Q2 2025 Piper Sandler Co Earnings Call
Please stand by, your conference is about to begin.
Good morning and welcome to the Piper Sandler Companies' second quarter 2025 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 Winslow. Please go ahead.
Thank you, operator.
Good morning and thank you for joining the piper Sandler company's second quarter 2025 earnings conference. Call hosting the call today, are chairman and CEO Chad Abraham. Our president Deb Shaman and CFO Kate Clune.
Today's discussion of the results is complimentary to the press release.
A replay of this call will also be available at that same website later today.
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.
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 Piper sandler.com. And on the SEC website at se.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.
A Reconciliation of these non-gaap Financial measures to the most directly comparable. Gaap measure is provided in our earnings release issued today.
I will now turn the call over to Chad.
Thank you, Kate.
Good morning everyone. Thank you for joining our second quarter 2025 earnings call.
When we spoke with you, after the first quarter, the macro environment was challenging.
And the second quarter began with uncertainty and persistent volatility.
By mid-May, market sentiment shifted. Equity markets recovered, and confidence improved.
As a more constructive Outlook took hold.
By an engagement across businesses, gained momentum.
.95.
All higher compared to the same period last year.
Advisory revenues were 206 million during the quarter up 12%. Year-over-year driven by our broad set of products and a higher average fee.
We completed 71 transactions During the period.
Up compared to the second quarter of last year.
Performance was led by our services and Industrials group.
Which delivered one of their best quarters since 2021.
The strong performance of our Services and Industrials team reflects the continued addition of high-quality talent that focuses on subverts important to our clients.
During the first half of 2025, advisory revenues were $423 million, up 24% compared to the year ago period.
This growth was driven by higher revenues from m&a, as well as increased non- m&a revenues.
Which include debt advisory private Capital advisory and restructuring?
Our investments in non-M&A advisory capabilities continue to gain traction, as total revenues from these product lines grew at a rate in excess of our overall advisory revenues.
We have strategically expanded our industry and product capabilities, which has not only deepened client relationships, but also enhanced our ability to deliver comprehensive advice.
Throughout the entire Market cycle.
For example, our debt advisory team has been very active, and we continue to experience strong demand for their services.
Our best-in-class team, which leverages deep industry, expertise and strong, lending relationships is delivering effective solutions for our clients.
Overall, our Market leadership, broad industry, coverage and product capabilities, continue to drive, strong relative performance.
diversification from both a sector and product perspective benefited US during the first half of 2025
Even as the number of completed Middle Market M&A transactions declined year-over-year.
In the quarter impacted some deal processes. The outlook for advisory Services has improved.
We have a robust pipeline of announced and in-process transactions, and we expect our third quarter advisory revenues to be largely consistent with the second quarter.
Turning to corporate financing.
Revenues were $35 million during the second quarter.
Down 31% from the year-ago period.
We completed 26 financings, raising $10 billion for corporate clients.
Performance was driven by Financial Services.
The team served as bookrunner on 14 of the 17 deals completed for financial services clients.
Which accounted for over half of our corporate finance.
While we're encouraged that corporate financing activity is improving in certain areas.
Other areas continue to be impacted by sector-specific factors.
For the first half of the year, the economic fee pool, for companies with sub 5 billion dollars of market, cap to increase, 19% year-over-year,
With that some core. Sectors were down more meaningfully, such as a 61% decline in the economic fee pool for biofarma companies.
As we look ahead, our pipeline, remains strong and diverse and we're pleased. The third quarter is off to a good start.
Shifting to Talent.
We finished the quarter with 182 managing directors.
Consistent with first quarter levels and up 7% from a year ago.
During the quarter, we hired 5 MDS to strengthen both sector and product expertise.
These hires will strengthen our coverage in biofarma, insurance, and technology, and enhance our secondary capital advisory and debt advisory capabilities.
The additions were offset by some reductions in force actions, which reflect our ongoing focus on broader talent management.
We remain intentional about strategically managing headcount and driving productivity, while looking for opportunities to strengthen our platform.
Overall, our second-quarter results were strong, and we are pleased with our performance.
As we look ahead, we are entering the back half of the year with solid momentum and are well positioned to gain share.
