Good morning, and welcome to the Piper Sandler Company's Second Quarter 2025 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 Company's Second Quarter 2025 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 Second Quarter 2025 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. Thank you for joining our second quarter 2025 earnings call. When we spoke with you after the first quarter, the macro environment was challenging, and the second quarter began with uncertainty and persistent volatility. By mid-May, market sentiment shifted, equity markets recovered, and confidence improved. As a more constructive outlook took hold, client engagement across businesses gained momentum. As a result, we closed the second quarter with adjusted net revenues of $405 million, an 18.1% operating margin, and adjusted EPS of $2.95, all higher compared to the same period last year. Advisory revenues were $206 million during the quarter, up 12% year-over-year, driven by our broad set of products and a higher average fee. We completed 71 transactions during the period, up compared to the second quarter of last year. Performance was led by our Services and Industrials group, which delivered one of their best quarters since 2021. The strong performance of our services and industrials team reflects the continued addition of high-quality talent that focuses on sub-verticals important to our clients. During the first half of 2025, advisory revenues were $423 million, up 24% compared to the year-ago period. This growth was driven by higher revenues from M&A as well as increased non-M&A revenues, which include debt advisory, private capital advisory, and restructuring. Our investments in non-M&A advisory capabilities continue to gain traction as total revenues from these product lines grew at a rate in excess of our overall advisory revenues. We have strategically expanded our industry and product capabilities, which has not only deepened client relationships but also enhanced our ability to deliver comprehensive advice throughout the entire market cycle. For example, our debt advisory team has been very active, and we continue to experience strong demand for their services. Our best-in-class team, which leverages deep industry expertise and strong lending relationships, is delivering effective solutions for our clients. Overall, our market leadership, broad industry coverage, and product capabilities continue to drive strong relative performance. Diversification from both a sector and product perspective benefited us during the first half of 2025 even as the number of completed middle-market M&A transactions declined year-over-year. Although volatility early in the quarter impacted some deal processes, the outlook for advisory services has improved. We have a robust pipeline of announced and in-process transactions, and we expect our third quarter advisory revenues to be largely consistent with the second quarter. Turning to corporate financing, revenues were $35 million during the second quarter, down 31% from the year-ago period. We completed 26 financings, raising $10 billion for corporate clients. Performance was driven by financial services. The team served as bookrunner on 14 of the 17 deals completed for financial services clients, which accounted for over half of our corporate financing revenues. While we're encouraged that corporate financing activity is improving in certain areas, other areas continue to be impacted by sector-specific factors. For the first half of the year, the economic fee pool for companies with sub-$5 billion of market cap decreased 19% year-over-year. Within that, some core sectors were down more meaningfully, such as a 61% decline in the economic fee pool for biopharma companies. As we look ahead, our pipeline remains strong and diverse, and we're pleased the third quarter is off to a good start. Shifting to talent, we finished the quarter with 182 managing directors, consistent with first quarter levels and up 7% from a year ago. During the quarter, we hired 5 MDs to strengthen both sector and product expertise. These hires will strengthen our coverage in biopharma, insurance, and technology and enhance our secondary capital advisory and debt advisory capabilities. The additions were offset by some reductions in force actions, which reflect our ongoing focus on broader talent management. We remain intentional about strategically managing headcount and driving productivity while looking for opportunities to strengthen our platform. Overall, our second quarter results were strong, and we are pleased with our performance. As we look ahead, we are entering the back half of the year with solid momentum and are well-positioned to gain share. With that, 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 remained favorable during the second quarter, driven by growing infrastructure needs, relatively stable borrowing conditions, and strong investor demand due to higher yields. These dynamics led issuers to more actively access the market. For the second quarter of 2025, we generated $42 million of municipal financing revenues, up 66% year-over-year, exceeding the market issuance growth in par value of 15%. Activity was robust across both our governmental and specialty sectors, with strong performance attributable to the breadth of our client and geographic reach. Performance was broad-based across several of our leading franchises, including those in Kansas and California, as well as our special district and health care groups. Looking ahead, we have a robust pipeline, yet expect third quarter revenues to moderate from the very strong second quarter. Now turning to our brokerage businesses. After a sharp selloff in April, the equity markets recovered with major indices reaching all-time highs. Equity brokerage generated $58 million of revenues for the second quarter of 2025, an increase of 12% year-over-year. We traded 2.9 billion shares on behalf of over 1,200 unique clients as we assisted clients in navigating the heightened volatility and rapidly changing landscape. Additionally, activity has been robust on our derivatives desk. We have consistently grown the number of clients and revenue per client on our derivatives desk through our strategic focus on enhancing client relationships and delivering tailored solutions. We expect revenues to moderate from second quarter levels as volatility has normalized with the VIX declining to 17 at the end of June. Lastly, turning to fixed income. We generated $54 million of revenues for the second quarter of 2025, up 21% from the first quarter and 37% from the year-ago period, driven by robust activity with our depository clients. Notably, we completed several large balance sheet restructuring trades in conjunction with the closing of bank M&A transactions. While engagement is high and the team continues to provide differentiated advice, activity with non-depository clients has been subdued, caused by spread tightening and relative value concerns. The combination of potential Fed rate cuts and a steepening yield curve should continue to enhance client engagement and activity. However, given our strong second quarter, we anticipate fixed income revenues to soften in the third quarter. Now I will turn the call over to Kate to review our financial results and provide an update on capital use.

