PIPER SANDLER COMPANIES

Previous wording

We have included financial measures that are not prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). Adjustments to these non-GAAP financial measures include (1) the exclusion of investment (income)/loss and non-compensation expenses related to noncontrolling interests, (2) the exclusion of interest expense on long-term financing from net revenues, (3) the exclusion of amortization of intangible assets related to acquisitions, (4) the exclusion of compensation expenses from acquisition-related agreements, (5) the exclusion of restructuring and integration costs related to acquisitions and/or headcount reductions, (6) the exclusion of non-compensation expenses from proposed regulatory settlements (see Note 12 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information) and (7) the income tax impact allocated to the adjustments. The non-compensation expenses from proposed regulatory settlements for the three and six months ended June 30, 2024 include the reversal of other operating expenses of $0.5 million and $4.0 million, respectively, as we reduced the accrual for civil penalties related to proposed regulatory settlements with the SEC and Commodity Futures Trading Commission. Additionally, we incurred $0.4 million of outside services expenses for the three and six months ended June 30, 2024 in connection with these matters. The adjusted weighted average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share contains an adjustment to include the common shares for unvested restricted stock awards with service conditions granted pursuant to all acquisitions since January 1, 2020. These adjustments affect the following financial measures: net revenues, compensation expenses, non-compensation expenses, income tax expense/(benefit), net income attributable to Piper Sandler Companies, earnings per diluted common share, total non-interest expenses, pre-tax income and pre-tax margin. Management believes that presenting these results and measures on an adjusted basis in conjunction with the corresponding U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across periods and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.

Current wording

We have included financial measures that are not prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). Adjustments to these non-GAAP financial measures include (1) the exclusion of investment (income)/loss and non-compensation expenses related to noncontrolling interests, (2) the exclusion of interest expense on long-term financing from net revenues, (3) the exclusion of amortization of intangible assets related to acquisitions, (4) the exclusion of compensation and non-compensation expenses from acquisition-related agreements, (5) the exclusion of restructuring and integration costs related to acquisitions and/or headcount reductions, (6) the exclusion of non-compensation expenses from regulatory settlements (see Note 13 to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information) and (7) the income tax impact allocated to the adjustments. The non-compensation expenses from regulatory settlements for the nine months ended September 30, 2024 include the reversal of other operating expenses of $4.0 million, as we reduced the accrual for civil penalties related to regulatory settlements with the SEC and Commodity Futures Trading Commission (the "CFTC"). The non-compensation expenses from regulatory settlements for the three and nine months ended September 30, 2023 include a $15.0 million accrual of other operating expenses for an estimated civil penalty related to the regulatory settlement with the SEC. In connection with these matters, we also incurred $0.4 million of outside services expenses for the nine months ended September 30, 2024, and $1.4 million of outside services expenses for the three and nine months ended September 30, 2023. The adjusted weighted average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share contains an adjustment to include the common shares for unvested restricted stock awards with service conditions granted pursuant to all acquisitions since January 1, 2020. These adjustments affect the following financial measures: net revenues, compensation expenses, non-compensation expenses, income tax expense, net income attributable to Piper Sandler Companies, earnings per diluted common share, total non-interest expenses, pre-tax income/(loss) and pre-tax margin. Management believes that presenting these results and measures on an adjusted basis in conjunction with the corresponding U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across periods and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.

Previous wording

As part of our growth strategy, on June 6, 2024, we announced a definitive agreement to acquire Aviditi Advisors, an alternative investment bank providing full lifecycle services to financial sponsors, global alternative investment managers and limited partner investors. The transaction is expected to close late in the third quarter or early in the fourth quarter of 2024, subject to obtaining required regulatory approvals and other customary closing conditions.

Current wording

As part of our growth strategy, on August 23, 2024, we completed the acquisition of Aviditi Capital Advisors, LLC ("Aviditi Advisors"), an alternative investment bank providing full lifecycle services to financial sponsors, global alternative investment managers and limited partner investors. The transaction adds private capital advisory capabilities to our platform.

Previous wording

U.S. monetary policy remains a more prevalent factor impacting the economy and financial markets. The U.S. Federal Reserve continued to hold its short-term benchmark interest rate steady in the second quarter of 2024 and is expected to begin reducing benchmark rates in the second half of the year as inflation moderates. The 2024 U.S. presidential election may influence the volatility or direction of the markets in the second half of the year based on investors' assessment of the outcome and the overall political outlook in the U.S. Additionally, geopolitical concerns, including the conflicts in the Middle East and Eastern Europe, could negatively impact financial market activity.

Current wording

U.S. monetary policy remains a prevalent factor impacting the economy and financial markets. The U.S. Federal Reserve cut its short-term benchmark interest rate by 50 basis points in the third quarter of 2024 and is expected to continue to reduce benchmark rates as inflation moderates. The 2024 U.S. presidential election may influence the volatility or direction of the markets in the fourth quarter based on investors' assessment of the outcome and the overall political outlook in the U.S. Additionally, geopolitical concerns, including the conflicts in the Middle East and Eastern Europe, could negatively impact financial market activity.

Previous wording

Equity financing activity declined in the second quarter from a strong first quarter of 2024. Corporate financing activity began the third quarter slowly and we expect our corporate financing revenues for the third quarter to be down from our first half of 2024 run rate as demand for equity new issuances has weakened.

