PIPER SANDLER COMPANIES

In Item 7 in this Form 10-K, we have included financial measures that are not prepared in accordance with U.S. 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 compensation and non-compensation expenses from acquisition-related agreements, (4) the exclusion of restructuring and integration costs related to acquisitions and/or headcount reductions, (5) the exclusion of amortization of intangible assets related to acquisitions, (6) the exclusion of non-compensation expenses from regulatory settlements (see Note 15 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information) and (7) the income tax impact allocated to the adjustments. For U.S. GAAP purposes, these items are included in each of their respective line items on the consolidated statements of operations.

These adjustments affect the following financial measures: net revenues, compensation and benefits expenses, non-compensation expenses, total non-interest expenses, income before income tax expense, income tax expense, net income attributable to Piper Sandler Companies, earnings per diluted common share, compensation ratio, non-compensation ratio, pre-tax margin and effective tax rate.

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.

Management believes that presenting results and measures on an adjusted, non-GAAP basis in conjunction with the corresponding U.S. GAAP measures provides a more meaningful basis for comparison of its operating results and underlying trends between 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.

Consolidation of the alternative asset management funds results in the inclusion of the proportionate share of the income or loss attributable to the equity interests in consolidated funds that are not attributable, either directly or indirectly, to us (i.e., noncontrolling interests). This proportionate share is reflected in net income/(loss) attributable to noncontrolling interests in the accompanying consolidated statements of operations, and has no effect on our overall financial performance, as ultimately, this income/(loss) is not income/(loss) for us. The adjusted, non-GAAP financial measures include only the actual proportionate share of the income/(loss) attributable to us as an investor in such alternative asset management funds.

Interest expense on long-term financing includes interest on our Class B unsecured fixed rate senior notes, and is an adjustment from net revenues as this arrangement was used to fund the acquisition of SOP Holdings, LLC and its subsidiaries, including Sandler O'Neill & Partners, L.P. (collectively, "Sandler O'Neill"). Management believes that presenting adjusted, non-GAAP financial measures excluding the acquisition-related amounts provides clarity on our financial results generated by the core operating components of our business.

The compensation and non-compensation expenses from acquisition-related agreements and amortization of intangible assets are excluded from the adjusted, non-GAAP financial measures as they represent expenses specifically related to acquisitions and therefore are not part of our ongoing operations.

The restructuring and integration costs excluded from the adjusted, non-GAAP financial results represent charges that resulted from severance benefits related to acquisitions or headcount reductions, as well as acquisition-related costs associated with contract termination, vacating redundant leased office space and professional fees related to the respective transaction. Excluding these restructuring and integration costs from our adjusted, non-GAAP financial measures provides a better understanding of our core non-compensation expenses.

The non-compensation expenses from regulatory settlements for the year ended December 31, 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 the CFTC. The non-compensation expenses from regulatory settlements for the year ended December 31, 2023 include a $20.0 million accrual of other operating expenses for estimated civil penalties related to the regulatory settlements with the SEC and CFTC. In connection with these matters, we also incurred $1.0 million and $1.5 million of outside services expenses for the years ended December 31, 2024 and 2023, respectively. Excluding these non-compensation expenses from regulatory settlements from our adjusted, non-GAAP financial measures provides a better understanding of our core non-compensation expenses.

Reconciliation of U.S. GAAP to adjusted non-GAAP financial information: