8-K
PIPER SANDLER COMPANIES (PIPR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 8-K
_________________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934February 10, 2022Date of report (Date of earliest event reported)
_______________________________
| PIPER SANDLER COMPANIES | |
|---|---|
| (Exact Name of Registrant as Specified in its Charter) |
_________________________________
| Delaware | 1-31720 | 30-0168701 | |||||
|---|---|---|---|---|---|---|---|
| (State of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||
| 800 Nicollet Mall, Suite 900 | |||||||
| Minneapolis | , | Minnesota | 55402 | ||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||
| (612) | 303-6000 | ||||||
| (Registrant's Telephone Number, Including Area Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
|---|---|---|---|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
| --- | --- | ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||
| --- | --- | ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||
| --- | --- | Securities registered pursuant to Section 12(b) of the Act: | |||
| --- | --- | --- | |||
| Title of Each Class | Trading Symbol | Name of Each Exchange On Which Registered | |||
| Common Stock, par value $0.01 per share | PIPR | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 10, 2022, Piper Sandler Companies (the "Company") reported its financial results for its fourth fiscal quarter and fiscal year ended December 31, 2021. See the Company's press release dated February 10, 2022, which is furnished as Exhibit 99 hereto.
Item 9.01. Financial Statements and Exhibits.
(d)Exhibit
99 Press Release dated February 10, 2022
104 Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PIPER SANDLER COMPANIES | |||
|---|---|---|---|
| Date: | February 10, 2022 | By | /s/ Timothy L. Carter |
| Name | Timothy L. Carter | ||
| Its | Chief Financial Officer |
Document
Exhibit 99
Piper Sandler Companies Reports Record Fourth Quarter and Full Year 2021 Results;
Grows Full Year 2021 Net Revenues by Over 60% Year-Over-Year;
Declares Special Dividend of $4.50 Per Share and Increases Quarterly Dividend to $0.60 Per Share
MINNEAPOLIS—February 10, 2022—Piper Sandler Companies (NYSE: PIPR), a leading investment bank, today announced its results for the fourth quarter and full year of 2021.
"We had a fantastic finish to a record year with over $600 million of revenues for the fourth quarter and $2 billion of revenues on a full year basis, led by an outstanding year in corporate investment banking," said Chad R. Abraham, chairman and chief executive officer. "Beyond the record results, we remain focused on growth and returning capital to our shareholders. Including the $4.50 per share special dividend declared today, we will have returned $9.45 per share for 2021."
| Fourth Quarter 2021 Results | Full Year 2021 Results | |||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| U.S. GAAP | Adjusted (1) | U.S. GAAP | Adjusted (1) | |||||||||||||||||||||||||
| (Dollars in millions, except per share data) | Q4 | vs. | vs. | Q4 | vs. | vs. | vs. | vs. | ||||||||||||||||||||
| 2021 | Q3-21 | Q4-20 | 2021 | Q3-21 | Q4-20 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Net revenues | 648.2 | 45 | % | 60 | % | 633.7 | 44 | % | 59 | % | 2,031.1 | 64 | % | 1,980.5 | 60 | % | ||||||||||||
| Pre-tax margin | 26.1 | 910 bps | 870 bps | 30.7 | 440 bps | 350 bps | 21.7 | 1,620 bps | 27.8 | 750 bps | ||||||||||||||||||
| Net income applicable to Piper Sandler Companies | 113.5 | 148 | % | 169 | % | 142.2 | 72 | % | 90 | % | 278.5 | 588 | % | 399.0 | 125 | % | ||||||||||||
| Earnings per diluted common share | 6.54 | 144 | % | 146 | % | 7.84 | 72 | % | 88 | % | 16.43 | 504 | % | 21.92 | 119 | % |
All values are in US Dollars.
(1)A non-U.S. GAAP ("non-GAAP") measure. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information." We believe that presenting our results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across periods.
| FINANCIAL & BUSINESS HIGHLIGHTS |
|---|
•Record net revenues for the fourth quarter of 2021 were driven by strong performances across our businesses.
•Advisory services revenues of $410 million for the fourth quarter of 2021 represent an all-time quarterly high with the financial services, diversified industrials & services, consumer, and chemicals teams all registering their strongest quarter on record.
•Municipal financing generated record revenues of $59 million for the fourth quarter of 2021, up 47% over the prior year quarter.
•For the full year of 2021, our results reflect strong execution and high demand for our services, as well as the benefits of our more scaled and diversified platform.
•Record net revenues of $2.0 billion for 2021 resulted from advisory services, corporate and municipal financing, and fixed income services all generating record full year revenues. Advisory services was a significant driver of growth with revenues exceeding $1.0 billion for the first time in our history, more than doubling 2020 revenues.
•Record profitability for 2021 resulted from pre-tax margin on a U.S. GAAP basis of 21.7% and adjusted operating margin of 27.8% which drove record earnings per diluted share of $16.43 on a U.S. GAAP basis and $21.92 on an adjusted, non-GAAP basis.
•In addition to strong absolute performance for 2021, we retained or grew market share in many of our businesses.
•Ranked No. 3 based on number of announced U.S. M&A deals with a reported value of less than $1 billion for 2021; ranked No. 1 in U.S. bank and thrift M&A based on number of announced transactions during 2021.
•Ranked in the top 3 for investment banks based on number of book run IPO and follow-on transactions completed for healthcare companies with sub-$5 billion of market cap.
•Ran the books on 62 deals raising $4.6 billion of debt for community and regional banks with less than $45 billion of assets, which accounts for 54% of the total debt raised in this market.
•Ranked as the No. 2 senior underwriter based on the number of nationwide municipal negotiated transactions during 2021.
| STRATEGIC UPDATES |
|---|
•On February 4, 2022, we completed the acquisition of Cornerstone Macro, an independent research firm that offers best-in-class macro research and equity derivatives trading to institutional investors.
•On January 5, 2022, we announced the acquisition of Stamford Partners LLP, a specialist M&A boutique offering investment banking services to European food & beverage and related consumer sectors, which is expected to close in the first half of 2022.
| TALENT |
|---|
•Added two investment banking managing directors to our technology practice during the quarter and one to our consumer franchise representing the ninth consecutive quarter of investment banking managing director headcount growth on a net basis.
| CAPITAL |
|---|
•Declared a special cash dividend of $4.50 per share of common stock and a quarterly cash dividend of $0.60 per share of common stock. Both dividends will be paid on March 11, 2022 to shareholders of record as of March 2, 2022.
•Total dividend of $9.45 per share related to fiscal year 2021 increased three-fold over 2020 and represents a 7% dividend yield.
•Returned an aggregate of $169.3 million to shareholders during 2021 through dividends and share repurchases.
U.S. GAAP SELECTED FINANCIAL DATA
The following summarizes our results on a U.S. GAAP basis.