I will turn the call over to Deb to discuss our Public Finance and brokerage businesses.
Thanks, Chad.
I'll begin with an update on our Public Finance business.
Market conditions remain favorable during the second quarter, driven by growing infrastructure needs, relatively stable borrowing conditions, and strong investor demand due to higher yields.
These dynamics led issuers to more actively assess the market.
For the second quarter of 2025, we generated $42 million in municipal financing revenues, up 66% year-over-year, exceeding the market issuance growth in par value of 15%.
Activity was robust across both our governmental and specialty sectors, with strong performance attributable to the breadth of our clients and geographic reach.
Performance with broad-based across several of our leading franchises, including those in Kansas and California, as well as our special district and Healthcare groups.
Looking ahead. We have a robust pipeline yet. Expect third quarter revenues, to moderate from the very strong second quarter.
Now, turning to our brokerage businesses.
After a sharp sell-off in April, the equity markets recovered, with major indices reaching all-time highs.
Equity brokerage generated 58 million of revenues for the second quarter of 2025, an increase of 12% year-over-year.
We traded 2.9 billion shares on behalf of over 1,200 unique clients as we assisted clients in navigating the heightened volatility and rapidly changing landscape.
Additionally, activity has been robust on our derivatives desk.
We have consistently grown the number of clients and revenue per client on our derivatives desk, through our strategic, focus on enhancing client relationships and delivering tailored Solutions.
We expect Revenue to moderate from second quarter levels. As volatility has normalized with the vix declining to 17 at the end of June.
lastly, turning to fixed income, we generated 54 million of revenues for the second quarter of 2025 up, 21% from the first quarter and 37% from the year ago, period driven by robust activity, with our depository clients,
Notably, we completed several large balance sheet restructuring trades in conjunction with the closing of bank M&A transactions.
While engagement is high, and the team continues to provide differentiated advice.
Activity with non-depository clients has been subdued caused by spread tightening and relative value concerns.
The combination of potential Fed rate cuts and a steepening yield curve, should continue to enhance client engagement and activity. However, given our strong second quarter, we anticipate fixed income revenues to soften in the third quarter.
Now, I will turn the call over to Kate to review our financial results and provide an update on Capital use.
Thanks Deb before reviewing our 9 Gap Financial results. Let me discuss an item impacting our Gap results. This quarter
For the second quarter of 2025, our GAP results include a $5 million restructuring charge related to headcount reductions, as well as vacated office space associated with our acquisition of Aid Advisors.
Turning now to our adjusted non-gaap Financial results, which should be considered in addition to and not a substitute for the corresponding gaap Financial measures.
We generated net revenues of 405 million for the second quarter of 2025.
Operating income was $73 million, resulting in an operating margin of 18.1%.
We delivered 53 million of net, income and 2.95 of diluted eps.
For the first half of 2025, net revenues totaled, 789 million operating income amounted to 142 million and our operating margin was 18%.
We generated $126 million of net income and 7.4 cents of diluted EPS.
Net revenues for the second quarter of 2025 increased 6% from the first quarter of this year and 14% compared to the second quarter of last year driven, primarily by strong activity in our Municipal financing and institutional brokerage businesses.
in addition, we benefited from increased advisory Services, revenues compared to the year ago quarter
Net revenues for the first half of 2025 increased 14% over last year, driven by advisory services, which accounted for 54% of total net revenues and increased 24% year-over-year.
And equity brokerage businesses both delivered record revenues for the first half period.
We reported a compensation ratio of 62% for the second quarter of 2025 and 62.2% for the first half of the year, an improvement from the comparable periods, driven by increased net revenues.
We remain committed to exercising, operating discipline and balancing employee retention and Strategic investment opportunities.
For the second quarter of 2025, non-compensation expenses excluding reimbursed deal costs were $69 million, consistent with the first quarter, and increased 6% year-over-year, driven by higher legal fees as well as increased professional fees associated with technology and consulting services.
Non-compensation costs for the first half of 2025, excluding reimbursed deals, totaled $139 million, an increase of 10% compared to the first half of last year.
Moving to income tax expense.
