Q4 2021 Piper Sandler Companies Earnings Call

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Okay.

Speaker 1: Good morning, and welcome to the Piper Standard Company's conference call to discuss the financial results for the fourth quarter and the full year of 2021. During the question and answer session, security industry professionals may ask questions of management. The company has asked that I remind you that the statements on this call that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements that involve inherent risk and uncertainties. A factor that would cause actual results.

Good morning, and welcome to the Piper Sandler companies conference call to discuss the financial results for the fourth quarter and the full year Austin in 'twenty one.

During the question and answer session security industry professionals may ask questions of management.

The company has asked that I remind you that our 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 are identified in the company's earnings release and on and reports on file with the SEC, which are available on the company's website at Www Dot Piper Sandler Dot com and on the SEC website at Www Dot.

E C dock off.

This call will also include statements regarding certain non-GAAP financial measures.

non-GAAP measures should be considered in addition to and not a substitute for a measure of financial performance prepared in accordance with GAAP.

Please refer to the company's earnings release issued today for reconciliation of these non-GAAP financial measure to the most direct comparable GAAP measure.

The earnings release, it's available on the Investor Relations page of the company's website and at the SEC website.

As a reminder, this call these being recorded.

And now I would like to turn the call over to Mr. Chad Abraham missed.

Speaker 2: Have you mean.

Mr. Abraham you may begin your call.

Speaker 3: Thank you. Good morning everyone. I am here with Deb Schoeneman, our president, and Tim Carter, our CFO .

Thank you good morning, everyone I'm here with Deb, Schoneman, our president and Tim Carter our CFO .

Speaker 3: We will go through our prepared remarks and then open up the call for questions.

We will go through our prepared remarks, and then open up the call for questions.

Piper Sandler delivered a record quarter and another record year of revenues and earnings during 2021.

Speaker 3: Piper Sandler delivered a record quarter and another record year of revenues and earnings during 2021.

Speaker 3: We entered the year with strong momentum as the global economy began to reopen.

We entered the year with strong momentum as the global economy began to reopen.

Speaker 3: We grew our business over 60% in 2021, and performance was strong across each of our business lines, including exceptional growth in some of our recently acquired business.

We grew our business over 60% in 2021 and performance was strong across each of our business lines, including exceptional growth in some of our recently acquired businesses.

Speaker 3: Clearly the firm's performance exceeded the expectations we had for 2021, and I'd like to thank my employee partners for their continued hard work and dedication.

Clearly the firm's performance exceeded the expectations, we had for 2021 and I'd like to thank my employee partners for their continued hard work and dedication.

Speaker 3: During the fourth quarter, the firm generated $634 million of adjusted net revenues, 29% higher than our previous

During the fourth quarter, the firm generated $634 million of adjusted net revenues.

99% higher than our previous quarterly record.

Operating margin was 37% and adjusted EPS for the quarter was $7 84.

Speaker 3: Operating margin was 30.7% and adjusted EPS for the quarter was $7.84.

Also quarterly records.

Speaker 3: On a full year basis, the firm generated $2 billion of adjusted net revenue.

On a full year basis, the firm generated $2 billion of adjusted net revenues.

Speaker 3: 27.8% operating margin and adjusted EPS of $21.92. Again, all records.

27, 8% operating margin and.

And adjusted EPS of $21 92.

Again all records.

Speaker 3: I'd like to review a few of the highlights from 2021.

I'd like to review a few of the highlights from 2021.

Speaker 3: First, we generated nearly $1.4 billion in corporate investment banking revenue.

First we generated nearly $1 4 billion in corporate investment banking revenues.

Speaker 3: significantly exceeding the long-term target of $1 billion we set last year.

Significantly exceeding the long term target of $1 billion, we set last year.

Speaker 3: We generated advisory revenues of over $1 billion, driven by record levels of activity, strong execution, and market share gains.

We generated advisory revenues of over $1 billion.

Driven by record levels of activity strong execution and market share gains.

Speaker 3: We underwrote a record number of financings, raising $106 billion for our corporate clients.

We underwrote a record number of financings raising 106 billion for our corporate clients.

Speaker 3: We finish the year strong in public finance with record fourth quarter and full year revenues and the highest economic market share in our history.

We finished the year strong and public finance with record fourth quarter and full year revenues and the highest economic market share in our history.

Speaker 3: We generated record institutional brokerage results and grew revenues despite lower volatility in volumes in the market compared to last year.

We generated record institutional brokerage results and grew revenues despite lower volatility in volumes in the market compared to last year.

Speaker 3: We strengthened diversity of our board and hired a director of diversity and inclusion to further advance our strategic priority of becoming a more diverse and inclusive firm.

We strengthened diversity of our board and hired a director of diversity and inclusion to further advance our strategic priority of becoming a more diverse and inclusive firm.

Speaker 3: We successfully added talent across the firm, growing our headcount on an organic basis by 9% from 2020.

We successfully added talent across the firm growing our head count on an organic basis by 9% from 2020.

Speaker 3: And last, we grew Investment Banking Managing Director headcount on a net basis for the ninth consecutive quarter finishing the year with 148 MDs up 7% over last year.

And last we grew investment banking managing director head count on a net basis for the ninth consecutive quarter, finishing the year with 148, Mds up 7% over last year.

Speaker 3: As I reflect on the transformation in our business over the last two years, we have significantly increased the sustainable earnings power of our platform.

As I reflect on the transformation in our business over the last two years, we have significantly increased the sustainable earnings power of our platform.

Speaker 3: During the last two years, the firm more than doubled its revenues.

During the last two years the firm more than doubled its revenues.

Speaker 3: We've grown our investment banking MD headcount by 80% creating a platform that is significantly larger and more diversified.

We've grown our investment banking MD head count by 80%, creating a platform that is significantly larger and more diversified.

Speaker 3: We've more than doubled the size of our brokerage businesses with a considerably broader client base and product capability.

We more than doubled the size of our brokerage businesses with a considerably broader client base and product capabilities.

Speaker 3: we generated significantly higher operating margins, profitability, and cash flow from ourere

We generated significantly higher operating margins profitability.

And cash flow from our enhanced scale.

Speaker 3: And we've grown our total firm headcount by 33% and exceeded $1 million in revenue per employee and 80% increase in productivity.

And we've grown our total firm head count by 33% and exceeded $1 million in revenue per employee and 80% increase in productivity.

Speaker 3: Beyond the record performance over the last two years, we continue to execute on a number of strategic initiatives to drive growth during 2022 and beyond.

Beyond the record performance over the last two years, we continue to execute on a number of strategic initiatives to drive growth during 2022 and beyond.

Speaker 3: We added Cornerstone Macro, an independent research firm that offers best in class macro research and equity derivatives trading.

We added cornerstone macro and independent research firm that offers best in class macro research and equity derivatives trading.

Speaker 3: We strengthened our advisory business with the announced acquisition of Stanford Partners, a highly complementary specialist M&A boutique focused on European food and beverage companies.

We strengthened our advisory business with the announced acquisition of Stanford partners are highly complementary specialist M&A boutique focused on European food and beverage companies.

Speaker 3: We remain focused on filling white spaces within investment banking, including technology, healthcare services, renewable energy, and further European expansion.

We remain focused on filling white spaces within investment banking, including technology healthcare services renewable energy and further European expansion.

Speaker 3: We continue to drive market share growth in our institutional brokerage businesses by taking advantage of our expanded product depth to identify synergies.

We continue to drive market share growth in our institutional brokerage businesses by taking advantage of our expanded product depth to identify synergies.

Speaker 3: and we continue to strengthen our public finance specialty sector.

And we continued strengths strengthen our public finance specialty sectors.

Speaker 3: Our success, culture, and momentum resonate in the marketplace, and we remain a destination of choice for top-tier talent.

Our success culture and momentum resonate in the marketplace and we remain a destination of choice for top tier talent.

Turning to our corporate investment banking business.

Speaker 3: We generated total corporate investment banking revenues of $476 million for the fourth quarter of 2021, up 62% sequentially and 85% from the fourth quarter of last year.

We generated total corporate investment banking revenues of $476 million for the fourth quarter of 2021.

Up 62% sequentially and 85% from the fourth quarter of last year.

Speaker 3: Revenues of $1.4 billion for 2021 were up 88% from 2020, driven by tremendous performance.

Revenues of $1 4 billion for 2021 were up 88% from 2020.

Driven by tremendous performance across our platform.

Speaker 3: Sector performance was broad-based with financial services, health care, diversified industrials and services, consumer, chemicals, and technology all registering record years.

Sector performance was broad based with financial services healthcare diversified industrials and services consumer chemicals and technology, all registering record years.

During 2021, M&A and restructuring activity generated 60% of revenues.

Equity financings contributed 24%.

Speaker 3: and debt advisory and underwriting engagements produce 16% of total corporate investment banking.

And debt advisory and underwriting engagements produced 16% of total corporate investment banking revenues.

Speaker 3: Specific to advisory services, we generated $410 million of revenues during the fourth quarter, up 65% from our previous quarterly record in the second quarter of 2021.

Specific to advisory services, we generated $410 million of revenues during the fourth quarter up 65% from our previous quarterly record in the second quarter of 2021.

Speaker 3: For the year, we generated over $1 billion of advisory revenues for the first time in our history, driven by strong absolute and relative performance.

For the year, we generated over $1 billion of advisory revenues for the first time in our history.

