Good morning, and welcome to the Piper Sandler Companies' Fourth Quarter and Full Year 2024 Earnings Conference Call. Today's call is being recorded and will include remarks by Piper Sandler management, followed by a question-and-answer session. I'll begin by turning the call over to Kate Winslow. Please go ahead.

Thank you, operator. Good morning, and thank you for joining the Piper Sandler Companies' fourth quarter and full year 2024 earnings conference call. Hosting the call today are Chairman and CEO, Chad Abraham; our President, Deb Schoneman; and CFO, Kate Clune. Earlier this morning, we issued a press release announcing Piper Sandler's fourth quarter and full year 2024 financial results, which is available on our website at pipersandler.com/earnings. Today's discussion of the results is complementary to the press release. A replay of this call will also be available at that same website later today. Before we begin, let me remind you that remarks made on today's call may contain forward-looking statements that are not historical or current facts, including statements about beliefs and expectations and involve inherent risks and uncertainties. Factors that could cause actual results to differ materially from those anticipated are identified in the company's reports on file with the SEC, which are available on our website at pipersandler.com and on the SEC website at sec.gov. Today's discussion also includes statements regarding certain non-GAAP financial measures that management believes are meaningful when evaluating the company's performance. The non-GAAP measures should be considered in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in our earnings release issued today. I will now turn the call over to Chad.

Thank you, Kate. Good morning, everyone. It's great to be with you to talk about our fourth quarter and full year 2024 results. Our platform performed well during 2024. We finished the year strong with the fourth quarter representing our best quarter of 2024 as well as our second highest quarterly revenues on record. We generated adjusted net revenues of $499 million, a 24.4% operating margin and adjusted EPS of $4.80. On a full year basis, adjusted net revenues were $1.5 billion, achieving a 19.7% operating margin and adjusted EPS of $12.69. There are a number of notable highlights from 2024. The firm achieved 16% revenue growth compared to 2023 with all of our businesses contributing to the higher revenues, leading to a 37% increase in net income. Advisory services accounted for over half of firmwide net revenues for the fourth consecutive year. Even with the headwinds in the depository space and healthcare sector, the breadth and strength of our platform resulted in 2024 being the second strongest advisory year on record. We grew our investment banking MD headcount to 183 Managing Directors as we continue to focus on deepening our sector and product coverage. We completed the acquisition of Aviditi Advisors, a full lifecycle advisor to financial sponsors, global alternative investment managers, and limited partner investors. And we returned $140 million to shareholders through dividends and share repurchases. Overall, 2024 marks another successful year as we continue to broaden our product and client mix and expand our geographic footprint, while maintaining strong operating discipline to generate $228 million of adjusted net income. Turning to Corporate Investment Banking. We generated revenues of $332 million during the fourth quarter of 2024, up sequentially and higher than the very strong fourth quarter of last year. Strong performance from advisory services and corporate financing drove 2024 corporate investment banking revenues of $983 million, an increase of 17% over 2023. Sector contributions were relatively diverse and six of our seven industry teams increased revenues over 2023. In addition, our agented debt business generated a record year fueled by revenue growth from private equity clients in this product. Specific to advisory services, we finished the year strong, generating fourth quarter revenues of $280 million, up 49% sequentially, driven by more completed transactions and a higher average fee. For the year, advisory services generated $809 million in revenues, up 14% from 2023. Our team completed 288 advisory transactions during 2024. Industry team contributions were led by financial services, followed by a record year from energy and power and solid contributions from healthcare, consumer and services, and industrials. During 2024, Piper Sandler ranked as a top three advisor on announced US M&A deals under $1 billion. Our performance within financial services was led by depositories, even though 2024 was a challenging year for this sector. We were the number-one advisor in US bank M&A based on the number of announced transactions and we advised on three of the five largest bank M&A transactions completed during 2024. Additionally, we saw solid contributions from our insurance and specialty finance teams. Record performance from our Energy and Power Group in 2024 was driven by our leadership in oilfield services, where we were the top advisor based on the number of completed M&A deals. We continue to invest in this sector and recently added two MDs specializing in infrastructure for the energy, technology, and transportation sectors. Another bright spot in 2024 was our technology investment banking group with significant year-over-year revenue growth. In the fourth quarter of 2022, we acquired DBO, which doubled the size of our technology franchise and strengthened our existing cyber security and software verticals, both of which performed well in 2024. We also added two managing directors to the platform during the year to help lead the fintech vertical. We remain committed to investing in our technology investment banking platform as we look to increase our share of this sector's large fee pool. Our focus on expanding revenues with private equity clients continued to yield strong results in 2024. Over the course of the last decade, we have expanded both our industry and product offerings to financial sponsors. These investments have produced meaningful contributions to the growth of the firm. For 2024, revenues from private equity clients grew north of 20%, exceeding both the value and volume growth of the overall sponsor M&A market. Today, roughly 50% of our advisory services revenues are generated from private equity. Our acquisition of Aviditi, which formed our Private Capital Advisory Group, has further expanded our ability to tap into private equity and increase our share of the wallet with this important client base. Looking forward, our advisory pipelines remain healthy and we're off to a strong start to 2025. With improving market conditions and an evolving regulatory landscape, we expect another year of growth in advisory revenues in 2025, with seasonality generally similar to 2024. Turning to corporate financing. We finished the year strong with our best quarter since 2021. We generated revenues of $53 million during the fourth quarter, up significantly from the sequential and prior year quarters, driven by more completed deals as clients took advantage of favorable market conditions to raise capital. For the year, corporate financing revenues of $174 million increased 33% from 2023, driven by more equity financings as market issuance during the year returned to more normalized levels. During 2024, we completed 117 equity, debt, and preferred financings raising $46 billion for corporate clients. Sector contributions for the year were again led by our healthcare team, which served as book runner on 40 of the 42 equity deals priced during 2024. We gained share in equity capital raising for financial services companies as we better leveraged our leading banking team with our book running equity capital markets franchise. The team completed several large capital raises in the depository space during 2024. We expect equity and debt financing activity to increase in 2025 as companies raise needed capital to execute on their strategic plans. Turning to Investment Banking Managing Director headcount. We finished the year with 183 Managing Directors, up 14 from 2023. During the year, we expanded product and sector coverage with MD additions in fintech, residential and commercial services, asset management, chemicals, and financial sponsor coverage. In addition, we added the Private Capital Advisory Group with the acquisition of Aviditi. Over the last 10 years, we have grown MD headcount by an average of 13% annually. We remain intentional about strategically managing headcount and driving productivity, while consistently looking for opportunities to strengthen the platform. Before handing it off to Deb, let me make one additional remark on our growth outlook. We continue to focus on growing annual corporate investment banking revenues to $2 billion over the medium term by continuing to scale industry groups, increasing transaction and fee size, enhancing productivity, and growing revenues from private equity clients. We have capacity within the current team for growth, but also expect corporate development to be a significant component of achieving our goal. Now I will turn the call over to Deb to discuss our public finance and brokerage businesses.

