PIPER SANDLER COMPANIES

Non-interest expenses on a U.S. GAAP basis were $327.8 million for the three months ended March 31, 2025, compared to $290.6 million in the prior-year period. For the three months ended March 31, 2025, adjusted non-interest expenses were $314.8 million, compared with $278.0 million for the first quarter of 2024. The variance explanations for non-interest expenses and adjusted non-interest expenses are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise. 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.

Compensation and Benefits

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 with service conditions, and restricted mutual fund shares of investment funds ("MFRS Awards"), 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.

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

For the three months ended March 31, 2025, compensation and benefits expenses increased 11.7 percent to $248.5 million, compared with $222.4 million in the corresponding period of 2024, due to higher revenues. Compensation and benefits expenses as a percentage of net revenues was 69.5 percent in the first quarter of 2025, compared to 64.8 percent in the first quarter of 2024. The higher compensation ratio was impacted by the investment loss on our investments and the noncontrolling interests in the alternative asset management funds that we manage, which more than offset the benefit from higher net revenues and lower acquisition-related compensation expenses. Our adjusted compensation ratio decreased to 62.5 percent in the first quarter of 2025, compared with 63.1 percent in the first quarter of 2024, primarily due to higher adjusted net revenues.

Outside Services

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 18.5 percent to $14.7 million in the first quarter of 2025, compared with $12.4 million in the corresponding period of 2024, primarily due to higher professional fees.

Occupancy and Equipment

For the three months ended March 31, 2025, occupancy and equipment expenses increased 13.7 percent to $18.2 million, compared with $16.0 million in the corresponding period of 2024, primarily due to incremental expenses as a result of relocating our Minneapolis corporate headquarters to a new building. We expect to incur additional occupancy costs related to this relocation for the remainder of 2025.

Communications

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 March 31, 2025, communication expenses increased 11.7 percent to $14.8 million, compared with $13.2 million in the corresponding period of 2024, primarily due to higher market data services expenses.

Marketing and Business Development

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. For the three months ended March 31, 2025, marketing and business development expenses increased 25.2 percent to $13.5 million, compared with $10.8 million in the corresponding period of 2024, primarily due to higher travel expenses associated with increased business activity.

Deal-Related Expenses

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 March 31, 2025, deal-related expenses were $5.5 million, compared with $6.4 million for the three months ended March 31, 2024. 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.

Trade Execution and Clearance

For the three months ended March 31, 2025, trade execution and clearance expenses increased to $5.2 million, compared with $4.9 million in the corresponding period of 2024.

Intangible Asset Amortization

Intangible asset amortization includes the amortization of definite-lived intangible assets. For the three months ended March 31, 2025, intangible asset amortization was $2.1 million, compared to $2.4 million for the three months ended March 31, 2024.

The following table summarizes the future aggregate amortization expense of our intangible assets with determinable lives:

Other Operating Expenses

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 $5.5 million in the first quarter of 2025, compared with $2.1 million in the corresponding period in 2024. Other operating expenses for the first quarter of 2024 included a $3.5 million reduction in the accrual for estimated civil penalties related to our regulatory settlements regarding recordkeeping requirements for business-related communications.