Piper Sandler(PIPR) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated $203 million of adjusted revenues in Q3, up 24% from Q2 and flat compared to last year [12] - Adjusted EPS for the quarter was $1.64, down $0.06 year-over-year and up $0.32 sequentially [34] - Year-to-date adjusted revenues of $547 million are up 5% from last year, with adjusted pretax income up 15% [12][35] Business Line Data and Key Metrics Changes - Advisory revenues were $107 million in Q3, slightly down from the previous year, with year-to-date Advisory revenues of $297 million, up 12% [13][14] - Equity financing activity generated $22 million in revenues for the quarter, negatively impacted by market volatility [17] - Equity brokerage business generated revenues of $25 million, significantly up compared to prior periods, driven by the acquisition of Weeden [19] Market Data and Key Metrics Changes - Municipal market underwriting volumes are up approximately 8% year-to-date, benefiting from lower interest rates [23] - Fixed income brokerage revenues were $26 million, up 28% sequentially and 42% year-over-year, driven by strong demand for taxable products [27] Company Strategy and Development Direction - The company closed the acquisition of Weeden & Company, enhancing equity trading capabilities and client base [6] - The sale of Advisory Research generated net cash proceeds of approximately $55 million, aligning with the company's strategic vision [7] - The pending acquisition of Sandler O'Neill is expected to add approximately $300 million of incremental annual revenues [9][41] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the strong pipeline and market conditions for M&A in the middle market [16][59] - The company expects to finish the year strong, with a solid pipeline across various industry verticals [12][59] - Management acknowledges potential macroeconomic challenges but maintains a positive outlook for short-term prospects [59] Other Important Information - The company incurred $6.1 million in restructuring and integration costs related to acquisitions in Q3 [31] - The adjusted tax rate for the quarter was 27%, with a full-year estimated tax rate range of 25% to 27% [36] - The company returned an aggregate of $30 million to shareholders through dividends year-to-date [39] Q&A Session Summary Question: Feedback on Sandler transaction and revenue synergies - Management received positive feedback from financial sponsors regarding the Sandler transaction and anticipates revenue synergies, though specific numbers are not projected yet [52][55] Question: Advisory pipeline and market conditions - Management noted a strong advisory pipeline and has not seen a material decline in new transactions despite macroeconomic concerns [59] Question: Non-compensation expenses outlook - Management expects non-compensation expenses in Q4 to be in the range of $47 million to $49 million, with a modest decline in the non-compensation ratio projected for 2020 [60][61]