very strong.
For the industry. So I'm just curious if.
Current levels are kind of above that period end.
We would also appreciate some comments on the healthcare and things of this vertical specifically and how you think that was of could play out here in 2020 from 'twenty one.
Yes, yes, so I think for us it depends on the it depends on the various industry teams I would say most of our industry teams have backlogs at least as strong as we entered.
2020 and in total for us.
Obviously that means our backlog is.
Stronger than that because we've also added valence in Trs and some new recruits and teams.
When you just parse through.
Particular industry groups, we've got a fantastic backlog in healthcare and feel very good about the M&A, you're we're going to have in health health care. We also have some very good discussions and financial services, what I would say about financial services and M&A backlog is theres just a longer period.
<unk> from announced the close so a lot of that momentum has really picked up in the in the last couple of months. So how much financial services M&A, we get done it depends a lot on how much we get announced in the first half, but generally across the board the back for the backdrop across our industry groups.
And even the stuff we've added like with valence.
Is quite strong so as I said, we're pretty optimistic about the results for advisory this year.
Okay, great and if I could just ask one more on I b here, so the $1 billion.
Sure.
The target that you laid out there I appreciate that that'll day that it certainly helps to have that guidepost out there.
Could you just give me a little bit more color. There is that have a timeframe kind of associated with it or is it obviously it is market dependent so it may not may take time, but.
Just curious how to think about.
Whats the timeframe could be and.
What market backdrop does that does that assume and can incorporate any other inorganic actions or bolt ons. When do you think about that 1 billion or is that meant to be.
The target for kind of of what the existing <unk>.
Piper Sandler platform looks like today.
Yes.
I would say is we've just found sort of in our investment banking organization.
We find a lot of value for sort of setting these goals.
Well when I was first routing banking, we had sort of set this goal for $500 million and it took us a few years when we did the Sandler acquisition. We felt like we had the investment banking platform that in the next two to three years, we could get to.
$750 million banking platform of frankly, it just happened.
A lot quicker than we thought.
And I think with just adding valens to some of the investments, we're making in Europe, adding the restructuring capability with Trs the focuses on.
Productivity.
We feel really good about the $1 billion target and I would say that that's probably a few year out.
The target is the way we think about that.
Could that include.
Some small team lift outs or tuck in acquisitions, yes, but it doesn't it doesn't assume anything sort of major on the corporate development front, we really feel like with our.
What will be throughout this year of $150 million or 150, managing directors. We've got the we've got the banking platform to drive that over the next few years.
Okay, Great I'll leave it there thanks Scott.
Thank you.
Our next question comes from the line of Mike Grondahl of Northland Securities Go ahead. Please your line is open.
Yes, thanks, guys and congratulations on the strong finish of a strong start.
Chad you mentioned, a little bit about how you grew market share.
And is there any vertical debt.
Debt for a couple of verticals debt really stick out where you think you took more share.
And then average.
Yes.
I would say the.
We had a spectacular year in healthcare.
Primarily driven by our ECM business.
We had.
We've had a very strong healthcare franchise for 20 plus years and it's always been led by sort of market, leading M&A I would say within the ECM business. We've also always had a significant business, but just going back five years.
Remind you we made a lot of investments in our biotech franchise building out a much broader research platform building out very specialized sales.
Efforts in healthcare, we added a bunch of senior <unk>.
Bankers and so we absolutely and it was a spectacular market for the fee pool I mean, the fee pool was up significantly last year, but even within that health care fee pool, we grow we grew market share a lot and I think it's the first time, we've been in the top five.
For book running sort of Ipos and follow ons in that entire healthcare market. So that's probably the one I would highlight for the most significant.
The industry vertical market share gains.
Any others the stick out over the course of the year in the fourth quarter.
Yes, I mean like I said, we had a strong fourth quarter and a lot of our verticals. We did frankly, the vast majority of our industrials business and M&A in Q4, So we feel good about where we're headed there, but obviously that was after a very slow Q2 Q3.
Financial services as I said was our number one advisory business in.
In Q4 really good combination of some larger deals closing and we just did a significant amount of capital advisory business in Q4, and so if I was to point to.
The other really high market share great business.
Our financial services team does a majority of the transactions for community Bank.
<unk> in in debt capital, raising whether thats underwritten debt private placement debt. However, you want to look at it we did a lot of volume in Q4 and have very high market share.
Got it and then.
Non comp expenses were basically flat <unk> to <unk>.
And obviously the revenue was up 100 million. So so great leverage there how do we think about those going forward.
At this new revenue plateau would you need to invest in.
In the non comp area mature.
How do we think about that as we go into 2021.
Yes, Mike.
I wouldn't say there is there.
A lot of the investment that has to be done it at these levels I mean, we obviously think that the.
Non comps are going to.
The gradually increase over over this year.
We just got obviously a lot of leverage on travel related expenses given given COVID-19.
And expect that we'll see those start to move.
Net of reimbursed deal $45 million.
We've said sort of this range of 48 to 50 on a quarterly basis for for 2021.
Early on I think it's certainly at the lower end of the range and as the year goes we expect assuming.
Vaccines rollout and things start to continue to get better that we trend up towards the towards more of the top end of that of that range.
But.
The side of that I don't see a lot of a lot of other changed from an outcome. So we can drive leverage from that.
Got it yes, sure Didnt for Q.
And then maybe lastly, Chad.
One or two top priorities for you just headed into 2021.
Yes, I think the.
The biggest priority while we're while we're pleased that we had a good rebound.
In advisory we still think there is.
Big opportunity for us.
Our average fee size as markets got difficult sort of all through the summer and in certain industry verticals.
It was hard to grow average fees when.
Deals get difficult, we think theres, a big opportunity to continue to grow our average deal size of M&A continue to grow our average fee size continue to drive productivity and then the big priority is making sure.
Across private equity, we've built a really nice investment banking platform across a lot of industries, we want to get that sort of full leverage from the private equity community.
In addition to making sure we capture all of the opportunity with valence in the chemical space, which we added last year and we're really excited about the early start we have with Trs as as you know we haven't been a a.
A big player in the restructuring market in the past and that's a big opportunity for us.
Great to hear thanks, a lot guys.
Thanks, Mike.
And there are no further questions in queue at this time I'd like to turn the call back over to Mr. Abraham for some closing remarks.
Okay. Thank you operator, let me close by again thanking all my employee partners for their hard work and dedication to our clients.
We look forward to maintaining our strong momentum here in 2021.
Everyone and have a great day.
Sure.
Ladies and gentlemen, this does conclude today's conference call you may now disconnect.
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Net.
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Yeah.