Piper Sandler Companies

Good morning and welcome to the Piper Sandler Company's second quarter 2024 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 will 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 2024 earnings conference call. Hosting the call today are Chairman and CEO Chad Abraham, our President Deb Shoneman, and CFO Kate Kloon. Earlier this morning, we issued a press release announcing Piper Sandler's second quarter 2024 financial results, which is available on our website at pipersandler.com slash earnings. 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 PiperSandler.com and on the SEC website at SEC.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.

Good morning, everyone. It's great to be with you to talk about our second quarter 2024 results. We delivered strong year-over-year growth, generating adjusted net revenues of $357 million, a 17.3% operating margin, and adjusted EPS of $2.52. Our diversified platform continues to deliver solid profitability, and as market conditions continue improving, we are well-positioned for a strong second half of the year. Corporate investment banking generated $235 million of revenues during the second quarter, an increase of 41% over the same period last year. For the first half of 2024, corporate investment banking revenues were up 33% from last year, with M&A and restructuring activity generating 65% of total corporate investment banking revenues, equity financings contributing 22%, and debt advisory and financings generating 13% of revenues. Results were driven by higher revenues from advisory transactions, the reopening of equity and debt capital markets, and strong relative performance. In addition, revenues generated from private equity clients were up significantly during the first half of 2024. During the year, we have deepened our sector coverage expanded our product capabilities, and grown our geographic coverage while closely managing headcount and productivity. In early June, we announced the pending acquisition of Avidity Advisors, a full lifecycle advisor to private equity GPs and LPs. Avidity was co-founded by Ryan Schlitt and John Robertshaw after previously holding senior positions in private capital advisory groups and asset management at Credit Suisse and DLJ. Ryan and John and their team will bring a wealth of experience and relationships to Piper Sandler. The Avidity team consists of approximately 45 professionals, including 11 managing directors, and will form Piper Sandler's private capital advisory group. The team provides fundraising services, secondary solutions to GPs and LPs, including continuation vehicles, and comprehensive capital market solutions for GPs across the lifecycle of their portfolio companies. The addition of these key capabilities will enhance the value of our platform to our single largest client base, private equity. By leveraging the combined network of financial sponsors with our broad sector coverage, significant opportunities exist to grow revenues over time. Specific to advisory services, revenues were $184 million during the second quarter of 2024, up significantly year-over-year driven by higher fees and more completed transactions. We benefited from broad-based contributions across our industry teams, along with increased revenues from PE clients. We completed 67 advisory transactions during the quarter. Performance was led by the financial services team, which closed several significant transactions that were announced prior to this year. In addition, our services and industrials, chemicals, and debt advisory teams all had strong quarters. Our market leadership, broad industry coverage, and product capabilities are driving strong relative performance, with our first half 2024 advisory revenues up 26% over the first half of last year, compared to middle market activity that was flat. Looking forward, the advisory market is gradually improving as CEO confidence strengthens. We expect our third quarter advisory revenues to be largely consistent with the second quarter, with the potential for upside as we build into a strong Q4. Turning to corporate financing, revenues were $51 million during the second quarter, down modestly from the first quarter. We completed 31 equity and debt financings, raising over $5 billion for corporate clients. Performance was led by our healthcare and financial services franchises. The healthcare team served as book runner on all nine equity deals priced during the quarter, and the financial services team completed a couple of large equity capital raises in the depository space. For the first half of 2024, the equity capital markets economic fee pool increased 54% over last year, while our economic fees increased 61%. The strength of our platform continues to drive market share growth. Looking ahead, corporate financing activity has slowed in July, and we expect revenues for the third quarter to be down from the first half 2024 run rate. 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 ended the second quarter with 170 managing directors as we remain focused on selectively adding MDs while managing retirements and productivity. We continue to invest in our technology franchise, adding two managing directors focused on financial technology. In addition, we recently announced the hiring of three managing directors to our services and industrials team who will focus on residential and commercial services. They joined 18 professionals based out of our new Birmingham, Michigan location, the majority of whom started during the second quarter. With that, I will turn the call over to Deb to discuss our public finance and brokerage businesses.