<unk> by strong absolute and relative performance for.

Speaker 3: For context, global completed M&A volumes in the market increased more than 40% compared to last year.

For context global completed M&A volumes in the market increased more than 40% compared to last year.

Speaker 3: Our advisory deal count was up 54% with our advisory revenues increasing 131%.

Our advisory deal Count was up 54% with our advisory revenues increasing 131%.

Speaker 3: With a core focus on taking longer strides rather than taking more, the trend of advising on larger transactions and generating larger average fees continues to be a key driver to our advisory growth.

With a core focus on taking longer strides rather than taking more the trend of advising on larger transactions and generating larger average fees continues to be a key driver to our advisory growth.

Speaker 3: During 2021, we closed or announced 285 deals with over $109 billion in aggregate transaction value.

During 2021, we closed or announced 285 deals with over $109 billion in aggregate transaction value.

Speaker 3: including 26 deals over $1 billion in value.

Including 2006 deals over $1 billion in value.

Speaker 3: Our advisory work with private equity firms continues to be market leading and a growth driver for us.

Our advisory work with private equity firms continues to be market, leading and a growth driver for us.

Speaker 3: During 2021, our sponsor-driven revenues were up 300% compared to 2020.

During 2021 are sponsor driven revenues were up 300% compared to 2020.

Speaker 3: PE clients and portfolio companies generated 50% of our overall advisory revenues during 2021.

<unk> clients and portfolio companies generated 50% of our overall advisory revenues during 2021.

Speaker 3: and were clients or counterparties on roughly two-thirds of our advisory revenue.

And where clients or counterparties on roughly two thirds of our advisory revenues.

Speaker 3: During the year, we were engaged 220 times by over 160 PE firms, highlighting the scale of our PE business and the increased relevance of our platform to a broader universe of financials.

During the year, we were engaged 220 times by over 160, P/e firms highlighting the scale of our business and the increased relevance of our platform to a broader universe of financial sponsors.

Speaker 3: We expect PE activity will continue to be a driver of secular growth in the M&A mark.

We expect pay activity will continue to be a driver of secular growth in the M&A market.

Speaker 3: Private equity firms continue to engage in high levels of deal activity to deploy record amounts of capital.

Private equity firms continue to engage in high levels of deal activity to deploy record amounts of capital.

Speaker 3: We've witnessed portfolio company exit multiples, rival public company valuations, contributing to a decrease in hold periods and more deal velocity.

We've witnessed portfolio company exit multiples rival public company valuations contributing to a decrease in hold periods and more deal velocity.

Speaker 3: with one of the largest middle market PE advisory businesses on the street.

With one of the largest middle market advisory businesses on the Street.

Speaker 3: Our M&A and Capital Advisory businesses are well positioned to benefit from the secular growth in PED elective.

Our M&A and capital advisory businesses are well positioned to benefit from the secular growth in pay deal activity.

Speaker 3: Looking forward, we expect M&A activity to remain strong in 2022.

Looking forward, we expect M&A activity to remain strong in 2022.

Speaker 3: We do anticipate advisory revenues to decline meaningfully during the first half of 2022 relative to the second half of 2021, given the high close rate on our fourth quarter pipeline and typical seasonality.

We do anticipate advisory revenues to decline meaningfully during the first half of 2022 relative to the second half of 2021, given the high close rate on our fourth quarter pipeline and typical seasonality.

Speaker 3: However, we expect economic growth, CEO confidence, and capital availability to continue to support a high level of deal activity.

However, we expect economic growth CEO confidence and capital availability to continue to support a high level of deal activity.

Speaker 3: As a result, if market conditions remain supportive, we believe our first half of 2022 advisory revenues will be at similar levels to the first half of 2021.

As a result, if market conditions remain supportive we believe our first half 2022 advisory revenues will be at similar levels to the first half of 2021.

Speaker 3: Turning to corporate financing, issuance volumes moderated during the fourth quarter, but remained solid as we generated $65 million of revenue.

Turning to corporate financing issuance volumes moderated during the fourth quarter, but remained solid as we generated $65 million of revenues.

Speaker 3: For the full year, we had a record $363 million of revenues, up 23% from 2020's record results.

For the full year, we had a record $363 million of revenues up 23% from 2000 Twenty's record results.

Speaker 3: Investor demand and healthy valuations combined with relatively stable rising markets drove record-setting equity issuance volumes in 2021.

Investor demand and healthy valuations combined with relatively stable rising markets drove record setting equity issuance volumes in 2021.

Speaker 3: The U.S. equity issuance fee pool surpassed $20 billion for the first time and was more than double the last 10-year average.

The U S equity issuance fee pool surpassed $20 billion for the first time and was more than double the last 10 year average.

Speaker 3: Against this favorable backdrop, we completed 214 equity financings during 2021, raising $90 billion of capital with notable contributions from our health care, financial services, technology, and consumer realism.

Against this favorable backdrop, we completed 214 equity financings during 2021, raising $90 billion of capital with notable contributions from our healthcare financial services technology and consumer teams.

Speaker 3: For the second consecutive year, our health care team had a standout year in corporate finance.

For the second consecutive year, our healthcare team had a standout year and corporate financings. The team completed 97 transactions of which 92 were book run raising over $20 billion in capital for our clients.

Speaker 3: The team completed 97 transactions, of which 92 were book run, raising over $20 billion in capital for our clients.

Speaker 3: We rank as a top three investment bank based on number of book run IPOs and follow-ons for healthcare companies with less than $5 billion of market...

We ranked as a top three investment bank based on number of book run Ipos and follow ons for health care companies with less than $5 billion of market cap.

Speaker 3: Innovation, investor demand, and significant capital requirements have led health care companies to raise record amounts of money.

Innovation Investor demand and significant capital requirements have led health care companies to raise record amounts of money.

Speaker 3: We believe there is a structural change in the size of the health care financing market that will support higher levels of activity relative to historical average.

We believe there is a structural change in the size of the health care financing market that will support higher levels of activity relative to historical averages.

Speaker 3: The beef pool for sub-5 billion dollar market cap companies in healthcare has consistently grown over the last decade, finishing 2021 at 3.6 billion, nearly double the last 10-year average.

The fee pool for sub $5 billion market cap companies in healthcare has consistently grown over the last decade, finishing 2021 at $3 6 billion nearly double the last 10 year average.

Speaker 3: The strength of our market leading health care team should benefit us on this long-term secular growth trend.

The strength of our market, leading health care team should benefit us on this long term secular growth trend.

Speaker 3: Another key driver of our growth in 2021 was our performance in the technology and consumer sectors where we priced 84 equity finance.

Another key driver of our growth in 2021 was our performance in the technology and consumer sectors, where we priced 84 equity financings.

Speaker 3: of which 37 were book runs, raising $58 billion in capital for clients.

Of which 37 were book run raising 58 billion in capital for clients.

Speaker 3: Our financial services group was also very active in the capital markets during the year. The team completed 53 debt and preferred stock offerings, raising $16 billion of capital for banks and other financial services companies. Our portfolio of clients... Our marketing infrastructure keeps driving our business as we know why.

Our financial services Group was also very active in the capital markets. During the year. The team completed 53 debt and preferred stock offerings, raising $16 billion of capital for banks and other financial services companies.

Our portfolio of clients was more diverse than last year.

Speaker 3: In addition to our established presence in depositories, we leveraged our market leadership and differentiated distribution to assist several non-bank clients to raise capital during 2021.

In addition to our established presence in Depositaries, we leveraged our market leadership and differentiated distribution to assist several non bank clients to raise capital during 2021.

Speaker 3: That said, we expect the 2022 issuance market to decline substantially from the record levels of the last two years.

That said, we expect the 2022 issuance market to decline substantially from the record levels of the last two years.

Speaker 3: Turning to Investment Banking Managing Director Headcount, we finish the year at 148 Managing Directors, up 10 as we bolster capabilities across the platform.

Turning to investment banking managing director head Count we finished the year at 148, managing directors up Ted as we bolster capabilities across the platform.

Speaker 3: We added TRS advisors to significantly strengthen our restructuring practices.

We added Trs advisors, just a significantly strengthened our restructuring practice.

Speaker 3: We built our European healthcare team adding coverage in healthcare and pharma service.

We built our European healthcare team, adding coverage and healthcare and pharma services.

Speaker 3: We added MDs to our energy and power franchise in renewables and clean energy and energy service.

We added <unk> to our energy and power franchise in renewables and clean energy and energy services.

Speaker 3: We added capabilities to our technology platform in industrial software and internet technology.

We added capabilities to our technology platform and industrial software and Internet technology.

Broadened our diversified industrials and services coverage by adding talent in automotive automotive aftermarket we.

Speaker 3: broadened our diversified industrials and services coverage by adding talent in automotive aftermarket.

Speaker 3: We added expertise to our consumer team in the retail and direct-to-consumer.

We added expertise to our consumer team in the retail and direct to consumer space.

Speaker 3: and continue to grow our sponsor business with the addition of a senior officer to cover European PE firms.

And continue to grow our sponsor business with the addition of a senior officer to cover European PE firms.

Speaker 3: Over the past decade, we have executed on our strategic vision and delivered strong growth in shareholder returns.

Over the past decade, we have executed on our strategic vision and delivered strong growth and shareholder returns.

Speaker 3: We have built a diverse platform with significant scale, margin, and cash flow.

We have built a diverse platform with significant scale margin and cash flow.

Speaker 3: In 2015, our investment banking business was dependent on four industry sectors.

In 2015, our investment banking business was dependent on four industry sectors health care consumer diversified industrials and services and technology.

Speaker 3: healthcare, consumer, diversified industrial and services, and technology.

Speaker 3: Since then, we have expanded from four to seven industry verticals, grown the number of managing directors from 65 to 148, and more than quadrupled revenues. Our investment banking business now...

Since then we've expanded from four to seven industry verticals growing the number of managing directors from 65 to 148 and more than quadrupled revenues.

Our investment banking business now covers most of the economy.

Speaker 3: We are more relevant, provide more deal flow, and offer more product capabilities to a larger, more diverse client base.

We are more relevant provide more deal flow and offer more product capabilities to a larger more diverse client base.

Speaker 3: This added breadth to our business has resulted in more stability.

This added breadth to our business has resulted in more stability.

Speaker 3: The enhanced scale and capabilities of our investment banking platform also provide meaningful opportunity for growth.

The enhanced scale and capabilities of our investment banking platform also provide meaningful opportunity for growth.

Speaker 3: I'd like to close my comments by sharing a new firm long-term target.

I'd like to close my comments by sharing a new firm long term target.

Speaker 3: Looking ahead to the next five years, we see a path to grow annual corporate investment banking revenues to $2 billion.

Looking ahead to the next five years, we see a path to grow annual corporate investment banking revenues to $2 billion.

Speaker 3: With that, I will turn the call over to Deb to discuss our public finance and brokerage.

With that 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.

Speaker 4: Thanks Chad. Let me begin with an update on our Equity Brokerage business.

Speaker 4: Equity markets in the fourth quarter saw elevated volatility and volumes, driving equity brokerage revenues of $42 million for the quarter, up 23% sequentially and 6% from the prior year.

Equity markets in the fourth quarter elevated volatility and volumes driving equity brokerage revenues of $42 million for the quarter up 23% sequentially and 6% from the prior year.

Speaker 4: For the full year, equity brokerage generated revenues of $154 million, down 5% from the strong prior year, which benefited from extreme pandemic-related volatility in volumes early in the year.

For the full year equity brokerage generated revenues of $154 million down 5% from the strong prior year, which benefited from extreme pandemic related volatility and volumes early in the year.

Speaker 4: In addition to our trading capabilities, the quality of our research and specialized equity sales force are key differentiators for us in supporting our record equity financing activity.

In addition to our trading capabilities the quality of our research and specialized equity Salesforce are key differentiators for us in supporting a record equity financing activity.

Speaker 4: For context, we are ranked number one based on the number of both small cap and mid cap companies under coverage. And in total, we have over 1,000 stocks under cover.

For context, we are ranked number one based on the number of small cap and mid cap companies under Capex and in total we have over 1000 stocks under coverage.

Speaker 4: Our equity sales force helped distribute the 214 equity underwriting deals, of which 141 were book run, totaling $90 billion in value.

Our equity sales force helped distribute the 214 equity underwriting deals of which 141 were book run totaling $90 billion in value.

Speaker 4: As we look forward to 2022, we're excited to have the Cornerstone Macro Research Team on our platform. The acquisition closed on February 4th.

As we look forward to 2022, we're excited to have the cornerstone macro research team on our platform. The acquisition closed on February 4th.

Speaker 4: We believe the high quality macro, thematic, and quantitative research product will be complementary to our company specific research and offer a wide range of cross selling opportunities.

We believe the high quality macro thematic and quantitative research product will be complementary to our company specific research and after a wide range of cross selling opportunities.

Speaker 4: Additionally, we believe there are opportunities for market share gains as we integrate Cornerstone and continue demonstrating the full capabilities of our platform and the buy side continues to consolidate towards high quality firms with scale.

Additionally, we believe there are opportunities for market share gains as we integrate cornerstone and continued demonstrating the full capabilities of our platform and the buy side continues to consolidate towards high quality firms with scale.

Speaker 4: After the full integration of Cornerstone, we believe we will have an equity brokerage platform that can generate close to $200 million in annual revenues.

After the full integration of cornerstone. We believe we will have an equity brokerage platform that can generate close to $200 million in annual revenues.

Turning to municipal financing.

Speaker 4: Our public finance business finished the year extremely strong with $59 million of financing revenues for the fourth quarter of 2021, up 39% from a strong third quarter and 47% from the fourth quarter of last year.

Our public finance business finished the year extremely strong with $59 million of financing revenues for the fourth quarter of 2021 up 39% from a strong third quarter and 47% from the fourth quarter of last year.

Speaker 4: As we highlighted last quarter, we have been building our high-yield specialty sector client base, which drove our record-setting performance during the quarter.

As we highlighted last quarter, we have been building our high yield specialty sector client base, which drove our record setting performance during the quarter.

Speaker 4: Demand for higher yielding municipal securities was robust. And through strong execution, we assisted specialty sector clients to construct new housing, build senior living facilities, construct charter schools, and improve transportation, among other things.

Demand for higher yielding municipal securities was robust and through strong execution, we assisted specialty sector clients to construct new housing those senior living facilities construct charter schools and improve transportation among other thing.

Speaker 4: Municipal issuance in the governmental space remained healthy as clients took advantage of low rates.

Municipal issuance in the governmental space remains healthy as clients took advantage of low rates.

Speaker 4: For the full year of 2021, we generated $164 million of municipal financing revenues, a firm record, and up 37% from last year.

For the full year of 2021, we generated $164 million of municipal financing revenues.

Firm record and up 37% from last year.

Speaker 4: We underwrote 933 municipal negotiated transactions, raising over $18 billion of par value for our clients.

We underwrote 933 municipal negotiated transactions raising over $18 billion of par value for our clients.

Speaker 4: Municipal issuance for the total market during 2021 was $475 billion, driven by low interest rates and strong investor appetite for municipal bonds, and nearly reached the 2020 record of $485 billion.

Municipal issuance for the total market during 2021 with 475 billion driven by low interest rates and strong investor appetite for municipal bonds and nearly reached the 2020 record at 485 billion.

Speaker 4: with our revenues up 37% year over year, relative to a market that was essentially flat, we have significantly grown our economic market.

With our revenues up 37% year over year relative to a market that was essentially flat we have significantly grown our economic market share.

Speaker 4: We have built one of the largest public finance franchises on the street, ranking number eight based on power value and number two based on the number of deals in the municipal negotiated market.

We have built one of the largest public finance franchises on the street ranking number eight based on par value and number two based on a number of deals and the municipal negotiated market.

Speaker 4: The strength of our franchise resonates externally, and we are a premier destination for talent and seek continued opportunity to extend our geographic reach in both our governmental business as well as specialty sector coverage.

The strength of our franchise resonates externally and we are a premier destination for talent and see continued opportunity to extend our geographic reach in both our governmental business as well as specialty sector coverage.

Speaker 4: With the investments we've made expanding our specialty sectors combined with our historically strong governmental business, we believe we are on the path to building a $200 million public finance franchise over the next several years.

With the investments we've made expanding our specialty sectors combined with our historically strong governmental business. We believe we are on the path to building a $200 million public finance franchise over the next several years.

As we look ahead to 2022, we expect a continuation of the trend experienced in 2021.

Speaker 4: As we look ahead to 2022, we expect a continuation of the trend experienced in 2021.

Speaker 4: Absent a dramatic turn in economic conditions, we expect overall market issuance levels to be consistent with the last two years as new money continues increasing and refunding opportunities are declining.

Absent a dramatic turn in economic conditions, we expect overall market issuance levels to be consistent with the last two years as new money continues increasing and refunding opportunities are declining.

Lastly, turning to our fixed income business.

Speaker 4: For the fourth quarter, we generated fixed income revenues of $50 million, down 10% on a sequential basis, and 5% compared to the fourth quarter of last year.

For the first quarter, we generated fixed income revenues of $50 million down, 10% on a sequential basis and 5% compared to the fourth quarter of last year.

Speaker 4: Client activity was a bit more muted during the fourth quarter as clients were more cautious as they digested the changing interest rate outlook and uncertain governmental fiscal policy.

Client activity was a bit more muted during the fourth quarter as clients are more cautious as they digested the changing interest rate outlook and uncertain governmental fiscal policies.

Speaker 4: Despite some softness in the market, our performance has been solid, with the fourth quarter of 2021 representing the sixth consecutive quarter with over $50 million in revenues, highlighting the breadth and scale of our platform.

Despite some softness in the market our performance has been solid with the fourth quarter of 2021, representing the sixth consecutive quarter with over $50 million in revenue highlighting the breadth and scale of our platform.

Speaker 4: For the full year of 2021, we produced $234 million of revenues, a firm record, and up 19% from last year.

For the full year of 2021, we produced $234 million of revenue a firm record and up 19% from last year.

Speaker 4: In 2021, we saw a surge in client volumes during the first quarter resulting from rising interest rates, followed by gradually decreasing client activity as yields flattened, and then an uptick in activity late in the fourth quarter as clients began positioning for higher rates.

In 2021, we saw a surge in client volumes during the first quarter, resulting from rising interest rates followed by gradually decreasing claims activity as yields flatten and then an uptick in activity late in the fourth quarter as clients began positioning for higher rates.

Speaker 4: Activity during the year was strongest within our financial institution client base as they put excess liquidity to work in mortgage backed securities and loan products.