Thanks, Chad. I'll begin with an update on our public finance business. Market conditions steadily improved as the year progressed, culminating in a robust fourth quarter. We generated $41 million of municipal financing revenues for the quarter, up 15% sequentially and 40% from the prior year quarter as increased fund flows and investor demand enabled us to execute more high-yield offerings. For the year, we generated $123 million of municipal financing revenues, up 47% from 2023 and our second strongest year on record. During 2024, par value issuances in the municipal negotiated market increased approximately 34% from the prior year. We underwrote 501 municipal negotiated transactions, raising $17 billion of par value for our clients. Additionally, we maintained our number-two ranking based on the number of municipal negotiated underwritings. Our performance during 2024 benefited from our strength in specialty sectors. Our largest specialty sector is a special district group, which assists clients in raising capital to fund the public infrastructure needs of growing communities. We've expanded this group geographically and in 2024, they delivered a record year with 85 transactions raising $2.8 billion. In addition to revenue growth in 2024, we've worked diligently to optimize the platform to drive higher productivity. The enhanced productivity will allow for more investment into this business as we look to further grow market share. In terms of outlook for 2025, we anticipate public finance market conditions and issuance volumes to remain favorable. Turning to our equity brokerage business. Equity markets steadily climbed higher during the year on better volumes and with generally muted volatility. Fourth quarter 2024 equity brokerage revenues of $61 million, a quarterly record, led to record revenues of $215 million for the full year. Performance was broad-based with our high-touch electronic and derivatives trading, all generating strong client activity. The strength of our platform attracted over 1,600 unique clients and we traded 11.3 billion shares on their behalf. We continue to maintain one of the largest research platforms in the small and mid-cap space with approximately 950 stocks under coverage. Additionally, our macro research capabilities continue to rank among the top in the industry. As we look forward to 2025, we expect revenues similar to 2024. Lastly, turning to fixed income. We generated revenues of $56 million for the fourth quarter of 2024, up 16% sequentially and 17% compared to the year-ago period. Our depository client activity was strong as banks and credit unions looked to deploy liquidity. In addition, our analytics team was active assisting clients in repositioning their balance sheets and we executed on several restructuring trades during the quarter. For 2024, we generated $186 million of fixed income revenues, up 11% from the prior year as we benefited from a normalizing yield curve as well as investments we've made in the business. Our fixed income strategy is focused on providing value to our clients with analytics and advice. This advice-centric model allows us to maintain a capital-light approach with modest inventory levels and high inventory turnover. As we look to 2025, we expect clients to be more active as the yield curve continues to normalize. We are very focused on our medium-term goal of growing annual fixed income revenues to $300 million by investing in talent that provides differentiated advice and expertise, building on our municipal franchise, and increasing electronic trading. Now, I will turn the call over to Kate to review our financial results and provide an update on capital use.