Current wording

While our corporate financing activity declined in the third quarter, activity in October has outpaced the entire third quarter. We expect our corporate financing revenues for the fourth quarter to be up meaningfully on a sequential basis.

Previous wording

For the three months ended June 30, 2024, we recorded net income attributable to Piper Sandler Companies of $34.8 million. Net revenues for the three months ended June 30, 2024 were $339.2 million, a 17.5 percent increase compared with $288.7 million in the year-ago period. In the second quarter of 2024, investment banking revenues were $259.8 million, up 41.2 percent compared to $184.0 million in the prior-year period, resulting from an increase in advisory services revenues, as well as higher corporate financing and municipal financing revenues. For the three months ended June 30, 2024, institutional brokerage revenues were $91.7 million, a 4.4 percent increase compared with $87.8 million in the second quarter of 2023, resulting from modest increases in both our fixed income services and equity brokerage businesses. For the three months ended June 30, 2024, net interest income increased to $5.0 million, compared to $1.1 million in the prior-year period, driven by higher interest income on our cash balances and lower interest expense as we repaid our long-term financing arrangement in the fourth quarter of 2023. In the second quarter of 2024, we recorded an investment loss of $17.4 million, compared to investment income of $15.8 million in the second quarter of 2023. In the current quarter, we recorded unrealized losses on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Non-interest expenses were $310.9 million for the three months ended June 30, 2024, up 13.3 percent compared with $274.3 million in the prior-year period, primarily due to increased compensation expenses resulting from higher revenues and profitability.

Current wording

For the three months ended September 30, 2024, we recorded net income attributable to Piper Sandler Companies of $34.8 million. Net revenues for the three months ended September 30, 2024 were $359.6 million, a 24.2 percent increase compared with $289.5 million in the year-ago period. In the third quarter of 2024, investment banking revenues were $241.5 million, up 14.1 percent compared to $211.7 million in the prior-year period, resulting from increases in advisory services and municipal financing revenues, partially offset by lower corporate financing revenues. For the three months ended September 30, 2024, institutional brokerage revenues were $100.9 million, an 11.5 percent increase compared with $90.5 million in the third quarter of 2023, resulting from increases in both our fixed income services and equity brokerage businesses. For the three months ended September 30, 2024, net interest income increased to $6.5 million, compared to $4.4 million in the prior-year period, driven by higher interest income on our cash balances and lower interest expense as we repaid our long-term financing arrangement in the fourth quarter of 2023. In the third quarter of 2024, we recorded investment income of $10.7 million, compared to an investment loss of $17.1 million in the third quarter of 2023. In the current quarter, we recorded gains on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Non-interest expenses were $304.0 million for the three months ended September 30, 2024, up 3.8 percent compared with $292.9 million in the prior-year period, primarily due to increased compensation expenses resulting from higher revenues and profitability.

Previous wording

Compensation and benefits expenses, which are the largest component of our expenses, include salaries, incentive compensation, benefits, stock-based compensation, employment taxes, the reversal of expenses associated with the forfeiture of stock-based compensation, and other employee-related costs. A significant portion of compensation expense is comprised of variable incentive arrangements, including discretionary incentive compensation, the amount of which fluctuates in proportion to the level of business activity, increasing with higher revenues and operating profits and decreasing with lower revenues and operating profits. Other compensation costs, primarily base salaries and benefits, are more fixed in nature. The timing of incentive compensation payments, which is generally in February, has a greater impact on our cash position and liquidity than is reflected on our consolidated statements of operations. In conjunction with our acquisitions, we have granted restricted stock and restricted cash with service conditions, which are amortized to compensation expense over the service period. We have also entered into forgivable loans with service conditions, which are amortized to compensation expense over the loan term. Additionally, expense estimates related to revenue-based earnout arrangements with service conditions entered into as part of our acquisitions are amortized to compensation expense over the service period.

Current wording

Compensation and benefits expenses, which are the largest component of our expenses, include salaries, incentive compensation, benefits, stock-based compensation, employment taxes, the reversal of expenses associated with the forfeiture of stock-based compensation, and other employee-related costs. A significant portion of compensation expense is comprised of variable incentive arrangements, including discretionary incentive compensation, the amount of which fluctuates in proportion to the level of business activity, increasing with higher revenues and operating profits and decreasing with lower revenues and operating profits. Other compensation costs, primarily base salaries and benefits, are more fixed in nature. The timing of incentive compensation payments, which is generally in February, has a greater impact on our cash position and liquidity than is reflected on our consolidated statements of operations. In conjunction with our acquisitions, we have granted restricted stock, restricted cash, and restricted mutual fund shares of investment funds ("MFRS Awards") with service conditions, which are amortized to compensation expense over the service period. We have also entered into forgivable loans with service conditions, which are amortized to compensation expense over the loan term. Additionally, expense estimates related to revenue-based earnout arrangements with service conditions entered into as part of our acquisitions are amortized to compensation expense over the service period.

