PIPER SANDLER COMPANIES
For the period ended Mar 31, 2025. Filed May 8, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 8, 2025
PIPR$65.92-1.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001230245-24-000179
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0001230245-25-000080
Management's Discussion and Analysis of Financial Condition and Results ofExecutive OverviewThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 211 previous paragraphs and 20 current paragraphs.
8 unchanged; 3 reworded; 8 added; 198 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 22 previous and 2 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Index
Current report
(1)See "Explanation and Reconciliation of Non-GAAP Financial Measures" for a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures and a reconciliation of U.S. GAAP to adjusted, non-GAAP financial information.
Current report
During the first quarter of 2025, uncertainty concerning the outlook for the U.S. economy increased in response to announcements by the U.S. presidential administration concerning its trade policy, including the implementation of increased global tariffs. The effects of announced U.S. trade policy, and any retaliatory actions (i.e., "trade wars") by global trading partners, including China and the European Union, and their potential impact on inflation, supply chains, and global trade is difficult to predict and has led to volatility in financial markets. Furthermore, there are concerns that this uncertainty has begun to lead to a global economic deceleration, and increased fears of a recession in the U.S. Monetary policy in the U.S. remains a prevalent factor impacting the economy and financial markets. The U.S. Federal Reserve held its short-term benchmark interest rate steady in the first quarter of 2025, indicating that it will monitor the inflationary impacts of U.S. trade policy as it balances its goals of maximum employment and stable prices. In addition, geopolitical concerns, including the conflicts in the Middle East and Eastern Europe and increased tensions with China as a result of the current trade war, could negatively impact financial market activity. These risks and uncertainties may pose consequences for the global economy and inject periods of heightened volatility into the U.S. equity and debt markets and may impact our overall client and business activity. A significant decrease in uncertainty, or resolutions to trade disputes and geopolitical concerns, would likely be constructive for global and U.S. economic conditions, and consequently, our client and business activity.
Current report
Our advisory services performance for the first quarter of 2025 was broad-based across industry groups as our results continue to benefit from our sector and product diversification. With heightened volatility, we expect active mergers and acquisitions ("M&A") transaction cycles to slow and new transaction announcements to be delayed. We anticipate that the conversion of our pipeline will be impacted and that second quarter of 2025 advisory services revenues will decline from the first quarter levels. However, we expect certain areas of the M&A market to remain active, such as service-based business models, and those companies that are less impacted by trade barriers will continue to transact at strong valuations. When markets become more constructive, we anticipate a strong and fairly broad rebound in activity, particularly with financial sponsors, which we are well positioned to capitalize on.
Current report
Our corporate financing activity declined in the first quarter as the market environment for equity financing weakened. Declining equity valuations and increased uncertainty resulted in a meaningful decline in the economic fee pool year-over-year, while the healthcare economic fee pool decreased over 60 percent from the first quarter of 2024. Equity financing activity has been very slow to start the second quarter and we expect that trend to continue until volatility subsides and valuations stabilize.
Current report
The equity markets experienced increased volatility and higher volumes during the first quarter of 2025. Our equity brokerage business continues to benefit from the quality of our trade execution and research product, especially during periods of heightened volatility. The second quarter of 2025 has started strong, and as long as volatility persists, activity should remain elevated as clients actively position their portfolios in this rapidly evolving landscape.
Current report
Our fixed income services business experienced solid activity across most of our client verticals during the first quarter of 2025 due to more accommodative markets. The near-term fixed income outlook remains cautious as persistent rate volatility continues to hamper client activity. However, the combination of potential short-term benchmark interest rate cuts by the U.S. Federal Reserve, a steepening yield curve, and reduced day-to-day volatility should increase investor confidence in committing capital into fixed income markets.
Current report
Our municipal financing activity was robust in the first quarter of 2025 across both our governmental and specialty sector businesses. Favorable market conditions, combined with growing infrastructure needs, led many issuers to access the market. However, activity in the second quarter of 2025 has started slowly as significant rate volatility has made it challenging to price transactions and several transactions have been postponed. We have a robust pipeline of issuers looking to access the market, but our near-term outlook is dependent on stabilization of the market.
Removed paragraphs (198)
Previous report
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 report
See the "Results of Operations" section for additional information.
Previous report
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 report
Our advisory services results continue to benefit from our sector and product diversification as well as improvement in the market outlook for mergers and acquisitions ("M&A") activity. Our advisory services activity for the fourth quarter of 2024 has started strong and if market conditions remain accommodative and closings stay on track, we expect a strong finish to the year.
Previous report
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 report
In our equity brokerage business, the quality of our research product and trade execution is driving a continued increase in our client research votes, which we believe will result in further market share gains over time and offset the impact from the declining research and trading services fee pool. The fourth quarter tends to be our equity brokerage business's strongest quarter of the year and we expect our results to follow that trend for 2024.
