Good morning, and welcome to the Piper Sandler Companies Third 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 Third 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 Third 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 third quarter 2025 earnings call. The market environment improved significantly in the third quarter. Equity markets reached record highs, and with lower volatility, equity underwriting meaningfully improved. Investor sentiment was helped by a calmer outlook on trade tensions and easing of monetary policy. Against this backdrop, we performed well with quarterly adjusted net revenues of $455 million, a 21.2% operating margin and adjusted EPS of $3.82, all higher compared to the same period last year. Our strategy anchored in deep sector expertise, market leadership, and a comprehensive suite of products across the client life cycle continues to resonate with clients. We have now achieved 8 consecutive quarters of year-over-year growth, underscoring our consistent execution and sustained momentum. This progress is supported by our investments in the business, the diversification of our platform, and an improving market backdrop. During the third quarter, we generated $292 million in corporate investment banking revenues, reflecting significant growth over the prior year and delivered one of our strongest third quarter performances on record. Our leading financial services and health care franchises each generated strong advisory and corporate financing revenues during the quarter. While both franchises have been perennial market leaders, we continue to expand these industry teams with additional subsector capabilities, product expertise, and connectivity with private equity clients. Our health care and financial services investment banking groups are among the largest teams in these sectors, led by senior bankers who have long tenures at Piper Sandler, a testament to our commitment to internal development and continuity. Additionally, we continue to advise on some of the most significant transactions in these sectors. We advised on the largest U.S. bank M&A deal that is closed in 2025 and served as book runner for one of the largest biopharma capital raises in the market. As the outlook improves in both health care and financial services, we are well positioned to support our clients and deliver strong results for our shareholders. Specific to the advisory component of Corporate Investment Banking, revenues for the quarter were $212 million, up 13% year-over-year as we completed 82 transactions. Sector performance was led by our Financial Services group with results bolstered by a resurgence in bank M&A activity. We advised on 6 of the 10 largest bank mergers that closed during the third quarter, and we ranked as the top adviser to banks based on the number of announced U.S. M&A transactions this year. We also had strong contributions from our health care, consumer, and energy, power and infrastructure teams during the quarter. In addition, our non-M&A advisory teams continue to drive revenue growth. In recent years, we have made substantial investments in these advisory capabilities, which include debt capital markets advisory, private capital advisory, and restructuring to expand client offerings and increase market share, especially with private equity. Our debt capital markets advisory business is on pace to deliver a third consecutive record year, reflecting higher average fees as well as a broader and more diversified client base. The combination of our industry expertise and deep relationships with a broad range of capital providers enables us to deliver best-in-class outcomes for our clients. Looking ahead, our advisory pipeline is robust and building. The fourth quarter is typically our strongest quarter, and this year is shaping up to be no different. We expect advisory revenues for the fourth quarter of 2025 to be similar to last year's fourth quarter. Turning to corporate financing. Markets were strong throughout the quarter, and we generated $80 million of revenues, our strongest quarterly results since 2021. We completed 38 financings, raising $14 billion for corporate clients. Increased transaction activity and significantly higher average fees contributed to our strong relative performance. Revenues for the quarter were driven by health care and financial services. Piper Sandler served as book runner on all 13 of the equity deals completed for health care companies, driven by an improved capital raising environment for biotech clients fueled by M&A activity, promising drug therapies, and lower interest rates. We were also active during the quarter, raising both equity and debt capital for financial services companies. Our performance underscores the strength of our execution capabilities and the earnings potential in a favorable market environment for our core sectors. As we look ahead, our pipeline remains strong and diverse. However, we expect fourth quarter corporate financing revenues to moderate from the particularly strong third quarter. Shifting to talent. We finished the quarter with 183 investment banking managing directors. 3 MDs joined our technology group as we closed the G Squared acquisition, which adds expertise in government services and defense technology. Early in the fourth quarter, we announced the hiring of 2 MDs focused on enterprise risk and resiliency and artificial intelligence. In total, we have added 8 new MDs to our technology group this year. Building out this franchise remains a strategic priority, given the sector's fee pool. Overall, our third quarter results were strong, and we are pleased with our performance year-to-date. The combination of improved activity levels, strong execution across business lines, and a constructive market environment positions us well as we head into year-end. We are entering the fourth quarter with good momentum, strong client engagement, and meaningful opportunities 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 remain favorable with elevated issuance levels, which are on track to surpass last year's record. For the third quarter of 2025, we generated $39 million of municipal financing revenues, down from the exceptionally strong second quarter, but up 8% year-over-year. We underwrote 133 municipal negotiated transactions, raising $6 billion of par value for our clients. Activity was broad-based across geographies with strong performance from our governmental business in Texas, California, and Iowa as well as our special districts and health care sectors. For the first 9 months of 2025, our revenues increased 31% over last year, outpacing the market issuance growth in par value of 12%. With record levels of issuance in the first half of this year, we saw some pull forward of activity, which has impacted the typical seasonality of this business. Our pipeline remains strong, particularly in the specialty sectors, and we expect our fourth quarter revenues to be similar to the third quarter. Turning to our equity brokerage business. We generated $54 million of revenues for the third quarter of 2025, down 7% from the second quarter as volatility moderated from elevated levels in April. Throughout the year, we've seen strength in our derivatives and electronic trading businesses. Our broad product capabilities, combined with the scale we have built over the last few years, have provided resiliency and upside to our performance and our year-to-date revenues are up 8%, compared to 2024. Lastly, turning to fixed income. We generated $56 million of revenues for the third quarter of 2025 consistent with the strong second quarter and up 15% from the year ago period. Activity was solid across most products and client verticals in anticipation of further rate cuts. We also continued to advise on balance sheet repositioning, resulting from bank M&A activity and as depository clients adjust to the changing rate environment. Our broad product capabilities, the breadth of our client base, and robust distribution allow us to provide both differentiated advice and liquidity across all aspects of the balance sheet, including loans, securities, and derivatives. Now I will turn the call over to Kate to review our financial results and provide an update on capital use.

Thanks, Deb. 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 third quarter of 2025, we generated net revenue of $455 million, operating income of $96 million, and an operating margin of 21.2%. Net income totaled $69 million and diluted EPS was $3.82. For the first 9 months of 2025, net revenues totaled $1.2 billion. Operating income was $238 million, and our operating margin was 19.2%. We generated $195 million of net income and $10.86 of diluted EPS. Net revenues for the third quarter of 2025 increased 12% from the sequential quarter, driven by robust equity capital markets activity. Net revenue for the quarter grew 29% over the third quarter of last year, driven by strong execution across all of our businesses in more accommodative markets. For the year-to-date period of 2025, net revenues increased 19% compared to the prior year, reflecting broad-based strength across the firm. Turning to expenses. We reported a compensation ratio of 61.7% for the third quarter of 2025 and 62% for the first 9 months of the year. Both ratios improved from the comparable periods of 2024, driven by increased net revenues. We continue to exercise strong operating discipline while balancing employee retention and strategic investment opportunities. For the third quarter of 2025, non-compensation expenses, excluding reimbursed deal costs, were $65 million and in line with our guided range. Non-compensation costs for the quarter, excluding reimbursed deal expenses, increased 6% year-over-year, driven by higher occupancy costs associated with relocating our Minneapolis headquarters office. Non-compensation costs for the first 9 months of 2025, excluding reimbursed deal expenses, totaled $204 million, an increase of 9%, compared to the prior year period. Moving to income tax expense. Our income tax rate for the quarter was 28.8%. For the year-to-date period, income tax expense was reduced by $27 million of tax benefits related to the vesting of restricted stock awards, which resulted in an income tax rate of 18.2%. Excluding the $27 million of benefits, our effective tax rate was 29.6%. Now finishing with capital. During the quarter, we returned an aggregate of $16 million to our shareholders, of which the majority related to our quarterly dividend payment. For the first 9 months of this year, we returned an aggregate of $204 million to shareholders. This includes repurchases of approximately 362,000 shares, or $105 million of our common stock, primarily related to employee tax withholding on the vesting of restricted stock awards. It also includes an aggregate of $99 million, or $5 per share paid to shareholders through our quarterly and special cash dividends. Lastly, I am pleased to announce that today, the Board approved a quarterly cash dividend of $0.70 per share. The dividend will be paid on December 12 to shareholders of record as of the close of business on November 25.

Thank you, Kate. We can now open the call for questions. Our first question will come from Brendan O'Brien with Wolfe Research.

To start, I just wanted to touch on the bank M&A environment. Clearly seeing the benefits of the pickup in activity, and I believe that last quarter was the most active in terms of the number of bank deals announced in the U.S. in some time. I just want to get a sense as to how you'd frame the size of the opportunity that you see over the next few years within this space? And maybe what are some of the key risks that you're mindful of that could derail this momentum over the next couple of years?

Thank you. As we mentioned last quarter, we've started to notice an uptick in activity during the summer months of June, July, and August. The pace of announced transactions in September and October has clearly accelerated, and we expect this trend to continue, especially considering that depositories represent only half of our FSG business, which is a fraction of the total. We're anticipating solid growth in the depository sector, which not only impacts M&A but also aids in balance sheet restructurings. However, a potential obstacle could be fluctuations in stock prices. While we're witnessing a rise in many stock prices, many depository stocks have remained relatively stagnant, making them a less ideal starting point for transactions. This valuation context and market conditions represent some of the significant risks we are watching closely.

That's helpful color. And I guess for my follow-up, I wanted to touch on margins. You guys have done a really good job managing expenses over the past couple of years and whether there's been a challenging backdrop. I know you've talked about getting to 20% plus over time, but given you're already running at a 19% margin year-to-date and you have all of these tailwinds that you're back as we enter into 2026, I just want to get a sense as to how you're thinking about the margin potential for the business as things start to normalize or in some cases, really accelerate from here.

Good morning. The answer for the question...

Go ahead, Kate.

I will begin here. Brendan, we usually provide guidance on matters we are confident in and focused on. In line with our discussion regarding the comp ratio range, we are actively seeking opportunities for discipline and leverage as our revenue improves. So, is that 20% a cap? It is not. Will we seek to accelerate that when opportunities arise? Absolutely. That was our initial target. As you mentioned, we are pleased with our performance thus far, and we will keep looking for ways to enhance that as we progress.

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

Chad, you saw a really good corporate financing print this quarter. You talked about a little bit about the fourth quarter already. But maybe you could just help us think about the risks to this business from the government shutdown, whether that's temporary and if you see any more permanent impacts if this persists?

Yes. I've definitely been getting that question a lot, and it's a difficult one. Honestly, when I think about sort of September and October and what happened, we haven't seen a lot of material results to revenues. But I do think the next 3 or 4 weeks are going to get more painful on that front. And it's a complicated question relative to Corporate Finance because it sort of depends on what type of transactions. There are time periods that lapse when you're trying to get reviewed that if you don't, you're fine. There are other situations where if you had done an IPO in the prior year and you're trying to do a follow-on and you're not auto-registered, then you do need to do a review. So I really do believe it's going to start both with financing and M&A starting to impact revenues if we're still talking about this a few weeks from now.

Okay. Really interesting. Just wanted to touch on the tech sector build-out within investment banking. You've seen strong market share gains. You just closed the G Squared acquisition in the space. Help us think through where you are in the build-out of that sector? And what are your aspirations?

Yes, I would say that we have been discussing this for the past three to four years, and we have made some progress along the way. We have made some changes to our existing team, including new hires and acquisitions. I would say we are about halfway to our goal regarding the team, but our long-term objective is to grow this fee pool. The current environment and ongoing evolution should offer us the chance to build a business comparable in size to our operations in financials and health care. I expect this will remain our top priority for the coming years. I see us as making good progress and beginning to see revenue results, but there is still a lot of potential for growth.

We will take our next question from Devin Ryan with Citizens Bank.

So I just want to come back to the outlook for M&A advisory. Great to hear about some of the improving trends there and kind of the expectation for a strong end of the year for revenues. But it would be great to just take a step back and think about kind of the cadence of activity, what you've been seeing, kind of how things trended through the third quarter? Is it post Labor Day, kind of everything kicked off? Or just like how to think about that trend? And then as you think across sectors, like what are outside of depositories, which you talked about in depth, like what are some of the big drivers that are supporting more activity and just the kind of impetus for sponsors to really more aggressively reengage in the market.

Thank you, Devin. I would say we've seen consistent growth throughout spring and summer, continuing into fall. Over the past couple of months, pitch activity and new mandates have significantly increased. We've already discussed the rising volume in the depository sector. Additionally, health care remains a key area for us. After a challenging year for health care M&A last year, this year has shown much improvement, particularly in med tech and other health care segments. Furthermore, activities related to private equity have picked up. As some transactions yield favorable results, there's a growing urgency for investors to seek liquidity from their existing pipeline. This trend is broad, impacting various segments like services and certain commercial and residential sectors where tariffs are not a concern. We continue to face challenges in some consumer segments, but overall, private equity influences all our industry groups. We anticipate growth not just in M&A but also in debt advisory, where a significant part of our business involves collaboration with sponsors.

Thank you for that information. I have a question for Deb regarding the fixed income brokerage business. Specifically, on the depository side, how should we view the normalization of that sector as interest rates decrease and engagement increases? Is there a way to quantify the potential revenue upside from normalization? Also, Deb, could you provide more insights into the current trends in municipal demand and how we should anticipate that changing if interest rates continue to decline?