Previous wording

The following table summarizes our future acquisition-related compensation expense for restricted stock and forgivable loans with service conditions, as well as expense estimates related to revenue-based earnout arrangements:

Current wording

The following table summarizes our expected future acquisition-related compensation expense for restricted stock, MFRS Awards and forgivable loans with service conditions, as well as expense estimates related to revenue-based earnout arrangements:

Previous wording

For the three months ended June 30, 2024, compensation and benefits expenses increased 24.1 percent to $234.7 million, compared with $189.2 million in the corresponding period of 2023, due to higher revenues and profitability. Compensation and benefits expenses as a percentage of net revenues was 69.2 percent in the second quarter of 2024, compared to 65.5 percent in the second quarter of 2023. Excluding the impact of noncontrolling interests, our compensation ratio decreased to 65.8 percent in the second quarter of 2024, compared with 68.6 percent in the second quarter of 2023, primarily due to higher revenues and a decrease in acquisition-related compensation expenses.

Current wording

For the three months ended September 30, 2024, compensation and benefits expenses increased 11.4 percent to $231.0 million, compared with $207.3 million in the corresponding period of 2023, due to higher revenues and profitability. Compensation and benefits expenses as a percentage of net revenues was 64.2 percent in the third quarter of 2024, compared to 71.6 percent in the third quarter of 2023. Excluding the impact of noncontrolling interests, our compensation ratio decreased to 65.7 percent in the third quarter of 2024, compared with 68.1 percent in the third quarter of 2023, primarily due to higher net revenues.

Previous wording

Outside services expenses include securities processing expenses, outsourced technology functions, outside legal fees, fund expenses associated with our consolidated alternative asset management funds and other professional fees. Outside services expenses increased slightly to $14.0 million in the second quarter of 2024, compared with $13.5 million in the corresponding period of 2023.

Current wording

Outside services expenses include securities processing expenses, outsourced technology functions, outside legal fees, fund expenses associated with our consolidated alternative asset management funds and other professional fees. Outside services expenses increased 7.9 percent to $13.5 million in the third quarter of 2024, compared with $12.5 million in the corresponding period of 2023, primarily due to higher recruiting and placement fees, as well as increased legal fees.

Previous wording

For the three months ended June 30, 2024, occupancy and equipment expenses increased to $16.8 million, compared with $16.0 million in the corresponding period of 2023.

Current wording

For the three months ended September 30, 2024, occupancy and equipment expenses increased slightly to $16.5 million, compared with $16.3 million in the corresponding period of 2023.

Previous wording

Communication expenses include costs for telecommunication and data communication, primarily consisting of expenses for obtaining third-party market data information. For the three months ended June 30, 2024, communication expenses increased 11.7 percent to $14.6 million, compared with $13.0 million in the corresponding period of 2023, primarily due to higher market data services expenses.

Current wording

Communication expenses include costs for telecommunication and data communication, primarily consisting of expenses for obtaining third-party market data information. For the three months ended September 30, 2024, communication expenses increased 6.4 percent to $13.7 million, compared with $12.9 million in the corresponding period of 2023, primarily due to higher market data services expenses.

Previous wording

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. For the three months ended June 30, 2024, marketing and business development expenses increased slightly to $11.4 million, compared with $10.9 million in the corresponding period of 2023.

Current wording

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. For the three months ended September 30, 2024, marketing and business development expenses increased 19.8 percent to $10.4 million, compared with $8.7 million in the corresponding period of 2023, primarily due to increased travel expenses associated with increased transaction opportunities.

Previous wording

Deal-related expenses include costs we incurred over the course of a completed investment banking deal, which primarily consist of legal fees, offering expenses, and travel costs. For the three months ended June 30, 2024, deal-related expenses were $5.9 million, compared with $7.5 million for the three months ended June 30, 2023. The amount of deal-related expenses is principally dependent on the level and mix of deal activity and may vary from period to period as the recognition of deal-related costs typically coincides with the closing of a transaction.

Current wording

Deal-related expenses include costs we incurred over the course of a completed investment banking deal, which primarily consist of legal fees, offering expenses, and travel costs. For the three months ended September 30, 2024, deal-related expenses were $6.1 million, compared with $6.7 million for the three months ended September 30, 2023. The amount of deal-related expenses is principally dependent on the level and mix of deal activity and may vary from period to period as the recognition of deal-related costs typically coincides with the closing of a transaction.

Previous wording

For the three months ended June 30, 2024, trade execution and clearance expenses decreased slightly to $4.5 million, compared with $4.9 million in the corresponding period of 2023.

Current wording

For the three months ended September 30, 2024, trade execution and clearance expenses increased slightly to $5.2 million, compared with $4.9 million in the corresponding period of 2023.

Previous wording

For the three months ended June 30, 2024, we incurred restructuring and integration costs of $1.0 million, primarily consisting of transaction costs related to our announced acquisition of Aviditi Advisors. We expect to incur additional restructuring and integration costs for the remainder of 2024.

Current wording

For the three months ended September 30, 2024, we incurred restructuring and integration costs of $0.8 million. The expenses related to our acquisition of Aviditi Advisors and consisted of $0.5 million of integration costs and $0.3 million for vacated leased office space. We expect to incur additional restructuring and integration costs in the fourth quarter of 2024.

Previous wording

Intangible asset amortization includes the amortization of definite-lived intangible assets. For the three months ended June 30, 2024, intangible asset amortization was $2.4 million, compared to $4.9 million for the three months ended June 30, 2023. The decrease was primarily due to lower intangible asset amortization expense associated with our 2022 acquisition of DBO Partners Holding LLC. We anticipate incurring additional intangible asset amortization expense upon completion of the acquisition of Aviditi Advisors.

Current wording

Intangible asset amortization includes the amortization of definite-lived intangible assets. For the three months ended September 30, 2024, intangible asset amortization was $2.6 million, compared to $4.8 million for the three months ended September 30, 2023. The decrease was primarily due to lower intangible asset amortization expense associated with our 2022 acquisition of DBO Partners Holding LLC.

Previous wording

Other operating expenses primarily include insurance costs, license and registration fees, expenses related to our charitable giving program and litigation-related expenses, which consist of the amounts we accrue for and/or pay out related to legal and regulatory matters. Other operating expenses were $5.8 million in the second quarter of 2024, compared with $10.5 million in the corresponding period in 2023. The decrease was primarily due to the write-off of a $7.5 million uncollectible receivable in our municipal financing business in the second quarter of 2023, partially offset by an increase in expense related to our charitable giving program in the current period driven by higher operating profits.

Current wording

Other operating expenses primarily include insurance costs, license and registration fees, expenses related to our charitable giving program and litigation-related expenses, which consist of the amounts we accrue for and/or pay out related to legal and regulatory matters. Other operating expenses were $4.3 million in the third quarter of 2024, compared with $18.9 million in the corresponding period in 2023. Other operating expenses for the third quarter of 2023 included a $15.0 million accrual for an estimated civil penalty related to our regulatory settlement with the SEC regarding recordkeeping requirements for business-related communications.

Previous wording

The adjusted financial results exclude (1) investment (income)/loss and non-compensation expenses related to noncontrolling interests, (2) interest expense on long-term financing from net revenues, (3) amortization of intangible assets related to acquisitions, (4) compensation expenses from acquisition-related agreements, (5) restructuring and integration costs related to acquisitions and/or headcount reductions and (6) non-compensation expenses from proposed regulatory settlements. For U.S. GAAP purposes, these items are included in each of their respective line items on the consolidated statements of operations.

Current wording

The adjusted financial results exclude (1) investment (income)/loss and non-compensation expenses related to noncontrolling interests, (2) interest expense on long-term financing from net revenues, (3) amortization of intangible assets related to acquisitions, (4) compensation and non-compensation expenses from acquisition-related agreements, (5) restructuring and integration costs related to acquisitions and/or headcount reductions and (6) non-compensation expenses from regulatory settlements. For U.S. GAAP purposes, these items are included in each of their respective line items on the consolidated statements of operations.

Previous wording

Net revenues on a U.S. GAAP basis were $339.2 million for the three months ended June 30, 2024, compared with $288.7 million in the prior-year period. For the three months ended June 30, 2024, adjusted net revenues were $356.7 million, compared with $277.4 million in the second quarter of 2023. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise.

Current wording

Net revenues on a U.S. GAAP basis were $359.6 million for the three months ended September 30, 2024, compared with $289.5 million in the prior-year period. For the three months ended September 30, 2024, adjusted net revenues were $351.8 million, compared with $306.2 million in the third quarter of 2023. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise.

Previous wording

In the second quarter of 2024, investment banking revenues increased 41.2 percent to $259.8 million, compared with $184.0 million in the prior-year period. For the three months ended June 30, 2024, advisory services revenues were $183.9 million, up 41.7 percent compared to $129.8 million in the second quarter of 2023, driven by a higher average fee and more completed transactions. During the second quarter of 2024, our activity was broad based across sectors, led by our financial services group with solid contributions from the services & industrials and chemicals sectors. In addition, our debt advisory product team registered strong results in the quarter. For the three months ended June 30, 2024, corporate financing revenues were $50.6 million, up 37.2 percent compared with $36.9 million for the three months ended June 30, 2023, due to a higher average fee. Activity for us during the second quarter of 2024 was principally in the healthcare and financial services sectors. We served as book runner on all nine completed healthcare equity deals during the quarter and our financial services group completed two large equity capital raises for our depository clients. In the prior-year period, the overall market activity for equity capital raising was below historic levels. Municipal financing revenues for the three months ended June 30, 2024 were $25.2 million, up 46.1 percent compared to $17.3 million in the prior-year period driven by increased issuance activity across both our governmental and specialty sector businesses as market conditions improved.

Current wording

In the third quarter of 2024, investment banking revenues increased 14.1 percent to $241.5 million, compared with $211.7 million in the prior-year period. For the three months ended September 30, 2024, advisory services revenues were $188.0 million, up 21.7 percent compared to $154.6 million in the third quarter of 2023, driven primarily by more completed transactions. During the third quarter of 2024, our activity was broad based across sectors, led by our healthcare group with strong, balanced contributions from our financial services, services & industrials, energy & power and consumer sectors. In addition, our debt advisory product team continued to record strong results in the quarter. For the three months ended September 30, 2024, corporate financing revenues were $17.9 million, down 51.8 percent compared with $37.2 million for the three months ended September 30, 2023, due to fewer completed equity transactions and a lower average fee. Activity for us during the third quarter of 2024 was led by our financial services group. Municipal financing revenues for the three months ended September 30, 2024 were $35.5 million, up 78.2 percent compared to $19.9 million in the prior-year period, driven by increased municipal negotiated issuance activity across both our specialty sector and governmental businesses resulting from higher investor demand and lower rates.

