管理層發言
Good morning, and welcome to the Piper Sandler Company's Second Quarter 2026 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 2026 Earnings Conference Call. Hosting the call today are Chairman and CEO, Chad Abraham; our President, Debbra Schoneman; and CFO, Kate Clune. Earlier this morning, we issued a press release announcing Piper Sandler's Second Quarter 2026 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 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 us. We posted second quarter adjusted net revenues of $491 million, a 21.8% operating margin and adjusted EPS of $1.04, all up significantly compared to the prior year. This marks our 11th consecutive quarter of year-over-year revenue growth, a testament to the durability of our model. Corporate Investment Banking revenues were $312 million for the quarter, up 31% year-over-year, driven by robust advisory activity. Financial services and Healthcare remain our two largest franchises and both delivered impressive quarterly results. During the first half of 2026, Corporate Investment Banking revenues totaled $636 million, a 30% increase over last year and our strongest first half performance on record. Our growth was broad-based with nearly all of our sectors and products contributing. This momentum validates our strategy of combining deep sector expertise with a broad suite of products to serve our clients throughout their life cycles and through a wide range of market conditions. Advisory Services achieved record second quarter revenues of $274 million, up 34% over last year, marking our sixth consecutive quarter of year-over-year growth. We completed 83 advisory transactions, a 17% increase in volume and earned more larger fees. Performance was led by financial services with meaningful contributions from Healthcare and Services and Industrials. Within Financial Services, our depository practice remains a market leader. While large-scale M&A activity continued to be lacking, middle market volume improved. We ranked as the #1 adviser in U.S. bank M&A by both announced transaction count and deal value in the first half, reinforcing our position as the go-to partner for bank clients across the size spectrum. Our Insurance and Asset Management franchises also contributed to our success. Investments in these franchises over the past several years, combined with increased alignment with our broader private equity relationships have driven meaningful growth. We are also experiencing positive momentum within our Private Capital Advisory group, which recorded their best quarter on our platform, driven by the secondary business. By leveraging our sponsor relationships and sector expertise, we are well positioned to capture share in this high-growth space. Our market-leading position, deep sector coverage and extensive portfolio of solutions drove first half advisory revenues of $525 million, up 25% over last year. In addition to financial services, our Healthcare group contributed strong results, led by our Med-Tech team, which advised on several of the largest deals announced in the sector. Market conditions for Healthcare M&A are more constructive, and our role as the top adviser in Med-Tech M&A by deal count continues to be a key differentiator as companies prioritize portfolio optimization, growth and scale. Despite a weaker environment for sponsor activity during the first half, our relative performance was strong. Advisory revenues from Private Equity clients grew 10% year-over-year, outperforming the broader U.S. private equity market. This resilience highlights the value of our coverage model. As we continue to prioritize our private equity partners, we recently transitioned two senior leaders from our Services and Industrials group to serve alongside our existing Head of Financial Sponsors, where they will focus on our Private Equity advisory efforts. We remain committed to scaling this practice, and we are uniquely positioned to increase our share of transaction activity, including M&A, debt capital markets advisory, continuation vehicles and IPOs as market conditions improve and transaction volumes accelerate. Turning to corporate financing. Second quarter revenues were $38 million, up 10% year-over-year, but down from the very strong first quarter. We completed 28 financings, raising $13 billion for corporate clients, primarily in the Healthcare space. While corporate financing activity and our revenues fluctuate based on client and sector-specific dynamics as well as macroeconomic data, our first half performance reflects a strong underlying trend. Revenues of $111 million are up 65% year-over-year, driven by a 33% increase in book-run transactions and higher average fees. Shifting to talent. We finished the quarter with 193 investment banking managing directors, a 6% increase year-over-year. Since the beginning of 2026, we have added 12 new MDs through promotions and hiring. We remain focused on productivity by selectively adding top producers to offset retirements and the departure of less productive bankers in order to align the platform for long-term success. 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. We generated $50 million of municipal financing revenues, double our first quarter revenues, up 18% year-over-year and our strongest second quarter on record. We underwrote 141 municipal negotiated transactions, raising $5 billion of par value for our clients. This performance was attributable to the strength of our specialty business, particularly the special district and hospitality groups, which completed several large transactions. We have built a differentiated market-leading specialty franchise that combines our high-touch underwriting with superior distribution and trading capabilities, creating a compelling value proposition for both issuers and municipal investors. Our governmental business remained resilient during the quarter despite a year-over-year decline as market conditions were more accommodative during the second quarter of last year. Our performance for the first half of 2026 was strong on a relative and absolute basis. Municipal financing revenues increased 7% over last year, outpacing the 4% par value growth of the municipal negotiated market. As we look ahead, similar to last year, we anticipate that revenues for the third quarter will decline from the robust second quarter. Our equity brokerage business generated record second quarter revenues of $63 million, up 8% year-over-year. This result was driven by successful execution of our strategy and aided by a unique convergence of benchmark rebalancing events in June. Our trading capabilities enabled us to participate meaningfully in these events, which produced our three largest days in firm history as measured by notional volume. During the first half of 2026, equity brokerage revenues totaled $123 million, a 10% increase over the prior year, and we traded 6.6 billion shares, up 14%. This performance underscores the strength of our platform and the value we provide clients. Looking ahead, we expect the third quarter revenues will follow historical trends, which typically reflect a seasonal decline. Lastly, turning to fixed income. The market environment remained challenging this quarter as ongoing geopolitical events and interest rate uncertainty, combined with a flattening yield curve dampened client activity. Against this backdrop, we recorded revenues of $49 million, down sequentially and year-over-year. While bank restructuring activity provided a partial offset to lower trading volumes during the quarter, it declined from the robust levels during second quarter of last year. We remain focused on providing tailored advice-driven solutions to help clients navigate the uncertain environment. Partnering with our banking colleagues to provide balance sheet restructuring advice following strategic events remains a differentiator for us. As we look ahead, we expect third quarter revenues to be similar to the second quarter. 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 second quarter of 2026, we posted net revenues of $491 million, operating income of $107 million and an operating margin of 21.8%. Net income totaled $74 million and diluted EPS was $1.04. During the first half of 2026, net revenues totaled $961 million, operating income was $201 million, and our operating margin was 20.9%. We generated $146 million of net income and $2.04 of diluted EPS. Second quarter net revenues increased 5% sequentially and 21% year-over-year, fueled by activity across advisory services, municipal financing and equity brokerage. This momentum carried through the first half, where net revenues rose 22% over the prior year period. Corporate Investment Banking led this growth with advisory revenues increasing 25% year-over-year, accounting for 55% of total net revenues and corporate financing revenues rising 65%. In addition, our municipal financing and equity brokerage businesses reached new revenue highs for the half year period. Our strategy of sustaining revenue growth while yielding best-in-class profitability continues to play out. Operating income for the first half grew 42% over 2025, outpacing our 22% revenue growth and illustrating the inherent scalability of our model. Turning to expenses. We continue to exercise operating discipline. Our compensation ratio of 61.5% for both the second quarter and the first half of 2026 improved year-over-year, reflecting our commitment to balancing employee retention with strategic investment opportunities. Non-compensation expenses for the second quarter of 2026 were $82 million or 16.7% of net revenue. For the first half, non-compensation expenses totaled $168 million, up 8% year-over-year, primarily due to a litigation-related expense taken during the first quarter. Non-compensation costs represented 17.5% of net revenues, a 230 basis point improvement from the first half of last year, highlighting our success in driving leverage as our revenue base expands. Our effective tax rate was 30.5% for the quarter and 27.1% for the first half of this year. Year-to-date tax expense was reduced by $7 million of benefits related to the vesting of restricted stock awards. Excluding these benefits, our effective tax rate for the first half was 30.7%. Now finishing with capital. During the second quarter, we repurchased approximately 391,000 shares of our common stock for $31 million and paid an aggregate of $14 million to our shareholders through our quarterly cash dividend. For the first half of this year, we returned an aggregate of $215 million to shareholders. This includes $115 million in cash dividends or $1.625 per share and repurchases of approximately 1.3 million shares of our common stock for $101 million. These buybacks have more than offset the share count dilution from the 2026 annual grants, reinforcing our commitment to disciplined capital management. Lastly, I'm pleased to announce that effective today, the Board approved a quarterly cash dividend of $0.20 per share to be paid on September 11 to shareholders of record as of the close of business on August 28. To conclude, our performance reflects the successful execution of our long-term strategy. Regarding our outlook, we anticipate third quarter net revenues will be in line with the third quarter of 2025. We enter the remainder of this year with a healthy pipeline and active client engagement. With our differentiated platform and proven ability to execute, we are well positioned to drive continued long-term growth and value for our shareholders. With that, we can open up the call for questions.
分析師問答
This is Noah Katz on for Devin. So to start, I think maybe we should focus a little bit on the middle market more broadly. Advisory results were strong this quarter, but the middle market still appears to be developing gradually within sponsor activity. Are you seeing a more meaningful shift from dialogue and pitching? Does the current level of activity give you confidence that middle market M&A can build from here? And what are your expectations for the second half of the year?
Yes. We've seen results all over the place from peers, so it matters which sectors you look at. Our two biggest sectors are Financial Services and Healthcare, and in those spaces the middle markets have been pretty good, and we are overweight in those two spaces. That is driving results. We noted in the release that the sponsor business depends on the data source you look at; some show it's down, others flat. Ours was up slightly, so we do think we're gaining some share. But there are still parts of the middle market in Consumer and some Industrials that are tougher. I still think it's a pretty good market — it's just not great and robust. Pitch calendars and new mandates look pretty good for the back half; it will depend on close rates. Across the industry, we've seen some data from various auctions where close rates have been a little lower than in the past, so we'll have to see.
