Q3 2024 Piper Sandler Co Earnings Call

Good morning, and welcome to the Piper Sandler companies third quarter 2024 earnings Conference call. Today's call is being recorded and will include remarks by Piper Sandler management, followed by a question and answer session I'll begin by turning the call over to Kate Wendt.

Operator: Good morning and welcome to the Piper Sandler Company's third quarter 2024 earnings conference call. Today's call is being recorded and will include remarks by Piper Sandler Management, followed by a question and answer session.

Kathy Winslow: I'll begin by turning the call over to Kate Winslow. Please go ahead.

Please go ahead.

Kathy Winslow: Thank you, operator.

Kate Wendt: Thank you operator, good morning, and thank you for joining the Piper Sandler companies third quarter 2024 earnings conference call hosting the call today are chairman and CEO, Chad Abraham our president Doug Schoen of men and CFO Kate Clinton.

Kathy Winslow: Good morning, and thank you for joining the Piper Sandler Companies third quarter 2024 earnings conference call. Hosting the call today are Chairman and CEO Chad Abraham, our President Deb Schoneman, and CFO Kate Clune. Earlier this morning, we issued a press release announcing Piper Sandler's third quarter 2024 financial results, which is available on our website at PiperSandler.com slash earning Today's discussion of the results is complementary to the press release. A replay of this call will also be available at the same website later today.

Kate Wendt: Earlier. This morning, we issued a press release announcing papers then there's third quarter 2024 financial result, which is available on our website at Piper Sandler Dotcom Slash earnings.

Kate Wendt: Today's discussion of the result is complementary to the press release.

Kate Wendt: A replay of this call will also be available at the same website later today.

Kathy Winslow: Before we begin, let me remind you that remarks made on today's call may contain forward looking statements that are not historical or current facts, including statements about beliefs and expectations, and involve inherent risks and uncertainty. Factors that could cause actual results to differ materially from those anticipated are identified in the company's reports on file with the SEC, which are available on our website at pipersandler.com and on the SEC website at sec.gov. Today's discussion also includes statements regarding certain non-GAAP financial measures that management believes are meaningful when evaluating the company's performance. The non-GAAP measures should be considered in addition to, and not a substitute for, measures of financial performance prepared in accordance with GAAP.

Kate Wendt: Before we begin let me remind you that remarks made on today's call may contain forward looking statements that are not historical or current facts, including statements about beliefs and expectations and involve inherent risks and uncertainties.

Kate Wendt: Factors that could cause actual results to differ materially from those anticipated are identified in the company's reports on file with the F. B C, which are available on our website at Piper Sandler Dot com and on the SBC website at SEC Gov.

Kate Wendt: Today's discussion also include statements regarding certain non-GAAP financial measures that management believes are meaningful when evaluating the company's performance.

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

Kathy Winslow: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in our earnings release issued today.

Kate Wendt: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in our earnings release issued today.

Chad Abraham: I will now turn the call over to Chad. Thank you, Kate. Good morning, everyone. It's great to be with you to talk about our third quarter 2024 results. We deliver strong year-over-year growth, generating adjusted net revenues of $352 million, an 18.4% operating margin. and Adjusted EPS of $2.57. October has started strong in many of our business.

Kate Wendt: I'll now turn the call over to Chad.

Chad Abraham: Thank you Kate and.

Good morning, everyone.

Chad Abraham: It's great to be with you to talk about our third quarter 2024 results.

Chad Abraham: We delivered strong year over year growth generating adjusted net revenues of $352 million and 18, 4% operating margin.

Chad Abraham: And adjusted EPS of $2 57.

Chad Abraham: October has started strong in many of our businesses and we expect fourth quarter revenues to be similar to the strong fourth quarter of last year.

Chad Abraham: And we expect fourth quarter revenues to be similar to the strong fourth quarter of last Turning to Corporate Investment Bank. Revenues of $206 million during the third quarter increased 7% over the same period last year. For the first nine months of 2024, corporate investment banking revenues of 650 million were up 24% from last As we have highlighted during past earnings calls, the investments we have made to increase and diversify our product capabilities and industry reach continues to be reflected in our results. M&A and restructuring activity generated 68% of total corporate investment banking. Equity Financing contributed 18% and Debt Advisory and Financing generated 14% of revenue.

Chad Abraham: Turning to corporate investment banking.

Revenues of $206 million during the third quarter increased 7% over the same period last year.

Chad Abraham: For the first nine months of 2020 for corporate investment banking revenues of $650 million were up 24% from last year.

Chad Abraham: As we have highlighted during past earnings calls the investments we have made to increase and diversify our product capabilities and industry reach continues to be reflected in our results.

Chad Abraham: M&A and restructuring activity generated 68% of total corporate investment banking revenues.

Equity financings contributed 18% and debt advisory and financings generated 14% of revenues.

Chad Abraham: From a sector perspective, we had strong and balanced performance across our industry team. With six of our seven verticals experiencing significant growth over the prior year period. In terms of client coverage, our focus on providing more comprehensive solutions to our private equity clients continues to drive performance. Activity from financial sponsors contributed to over half of the year-over-year growth in corporate investment banking. Specific to advisory services, revenues were $188 million during the third quarter of 2024. Up 22% year-over-year driven by more completed transactions. completed 71 advisory transactions during the quarter. Performance was led by healthcare, as our market-leading medtech team closed several significant transactions.

Chad Abraham: From a sector perspective, we had strong and balanced performance across our industry teams with.

With six of our seven verticals experiencing significant growth over the prior year period.

