Piper Sandler Companies

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 first quarter 2025 earnings conference call. Hosting the call today are Chairman and CEO Chad Abraham, our President, Deb Shoneman, and CFO, Kate Klunk. Earlier this morning, we issued a press release announcing Piper Sandler's first quarter 2025 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 measures is provided in our earnings release issued today. I will now turn the call over to Chad.

Thank you, Kate. Good morning, everyone. Thank you for joining our first quarter 2025 earnings call. Over the past month, we have witnessed heightened volatility in both equity and debt markets. with the only constant in this challenging environment being continued uncertainty. In response to these challenges, we are increasing client engagement, drawing on our deep sector expertise, and leveraging our comprehensive suite of products to assist clients navigate this uncertainty with the support and insights they need to succeed. Turning to our results, we are pleased with our start to 2025. We finished the first quarter strong with adjusted net revenues of $383 million, a 17.9% operating margin, and adjusted EPS of $4.09, all up compared to the same period last year. Turning to corporate investment banking, revenues for the quarter totaled $253 million, reflecting a 20% increase year-over-year. This improvement was driven by advisory services. which ended the quarter with revenues of $217 million, a 38% increase from last year, showcasing strong absolute and relative performance. An increased average fee drove the growth in our advisory revenues as we completed 55 advisory transactions during this period, consistent with the first quarter of last year. Our performance across industry groups was broad-based, and five of the seven groups delivered year-over-year growth. We also saw balanced contributions from both strategic and financial sponsor clients. The outlook is difficult to predict in this environment. With heightened volatility, we expect active M&A deal cycles to slow and new announcements to be delayed. However, our ability to provide a range of solutions to clients should serve us well. Over the last several years, we have expanded both our industry and product capabilities. This expansion has significantly bolstered our ability to provide advice and solutions across more sectors of the economy throughout the entire market cycle. In addition, due to our diversified sector coverage and because much of our business is U.S., mid-cap, and sponsor-centric, We believe that we are well positioned on a relative basis in this challenging environment. In particular, as the economic backdrop for M&A becomes more challenging, financial sponsors are able to draw on our diversified product teams, including agent of debt, continuation vehicles, and restructuring to address capital and liquidity needs. And while we anticipate that the conversion of our pipelines will be impacted, and that second quarter advisory revenues will decline from the first quarter levels, it is worth noting that certain areas of the M&A market remain active. Service-based business models and those that are less impacted by trade barriers continue to transact and do so at strong valuations. When the market does find its footing once again, we anticipate a strong and fairly broad rebound in activities. particularly with financial sponsors as they continue to face pressure to transact given the aging of both uninvested capital and their portfolio investments. That backdrop, together with the roughly 340 companies we have sold to financial sponsors that still reside in their portfolios, position us well as the incumbent bank to capitalize on round-trip sale, continuation vehicle, and financing opportunities from our private equity client base. Turning to corporate financing. Activity was challenged this quarter as the market environment for equity underwriting weakened. Declining equity valuations and increased uncertainty led investors to adopt a more risk-off stance ahead of the trade policy announcements. As a result, the economic fee pool declined meaningfully year over year, while the health care fee pool decreased over 60%. For the quarter, We generated $36 million of corporate financing revenues, down 32% from the year-ago period. We completed 27 financings, raising $10 billion for corporate clients. Highlights of these efforts include serving as a book runner on four IPOs, including two for MedTech companies. Equity capital raising has been very slow in April. and we expect that trend to continue until volatility subsides and valuations stabilize. Shifting to talent, we finished the quarter with 182 managing directors, a 6% increase from a year ago. During the quarter, we hired two MDs to our Energy, Power, and Infrastructure group. These new hires, along with additional junior bankers, highlight a further expansion into the infrastructure sector, which naturally complements our well-established energy sector franchise. We also added a managing director to our healthcare investment banking team to serve and support clients within the pharma services sector. Let me close with a few final points. While the near term remains uncertain, we have strategically built an investment banking platform that is well-positioned to gain market share. We continuously rank as a top three investment bank in middle market deal activity, an area of the market that typically demonstrates greater resilience. We have significantly grown market share with private equity clients, providing a solid foundation for future growth. Our diversified platform on a product and sector level enables our bankers to better assist the evolving needs of their clients. And lastly, We remain a destination of choice for talent. This environment often presents opportunities to attract talented professionals who are drawn to our collaborative culture, proven track record of growth, and the positive impact they can have on their clients and the overall firm. With that, I will turn the call over to Deb to discuss our public finance and brokerage businesses.