Piper Sandler Companies

Your conference is about to begin. Good morning and welcome to the Piper Sandler Company's second quarter 2025 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'll 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 2025 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 2025 financial results, which is available on our website at pipersandler.com slash earnings. Today's discussion of the results is complementary 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.

Thank you, Kate. Good morning, everyone. Thank you for joining our second quarter 2025 earnings call. When we spoke with you after the first quarter, the macro environment was challenging, and the second quarter began with uncertainty and persistent volatility. By mid-May, market sentiment shifted, equity markets recovered, and confidence improved. As a more constructive outlook took hold, client engagement across businesses gained momentum. As a result, we closed the second quarter with adjusted net revenues of $405 million, an 18.1% operating margin, and adjusted EPS of $2.95, all higher compared to the same period last year. Advisory revenues were $206 million during the quarter, up 12% year over year, driven by our broad set of products and a higher average fee. We completed 71 transactions during the period, up compared to the second quarter of last year. Performance was led by our Services and Industrials group, which delivered one of their best quarters since 2021. The strong performance of our Services and Industrials team reflects the continued addition of high-quality talent that focuses on sub-verticals important to our clients. During the first half of 2025, advisory revenues were $423 million, up 24% compared to the year-ago period. This growth was driven by higher revenues from M&A as well as increased non-M&A revenues, which include debt advisory, private capital advisory, and restructuring. Our investments in non-M&A advisory capabilities continue to gain traction as total revenues from these product lines grew at a rate in excess of our overall advisory revenues. We have strategically expanded our industry and product capabilities, which has not only deepened client relationships, but also enhanced our ability to deliver comprehensive advice throughout the entire market cycle. For example, our debt advisory team has been very active, and we continue to experience strong demand for their services. Our best-in-class team, which leverages deep industry expertise and strong lending relationships, is delivering effective solutions for our clients. Overall, our market leadership, broad industry coverage, and product capabilities continue to drive strong relative performance. Diversification from both a sector and product perspective benefited us during the first half of 2025. even as the number of completed middle market M&A transactions declined year over year. Although volatility early in the quarter impacted some deal processes, the outlook for advisory services has improved. We have a robust pipeline of announced and in-process transactions, and we expect our third quarter advisory revenues to be largely consistent with the second quarter. Turning to corporate financing. Revenues were $35 million during the second quarter, down 31% from the year-ago period. We completed 26 financings, raising $10 billion for corporate clients. Performance was driven by financial services. The team served as book runner on 14 of the 17 deals completed for financial services clients, which accounted for over half of our corporate financing revenues. While we're encouraged that corporate financing activity is improving in certain areas, other areas continue to be impacted by sector-specific factors. For the first half of the year, the economic fee pool for companies with sub-$5 billion of market cap decreased 19% year over year. Within that, some core sectors were down more meaningfully, such as a 61% decline in the economic fee pool for biopharma companies. As we look ahead, our pipeline remains strong and diverse, and we're pleased the third quarter is off to a good start. Shifting to talent, we finished the quarter with 182 managing directors, consistent with first quarter levels and up 7% from a year ago. During the quarter, we hired five MDs to strengthen both sector and product expertise. These hires will strengthen our coverage in biopharma, insurance, and technology and enhance our secondary capital advisory and debt advisory capabilities. The additions were offset by some reductions in force actions, which reflect our ongoing focus on broader talent management. We remain intentional about strategically managing headcount and driving productivity while looking for opportunities to strengthen our platform. Overall, our second quarter results were strong and we are pleased with our performance. As we look ahead, we are entering the back half of the year with solid momentum and are well positioned to gain share. With that, I will turn the call over to Deb to discuss our public finance and brokerage businesses.