Chad Abraham: In terms of client coverage, our focus on providing more comprehensive solutions to our private equity clients continues to drive performance.

Chad Abraham: Activity from financial sponsors contributed to over half of the year over year growth in corporate investment banking revenues.

Chad Abraham: Specific to advisory services revenues were $188 million during the third quarter of 2024 up 22% year over year, driven by more completed transactions.

Chad Abraham: We completed 71 advisory transactions during the quarter.

Chad Abraham: Performance was led by health care as our market, leading med Tech team closed several significant transactions.

Chad Abraham: In addition, our financial services, services and industrials, energy and power. Consumer Verticals, all produce strong quarters. Diversification of the platform has been evident in 2024 with a different sector leading performance each quarter. Our agent at Debt Advisory Revenues, which are reported within Advisory Services, continue to be a bright spot as the team is on pace for another strong year. We have an outstanding debt advisory team that assists clients on an agented basis without using any underwriting capital. The growth in private credit, combined with the trend of financial sponsors outsourcing their debt-raising capabilities. has resulted in increased activity.

Chad Abraham: In addition, our financial services services, and industrials energy and power and consumer verticals all produced strong quarters.

Chad Abraham: The diversification of the platform has been evident in 2024 with a different sector leading performance each quarter.

Our agent at debt Advisory revenues, which are reported within advisory services continue to be a bright spot as the team is on pace for another strong year.

Chad Abraham: We have an outstanding debt advisory team that assists clients on an <unk> basis without using any underwriting capital.

Chad Abraham: The growth in private credit combined with the trend of financial sponsors outsourcing their debt raising capabilities has resulted in increased activity.

Chad Abraham: Through the first nine months of 2024. The team has raised over $4 2 billion of proceeds for our clients.

Chad Abraham: Through the first nine months of 2024, the team has raised over 4.2 billion of proceeds for our clients. Our success in designing, structuring, and executing creative solutions tailored to client needs, while leveraging deep sector expertise, has led to more clients using our debt advisory services, as well as significant repeat business from financial sponsor clients. Through nine months, we generated $529 million in advisory revenue. Up 25% from a year ago and outperformed U.S. transaction volume, which was up approximately 10% from the prior year. Looking forward, a strong October has contributed to a good start to the fourth quarter.

Chad Abraham: Our success in designing structuring and executing creative solutions tailored to client needs, while leveraging deep sector expertise has led to more clients using our debt advisory services as well as significant repeat business from financial sponsor clients.

Chad Abraham: Through nine months, we generated $529 million in advisory revenues.

Chad Abraham: Up 25% from a year ago, and outperformed U S transaction volume, which was up approximately 10% from the prior year.

Chad Abraham: Looking forward our strong October has contributed to a good start to the fourth quarter.

Chad Abraham: If market conditions remain accommodative and closings stay on track, we expect a strong finish to the year in advice.

Chad Abraham: If market conditions remain accommodative and closing stay on track, we expect a strong finish to the year and advisors.

Turning to corporate financing.

Chad Abraham: Turning to corporate finance. Revenues were $18 million during the third quarter, down significantly both sequentially and year over year. We completed 17 equity and debt financings, raising $10 billion for corporate clients. The performance was led by our financial services team, which completed capital raises in the depository space, as well as real estate and insurance. Corporate financing activity in October has outpaced the entire third quarter, and we expect revenues for the fourth quarter to be up meaningfully on a sequential basis.

Chad Abraham: Revenues were $18 million during the third quarter down significantly both sequentially and year over year.

Chad Abraham: We completed 17 equity and debt financings raising $10 billion for corporate clients.

Chad Abraham: Performance was led by our financial services team, which completed capital raises in the depository space as well as real estate and insurance.

Chad Abraham: Corporate financing activity in October has outpaced the entire third quarter and we expect revenues for the fourth quarter to be up meaningfully on a sequential basis.

Chad Abraham: Turning to investment banking managing director head count.

Chad Abraham: Turning to Investment Banking Managing Director Head We ended the third quarter with 184 managing directors. The most MDs in our firm history. In August, we closed the acquisition of Avidity Advisors, which added 11 Managing Directors to form our Private Capital Advisory Committee. Throughout 2024, we have continued to build out sector coverage with MD ads in FinTech residential and commercial services, and financial sponsors. We remain focused on continuing to expand our capabilities, increasing productivity, and positioning our platform for long-term growth.

Chad Abraham: We ended the third quarter with 184, managing directors, the most MTS and our firm history.

Chad Abraham: In August we closed the acquisition of Avidity advisors, which added 11, managing directors to form our private capital Advisory group.

Chad Abraham: Throughout 2024, we have continued to build out sector coverage with M D ads in Fintech.

Chad Abraham: Residential and commercial services and financial sponsors.

Chad Abraham: We remain focused on continuing to expand our capabilities, increasing productivity and positioning our platform for long term growth.

Chad Abraham: In closing our third quarter results were solid the operating environment has become more constructive and we continue to deliver on our strategy.

Chad Abraham: In closing, our third quarter results were solid, the operating environment has become more constructive, and we continue to deliver on our strategy.

Debbra Schoneman: With that, I will turn the call over to Deb to discuss our public finance and brokerage Thanks, Chad. I'll begin with an update on our public finance business, where market conditions have markedly improved with increased issuance and strong investors. During the third quarter, we generated $36 million of municipal financing revenues, up 78% from the prior year quarter, and our best quarter since 2021. We underwrote 157 municipal negotiated transactions, raising over $5 billion of par value for our clients. Revenues this quarter were driven by strong performance from both our specialty groups and government. Our Special Districts Group has capitalized on the demand for higher yielding issuance.

