Piper Sandler Companies

Good morning, and welcome to the Piper Sandler Company's conference call to discuss the financial results for the third 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, are forward-looking statements that involve inherent risks and uncertainties. factors that could cause actual results to differ materially from those anticipated are identified in the company's earnings release and 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 would like to turn the call over to Mr. Chad Abraham. Sir, you may begin your call.

Good morning, everyone. Thank you for joining our call to review our results for the third quarter of 2021. 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. We recorded the fourth consecutive quarter with net revenues at or above 400 million, as we're experiencing strong demand for our services across the platform. We generated adjusted net revenues of 440 million for the third quarter, a 26.3% operating margin, and adjusted EPS of $4.55. For the first nine months of 2021, we recorded adjusted net revenues of $1.3 billion, a 26.4% operating margin, and adjusted EPS of $14.08, all record-setting activity. Our success in the marketplace and the strength of our platform continue to present opportunities for us to add high-quality teams. We were very pleased to announce our combination with Cornerstone Macro earlier in October. Deb will provide more details on the acquisition in her remarks. Turning to our corporate investment banking business, we generated total corporate investment banking revenues of $293 million in the third quarter of 2021, representing our fourth consecutive quarter with revenues in excess of $250 million. Performance during the quarter was strong across industry verticals and product offerings. highlighting the strength of our platform, the benefits from the economic recovery, and demand from market participants across industries. Our financial services, healthcare, consumer, chemicals, and technology teams all had good results in the quarter. Highlights for the quarter included our financial services group posted strong results across multiple subsectors, including banks, asset management, real estate, and insurance. Bank M&A has been very strong in 2021, and we rank as the number one advisor to banks based on number of announced deals and have worked on six of the 10 largest bank mergers announced in 2021. Our market-leading healthcare team continues to put up consistently strong results with balanced contributions from both advisory and financing activity. Our chemicals team closed on a couple of high-profile M&A engagements in the third quarter, and the pipeline remains robust with transactions slated to close later this year or early next year. Thus far in 2021, this team has advised on deals with an aggregate announced value of $22 billion and has solidified their position as a global leader in chemicals M&A. The team is also building a pipeline of financing transactions. When we acquired Valence last year, we were optimistic of capitalizing on the team's sector expertise with our broader suite of product offerings, and we are starting to see these synergies play out. We are pleased that the Valence team is exceeding our expectations. Within corporate investment banking, our advisory services business generated another strong quarter with revenues of $214 million. While this number is down 14% from an exceptionally strong second quarter, it is up 177% from the slow third quarter of last year. M&A activity was strong across industry verticals with high volumes and increased transaction sizes. During the third quarter, we completed 68 M&A and restructuring transactions and 31 capital advisory deals. On a year-to-date basis, advisory services generated $616 million, up 125% over the prior year. During the first nine months of the year, we have either closed or announced more than 200 M&A deals with an aggregate transaction value of over $72 billion. The demand for advisory services has been robust throughout 2021 as we assist clients to navigate a changing landscape. We continue a trend of advising on larger and larger transactions, and our top 10 announced or closed M&A transactions for the first nine months of 2021 averaged $3.5 billion in deal value. We believe the M&A market is experiencing strong secular growth, and with the diversity of our platform, we are well positioned to benefit. A segment of our business that continues to be a growth driver for us is our advisory work with private equity firms. Private equity firms are responsible for a significant portion of middle market M&A activity. The PE firms hold near record amounts of capital and have a tremendous backlog of portfolio companies that require exits to generate liquidity. We expect that private equity firms will continue to account for a meaningful portion of of M&A activity for the foreseeable future. This trend is evident in our M&A business as well. Private equity firms or private equity portfolio companies have been either a client, a counterparty, or both on over two-thirds of our M&A activity during the last 12-month period. The increase to our PE advisory activity has largely been driven by the investments we have made to expand our industry expertise and product capabilities. In 2015, our investment banking business consisted of 65 managing directors, primarily covering four industry segments, healthcare, consumer, diversified industrials and services, and technology. Today, we have 146 managing directors across seven industry segments, chemicals and materials, and financial services. In addition, we have increased our restructuring capabilities, we have continued to enhance our debt capital markets capabilities, and we have expanded our financial sponsors coverage team during this time period. As a result of this strategy, our deal flow, relevance, and reach into the private equity community has grown significantly. As for an outlook, Our advisory pipeline of deals is very strong with a number of larger fee deals announced and expected to close in Q4. Turning to corporate financing. During the third quarter of 2021, we generated $79 million of revenues and completed 66 equity, debt, and preferred financings, raising $30 billion in new capital for our clients. Corporate financing revenues moderated some in the third quarter from the robust level seen over the past several quarters. However, the market remained strong on a relative historical basis. Our healthcare team led the quarter, followed by financial services, technology, and consumer. In healthcare, we continue to be a market leader. We ran the books on 14 of the 15 deals we completed during the quarter. healthcare remains a very large and growing fee pool in equity capital markets. Year to date, we have participated in 83 equity offerings, raising over $18 billion for our clients. Healthcare clients, especially those in the biopharma space, are serial capital raisers in the equity markets, and we have experienced excellent client retention. For example, since the beginning of 2020, we have been hired on 100% of follow-on activity for biopharma clients where we were a lead manager on the IPO financing. The strength of our platform across banking, research, and distribution make us a premier service provider for the entire lifecycle of our clients. In financial services, we continue to be active in debt and preferred financings, pricing 15 deals raising $6 billion for clients during the quarter. Our superior execution and strong distribution remain a key differentiator for us in the marketplace. We were also active in the technology and consumer sectors. During the quarter, we priced 19 deals for technology companies and 9 deals for consumer companies, raising a combined $17 billion in capital. We are focused on growing both sectors and have made significant progress in 2021, not only participating in more deals, but increasingly winning book-run mandates. Lastly, we finished the quarter with 146 MDs in investment banking and capital markets, representing the eighth consecutive quarter of net MD growth, which includes the addition of one new managing director to strengthen our financial sponsors coverage in Europe. Now, I will turn the call over to Deb.