Our income tax rate in the quarter was 28.1%, and 11% for the first half of the year.
Income tax expense for the year to date was reduced by $26 million of tax benefits related to the vesting of restricted stock awards.
Excluding the $26 million of benefits, our effective tax rate for the year-to-date period was 29.6%.
Now finishing with capital.
During the quarter, we repurchased approximately 85,000 shares, or $21 million, of our common stock and paid an aggregate of $17 million to shareholders through our quarterly dividend.
For the first half of this year, we returned an aggregate of $189 million to shareholders. This includes repurchases of approximately 351,000 shares or $102 million of our common stock, primarily related to employee tax withholdings on the vesting of restricted stock awards.
It also includes an aggregate of $87 million, or 4.3 cents per share, paid to shareholders through our quarterly and special cash dividends.
Lastly, I am pleased to announce that, effective today, the Board approved a 5-cent increase to our quarterly cash dividend, bringing it to $0.70 per share.
The dividend will be paid on September 12th to shareholders of record as of the close of business on August 29th.
Thanks Kate.
Before taking questions, let me close with a few remarks on our acquisition announcement from earlier this morning.
We've entered into a definitive agreement to acquire G-Squared Capital Partners.
A boutique Investment Bank.
Specializing in government services and defense technology.
The transaction is expected to close in the third quarter of 2025.
based in Washington DC area, g-squared consists of 10 professionals, including 3 managers
Depending on the acquisition, it will further the growth of our Technology Investment Banking group.
By combining their deep government sector experience with our cyber security and broader technology expertise.
As well as our strong access and relevance to private equity.
In addition, we will provide g-squared access to our full Suite of product capabilities to better serve their clients.
This transaction is consistent with the strategic goal we've articulated previously to continue growing our M&A, business, and technology.
With that, we can now open up the call for questions.
Thank you. If you'd like to ask a question, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Once again, that is star 1 to signal for a question.
And we'll move right to Devin Ryan with citizens. Please go ahead.
I agree. Good morning, everyone. How are you?
Morning.
Um, first question on, uh, consolidation in the depository space, obviously, the no Sandler team's been active in in the non-bank space, over the last few years, uh, which was just good but, uh, starting to see some Bank m&a, finally. And, um, you guys are obviously starting to participate in that as well. Um, so just love to get a, a sense of of how you would frame. Um, you know, what, a more normal Bank consolidation Market could mean for revenue for Piper, uh, and then just incredible, you're seeing in the backlog, the timing you do you think that there's revenues potentially for this year, ramping or, or is this much more of a 2026 story and
Yeah. Um, I do think the conditions have continued to, uh, improve for depository M&A, obviously.
Uh, credits been pretty good. Uh, there's Capital available if that needs to be part of, uh, transactions were definitely seeing
Proof of, uh, regulatory approvals. Um, I’m being quicker. Um, yeah, and I would say our pace of announcements has increased, you know, kind of across the spectrum, the small deals, uh, a few of the larger deals. Um, I do think some of these will, uh, you know, some of the stuff, uh, because it’s closing faster will close.
Uh, later in the year, but I, I still think we'll feel a lot of this impact, uh, um, next year, but the conversations are good. And it's, you know, honestly, it's it's hard to, you know, besides, uh, you know, the fact that, that a lot of the bank stock prices haven't recovered, uh, quite as much. It's hard to imagine, you know, much of the other criteria being a lot better.
Got it. Okay. Thanks, Chad. Um, and then, uh, the follow-up here on ability and just kind of the kind of capital.
Solution. So, almost 1 year, um, you know, post closing. Um, it'd be great just to hear about, uh, how that business is enhancing connectivity with clients now that you've kind of been connected for some time and and to go to markets, um, I'm sure kind of pretty well-developed right now. Um, so can you talk about how it's improving connectivity with clients and then, is there more that you can do their meaning? If you added a lot more resources or are there any capabilities, you're learning, you still might need to add for um, your your sponsor clients. Thanks.