Previous wording

For the three months ended June 30, 2024, institutional brokerage revenues were $91.7 million, up 4.4 percent compared with $87.8 million in the prior-year period. Equity brokerage revenues were $52.1 million in the second quarter of 2024, up 3.3 percent compared with $50.4 million in the corresponding period of 2023 due to increased client activity across our full suite of products. For the three months ended June 30, 2024, fixed income services revenues were $39.7 million, up 6.0 percent compared to $37.4 million in the prior-year period. Market activity within fixed income remains subdued as clients continue to wait for more certainty on interest rates.

Current wording

For the three months ended September 30, 2024, institutional brokerage revenues were $100.9 million, up 11.5 percent compared with $90.5 million in the prior-year period. Equity brokerage revenues were $52.5 million in the third quarter of 2024, up 4.5 percent compared with $50.2 million in the corresponding period of 2023 due to increased client activity across our full suite of products. For the three months ended September 30, 2024, fixed income services revenues were $48.5 million, up 20.4 percent compared to $40.3 million in the prior-year period as more certainty in the direction of interest rates drove increased activity among our depository clients.

Previous wording

Interest income represents amounts earned from holding long inventory positions and cash balances. For the three months ended June 30, 2024, interest income increased to $6.7 million, compared with $3.7 million for the three months ended June 30, 2023, reflecting higher interest on our cash balances.

Current wording

Interest income represents amounts earned from holding long inventory positions and cash balances, as well as interest earned on installment fee receivables. For the three months ended September 30, 2024, interest income increased to $7.8 million, compared with $7.0 million for the three months ended September 30, 2023, reflecting higher interest on our cash balances.

Previous wording

Investment income/(loss) includes realized and unrealized gains and losses on investments, including amounts attributable to noncontrolling interests, in our alternative asset management funds, as well as management and performance fees generated from those funds. For the three months ended June 30, 2024, we recorded an investment loss of $17.4 million, compared with investment income of $15.8 million in the corresponding period of 2023. In the second quarter of 2024, we recorded unrealized losses on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Excluding the impact of noncontrolling interests, adjusted investment income was $0.2 million for the three months ended June 30, 2024, compared with $2.8 million for the three months ended June 30, 2023.

Current wording

Investment income/(loss) includes realized and unrealized gains and losses on investments, including amounts attributable to noncontrolling interests, in our alternative asset management funds, as well as management and performance fees generated from those funds. For the three months ended September 30, 2024, we recorded investment income of $10.7 million, compared with an investment loss of $17.1 million in the corresponding period of 2023. In the third quarter of 2024, we recorded gains on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Excluding the impact of noncontrolling interests, adjusted investment income was $3.0 million for the three months ended September 30, 2024, compared with adjusted investment loss of $2.0 million for the three months ended September 30, 2023.

Previous wording

Interest expense represents amounts associated with financing, economically hedging and holding short inventory positions, including interest paid on our short- and long-term financing arrangements, as well as commitment fees on our committed line and revolving credit facility. For the three months ended June 30, 2024, interest expense decreased to $1.7 million, compared with $2.6 million in the prior-year period. The decrease was primarily due to lower interest paid on long-term financing arrangements, as we repaid our $125 million of Class B unsecured fixed rate senior notes upon maturity on October 15, 2023.

Current wording

Interest expense represents amounts associated with financing, economically hedging and holding short inventory positions, including interest paid on our short- and long-term financing arrangements, as well as commitment fees on certain short-term financing arrangements. For the three months ended September 30, 2024, interest expense decreased to $1.4 million, compared with $2.5 million in the prior-year period. The decrease was primarily due to lower interest paid on long-term financing arrangements, as we repaid our $125 million of Class B unsecured fixed rate senior notes upon maturity on October 15, 2023.

Previous wording

Pre-tax margin for the three months ended June 30, 2024 increased to 8.3 percent, compared to 5.0 percent for the corresponding period of 2023 resulting primarily from increased net revenues. Adjusted pre-tax margin for the three months ended June 30, 2024 increased to 17.3 percent, compared with 9.5 percent for the corresponding period of 2023 primarily due to higher adjusted net revenues, a lower adjusted compensation ratio and reduced adjusted non-compensation expenses.

Current wording

Pre-tax margin for the three months ended September 30, 2024 was 15.5 percent, compared to a negative 1.2 percent for the corresponding period of 2023. The increase in pre-tax margin for the current quarter was driven by higher net revenues, a lower compensation ratio and lower non-compensation expenses. The pre-tax margin for the third quarter of 2023 was impacted by higher non-compensation expenses related to an accrual recorded for an estimated civil penalty related to our regulatory settlement with the SEC regarding recordkeeping requirements for business-related communications. Adjusted pre-tax margin for the three months ended September 30, 2024 increased to 18.4 percent, compared with 15.3 percent for the corresponding period of 2023 primarily due to higher adjusted net revenues and a lower adjusted compensation ratio.

