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Piper Sandler(PIPR) - 2022 Q3 - Earnings Call Transcript
PIPRPiper Sandler(PIPR)2022-10-28 19:52
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Financial Data and Key Metrics Changes - The company generated adjusted net revenues of 335millionforQ32022,withanoperatingmarginof17.3335 million for Q3 2022, with an operating margin of 17.3% and adjusted diluted EPS of 2.32 [4][14] - For the first nine months of 2022, adjusted net revenues totaled 1billion,withanoperatingmarginof18.61 billion, with an operating margin of 18.6% and adjusted diluted EPS of 7.93 [4][14] - Compared to Q2 2022, net revenues decreased by 3%, while year-over-year, they decreased by 24% due to lower corporate investment banking revenues [14] Business Line Data and Key Metrics Changes - Advisory revenues for Q3 2022 were 175million,a3175 million, a 3% increase sequentially but an 18% decline year-over-year [5] - Corporate financing revenues were 40 million, up 37% from the prior quarter but down 49% from the same quarter last year [6] - Equity brokerage generated record revenues of 53million,benefitingfromelevatedtradingvolumesandtheadditionofCornerstoneMacro[10]−Fixedincomerevenueswere53 million, benefiting from elevated trading volumes and the addition of Cornerstone Macro [10] - Fixed income revenues were 37 million, down 31% from Q2 2022 due to increased rate volatility and reduced client activity [12] Market Data and Key Metrics Changes - The public finance business generated 27millioninmunicipalfinancingrevenues,down2527 million in municipal financing revenues, down 25% from Q2 2022, with overall market issuance declining to approximately 94 billion [9] - The company ranked as the number two adviser for US M&A deals under 1billionbasedonannouncedtransactionsduringthefirstninemonthsof2022[5]CompanyStrategyandDevelopmentDirection−Thecompanyaimstogrowitsadvisorybusinessthroughsectorandproductexpansion,withafocusontechnologyandprivateequity[3]−Recentacquisitions,includingDBOPartners,areintendedtoenhancecapabilitiesandscaleinthetechnologyinvestmentbankingsector[3][4]−Thecompanyisfocusedonbuildingitstechbusinesstomatchthesizeofitsfinancialandhealthcaresectors,withplansforgeographicexpansioninEurope[28]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatwhilemarketconditionsremainchallenging,clientengagementisstrong,andthereareopportunitiesforgrowth[7]−Theadvisorypipelineisstrong,butconversionisdifficultduetocautiousclientbehaviorandlongerdealtimelines[35]−ThecompanyexpectsQ42022tobestrongerthantheprevioustwoquarters,despiteongoingmarketchallenges[5]OtherImportantInformation−Thecompanyrepurchasedapproximately199,000sharesfor1 billion based on announced transactions during the first nine months of 2022 [5] Company Strategy and Development Direction - The company aims to grow its advisory business through sector and product expansion, with a focus on technology and private equity [3] - Recent acquisitions, including DBO Partners, are intended to enhance capabilities and scale in the technology investment banking sector [3][4] - The company is focused on building its tech business to match the size of its financial and healthcare sectors, with plans for geographic expansion in Europe [28] Management's Comments on Operating Environment and Future Outlook - Management noted that while market conditions remain challenging, client engagement is strong, and there are opportunities for growth [7] - The advisory pipeline is strong, but conversion is difficult due to cautious client behavior and longer deal timelines [35] - The company expects Q4 2022 to be stronger than the previous two quarters, despite ongoing market challenges [5] Other Important Information - The company repurchased approximately 199,000 shares for 22 million in Q3 2022, totaling 1.4 million shares for 186millionyear−to−date[16]−Aquarterlycashdividendof186 million year-to-date [16] - A quarterly cash dividend of 0.60 per share was approved, to be paid on December 9, 2022 [16] Q&A Session Summary Question: Improvement in M&A conditions - Management indicated that while there was a small sequential pickup in advisory business, overall market conditions remain difficult, with longer timelines for deals [21] Question: Equity trading business performance - Management attributed the success in equity trading to the Cornerstone acquisition and the overall trading platform, benefiting from market volatility [23] Question: Fixed income brokerage outlook - Management expects continued softness in fixed income due to rate volatility and reduced liquidity among depository clients [25] Question: Advisory business growth and M&A opportunities - Management expressed optimism about future M&A opportunities, particularly in the technology sector, despite current market challenges [28] Question: Impact of rate hikes on client dialogues - Management noted that rising rates have made financing more expensive, affecting various business lines, particularly in financial services [30] Question: Key drivers for municipal financing - Management highlighted that refinancing activity has halted, impacting the governmental side of municipal financing, while new issues remain stable [32] Question: Advisory pipeline strength - Management clarified that while the advisory pipeline is strong, deals are taking longer to close, and the environment remains cautious [35] Question: DBO team's integration and potential - Management expressed excitement about the DBO team's capabilities and the potential for growth in private equity advisory services [39]