Thanks, Deb. Before reviewing our non-GAAP financial results, let me discuss an item impacting our GAAP results this quarter. For the second quarter of 2025, our GAAP results include a $5 million restructuring charge related to headcount reductions as well as vacated office space associated with our acquisition of Aviditi Advisors. Turning now to our adjusted non-GAAP financial results, which should be considered in addition to and not a substitute for the corresponding GAAP financial measures. We generated net revenues of $405 million for the second quarter of 2025. Operating income was $73 million, resulting in an operating margin of 18.1%. We delivered $53 million of net income and $2.95 of diluted EPS. For the first half of 2025, net revenues totaled $789 million, operating income amounted to $142 million, and our operating margin was 18%. We generated $126 million of net income and $7.04 of diluted EPS. Net revenues for the second quarter of 2025 increased 6% from the first quarter of this year and 14% compared to the second quarter of last year, driven primarily by strong activity in our municipal financing and institutional brokerage businesses. In addition, we benefited from increased advisory services revenues compared to the year-ago quarter. Net revenues for the first half of 2025 increased 14% over last year, driven by advisory services, which accounted for 54% of total net revenues and increased 24% year-over-year. Additionally, our municipal financing and equity brokerage businesses both delivered record revenues for the first half period. Turning to expenses, we reported a compensation ratio of 62% for the second quarter of 2025 and 62.2% for the first half of the year, an improvement from the comparable period, driven by increased net revenues. We remain committed to exercising operating discipline and balancing employee retention and strategic investment opportunities. For the second quarter of 2025, non-compensation expenses, excluding reimbursed deal costs, were $69 million, consistent with the first quarter and increased 6% year-over-year, driven by higher legal fees as well as increased professional fees associated with technology and consulting services. Non-compensation costs for the first half of 2025 excluding reimbursed deal expenses totaled $139 million, an increase of 10% compared to the first half of last year. Moving to income tax expense, our income tax rate in the quarter was 28.1% and 11% for the first half of the year. Income tax expense for the year-to-date period was reduced by $26 million of tax benefits related to the vesting of restricted stock awards. Excluding the $26 million of benefits, our effective tax rate for the year-to-date period was 29.6%. Now finishing with capital. During the quarter, we repurchased approximately 85,000 shares or $21 million of our common stock and paid an aggregate of $17 million to shareholders through our quarterly dividend. For the first half of this year, we returned an aggregate of $189 million to shareholders. This includes repurchases of approximately 351,000 shares or $102 million of our common stock, primarily related to employee tax withholdings on the vesting of restricted stock awards. It also includes an aggregate of $87 million or $4.30 per share paid to shareholders through our quarterly and special cash dividends. Lastly, I'm pleased to announce that effective today, the Board approved a $0.05 increase to our quarterly cash dividend to $0.70 per share. The dividend will be paid on September 12 to shareholders of record as of the close of business on August 29.