Thank you, Devin. In the depository sector for fixed income, as rates decrease and the yield curve becomes steeper, we are experiencing increased engagement from clients, particularly in how they can reposition their balance sheets. However, determining what normalization will look like is challenging. We've also observed larger revenue opportunities arising from balance sheet restructurings linked to M&A transactions, which have contributed to our performance in recent quarters. These transactions tend to be sizable, and we anticipate this trend will persist. There's a strong correlation between bank M&A activity and these restructuring events. Although pinpointing the timing of these events can be tricky, we expect to see positive developments in our fixed income sector as these market dynamics unfold. Specifically regarding municipalities, we experienced robust fund flows at the start of the year, which softened slightly in the second quarter but have since rebounded, which is encouraging for the market. In the high-yield sector, we're noticing that investors are being disciplined; they are selective even amidst strong inflows, indicating a healthy environment for well-structured deals. Concerning rates, as they decline, we expect refinancing activities to increase. We've observed a modest uptick in the third quarter, but many clients seem inclined to wait and see what unfolds next year. Therefore, we believe that significant refinancing activity is more likely to emerge in 2026 than in 2025.

Excellent. Just as a follow-up, Deb, just on the bank M&A driven kind of balance sheet restructuring, obviously, chunky, those could be nice fees for you. Is that primarily going to be tied to deals where you're directly advising? Or is there an opportunity to get involved when maybe you're not working on the M&A side of the deal, but there's just need for your expertise?

Yes. Great question. It is really both. We have seen some transactions where we have strong relationships where given the approach we take, the team we have that does that work being very well recognized in the marketplace, we are seeing some of these balance sheet restructuring that we're doing that were not associated with us on the M&A side.

Yes. But for the record, Devin, we'd love a significant M&A fee, and we want to do the restructuring on everything.

We will take our next question from Mike Grondahl with Northland Securities.

Congrats on a nice quarter. Chad, anything else to call out on this good momentum you're seeing entering 4Q?

No, I would just say that our equity financing business was probably the strongest aspect of Q3. Although it started from very low levels in the first couple of quarters, it has become quite diverse. We are heavily involved in health care and are seeing more significant health care transactions. We have played a major role in a few large ones, which has made a notable impact. Additionally, financial services and financing in both debt and equity have also been strong. There were many significant developments in Q3, which is why I mentioned that I’m uncertain if we will return to those levels in Q4, but it is still much better than where we were previously. We are also beginning to see IPO activity and ongoing deals, which is encouraging for more IPOs. Of course, whether we can get those approved and launched remains to be seen, especially with the government shutdown. However, the overall environment looks promising for increased financing across many of our sectors. I would highlight this in addition to my previous remarks about M&A.

Perfect. And Deb, how are you feeling about 2026 in general after two Fed cuts, even if not so much about the fourth quarter? How are you thinking about fixed income and municipal for 2026?

Yes, I believe that as I mentioned earlier, the decrease in rates and, more importantly, the normalization of the yield curve are key factors to monitor. We can expect to see increased activity, and a major driver of this is the greater certainty in the market. When uncertainty arises, investors tend to hold back. Overall, this creates a favorable environment, particularly with rate cuts and the normalization of the yield curve being significant aspects.

We will take a follow-up question from James Yaro with Goldman Sachs.

Chad, maybe would it be possible to just comment on the momentum in your non-M&A advisory business? And maybe if you could just size how much this contributed in the quarter?

Yes. We still don't disclose the percentage of sort of non-M&A advisory. We are looking at that as it becomes more and more significant. What I would say is the last 3 years, the pace of growth has been more significant than M&A. And just as a reminder, there's multiple pieces to that. We obviously talked about the agented debt business that we do a lot with sponsors. And that's just growing significantly as there's just so many providers of that capital. And I would say we're doing larger and larger deals there. A lot of our deals used to be $50 million, $100 million, $150 million there. And now we're seeing opportunities in sort of agented debt where we're doing $400 million, $500 million, $600 million raises, which makes a big difference. Another piece for us is obviously restructuring. I would say that, that business is the longer we get into it, the more and more we're doing with more industry teams. In general, the market backdrop there probably has that as a flatter market. But given that's a small fee pool for us, we still feel like we can grow share. And then obviously, another big piece for us is we're having success with the private capital advisory and the Aviditi team we added closed recently a significant secondary transaction. And so the more wins that we get there, the more stories that we have with clients. So all of those make up the lion's share of that business. And I would say that business continues to grow faster than M&A.

There are no further questions at this time. I will turn the conference back to Mr. Abraham for any additional or closing remarks.

All right. Thanks, everyone that joined us this morning. We look forward to updating you on our fourth quarter and full year 2025 results early next year. Have a great day and happy Halloween.

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