Activity during the year was strongest within our financial institution client base as they put excess liquidity to work and mortgage backed securities and loan products.

Speaker 4: Our deep expertise in banks has enabled us to advise clients on repositioning their balance sheets and investing in a changing rate environment.

Our deep expertise in banks has enabled us to advise clients and repositioning their balance sheets and investing in a changing rate environment.

Speaker 4: Our trading, underwriting, and distribution is a key differentiator for us within fixed income. And our sales force was very active during 2021, distributing over 1,000 new issue deals in both public finance and debt capital markets, raising over $40 billion for clients.

Our trading underwriting and distribution is a key differentiator for us within fixed income and our sales force was very active during 2021 distributing over 1000, new issue deals in both public finance and debt capital markets raising over 40 billion for clients.

Speaker 4: We continue to invest in our platform and have made several targeted sales and trading hires in 2021 that will increase the depth in both product and client vertical knowledge and specialization.

We continue to invest in our platform and have made several targeted sales and trading hires in 2021 that will increase the depth in both product and client vertical knowledge and specialization.

Speaker 4: From an outlook perspective, in 2022, we expect to repeat the strong performance of the last two years as we assist clients in navigating a changing interest rate environment. In the near term, we've seen client volumes increase in reaction to rising interest rates.

From an outlook perspective in 2022, we expect to repeat the strong performance of the last two years as we assist clients in navigating a changing interest rate environment in.

In the near term, we've seen client volumes increase in reaction to rising interest rates inflation and changes in federal reserve interest rate posturing has increased uncertainty with rates, which may injected bit more volatility in revenue generation as clients react to an ever changing rate environment.

Speaker 4: Inflation and changes in Federal Reserve interest rate posturing has increased uncertainty with rates, which may inject a bit more volatility in revenue generation as clients react to an ever-changing rate environment.

Speaker 4: Now I will turn the call over to Tim to review our financial results and provide an update on capital use.

Now I will turn the call over to Tim to review, our financial results and provide an update on capital use.

Thanks Deb.

Speaker 5: As a reminder, my comments will be focused on our adjusted non-GAAP financial results.

As a reminder, my comments will be focused on our adjusted non-GAAP financial results.

Speaker 5: We generated net revenues of $634 million for the fourth quarter of 2021, an increase of 44% from the third quarter and 59% from the fourth quarter of last year. As Chad noted, the exceptional finish to the year was driven by record activity from advisory services and municipal financing, as well as solid activity from corporate financing and both brokerage businesses.

We generated net revenues of $634 million for the fourth quarter of 2021, an increase of 44% from the third quarter and 59% from the fourth quarter of last year as.

As Chad noted the exceptional finish to the year was driven by record activity from advisory services and municipal financing as well as solid activity from corporate financing in both brokerage businesses.

Speaker 5: Net revenues for 2021 totaled $2 billion, an increase of 60% over the prior year. Performance was broad-based with corporate investment banking, municipal financing, and fixed income all generating record revenues, and equity brokerage registering its second-strongest year on record.

Net revenues for 2021 totaled $2 billion, an increase of 60% over the prior year.

Performance was broad based with corporate investment banking municipal financing and fixed income all generating record revenues and equity brokerage registering its second strongest year on record.

Speaker 5: The investments we have made to transform our business by adding scale and diversification have elevated our platform on a sustained basis.

The investments we have made to transform our business by adding scale and diversification have elevated our platform on a sustained basis.

Speaker 5: This, combined with strong demand for our services, drove the strongest four quarters on record during 2021.

This combined with strong demand for our services drove the strongest for quarters on record during 2021.

Speaker 5: Turning to operating expenses and margin. Our compensation ratio was 58.4% for the fourth quarter of 2021, down from 60.2% for the third quarter of this year, resulting from our strong performance to finish the year.

Turning to operating expenses and margin our compensation ratio was 58, 4% for the fourth quarter of 2021 down from 62% for the third quarter of this year, resulting from our strong performance to finish the year.

Speaker 5: For the year, our compensation ratio was 60%, reflecting the leverage in our business at these robust revenue levels.

For the year, our compensation ratio was 60%, reflecting the leverage in our business at these robust revenue levels.

Speaker 5: Our philosophy to managing compensation levels continues to be a balance of business performance, revenue mix, investment considerations, and employee retention.

Our philosophy to managing compensation levels continues to be a balance of business performance revenue mix investment considerations and employee retention.

Speaker 5: Looking ahead to 2022, we expect our compensation ratio to be near 62% on a four-year basis as we remain focused on investing for growth.

Looking ahead to 2022, we expect our compensation ratio to be near 62% on a full year basis as we remain focused on investing for growth.

Speaker 5: Non-compensation expenses, excluding reimbursed deal expenses, were $58 million for the fourth quarter of 2021, up 20% compared to the third quarter.

Non compensation expenses, excluding reimburse deal expenses were $58 million for the fourth quarter of 2021 up 20% compared to the third quarter the.

Speaker 5: The increase was driven by higher travel costs, increased legal and professional fees associated with business expansion, as well as variable costs related to higher revenues and profitability.

The increase was driven by higher travel costs increased legal and professional fees associated with business expansion as well as variable costs related to higher revenues and profitability.

Speaker 5: On a full year basis, excluding deal expenses, non-compensation costs totaled $199 million, an increase of 9% over 2020.

On a full year basis, excluding deal expenses non compensation costs totaled $199 million, an increase of 9% over 2020.

Speaker 5: This compares to a 60% increase in revenues year over year, demonstrating the significant leverage in our business.

This compares to a 60% increase in revenues year over year, demonstrating the significant leverage in our business.

We continue to be disciplined in managing costs, while adapting to the environment and market conditions.

Speaker 5: We continue to be disciplined in managing costs while adapting to the environment and market conditions.

Speaker 5: In 2022, we expect higher non-compensation expenses, stemming from increased travel, business and office expansion, and the additions of cornerstone and stamp.

In 2022, we expect higher non compensation expenses stemming from increased travel business and office expansion and the additions of cornerstone and Stanford.

Speaker 5: Given these factors, we expect our non-compensation costs, excluding deal expenses, to range from $55 to $57 million per quarter.

Given these factors, we expect our non compensation costs, excluding deal expenses to range from $55 to $57 million per quarter.

Speaker 5: For the fourth quarter of 2021, we generated operating income of $195 million and an operating margin of 30.7%, both quarterly records.

For the fourth quarter of 2021, we generated operating income of $195 million and an operating margin of 37% both quarterly records.

Speaker 5: For 2021, we generated operating income of $550 million, an increase of 120% over the prior year.

For 2021, we generated operating income of $550 million, an increase of 120% over the prior year.

Speaker 5: Our margin for the year was 27.8%, a meaningful expansion from 20.3% in 2020.

Our margin for the year was 27, 8% a meaningful expansion from 23% in 2020.

Speaker 5: The increased scale of our platform is expanding our margins and increasing the profitability of our platform.

The increased scale of our platform is expanding our margins and increasing the profitability of our platform.

Speaker 5: For some additional context, during the period 2018 and 2019, our margin averaged 16%, and during 2020 and 2021, our margin averaged 24%.

For some additional context during the period 2018 in 2019, our margin averaged 16% and during 2020 in 2021, our margin averaged 24%.

Speaker 5: Our adjusted tax rate for the fourth quarter and full year of 2021 was 26.3%.

Our adjusted tax rate for the fourth quarter and full year of 2021 was 26, 3%.

Speaker 5: Looking forward, we continue to expect our full year adjusted tax rate will be within our targeted range of 26 to 28 percent, excluding any tax impact from stock vessels.

Looking forward, we continue to expect our full year adjusted tax rate will be within our targeted range of 26% to 28%, excluding any tax impact from stock vesting.

Turning to earnings for the fourth quarter of 2021, we generated record net income of 142 million and diluted EPS of $7 84.

Speaker 5: Turning to earnings, for the fourth quarter of 2021, we generated record net income of $142 million and diluted EPS of $7.84.

Speaker 5: For the year, net income totaled $399 million and diluted EPS was $21.92.

For the year net income totaled 399 million and diluted EPS was $21 92.

Speaker 5: Compared to 2020, we more than doubled our net income and diluted EPS, driven by robust market demand and strong execution.

Compared to 2020, we more than doubled our net income and diluted EPS driven by robust market demand and strong execution.

Let me finish with an update on capital.

Speaker 5: We remain committed to returning capital to our shareholders to drive total return.

We remain committed to returning capital to our shareholders to drive total returns.

Speaker 5: With our Capital Light business model and strong earnings, we continue to build excess cash which can help drive future growth.

With our capital light business model and strong earnings we continued to build excess cash, which can help drive future growth.

Speaker 5: Given our level of earnings and strong capital position, the board approved a special cash dividend of $4.50 per share related to our 2021 full year results.

Given our level of earnings and strong capital position. The board approved a special cash dividend of $4 50 per share related to our 2021 full year results.

Speaker 5: Including this special dividend, our total dividend for fiscal year 2021 equals $9.45 per share, slightly above the midpoint of our 30 to 50 percent payout ratio.

Including the special dividend, our total dividend for fiscal year, 2021 equals $9 45 per share slightly above the midpoint of our 30% to 50% payout ratio.

Speaker 5: This represents a three-fold increase over the 2020 dividend and a 7% dividend yield based on our average share price during 2021.

This represents a three fold increase over the 2020 dividend and a 7% dividend yield based on our average share price during 2021.

