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PIPER SANDLER COMPANIES (PIPR)·Q4 2024 Earnings Summary

Executive Summary

  • Fourth quarter delivered second-highest quarterly revenues on record with adjusted net revenues of $499M, adjusted operating margin of 24.4%, and adjusted EPS of $4.80, capping a strong full year 2024 (adjusted net revenues $1.54B, adjusted EPS $12.69) .
  • Advisory services were robust at $279.6M (third-strongest quarter on record), while corporate financing rebounded to $52.8M (strongest since 2021); equity brokerage hit a quarterly record at $61.2M and fixed income rose to $56.1M .
  • Board declared a special cash dividend of $3.00 per share and a quarterly dividend of $0.65 per share (paid March 14 to shareholders of record March 4), returning $140M to shareholders in 2024; total FY24 dividend equals $5.50 per share (~43% payout of adjusted net income) .
  • Management guided 2025 non-compensation expense to $65–$67M per quarter and a ~30% full-year tax rate (ex-vesting), and expects a modest decline in the compensation ratio as revenues grow; equity brokerage revenues expected to be similar to 2024, with constructive outlooks for public finance and fixed income .
  • Catalysts: special dividend and strong margin performance, healthy advisory pipelines, improving ECM breadth (selected med-tech and energy IPOs performed well), and a strategic alliance with BC Partners Credit to expand financing solutions for financial services clients .

What Went Well and What Went Wrong

What Went Well

  • Advisory strength: “third strongest quarter on record” with $279.6M, diversified sector contributions; private equity client revenues grew >20% YoY for 2024, now ~50% of advisory revenues .
  • Corporate financing rebound: $53M, best since 2021, driven by more completed deals and favorable market conditions; healthcare and financial services led full-year ECM share gains .
  • Brokerage outperformance: equity brokerage revenues hit a quarterly record at $61M, full-year $215M; broad-based strength across high-touch, electronic, and derivatives trading .
  • Margin execution: adjusted operating margin expanded to 24.4% in Q4; full-year adjusted operating margin reached 19.7% with disciplined comp/non-comp ratios .

Quotes:

  • “We finished the year strong with…our second highest quarterly revenues on record.”
  • “We expect equity and debt financing activity to increase in 2025…as companies raise needed capital.”
  • “Fourth quarter 2024 equity brokerage revenues of $61 million, a quarterly record.”

What Went Wrong

  • Health care softness earlier in 2024; regulatory scrutiny and weak market performance pressured activity, though management sees improving signs in M&A (recent med-tech transactions) .
  • Depositories M&A remained challenging in 2024 (low completed transactions), despite equity capital raising bright spots; improvement anticipated but timing uncertain .
  • Investment income/(loss): Q4 investment loss of $15.4M (vs. income in Q3/Q4’23), contributing to elevated GAAP comp ratio vs. adjusted .
  • Corporate financing was weak in Q3 before rebounding in Q4; ECM flows remain sensitive to sector/market timing (January was “only okay” in biotech) .

Financial Results

Summary Financials vs prior periods and estimates

MetricQ4 2023Q3 2024Q4 2024Consensus (Q4 2024)
Adjusted Net Revenues ($USD Millions)$457.4 $351.8 $498.6 N/A (S&P Global data unavailable)
GAAP Net Revenues ($USD Millions)$471.9 $359.6 $484.1 N/A (S&P Global data unavailable)
Adjusted EPS ($USD)$4.03 $2.57 $4.80 N/A (S&P Global data unavailable)
GAAP Diluted EPS ($USD)$3.00 $1.96 $3.86 N/A (S&P Global data unavailable)
Adjusted Operating Margin (%)21.7% 18.4% 24.4% N/A (S&P Global data unavailable)

Note: S&P Global Wall Street consensus data was unavailable at time of writing; will update when accessible.

Segment Revenues

Segment ($USD Millions)Q4 2023Q3 2024Q4 2024
Advisory Services$284.3 $188.0 $279.6
Corporate Financing$30.2 $17.9 $52.8
Municipal Financing$29.3 $35.5 $41.0
Equity Brokerage$55.0 $52.5 $61.2
Fixed Income Services$47.9 $48.5 $56.1

KPIs

KPIQ2 2024Q3 2024Q4 2024
Completed Advisory Transactions (count)67 71 92
Completed Capital Advisory (count)15 14 29
Equity Transactions Priced (total)20 11 25
Book-run Equity Transactions (count)17 8 19
Debt & Preferred Transactions (total)11 6 9
Book-run Debt & Preferred (count)8 4 5
Municipal Par Value Priced ($B)$3.2 $5.5 $4.3
Municipal Issues Priced (count)110 157 148
Equity Brokerage Shares Traded (billions)2.8 2.7 3.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non-Compensation Expenses per quarter (ex reimbursed deals)FY 2025~$62M (near-term guide in Q2/Q3 2024) $65–$67M Raised
Compensation Ratio (full-year)FY 202561.5%–62.5% normalized range Modest decline from ~62% as revenues grow Maintained trajectory (slightly lower)
Effective Tax Rate (ex vesting)FY 202527%–29% for FY2024 ex-vesting ~30% (pressure from nondeductible expenses incl. ARPA limits) Raised
Equity Brokerage RevenuesFY 2025N/ASimilar to 2024 Maintained
Public Finance Market ConditionsFY 2025N/ARemain favorable Positive outlook
Fixed Income Revenues (medium-term target)Medium-termN/A$300M Target introduced
Corporate Investment Banking Revenues (medium-term target)Medium-termN/A$2B Target reiterated
DividendsNear-termQuarterly $0.65 (Q3 2024) Special $3.00 and Quarterly $0.65 (paid Mar 14; record Mar 4) Announced/Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Private equity sponsor activitySlow, steady improvement; thin end-processes but pitch activity rising Gradual improvement continues; not a snapback PE revenues up >20% in 2024; ~50% of advisory; pipelines healthy into 2025 Improving steadily
Depositories M&AEarly signs of more constructive dialogues Slow build expected; post-election clarity a catalyst 2024 was tough for completed deals; 2025 better, but timing uncertain Improving, timing uncertain
Healthcare sectorWeakness from regulatory scrutiny; expecting back-half recovery Healthcare lagged advisory; regulatory environment tougher Seeing signs of improvement; recent med-tech deals; January biotech only “okay” Stabilizing
ECM/IPOsQ3 anticipated softer vs H1; backlog weighted to healthcare/biotech Q4 expected stronger for ECM vs Q3 Q4 ECM strongest since 2021; breadth improving across energy/med-tech; generalist accounts participating Rebounding
Fixed income environmentMuted activity; optimism about improvement Stronger sequentially; clients reposition as rates cut Q4 up 17% YoY; expect more activity as yield curve normalizes; build-outs in structured products/munis/electronic trading Improving; strategic build-out
Non-comp cost inflationDatacom/market data/T&E pressures but discipline maintained (~$62M/qtr) Non-comp down YoY; regulatory settlement costs declined 2025 non-comp raised to $65–$67M per quarter (HQ relocation, inflation, added talent) Higher baseline with growth investments
Strategic M&A (corporate development)Aviditi acquisition pending; synergies expected Aviditi closed; integration progressing Pursuing additional acquisitions with normalized revenue outlooks; optimistic pipeline Active

Management Commentary

  • Strategic scale and targets: “We continue to focus on growing annual corporate investment banking revenues to $2 billion over the medium term” .
  • Fixed income ambition: “Medium-term goal of growing annual fixed income revenues to $300 million by investing in talent…building on our municipal franchise, and increasing electronic trading” .
  • Platform performance: “Fourth quarter representing our best quarter of 2024 as well as our second highest quarterly revenues on record” .
  • Private equity focus: “Revenues from private equity clients grew north of 20%…roughly 50% of our advisory services revenues are generated from private equity” .
  • Expense/tax outlook: “Noncompensation expenses in 2025…$65M to $67M per quarter…we expect our income tax rate…around 30%” .

Q&A Highlights

  • Sector recovery: Health care and financial services dialogs improving; depositories likely better in 2025 but close/announce timing remains a swing factor .
  • Advisory cadence: Deal processes remain thin at the end, but slow, steady improvement across sectors; potential for a more normal, longer cycle .
  • ECM/IPO breadth: Early signs of improvement with strong energy and med-tech IPOs; broader investor participation beyond specialists .
  • Acquisitions landscape: More realistic revenue outlooks enable deals; strong interest from potential partners; optimistic on corporate development over next couple of years .
  • Fixed income build-out: Structured products/securitizations growth opportunity; expanding municipal franchise into secondary/electronic trading to address rising small-lot activity .
  • Compensation framework: 61.5–62.5% normalized range reiterated; expect modest decline with revenue growth .

Estimates Context

  • S&P Global Wall Street consensus for Q4 2024 revenue and EPS was unavailable due to data access limits at time of writing. Actual results cannot be benchmarked to consensus until retrieval is restored. We will update beat/miss assessments when S&P Global data is accessible.

Key Takeaways for Investors

  • Q4 strength across advisory, ECM, brokerage, and fixed income delivered 24.4% adjusted operating margin and $4.80 adjusted EPS—indicative of strong operating leverage as markets normalize .
  • Advisory momentum and deeper private equity penetration (>20% PE revenue growth; ~50% of advisory) underpin 2025 pipeline resilience; expect slow, steady improvement rather than a rapid snapback .
  • ECM breadth is improving beyond biotech (energy and med-tech IPOs performed well), which could sustain capital-raising activity into 2025; monitor sector rotation and investor mix .
  • Equity brokerage scale and electronic capabilities produced a quarterly record in Q4; management expects 2025 revenues similar to 2024, indicating durable franchise strength .
  • Public finance and fixed income should benefit from normalizing yield curves; medium-term fixed income revenue target of $300M signals growth runway via structured products, municipals secondary, and electronic trading .
  • Expense outlook rising to $65–$67M per quarter in 2025 and tax rate ~30% reflect growth investments and nondeductible pressures; comp ratio expected to decline modestly with revenue growth—watch margin trajectory .
  • Capital returns remain supportive: special $3 dividend plus $0.65 quarterly; total FY24 dividends $5.50/share and $140M returned to shareholders—an ongoing tailwind for total return .

Additional Relevant Press Releases (Q4 2024)

  • Strategic alliance with BC Partners Credit to enhance debt capital markets solutions for financial services clients, leveraging anchor demand and broad distribution networks .