Thanks, Deb. As a reminder, my comments will address our adjusted non-GAAP financial results, which should be considered in addition to and not a substitute for the corresponding GAAP financial measures. For the fourth quarter of 2024, we generated net revenues of $499 million, up 42% from the sequential quarter and 9% compared to the fourth quarter of last year. For 2024, net revenues totaled $1.5 billion, up 16% over last year as all of our businesses registered increased revenues. Our strong performance was driven by an improved operating environment, combined with our scale, market leadership, and deep client relationships. Turning to operating expenses and margin. Our compensation ratio was 60.3% for the fourth quarter of 2024 and 62% for the full year, down 160 basis points from 2023, driven by increased net revenue. Looking to 2025, we expect to drive compensation leverage with a modest decline in our compensation ratio on a full year basis as we remain focused on balancing employee retention and investment opportunities while exercising strong operating discipline. Non-compensation expenses for the fourth quarter of 2024, excluding reimbursed deal costs were $65 million, up 6% on a sequential basis and 7% compared to the year-ago quarter. Non-compensation costs were higher during the current quarter, driven primarily by increased recruiting and placement fees and a full quarter of Aviditi on our platform. For 2024, excluding reimbursed deal costs, non-compensation expenses totaled $251 million or an average of $63 million per quarter and increased 3% over 2023. We continue to drive operating leverage on our non-compensation expenses with our non-compensation ratio declining more than 2 percentage points compared to last year. Our expectations for non-compensation expenses in 2025 have been adjusted to a range of $65 million to $67 million per quarter, excluding reimbursed deal costs. Increased non-compensation expenses for 2025 are driven by relocating our Minneapolis office headquarters to support growth in the business. In addition to occupancy costs, inflationary increases in both data communication contracts and travel costs, the addition of new employees to our platform, and the expectation of increased business activity will drive elevated costs. Non-compensation expenses are a key driver of operating leverage and we remain focused on managing the actionable expenses. During the fourth quarter of 2024, we generated operating income of $121 million and an operating margin of 24.4%, up over both of the comparable quarters. For the year, operating income totaled $304 million, which resulted in a 19.7% operating margin. Our full year net revenues increased 16%, while our operating profits are up 43% compared to the prior year period. Our income tax rate was 28.5% for the fourth quarter of 2024 and 24.9% for the year. Income tax expense for the year was reduced by $14 million of tax benefits related to the vesting of restricted stock awards. Excluding these benefits, our 2024 income tax rate was 29.6%. For 2025, we expect our income tax rate on a full year basis to be around 30%, excluding the impact from the vesting of restricted stock awards. We have revised our income tax rate expectations as we're experiencing upward pressure as the result of increased non-deductible expenses, including limitations on the deduction of compensation expense enacted with the American Rescue Plan Act of 2021. During the fourth quarter of 2024, we generated net income of $87 million and a diluted EPS of $4.80. For the year, net income totaled $228 million and diluted EPS was $12.69. I'll finish with an update on capital allocation. We remain committed to returning capital to shareholders and during 2024, we returned an aggregate of $140 million to shareholders. We paid an aggregate of $74 million or $3.50 per share to our shareholders through our quarterly and special cash dividend. We repurchased approximately 347,000 shares of our common stock for $66 million related to employee tax withholdings on the vesting of restricted stock awards. These repurchases more than offset the share count dilution from this year's annual stock grants. Given our level of earnings today, the Board approved a special cash dividend of $3 per share related to our 2024 full year results. Including this special dividend, our total dividend for fiscal year '24 equals $5.50 per share of common stock or a payout ratio of 43% of adjusted net income. In addition, the Board approved a quarterly cash dividend of $0.65 per share. Both the special and the quarterly cash dividends will be paid on March 14 to shareholders of record as of the close of business on March 4. 2024 marked a successful year for Piper Sandler. We grew revenue and profitability while furthering the strategic expansion of our business. As we look forward, we're focused on executing on our strategic priorities to drive revenue growth and strong return for our shareholders. With that, we can open up the call for questions.

