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PIPER SANDLER COMPANIES (PIPR)·Q2 2025 Earnings Summary

Executive Summary

  • Strong quarter with broad-based YoY growth: Net revenues rose 17% YoY to $396.8M and adjusted net revenues rose 14% YoY to $405.4M; adjusted EPS was $2.95 and operating margin 18.1% .
  • Clear estimate beats: EPS $2.95 vs $2.23 consensus; revenue $396.8M vs $355.1M consensus, reflecting strength in municipal finance and institutional brokerage, plus resilient advisory; dividend raised to $0.70 per share (from $0.65) effective Sept. 12 record Aug. 29 (bolding reflects significance)* .
  • Mix drivers: Advisory $206.2M (+12% YoY), municipal finance $41.9M (+66% YoY, best quarter since 2021), equity brokerage $58.1M (+12% YoY), and fixed income $54.3M (+37% YoY) .
  • Outlook/tone: Management expects Q3 advisory revenues to be largely consistent with Q2; anticipates moderation in municipal and fixed income from very strong Q2 levels; CFO targets comp ratio in 61.5–62.5% range for remainder of year .
  • Strategic update: Announced acquisition of G Squared Capital Partners to deepen government services/defense technology coverage and augment technology IB platform (expected to close Q3’25) .

What Went Well and What Went Wrong

  • What Went Well

    • Municipal financing posted $41.9M, up 66% YoY, best since 2021; activity robust across governmental and specialty sectors (Kansas, California, special district, healthcare); management signaled strong pipeline albeit normalization in Q3 .
    • Institutional brokerage strength: equity brokerage $58.1M (+12% YoY) on higher volatility, and fixed income $54.3M (+37% YoY) supported by large balance-sheet restructuring trades tied to bank M&A closings .
    • Advisory remained the anchor: $206.2M (+12% YoY) with outsized contributions from services & industrials, healthcare, and debt advisory; 71 advisory transactions completed (up 4% YoY) .

  • What Went Wrong

    • Corporate financing remained soft at $35.0M (-31% YoY) amid fewer completed equity deals and lower average fees; healthcare/biotech financing backdrop still lagging despite improving IPO tone .
    • Non-compensation costs climbed to $89.6M (+18% YoY), including $5.0M restructuring/integration related to headcount reductions and Avidity office space; higher legal and technology consulting fees also weighed .
    • GAAP EPS declined 35% QoQ to $2.38 due to the absence of Q1’s $25.4M tax vesting benefit; tax rate rose to 35.1% in Q2 (vs -24.9% Q1), elevating GAAP vs adjusted spread .

Financial Results

  • Consolidated results vs prior periods (GAAP and Adjusted)
MetricQ2 2024Q1 2025Q2 2025
Net Revenues ($M)$339.2 $357.3 $396.8
Adjusted Net Revenues ($M)$356.7 $383.3 $405.4
Diluted EPS (GAAP)$1.97 $3.65 $2.38
Adjusted EPS$2.52 $4.09 $2.95
Pre-tax Margin (GAAP)8.3% 8.2% 12.3%
Adjusted Operating Margin17.3% 17.9% 18.1%
Compensation Ratio (GAAP)69.2% 69.5% 65.1%
  • Segment revenue breakdown
Segment ($M)Q2 2024Q1 2025Q2 2025
Advisory Services$183.9 $216.8 $206.2
Corporate Financing$50.6 $35.7 $35.0
Municipal Financing$25.2 $26.4 $41.9
Equity Brokerage$52.1 $54.3 $58.1
Fixed Income Services$39.7 $45.0 $54.3
Interest Income$6.7 $10.0 $7.9
Investment Income/(Loss)$(17.4) $(29.6) $(4.8)
  • KPIs
KPIQ2 2024Q1 2025Q2 2025
Completed M&A + Restructuring52 42 49
Completed Capital Advisory16 13 22
Total Completed Advisory68 55 71
Total Equity Deals Priced20 15 16
Bookrun Equity Deals17 11 12
Total Debt/Preferred Deals11 12 10
Bookrun Debt/Preferred8 8 8
Municipal Par ($B)$3.2 $3.4 $5.7
Municipal Issues110 94 175
Equity Shares Traded (B)2.8 2.9 2.9
  • Results vs. S&P Global consensus
MetricActualConsensus*Outcome
Adjusted EPS$2.95 $2.23*Bold beat
Net Revenues ($M)$396.8 $355.1*Bold beat
EPS # of Estimates—4*—
Revenue # of Estimates—4*—

Values marked with * are from S&P Global consensus (tool). Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Advisory RevenuesQ3 2025N/A“Largely consistent with Q2” Maintain (stable)
Municipal Financing RevenuesQ3 2025N/AExpect moderation from very strong Q2 Lower
Fixed Income RevenuesQ3 2025N/AAnticipate softening after strong Q2 Lower
Equity Brokerage RevenuesQ3 2025N/AExpect moderation as volatility normalized (VIX 17 end-June) Lower
Compensation RatioRemainder of 2025Target range historically referencedExpect to be in ~61.5–62.5% range Maintain target
Non-comp Expenses (ex. reimbursed)FY 2025Range previously raisedTrending between current run-rate and high end of prior guided range Toward high end
Effective Tax RateFY 2025N/ANo formal guide; YTD normalized ~29.6% excluding vesting benefit N/A
DividendOngoing$0.65/qtr$0.70/qtr declared; payable Sep 12, record Aug 29 Raised

Note: PIPR does not provide formal revenue/EPS guidance; commentary is directional and segment-specific.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Advisory pipelineQ4: strong advisory breadth; 2024 IB revenues +20% YoY . Q1: record Q1 advisory; +38% YoY .Advisory $206M (+12% YoY); Q3 expected similar to Q2 .Stable-to-improving
Corporate financing/ECMQ4: strongest since 2021 . Q1: softness amid volatility, lower fees .Still subdued (-31% YoY); medtech IPOs improving; biotech still slow .Mixed
Municipal financeQ4: strong across specialty sectors . Q1: +27% YoY; more accommodative markets .$41.9M (+66% YoY); best since 2021; Q3 moderation expected .Strong but normalizing
Depository M&A/balance-sheet workQ4: FI up on rate cuts, restructuring trades . Q1: fixed income soft QoQ but +7% YoY .Large restructuring trades; optimism on bank M&A approvals; fixed income to soften from strong Q2 .Improving M&A; near-term FI normalize
Expenses/comp ratioQ4: adj comp 60.3% . Q1: adj comp 62.5% .Comp ratio targeted 61.5–62.5% remainder of year; non-comp trending high (legal/tech consulting) .Operating discipline with cost pressure
Technology IB/capability expansionQ4: platform momentum across sectors . Q1: continued MD hires in infra/healthcare .Acquiring G Squared to deepen gov/defense tech; complements cybersecurity/tech .Expanding

Management Commentary

  • Strategic positioning and revenue mix: “We closed the second quarter with adjusted net revenues of $405 million, an 18.1% operating margin, and adjusted EPS of $2.95… Advisory revenues were $206 million… We completed 71 transactions” — Chad Abraham, CEO .
  • Advisory outlook: “We have a robust pipeline… expect our third quarter advisory revenues to be largely consistent with the second quarter” — Kate Clune, CFO .
  • Municipal finance: “Generated $42 million… up 66% YoY… performance was broad based… expect third quarter revenues to moderate” — Deb Schoneman, President .
  • Brokerage/FI cadence: “Equity brokerage… $58M… expect revenues to moderate… Fixed income… $54M… anticipate fixed income revenues to soften in the third quarter” — Deb Schoneman .
  • Cost framework: “We’d expect [comp ratio] for the remainder of the year to be in this range… 61.5% to 62.5%… Non-comps trending a bit above the increased guided range due to occupancy, T&E, and higher legal/professional fees” — Kate Clune, CFO .
  • Strategy/M&A: “Entered into a definitive agreement to acquire G Squared… to further the growth of our technology investment banking group” — Chad Abraham, CEO .

Q&A Highlights

  • Depository M&A trajectory: CEO cited improving conditions (credit, capital availability, faster regulatory approvals) with increasing announcements; expects some closings later this year but more impact in 2026 .
  • Avidity (capital advisory) integration: Performing as hoped; deep LP relationships enhancing cross-sell across debt advisory and sell-side M&A; added senior hire in secondaries to accelerate growth .
  • IPO/biotech financing: IPO market improving (notably medtech, insurance), but biotech still lagging; overall financing activity remains sector-dependent .
  • Fixed income vs bank M&A: FI moderation guided off a very strong Q2 with several large restructuring trades; bank underwriting picking up as terms/coupons improve, high market share in FSG .
  • Costs: CFO reiterated comp ratio within 61.5–62.5% target range, and non-comp dollars trending between current run-rate and the high end of the prior range, driven by occupancy (HQ move), T&E, and legal/professional fees .

Estimates Context

  • Q2’25 results beat consensus on both revenue and EPS, driven by stronger-than-expected municipal finance and institutional brokerage, with resilient advisory offsetting soft ECM.
  • Consensus metrics used in “Results vs. S&P Global consensus” table above. Expect upward revisions to FY’25 adjusted operating margin and modest upward adjustments to advisory/municipal run-rate; ECM forecasts likely remain conservative until sustained biotech recovery is evidenced .

Values marked with * are from S&P Global consensus (tool). Values retrieved from S&P Global.

Key Takeaways for Investors

  • Broad-based beat with quality mix: Municipal and brokerage strength plus steady advisory drove an EPS and revenue beat vs consensus; dividend increased to $0.70 underscores confidence .
  • Momentum into 2H but normalization ahead: Advisory expected stable in Q3, while municipal and fixed income likely moderate from Q2 peaks; trading desks should plan for lower volatility revenue vs Q2 .
  • Positive medium-term setup: Improving bank M&A and restructuring create multi-product opportunities across advisory and fixed income; G Squared expands technology/government services footprint .
  • Cost discipline intact: Comp ratio guided to remain in the 61.5–62.5% range; watch legal/professional fees and occupancy as non-comp headwinds; adjusted operating margin held ~18% despite higher non-comp .
  • ECM still mixed: Medtech/insurance improving; biotech remains slow—keep ECM expectations conservative near term .
  • Capital returns: Elevated shareholder returns ($189M 1H’25) and dividend hike support total return profile; share repurchases ongoing .
  • Trading lens: Near-term catalysts include depository M&A announcements, advisory deal closings, and ECM breadth; potential headwind from lower Q3 volatility and FI normalization vs Q2 .

Footnote:
Values marked with * are from S&P Global consensus (tool). Values retrieved from S&P Global.