Previous report
We experienced increased client activity within fixed income services during the third quarter of 2024 as market conditions improved. The U.S. Federal Reserve's action to reduce short-term benchmark interest rates, more confidence on the direction of interest rates and the change in the yield curve drove higher activity among our depository clients. With continued improvement in the fixed income markets, we anticipate a strong finish to the year, with fourth quarter fixed income services revenues similar to the third quarter of 2024.
Previous report
Overall market conditions for our municipal financing business markedly improved during the third quarter of 2024. Our municipal negotiated issuance activity increased across both our specialty sector and governmental businesses during the current quarter driven by strong investor demand and lower rates. We expect a strong fourth quarter in our municipal financing business to finish the year.
Previous report
RESULTS OF OPERATIONS
Previous report
Financial Summary for the three months ended September 30, 2024 and September 30, 2023
Previous report
The following table provides a summary of the results of our operations on a U.S. GAAP basis and the results of our operations as a percentage of net revenues for the periods indicated:
Previous report
N/M – Not meaningful
Previous report
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 report
Consolidated Non-Interest Expenses
Previous report
Compensation and Benefits
Previous report
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 report
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 report
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 report
Outside Services
Previous report
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 report
Occupancy and Equipment
Previous report
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 report
Communications
Previous report
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 report
Marketing and Business Development
Previous report
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 report
Deal-Related Expenses
Previous report
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 report
Trade Execution and Clearance
Previous report
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 report
Restructuring and Integration Costs
Previous report
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 report
Intangible Asset Amortization
Previous report
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 report
The following table summarizes the future aggregate amortization expense of our intangible assets with determinable lives:
Previous report
Other Operating Expenses
Previous report
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 report
Income Taxes
Previous report
For the three months ended September 30, 2024, our provision for income taxes was $15.2 million, which included $0.8 million of tax benefits related to stock-based compensation awards vesting at values greater than the grant price. Excluding the impact of this benefit and noncontrolling interests, our effective tax rate was 32.0 percent.
Previous report
For the three months ended September 30, 2023, our provision for income taxes was $10.2 million, which included $0.9 million of tax benefits related to stock-based compensation awards vesting at values greater than the grant price. Excluding the impact of this benefit and noncontrolling interests, our effective tax rate was 79.1 percent, which was impacted by the non-deductibility of the estimated civil penalty related to our regulatory settlement with the SEC regarding recordkeeping requirements for business-related communications.
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Reworded paragraphs (3)
Previous wording
The following information should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and exhibits included elsewhere in this Quarterly Report on Form 10-Q. Certain statements in this Quarterly Report on Form 10-Q may be considered forward-looking. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These forward-looking statements include, among other things, statements other than historical information or statements of current conditions and may relate to our future plans and objectives and results, and also may include our belief regarding the effect of various legal proceedings, as set forth under "Legal Proceedings" in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2023, as updated in our subsequent reports filed with the Securities and Exchange Commission ("SEC"), and under "Legal Proceedings" in Part II, Item 1 of this Quarterly Report on Form 10-Q. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including those factors discussed below under "External Factors Impacting Our Business" as well as the factors identified under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, as updated in our subsequent reports filed with the SEC, and under "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.
Current wording
Certain statements in this Quarterly Report on Form 10-Q may be considered forward-looking. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These forward-looking statements include, among other things, statements other than historical information or statements of current conditions and may relate to our future plans and objectives and results, and also may include our belief regarding the effect of various legal proceedings, as set forth under "Legal Proceedings" in Part I, Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2024, as updated in our subsequent reports filed with the Securities and Exchange Commission ("SEC"), and under "Legal Proceedings" in Part II, Item 1 of this Quarterly Report on Form 10-Q. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including those factors discussed below under "External Factors Impacting Our Business" as well as the factors identified under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, as updated in our subsequent reports filed with the SEC, and under "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.
Previous wording
Throughout this section, we have presented results on both a U.S. GAAP and non-GAAP basis. 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 results should be considered in addition to, not as a substitute for, the results prepared in accordance with U.S. GAAP.
Current wording
Item 2 in this Form 10-Q includes financial measures that are not prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP"). 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. See "Explanation and Reconciliation of Non-GAAP Financial Measures" for a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures and a reconciliation of U.S. GAAP to adjusted, non-GAAP financial information.
Previous 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.
Current wording
As part of our growth strategy, on August 23, 2024, we completed the acquisition of Aviditi Capital Advisors, LLC, an alternative investment bank providing full lifecycle services to financial sponsors, global alternative investment managers and limited partner investors. The transaction added private capital advisory capabilities to our platform.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The following information should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes and exhibits included elsewhere in this Quarterly Report on Form 10-Q.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
EXPLANATION OF NON-GAAP FINANCIAL MEASURES
Previous report — wording carried elsewhere
(1)Reconciliation of U.S. GAAP to adjusted non-GAAP financial information: