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 2024. During the question and answer session, securities industry professionals may ask questions of management. The company will make forward-looking statements on this call 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 earnings release and reports on file with the SEC, which are available on the company's website at www.piperstandler.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. Good morning, everyone.

Thanks for joining us. It's great to be with you to talk about our first quarter 2024 results. I am here with Deb Shoneman, our president, and Kate Kloon, our CFO. During the first quarter, we generated adjusted net revenues of $334 million and a 16.8% operating margin, and adjusted EPS of $2.79. While market headwinds persist, we're encouraged by the improvement in certain businesses, most notably equity capital markets. Our diversified platform continues to perform well through varied cycles. Corporate investment banking generated revenues of $210 million during the first quarter and a 25% increase over the same period last year, driven by higher revenues from both advisory and corporate financing. We benefited from the sector and product diversification of our business, along with increased revenues from private equity clients. Advisory services revenues were $157 million during the quarter and increased year-over-year, driven by higher average fees. The trend of advising on larger transactions and generating larger fees continues to be a key driver of our results. We completed 57 advisory transactions during the first quarter. Performance was led by the best quarter on record from our energy and power team, with solid contributions from our financial services, consumer, and healthcare groups. In addition, following a record 2023 Both our restructuring and debt advisory groups started this year with strong results. The outlook for M&A has improved as CEO confidence strengthens. We expect our second quarter advisory revenues to be consistent with the first quarter before improving in the second half of 2024, resulting in revenue seasonality similar to last year. Turning to corporate financing. The market for equity underwriting improved considerably during the quarter, driven by a more accommodative backdrop and increased demand from companies looking to raise capital. For context, the economic fee pool was approximately $2 billion during the quarter, almost double the average of the last eight quarters and more in line with normalized levels. The sub-$5 billion market cap fee pool also increased meaningfully and included an outsized contribution from health care. Corporate financing revenues were $53 million during the first quarter, nearly double the prior year quarter, driven by higher average fees and more completed transactions. We completed 35 equity, debt, and preferred financings, raising over $10 billion for corporate clients. Performance was led by our market-leading healthcare franchise, which served as book runner on 19 of the 20 equity deals priced during the quarter. Looking ahead, if this level of market activity is sustained, we expect participation will broaden across sectors. Turning to investment banking managing director headcount. Our approach has not changed, and we continue to target the addition of five to seven MDs annually. We added a net two managing directors during the quarter, finishing with 171 MDs. We remain focused on strengthening sector coverage and expanding our product offerings. and we are well positioned to drive revenue growth as markets continue to normalize. During the last several years, we have grown our market leadership meaningfully, and Piper Sandler is increasingly seen as a destination of choice for talented professionals and teams looking to leverage our full suite of products to better serve their clients and grow their book of business. Our recruiting pipeline is robust, with a number of investment banking managing directors slated to start during the second and third quarters of this year. Over the long term, we remain focused on growing our corporate investment banking revenues by continuing to advance corporate development, scaling industry teams, gaining market share with a focus in technology, increasing our product delivery to private equity clients, and continuing to build out our equity capital markets business with a disciplined focus in each of our industry sectors. With that, 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. While interest rates trended higher during the quarter, the market for higher yielding municipal debt offerings has thawed. Credit spreads have tightened due to increased investor demand, allowing us to execute on a number of specialty transactions. We generated $21 million of municipal financing revenues during the first quarter of 2024, up 23% year over year, driven by our specialty sector business. We underwrote 86 municipal negotiated transactions, raising $4 billion of par value for our clients. Performance during the quarter was driven by our real estate, healthcare, and affordable housing sectors, as well as our state and local government practice in Texas and Washington. As we look ahead, we believe a period of sustained municipal fund inflows and lower nominal interest rates are needed for middle market issuance to increase. Turning to our equity brokerage business, equity markets saw muted volatility during the first quarter as markets ground higher with indices hitting new highs. We generated revenues of $49 million for the first quarter of 2024, down 8% from the first quarter of last year, which benefited from increased volatility. We traded 2.6 billion shares during the quarter on behalf of over 1,200 unique clients as they sought our market-leading research, corporate access, and trading capabilities. We continue to see client research votes increasing as we demonstrate the value of our capabilities and ability to assist clients generate alpha. During the quarter, we hired a senior research analyst in healthcare with coverage focused on biotech companies, a key addition in the build-out of our biotech franchise. With muted volatility, we see near-term results to be relatively consistent with the first quarter while expecting increased volumes and activity in the second half of the year. Lastly, turning to fixed income, we generated revenues of $42 million for the first quarter of 2024, consistent with the year-ago quarter. Client activity is slowly improving but remains fairly muted as market participants wait for more certainty on interest rates. The breadth of our client relationships and product capabilities continues to provide a level of resiliency to our results. Public entity clients were active as they found relative value in the short end of the yield curve, while insurance companies were active due to the higher rate environment. Now I will turn the call over to Kate to review our financial results and provide an update on capital use.