With that I will turn the call over to Deb to discuss our public finance and brokerage businesses.

Thanks, Chad.

Deb: I'll begin with an update on our public finance business, where market conditions have markedly improved with increased issuance and strong investor demand.

Deb: During the third quarter, we generated $36 million of municipal financing revenues up 78% from the prior year quarter, and our best quarter since 2021.

We underwrote 157 municipal negotiated transactions raising over $5 billion of par value for our clients.

Deb: Revenues this quarter were driven by strong performance from both our specialty groups and governmental business.

Deb: Our special districts group has capitalized on the demand for higher yielding issuances and helped raise $1 6 billion in par value through the first nine months of 2024.

Debbra Schoneman: and helped raise $1.6 billion in par value through the first nine months of 2020. This group specializes in creating unique financing structures in partnership with local governments and real estate developers to fund the public infrastructure needs of growing communities. We've been growing our special district capabilities and entering new geographies over the last two years and are seeing the results from those investments. Within our governmental business, we continue to build out our national We recently added two senior bankers to lead our Missouri school business. And in Texas, we have built our franchise into the number one underwriter of school financings in the state.

Deb: This group specializes in creating unique financing structures in partnership with local governments and real estate developers to fund the public infrastructure needs of growing community.

Deb: We've been growing our special district capabilities and entering new geographies over the last two years and are seeing the results from those investments.

Deb: Within our governmental business, we continue to build out our national footprint. We recently added two senior bankers to lead our Missouri School business and in Texas, We have built our franchise into the number one underwriter of school financings in the state.

Debbra Schoneman: Looking ahead, we expect a strong quarter to finish.

Deb: Looking ahead, we expect a strong quarter to finish the year.

Deb: Turning to our equity brokerage business, we generated revenues of $52 million up 4% from the third quarter of last year.

Debbra Schoneman: Turning to our equity brokerage business, we generated revenues of $52 million, up 4% from the third quarter of last year. We traded 2.7 billion shares during the quarter on behalf of over 1,200 unique clients. The quality of our research product and trade execution is winning market share and helping offset the impact from a declining market wallet. The fourth quarter tends to be our strongest of the year, and we expect this year to follow that trend. Lastly, turning to fixed income, we generated revenues of 48 million for the third quarter of 2024, up 22% sequentially and 20% from the year ago period.

Deb: We traded $2 7 billion shares during the quarter on behalf of over 200 unique clients.

Deb: The quality of our research product and trade execution is winning market share and helping offset the impact from a declining market wallet.

Deb: The fourth quarter tends to be our strongest of the year and we expect this year to follow that trend.

Deb: Lastly, turning to fixed income, we generated revenues of $48 million for the third quarter of 2024 up 22% sequentially and 20% from the year ago period.

Debbra Schoneman: Market conditions improved during the quarter, driving increased client activity. with the Fed cutting interest rates 50 basis points and more confidence on the direction of interest. Clients were eager to invest some of their liquidity as well as adjust their hedging Additionally, many of our depository clients have worked with our analytics team to take advantage of the change in the yield curve and execute significant balance sheet restructuring. Our fixed income strategy is to lead with analytics and advice, which allows us to maintain a capital light approach, even with significantly higher revenues. With continued improvement in the fixed income markets, we anticipate a strong finish to the year with fourth quarter results similar to the third quarter.

Deb: Market conditions improved during the quarter driving increased client activity.

Deb: With the fed cutting interest rates 50 basis points and more confidence on the direction of interest rates clients are eager to invest some of their liquidity as well as adjust their hedging positions.

Deb: Additionally, many of our depository clients have worked with our analytics team to take advantage of the change in the yield curve and execute significant balance sheet restructuring trades.

Deb: Our fixed income strategy is to lead with analytics and advice, which allows us to maintain a capital light approach, even with significantly higher revenues.

Speaker Change: With continued improvement in the fixed income markets, we anticipate a strong finish to the year with fourth quarter results similar to the third quarter now I will turn the call over to Kate to review, our financial results and provide an update on capital use.

Kate Clune: Now I will turn the call over to Kate to review our financial results and provide an update on Katherine. As Deb said, as a reminder, my comments will address our adjusted non-GAAP Considered in addition to, and not a substitute for, the corresponding gap. We generated net revenues of $352 million for the third quarter of 2024, in line with the sequential quarter, as the improvement in municipal financing, fixed income services, and advisory offset the decline in corporate financing. Net revenues for the quarter increased 15% compared to the third quarter of last year. driven by higher revenues across most of our first nine months of 2024 net revenues totaled $1 billion, up 19% over last year.

Kate: Thanks Deb as a reminder, my comments will address our adjusted non-GAAP financial results, which should be considered in addition to and not a substitute for the corresponding GAAP financial measures.

Kate: We generated net revenues of $352 million for the third quarter of 2024 in line with the sequential quarter as the improvement in municipal financing fixed income services and advisory offset the decline in corporate financing activity.

Kate: Net revenues for the quarter increased 15% compared to the third quarter of last year, driven by higher revenues across most of our businesses.

Kate: For the first nine months of 2024 net revenues totaled $1 billion up 19% over last year.

Kate Clune: More accommodative markets, as well as market share gains, drove increased revenues across corporate investment banking, municipal financing, and fixed assets. year-over-year growth and net revenue continues to highlight the benefits. and Client Diversity. within our business.

Kate: More accommodative markets as well as market share gains drove increased revenues across corporate investment banking municipal financing and fixed income services.