Speaker 5: In addition, the board approved an increase to our quarterly dividend to $0.60 per share.

In addition, the board approved an increase to our quarterly dividend to <unk> 60 per share.

Speaker 5: Both the special and quarterly dividend will be paid on March 11th to shareholders of record as of the close of business on March 2nd.

Both the special <unk> quarterly dividend will be paid on March 11th to shareholders of record as of the close of business on March 2nd.

Speaker 5: In addition to dividends, we continue to deploy capital towards acquisitions to accelerate growth, as well as repurchase shares to offset any dilution related to our annual grant.

In addition to dividends, we continue to deploy capital towards acquisitions to accelerate growth as well as repurchase shares to offset any dilution related to our annual grants.

Speaker 5: During 2021, we paid an aggregate of $99 million through our quarterly and special dividends. We repurchased approximately 572,000 shares, or $70 million, of common stock which more than offset dilution from annual stock grants. And we repaid our $50 million of Class A notes upon maturity.

During 2021, we paid an aggregate of $99 million through our quarterly and special dividends, we repurchased approximately 572000 shares or $70 million of common stock, which more than offset dilution from annual stock grants.

And we repaid our $50 million of class a notes upon maturity.

Speaker 5: We maintain $125 million of long-term debt, maturing in October 2023.

We maintain a 125 million of long term debt maturing in October 2023.

Speaker 5: Lastly, we have repurchased slightly more than 90,000 shares of common stock to date during the first quarter of 2022.

Lastly, we have repurchased slightly more than 90000 shares of common stock to date during the first quarter of 2022.

Speaker 5: Overall, 2021 marked a year of tremendous growth for Piper Sandler. The strategic expansion of our business, combined with strong demand for our services, resulted in historic results by every financial metric.

Overall 2021 marked a year of tremendous growth for Piper Sandler the strategic expansion of our business combined with strong demand for our services resulted in historic results by every financial metric.

Speaker 5: We've made great strides during the last two years, and we're excited to continue executing our strategic plans of growing our advice-driven businesses and diversifying our platform to drive shareholder value. Thanks.

We've made great strides during the last two years and we're excited to continue executing our strategic plans of growing our advice driven businesses and diversifying our platform to drive shareholder value.

Thanks, and we can now open up the call for questions.

Speaker 1: Thank you. At this time, if you would like to ask a question, please press star then the number one on your telephone keypad. Once again, that's star one on your telephone keypad. If you wish to withdraw your question, please press the pound key. Thank you.

Thank you at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad once again Thats star one on your telephone keypad. If you wish to withdraw your question. Please press the pound key thank you.

Speaker 1: Our first question comes from the line of James Yarrow of Goldman Sachs here.

Our first question comes from the line of TMC Arrow of Goldman Sachs. Your line is open.

Speaker 6: Thanks for taking my questions and congratulations on the quarter. I just wanted to ask first about the equity underwriting pipeline.

Thanks for.

Taking my questions and congratulations on the quarter.

I just wanted to ask first about the equity underwriting pipeline everything that we've seen so far in 2020 to suggest that.

Speaker 6: everything that we've seen so far in 2022 suggests that, you know, a lot of those deals are on hold. So when you talk to clients, is it more the deals are being pushed out? Or are they being canceled entirely? And then if it is indeed the former that they're just being pushed out, how much market volatility and for how long does it take to turn those those deals that have been put on hold into

A lot of those deals are on hold so when you talk to clients is it more of the deals are being pushed out or are they being canceled entirely and then if it is indeed, the former that they're just being pushed out.

How much market volatility and for how long does it take to turn those deals that have been put on hold.

Cancel deals.

Speaker 3: Yep, thanks, James. Good question. I mean, yeah, obviously everybody can see the geologic data for ECM and the first five or six weeks of this year has been incredibly slow in equity capital markets. I mean, if you go back over

Yep, Thanks, James good.

Good question I mean, obviously, everybody can see the dealogic data for ECM and the first five or six weeks of this year has been incredibly slow.

In equity capital markets I mean, if you go back over.

Speaker 3: four or five years we've we've had slow period uh... certainly before uh... you know it's not that common that it lasts you know over

Five years, we've had slow periods.

Certainly before.

Not that common that it lasts over.

Speaker 3: I would say what happens is you know you got to get a few clients you know relative to the IPO side to sort of be first and test the market and get some good results.

Quarter I would say what happens is you got to get a few clients relative to the IPO side to sort of be first and test the market and get some good results, but most of those backlogs and clients are out there relative to ipos. They want to do the transaction and you just need.

Speaker 3: But most of those backlogs and clients are out there relative to IPOs, they wanna do the transaction and you just need less volatility. And it takes a few weeks after the market stabilizes and then you start to see clients to go. I would say relative to the follow on market and capital raising, which is a little more relevant to healthcare and biotech, some of that takes a little bit longer because it gets...

Less volatility and it takes a few weeks after the market stabilizes and then you then you start to see clients to go I would say relative to the follow on market and capital raising which is a little more relevant to healthcare and biotech.

Some of that takes a little bit longer because it's related to what's the overall share price of the stock where did you think you were going to.

Speaker 3: related to what's the overall share price of the stock. Where did you think you were going to.

Speaker 3: raise that money. So you know some of that market may take a little longer to come back.

Raise that money. So some of that market may take a little longer to come back.

Okay, and then I guess.

Speaker 6: And then, you know, I guess just one other one which is, you know, we're obviously in the midst of a...

Just one other one which is we're obviously in the midst of a long term and somewhat intense investment cycle as well, there's obviously cost inflation occurring and thats across both comp and technology. So I'd just be curious to know how you think about your investment priorities today and whether your guidance for roughly 62.

Speaker 6: a long-term and somewhat intense investment cycle as well as, you know, there's obviously cost inflation occurring and that's across both comp and technology. So I'd just be curious to know how you think about your investment priorities today and whether your guidance for, you know, roughly 62% adjusted comp ratio for 2022 reflects the impact

Adjusted comp ratio for 2022 reflects the impact of the competitive hiring environment and then when you think longer term.

Speaker 6: of the competitive hiring environment. And then when you think longer term,

Speaker 6: Is pressure on expenses likely to continue beyond 2022 or is the investment in 2022 more of an off?

Is this pressure on expenses likely to continue beyond 2022 or is the investment in 2022 more one off.

Yes, I would say.

Speaker 3: For us and the commentary around the 62%, it's really a combination of a few things. First of all, just with the tremendous revenue levels, some leverage on comp and corporate support and some of those things.

For us in the commentary around the 62% its really a combination of a few things first of all just with the tremendous revenue levels some leverage on on comp and corporate support in some of those things we had some higher investment income.

Speaker 3: We had some higher investment income, which drives a lower comp ratio. And I also do think we're being very focused on kind of to continue to grow. And obviously we took advantage of very good revenues to return more.

Which drives a lower comp ratio and I also I do think we're being.

Very well.

Focused on kind of to continue to grow.

And obviously, we took advantage of very good revenues to return more.

Speaker 3: cash flow to shareholders, but we're still very much in growth mode. We think there's people to hire. I wouldn't really say it's necessarily inflationary sort of expenses, but more just making sure we've got the capability to invest in many of the areas we want to continue to grow.

Cash flow to shareholders, but we're still very much in growth mode. We think theres people to hire I wouldn't really say, it's necessarily inflationary sort of expenses, but more just making sure. We've got the capability to invest in many of the areas we want to continue to grow.

Okay that makes a lot of sense. Thank you for taking my questions.

Thank you.

Speaker 1: Thank you. Next question comes from the line of Dave and Ryan of JMP Securities, your line.

Thank you next question comes from the line of death.

Devin Ryan of JMP Securities. Your line is open.

Speaker 5: All right, great. Good morning, Chad, Devin, Tim. How are you? Good. Hi, Devin.

Great. Good morning, Chad Devin Tim how are you good I'd have Kevin.

Yes.

Speaker 5: I just want to start on the outlook for guys.

I just wanted to start on the outlook for <unk>.

<unk> business kind of.

Speaker 5: digging a little bit more around trends in the M&A market. Obviously, just a phenomenal year and kind of end of the year as well. And you appreciate the outlook for the first half of 2022. I think that's pretty.

Maybe digging a little bit more around trends in the M&A market, obviously, just a phenomenal year and kind of ended the year as well.

I appreciate the outlook for the first half of 2022, I think that's pretty consistent with how we were already modeling the business, but if you take a step back can you maybe just talk a little bit about just the tone in that business after.

Speaker 5: how we were already modeling the business. But if you take a step back, can you maybe just talk a little bit about just the tone in that business after.

Speaker 5: Um, you know, such a tremendous 2021. I mean, is activity still accelerating? We did hear from 1 peer last night that there's been a little bit of a push out in terms of the. The timing of deal completion, so I'm just curious kind of more broadly.

Such a tremendous 2021 is activity still accelerating we did hear from one <unk> last night.

In a world of a push out in terms of the.

Timing of deal completion, so I'm, just curious kind of more broadly what you're seeing in kind of the $1 billion plus revenues in 2021, how much of a high watermark as that versus.

Speaker 5: what you're seeing in kind of the billion dollar plus revenues in 2021. How much of a high watermark is that person?

Speaker 5: you know, maybe an ability to get back there or grow through that over the inter...

Maybe an ability to get back their growth through that over the intermediate term.

