Piper Sandler(PIPR) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements This section presents Piper Sandler Companies' unaudited consolidated financial statements as of June 30, 2025, including statements of financial condition, operations, cash flows, and detailed notes Consolidated Statements of Financial Condition Total assets decreased to $1.96 billion by June 30, 2025, from $2.26 billion at year-end 2024, mainly due to reduced cash and cash equivalents Consolidated Statements of Financial Condition (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,959,140 | $2,255,936 | | Cash and cash equivalents | $123,323 | $482,834 | | Total financial instruments owned | $488,579 | $425,728 | | Goodwill | $311,944 | $312,024 | | Total Liabilities | $559,726 | $840,163 | | Accrued compensation | $299,903 | $563,088 | | Total Shareholders' Equity | $1,399,414 | $1,415,773 | Consolidated Statements of Operations Q2 2025 net revenues increased 17.0% to $396.8 million, with diluted EPS rising to $2.38, while six-month net revenues grew 10.5% to $754.1 million Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenues | $398,577 | $340,844 | | Net Revenues | $396,778 | $339,179 | | Net Income Attributable to Piper Sandler | $42,182 | $34,773 | | Diluted EPS | $2.38 | $1.97 | Six Months 2025 vs 2024 Performance (in thousands, except per share data) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Total Revenues | $757,131 | $685,283 | | Net Revenues | $754,050 | $682,235 | | Net Income Attributable to Piper Sandler | $107,097 | $77,266 | | Diluted EPS | $6.03 | $4.40 | Consolidated Statements of Cash Flows Net cash used in operating activities was $175.1 million for the six months ended June 30, 2025, reversing from $69.3 million provided in 2024, leading to a $359.5 million decrease in cash Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by/(used in) operating activities | $(175,081) | $69,289 | | Net cash used in investing activities | $(25,364) | $(4,652) | | Net cash used in financing activities | $(162,229) | $(126,291) | | Net decrease in cash and cash equivalents | $(359,511) | $(62,163) | | Cash and cash equivalents at end of period | $123,323 | $320,935 | Notes to the Consolidated Financial Statements Detailed notes cover accounting policies, acquisitions like Aviditi Advisors and G Squared Capital Partners, fair value measurements, equity activities, and compensation plans - On August 23, 2024, the company completed the acquisition of Aviditi Capital Advisors, LLC, an alternative investment bank, adding private capital advisory capabilities, which resulted in $10.2 million of goodwill[34][35] - The company declared and paid quarterly cash dividends aggregating $1.30 per share and a special cash dividend of $3.00 per share during the first six months of 2025[113] - On August 1, 2025, the company announced a definitive agreement to acquire G Squared Capital Partners LLC, a boutique investment bank specializing in government services and defense technology, with the transaction expected to close in Q3 2025[177] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 and H1 2025 financial performance, highlighting revenue growth, strategic acquisitions, market conditions, liquidity, capital resources, and risk management Executive Overview The company, focusing on middle-market investment banking, completed the Aviditi Advisors acquisition and announced G Squared Capital Partners, with Q2 2025 GAAP net revenues up 17.0% to $396.8 million - Recent strategic growth initiatives include the completed acquisition of Aviditi Advisors on August 23, 2024, and the announced definitive agreement to acquire G Squared Capital Partners LLC on August 1, 2025[184] Q2 2025 Financial Highlights (U.S. GAAP) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net revenues | $396,778 | $339,179 | 17.0% | | Net income attributable to Piper Sandler | $42,182 | $34,773 | 21.3% | | Earnings per diluted common share | $2.38 | $1.97 | 20.8% | Results of Operations Q2 2025 net revenues increased 17.0% to $396.8 million, driven by 9.0% growth in investment banking and 22.5% in institutional brokerage, despite a decline in corporate financing Q2 2025 vs Q2 2024 Revenue Breakdown (in thousands) | Revenue Source | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total investment banking | $283,085 | $259,782 | 9.0% | | - Advisory services | $206,202 | $183,908 | 12.1% | | - Corporate financing | $34,976 | $50,641 | (30.9)% | | - Municipal financing | $41,907 | $25,233 | 66.1% | | Total institutional brokerage | $112,374 | $91,737 | 22.5% | | Net revenues | $396,778 | $339,179 | 17.0% | - Compensation expenses for Q2 2025 increased 10.0% to $258.2 million due to higher revenues, but the compensation ratio improved, decreasing to 65.1% from 69.2% in Q2 2024[209] - Restructuring and integration costs for Q2 2025 were $5.0 million, primarily consisting of $2.9 million in severance benefits and $1.8 million for vacated office space related to the Aviditi Advisors acquisition[216] Liquidity, Funding and Capital Resources The company maintains robust liquidity, with an adjusted leverage ratio of 1.6x as of June 30, 2025, and $222.7 million in net capital, significantly exceeding regulatory minimums - The company's board authorized a $150.0 million share repurchase program effective February 5, 2025, with $16.6 million in shares repurchased during the first six months of 2025 under this authorization[261] Leverage Ratios | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Leverage ratio | 1.4 | 1.6 | | Adjusted leverage ratio | 1.6 | 1.9 | - At June 30, 2025, the company's net capital was $222.7 million, which was $221.7 million in excess of the SEC's minimum requirement[278] Risk Management The company employs a formal risk management process to identify and monitor strategic, market, liquidity, credit, operational, human capital, and legal/regulatory risks, overseen by internal committees and the board - The company's principal risks are identified as strategic, market, liquidity, credit, operational, human capital, and legal/regulatory risk[291] - As of June 30, 2025, the company estimates that a parallel 50 basis point adverse change in interest rates would result in a decrease of approximately $0.7 million in the carrying value of its fixed income securities inventory, including hedging effects[300] Credit Rating of Long Fixed Income Securities (June 30, 2025) | Rating | % of Total | | :--- | :--- | | AAA | 11.2% | | AA | 73.8% | | A | 11.1% | | BBB | 0.1% | | BB | 0.0% | | Not Rated | 3.8% | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section incorporates by reference the detailed discussion of market risk from the 'Risk Management' section in Item 2 of this report - The disclosures about market risk are incorporated by reference from the 'Risk Management' section in Part I, Item 2 of the report[324] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of the end of the period[325] - No changes in internal control over financial reporting occurred during the second quarter that materially affected, or are reasonably likely to materially affect, internal controls[326] Part II. Other Information Item 1. Legal Proceedings This section incorporates legal proceedings from Note 13, with management believing pending actions will not materially affect financial condition or operations - The discussion of legal proceedings is incorporated by reference from Note 13 to the consolidated financial statements[327] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024[329] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company repurchased 84,608 shares at an average of $246.88 per share, with $133.4 million remaining for future repurchases Share Repurchases for the Quarter Ended June 30, 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | April 2025 | 11,894 | $230.04 | — | | May 2025 | 64,777 | $249.02 | 61,850 | | June 2025 | 7,937 | $254.69 | 4,908 | | Total | 84,608 | $246.88 | 66,758 | - As of the end of Q2 2025, $133.4 million remained under the company's share repurchase authorization, which is effective through December 31, 2026[332]