Kate: Year over year growth in net revenue continues to highlight the benefits for margin.

Kate: And client diversification within our businesses.

Kate Clune: starting to operating expenses and Our compensation ratio was 62.5% for the third quarter of 2020. down 90 basis points from the first nine months of 2020. due to increased continue to exercise strong operating discipline while balancing employee retention, investment opportunities, and near term Based on our current outlook, we continue to expect our full year compensation ratio to be near the... non-compensation expenses for the third quarter of 2020. Including Reimbursed Steel Costs. One Million, and in line with our guide. non-compensation costs during the quarter. Including Deal Expenses. 6% unsequential increased 7%. On a year to date basis, excluding reimbursed deal costs, non compensation expenses were 187 million, or an average of 62 million per quarter, and increased 2% over the nine month period of 2023.

Kate: Turning to operating expenses and margin.

Kate: Our compensation ratio was 62, 5% for the third quarter of 2024, and 62, 8% for the nine months period down 90 basis points from the first nine months of 2023 due to increased net revenues.

We continue to exercise strong operating discipline, while balancing employee retention investment opportunities and near term margin.

Kate: Based on our current outlook, we continue to expect our full year compensation ratio to be near this level.

Kate: Non compensation expenses for the third quarter of 2024, excluding reimburse steel costs were $61 million and in line with our guidance.

Kate: Non compensation cost during the quarter, excluding deal expenses decreased 6% on a sequential basis and increased 7% compared to the year ago quarter.

Kate: On a year to date basis, excluding reimbursed deal costs non compensation expenses were $187 million or an average of $62 million per quarter and increased 2% over the nine months period of 2023.

Kate Clune: Continued focus on managing the actionable expenses is driving operating leverage with our non-compensation ratio down 3.6%. compared to last year. third quarter of 2024 we generated operating income of $65 million and an operating margin of $18.4 up over both of the comparable courts. For the first nine months of this year, operating income totaled $182 million. date, net revenues increased 19% while our operating profits are up 6%. compared to the prior year period. Our income tax rate was 28.6% for the third quarter of 2020. and 22.4% for the first nine Income Tax Expense for the Year to Date reduced by $13 million of taxes.

Kate: Our continued focus on managing the actionable expenses is driving operating leverage with our non compensation ratio down three six percentage points compared to last year.

Kate: During the third quarter of 2024, we generated operating income of $65 million and an operating margin of 18, 4% up over both of the comparable quarters.

For the first nine months of this year operating income totaled $182 million, which resulted in a 17, 5% operating margin year to date net revenues increased 19%, while our operating profits are up 60% compared to the prior year period.

Kate: Our income tax rate was 28, 6% for the third quarter of 2024 and 22, 4% for the first nine months of this year.

Income tax expense for the year to date period was reduced by $13 million of tax benefits related to the vesting of restricted stock awards.

Kate Clune: related to the vesting of restrictions. During the third quarter of 2024, we generated net income of 46 and Diluted EPS of $2.57. For the first nine months of this year, net income totaled $141 million and diluted EPS was $7.89.

Kate: During the third quarter of 2024, we generated net income of 46 million and diluted EPS of $2 57.

For the first nine months of this year net income totaled 141 million and diluted EPS was $7 88.

Kate Clune: Let me finish with an update on Capital Today the Board approved a quarterly cash dividend of $0.65 per share. The dividend will be paid on December 13th. to shareholders of record as of the close of business on November during the third quarter of 2024. turned an aggregate of $13 million to shareholders primarily through dividend. to date period, we returned an aggregate of $121 million to shareholders. dividends paid and share repurchase. paid an aggregate of $61 million, or $2.85. to our shareholders through our quarterly and special cash dividends. We also repurchased approximately 325,000 shares of our common stock.

Kate: Let me finish with an update on capital allocation.

Kate: Today, the board approved a quarterly cash dividend of <unk> 65 per share.

Kate: The dividend will be paid on December 13th to shareholders of record as of the close of business on November 20.

Kate: During the third quarter of 2024, we returned an aggregate of $13 million to shareholders primarily through dividends paid.

Kate: For the year to date period, we returned an aggregate of $121 million to shareholders through dividends paid and share repurchases.

Kate: We paid an aggregate of $61 million or $2 85 per share to our shareholders through our quarterly and special cash dividend.

Kate: Also repurchased approximately 325000 shares of our common stock for $60 million related to employee tax withholding on the vesting of restricted stock awards.

Kate Clune: Aidan Hall, Kate Clune, Devin Ryan, James Yaro, Devin Ryan, Aidan Hall, Katherine Clune, These repurchases more than offset the share account dilution from this year's annual continue to execute on our strategy, deliver strong revenues, margins and returns to our shareholders. cycles while growing our capability. Our results for the third quarter and first nine months of 2024 continue to demonstrate the benefit of our diversified platform, as well as strong performance relative to our And we are well-positioned to finish the year.

Kate: These repurchases more than offset the share count dilution from this year's annual stock grants.

Kate: We continue to execute on our strategy to deliver strong revenues margins and returns to our shareholders through cycles, while growing our capability our.

Our results for the third quarter and first nine months of 2024 continue to demonstrate the benefit of our diversified platform as well as strong performance relative to our peer set and we are well positioned to finish the year strong with that we can open up the call for questions.

Operator: With that, we can open up. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one to ask a question.

Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to retire equipment again that is star one to ask a question and we'll pause for just a moment to allow everyone an opportunity to signal.

James Yaro: And we'll pause for just a moment to allow everyone an opportunity to And our first question comes from James Yaro with Goldman Sachs. Good morning and thanks for taking my question. So, I think you did see a little bit of a slowdown sequentially in the corporate finance line. I think so far in 4Q, we've seen some stronger industry IPO trends. I think, Chad, you talked a little bit about some of the stronger 4Q trends for your business in corporate financing. Is that outlook for 4Q in reference to ECM and DCM? And then how do you think about the ECM trajectory into next year?

Speaker Change: And our first question comes from James Yarrow with Golden Goldman Sachs.

James Yarrow: Good morning, and thanks for taking my question. So I think you did see a little bit of a slowdown sequentially in the corporate finance line I think so far in <unk>, we've seen some stronger industry IPO trends I think Chad you talked a little bit about some of the stronger <unk> trends for your business and corporate financing.

Is that outlook for <unk>.

James Yarrow: And in reference to ECM and DCM and then how do you think about the ECM trajectory into next year.

Chad Abraham: Yeah, I think for us, obviously, Q3 was just real slow for corporate financing, you know, I obviously part of that was the market, but you know, some of it was just idiosyncratic, you know, idiosyncratic to us, but We had a few of our larger equity deals that slipped into October. We started you know, October very, very strong on ECM. And yeah, we also expect Q4 to be stronger for DCM. I think most of our commentary on the real strong corporate financing is you know, based on what we're seeing for ECM, but we also expect DCM to be better.

Speaker Change: Yes, I think for us.

Obviously Q3 was just real slow for corporate financing.

Speaker Change: Obviously part of that was the market, but some of it was just studios.

Speaker Change: Socratic to us but.

Speaker Change: We had a few of our larger equity deals that slipped into October we started October very very strong on ECM.

Speaker Change: And yes, we also expect Q4 to be stronger for DCM I think most of our commentary on the real strong corporate financing is based on what we're seeing for ECM, but we also expect.

Speaker Change: DCM to be better.

Debbra Schoneman: Okay, that's helpful. Um, Deb, maybe just one on the equities business, which I think continues to develop to deliver healthy results. Maybe you could just help us think about the ability to continue to grow this business and take share from here into the next couple of years. Yeah, I'd say a couple things, James.

Speaker Change: Okay. That's helpful.

Maybe just one on the equities business, which I think continues to develop to deliver healthy results.

Speaker Change: Maybe you could just help us think about the ability to continue to grow this business and take share from here into the next couple of years.

Speaker Change: Yeah I'd say.

Speaker Change: A couple of things James first of all as we look to continue to build out and we'll be able to talk more about this in the future as well, but build out the sale of our U S research product into the U K, the EU and actually rest of world. So that's something that we're spending some time, we've hired some talent to build out so I think that's where.

Debbra Schoneman: First of all, as we look to continue to build out, and we'll be able to talk more about this in the future as well, but build out the sale of our US research product into the UK, the EU, and actually rest of world. So that's something that we're spending some time, we've hired some talent to build out. So I think that's where it's a share gain outside of the US. The other thing we're looking at is just our electronics platform, again, hired some strong talent. There and it'll take some time, but looking to continue to build that out, both just with additional client relationships, but also with the product itself.

Speaker Change: It's a share gain outside of the U S.

Speaker Change: Other thing we're looking at is just our electronics platform again hired some strong talent, there and it'll take some time, but looking to continue to build that out.

Speaker Change: Both just with additional client relationships, but also with the product itself. So I'd say those are the two areas, where we see outside of always just blocking and tackling.

Debbra Schoneman: So I'd say those are the two areas where we see outside of always just blocking and tackling with the accounts here in the US. But those are two areas for growth for us as we look out over the next year or two.

Speaker Change: With the accounts here in the U S. But those are two areas for growth for us as we look out over the next year or two.

James Yaro: Okay thanks so much for taking my questions. Thank you.

Speaker Change: Okay. Thanks, so much for taking my questions.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from Brendan O'brien with Wolfe Research.

Brendan O'brien: Our next question comes from Brendan O'Brien with Wolf Research. Good morning, and thanks for taking my question.

Good morning, and thanks for taking my questions I guess to start I, just wanted to touch on capital allocation and how youre thinking about at the moment, specifically, whether you are more inclined to do an acquisition versus returning capital to shareholders.

Brendan O'brien: I guess to start, I just wanted to touch on capital allocation and how you're thinking about it at the moment, specifically, whether you're more inclined to do an acquisition versus returning capital to shareholders than you would be historically, just given where you and your peers are trading today, it feels like there could be some interesting opportunities out there to leverage your multiple to do some accretive acquisitions. So yeah, it would just be great to get your updated thoughts and how you're thinking is involved here at all. Yeah, I would say in the, you know, stacker returning capital, you know, trying to add new teams and acquisitions is always at the top, Brendan.

Speaker Change: It would be historically, just given where you and your peers are trading today. It feels like there could be some interesting opportunities out there to leverage your multiple to do some accretive acquisitions.

Speaker Change: It would just be great to get your.

Updated thoughts and how you think he has evolved here if at all.

Speaker Change: Yes, I would say in the stack of returning capital.

Speaker Change: Trying to add new teams and acquisitions is always at the top Brendan and a lot of that just has to do with.

Chad Abraham: And a lot of that just has to do with Over the last six to seven years, you know, we've gotten really good returns from the acquisitions we've done. You know, obviously, we closed Avidity this quarter. But I would say just in general, you know, the acquisition activity has been a little slower because it's just hard to normalize in terms of what, you know, some of the folks were talking to what the results are, you know, historically through the slow period going forward. Some of that's normalizing now. And yeah, I would say we're quite active. And then, you know, again, given that we've just had the you know, string of success on the on the deals, you know, that that helps us with other people sort of calling an interesting interest being interested in partnering.

Speaker Change: Over the last six or seven years, we've gotten really good returns from the acquisitions we've done.

Speaker Change: Obviously, we closed our avidity this quarter.

Speaker Change: But I would say just in general the acquisition activity has been a little slower because it's just hard to normalize in terms of.

Speaker Change: What some of the folks we're talking to what the results are historically through the slow period going forward.

Speaker Change: That is normalizing now and yes, I would say we are quite active and then again given that we've just had.

Speaker Change: A string of success on the on the deals.

Speaker Change: That helps us with other people sort of calling an interesting interest being interested in partnering so yes, we feel pretty good about the pipeline there.

Chad Abraham: So yeah, we feel pretty good about the pipeline there.

Brendan O'brien: That's great. And then for my follow up, I just want to touch on sponsor activity. While trends are clearly improved relative to where we were in the first half of this year, that area of the market is still clearly running well below normal.

Speaker Change: That's great and then for my follow up I, just wanted to touch on sponsor activity, while trends have clearly improved relative to where we were in the first half of this year.

Speaker Change: That area of the market is still clearly running well below normal. So I just wanted to get a sense as to whether the recent fed rate cut has had any impact on the willingness of sponsors.

Chad Abraham: So I just want to get a sense as to whether the recent Fed rate cut has had any impact on the willingness of sponsors to transact and whether we can begin to see sponsors, when we can begin to see sponsors return to the market more aggressively. Yeah, I would say relative to sponsors, it's sort of the same theme I've had the last three or four quarters. It's definitely improving, but but slowly, you know, at the end of some of our heavy private equity processes, you know, where we usually have a handful of buyers, you know, we're negotiating with one or two, you know, the price isn't quite right, the you know, the financing isn't quite perfect.

Transact and whether we can begin to see sponsors when we can begin to see sponsors returned to the market more aggressively.

Speaker Change: Yes, I would say relative to sponsors at sort of the same theme I've had the last three or four quarters, it's definitely improving but but slowly at the end of some of our heavy private equity processes, where we usually have a handful of.

Speaker Change: Buyers were negotiating with one or two the price isn't quite right the financing isn't quite perfect and so I would say, it's it's every quarter it gets better but again, it's not a it's not a snapback so.

Chad Abraham: And so I would say it's, it's every quarter it gets better, but it again, it's not a it's not a snapback.

Chad Abraham: So All that being said, I would say the you know, the last few weeks, we've seen a lot of new pitching with private equity. And so I definitely think we'll see continued improvement in 25 from our private equity business, whether that pace of improvement accelerates, you know, not sure. But you know, right now, we're just sort of assuming that the gradual improvement continues.

Speaker Change: All that being said I would say the last few weeks, we've seen a lot of new pitching with private equity and so I definitely think we will see continued improvement.

Speaker Change: In 25 from our private equity business, whether that pace of improvement accelerate.

Speaker Change: Not sure, but right now we're just sort of.

Speaker Change: Assuming that the gradual improvement continues.

Brendan O'brien: Great, thank you for taking my question. Thank you.

Speaker Change: Alright, Thank you for taking my questions.

Thank you.

Devin Ryan: Our next question comes from Devin Ryan with Citizens JMP. All right. Thanks.

Speaker Change: Our next question comes from Devin Ryan with citizens JMP.

Devin Ryan: Alright, Thanks, good morning, Chad dedicate how are you.

Devin Ryan: Good morning, Chad, Deb, and Kate. Good. Hi, Devin.

Chad Abraham: Good Hi, Devin.

Chad Abraham: Okay.

Chad Abraham: First question, just on Avidity, I know you guys are pretty optimistic about the potential from that transaction, and so with that deal closing recently, I'd love to just maybe get a little bit of a sense of how the integration has been going thus far and the outlook for that business, and really also how much opportunity you see to invest behind the business from here, whether that's on the fundraising side or the secondaries advisory side. Just good to get an update on how that's going so far. Yeah, so we closed at the end of August. And you know, obviously, we've done a lot of transactions, and some of them have been product faced like this, I would say I feel like relative to other transactions, sort of the uptake of sort of inbound calls and a couple of sort of early joint pitches, you know, the the pace of sort of interest from our core banking team in this product, you know, has been very, very good.

Devin Ryan: First question just on visibility I know you guys are pretty optimistic about the potential from that transaction and so with that deal closing recently.

Devin Ryan: And what just maybe get a little bit of sense of how the integration.

Devin Ryan: It's been going thus far and the outlook for that business and really also how much opportunity you see to invest behind the business from here, whether that's on the fundraising side in the secondary advisory side just kidding.

So far.

Speaker Change: Yes, so we closed at the end of August and obviously, we've done a lot of transactions and some of them have been product.

Speaker Change: Base like this I would say I feel like relative to other transactions sort of the uptake of sort of inbound calls and a couple of sort of.

Speaker Change: Early joint pitches.

Speaker Change: Pace of sort of interest from our core banking team and this product.

Speaker Change: It has been very very good so.

Chad Abraham: So, you know, we're excited about that, I think relative to investing, like you talked about, you know, obviously, they had a, a secondary team, but you know, we're going to put a lot more investment behind that, you know, we're going to need more talent. You know, that's, that's probably where there's even more interest from the bankers. So, you know, we're hoping to accelerate that, you know, obviously, that'll take us some time, but we're hoping we have, you know, all the right people. next year and we can dramatically improve that business for them.

Speaker Change: We're excited about that I think relative.

Speaker Change: Two investing like you talked about obviously they had a.

Speaker Change: Hey secondary team, but we're going to put a lot more investment behind that we're going to need more talent.

Speaker Change: That's probably where there's even more interest.

Speaker Change: From the bankers, so we're hoping to accelerate that obviously that will take us some time, but we're hoping we have.

Speaker Change: All the right people.

Speaker Change: Next year, and we can dramatically improve that business for them.

Speaker Change: Alright, alright, great. Thanks, and then.

Devin Ryan: Great. Thanks.

Devin Ryan: And then I just want to come back to your comments on the broader M&A backdrop and sponsors and disengagement that you're seeing right now. I'm just curious, you know, are there certain sectors that are maybe recovering faster? And then are there areas where maybe you see catalysts on the horizon? Clearly, you know, the election is one that's coming soon here. You know, financials would seem to potentially benefit more in the Republican administration. But I'm just curious, kind of what you're seeing behind the scenes in terms of is it broad based, kind of slow recovery? Or are there certain areas that are maybe perking up faster and then potential catalysts to change that as we look into 2025?

Speaker Change: Want to come back to your comments on the broader M&A backdrop and sponsors interest and engagement that you're seeing right now.

Speaker Change: I'm just curious are there certain sectors that are.

Speaker Change: You may be recovering faster and then are there areas, where maybe you see catalysts on the horizon clearly the election walnuts.

Speaker Change: Coming soon here financials would seem too, particularly benefit more in Republican administration, but I'm, just curious kind of what you're seeing behind the scenes in terms of is it broad based kind of a slow recovery or are there certain areas that are maybe parking perhaps or a bed.

Speaker Change: Catalyst to change that as we look into 2025.

Chad Abraham: Yeah, I mean, for us, we talked about it, I think six of our six of our seven industry teams are up nicely over the nine months, you know, the one that's not in advisory is is health care, I would say, you know, relative to Some of the transactions, some of the regulatory environment, you know, some things particularly with, you know, certain of our health care segments, it's been a bit of a tougher health care environment. But, you know, frankly, everything else has been pretty strong. Obviously, you know, kind of every year has been recently been a new record in energy.

Yes, I mean for US we talked about it I think six of our.

Speaker Change: Six of our seven industry teams are up nicely over the nine months.

Speaker Change: One that's not an advisory is.

Speaker Change: Health care, I would say relative to <unk>.

Speaker Change: Some of the some of the transactions some of the regulatory environment, some things, particularly with the.

Speaker Change: Certain of our healthcare segments, it's been a bit of a tougher healthcare environment, but frankly everything else has been pretty strong obviously kind of every year has been recently been a new record.

Speaker Change: In energy, but really across the board, we feel pretty good about how broad advisory is I think relative to financials.

Chad Abraham: But really, across the board, we feel pretty good about, you know, how broad advisory is, I think, relative to financials. Yeah, we're definitely feeling better about depositories. And, you know, obviously, you know, what happens in the election, like you said, is going to matter. But I think just having that behind us, regardless of what happens, will be a bit more of a catalyst. So, you know, there's a slow build in depositories, because it, you know, it takes a while to get the deals announced, and then it takes a long time to get them closed. But we will definitely start to see more transactions there.

Speaker Change: Yes, we're definitely feeling better.

Speaker Change: Depository and.

Speaker Change: Obviously.

Speaker Change: What happens in the election like you said is going to matter, but I think just having that behind us regardless of what happens.

Speaker Change: We'll be a bit more of a catalyst so.

Speaker Change: A slow build and depository is because it takes.

Speaker Change: It takes a while to get the deals announced and then it takes a long time to get them closed, but we will we will definitely start to see more transactions there.

Chad Abraham: Yeah, okay, that's great.

Speaker Change: Okay. That's great. Thanks, and then I guess, probably one year for Kate on the comp ratio.

Kate Clune: Thanks, Chad. And then I guess probably one here for Kate on the comp ratio. Obviously saw a little bit of improvement there in the third quarter. So just given the expectation for a better fourth quarter, should we expect a similar level in the fourth quarter for the comp ratio?

We saw a little bit of improvement there in the third quarter. So just given the expectation for a better fourth quarter should we expect a similar level in the fourth quarter for the comp ratio and then just maybe remind us how we should be thinking about the relationship of revenue growth and the comp ratio as we look into 2025 as well. Thanks.

Kate Clune: And then, you know, just maybe remind us how we should be thinking about the relationship of revenue growth and the comp ratios we look into 2025 as well. Thanks. Thank you for the question. So we did see leverage as we continue to demonstrate discipline on the compensation side. We expect the fourth quarter, if the environment is accommodative and the revenues are strong, to see a little bit of incremental leverage. As a reminder, as we think about things normalizing, we typically guide to 61.5 to 62.5 as being a more normalized range. Of course, that's absent any significant investments.

Speaker Change: Sure. Thank you for the question.

Speaker Change: So we did see leverage as we continue to demonstrate discipline on the compensation side.

Speaker Change: We expect the fourth quarter.

Speaker Change: The environment is accommodative and the revenues are strong to see a little bit of incremental leverage as a reminder, as we think about things normalizing. We typically guide to 61, 5% to 62 and a half as being a more normalized range of course.

Speaker Change: Absent any significant investments and so I think that holds true as we think about going into next year and I think it's twofold. It's both the environment and the revenue side of things and again the investment side of things. So I think that range is still reasonable.