Speaker 3: Yeah, thanks, Devin. I mean, obviously, that's certainly the big question. I would say, in general, many of the factors that drove such a fantastic 2021 for the advisory business are still in place, especially when it comes to just the sponsor business, which lots of dry powder, good ability to finance transactions.

Yeah, Thanks, Kevin I mean, obviously that that's.

That's certainly the big question I would say in general.

Many of the factors that drove such a fantastic 2021 for the advisory business are still in place.

Especially when it comes to just.

The sponsor business, which lots of dry powder.

Good ability to finance transactions.

Speaker 3: I would say relative to taking longer to close transactions. We didn't see a lot of that in Q4. In fact, when we started.

I would say relative to taking longer to close transactions, we didn't see a lot of that in Q4 in fact, when we when we started.

Speaker 3: Q4, I mean, we usually look at the list of what we expect is going to close. And I then look at when we get to January , what didn't close. We had a lot of stuff just get closed in Q4. I would say relative to a few of our larger transactions, we're certainly seeing some of the approvals take a little longer and push out. But for the vast majority of our sort of middle market sponsored pipeline that

Q4, I mean, we usually look at the list of what we expect is going to close and.

I then look at when we get to January what didn't close we had a lot of stuff just get closed in Q4, I would say relative to a few of our larger transactions, where we're certainly seeing some of the approvals take a little longer and.

Push out but for the vast majority of our are sort of middle market sponsor pipeline that.

Speaker 3: That's not the case. So for a lot of us, we looked at pipelines by industry team. I think our pipelines are very similar to where they were this time last year. Obviously, our business has always been sort of weighted to the back half.

That's not the case.

So for a lot of us we looked at sort of pipelines by industry team I think our pipelines are very similar to where they were this time last year. Obviously, our business has always been sort of weighted to the back half and I would say everybody's.

Speaker 3: And I would say everybody's, you know, that's quite active in the sponsor PE market.

That's quite active in the sponsor pay market. It's just a a trend that more business closes in the back half of the year relative to when they start those processes. So our pitch calendars are very high the pipelines are good.

Speaker 3: It's just a trend that more business closes in the back half of the year relative to when they start those processes. So our pitch calendars are very high. The pipelines are good. You know, we're not going to stick our neck out relative to where the back half is going to come in. But, you know, relative to the, you know, last several years, there are still fantastic M&A market conditions.

We're not going to stick our neck out relative to where the back half is going to come in but relative to the last several years.

There are still fantastic M&A market conditions.

Speaker 5: Okay, great, thanks, Chad. Very helpful. I guess one for Deb here on the fixed income brokerage business.

Okay.

Great color, Thanks, Chad very helpful.

I guess, one for Deb here on the fixed income brokerage business.

Speaker 5: You know, I'm trying to think through some of the puts and takes there. You know, the business did benefit from lower interest rates just as depositories were flush with cash and then were repositioning their securities books and

I'm trying to think through some of the puts and takes there.

The benefit there.

Business did benefit from lower interest rates juices depository, we're flush with cash and then we're repositioning the securities books.

Speaker 3: Is rate to move higher, I appreciate that maybe there's a period of repositioning, but is there just a lag there? Right now you're seeing very high volume, but the expectation is that may transition –

As rates move higher I appreciate that maybe theres a period of repositioning but does that is there just a lag there. So right now youre seeing very high volume, but the expectation is that may transition.

Speaker 5: you know, as kind of that runs through the system and potentially depositories aren't as flush with cash, and they've already repositioned. And then I'm trying to think about on the other side, some of the other handoffs in your fixing a brokerage business because it is much more diverse than it was, you know, heading into 2020. So just trying to think about some of the puts and takes there as well, particularly given what I thought sounded like a pretty positive outlook for the business and then you're

Yes.

<unk> kind of that run through the system and potentially depositories arent is flushed with cash and they've already repositioned and then I'm trying to figure out on the other side some of the other hand offs in your fixed income brokerage business because it is a much more diverse than it was heading into 2020. So just trying to think about some of the puts and takes there as well, particularly given what I thought so.

Like a pretty positive outlook for the business in the near term.

Yes, thanks, Kevin.

Speaker 4: Specifically, I guess I would start by saying overall higher rates tend to be good for our overall business.

Specifically, maybe I guess I would start I think overall higher rates tend to be good for our overall business.

Speaker 4: The comments that you made around banks, it's very true in that they have had lower loan demand out there, more deposits, so more to invest.

Comments that you made around banks, it's very true and that they have had lower loan demand out there more deposits in March to invest a couple of things will happen to though as that starts to shift and those.

Speaker 4: A couple of things will happen too though as that starts to shift and those, they start lending more obviously the other side of those transactions. And part of it for us is when there's a lot of interest rate volatility, we also do a lot of advisory work and derivative business with the banks trying to help them really manage through that volatility.

They start lending more obviously, there's the other side of those transactions and part of it for US is when there is a lot of interest rate volatility. We also do a lot of advisory work and derivatives business with the banks trying to help them really manage through.

That volatility.

Speaker 4: The other thing which you alluded to in the second part of your question is just what's on the other side of that. And we are very focused on growing the other client verticals as well. You highlight rightly so that a lot of the business currently is with financial institutions. But looking for ways to expand the business we do with them through even non-QSIP products that can...

Other thing, which you alluded to in the second part of your question as to what's on the other side of that and we are very focused on growing the other client verticals as well.

You highlight rightly so that a lot of the business currently is swift financial institutions, but looking for ways to.

Expand the business, we do with them through even non CUSIP products.

Can.

Speaker 4: tend to maybe be a little less of the day-to-day trading volatility in volumes that you might see. So net net, higher rates will generally help our fixed income business. We have seen, as I had noted in my prior comments, the fourth quarter started to pick up a little bit as we had seen declining volumes, or declining revenues, excuse me, throughout the year. And we are seeing decent start to the year, with pillow glory levels sitting down. As strong as it's Prime Minister announced, the be-blank is Barnard Now, as war AUDIENCE for Music VeryB

<unk>.

Little.

Less of the day to day trading volatility in volumes that you might see and so net net higher rates will generally help our fixed income business. We have seen as I had noted in my prior comments the fourth quarter started to pick up a little bit as we had seen declining.

<unk>.

Meaning revenues excuse me throughout the year and we are seeing decent start to the year, which gives us some confidence in our comments just around how we see the outlook for the overall year, but very much likely to be more evenly spread this year than you would have seen in 2021.

Speaker 4: Gives us some confidence in our comments just around how we see the outlook for the overall year, but very much likely to be more evenly spread this year than you would have seen in 2021.

Speaker 5: Great. If I could squeeze one more in just to round things out and give Tim a question as well. Just thinking about the excess cash position, clearly fantastic year, a lot of cash generation, also a lot of redeployment into M&A and the dividend and the special and even some buyback.

Great if I could squeeze one more in just to round things out.

Tim My question as well.

Just thinking about the excess cash position clearly.

Fantastic year, a lot of cash generation.

So a lot of redeployment into M&A.

Dividend and the special and even some buyback.

Speaker 5: After a great year, and I guess after you pay the special and you pay bonuses, how should we think about the excess cash position today relative to a year ago? I don't know if there's a way to quantify that, but it still feels like even after all of those actions, there's been some nice build there. So just trying to think about some of the moving parts and just how you feel like your position heading into 2022, even after you satisfy some of the cash needs here.

After.

A great year.

After you pay the special when you pay bonuses, how should we think about the excess cash position today relative to a year ago I don't if theres a way to quantify that but it still feels like even after all of those actions. There's been some nice build there. So just trying to think about some of the moving parts and just how you feel like you're positioned heading into 2022.

<unk> even after.

You kind of.

Satisfy satisfy some of the cash needs here.

Yeah Devin.

Speaker 7: you know, you're right, I would say.

Youre right I would say.

Speaker 5: year over year, there is some increase to that excess cash and capital position, even after the dividends and buybacks. Obviously, we're a little less active during 21, in terms of corporate development now we've done, the cornerstone deal just closed and

Year over year, there is some some increase to that to that excess cash and capital position, even after the dividends and buybacks obviously.

A little less active during 'twenty one in terms of corporate development that we've done.

Cornerstone deal just closed and we've got Stanford wind up smaller deals, but but things that we can use some cash or so.

Speaker 5: We've got Stanford lined up, smaller deals, but things that we can use some cash for. So obviously, we've also continued to move up in the dividend payout ratio to a little over the midpoint. We can continue to flex that up. But we continue to want to be active to grow the business.

Obviously, we've also continued to move up the dividend payout.

<unk>.

A little over the mid point I mean, we can flex continue to flex that up.

We continue to want to be active to grow the business.

Speaker 8: You know, through corporate development and having some of that excess cash to do that puts us in a good position to to to grow that way.

Through corporate development, and having some of that excess cash to do that puts us in a good position.

Two to grow that way.

Okay terrific well I'll leave it there thank you for <unk>.

All my questions.

Thanks, Kevin.

Speaker 1: Thank you. Next question comes from the line of Michael Brown of KBW.

Thank you next question comes from the line of Michael Brown of <unk> W. Your line is open.

Speaker 9: Great. Good morning, Chad, Tim, Deb. How are you guys? Great. Good.

Great. Good morning, Chad Tim Deb are you guys. Good luck.

Speaker 9: So I just wanted to maybe pull some of your commentary together and.

So I just wanted to maybe.