Thanks, Kate. Before taking questions, let me close with a few remarks on our acquisition announcement from earlier this morning. We've entered into a definitive agreement to acquire G Squared Capital Partners, a boutique investment bank, specializing in government services and defense technology. The transaction is expected to close in the third quarter of 2025. Based in the Washington D.C. area, G Squared consists of 10 professionals, including 3 managing directors. The pending acquisition will further the growth of our technology investment banking group by combining their deep government sector experience with our cybersecurity and broader technology expertise as well as our strong access and relevance to private equity. In addition, we will provide G Squared access to our full suite of product capabilities to better serve their clients. This transaction is consistent with the strategic goal we've articulated previously, to continue growing our M&A business and technology. With that, we can now open up the call for questions.

And we'll move right to Devin Ryan with Citizens.

Great. Good morning, everyone. First question on consolidation in the depository space. Obviously, the Sandler team has been active in the nonbank space over the last few years, which is good. But starting to see some bank M&A finally, and you guys are obviously starting to participate in that as well. I just want to get a sense of how you would frame what a more normal bank consolidation market could mean for revenue for Piper? And then just in terms of what you're seeing the timing? Do you think that there's revenues potentially for this year ramping? Or is this much more of a 2026 story and how you would frame that piece as well?

Yes, I believe the conditions for depository mergers and acquisitions have improved significantly. The credit environment is favorable, and capital is accessible for transactions. We're noticing that regulatory approvals are happening more swiftly. Our frequency of announcements has increased, covering both small and larger deals. While some transactions are closing sooner and may conclude later this year, I anticipate that we will feel the effects of these developments next year. The discussions have been positive, and aside from the fact that many bank stock prices haven't fully recovered, it’s challenging to see much improvement in other areas.

Got it. Okay. And then a follow-up here on Aviditi and just kind of the private capital solutions. So almost 1 year post-closing, it'd be great just to hear about how that business is enhancing connectivity with clients now that you've kind of been connected for some time in the go-to-market, I'm sure, kind of pretty well developed right now. So can you just talk about how it's improving connectivity with clients? And then is there more that you can do there, meaning if you added a lot more resources or are there any capabilities you're learning you still might need to add for your sponsor clients?

Yes, I would say, honestly, that transaction has worked out sort of exactly as we had hoped. Just as a reminder, they've got a couple of large parts of the business, actually a few parts of the business, but new fund and existing fund raising and then obviously, the secondary market, they were heavily weighted sort of new capital raising. We did recently announced a significant hire to help just with more teams helping on the secondary side. I think what I've been really pleasantly surprised with is just the depth of relationships when you're raising money for a particular fund you're dealing with the senior partners, the decision makers, and I think that helps across all types of transactions. It helps us tell our story about our debt advisory business. It helps us on sell-side M&A. So relative to other things we've done, I think we've had quite a bit of pickup. And certainly quicker than other things in terms of the bankers really locking on to this as an opportunity. So I think our timing was good. Transactions are picking up. And frankly, the results have been pretty good. So we're very pleased with how that's going.

We move next to James Yaro with Goldman Sachs.

Chad, I was hoping you might be able to touch a little bit on the IPO backdrop as we look ahead. And perhaps if you could also comment, specifically on biotech. Any color you could offer on the scale of the pipelines and perhaps contextualize that versus history for the broader IPOs as well as biotech.