Thank you. We can take our first question from Brendan O'Brien with Wolfe Research.

Good morning guys, and thank you for taking my question. I guess to start things off, you mentioned this a bit in your prepared remarks, Chad, the headwinds within financial services and healthcare. And given that those two areas were arguably under the greatest scrutiny during the prior administration, I just want to get a sense as to how dialogues have developed over the last few months, whether you're starting to see even a further pickup within financial services, just after what was a strong 2024.

Yes, I would say conditions are definitely improving in both sectors. Starting with healthcare, there was some regulatory scrutiny and associated fears that affected the market. It was a challenging year for healthcare stocks, given our 25 to 30-year history in this field. Despite this, we've seen positive signs in the M&A market for healthcare, with some promising transactions in MedTech happening recently. In financial services, which was our largest business last year, the situation for depositories has improved, although it was tough for most of the year. There have been positive developments in discussions regarding depositories, and we believe 2025 will be a better year for them. However, we need to monitor how many deals are announced and closed, as that should happen by May or June. Even with the difficulties, there were successful equity capital market raises in this area, resulting in a diversified revenue stream. Overall, while the completed M&A transactions for depositories were still challenging, we anticipate improvements in 2025 or 2026.

That's great color. And then for my follow-up, I just wanted to touch on a follow-up on the advisory business. Two of the biggest headwinds you cited have been deal elongation and buyer-seller valuation disparities, it would be great to get a mark-to-market of how those two areas are trending? How close we are to more normal course type of activity?

What I would say about the advisory business is that it's really more of the same. I know I’ve repeated this over the last four quarters, but we are seeing a slow, steady improvement across nearly every sector, and we are able to close deals. In our private equity and sponsor business, we are not encountering competitive processes with numerous buyers at the end; instead, it's quite sparse. We have a couple of buyers, they can secure financing, and we are able to finalize deals. However, it's important to note that the improvement is gradual. We are definitely not experiencing a rapid upturn, which is acceptable. This slow and steady growth suggests that we could be looking forward to a more normalized, longer cycle ahead.

Great. Thank you for taking my questions.

Thank you. We will take our next question from James Yaro with Goldman Sachs.

Good morning, and thanks for taking my questions. I just wanted to touch on the ECM business. Obviously, very strong results in corporate finance in the quarter. Maybe you could just help us think through the outlook for IPOs generally, but specifically, maybe you could just comment a little bit on the client appetite for healthcare transactions and what is clearly, from a regulatory perspective, a backdrop that has some crosswinds?

It was a very strong quarter for us in ECM following a relatively weak Q3. The outcome depends on the number of large transactions we execute at the beginning and end of the quarter, but we had notable strength, especially in healthcare. Biotech financings are a significant part of the market, and while January has been only fair, the IPO market definitely seems to be improving. We don’t have extensive data, but we do have a few indicators. We participated in a couple of energy transactions and one MedTech IPO this week, both of which performed well, and we haven't seen many of those in recent years. This suggests we're starting to see some diversity in the market. We're also seeing some expansion into generalist accounts beyond just healthcare specialists. I believe we are in the early stages of a positive trend in the IPO market, and if this continues with broader sector participation, it will bode well for further improvements in our ECM business.

Great. That's very clear. So maybe just thinking about acquisitions here, you talked a little bit about a potentially longer cycle here. How does that longer cycle impact your ability to conduct acquisitions going forward?

Yeah. I would say, we're pretty excited. We're kind of, I think in what should be a pretty good market for acquisitions. We're long enough away kind of from the 2020 peak revenues where we've had for some of the boutiques and sectors, a couple of tougher sectors in '22, '23, I think some of the businesses have normalized in '24, so we're kind of dealing with realistic revenue outlooks, which makes sort of deal doing easier. And I think the companies we're talking to are looking at sort of pretty good pipelines, pretty good line of sight in revenues. And I think we're able to diligence that. Likewise, I think on a relative basis, we've performed really well. So we've got a lot of interest from folks to talk to us. So I'm pretty optimistic about the next couple of years here for that.