Thanks, Chad. Before I review our quarterly performance, let me provide some background on our recently announced acquisition of Cornerstone Macro, an independent research firm that offers best-in-class macro research and equity derivatives trading to institutional investors. Cornerstone brings over 50 professionals, including 21 research analysts, to Piper Sandler. They specialize in producing high-quality, thought-leading macro, thematic, and quantitative research on global economics, fiscal and tax policy, monetary policy and global asset allocation, portfolio strategy, energy and renewables, and technology. In addition, Cornerstone Macro's options strategy team provides derivative strategy advice and trading capabilities. We believe this research product and option trading strategy will fit perfectly within our broader platform featuring industry-leading deep company and sector-focused research coverage broad trading capabilities, and an experienced distribution team. Together, we will have approximately 1,700 clients, of which nearly 1,300 have no overlap, highlighting the opportunity to cross-sell each other's products. The acquisition further strengthens our position as a top institutional equities platform and represents a significant step towards building a durable $200 million institutional equities business. The transaction is expected to close in the first quarter of 2022. Now turning to equities operating performance. For the third quarter of 2021, we generated equity brokerage revenues of $34 million, down 2% sequentially and up 2% from the third quarter of last year. Equity markets saw reduced volumes during the first half of the third quarter. However, the tone of the equity markets has shifted toward the end of the quarter with increased volatility and volumes in September. We believe volatility and volumes will remain elevated heading into year end. We typically see an uptick in activity in the fourth quarter, and there are a number of catalysts that could elevate client activity, including higher energy prices, inflationary labor, and supply chain constraints impacting company earnings, and the enactment of significant new spending and tax legislation. Turning to municipal financing. For the third quarter of 2021, our public finance business generated an all-time record of $42 million of financing revenues. up 17% from the second quarter and 60% compared to the third quarter of last year. We underwrote 221 municipal negotiated issuances during the quarter, raising $5.2 billion for our clients. We're recording great results from both our governmental and specialty sector clients. As we've noted on prior calls, we've been building our specialty sector client base. which includes special districts, senior living, health care, project finance, education, hospitality, housing, and transportation. The breadth of our high-yield platform within public finance, centered around these specialty sectors, differentiates us in the marketplace and provides diversification from our governmental business. An illustration of this high-yield expansion is our recently added special district group. We entered this space in late 2020 with six senior hires. and have added more than 20 dedicated professionals over the last year. The team currently has market leadership in Colorado and has served as lead manager on $1.5 billion of par value through the first nine months of 2021. We see opportunity to expand this expertise to more states and leverage our geographic reach and local relationships. On a year-to-date basis, municipal financing revenues of $106 million represent our strongest first nine months on record. Our performance relative to peers was also strong, with revenues up 32% from the first nine months of 2020 as compared to a 4% decline in the overall market based on par value of municipal negotiated issuances. With low interest rates and a positive credit outlook, municipal market issuance continues to remain healthy. Looking forward, we expect another strong quarter to finish the year. Turning to fixed income. For the third quarter of 2021, We generated fixed income revenues of $56 million, down 8% on a sequential basis, and up 5% compared to the third quarter of last year. The reduction in yields early in the quarter drove some market participants to the sidelines, awaiting more clarity in the direction of rates. As rates bottomed and then headed higher, we experienced increased activity within our financial services clients as banks flushed with excess liquidity put money to work. Our deep expertise has enabled us to advise these clients on repositioning their balance sheets and investing in a changing rate environment. Our fixed income platform benefits from some built-in synergies with our financial services banking clients. We are adept at helping bank clients reposition loan portfolios and balance sheets following a merger combination. These post-business combination assignments can generate significant revenue opportunities. as we advise clients on optimizing balance sheets following a merger. With increased bank M&A activity, we have seen an increase in these assignments. Activity among many of our public entity and municipal focus clients has been softer, as tight spreads and low yields, combined with a decline in refunding activity, has led clients to remain on the sidelines, resulting in a decline in secondary trading, particularly in tax-exempt municipals. We continue to build our fixed income sales team focused on hiring highly productive individuals who have deep relationships and product expertise and who can leverage our platform capabilities to grow their book of business. As part of that initiative, we have a deliberate effort focused on credit unions, and we recently hired a senior salesperson to join that team. We're looking to continue growing this team and leveraging our financial strategies group to provide differentiated analysis and advice. From an outlook perspective, we expect the fourth quarter to be similar to our prior strong quarters this year. Now, I will turn the call over to Tim to review our financial results and provide an update on capital use.