yeah, I would say honestly, that that transaction has um, worked out sort of exactly as we had hoped, you know, just as a reminder they've got uh,
a couple large parts of the business, actually a few parts of the business, but, uh, um, you know, new fund and existing Fund Raising and then obviously, uh, the secondary Market, they were
You know, heavily weighted, uh, sort of new capital raising. Uh, we did, uh, recently announced, um, you know, a a significant higher to help just with, uh,
Uh, more teams helping on the secondary side. You know, I I think what I've been really pleasantly surprised with is just, uh, you know, the depth of relationships, when you're raising money, you know, for a particular fund, uh, you know, that the you're dealing with the senior Partners, the decision makers, and I think that helps across
All types of transactions that, you know, help us tell our story about our debt advisory business. It helps us on sell-side M&A. So,
You know, relative to other things we've done, I think we've had quite a bit of pickup. And, um, you know, certainly...
Quicker than other things in terms of, uh, you know, the bankers really locking on to this as an opportunity. So I think our timing was good. Transactions are picking up and, uh, you know, frankly, the results have been pretty good. So we're very pleased with how that's going.
Okay, uh, that's great. I will leave it there, but thanks for taking the questions.
Do you find that? Your question has been answered. You may remove yourself from the queue by pressing *2. We move next to James Yarrow with Goldman Sachs.
Uh, good morning and thanks for taking the questions. Chad I was I was hoping you might be able to touch a little bit on the IPO backdrop as we look ahead. And perhaps, if you could also comment specifically on biotech, uh any color you could offer on the scale of the pipelines and and perhaps contextualize that versus history for the broader IPO for broader IPOs as well as biotech.
Yeah, so I honestly think, uh, you know, that question is really the tale of two cities. We're
Um, you know, relative to the IPO market. Now, these are off of a few years that were really slow, so we're, but, you know, we're definitely seeing a pickup. And I, you know, I can just really comment on some of the sectors.
we're pretty active in, you know, we had a few years where we didn't see
Many IPOs in Medtech. And now we've been, uh, you know, this year on 4 or 5, uh, IPOs in Medtech, uh, which is great to see. Uh, obviously, we've heavily invested in, uh, Insurance. Uh, we've been on a few great, uh, transactions there. So, you know, the backdrop, the conditions, the performance of some of these deals. I I do think that, uh, continues to set up for
The reason our financing business has been down is, you know, we we, we're, we're heavily weighted to healthcare and obviously way to biotech, and, you know, that people's been weighed down, uh, you know, frankly follow-ons but, you know, especially IPOs. I mean, I, I can't, uh, you know, can't recall. But it's, it's been a while since we've seen a biotech IPO. So, uh, those are always kind of different markets. So I say, you know, in general, uh, the IPO markets, improving in general. Uh, we we're off in July here. We've done some nice transactions in biotech, but it's coming off of a slow pace. And so I think we're going to need to see continued Improvement before that hits the biotech IPO Market.
That's very clear. Thank you. Uh, as just a second question, I'd just like to parse the the constructive Bank m&a, tone versus the weaker, uh, 3Q. Fixed income trading commentary, and perhaps that's, it's just a timing issue. But, um, uh, you know, some thoughts there and then maybe also just on bank and writing so specifically, um, you know, how does the week or fixed income trading square, with the improving Bank m&a backdrop. Um, and then, if you could just comment uh, on the outlook for Bank equity and debt underwriting
Yeah, I'll start James with the fixed income side. So I would say it's a little more of just, uh, having a really, a strong Q2 than seeing anything. That might seem, uh, inconsistent with the commentary on that. Chad made on Bank m&a. Uh, 1 of the things with our restructuring business and we did have a very, uh, strong
A couple of strong Trend, very large transactions in the second quarter. Um, you know, for example we had a a transaction a restriction transaction that was over 2.5 billion uh in par relative to both the the buys and sells so um very large so just I it's more about coming off of that. Strong second quarter as we think about restructuring going forward. Uh, there's 2 pieces, 1 is maybe more a little bit tougher to predict which is part of what's in our comments relative to restructuring. It is true that, as m&a picks up, we will see in our seeing more of that activity. It's just a little difficult to predict exactly when that will happen. There's a more predictable side to restructuring that we see more this seasonality around building into Q4. Um, so I don't if that answers your question, if you need more clarity, but I would say it's just more destroying strong second quarter. Yeah. And the, the second part of your question, uh, uh.
