Piper Sandler Companies

Good morning, and welcome to the Piper Sandler Company's conference call to discuss the financial results for the first quarter of 2021. During the question and answer session, securities industry professionals may ask questions of management. The company has asked that I remind you that statements on this call that are not historical or current facts, including statements about beliefs and expectations, or 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 reports on file with the SEC, which are available on the company's website at www.pipersandler.com and on the SEC website at www.sec.gov. This call will also include statements regarding certain non-GAAP financial measures. The non-GAAP measures should be considered in addition to, and not a substitute for, measures of financial performance prepared in accordance with GAAP. Please refer to the company's earnings release issued today for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure. The earnings release is available on the investor relations page of the company's website and at the SEC website. As a reminder, this call is being recorded. And now, I'd like to turn the call over to Mr. Chad Abraham. Mr. Abraham, you may begin your call.

Good morning, everyone. Thank you for joining the call to review our first quarter 2021 results. I am here with Deb Shoneman, our president, and Tim Carter, our CFO. We will go through our prepared remarks and then open up the call for questions. Market conditions remain supportive during the quarter and the strength and diversity of our franchise continues to be evident as we delivered record first quarter results and we continue to execute on our strategic priorities. As the operating environment continues to open, we are accelerating the process of bringing employees back to the office, and we are increasingly meeting with clients face-to-face. During the first quarter of 2021, we generated record adjusted net revenues of $414 million, a 24.8% operating margin, and adjusted EPS of $4.13. Our strong start to the year was broad-based as all of our businesses had impressive results during the quarter. Turning to our corporate investment banking business, we generated total corporate investment banking revenues of $269 million in the first quarter of 2021. This is the second consecutive quarter with corporate investment banking revenues in excess of $250 million. Our performance by sector was broad, led by our market-leading healthcare practice, which continues to generate record results as we assist clients to connect them with investors who have an interest in this space. The quarter also included strong contributions from our consumer team, which had a record quarter driven by strong M&A activity, and from our technology group, which was active in equity capital raising. During the quarter, equity financings contributed 43% of total corporate investment banking revenues. M&A activity generated 40%, and debt and capital advisory engagements produced 17% of revenues. We expect our mix of corporate investment banking revenues to shift as our advisory pipeline builds and equity capital markets activity begins to moderate. Our advisory services business performed well, generating revenues of $153 million during the first quarter of 2021. We completed 47 M&A transactions and 30 capital advisory deals. M&A activity and pipelines continue to build across all of our industry verticals. As an example, we have advised on seven of the 10 largest valued bank M&A transactions announced this year. The pace of COVID-19 vaccine access has picked up and businesses are quickly repositioning for a post-pandemic landscape. Demand from PE investors and SPACs along with low rates, ample liquidity, and a strong economic recovery, are driving CEO confidence and M&A activity. With the investments we have made and the strength and breadth of our advisory business, we believe we are well positioned to capitalize on the accelerating strength of the market. Turning to corporate financing, we continue to take advantage of a spectacular equity new issuance market where activity was centered on healthcare companies and SPACs. During the first quarter of 2021, we generated a record $116 million of revenues and completed 71 equity financings, raising $22 billion in new capital for our clients. Our expertise and reputation in the healthcare space, combined with robust markets, allowed us to assist our clients to raise record levels of capital to fund innovative technologies. which drove our strong performance. We ranked as a top three book runner of healthcare IPO and follow on offerings during the quarter. Our success and momentum continue to resonate in the marketplace, and our recruiting efforts have been very effective. Over the last six months, we have strengthened our presence by adding MDs in healthcare, technology, financial services, and diversified industrials, as well as our growing restructuring capabilities. We plan to continue strengthening our sector penetration by adding talent, looking to embrace our client-centric culture. Before I turn the call over to Deb, I'd like to highlight a recent leadership transition. In March, we named Mike Dillahunt as co-head of investment banking and capital markets. Scott LaRue has transitioned to the role of vice chairman of investment banking. For over a decade, Scott was my steadfast partner as co-head of investment banking and and has continued as a trusted advisor. As vice chairman of investment banking, Scott will remain involved in many of our most important growth initiatives, including seeking out corporate development opportunities and identifying and connecting with talented people who fit our culture. Mike Dillahunt will co-lead the group alongside James Baker, who has served as global co-head of investment banking and capital markets since 2018. Mike is a 23-year veteran of Piper Sandler, an exceptional banker, as well as a growth-oriented team builder and culture carrier for the firm. Mike recently served as co-head of the Diversified Industrials and Services Group, where he led its sector expansion and growth of its private equity coverage. I am confident that Mike and James will successfully lead our corporate investment banking business to accomplish its many near and long-term goals including growing annual revenues to a consistent $1 billion plus in the coming years. Now I will turn the call over to Deb.