Very clear. Thanks so much, Chad.

Thank you. Our next question comes from Devin Ryan with Citizens JMP.

Hey, good morning. This is Brian Fitzgerald on for Devin. I wanted to start on fixed income. In the press release, you guys mentioned a new Managing Director hire that's going to head the structured products group. I wanted to get a sense on the opportunity you see in securitized products and any color on how your fixed income business could evolve? Thanks.

Thank you for the question. Let me address the evolution of our fixed income business comprehensively, which will also cover your initial question. We talked about investing in talent, and our recent Managing Director hire is part of that initiative. We are optimistic about expanding the non-depository segment of our business. There's a beneficial connection between the depository and non-depository areas as banks restructure and bring parts of their balance sheets to the market. This presents a solid opportunity to enhance our non-depository operations. Specifically, we are focusing on the development of structured products and securitizations, which are gaining significant traction in the marketplace and align well with our investment banking efforts in financial services. Additionally, expanding our municipal franchise is another key focus. We aim to leverage our strong public finance business further into the secondary market. We've brought in new traders for the soft yield sector to support our investment grade trading team and are now concentrating on recruiting sales talent to boost our secondary market activities. Moreover, we have observed a notable increase in separately managed accounts in the marketplace, with retail and household ownership of municipal bonds rising sharply. The proportion of trades in the municipal market that are small, under one million dollars, has surged from around 3% a few years ago to over 30% now. Given the volume of transactions involving smaller trades, it's crucial for us to engage efficiently with those managing these accounts and the larger funds involved. These are the key aspects of our fixed income expansion strategy, and please let me know if I missed anything you were looking for in response to your first question.

No. That was great. Thank you. And then as a follow-up, just the comp ratio is 62% for the full year. I think last quarter you guys were talking about that 61.5% to 62.5% range for 2025. I guess given the revenue strength in Q4, do you have any updates to that or is that still fair game? Thanks.

Hi, Brian. Thank you for the question. I think that range is still fair game, although we do continue to anticipate driving, we said, modest decline in the comp ratio as revenues continue to grow. Of course, that depends on the magnitude to which revenues grow. And of course, our continued investment in talent for the platform. So I think the range is reasonable. Obviously, we concluded the year on a full year basis, dead middle there. And I do expect continued leverage on that as we move into 2025 if expectations unfold as we're contemplating.

Thank you. Our next question comes from Mike Grondahl with Northland Securities.

Hey, guys. Thanks, and congratulations on a strong finish. Chad, what would you highlight as your top two priorities for '25?

I appreciate it. I would focus on a couple of key areas. In investment banking, our priorities include expanding some of our industry teams, particularly in financial services and healthcare, where we still have opportunities to enhance our talent. We achieved a record year in energy and made significant strides in our technology and software team with an industry-specific focus. I believe there is potential to double the number of Managing Directors and talent in technology over the next few years, and we see that business growing to match the size of our financial services and healthcare segments. Additionally, we've built strong expertise in various products over the years, and we are expanding our restructuring and capital advisory teams. My second focus is to leverage our 185 Managing Directors across these products effectively. Lastly, as Deb mentioned regarding growth priorities beyond investment banking, we will place emphasis on fixed income due to the size of the fee pool, which presents considerable growth opportunities for us.

Great. And maybe it's already answered with what Deb said earlier, but Deb, I'll just give you a chance to maybe add anything as you look at fixed income and the brokerage business?

Regarding our priorities, I would say that for fixed income, I don't have much to add. We have been focused on adding the right talent, which is a gradual process as we move forward in those areas I mentioned. My comments on municipals are further along and more immediate, whereas structured products and securitization require a bit more time to develop. We've brought in new talent and are still recruiting in that area. As for equity brokerage, I mentioned during last quarter's call that we are working on some near-term developments, particularly in electronic trading, and are also expanding geographically in the UK, EU, and other markets where we see growth potential. Thank you for the question.

Yeah. You bet. Thanks, guys.

Thank you. It appears that we have no further questions at this time. Mr. Abraham, I will turn the conference back to you for closing remarks.

Thank you, Melissa, and thanks to everyone that joined. We look forward to updating you on our first quarter results in a few months. Have a great day and a good weekend.

This concludes today's call. Thank you for your participation. You may now disconnect.