About just, uh, capital raising and, and, uh, DCM. We're definitely seeing a pickup there, uh, with banks. You know, we did a lot of this financing, uh, five years ago, a lot of that paper, uh, rolls off and frankly, the terms just, uh, and coupons continue to get, uh, uh, better. And you know, we have very high market share, ah, there. So, um, you know, we commented that, you know, a good chunk of what we did do in financing came from, uh, FSG Discord or so. Uh, you know, we expect that to continue.
Really helpful. Thank you. And just to be clear, Deb, when you say "restructure," you mean balance sheet restructuring within fixed income? All right, yes.
Yes, that's what I was thinking about. Yeah, thank you, perfect. Thank you.
We'll go next to Brendan O'Brien with Wolfe research.
Good morning and uh, thanks for taking my questions.
Just wanted to ask on the sponsor environment just give in, you know, the increased pressure to return Capital to LPS, you know, Trends seem to have been improving of late, but just wanted to get a sense as to how you would characterize the conversations.
Excuse me, you're having discussions with your sponsor clients at the moment. Has there been any shifts in the tenor of those discussions? Um, over the past, you know, few weeks, even? It feels like we're starting to see some acceleration there.
Yeah. I mean, obviously I have, uh, we've said it's coming, um, uh, several times. And, you know, I would say the data is, uh, a little bit better, but not a lot better. I would say I've been out with, uh, sponsors a lot the last, uh,
Month. And, you know, everybody seems pretty active. I do think there's a lot of transactions that have launched. Um, I think relative to sort of process. Uh, people are still being, uh, careful. But I, I absolutely believe we're going to see a nice pickup in the, the back half and, uh, and into next year, um, although I agree, it's probably been a little slower than we've than we've thought.
A couple color and then I guess from my follow-up question, more of a bigger picture 1, you know, now that we're on our way or entering what feels like a recovery. Um you know obviously depending on how
But you know, now that we're on the path towards recovery, I just wanted to get a sense of your confidence in your ability to hit that $2 billion Investment Banking target that you outlined prior to this slowdown and how to think about the trajectory or the building blocks from here.
yeah, I mean every time I talk about that it's that's really just related to sort of the diversity of the business and seeing within each of those industry teams where our
pockets are to grow. And, you know, we continue to invest in in that. Obviously, we've talked a lot about technology. We did a, a small transaction today, super complimentary to our cyber and security practice. Uh, you know, gets us, uh, uh, a new office in uh DC. Um, I think there's just multiple
Uh, verticals and things like that, that we're having success with. We talked a lot about uh, our services and Industrial business which, you know, we've felt uh,
Uh, you know, with the team we hired in Michigan, uh, frankly. That has a lot of traction. So I think we're still on the, the Brick by Brick strategy with opportunity in every industry team. I'm always careful not to get pinned into a corner. Like exactly how many years is that going to take, but I think we have even more conviction. Uh, you know as time goes by relative to each industry team where we're going to see the growth where we're going to add, uh, the MDS. And we still believe we'll see some increase, um, uh, productivity because
Even though we're growing revenues, uh, you know, we're still not happy with the total productivity levels.
Thank you for taking my questions.
Once again, that is star 1 to signal for a question. We'll move next to Mike Grandahl with Northland Securities.
Hey, thank you, and congrats on a strong quarter. Um, first question, just Chad.
Uh, your health care advisory outlook.
Kind of, what do you seeing there?
Yeah. Uh,
your member relative to advisory Healthcare was our only team that was down last year. Uh, it's been quite strong this year. Probably our team that's up the most in advisory, um, which which, which has had a big part of uh, uh, the Improvement. So I think that's really twofold. Uh, you know, coming off of a very slow year, um, different regulatory environment that uh uh people are willing to uh try sort of uh you know, not completely. But mostly tariff proof relative to, you know, a lot of domestic businesses a lot of service businesses. So, um, we're we're having a very good good year. In healthcare advisory
got it, and then
Within that overall advisory, could you kind of describe a debt advisory transaction and a private capital market transaction? I just want to better understand those two areas, as that area, along with restructuring, is growing a lot.