Previous wording

Financial Summary for the six months ended June 30, 2024 and June 30, 2023

Current wording

Financial Summary for the nine months ended September 30, 2024 and September 30, 2023

Previous wording

For the six months ended June 30, 2024, we recorded net income attributable to Piper Sandler Companies of $77.3 million. Net revenues for the six months ended June 30, 2024 increased 16.3 percent to $682.2 million, compared with $586.6 million in the year-ago period. In the first half of 2024, investment banking revenues increased 33.1 percent to $490.3 million, compared with $368.4 million in the prior-year period, resulting from increases in advisory services and corporate financing revenues, as well as higher municipal financing revenues. For the six months ended June 30, 2024, institutional brokerage revenues were $183.2 million, essentially flat compared with $184.2 million in the first half of 2023. In the first six months of 2024, net interest income increased to $11.9 million, compared to $7.2 million in the prior-year period, driven by higher interest income on our cash balances and lower interest expense as we repaid our long-term financing arrangement in the fourth quarter of 2023. For the six months ended June 30, 2024, we recorded an investment loss of $3.2 million, compared to investment income of $26.9 million in the prior-year period. In the first six months of 2024, we recorded unrealized losses on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Non-interest expenses were $601.6 million for the six months ended June 30, 2024, up 10.1 percent compared to $546.4 million in the year-ago period, primarily due to increased compensation expenses resulting from higher revenues and profitability.

Current wording

For the nine months ended September 30, 2024, we recorded net income attributable to Piper Sandler Companies of $112.1 million. Net revenues for the nine months ended September 30, 2024 increased 18.9 percent to $1.04 billion, compared with $876.1 million in the year-ago period. In the first nine months of 2024, investment banking revenues increased 26.2 percent to $731.8 million, compared with $580.0 million in the prior-year period, driven by an increase in advisory services revenues, as well as higher municipal financing and corporate financing revenues. For the nine months ended September 30, 2024, institutional brokerage revenues were $284.1 million, up 3.4 percent compared with $274.6 million in the first nine months of 2023, due to an increase in fixed income services revenues. In the first nine months of 2024, net interest income increased to $18.4 million, compared to $11.6 million in the prior-year period, driven by higher interest income on our cash balances and lower interest expense as we repaid our long-term financing arrangement in the fourth quarter of 2023. For the nine months ended September 30, 2024, we recorded investment income of $7.5 million, compared to $9.8 million in the prior-year period. Non-interest expenses were $905.5 million for the nine months ended September 30, 2024, up 7.9 percent compared to $839.4 million in the year-ago period, primarily due to increased compensation expenses resulting from higher revenues and profitability.

Previous wording

For the three months ended June 30, 2023, we incurred restructuring and integration costs of $3.9 million. The expenses principally consisted of $2.9 million of severance benefits related to headcount reductions and $0.9 million for vacated leased office space associated with our acquisitions of Cornerstone Macro Research LP and The Valence Group.

Current wording

For the nine months ended September 30, 2023, we incurred restructuring and integration costs of $3.9 million, primarily consisting of $2.9 million of severance benefits related to headcount reductions in the second quarter of 2023 and $0.9 million for vacated leased office space associated with our acquisitions of Cornerstone Macro Research LP and The Valence Group.

Previous wording

For the six months ended June 30, 2024, other operating expenses were $7.9 million, compared with $15.2 million in the corresponding period of 2023. The decrease was primarily due to a $4.0 million reduction in the accrual for civil penalties related to our proposed regulatory settlements regarding recordkeeping requirements for business-related communications, as well as the write-off of a $7.5 million uncollectible receivable in our municipal financing business in the second quarter of 2023. The decrease was partially offset by an increase in expense related to our charitable giving program in the current period driven by higher operating profits.

Current wording

For the nine months ended September 30, 2024, other operating expenses were $12.2 million, compared with $34.1 million in the corresponding period of 2023. Other operating expenses for the nine months ended September 30, 2024 included a $4.0 million reduction in the accrual for civil penalties related to our regulatory settlements with the SEC and CFTC regarding recordkeeping requirements for business-related communications. Other operating expenses for the nine months ended September 30, 2023 included a $15.0 million accrual recorded in the third quarter of 2023 for an estimated civil penalty related to our regulatory settlement with the SEC regarding recordkeeping requirements for business-related communications, as well as the write-off of a $7.5 million uncollectible receivable in our municipal financing business that was recorded in the second quarter of 2023.

Previous wording

Net revenues on a U.S. GAAP basis were $682.2 million for the six months ended June 30, 2024, compared with $586.6 million in the prior-year period. In the first half of 2024, adjusted net revenues were $690.6 million, compared with $566.6 million in the first half of 2023. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise.

Current wording

Net revenues on a U.S. GAAP basis were $1.04 billion for the nine months ended September 30, 2024, compared with $876.1 million in the prior-year period. In the first nine months of 2024, adjusted net revenues were $1.04 billion, compared with $872.8 million in the first nine months of 2023. The variance explanations for net revenues and adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise.

Previous wording

In the first half of 2024, investment banking revenues were $490.3 million, up 33.1 percent compared to $368.4 million in the corresponding period of 2023. For the six months ended June 30, 2024, advisory services revenues were $341.1 million, up 26.1 percent compared with $270.4 million in the first half of 2023, driven by a higher average fee. During the first six months of 2024, our activity was broad based across sectors, led by our financial services group with solid contributions from the energy & power, services & industrials and consumer sectors. In addition, our debt advisory product team registered strong results in the first half of 2024. Corporate financing revenues were $103.2 million for the six months ended June 30, 2024, up 62.0 percent compared to $63.7 million in the prior-year period, due to both a higher average fee and more completed corporate financings. While the overall market for equity financing declined during the second quarter from a strong first quarter of 2024, equity financing activity has improved compared to the prior-year period. Activity for us during the first six months of 2024 was principally in the healthcare sector, and we served as book runner on 28 of 29 completed healthcare equity deals. Municipal financing revenues for the six months ended June 30, 2024 were $46.0 million, up 34.4 percent compared to $34.2 million in the year-ago period as we executed more specialty sector financings driven by solid investor demand, and experienced an increase in issuance activity with our governmental clients.

Current wording

In the first nine months of 2024, investment banking revenues were $731.8 million, up 26.2 percent compared to $580.0 million in the corresponding period of 2023. For the nine months ended September 30, 2024, advisory services revenues were $529.1 million, up 24.5 percent compared with $425.0 million in the first nine months of 2023, driven by a higher average fee and more completed transactions. During the first nine months of 2024, our activity was broad based across sectors, led by our financial services group with solid contributions from the energy & power, services & industrials, healthcare and consumer sectors. In addition, our debt advisory product team recorded strong results in the first nine months of 2024. Corporate financing revenues were $121.1 million for the nine months ended September 30, 2024, up 20.0 percent compared to $100.9 million in the prior-year period, due to more completed transactions. While the overall market for equity financing declined during the second and third quarters from a strong first quarter of 2024, equity financing activity has improved compared to the prior-year period. Activity for us during the first nine months of 2024 was primarily in the healthcare sector, and we served as book runner on 31 of 33 completed healthcare equity deals. Municipal financing revenues for the nine months ended September 30, 2024 were $81.5 million, up 50.5 percent compared to $54.1 million in the year-ago period, driven by increased issuance activity across both our specialty sector and governmental businesses as market conditions and investor demand improved.

Previous wording

Interest income for the six months ended June 30, 2024 increased to $15.0 million, compared with $12.4 million in the prior-year period, reflecting higher interest on our cash balances.

Current wording

Interest income for the nine months ended September 30, 2024 increased to $22.8 million, compared with $19.4 million in the prior-year period, reflecting higher interest on our cash balances.

Previous wording

For the six months ended June 30, 2024, we recorded an investment loss of $3.2 million, compared to investment income of $26.9 million in the year-ago period. In the first six months of 2024, we recorded unrealized losses on our investments and the noncontrolling interests in the alternative asset management funds that we manage. Excluding the impact of noncontrolling interests, adjusted investment income was $5.2 million for the six months ended June 30, 2024, compared with $3.6 million for the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024, we recorded investment income of $7.5 million, compared to $9.8 million in the year-ago period. Excluding the impact of noncontrolling interests, adjusted investment income was $8.2 million for the nine months ended September 30, 2024, compared with $1.6 million for the nine months ended September 30, 2023.

Previous wording

Interest expense for the six months ended June 30, 2024 decreased to $3.0 million, compared with $5.2 million in the prior-year period. The decrease was primarily due to lower interest paid on long-term financing arrangements, as we repaid our $125 million of Class B unsecured fixed rate senior notes upon maturity on October 15, 2023.

Current wording

Interest expense for the nine months ended September 30, 2024 decreased to $4.4 million, compared with $7.8 million in the prior-year period. The decrease was primarily due to lower interest paid on long-term financing arrangements, as we repaid our $125 million of Class B unsecured fixed rate senior notes upon maturity on October 15, 2023.

Previous wording

Pre-tax margin for the six months ended June 30, 2024 increased to 11.8 percent, compared to 6.9 percent for the six months ended June 30, 2023. Adjusted pre-tax margin for the six months ended June 30, 2024 increased to 17.0 percent, compared with 11.9 percent for the corresponding period of 2023. In the first six months of 2024, the increase in pre-tax margin on both a U.S. GAAP and adjusted basis was primarily due to higher net revenues.

Current wording

Pre-tax margin for the nine months ended September 30, 2024 increased to 13.1 percent, compared to 4.2 percent for the nine months ended September 30, 2023. Adjusted pre-tax margin for the nine months ended September 30, 2024 increased to 17.5 percent, compared with 13.0 percent for the corresponding period of 2023. In the first nine months of 2024, the increase in pre-tax margin on both a U.S. GAAP and adjusted basis was primarily due to higher net revenues. Additionally, U.S. GAAP pre-tax margin increased due to lower non-compensation expenses.

Previous wording

Effective May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million in common shares through December 31, 2024. During the six months ended June 30, 2024, we did not repurchase any shares of our common stock related to this authorization. At June 30, 2024, we had $138.2 million remaining under this authorization.

Current wording

Effective May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million in common shares through December 31, 2024. During the nine months ended September 30, 2024, we did not repurchase any shares of our common stock related to this authorization. At September 30, 2024, we had $138.2 million remaining under this authorization.

Previous wording

We also purchase shares of common stock from restricted stock award recipients upon the award vesting as recipients sell shares to meet their employment tax obligations. During the first half of 2024, we purchased 316,130 shares of our common stock at an average price of $182.16 per share for an aggregate purchase price of $57.6 million for these purposes.

Current wording

We also purchase shares of common stock from restricted stock award recipients upon the award vesting as recipients sell shares to meet their employment tax obligations. During the first nine months of 2024, we purchased 325,019 shares of our common stock at an average price of $184.51 per share for an aggregate purchase price of $60.0 million for these purposes.

