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PIPER SANDLER COMPANIES (PIPR)·Q1 2025 Earnings Summary

Executive Summary

  • Adjusted EPS of $4.09 beat consensus by roughly $1.25, driven by record first quarter advisory revenues and tax benefits; GAAP net revenues of $357.3M were below consensus as investment losses and lower underwriting volumes weighed on results . Current-period Street figures marked below(*) from S&P Global.
  • Advisory services posted $216.8M (+38% y/y), accounting for ~60% of net revenues; institutional brokerage rose 9% y/y while corporate financing fell 32% y/y amid weak equity capital markets .
  • Management guided for advisory revenues to decline sequentially in Q2 and flagged continued weakness in equity underwriting until volatility subsides; municipal and fixed income outlooks hinge on rate stability and client conviction .
  • Capital return remained a support: $3.65 per share paid (special + quarterly) in Q1, $0.65 quarterly dividend declared, and 266k shares repurchased ($80.6M); new $150M repurchase authorization announced in February .

What Went Well and What Went Wrong

What Went Well

  • Advisory services delivered a record first quarter: $216.8M (+38% y/y) with broad-based industry contributions and higher average fees; “pleased to report a strong start to 2025” with advisory leading the quarter .
  • Institutional brokerage performance solid: equity brokerage $54.3M (+10% y/y) on higher volatility; fixed income $45.0M (+7% y/y) amid more accommodative markets .
  • Operating leverage on adjusted basis: adjusted operating income +23% y/y; adjusted operating margin 17.9% vs 16.8% y/y . CFO emphasized operating efficiency and profitability focus .

What Went Wrong

  • Corporate financing down 32% y/y to $35.7M, with weak equity issuance and lower average fees amid volatility and declining valuations; April equity capital raising “very slow” with expectation it remains so near term .
  • GAAP pre-tax margin compressed to 8.2% (from 15.3% y/y), compensation ratio rose to 69.5%, both pressured by investment losses including noncontrolling interests .
  • Near-term outlook cautious: management expects Q2 advisory revenues to decline q/q; fixed income client conviction hampered by rate volatility; municipal issuance slowed in April pending stabilization .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Net Revenues ($USD Millions, GAAP)$359.6 $484.1 $357.3
Adjusted Net Revenues ($USD Millions)$351.8 $498.6 $383.3
Diluted EPS (GAAP, $)$1.96 $3.86 $3.65
Adjusted Diluted EPS ($)$2.57 $4.80 $4.09
Pre-tax Margin (GAAP, %)15.5% 17.0% 8.2%
Adjusted Operating Margin (%)18.4% 24.4% 17.9%
Compensation Ratio (GAAP, %)64.2% 65.3% 69.5%
Adjusted Compensation Ratio (%)62.5% 60.3% 62.5%
Effective Tax Rate (GAAP, %)27.4% 36.1% -24.9%
Effective Tax Rate (Excl. vesting benefit, %)——29.8% (normalized)

Segment revenues

Segment ($USD Millions)Q3 2024Q4 2024Q1 2025
Advisory Services$188.0 $279.6 $216.8
Corporate Financing$17.9 $52.8 $35.7
Municipal Financing$35.5 $41.0 $26.4
Equity Brokerage$52.5 $61.2 $54.3
Fixed Income Services$48.5 $56.1 $45.0
Interest Income$7.8 $10.1 $10.0
Investment Income/(Loss)$10.7 $(15.4) $(29.6)

Key KPIs

KPIQ3 2024Q4 2024Q1 2025
Completed M&A & Restructuring Transactions57 63 42
Completed Capital Advisory Transactions14 29 13
Total Completed Advisory Transactions71 92 55
Total Equity Transactions Priced11 25 15
Book-run Equity Transactions Priced8 19 11
Total Debt & Preferred Transactions Priced6 9 12
Book-run Debt & Preferred Transactions Priced4 5 8
Municipal Aggregate Par ($ Billions)$5.5 $4.3 $3.4
Total Municipal Issues Priced157 148 94
Equity Brokerage Shares Traded (Billions)2.7 3.1 2.9

Consensus vs Actual

MetricQ3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD Millions)368.4*454.4*367.7*
Revenue Actual ($USD Millions)359.6 484.1 357.3
Primary EPS Consensus Mean ($)2.675*3.9875*2.845*
EPS Actual ($)2.57 4.80 4.09

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Advisory Services RevenueQ2 2025Not providedExpected to decline q/q vs Q1 2025 Lowered
Equity Underwriting ActivityQ2 2025Not provided“Very slow” in April; expected to remain slow until volatility subsides and valuations stabilize Lowered
Municipal FinancingNear termNot providedApril slow; robust pipeline but execution dependent on rate volatility, MMD, fund flows Conditional/unchanged pipeline; execution risk
Fixed Income ServicesNear termNot providedCautious; rate volatility hampering conviction; hedging activity ongoing; confidence could improve with Fed cuts/steeper curve Conditional
Non-Comp Expenses (ex reimbursed deal costs)FY 2025Expected to increase in 2025 (HQ move, hiring, inflation, activity) Q1 came in $70M, above guided range due to more travel Above prior range (near-term higher)
Compensation RatioNear termLargely aligned with revenue levels Could see near-term pressure Higher near term
Effective Tax RateQ1 2025—Normalized ~29.8% excluding $25M vesting benefit Informational
Dividend per ShareOngoing$0.65 declared in Q4 2024 $0.65 declared for payment on Jun 13, 2025 Maintained
Share Repurchase AuthorizationProgramPrior authorization expired 12/31/2024 New $150M authorization through 12/31/2026 Raised/extended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 & Q4 2024)Current Period (Q1 2025)Trend
Tariffs/Macro UncertaintyMacro framed around interest rate backdrop and sector breadth; Aviditi acquisition to diversify sponsor solutions Heightened volatility; tariff uncertainty bifurcating sectors; expect slower M&A cycles and delayed announcements More cautious
Equity Underwriting/IPO PipelineCorporate financing strongest since 2021 in Q4; healthcare franchise leading book-run deals April very slow; four Q1 IPOs (two MedTech); pipeline depends on stabilization; small-cap biotech backdrop weak Soft near term
Financial Sponsors/Countercyclical SolutionsAdded private capital advisory (Aviditi) in Q3; debt advisory strong Debt capital markets, continuation vehicles, restructuring providing ballast; sponsors well positioned to transact when market stabilizes Increasing relevance
Municipal FinancingRobust in Q3/Q4 amid accommodative conditions +27% y/y in Q1; April slowed due to rate volatility; pipeline robust Mixed (execution risk)
Depositories/Fixed IncomeQ3/Q4 saw increased activity as rates fell, clients repositioned Near-term client conviction hampered; activity around M&A-linked balance sheet restructurings; more derivatives hedging Softer
Talent/RecruitingAdded MDs across teams; expanded sector coverage in Q3/Q4 182 MDs (+6% y/y); added MDs in EPI and pharma services; destination of choice for talent Steady build

Management Commentary

  • “We are pleased to report a strong start to 2025, led by advisory services which achieved record first quarter revenues.” — Chad Abraham, CEO .
  • “Equity capital raising has been very slow in April, and we expect that trend to continue until volatility subsides and valuations stabilize.” — Chad Abraham .
  • “We could see some near-term pressure on [the compensation] ratio… non-compensation expenses… were $70M… above our guided range as our employees were particularly active.” — Kate Clune, CFO .
  • “We anticipate that the conversion of our pipelines will be impacted, and that second quarter advisory revenues will decline from the first quarter levels.” — Chad Abraham .
  • “Volatility is creating too much uncertainty right now… more activity on our derivatives hedging side to help depositories manage through this environment.” — Deb Schoneman, President .

Q&A Highlights

  • M&A conditions bifurcated: consumer products and beauty/personal care exposed to China sourcing face stalled processes; service-heavy domestic sectors seeing firmer interest; financing available for unaffected businesses .
  • Depositories: conversations picking up; several transactions announced; some April deals may close in 2025 versus 2024 expectations .
  • Municipal pipeline: robust, but execution hinges on rate volatility, MMD, absolute rates, and fund flows; stabilization in recent days enabled deals .
  • Countercyclical lines: debt capital markets advisory, continuation vehicles, and restructuring are growing faster than M&A and providing ballast .
  • IPO pipeline: traction in MedTech and energy; small-cap biotech remains decimated—investors likely return to beaten-down names before IPOs .
  • Fixed income trading appetite: client conviction constrained by volatility; activity around M&A-related balance sheet restructuring and derivatives hedging .

Estimates Context

  • Q1 2025: EPS $4.09 vs 2.845 consensus; revenue $357.3M vs $367.7M consensus. The EPS beat was aided by strong advisory revenues and a $25.4M vesting-related tax benefit; revenue missed amid weaker underwriting and investment losses including noncontrolling interests . Values retrieved from S&P Global.*
  • Trend: Q4 2024 beat both revenue and EPS; Q3 2024 modestly missed revenue and EPS versus consensus, showing improved execution through year-end before market volatility re-intensified in Q1 . Values retrieved from S&P Global.*

Where estimates may need adjustment:

  • Near-term (Q2) advisory downtick and underwriting softness suggest revenue estimates may need trimming; EPS trajectories should incorporate potential compensation ratio pressure and less tax benefit normalization (~29.8% ETR excluding vesting) .

Key Takeaways for Investors

  • Advisory strength offsets market softness: record Q1 advisory revenues and diversified sector/product capabilities underpin mid-cycle resilience; watch sponsors-driven solutions (agented debt, continuation vehicles, restructuring) .
  • Near-term caution on ECM and advisory conversion: expect Q2 advisory decline and slow April ECM; potential rebound contingent on volatility/tariff clarity—timing matters for H2 setup .
  • Earnings quality: adjusted margin held at 17.9%; GAAP optics pressured by investment losses and noncontrolling interests; normalize tax rate to ~30% for forward modeling .
  • Municipal and fixed income: robust pipelines but execution dependent on rate stability and client conviction; derivatives hedging demand a steady line of activity .
  • Capital return: ongoing $0.65 quarterly dividend; fresh $150M buyback authorization; Q1 repurchases offset dilution—supportive in volatile tapes .
  • Talent/recruiting: continued MD additions in energy/infrastructure and healthcare services expand coverage in sponsor-friendly sectors .
  • Trading implications: EPS beat vs revenue miss with cautious near-term commentary likely drives mixed reaction; watch headlines on tariff policy, rate path, sponsor deal closings, and ECM windows reopening as catalysts .