Yes, I believe that question highlights two different scenarios. While the IPO market has been slow in recent years, we are definitely seeing an uptick now. In the medtech sector, for example, we've seen four or five IPOs this year, which is encouraging. We've also made significant investments in insurance and have participated in several strong transactions there. Overall, the conditions and performance of these deals suggest that the IPO market will continue to improve. However, regarding biotech, our financing business has been impacted because we were heavily focused on healthcare and especially biotech, which has seen a significant decline in follow-on offerings and particularly in IPOs. It's been quite a while since we've witnessed a biotech IPO, indicating that these markets behave differently. Overall, the IPO market is on the rise, but we experienced a slowdown in July. Although we've managed to complete some successful transactions in biotech, they come after a period of low activity. Continued improvement will be necessary before we see rejuvenation in the biotech IPO market.

That's very clear. Just a second question, I'd just like to parse the constructive bank M&A tone versus the weaker 3Q fixed income trading commentary and perhaps it's just a timing issue. But some thoughts there? And then maybe also just on bank underwriting. So specifically, how does the weaker fixed income trading square with the improving bank M&A backdrop? And then if you could just comment on the outlook for bank, equity and debt underwriting.

I'll begin with the fixed income side. It appears that we had a particularly strong second quarter, rather than any inconsistencies with Chad's comments on bank mergers and acquisitions. In our restructuring business, we experienced several large transactions in the second quarter, including a restructuring deal that exceeded $2.5 billion in par value for both buys and sells. It's primarily about coming off that strong second quarter. Looking ahead at restructuring, there are two aspects to consider. One part is a bit harder to predict, which relates to our remarks about restructuring. As mergers and acquisitions increase, we will see, and are already seeing, more activity in that area, although it’s challenging to accurately predict the timing. The other aspect of restructuring follows a more predictable seasonal pattern that usually builds up towards the fourth quarter. I hope this provides clarity, but the main point is the strong performance in the second quarter.

Yes. And the second part of your question about just capital raising and DCM. We're definitely seeing a pickup there. With banks we did a lot of this financing 5 years ago, a lot of that paper rolls off. And frankly, the terms just and coupons continue to get better, and we have very high market share there. So we commented that a good chunk of what we did do in financings came from FSG this quarter. So we expect that to continue.

Really helpful. And just to be clear, Deb, when you say restructuring, you mean balance sheet restructuring within fixed income right?

Sorry, yes. Yes, that's what I'm thinking about. Yes.

We'll go next to Brendan O'Brien with Wolfe Research.

Just wanted to ask on the sponsor environment, just given the increased pressure to return capital to LPs, trends seem to have been improving of late. But I just want to get a sense as to how you would characterize the conversations you're having with your sponsor clients at the moment. Has there been any shifts in the tenor of those discussions over the past few weeks even? It feels like we're starting to see some acceleration there.

Yes. I mean, obviously, we've said it's coming several times. And I would say the data is a little bit better but not a lot better. I would say I've been out with sponsors a lot the last month and everybody seems pretty active. I do think there's a lot of transactions that have launched. I think relative to sort of process, people are still being careful, but I absolutely believe we're going to see a nice pickup in the back half and into next year, although I agree it's probably been a little slower than we thought.

That's helpful color. And then I guess for my follow-up question, more of a bigger picture one. Now that we're on our way or entering what feels like a recovery, obviously, depending on how things react today and over the next few weeks with the trade deals, but now that we're on the path towards recovery, I just want to get a sense as to your confidence in your ability to hit that $2 billion investment banking target that you outlined prior to the slowdown and how to think about the trajectory of the building blocks from here.

Yes. I mean, every time I talk about that, that's really just related to sort of the diversity of the business and seeing within each of those industry teams where our pockets are to grow, and we continue to invest in that. Obviously, we've talked a lot about technology. We did a small transaction today. Super complementary to our cyber and security practice gets us a new office in D.C. I think there's just multiple verticals and things like that, that we're having success with. We talked a lot about our services and industrial business, which we felt, with the team we hired in Michigan, frankly, has a lot of traction. So I think we're still on the brick-by-brick strategy with opportunity in every industry team. I'm always careful not to get pinned into a corner like exactly how many years that is going to take. But I think we have even more conviction as time goes by relative to each industry team where we're going to see the growth, where we're going to add the MDs, and we still believe we'll see some increased productivity because even though we're growing revenues, we're still not happy with the total productivity levels.