Yeah, we we obviously we sort of called out um, you know, we really look at the non m&a advisory business as capital advisory which we already talked about, uh, debt advisory.
And restructuring, um, you know, our, our peer sort of agent and debt advisor has been 1 of the fastest growing parts of the firm over the last.
4 or 5 years. A lot of that has to do with all the alternative sources for Capital with, you know, various credit funds. Um,
and so, you know, a typical transaction, uh, you know, obviously there's there's never a typical transaction but all Sites types of transactions relative to financing to a sponsor, to do an acquisition, uh, financing to a sponsor to recap, uh, financing. Uh, you know, that they have, um, adding sort of, uh, add-on, uh, capital
All all sorts of things, you know, sometimes sort of exclusive to 1 buyer. Uh, sometimes there's uh,
A couple of buyers. But it's, you know, there's just been an explosion of various providers of credit and uh, you know, that's been very good for our business because it's also
It's hard for companies, you know they they used to have to access Capital with 10 or 12 Banks. Now you know there's several hundred
That business, which I think you asked about, um, in our FSG business, we do some sort of underwritten, but we do a lot of agent, uh, debt business. A lot of this Bank business, we just talked about, you know, is
Uh, so the other financial institutions depositories, other types of financial institutions, it's usually sort of 5 year paper. Um, you know, all a lot of the banks, other financial institutions sort of have that paper. A lot of times they're just rolling that over with other financing. Sometimes it's new capital.
Got it. Hey, that that's helpful. And uh congratulations.
Thank you, thanks.
For return to James yarrow, with Goldman Sachs. Please go ahead.
Thanks for the follow-up. I just wanted to touch a little bit more on the comp and non-comp expenses on the comp side. Uh, how would you think about the competition show trajectory from here? Now that you're comfortably within, I think your target range and on the non-comp uh, dollar side growth, uh x-ray. Reimbursable expenses has been a bit higher uh, than I think you you'd previously talked about. So, so maybe just any update on how we should think about uh full year uh non-comp expenses.
So, uh, thanks for the question James, uh, starting on the comp ratio side. Um, again, we continue to focus on that balance of, you know, driving leverage, and then ensuring that, we're, uh, also investing where those opportunities arise. Um, you know, with the improved Revenue this quarter. It allowed us to, to drive for that leverage, um, that you referenced, and we'd expect for the remainder of the year to be in this range. Um, you know, without providing any sort of specific, um, figure to your point, we're kind of right in between our 61 and a half to 62 and a half sort of normalizing range for comp ratio so feeling good about that. Um, and that's really barring any, uh, significant outsized Investments or, you know, kind of turn in the market conditions.
Um, just to take a moment on non-con. Uh, you're right. We are, uh, trending a bit above, you know, kind of that increased guided range that we've provided for this year. I think about 3 material drivers there. Um, 1 is the large occupancy expense increase, uh, that we have, um, you know, telegraphed out there. And that has to do with the relocation of our, our headquarters here in Minneapolis, um, as we talked about, at the end of the first quarter, tne running a little bit ahead of, of where we had expected. Some of that just has to do with, you know, more people on the platform higher cost of travel Etc. That is moderated a bit, although it does run a little bit ahead of where we thought we would still be kind of on a year-to-date basis. Then the third category that I think is really what's driving the differential?
As we referenced uh in the script for this quarter, it's kind of professional and legal fees. Um, legal fees, I think about in 2 categories, 1 is just sort of standard legal fees that you know, comments running the business a little bit ahead of of where we expected. The other is a little bit more of a, a legal expense associated. With some of our ECM transactions, given the uh, ECM, um, volatility, we saw at the beginning of, of the period here, um, we aren't adjusting that range, I think we'll be sort of between where we are here in the higher end of the range that we have provided for the remainder of the year. But we'll certainly update that that guidance, if if anything changes
Okay, thank you so much.
At the time, we have no further questions. I'd like to turn the floor back to Chad for any additional or closing remarks.
Thank you to everyone who joined us this morning. We look forward to updating you on our Q3 results. Have a great day.
This concludes today's conference, we thank you for your participation. You may disconnect your lines at this time.