Kate Clune: And so I think that holds true as we think about going into next year. And I think it's twofold. It's both the environment and the revenue side of things and, again, the investment side of things. So I think that range is still reasonable as we think about 2025, but certainly maintaining discipline and driving leverage where we can.

Speaker Change: A reasonable as we think about 2025, but certainly maintaining discipline and driving leverage where we can.

Devin Ryan: All right, great. Thanks so much.

Speaker Change: Alright, great. Thanks, so much I'll leave it there thanks, everyone.

Devin Ryan: I'll leave it there. Thanks, everyone.

Speaker Change: Thanks, Thanks, Kevin.

Operator: Thanks, Devin. And before we go to our next question, one final reminder to our audience, that is star one to ask a question.

And before we go to our next question. One final reminder, to our audience that is star one to ask a question.

Mike Grondahl: Our next question comes from Mike Grondahl with Northland Security. Hey, thanks, guys. And good morning.

Speaker Change: Our next question comes from Mike Grondahl with Northland Securities.

Hey, Thanks, guys and good morning.

Debbra Schoneman: Um, Deb, what are you feeling about a fixed income outlook kind of 4Q and over 25? Yeah, so Q4, as we stated, feel like it's going to look really similar to Q3. Part of that is we've seen some real strength in our depository clients, both just being more active day to day, but also importantly, some of these restructuring trades that they're doing as they look to shed some non-performing assets, take some losses, but really put that money to work in higher performing. We saw that activity in the end of Q3 and going into Q4 pick up as the Fed reduced rates.

Mike Grondahl: Deb branches, what are you feeling about a fixed income outlook kind of <unk> in over 25.

Speaker Change: Yeah. So in Q4 as we stated feel like it's going to look really similar to Q3 part of that as we've seen some real strength in our <unk>.

Mike Grondahl: <unk> clients.

Mike Grondahl: Both just being more active day to day, but also importantly, some of these restructuring trades that they're doing as they look to shed some nonperforming assets take some losses, but really put that money to work in and higher performing we saw that activity in the end of Q3 and going into Q4 pick up as the fed.

Debbra Schoneman: And I think there's a certain amount of let's make sure we don't miss out on this opportunity. But now as rates have, you know, gone back up a little bit, there's just more measured approach to that. So still a great environment for it.

Mike Grondahl: Reduced rates and I think theres, a certain amount of <unk>.

Mike Grondahl: Let's make sure we don't Miss out on this opportunity, but now as rates have.

Mike Grondahl: Gone back up a little bit there's just more measured approach to that so it's still a great environment for it but with the election and all that's why we talk about Q3.

Debbra Schoneman: But with the election and all, that's why we talked about Q3, Q4 looking very similar to Q3. And as we go into 2025, one of the things that's overall important for the fixed income business is just an upward sloping yield curve. So as we see that continue to become more normalized, that'll be good for our fixed income business next year. Got it.

Q4, looking very similar to Q3 and as we go into 2025.

Mike Grondahl: One of the things Thats overall important for the fixed income business is just an upward sloping yield curve. So as we see that continue to become more normalized that'll be good for our fixed income business next year.

Speaker Change: Got it.

Chad Abraham: And Chad, you had said in your prepared remarks, 4Q24 was going to look similar to 4Q23. I don't know any other insight you want to provide on that.

Speaker Change: Chad you had said in your prepared remarks for Q24 was going to look similar to <unk> 23.

Speaker Change: I don't know any other insight you want to provide on that.

Chad Abraham: Yeah, I think, you know, just to remind people, you just on a relative basis, we had a very strong for Q of last year, and we always knew it was going to be a difficult comp. I think we've just felt really good about the start in ECM and the start in advisory and frankly, the start in all of the business lines in October, you know, that that, you know, gives us confidence that, you know, we can match that Uh... Q4 23, you know, obviously, that if there's some dramatic change in market, you know, conditions and the close rate on some of these advisory deals, you know, that then then, you know, then that won't happen.

Speaker Change: Yes, I think.

Speaker Change: Just to remind people just on a relative basis, we had a very strong.

Speaker Change: <unk>.

Last year, and we always knew it was going to be a difficult comp I think we've just felt really good about the start.

Speaker Change: ECM and the start in advisory and frankly, the start in all other business lines in October.

Speaker Change: <unk>.

Speaker Change: It gives us confidence that we can match that.

Speaker Change: Q4, 'twenty three obviously that if there's some dramatic change in market conditions and the close rate on some of these advisory deals.

Speaker Change: Then.

Speaker Change: Then that won't happen, but as we sit here today and with the start in October we feel pretty good about.

Chad Abraham: But as we sit here today, and with the start in October, we feel pretty good about having a result similar to last year. Great to hear.

Speaker Change: Having a result similar to last year.

Speaker Change: Great to hear thank you.

Operator: Hey, thank And it appears there are no further questions at this time.

Speaker Change: Thanks, Mike.

Speaker Change: And it appears there are no further questions at this time, Mr. Abraham I will turn the conference back to you for any additional or closing remarks.

Chad Abraham: Mr. Abraham, I will turn the conference back to you for any additional or closing remarks. Thank you, operator and everyone that joined. We look forward to updating you on our fourth quarter results next year. Have a great day.

Chad Abraham: Thank you operator, and everyone that joined we look forward to updating you on our fourth quarter results next year have a great day.

Operator: This concludes today's call. Thank you for your participation.

Speaker Change: This concludes today's call. Thank you for your participation you may now disconnect.

Operator: You may now disconnect.

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