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands, except per share data) | Dec. 31, | Sept. 30, | Dec. 31, | % Change vs. | Dec. 31, | Dec. 31, | % | ||||||||||||||||||||||
| 2021 | 2021 | 2020 | Q3-21 | Q4-20 | 2021 | 2020 | Change | ||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||||||||
| Advisory services | $ | 410,456 | $ | 214,165 | $ | 169,282 | 92 | % | 142 | % | $ | 1,026,138 | $ | 443,327 | 131 | % | |||||||||||||
| Corporate financing | 65,195 | 79,065 | 87,181 | -18 | % | -25 | % | 362,797 | 295,333 | 23 | % | ||||||||||||||||||
| Municipal financing | 58,744 | 42,373 | 39,953 | 39 | % | 47 | % | 164,284 | 119,816 | 37 | % | ||||||||||||||||||
| Investment banking | 534,395 | 335,603 | 296,416 | 59 | % | 80 | % | 1,553,219 | 858,476 | 81 | % | ||||||||||||||||||
| Equity brokerage | 41,898 | 34,062 | 39,509 | 23 | % | 6 | % | 154,067 | 161,445 | -5 | % | ||||||||||||||||||
| Fixed income services | 50,262 | 56,037 | 52,998 | -10 | % | -5 | % | 233,510 | 196,308 | 19 | % | ||||||||||||||||||
| Institutional brokerage | 92,160 | 90,099 | 92,507 | 2 | % | — | % | 387,577 | 357,753 | 8 | % | ||||||||||||||||||
| Interest income | 1,752 | 1,485 | 1,939 | 18 | % | -10 | % | 6,967 | 13,164 | -47 | % | ||||||||||||||||||
| Investment income | 22,524 | 21,046 | 18,278 | 7 | % | 23 | % | 94,032 | 23,265 | 304 | % | ||||||||||||||||||
| Total revenues | 650,831 | 448,233 | 409,140 | 45 | % | 59 | % | 2,041,795 | 1,252,658 | 63 | % | ||||||||||||||||||
| Interest expense | 2,590 | 2,668 | 3,252 | -3 | % | -20 | % | 10,734 | 14,445 | -26 | % | ||||||||||||||||||
| Net revenues | $ | 648,241 | $ | 445,565 | $ | 405,888 | 45 | % | 60 | % | $ | 2,031,061 | $ | 1,238,213 | 64 | % | |||||||||||||
| Non-interest expenses | |||||||||||||||||||||||||||||
| Compensation and benefits | $ | 397,727 | $ | 301,859 | $ | 266,118 | 32 | % | 49 | % | $ | 1,305,166 | $ | 877,462 | 49 | % | |||||||||||||
| Non-compensation expenses | 81,639 | 67,996 | 69,239 | 20 | % | 18 | % | 284,383 | 292,203 | -3 | % | ||||||||||||||||||
| Total non-interest expenses | $ | 479,366 | $ | 369,855 | $ | 335,357 | 30 | % | 43 | % | $ | 1,589,549 | $ | 1,169,665 | 36 | % | |||||||||||||
| Income before income tax expense | $ | 168,875 | $ | 75,710 | $ | 70,531 | 123 | % | 139 | % | $ | 441,512 | $ | 68,548 | 544 | % | |||||||||||||
| Ratios and margin | |||||||||||||||||||||||||||||
| Compensation ratio | 61.4 | % | 67.7 | % | 65.6 | % | 64.3 | % | 70.9 | % | |||||||||||||||||||
| Non-compensation ratio | 12.6 | % | 15.3 | % | 17.1 | % | 14.0 | % | 23.6 | % | |||||||||||||||||||
| Pre-tax margin | 26.1 | % | 17.0 | % | 17.4 | % | 21.7 | % | 5.5 | % | |||||||||||||||||||
| Net income applicable to Piper Sandler Companies | $ | 113,513 | $ | 45,721 | $ | 42,160 | 148 | % | 169 | % | $ | 278,514 | $ | 40,504 | 588 | % | |||||||||||||
| Earnings per diluted common share | $ | 6.54 | $ | 2.68 | $ | 2.66 | 144 | % | 146 | % | $ | 16.43 | $ | 2.72 | 504 | % |
Revenues
For the fourth quarter of 2021, net revenues of $648.2 million increased 45% compared to the third quarter of 2021 and 60% compared to the fourth quarter of 2020.
Net revenues of $2.03 billion for the year ended December 31, 2021 increased 64% compared to the prior year.
Investment banking revenues of $534.4 million for the fourth quarter of 2021 increased 59% compared to the third quarter of 2021 and 80% compared to the fourth quarter of 2020. For the fourth quarter of 2021, investment banking generated 82% of total net revenues.
Investment banking revenues of $1.55 billion for 2021 increased 81% compared to the prior year. For 2021, investment banking generated 76% of total net revenues.
•Advisory services revenues of $410.5 million for the fourth quarter of 2021 represent the strongest quarter on record and include broad contributions from all of our industry and product teams. Revenues for the current quarter increased 92% compared to the third quarter of 2021 and 142% compared to the fourth quarter of 2020 driven by a higher average fee and more completed deals.
Advisory services revenues of $1.03 billion for 2021 represent a record year and an increase of 131% compared to 2020. Most of our industry and product teams registered record performance driven by the significant market recovery in M&A activity, strong relative performance and the focused investments we have made to grow our advisory platform.
•Corporate financing revenues of $65.2 million for the fourth quarter of 2021 decreased 18% compared to the third quarter of 2021 and 25% compared to the fourth quarter of 2020. Consistent with the market, our financing activity during the current quarter moderated from the sequential quarter. Our performance reflects solid contributions from healthcare, financial services, consumer and technology.
For the year ended December 31, 2021, record corporate financing revenues of $362.8 million increased 23% compared to 2020. Market conditions remained favorable for most of the year leading to record capital raising activity. Our performance during the year was led by our book run healthcare franchise, and includes meaningful contributions from financial services, technology and consumer.
•Municipal financing revenues of $58.7 million for the fourth quarter of 2021 represent a quarterly record and increased 39% compared to the third quarter of 2021 and 47% compared to the fourth quarter of 2020. Our performance for the current quarter was led by our specialty sectors which continue to experience strong issuance activity and investor demand.
Record municipal financing revenues of $164.3 million for 2021 increased 37% compared to 2020 driven by strong execution within our governmental business and specialty sectors, as well as market share gains and robust market issuance.
Institutional brokerage revenues of $92.2 million for the fourth quarter of 2021 increased 2% compared to the third quarter of 2021 and were consistent with the fourth quarter of 2020. For the fourth quarter of 2021, institutional brokerage generated 14% of total net revenues.
For the full year of 2021, institutional brokerage revenues of $387.6 million increased 8% compared to 2020. Institutional brokerage generated 19% of total net revenues for 2021.
•Equity brokerage revenues of $41.9 million for the fourth quarter of 2021 increased 23% compared to the third quarter of 2021 and 6% compared to the fourth quarter of 2020. As anticipated, volumes and volatility remained elevated during the fourth quarter of 2021 leading to increased client activity compared to the prior periods.
Equity brokerage revenues of $154.1 million for the full year of 2021 decreased 5% compared to 2020 which benefited from pandemic-related volatility and volumes.
•Fixed income services revenues of $50.3 million for the fourth quarter of 2021 decreased 10% compared to the third quarter of 2021 and 5% compared to the fourth quarter of 2020. The changing rate outlook continues to drive a pause in activity for some of our clients.
For the year, record fixed income services revenues of $233.5 million increased 19% compared to 2020 as activity was more robust among our financial services clients.
Investment income of $22.5 million for the fourth quarter of 2021 increased 7% compared to the third quarter of 2021 and 23% compared to the fourth quarter of 2020. Investment income of $94.0 million for the full year of 2021 increased 304% compared to the prior year. The current and prior periods include amounts attributable to noncontrolling interests. Investment income for the current and prior periods primarily related to gains recorded in our merchant banking portfolio.
Non-Interest Expenses
For the fourth quarter of 2021, non-interest expenses of $479.4 million increased 30% compared to the third quarter of 2021 and 43% compared to the fourth quarter of 2020.
For the year ended December 31, 2021, non-interest expenses of $1.59 billion increased 36% compared to the prior year.
•Compensation ratio of 61.4% for the fourth quarter of 2021 decreased compared to the third quarter of 2021 and the fourth quarter of 2020 as a result of higher net revenues and a strong finish to the year. In addition, the compensation ratio for the third quarter of 2021 included a cumulative adjustment to acquisition-related compensation expense related to the earn out associated with the acquisition of The Valence Group.
Compensation ratio of 64.3% for the full year of 2021 decreased compared to 2020 resulting from higher net revenues.
•Non-compensation expenses of $81.6 million for the fourth quarter of 2021 increased 20% compared to the third quarter of 2021 and 18% compared to the fourth quarter of 2020. Non-compensation expenses increased compared to both of the prior periods driven by increased marketing and business development expenses related to employee travel and higher outside services expenses associated with business expansion, as well as increased variable costs associated with higher revenue and profitability. Compared to the fourth quarter of 2020, the increase in non-compensation expenses was offset in part by reduced acquisition-related intangible asset amortization and restructuring and integration costs.
For the year ended December 31, 2021, non-compensation expenses of $284.4 million decreased 3% compared to the prior year primarily driven by lower acquisition-related non-compensation expenses and restructuring and integration costs, offset in part by higher marketing and business development expenses related to employee travel.
Pre-Tax Income
For the fourth quarter of 2021, we recorded pre-tax income of $168.9 million compared to $75.7 million for the third quarter of 2021 and $70.5 million for the fourth quarter of 2020.
Pre-tax income of $441.5 million for the full year of 2021 increased 544% compared to the prior year.
•Pre-tax margin of 26.1% for the fourth quarter of 2021 increased compared to 17.0% for the third quarter of 2021 and 17.4% for the fourth quarter of 2020 resulting from higher net revenues and a lower compensation ratio.
For the full year of 2021, pre-tax margin of 21.7% increased compared to 5.5% for the prior year demonstrating the leverage in our business at this record level of net revenues.
Net Income & Earnings Per Share
For the fourth quarter of 2021, we generated record net income of $113.5 million, or $6.54 per diluted common share. Results for the current quarter increased compared to the third quarter of 2021 and the fourth quarter of 2020 driven by increased net revenues and a higher pre-tax margin.
For the year ended December 31, 2021, we generated record net income of $278.5 million, or $16.43 per diluted common share. Results for the current year increased more than six-fold compared to 2020, highlighting the earnings power of our platform at robust revenue levels.
NON-GAAP SELECTED FINANCIAL DATA
The following summarizes our results on an adjusted, non-GAAP basis.
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands, except per share data) | Dec. 31, | Sept. 30, | Dec. 31, | % Change vs. | Dec. 31, | Dec. 31, | % | ||||||||||||||||||||||
| 2021 | 2021 | 2020 | Q3-21 | Q4-20 | 2021 | 2020 | Change | ||||||||||||||||||||||
| Adjusted net revenues | |||||||||||||||||||||||||||||
| Advisory services | $ | 410,456 | $ | 214,165 | $ | 169,282 | 92 | % | 142 | % | $ | 1,026,138 | $ | 443,327 | 131 | % | |||||||||||||
| Corporate financing | 65,195 | 79,065 | 87,181 | -18 | % | -25 | % | 362,797 | 295,333 | 23 | % | ||||||||||||||||||
| Municipal financing | 58,744 | 42,373 | 39,953 | 39 | % | 47 | % | 164,284 | 119,816 | 37 | % | ||||||||||||||||||
| Investment banking | 534,395 | 335,603 | 296,416 | 59 | % | 80 | % | 1,553,219 | 858,476 | 81 | % | ||||||||||||||||||
| Equity brokerage | 41,898 | 34,062 | 39,509 | 23 | % | 6 | % | 154,067 | 161,445 | -5 | % | ||||||||||||||||||
| Fixed income services | 50,262 | 56,037 | 52,998 | -10 | % | -5 | % | 233,510 | 196,308 | 19 | % | ||||||||||||||||||
| Institutional brokerage | 92,160 | 90,099 | 92,507 | 2 | % | — | % | 387,577 | 357,753 | 8 | % | ||||||||||||||||||
| Interest income | 1,752 | 1,485 | 1,939 | 18 | % | -10 | % | 6,967 | 13,164 | -47 | % | ||||||||||||||||||
| Investment income | 6,262 | 13,593 | 9,489 | -54 | % | -34 | % | 34,982 | 10,384 | 237 | % | ||||||||||||||||||
| Total revenues | 634,569 | 440,780 | 400,351 | 44 | % | 59 | % | 1,982,745 | 1,239,777 | 60 | % | ||||||||||||||||||
| Interest expense | 866 | 450 | 779 | 92 | % | 11 | % | 2,288 | 4,817 | -53 | % | ||||||||||||||||||
| Adjusted net revenues | $ | 633,703 | $ | 440,330 | $ | 399,572 | 44 | % | 59 | % | $ | 1,980,457 | $ | 1,234,960 | 60 | % | |||||||||||||
| Adjusted operating expenses | |||||||||||||||||||||||||||||
| Adjusted compensation and benefits | $ | 370,148 | $ | 265,120 | $ | 237,865 | 40 | % | 56 | % | $ | 1,188,371 | $ | 764,066 | 56 | % | |||||||||||||
| Adjusted non-compensation expenses | 68,836 | 59,186 | 53,086 | 16 | % | 30 | % | 242,134 | 220,606 | 10 | % | ||||||||||||||||||
| Adjusted operating expenses | $ | 438,984 | $ | 324,306 | $ | 290,951 | 35 | % | 51 | % | $ | 1,430,505 | $ | 984,672 | 45 | % | |||||||||||||
| Adjusted operating income | $ | 194,719 | $ | 116,024 | $ | 108,621 | 68 | % | 79 | % | $ | 549,952 | $ | 250,288 | 120 | % | |||||||||||||
| Adjusted ratios and margin | |||||||||||||||||||||||||||||
| Adjusted compensation ratio | 58.4 | % | 60.2 | % | 59.5 | % | 60.0 | % | 61.9 | % | |||||||||||||||||||
| Adjusted non-compensation ratio | 10.9 | % | 13.4 | % | 13.3 | % | 12.2 | % | 17.9 | % | |||||||||||||||||||
| Adjusted operating margin | 30.7 | % | 26.3 | % | 27.2 | % | 27.8 | % | 20.3 | % | |||||||||||||||||||
| Adjusted net income | $ | 142,175 | $ | 82,814 | $ | 74,961 | 72 | % | 90 | % | $ | 399,037 | $ | 177,555 | 125 | % | |||||||||||||
| Adjusted earnings per diluted common share | $ | 7.84 | $ | 4.55 | $ | 4.17 | 72 | % | 88 | % | $ | 21.92 | $ | 10.02 | 119 | % |
Throughout this press release, including the table above, we present financial measures that are not prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The non-GAAP financial measures include adjustments to exclude: (1) revenues and expenses related to noncontrolling interests, (2) interest expense on long-term financing, (3) amortization of intangible assets related to acquisitions, (4) compensation and non-compensation expenses from acquisition-related agreements and (5) acquisition-related restructuring and integration costs. The adjusted weighted average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share contains an adjustment to include the common shares for unvested restricted stock awards with service conditions granted pursuant to the acquisitions of Sandler O'Neill, The Valence Group and TRS Advisors LLC. Management believes that presenting results and measures on this adjusted basis alongside U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods, and enhances the overall understanding of our current financial performance by excluding certain items that may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information."