Thanks, Chad. I'll begin with an update on our equity brokerage business. Equity markets in the first quarter saw elevated volatility and volumes. Market indices traded higher, driven by COVID-19 vaccination access and improving economic metrics. Client activity increased with market participants repositioning into securities that are expected to benefit from the reopening of the economy and a shift from growth stocks to value stocks. Federal stimulus measures and accommodative Federal Reserve policies providing ample liquidity were additional catalysts to the market. Our equity brokerage business generated revenues of $43 million for the quarter, up 9% sequentially and down 10% from the first quarter of 2020, where we saw unprecedented volatility as the world first faced the pandemic. We assisted clients trade 3 billion shares during the quarter as clients repositioned portfolios and set our premier trade execution capabilities. We continue to increase the number of clients transacting with us on a monthly basis as an increasing number of clients gravitate to our enhanced scale research products and execution capabilities. Looking forward, in April we have seen meaningfully lower volumes resulting from the decline in volatility as market participants have entered a consolidation phase. We remain focused on providing value-added research product and premier execution capabilities to assist clients navigate an ever-changing investing landscape. Turning to municipal financing. Our public finance business started the year strong with $27 million of financing revenues down from the strong fourth quarter of 2020, and up 20% compared to the first quarter of last year. We continued to benefit from strong new issuance as clients took advantage of low rates. The first quarter saw a decline in governmental issuance from the robust fourth quarter, especially in the school district space. However, we saw a marked increase in demand for specialty sector issuances, which provide investors with higher yields and can offer us higher fees. We continue to grow our specialty sector offerings, which is a differentiator in the marketplace. We were able to capitalize on our strength in charter schools, senior living, and project finance specializations to assist clients in these specialty sectors raise capital in the first quarter of 2021. We underwrote 181 municipal negotiated issuances representing approximately 10% of the activity in this market and we retained our number two ranking based on number of deals nationwide. Looking ahead, we expect market issuance to remain strong. We expect governmental issuance to continue to moderate. However, we see increased demand for higher yielding specialty sector offerings where our pipeline is strong, including with our recently added Colorado-based team specializing in special district financings. Turning to fixed income. For the first quarter of 2021, we generated record fixed income revenues of $66 million, up 25% from the fourth quarter of 2020. The market saw increased interest rates in the first quarter, which drove client activity. The 10-year Treasury rate increased from 0.93% at December 31st to 1.74% at March 31st. The increase in risk-free treasury yields reflect uncertainty in the market on expectations of future inflation. Volatility in yields has been driven by uncertainty in the market with respect to the impacts from government stimulus, increase in government debt levels, very accommodative Fed policies, and the strength of economic activity from the reopening of the economy. We have seen some clients repositioning balance sheets and portfolios for higher rates, while other clients see the increase in rates as transitory. The uncertainty in the direction of future interest rates has driven client volumes higher, which has benefited our client flow-based business. From an outlook perspective, we anticipate the uncertainty over the direction of interest rates to remain front and center as our clients react to an evolving economic outlook. We aim to retain the tremendous momentum in our fixed income business by providing differentiated advice and analytics tailored to define client verticals, serving those clients with product expertise that goes far beyond traditional bonds to include derivatives, loan strategies, and securitizations. We also provide clients with access to the breadth of our new issue taxable and tax-exempt products. Now I will turn the call over to Tim to review our financial results and provide an update on capital use.