Ultimately a commentary together and just kind of think through the operating margin here. So obviously you had a really strong.

Speaker 9: through the operating margin here. So obviously you had a really strong margin result last year at.

Margin result last year.

Speaker 9: and you get some commentary on the comp ratio and the non-comp lines. But again, if we pull that together, what is the right way to think about your operating margin for the business in 2022 and beyond?

2007 to eight.

You gave some commentary on the comp ratio in the non comp line.

But again, if we pull that together.

Is it the right way to think about your operating margin for the business in 'twenty, two and beyond as it is 20% still kind of like that.

Right way to think about a floor here.

Scott interesting thoughts there yes.

Speaker 8: Yeah, Mike, maybe I'll take that. We had talked about this 20% hurdle from a margin perspective as a goal. I think we certainly feel like we've moved past that. I think a little bit more now in the near term, that could be in the low to mid 20s. I think as we think about it now a little more long term, it's that idea of getting to 25.

Yes, maybe I'll take that.

We had talked about sort of this 20% hurdle from a margin perspective.

As a goal I think we certainly.

I feel like we've moved past that I think a little bit more now in the near term.

That can be in the low <unk>.

Mid twenties.

I think.

As we think about it now a little more long term is that idea of getting to kind of 'twenty five.

Speaker 8: you know, plus on a more sustainable basis. But I think, you know, given

Plus on a more sustainable basis, but I think given.

Speaker 8: you know you look at over the last two years and you know running a you know a 20.3 in 2020 and you know now the 27.8 I mean you kind of feel like you know the 27.8 was was certainly higher benefited from you know from some different aspects that were unique to the year so I think more in the near term is you know it's in that that low to mid mid-20

You look at over the last two years running.

23% in 2020 and now the 27 to eight you kind of feel like the 2700 was certainly higher benefited from from some different aspects that were unique to the year. So I think more in the near term.

That low to mid mid twenties.

Speaker 9: Okay, great. Thanks, Tim. I just wanted to talk about the $2 billion target for corporate investment banking. I've always appreciated the way you guys put a guidepost out there so we can understand where your longer term growth trajectory could go. But Chad, I thought it would be helpful just to hear a little bit about how you get there. If you think about over the next five years, what's the balance between inorganic growth and inorganic growth?

Okay, great. Thanks, Tim and then I just wanted to talk about the $2 billion target for corporate investment banking so.

I've always appreciate the way you guys put a guidepost out there. So we can understand where your longer term growth trajectory could go.

But Chad I thought it would be helpful. Just to hear a little bit about how you get there. If you think about over the next five years, what's what's the balance between inorganic growth and organic growth.

Speaker 9: organic growth side, is that just simply adding more MDs to the platform and increasing the overall feed size or is there anything else?

Organic growth side.

Is that just.

Simply adding more empties to the platform and increasing overall fee size or is there anything else, we should be thinking about there.

Speaker 3: Yeah, no perfect timing and I was actually just, I was just with, we had an MD offsite for investment banking.

Yes.

Perfect timing and I was actually just.

I was just with we had a MD off site for investment banking.

Speaker 3: in Utah with our 150 managing directors. We talked about

In Utah with our 150, <unk> managing directors, we talked about.

Speaker 3: The same $2 billion target, yeah, for the 10 years I've been involved in helping run investment banking, we have set these longer term targets to stay focused on growth. It's a combination of a number of things. Obviously, you've got productivity, you've got new hiring, you've got promotions of managing directors. So clearly, to get to $2 billion, we've got to keep growing the managing director head count from the 150.

At the same $2 billion target yet for that for the 10 years sort of I've been involved in helping run investment banking, we have set these longer term targets.

To stay focused on growth.

A combination of a number of things obviously, you've got productivity, you've got new hiring you've got promotions of managing directors. So clearly to get to $2 billion. We've got to keep growing the managing director head count from the 150, we have if you look back our last five years that really comes that growth.

Speaker 3: We have, you know, if you look back our last five years, that really comes, that growth, pretty close to 50% sort of organic and 50% through corporate development. So we do believe in that five plus year target, two billion for banking, that some of that will come through corporate development. We, I think it's sort of safe to look at it half organic, you know, half through.

Pretty close to 50% sort of organic and 50% through corporate development. So we do believe in that five plus year target $2 billion for banking that some of that will come through corporate development I think it sort of safe to look at it half organic half.

Through.

Speaker 3: Corporate Development, we talked about some obvious themes. I think, obviously, our two biggest businesses, healthcare and financial services. Once you have these great franchises, it's in some ways easier to grow what you're great at. And in both of those franchises, just as examples, we have.

Corporate development, we've talked.

About some some obvious themes I think.

Obviously, our two biggest businesses healthcare and financial services.

Once you have these great franchises.

In some ways easier to grow whats you're great at and in both of those franchises just as examples we have some green space, we're pushing really hard into sort of health care services as a just a fantastic part of the M&A market as an example, and then in financial services we have.

Speaker 3: green space, we're pushing really hard into sort of healthcare services as just a fantastic

Speaker 3: part of the M&A market as an example. And then in financial services, we had a nice growth year in non-depositories as well, and we think there's still.

A nice growth year in non depository as well and we think theres still.

Speaker 3: lots of opportunities there. And then maybe the two other big themes we've talked about, you know, we've made some good progress.

Lots of opportunities there and then maybe the two other big themes that we've talked about we've made some good progress.

Speaker 3: in sort of how we think about Europe and potential growth areas there. And then I think the last several calls we've been

And sort of how we think about Europe .

And potential growth areas, there and then I think the last several calls we've been.

Speaker 3: pretty specific relative to the technology group while we have grown our

Pretty specific relative to that technology group, while we have grown our tax software business nicely. The last couple of years. It is still really undersized relative to the size of the market. So that's a significant opportunity. So I think you stack up and all of our industry teams. There is an opportunity there.

Speaker 3: tech software business nicely the last couple years, it is still really undersized relative to the size of the market. So that's a

Speaker 3: significant opportunity. So I think you stacked up in all of our industry teams there's an opportunity.

Speaker 3: There's certainly a few larger opportunities like tech in Europe we've talked about, and so it's a brick by brick strategy to 2 billion over the next five years.

Certainly a few larger opportunities like tech in Europe , we've talked about and so.

It's a brick by brick strategy to $2 billion over the next five years.

Got it okay, great. Thanks, Thanks, Chad Thanks for taking my questions.

Speaker 1: Thank you. Next question comes from the line of Mike Rondall of Nordland Security.

Thank you next question comes from the line of Mike Grondahl of Northland Securities. Your line is open.

Speaker 10: Hey, thanks. Congrats on the quarter guys. Chad, a question about, you know, obviously the huge advisory court.

Hey, thanks, Congrats on the quarter guys.

Chad a question about obviously the huge advisory quarter.

Speaker 10: You called out records in financial, diversified industrials and consumer, just trying to understand kind of the relative contribution maybe from healthcare and energy in the quarter.

You called out records in financial diversified industrials and consumer just trying to understand kind of the relative contribution maybe from healthcare and energy in the quarter.

Yes.

Speaker 3: So frankly for the year, I think we had records in every industry team except energy. Obviously, energy is starting to recover with oil prices and frankly the transition from our business to more clean tech and renewables. So we're pretty optimistic about the year we can have in energy.

So.

Frankly for the year I think we had records in every industry team.

Except to energy, obviously energy is starting to recover with <unk>.

Oil prices and frankly, the transition from our business to more.

Clean tech and renewable so we're pretty optimistic about the year, we can have in energy.

Speaker 3: in 2022, relative to the quarter, you know, frankly, all of the industry teams, you know, had significant quarters, I think, on a relative basis, our diversified and industrials business had a really big Q4, which isn't surprising, given that that business is almost 100% tied to sponsors. And in, in general, the back half of the year is very good.

In 2022 relative to the quarter frankly, all of the industry teams.

It had significant quarters I think on a relative basis, our diversified industrials business had a really big Q4, which isn't surprising given that that business is almost a 100% tied to sponsors.

And in in.

In general the back half of the year is very good.

Speaker 3: for our sponsor business. So, and then on a just a year over year basis, by far the biggest business we had in advisory was financial services. Really good year, frankly, some good transactions still expected to close here in the first half of 22 as well.

For our sponsor business so.

On a just a year over year basis by far the biggest business. We had in advisory was financial services.

Really good year frankly, some good transaction is still expected to close here in the first half of 'twenty two as well.

Speaker 10: Got it. And then maybe just lastly, any update to call out on Europe and some of the progress?

Got it and then maybe just lastly.

Any update to call out on Europe , and some of the progress.

Speaker 10: you're making there. And then, you know, as part of that $2 billion goal in five years, any rough estimate what might come from Europe .

You're making there.

Then.

Part of that $2 billion goal in five years any rough estimate what might come from Europe .

Speaker 3: Yeah, I would say just relative to progress in Europe , we made a couple of significant hires in health care that had some impact. We made a hire in sponsors. We had a fantastic year from our valence chemicals business, which we have been working on, through ourime Introduction

Yes, yes, I would say just relative to progress in Europe , I mean, we've made a couple of significant hires in healthcare.

It had some impact we made a hire.

And sponsors we had a fantastic year from our valence chemicals business, which is always sort of been a half.