Adjusted Net Revenues
For the fourth quarter of 2021, record adjusted net revenues of $633.7 million increased 44% compared to the third quarter of 2021 and 59% compared to the fourth quarter of 2020. Adjusted net revenues for the current quarter were driven by record advisory services and municipal financing revenues, with solid contributions from corporate financing and both brokerage businesses. For the fourth quarter of 2021, investment banking generated 84% of total adjusted net revenues and institutional brokerage generated 15%.
Record adjusted net revenues of $1.98 billion for the full year of 2021 increased 60% compared to the prior year. Adjusted net revenues for the current year were driven by record performances from across our scaled and diverse corporate investment banking platform and our municipal financing and fixed income businesses, as well as strong equity brokerage results. For the full year of 2021, investment banking generated 78% of total adjusted net revenues and institutional brokerage generated 20%.
Adjusted Operating Expenses
For the fourth quarter of 2021, adjusted operating expenses of $439.0 million increased 35% compared to the third quarter of 2021 and 51% compared to the fourth quarter of 2020.
Adjusted operating expenses of $1.43 billion for the year ended December 31, 2021 increased 45% compared to 2020.
•Adjusted compensation ratio of 58.4% for the fourth quarter of 2021 decreased compared to 60.2% for the third quarter of 2021 and 59.5% for the fourth quarter of 2020. The adjusted compensation ratio for the current quarter was lower compared to the prior periods driven by our record performance.
Adjusted compensation ratio of 60.0% for the full year of 2021 decreased compared to 61.9% for 2020 as a result of higher net revenues.
•Adjusted non-compensation expenses of $68.8 million for the fourth quarter of 2021 increased 16% compared to the third quarter of 2021 and 30% compared to the fourth quarter of 2020. Non-compensation expenses increased compared to both of the prior periods resulting from increased marketing and business development expenses related to employee travel and higher outside services expenses associated with business expansion, as well as increased variable costs associated with higher revenue and profitability. In addition, non-compensation expenses increased compared to the fourth quarter of 2020 due to higher deal-related expenses.
Adjusted non-compensation expenses of $242.1 million for the full year of 2021 increased 10% compared to the prior year driven primarily by higher marketing and business development expenses related to the resumption of employee travel and increased outside services expenses associated with business expansion, as well as higher reimbursed deal costs.
Adjusted Operating Income
For the fourth quarter of 2021, adjusted operating income of $194.7 million increased 68% compared to the third quarter of 2021 and 79% compared to the fourth quarter of 2020.
Adjusted operating income of $550.0 million for the year ended December 31, 2021 increased 120% compared to the prior year.
•Adjusted operating margin of 30.7% for the fourth quarter of 2021 increased compared to 26.3% for the third quarter of 2021 and 27.2% for the fourth quarter of 2020 driven by higher adjusted net revenues and a lower adjusted compensation ratio.
For the full year of 2021, adjusted operating margin of 27.8% increased compared to 20.3% for 2020 resulting from higher adjusted net revenues and a lower adjusted compensation ratio.
Adjusted Net Income & Adjusted Earnings Per Share
For the fourth quarter of 2021, we generated record adjusted net income of $142.2 million, or $7.84 of adjusted earnings per diluted common share. Results for the current quarter increased compared to the third quarter of 2021 and the fourth quarter of 2020 driven by higher adjusted net revenues and a higher adjusted operating margin.
For the year ended December 31, 2021, we generated record adjusted net income of $399.0 million, or $21.92 of adjusted earnings per diluted common share. Results for the current year more than doubled compared to 2020 illustrating the earnings power of our platform.
COMPLETED DEAL INFORMATION
The following summarizes information on deals closed during the periods presented.
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in billions) | Dec. 31, | Sept. 30, | Dec. 31, | % Change vs. | Dec. 31, | Dec. 31, | % | |||||||||||||||||
| 2021 | 2021 | 2020 | Q3-21 | Q4-20 | 2021 | 2020 | Change | |||||||||||||||||
| Advisory services | ||||||||||||||||||||||||
| M&A and restructuring transactions | 99 | 68 | 51 | 46 | % | 94 | % | 274 | 167 | 64 | % | |||||||||||||
| Capital advisory transactions | 46 | 31 | 43 | 48 | % | 7 | % | 145 | 105 | 38 | % | |||||||||||||
| Corporate financings | ||||||||||||||||||||||||
| Total equity transactions | 45 | 50 | 40 | -10 | % | 13 | % | 214 | 137 | 56 | % | |||||||||||||
| Book run equity transactions | 33 | 29 | 29 | 14 | % | 14 | % | 141 | 99 | 42 | % | |||||||||||||
| Total debt and preferred transactions | 12 | 16 | 13 | -25 | % | -8 | % | 53 | 58 | -9 | % | |||||||||||||
| Book run debt and preferred transactions | 6 | 8 | 9 | -25 | % | -33 | % | 26 | 37 | -30 | % | |||||||||||||
| Municipal negotiated issues | ||||||||||||||||||||||||
| Aggregate par value | $ | 5.1 | $ | 5.3 | $ | 4.8 | -4 | % | 6 | % | $ | 18.4 | $ | 19.1 | -4 | % | ||||||||
| Total issues | 211 | 231 | 253 | -9 | % | -17 | % | 933 | 855 | 9 | % |
TAXES
Our non-GAAP effective tax rate was 26.3% for both the fourth quarter and full year of 2021, within our expected range of 26% to 28%.
Our non-GAAP effective tax rate was 29.4% for the fourth quarter of 2020 and 26.2% for the year ended December 31, 2020. The non-GAAP effective tax rate was lower for the year-to-date period as we recorded tax benefits of $3.5 million primarily related to the Coronavirus Aid, Relief and Economic Security Act. Excluding the impact of these tax benefits, our non-GAAP effective tax rate was 27.7% for the year ended December 31, 2020.
CAPITAL
Dividends
On February 10, 2022, our Board of Directors declared a special cash dividend on the company's common stock of $4.50 per share related to our financial results for fiscal year 2021 to be paid on March 11, 2022, to shareholders of record as of the close of business on March 2, 2022. Including this special cash dividend, our total dividend related to fiscal year 2021 amounts to $9.45 per share, or a payout ratio of 43.1% of adjusted net income.
In addition, on February 10, 2022, our Board of Directors declared a quarterly cash dividend on the company's common stock of $0.60 per share to be paid on March 11, 2022, to shareholders of record as of the close of business on March 2, 2022. This quarterly dividend represents a 60% increase compared to the pre-pandemic dividend of $0.375 per share.
During the fourth quarter of 2021, we paid a quarterly cash dividend of $0.55 per share and a special cash dividend of $3.00 per share on the company's common stock, totaling $50.2 million. For the full year of 2021, we returned an aggregate of $99.4 million, or $6.80 per share, to shareholders through quarterly and special cash dividends.
Share Repurchases
During the fourth quarter of 2021, we repurchased approximately 8,000 shares at an average price of $181.75 per share.
During 2021, we repurchased approximately 418,000 shares, at an average price of $125.03 per share, pursuant to our share repurchase authorization. We also repurchased approximately 154,000 shares of the company's common stock at an average price of $114.53 per share, from restricted stock award recipients selling shares upon the award vesting to meet their employment tax obligations. The aggregate amount of approximately 572,000 shares, or $69.9 million, were repurchased at an average price of $122.20 per share.
ADDITIONAL INFORMATION
| Dec. 31, | Sept. 30, | Dec. 31, | ||||
|---|---|---|---|---|---|---|
| 2021 | 2021 | 2020 | ||||
| Human Capital | ||||||
| Full-time employees | 1,665 | 1,669 | 1,511 | |||
| Investment banking managing directors | 148 | 146 | 138 | |||
| Shareholder Information (amounts in millions) | ||||||
| Common shareholders’ equity | $ | 1,062.2 | $ | 980.2 | $ | 829.4 |
| Common shares outstanding | 14.1 | 14.1 | 13.8 | |||
| Restricted shares outstanding | 3.8 | 3.8 | 4.3 | |||
| Total shares outstanding | 17.9 | 17.9 | 18.1 |
Conference Call with Management
Chad R. Abraham, chairman and chief executive officer; Debbra L. Schoneman, president; and Timothy L. Carter, chief financial officer, will host a conference call to discuss the financial results on Thursday, February 10, 2022, at 9 a.m. Eastern Time (8 a.m. Central Time). Participants can access the call by dialing 888-810-0209 (toll-free domestic) or 706-902-1361 (international) and referencing reservation number: 9315948. Callers should dial in at least 15 minutes prior to the call time. A live audio webcast of the call will be available through the company's website at www.pipersandler.com.
A recording of the conference call will be available for replay approximately three hours following the completion of the live call. Participants can listen to the recording by dialing 855-859-2056 and referencing reservation number: 9315948. A replay of the audio webcast will also be available through the company’s website referenced above.
About Piper Sandler
Piper Sandler Companies (NYSE: PIPR) is a leading investment bank driven to help clients Realize the Power of Partnership®. Securities brokerage and investment banking services are offered in the U.S. through Piper Sandler & Co., member SIPC and NYSE; in Europe through Piper Sandler Ltd., authorized and regulated by the U.K. Financial Conduct Authority; and in Hong Kong through Piper Sandler Hong Kong Ltd., authorized and regulated by the Securities and Futures Commission. Alternative asset management and fixed income advisory services are offered through separately registered advisory affiliates.
© 2022 Piper Sandler Companies. Since 1895. 800 Nicollet Mall, Minneapolis, Minnesota 55402-7036
Investor Relations Contact
Tim Carter
Tel: 612 303-5607
investorrelations@psc.com
Cautionary Note Regarding Forward-Looking Statements
This press release and the conference call to discuss the contents of this press release contain forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are subject to significant risks and uncertainties that are difficult to predict. These forward-looking statements cover, among other things, statements made about the outlook for future periods for corporate advisory (i.e., M&A), capital markets, and public finance transactions (including our performance in specific sectors), current deal pipelines (or backlogs), the scope and impact of COVID-19, the financial performance of pending and completed transactions (i.e., Stamford Partners LLP, Cornerstone Macro, TRS Advisors, The Valence Group, and Sandler O'Neill), areas of potential growth and market share gains for the company, economic and market conditions (including the outlook for equity markets, CEO confidence, municipal issuance, and the interest rate environment), our recruiting pipeline, the state of our equity and fixed income brokerage businesses, anticipated financial results for future periods (including expectations regarding revenue levels, non-compensation expenses, effective tax rate, compensation ratio, compensation and benefits expense, operating margins, return on equity, and earnings per share), our strategic priorities, including growth of investment banking and focus on private equity clients within investment banking, the payment of our quarterly and special dividends to our shareholders, our share repurchase program, the expected benefits and integration of our pending acquisition of Stamford Partners LLP and our recently completed acquisitions of Cornerstone Macro, TRS Advisors, The Valence Group, and Sandler O'Neill, or other similar matters.
Forward-looking statements involve inherent risks and uncertainties, both known and unknown, and important factors could cause actual results to differ materially from those anticipated or discussed in the forward-looking statements. These risks, uncertainties and important factors include, but are not limited to, the following:
•revenues from corporate advisory (i.e., M&A) engagements and equity and debt financings may vary materially depending on the number, size, and timing of completed transactions, and completed transactions do not generally provide for subsequent engagements;
•the duration, extent and severity of the ongoing COVID-19 pandemic, including its impacts across our business, operations and employees and on economies and markets more generally;
•the expected benefits of our pending acquisition of Stamford Partners LLP and our recently completed acquisitions of Cornerstone Macro, TRS Advisors, The Valence Group, and Sandler O'Neill may take longer than anticipated to achieve or may not be achieved in their entirety or at all, and will in part depend on our ability to retain and hire key personnel, and the costs or difficulties relating to the combination of the businesses may be greater than expected and may adversely affect our results of operations;
•market and economic conditions or developments may be unfavorable, including in specific sectors in which we operate, and these conditions or developments, such as market fluctuations or volatility, may adversely affect our business, revenue levels and profitability;
•the volume of anticipated transactions – including corporate advisory (i.e., M&A), equity financing, and debt financing – and the corresponding revenues from the transactions may vary from quarter to quarter significantly, particularly if there is a decline in macroeconomic conditions or the financial markets;
•interest rate volatility, especially if the changes are rapid or severe, could negatively impact our fixed income institutional business and the negative impact could be exaggerated by reduced liquidity in the fixed income markets; and
•our stock price may fluctuate as a result of several factors, including but not limited to, changes in our revenues and operating results.
A further listing and description of these and other risks, uncertainties and important factors can be found in the sections titled "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, and updated in our subsequent reports filed with the SEC (available at our Web site at www.pipersandler.com and at the SEC Web site at www.sec.gov).
Forward-looking statements speak only as of the date they are made, and readers are cautioned not to place undue reliance on them. We undertake no obligation to update them in light of new information or future events.
Piper Sandler Companies
Preliminary Results of Operations (U.S. GAAP – Unaudited)
| Three Months Ended | Percent Inc/(Dec) | Twelve Months Ended | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Amounts in thousands, except per share data) | Dec. 31, | Sept. 30, | Dec. 31, | 4Q '21 | 4Q '21 | Dec. 31, | Dec. 31, | Percent | ||||||||||||||||
| 2021 | 2021 | 2020 | vs. 3Q '21 | vs. 4Q '20 | 2021 | 2020 | Inc/(Dec) | |||||||||||||||||
| Revenues: | ||||||||||||||||||||||||
| Investment banking | $ | 534,395 | $ | 335,603 | $ | 296,416 | 59.2 | % | 80.3 | % | $ | 1,553,219 | $ | 858,476 | 80.9 | % | ||||||||
| Institutional brokerage | 92,160 | 90,099 | 92,507 | 2.3 | (0.4) | 387,577 | 357,753 | 8.3 | ||||||||||||||||
| Interest income | 1,752 | 1,485 | 1,939 | 18.0 | (9.6) | 6,967 | 13,164 | (47.1) | ||||||||||||||||
| Investment income | 22,524 | 21,046 | 18,278 | 7.0 | 23.2 | 94,032 | 23,265 | 304.2 | ||||||||||||||||
| Total revenues | 650,831 | 448,233 | 409,140 | 45.2 | 59.1 | 2,041,795 | 1,252,658 | 63.0 | ||||||||||||||||
| Interest expense | 2,590 | 2,668 | 3,252 | (2.9) | (20.4) | 10,734 | 14,445 | (25.7) | ||||||||||||||||
| Net revenues | 648,241 | 445,565 | 405,888 | 45.5 | 59.7 | 2,031,061 | 1,238,213 | 64.0 | ||||||||||||||||
| Non-interest expenses: | ||||||||||||||||||||||||
| Compensation and benefits | 397,727 | 301,859 | 266,118 | 31.8 | 49.5 | 1,305,166 | 877,462 | 48.7 | ||||||||||||||||
| Outside services | 16,938 | 10,736 | 10,644 | 57.8 | 59.1 | 45,942 | 38,377 | 19.7 | ||||||||||||||||
| Occupancy and equipment | 14,721 | 14,483 | 14,651 | 1.6 | 0.5 | 56,946 | 54,007 | 5.4 | ||||||||||||||||
| Communications | 11,551 | 10,623 | 10,459 | 8.7 | 10.4 | 44,008 | 44,358 | (0.8) | ||||||||||||||||
| Marketing and business development | 8,169 | 5,552 | 308 | 47.1 | N/M | 20,902 | 13,472 | 55.2 | ||||||||||||||||
| Deal-related expenses | 10,805 | 10,975 | 8,385 | (1.5) | 28.9 | 42,921 | 38,072 | 12.7 | ||||||||||||||||
| Trade execution and clearance | 4,509 | 3,637 | 3,805 | 24.0 | 18.5 | 16,533 | 18,934 | (12.7) | ||||||||||||||||
| Restructuring and integration costs | 842 | 314 | 3,537 | 168.2 | (76.2) | 4,724 | 10,755 | (56.1) | ||||||||||||||||
| Intangible asset amortization | 7,520 | 7,520 | 11,606 | — | (35.2) | 30,080 | 44,728 | (32.7) | ||||||||||||||||
| Other operating expenses | 6,584 | 4,156 | 5,844 | 58.4 | 12.7 | 22,327 | 29,500 | (24.3) | ||||||||||||||||
| Total non-interest expenses | 479,366 | 369,855 | 335,357 | 29.6 | 42.9 | 1,589,549 | 1,169,665 | 35.9 | ||||||||||||||||
| Income before income tax expense | 168,875 | 75,710 | 70,531 | 123.1 | 139.4 | 441,512 | 68,548 | 544.1 | ||||||||||||||||
| Income tax expense | 43,292 | 23,512 | 20,592 | 84.1 | 110.2 | 111,144 | 19,192 | 479.1 | ||||||||||||||||
| Net income | 125,583 | 52,198 | 49,939 | 140.6 | 151.5 | 330,368 | 49,356 | 569.4 | ||||||||||||||||
| Net income applicable to noncontrolling interests | 12,070 | 6,477 | 7,779 | 86.4 | 55.2 | 51,854 | 8,852 | 485.8 | ||||||||||||||||
| Net income applicable to Piper Sandler Companies | $ | 113,513 | $ | 45,721 | $ | 42,160 | 148.3 | % | 169.2 | % | $ | 278,514 | $ | 40,504 | 587.6 | % | ||||||||
| Earnings per common share | ||||||||||||||||||||||||
| Basic | $ | 8.04 | $ | 3.22 | $ | 3.07 | 149.7 | % | 161.9 | % | $ | 19.52 | $ | 2.94 | 563.9 | % | ||||||||
| Diluted | $ | 6.54 | $ | 2.68 | $ | 2.66 | 144.0 | % | 145.9 | % | $ | 16.43 | $ | 2.72 | 504.0 | % | ||||||||
| Dividends declared per common share | $ | 3.55 | $ | 0.55 | $ | 0.38 | 545.5 | % | 834.2 | % | $ | 6.80 | $ | 2.00 | 240.0 | % | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||
| Basic | 14,119 | 14,213 | 13,755 | (0.7) | % | 2.6 | % | 14,265 | 13,781 | 3.5 | % | |||||||||||||
| Diluted | 17,357 | 17,047 | 15,860 | 1.8 | % | 9.4 | % | 16,955 | 14,901 | 13.8 | % |
N/M — Not meaningful
Piper Sandler Companies
Preliminary Selected Summary Financial Information (Non-GAAP – Unaudited) (1)
| Three Months Ended | Percent Inc/(Dec) | Twelve Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, | Sept. 30, | Dec. 31, | 4Q '21 | 4Q '21 | Dec. 31, | Dec. 31, | Percent | |||||||||
| (Amounts in thousands, except per share data) | 2021 | 2021 | 2020 | vs. 3Q '21 | vs. 4Q '20 | 2021 | 2020 | Inc/(Dec) | ||||||||
| Revenues: | ||||||||||||||||
| Investment banking | $ | 534,395 | $ | 335,603 | $ | 296,416 | 59.2 | % | 80.3 | % | $ | 1,553,219 | $ | 858,476 | 80.9 | % |
| Institutional brokerage | 92,160 | 90,099 | 92,507 | 2.3 | (0.4) | 387,577 | 357,753 | 8.3 | ||||||||
| Interest income | 1,752 | 1,485 | 1,939 | 18.0 | (9.6) | 6,967 | 13,164 | (47.1) | ||||||||
| Investment income | 6,262 | 13,593 | 9,489 | (53.9) | (34.0) | 34,982 | 10,384 | 236.9 | ||||||||
| Total revenues | 634,569 | 440,780 | 400,351 | 44.0 | 58.5 | 1,982,745 | 1,239,777 | 59.9 | ||||||||
| Interest expense | 866 | 450 | 779 | 92.4 | 11.2 | 2,288 | 4,817 | (52.5) | ||||||||
| Adjusted net revenues (2) | $ | 633,703 | $ | 440,330 | $ | 399,572 | 43.9 | % | 58.6 | % | $ | 1,980,457 | $ | 1,234,960 | 60.4 | % |
| Non-interest expenses: | ||||||||||||||||
| Adjusted compensation and benefits (3) | $ | 370,148 | $ | 265,120 | $ | 237,865 | 39.6 | % | 55.6 | % | $ | 1,188,371 | $ | 764,066 | 55.5 | % |
| Ratio of adjusted compensation and benefits to adjusted net revenues | 58.4% | 60.2% | 59.5% | 60.0% | 61.9% | |||||||||||
| Adjusted non-compensation expenses (4) | $ | 68,836 | $ | 59,186 | $ | 53,086 | 16.3 | % | 29.7 | % | $ | 242,134 | $ | 220,606 | 9.8 | % |
| Ratio of adjusted non-compensation expenses to adjusted net revenues | 10.9% | 13.4% | 13.3% | 12.2% | 17.9% | |||||||||||
| Adjusted operating income (5) | $ | 194,719 | $ | 116,024 | $ | 108,621 | 67.8 | % | 79.3 | % | $ | 549,952 | $ | 250,288 | 119.7 | % |
| Adjusted operating margin (6) | 30.7% | 26.3% | 27.2% | 27.8% | 20.3% | |||||||||||
| Interest expense on long-term financing | 1,724 | 2,218 | 2,473 | (22.3) | (30.3) | 8,446 | 9,628 | (12.3) | ||||||||
| Adjusted income before adjusted income tax expense (7) | $ | 192,995 | $ | 113,806 | $ | 106,148 | 69.6 | % | 81.8 | % | $ | 541,506 | $ | 240,660 | 125.0 | % |
| Adjusted income tax expense (8) | 50,820 | 30,992 | 31,187 | 64.0 | 63.0 | 142,469 | 63,105 | 125.8 | ||||||||
| Adjusted net income (9) | $ | 142,175 | $ | 82,814 | $ | 74,961 | 71.7 | % | 89.7 | % | $ | 399,037 | $ | 177,555 | 124.7 | % |
| Effective tax rate (10) | 26.3% | 27.2% | 29.4% | 26.3% | 26.2% | |||||||||||
| Adjusted earnings per diluted common share | $ | 7.84 | $ | 4.55 | $ | 4.17 | 72.3 | % | 88.0 | % | $ | 21.92 | $ | 10.02 | 118.8 | % |
| Adjusted weighted average diluted common shares outstanding (11) | 18,141 | 18,192 | 17,968 | (0.3) | % | 1.0 | % | 18,206 | 17,715 | 2.8 | % |
This presentation includes non-GAAP measures. The non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP. For a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures, see "Reconciliation of U.S. GAAP to Selected Summary Financial Information."
Piper Sandler Companies
Reconciliation of U.S. GAAP to Selected Summary Financial Information (1) (Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, | Sept. 30, | Dec. 31, | Dec. 31, | Dec. 31, | ||||||
| (Amounts in thousands, except per share data) | 2021 | 2021 | 2020 | 2021 | 2020 | |||||
| Net revenues: | ||||||||||
| Net revenues – U.S. GAAP basis | $ | 648,241 | $ | 445,565 | $ | 405,888 | $ | 2,031,061 | $ | 1,238,213 |
| Adjustments: | ||||||||||
| Revenue related to noncontrolling interests (12) | (16,262) | (7,453) | (8,789) | (59,050) | (12,881) | |||||
| Interest expense on long-term financing | 1,724 | 2,218 | 2,473 | 8,446 | 9,628 | |||||
| Adjusted net revenues | $ | 633,703 | $ | 440,330 | $ | 399,572 | $ | 1,980,457 | $ | 1,234,960 |
| Compensation and benefits: | ||||||||||
| Compensation and benefits – U.S. GAAP basis | $ | 397,727 | $ | 301,859 | $ | 266,118 | $ | 1,305,166 | $ | 877,462 |
| Adjustment: | ||||||||||
| Compensation from acquisition-related agreements | (27,579) | (36,739) | (28,253) | (116,795) | (113,396) | |||||
| Adjusted compensation and benefits | $ | 370,148 | $ | 265,120 | $ | 237,865 | $ | 1,188,371 | $ | 764,066 |
| Non-compensation expenses: | ||||||||||
| Non-compensation expenses – U.S. GAAP basis | $ | 81,639 | $ | 67,996 | $ | 69,239 | $ | 284,383 | $ | 292,203 |
| Adjustments: | ||||||||||
| Non-compensation expenses related to noncontrolling interests (12) | (4,192) | (976) | (1,010) | (7,196) | (4,029) | |||||
| Acquisition-related restructuring and integration costs | (842) | (314) | (3,537) | (4,724) | (10,755) | |||||
| Amortization of intangible assets related to acquisitions | (7,520) | (7,520) | (11,606) | (30,080) | (44,728) | |||||
| Non-compensation expenses from acquisition-related agreements | (249) | — | — | (249) | (12,085) | |||||
| Adjusted non-compensation expenses | $ | 68,836 | $ | 59,186 | $ | 53,086 | $ | 242,134 | $ | 220,606 |
| Income before income tax expense: | ||||||||||
| Income before income tax expense – U.S. GAAP basis | $ | 168,875 | $ | 75,710 | $ | 70,531 | $ | 441,512 | $ | 68,548 |
| Adjustments: | ||||||||||
| Revenue related to noncontrolling interests (12) | (16,262) | (7,453) | (8,789) | (59,050) | (12,881) | |||||
| Interest expense on long-term financing | 1,724 | 2,218 | 2,473 | 8,446 | 9,628 | |||||
| Non-compensation expenses related to noncontrolling interests (12) | 4,192 | 976 | 1,010 | 7,196 | 4,029 | |||||
| Compensation from acquisition-related agreements | 27,579 | 36,739 | 28,253 | 116,795 | 113,396 | |||||
| Acquisition-related restructuring and integration costs | 842 | 314 | 3,537 | 4,724 | 10,755 | |||||
| Amortization of intangible assets related to acquisitions | 7,520 | 7,520 | 11,606 | 30,080 | 44,728 | |||||
| Non-compensation expenses from acquisition-related agreements | 249 | — | — | 249 | 12,085 | |||||
| Adjusted operating income | $ | 194,719 | $ | 116,024 | $ | 108,621 | $ | 549,952 | $ | 250,288 |
| Interest expense on long-term financing | (1,724) | (2,218) | (2,473) | (8,446) | (9,628) | |||||
| Adjusted income before adjusted income tax expense | $ | 192,995 | $ | 113,806 | $ | 106,148 | $ | 541,506 | $ | 240,660 |
| Income tax expense: | ||||||||||
| Income tax expense – U.S. GAAP basis | $ | 43,292 | $ | 23,512 | $ | 20,592 | $ | 111,144 | $ | 19,192 |
| Tax effect of adjustments: | ||||||||||
| Compensation from acquisition-related agreements | 5,648 | 5,793 | 6,817 | 23,646 | 27,456 | |||||
| Acquisition-related restructuring and integration costs | 208 | 78 | 834 | 1,180 | 2,043 | |||||
| Amortization of intangible assets related to acquisitions | 1,609 | 1,609 | 2,944 | 6,436 | 11,345 | |||||
| Non-compensation expenses from acquisition-related agreements | 63 | — | — | 63 | 3,069 | |||||
| Adjusted income tax expense | $ | 50,820 | $ | 30,992 | $ | 31,187 | $ | 142,469 | $ | 63,105 |
| Continued on next page |
Piper Sandler Companies
Reconciliation of U.S. GAAP to Selected Summary Financial Information (1) (Unaudited)
| Three Months Ended | Twelve Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Dec. 31, | Sept. 30, | Dec. 31, | Dec. 31, | Dec. 31, | ||||||
| (Amounts in thousands, except per share data) | 2021 | 2021 | 2020 | 2021 | 2020 | |||||
| Net income applicable to Piper Sandler Companies: | ||||||||||
| Net income applicable to Piper Sandler Companies – U.S. GAAP basis | $ | 113,513 | $ | 45,721 | $ | 42,160 | $ | 278,514 | $ | 40,504 |
| Adjustments: | ||||||||||
| Compensation from acquisition-related agreements | 21,931 | 30,946 | 21,436 | 93,149 | 85,940 | |||||
| Acquisition-related restructuring and integration costs | 634 | 236 | 2,703 | 3,544 | 8,712 | |||||
| Amortization of intangible assets related to acquisitions | 5,911 | 5,911 | 8,662 | 23,644 | 33,383 | |||||
| Non-compensation expenses from acquisition-related agreements | 186 | — | — | 186 | 9,016 | |||||
| Adjusted net income | $ | 142,175 | $ | 82,814 | $ | 74,961 | $ | 399,037 | $ | 177,555 |
| Earnings per diluted common share: | ||||||||||
| Earnings per diluted common share – U.S. GAAP basis | $ | 6.54 | $ | 2.68 | $ | 2.66 | $ | 16.43 | $ | 2.72 |
| Adjustment for inclusion of unvested acquisition-related stock | (0.35) | (0.31) | (0.55) | (1.62) | (1.89) | |||||
| $ | 6.19 | $ | 2.37 | $ | 2.11 | $ | 14.81 | $ | 0.83 | |
| Adjustments: | ||||||||||
| Compensation from acquisition-related agreements | 1.26 | 1.82 | 1.34 | 5.49 | 5.76 | |||||
| Acquisition-related restructuring and integration costs | 0.04 | 0.01 | 0.17 | 0.21 | 0.58 | |||||
| Amortization of intangible assets related to acquisitions | 0.34 | 0.35 | 0.55 | 1.40 | 2.24 | |||||
| Non-compensation expenses from acquisition-related agreements | 0.01 | — | — | 0.01 | 0.61 | |||||
| Adjusted earnings per diluted common share | $ | 7.84 | $ | 4.55 | $ | 4.17 | $ | 21.92 | $ | 10.02 |
| Weighted average diluted common shares outstanding: | ||||||||||
| Weighted average diluted common shares outstanding – U.S. GAAP basis | 17,357 | 17,047 | 15,860 | 16,955 | 14,901 | |||||
| Adjustment: | ||||||||||
| Unvested acquisition-related restricted stock with service conditions | 784 | 1,145 | 2,108 | 1,251 | 2,814 | |||||
| Adjusted weighted average diluted common shares outstanding | 18,141 | 18,192 | 17,968 | 18,206 | 17,715 |
This presentation includes non-GAAP measures. The non-GAAP measures are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with U.S. GAAP.
Piper Sandler Companies
Notes to Non-GAAP Financial Schedules
(1)Selected Summary Financial Information are non-GAAP measures. Management believes that presenting results and measures on an adjusted basis in conjunction with U.S. GAAP measures provides the most meaningful basis for comparison of its operating results across periods.
(2)A non-GAAP measure which excludes (a) revenues related to noncontrolling interests (see (12) below) and (b) interest expense on long-term financing.
(3)A non-GAAP measure which excludes compensation expense from acquisition-related agreements.
(4)A non-GAAP measure which excludes (a) non-compensation expenses related to noncontrolling interests (see (12) below), (b) acquisition-related restructuring and integration costs, (c) amortization of intangible assets related to acquisitions and (d) non-compensation expenses from acquisition-related agreements.
(5)A non-GAAP measure which excludes (a) revenues and expenses related to noncontrolling interests (see (12) below), (b) interest expense on long-term financing, (c) compensation and non-compensation expenses from acquisition-related agreements, (d) acquisition-related restructuring and integration costs and (e) amortization of intangible assets related to acquisitions.
(6)A non-GAAP measure which represents adjusted operating income as a percentage of adjusted net revenues.
(7)A non-GAAP measure which excludes (a) revenues and expenses related to noncontrolling interests (see (12) below), (b) compensation and non-compensation expenses from acquisition-related agreements, (c) acquisition-related restructuring and integration costs and (d) amortization of intangible assets related to acquisitions.
(8)A non-GAAP measure which excludes the income tax benefit from (a) compensation and non-compensation expenses from acquisition-related agreements, (b) acquisition-related restructuring and integration costs and (c) amortization of intangible assets related to acquisitions.
(9)A non-GAAP measure which represents net income earned by Piper Sandler Companies excluding (a) compensation and non-compensation expenses from acquisition-related agreements, (b) acquisition-related restructuring and integration costs, (c) amortization of intangible assets related to acquisitions and (d) the income tax expense allocated to the adjustments.
(10)A non-GAAP measure which is computed based on a quotient, the numerator of which is adjusted income tax expense and the denominator of which is adjusted income before adjusted income tax expense.
(11)A non-GAAP measure which assumes the vesting of acquisition-related restricted stock with service conditions.
(12)Noncontrolling interests include revenue and expenses from consolidated alternative asset management entities that are not attributable, either directly or indirectly, to Piper Sandler Companies.
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