We'll move next to Mike Grondahl with Northland Securities.

Congrats on a strong quarter. First question, just, Chad, your health care advisory outlook, kind of what are you seeing there?

Yes. If you remember, relative to advisory, Healthcare was our only team that was down last year. It's been quite strong this year, probably our team that's up the most in advisory, which has had a big part of the improvement. So I think that's really twofold. Coming off of a very slow year, different regulatory environment that people are willing to try sort of not completely, but mostly tariff proof relative to a lot of domestic businesses, a lot of service businesses. So we're having a very good year in health care advisory.

Got it. And then within that overall advisory, could you kind of describe a debt advisory transaction in a private capital market transaction? Just I want to better understand those 2 areas as that area along with restructuring is growing a lot.

Yes, we view the non-M&A advisory business as Capital Advisory, which includes debt advisory and restructuring. Our agented debt advisory has been one of the fastest-growing areas of the firm over the last four or five years, largely due to the increasing number of alternative capital sources through various credit funds. While there is no typical transaction, we handle a variety of financing arrangements for sponsors, including funding for acquisitions, recapitalizations, and add-on capital. There are situations where we deal with one buyer exclusively, and others with multiple buyers, but overall, there has been significant growth in the variety of credit providers available, which has benefited our business. Historically, companies had to secure capital from 10 to 12 banks, but now they have access to several hundred funds. We've had similar success with certain private equity funds. Although larger funds have their own capital markets teams, many mid-market and smaller funds may lack the necessary professionals, so we manage all of their transactions based on their debt capital needs. Additionally, within our FSG business, we engage in some underwritten deals but primarily focus on agented debt transactions. Much of the bank business discussed is sold to various financial institutions, which typically involves five-year paper. These financial institutions often roll over this paper with other financing, though there are instances of new capital being introduced.

Congratulations.

We'll return to James Yaro with Goldman Sachs.

I just wanted to touch a little bit more on the comp and noncomp expenses. On the comp side, how would you think about the comp ratio trajectory from here now that you're comfortably within, I think, your target range? And on the noncomp dollar side, growth ex reimbursable expenses has been a bit higher than I think you previously talked about. So maybe just any update on how we should think about full year non-comp expenses.

So thanks for the question, James. Starting on the comp ratio side, again, we continue to focus on that balance of driving leverage and then ensuring that we're also investing where those opportunities arise with the improved revenue this quarter allowed us to drive for that leverage that you referenced, and we'd expect for the remainder of the year to be in this range without providing any sort of specific figure. To your point, we're kind of right in between our 61.5% to 62.5% sort of normalizing range for comp ratio. So feeling good about that. And that's really barring any significant outsized investments or kind of turn in the market conditions. Just to take a moment on noncomps. You're right, we are trending a bit above kind of that increased guided range that we provided for this year. I think about 3 material drivers there. One is the large occupancy expense increase that we have telegraphed out there, and that has to do with the relocation of our headquarters here in Minneapolis. As we talked about at the end of the first quarter, T&E running a little bit ahead of where we had expected. Some of that just has to do with more people on the platform, higher cost of travel, et cetera. That has moderated a bit, although it does run a little bit ahead of where we thought we would still be kind of on a year-to-date basis. Then the third category that I think is really what's driving the differential as we referenced in the script for this quarter is kind of professional and legal fees. Legal fees, I think about in 2 categories. One is just sort of standard legal fees that come with running the business, a little bit ahead of where we expected. The other is a little bit more of a legal expense associated with some of our ECM transactions given the ECM volatility we saw at the beginning of the period here. We aren't adjusting that range. I think we'll be sort of between where we are here and the higher end of the range that we have provided for the remainder of the year, but we'll certainly update that guidance if anything changes.

At this time, we have no further questions. I'd like to turn the floor back to Chad for any additional or closing remarks.

Okay. Thanks to everyone that joined us this morning. We look forward to updating you on our third quarter results. Have a great day.

This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time.