Speaker 3: always sort of been a half European business. So we're definitely seeing the green shoots of other things we can add to that. I mean, on a relative basis to all of our peers in the middle market, we're still way under weighted in Europe . And so, I don't know if that's, becomes 100, 150, $200 million business, but there's a lot of growth opportunity for us there. Great, and.

European business, So we're definitely seeing the green shoots.

Other things, we can add to that I mean on a relative basis to all of our peers.

In the middle market, we're still way under weighted.

In Europe , and so I don't know if that becomes a 100 $150 million to $100 million business, but theres a lot of growth opportunity for us there.

Great.

Thanks, and congrats again.

Thank you.

Speaker 1: Thank you. Next question comes from the line of Steven Schubert of Wolf Research. In the line-

Thank you next question comes from the line of Steven <unk> of Wolfe Research. Your line is open.

Okay.

Speaker 9: Good morning guys, this is Brendan O'Brien filling in for Steven.

Good morning, guys. This is.

Brendan O'brien filling in for Steven.

Speaker 11: To start, antitrust rhetoric has continued to pick up with banks seemingly in the crosshairs. However, we haven't really seen regulators take any action on bank deals of late other than maybe a more prolonged time from announced to close. I was wondering if you are hearing anything in your conversations that would suggest that the deals that are currently in your backlog could be at risk or whether the increased scrutiny has impacted willingness to transact in the sector.

To start.

Antitrust rhetoric has continued to pick up with banks seemingly in the cross hairs. However, we haven't really seen regulators later is take any action on bank deals of late other than maybe a more prolonged time from amounts to close was wondering if you are hearing anything in your conversation that would suggest that the deals that are currently in your backlog could be.

Rich.

Whether the increased scrutiny has impacted willingness to transact in the sector at all.

Yes, So I think you characterized it perfectly in the question which is.

Speaker 3: Yeah, so I think you characterized it perfectly in the question, which is there was a lot of noise around that sort of in Q3, Q4. I do think on most of our larger transactions, they're taking a little longer. We really can't point to, you know,

There was a lot of noise around that sort of in Q3 Q4, I do think on most of our larger transactions theyre, taking a little longer we really can't point to.

Speaker 3: transactions that haven't closed because of that. I do expect that scrutiny and rhetoric to continue, but frankly even being focused even more at the high end of the market.

Transactions that haven't closed.

Cause of that.

Do you expect that scrutiny and rhetoric to continue but frankly, even being focused even more at the high end of the market.

And certainly being talked about but I think the fact that deals are still closing activity is still happening.

Speaker 3: and certainly being talked about, but I think the fact that deals are still closing, activity is still happening, people are going to talk about it less and keep transacting.

People are going to talk about it less and keep transacting.

Speaker 11: That's a great color. Thank you for that. And you mentioned that you see the public finance business growing to $200 million per year run rate eventually, which implies pretty significant growth relative to this past year. Given that issuance was once again your record levels and is likely to moderate somewhat as interest rates rise, I was hoping you could provide a bit more color around what you see as driving that growth.

That's great color. Thank you for that.

You.

And that you see the public finance business growing to $200 million per year.

Run rate, eventually, which implies pretty significant growth relative to this past year.

Given that issuance was once again your record levels and is likely to moderate somewhat as interest rates rise was hoping you could provide a bit more color around what you see is driving that growth.

Speaker 4: Absolutely. It's going to echo comments Chad made around the growth of our corporate investment banking business in this sort of brick by brick.

Yes, absolutely.

It's going to Echo comments, Todd made around the growth of our corporate investment banking business in this sort of brick by brick.

Speaker 4: If you look at it from two different aspects, one is our governmental business, the second being what we would call our specialty businesses.

If you look at it from two different aspects one is our governmental business the second being what we call our specialty businesses.

Speaker 4: We continue to look for individual talent, and this is where it's...

We continue to look for individual.

Individual talent and this is where it is brick by brick adding in different geographies and we see definite room to grow our market leadership in areas nor in the eastern part of the United States, Pennsylvania.

Speaker 4: brick by brick, adding in different geographies. And we see definite room to grow market leadership in areas more in the eastern part of the United States, Pennsylvania, the southeast holistically. Still see a lot of opportunity there. So again, it could be really small acquisitions or team hires or individual hires. So again,

Both east Holistically still see a lot of opportunity there so again it could be.

Really small acquisitions or team hires or individual hires so again.

Speaker 4: brick by brick and just maybe touching on governmental relative to

Brick by brick and just maybe touching on governmental relative to the.

Speaker 4: the interest rate environment. You know, we have seen the trend move towards new money issuance versus refinancing. Over the last year, new money was about 70% of the issuance in the municipal market. Refinancing, 30%, and refinancing was down about 25%. So I guess my point is you're already seeing a shift there. I think as the economy recovers and we see more and more new money, which tends to be slightly less interest rate sensitive.

The interest rate environment, we have seen the trend toward new money issuance versus refinancing.

Over the last year to Newmont is about 70% of the issuance in the municipal market.

Refinancing 30 in refinancing was down about 25%. So I guess my point is you're already seeing a shift there I think as the economy recovers and we see more and more new money, which tends to be slightly less interest rate sensitive than if I go to the specialty businesses, Here's where we see probably even a larger opportunity.

Speaker 4: Then if I go to the specialty businesses, here's where we see probably even a larger opportunity.

Speaker 4: in some of our current businesses that we're in.

And some of our current businesses that we're in.

Speaker 4: You know, take something like senior living and hospitality, which actually have been. Hurt by cobit somewhat and as we come out of that, we're seeing those businesses pick up our special district business, which we moved into late in 2020. A lot of opportunity there as we build that out nationally. And those tend to be.

It takes something like senior living and hospitality, which actually has been hurt by Covid somewhat and as we come out of that we're seeing those businesses pick up our special district business, such we moved into late in 2020, a lot of opportunity there as we build that out nationally and those tend to be.

Speaker 4: Again, a little less interest rate sensitive, a little more focused on what's the credit outlook and investor demand for those.

Then a little less interest rate sensitive a little more focused on what's the credit outlook and investor demand for those so happy to fill in any other gaps, but thats, how we see that business Brian .

Speaker 4: So, happy to fill in any other gaps, but that's how we see that business growing.

Speaker 11: That's a great color. Thanks for that, Deb. And thanks for sending me questions.

That's great color, Thanks, a lot Doug.

Thanks for taking my questions.

Thank you.

Speaker 1: Thank you. This is a follow-up question from James Yarrow of Goldman Sachs.

Thank you a follow up question from James <unk> of Goldman Sachs. Your line is open.

Speaker 6: Thanks for taking my follow up. I just had one for Deb. I'd be curious to know what the impact of weaker client performance among a number of asset managers year to date means for the equity brokerage business and whether that could end up being somewhat of a head.

Thanks for taking my follow up I, just had one for Deb I'd be curious to know what the impact of weaker client performance. Among a number of asset managers to year to date means for the equity brokerage business and whether that could end up being somewhat of a headwind.

Speaker 4: Yeah, I think that it's a good comment and a true comment. And overall, as you've watched the equity brokerage business over the years, you see almost a natural decline in that market wallet, which is why we have been really focused on closing the gaps in our product offering and building scale and becoming much more relevant to clients. So.

Yes, I think that is.

Good comment and a true comment and overall as you've watched the equity brokerage business over the years you can see almost a natural decline in that market wallet, which is why we have been really focused on closing the gaps in our product offering and building scale and becoming much more relevant to clients. So.

Speaker 4: We believe, and you heard in the commentary around our ability to, with Cornerstone now closed last Friday, that's going to grow our revenue by about 30 percent, so getting us on close to that $200 million run rate on an annual basis. see something buildin Neural

We believe and you heard in the commentary around our ability to with cornerstone now closed last Friday, and Thats going to grow our revenue by about 30% so getting us on.

Close to that $200 million run rate on an annual basis.

Having filled in some of the gap.

Speaker 4: building our market presence with these clients, we feel that can offset what you speak to, which is going to be some headwind in the business overall. So which really means that we need to continue to gain market share. Yeah, and I would add, James, I mean, obviously you're talking about some of the performance of certain funds was really...

<unk> our market presence with these clients, we feel that can offset what you what you speak to which is going to be.

Some headwind in the business overall, so which really means that we need to continue to gain market share and I would add James I mean, obviously youre talking about some of the performance of certain funds was really.

Speaker 3: hurt here at the start of the year. That always impacts how people pay, but I think we just see an opportunity with, you know, doing Cornerstone, still getting the benefits of weed and there's lots of accounts that we can get more market share from and make up for some of that.

Hurt here at the start of the year that always impacts how people pay but I think we just do you see an opportunity with <unk>.

<unk> cornerstone.

Getting the benefits of weeden.

There's lots of accounts that we can get more market share from and make up for some of that.

Okay. Thanks, a lot.

Thank you.

Thank you there are no further question at this time I would like to turn the call over to Mr. Chad Abraham for closing remarks.

Speaker 1: Thank you. There are no further questions at this time and I would like to turn the call over to Mr. Chad Abrams for closing remarks.

Speaker 3: OK, thanks operator. Let me close again by thanking all my employee partners for their hard work and dedication to our clients. We very much look forward to maintaining our strong momentum in 2022. Thanks everyone and have a great day.

Okay. Thanks, Operator, let me close again by thanking all my employee partners for their hard work and dedication to our clients. We very much look forward to maintaining our strong momentum in 2022, thanks, everyone and have a great day.

Speaker 1: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Have a great day!

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect have a great day.

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