Piper Sandler Companies

Good morning and welcome to the Piper Sandler Company's conference call to discuss the financial results for the second quarter of 2022. 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 pipersandler.com and on the SEC website at 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, and thank you for joining us.

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. The firm delivered solid performance during the quarter, and we continue to invest in acquisitions to expand our areas of focus and accelerate long-term growth. Our business proved resilient against a challenging backdrop, reflecting the benefits of a diversified business model. Our strategy is focused around growing our advisory business through sector and product expansion, as well as continuing to add scale and increasing market share in our financing and brokerage businesses through market cycles. While the macro environment remains uncertain, I am confident about our position in the market and our ability to execute on our growth strategy. To that point, in June, we closed on our acquisition of Stanford Partners, a European consumer M&A boutique with a focus on food and beverage. Stanford is highly complementary to our existing strong franchise in food and beverage and will increase our ability to serve clients both domestically and internationally. In addition, on July 6th, we announced the pending acquisition of DBO Partners, a technology investment banking firm. The acquisition is expected to close during the fourth quarter of 2022 and will roughly double our technology practice to over 50 professionals on a combined basis. The DBO team adds exceptional talent and enhanced scale to our tech practice. The acquisition will elevate our franchise by adding new sectors, reaching more clients, and expanding our market share. DBO brings a strong track record of working with market-leading clients and enhances our large-cap credentials as well as our brand in both the corporate and financial sponsor world. In addition, DBO's general partner advisory practice provides us with an additional valuable capability to offer our financial sponsor clients. In turn, we will provide DBO access to our equity and debt capital markets capabilities, as well as provide DBO with connectivity to the hundreds of private equity clients we do business with. Both transactions are consistent with the strategic goals we've articulated previously, namely to grow our M&A business in technology and further expand our European business. Focusing in on our financial results, during the second quarter of 2022, we generated adjusted net revenues of $346 million, a 17.5% operating margin and adjusted diluted EPS of $2.47. During the first half of 2022, we recorded adjusted net revenues of $707 million, a 19.2% operating margin, and adjusted diluted EPS of $5.59. Although lower compared to the record prior year period, we delivered solid performance given the challenging and complicated macroeconomic environment. Next, let me review our corporate investment banking business, beginning with advisory services. Advisory revenues of $170 million during the second quarter of 2022 declined 20% sequentially and 32% from the exceptional year-ago quarter. Market volatility has resulted in delayed transaction closings, which impacted Q2 results. Performance during the quarter was led by our financial services group, which advised on three of the five largest U.S. bank M&A transactions that closed during the quarter. And we remain the number one advisor to U.S. banks based on the number of announced M&A deals during both the second quarter and the first half of 2022. In addition, our energy and power team has been capitalizing on renewed interest and increased activity in the industry, driving strong results during the quarter. More broadly, Piper Sandler was the number two advisor for USM&A deals under $1 billion, based on the number of announced transactions during both the second quarter and the first half of this year. Our advisory pipelines across verticals remain strong. However, current macroeconomic conditions have introduced a level of uncertainty in our outlook that we have not experienced in the past 18 months. During the quarter, we began to experience more deals slipping into the second half of this year and a limited number of deals that died. Longer deal timelines is a trend we expect to continue in the second half of 2022. Turning to corporate financing, we generated $29 million of financing revenues during the second quarter. Although the equity capital markets remained largely shut down, we improved on a sequential basis as we underwrote 11 equity deals as well as several preferred and debt capital raises for financial services companies. Turning to investment banking managing director headcount, we finished the quarter at 153 managing directors. representing our 11th consecutive quarter of managing director growth on a net basis. We had an active quarter from a recruiting perspective, as we added two MDs to strengthen our restructuring practice, as well as expanded our technology and diversified industrials and services groups. As we have experienced in the past, during more challenging market conditions, we have had success strengthening our platform. In the short term, This can impact current results, but as we have communicated, our focus remains on growing the franchise long-term to derive results for our shareholders. Our success and momentum continue to resonate in the marketplace. Both our recruiting efforts and the development of our own talent continue to be priorities. While the second half of the year remains difficult to predict, I remain confident in our ability to execute our plan, strengthen our competitive position, and achieve long-term growth. With that, I will turn the call over to Deb to discuss our public finance and brokerage businesses.