Previous wording

Adjusted assets and tangible common shareholders' equity are non-GAAP financial measures. Goodwill and intangible assets are subtracted from total assets and total shareholders' equity in determining adjusted assets and tangible common shareholders' equity, respectively, as we believe that goodwill and intangible assets do not constitute operating assets that can be deployed in a liquid manner. Right-of-use lease assets are also subtracted from total assets in determining adjusted assets as these are not operating assets that can be deployed in a liquid manner. Amounts attributable to noncontrolling interests are subtracted from total assets and total shareholders' equity in determining adjusted assets and tangible common shareholders' equity, respectively, as they represent assets and equity interests in consolidated entities that are not attributable, either directly or indirectly, to Piper Sandler Companies. We view the resulting measure of adjusted leverage, also a non-GAAP financial measure, as a more relevant measure of financial risk when comparing financial services companies. Our adjusted leverage ratio decreased from December 31, 2023, primarily due to a decline in cash and cash equivalents driven by the payment of annual incentive compensation in the first quarter of 2024.

Current wording

Adjusted assets and tangible common shareholders' equity are non-GAAP financial measures. Goodwill and intangible assets are subtracted from total assets and total shareholders' equity in determining adjusted assets and tangible common shareholders' equity, respectively, as we believe that goodwill and intangible assets do not constitute operating assets that can be deployed in a liquid manner. Right-of-use lease assets are also subtracted from total assets in determining adjusted assets as these are not operating assets that can be deployed in a liquid manner. Amounts attributable to noncontrolling interests are subtracted from total assets and total shareholders' equity in determining adjusted assets and tangible common shareholders' equity, respectively, as they represent assets and equity interests in consolidated entities that are not attributable, either directly or indirectly, to Piper Sandler Companies. We view the resulting measure of adjusted leverage, also a non-GAAP financial measure, as a more relevant measure of financial risk when comparing financial services companies. Our adjusted leverage ratio decreased from December 31, 2023, primarily due to higher tangible common shareholders' equity driven by strong net income for the nine months ended September 30, 2024.

Previous wording

We have established an arrangement to obtain financing from Pershing related to the majority of our trading activities. Under our fully disclosed clearing agreement, all of our securities inventories with the exception of convertible securities, and all of our customer activities are held by or cleared through Pershing. Financing under this arrangement is secured primarily by securities, and collateral limitations could reduce the amount of funding available under this arrangement. We may accommodate non-standard settlement timeframes for our clients, which can impact our funding and collateral balances. Our clearing arrangement activities are recorded net of trading activity and reported within receivables from or payables to brokers, dealers and clearing organizations. The funding is at the discretion of Pershing (i.e., uncommitted) and could be denied without a notice period. Our fully disclosed clearing agreement includes a covenant requiring Piper Sandler & Co., our U.S. broker dealer subsidiary, to maintain excess net capital of $120 million. At June 30, 2024, we had $9.4 million of financing outstanding under this arrangement.

Current wording

We have established an arrangement to obtain financing from Pershing related to the majority of our trading activities. Under our fully disclosed clearing agreement, all of our securities inventories with the exception of convertible securities, and all of our customer activities are held by or cleared through Pershing. Financing under this arrangement is secured primarily by securities, and collateral limitations could reduce the amount of funding available under this arrangement. We may accommodate non-standard settlement timeframes for our clients, which can impact our funding and collateral balances. Our clearing arrangement activities are recorded net of trading activity and reported within receivables from or payables to brokers, dealers and clearing organizations. The funding is at the discretion of Pershing (i.e., uncommitted) and could be denied without a notice period. Our fully disclosed clearing agreement includes a covenant requiring Piper Sandler & Co., our U.S. broker dealer subsidiary, to maintain excess net capital of $120 million. At September 30, 2024, we had $7.3 million of financing outstanding under this arrangement.

Previous wording

We have established a financing arrangement with a U.S. branch of Canadian Imperial Bank of Commerce ("CIBC") related to our convertible securities inventories. Under this arrangement, our convertible securities inventories are cleared through a broker dealer affiliate of CIBC and held by CIBC. We generally economically hedge changes in the market value of our convertible securities inventories using the underlying common stock or the stock options of the underlying common stock. Financing under this arrangement is secured primarily by convertible securities and collateral limitations could reduce the amount of funding available. The funding is at the discretion of CIBC (i.e., uncommitted) and could be denied subject to a notice period. This arrangement is reported within receivables from or payables to brokers, dealers and clearing organizations, net of trading activity. At June 30, 2024, we had $62.3 million of financing outstanding under this arrangement.

Current wording

We have established a financing arrangement with a U.S. branch of Canadian Imperial Bank of Commerce ("CIBC") related to our convertible securities inventories. Under this arrangement, our convertible securities inventories are cleared through a broker dealer affiliate of CIBC and held by CIBC. We generally economically hedge changes in the market value of our convertible securities inventories using the underlying common stock or the stock options of the underlying common stock. Financing under this arrangement is secured primarily by convertible securities and collateral limitations could reduce the amount of funding available. The funding is at the discretion of CIBC (i.e., uncommitted) and could be denied subject to a notice period. This arrangement is reported within receivables from or payables to brokers, dealers and clearing organizations, net of trading activity. At September 30, 2024, we had $71.7 million of financing outstanding under this arrangement.