That's great. Okay. And then switching gears a little bit, focusing specifically on fixed income. If short-term rates were to move higher from here, how much would that change activity levels? And how would you think about the potential impacts across fixed income brokerage and then the municipal underwriting business?
I would say one important point is depositories, which are about half of our fixed income business, are very focused on that client set and the path of Fed funds to five years finally getting into positive territory was good for banks. If that reverses, it will put pressure on that segment of our client base. Regarding the municipal business, rates that matter are longer-term rates — all the way out to 30 years — so movements in the 10- to 30-year part of the curve have a bigger impact on municipal financing. It's less about short-term rates and more about where longer-term rates move and overall sentiment, which impacts municipal financing activity.
Chad, the ECM business has been somewhat volatile this year so far, notwithstanding a robust Healthcare ECM backdrop, which you're obviously highly exposed to. Could you just help us think through the ECM outlook for the business?
Yes. You get both effects. Q1 was a strong outperformance relative to the market and Q2 underperformed. For the first half in total, it's pretty good, but it's hard to benchmark on a single quarter — a single high-fee biotech can move the numbers. We feel pretty good about the back half because the lion's share of our ECM business is biotech and healthcare-related, and that backlog looks good. If the second half is similar to the first half, it would be a strong ECM year for us. We're a bit underrepresented in some industrial tech and aerospace pockets where there has been ECM activity, so you need to look sector by sector. Overall, healthcare biotech is quite healthy for us.
Excellent. You have continued to deliver robust cost discipline, which is notably better than many of your peers, in particular this quarter. Could you update us on your approach to managing costs and what's allowed you to offset some of the upward structural drivers of cost such as AI spend and data so effectively?
Maybe we'll split this up. The biggest part of cost is compensation. Having a diversified business with depositories and energy, which are sometimes different cycles than tech and healthcare, helps our comp rate. We're still a bit underweight in tech. Our mix of industries and products has been quite good, which helps on the comp ratio. Also, we run a variable comp model that is pay for performance — top producers get paid very well, and we don't have a lot of fixed contracts. That creates ups and downs but allows us to manage the comp ratio more tightly.
I'll take the non-comp side. We had some pressure through 2025 with double expense from the move from Minneapolis, so not having that bleed into 2026 has given us a natural offset. We have seen upward pressure from renewals of data contracts and similar items. We've focused on good hygiene day-to-day. There will be some continued upward pressure — for example, this is the first quarter where we have a bit of double expense for New York, and I expect that to trend higher through the end of 2026 and into 2027. So we have some upward pressure on occupancy with an offset from last year's one-time expense. On the data and tech side, including AI, it's about good hygiene, control and transparency in how we deploy those resources.
This is Luke on for Mike. Congrats on the quarter. Just wanted to touch on advisory revenues. Fewer completed transactions during the quarter. I was wondering how much of that average fee expansion was structural versus deal-mix driven or the sustainability of the higher fees?
Relative to some sectors being tougher in the middle market, that probably impacts total volume. I don't think we'll see the same total deal volume uptick we saw last year in the back half. But our mix of larger fees is quite good and we have larger fees in the pipeline. It will come down to how many of those actually get announced and close in Q4. This year will be more of a fee-size story than just volume.
Okay. Got it. And then on municipal — nice uptick sequentially. How much of that was timing or pull forward versus genuine demand recovery?
There was both some demand recovery and some large transactions that came together in the same quarter. Historically, pre-2025, we would see a steady increase quarter-over-quarter. Last year, the second quarter was strong due to some fear of tax law changes, which drove demand. This quarter, a number of larger transactions came together in the same quarter, which makes this year look more like last year in terms of trends than maybe historically.
This is Kenny on for Stephen. I just had a quick question on the outlook for advisory. In prior years, you've seen meaningful growth in the back half relative to the first half. Given the momentum in the business but a more challenging backdrop for sponsor activity and bank M&A, do you think it's fair to underwrite a similar ramp in the back half of 2026 similar to prior years?
Our back half last year was very strong, so the comps get much tougher. We do not think the growth rate on the back half will be the same as last year. Some of that depends on a list of larger fee transactions closing in Q4. We have had some good depository announcements that will close in the back half. We still feel good about our growth for the year, but it's hard to look at quarter-over-quarter growth in this business.
Maybe to ask on non-compensation costs in a slightly different way. Some peers have highlighted accelerated investments because of the generational shift with technology and AI. How are you thinking about those investments and whether you might accelerate some given the strong revenue backdrop?
AI is something we're focused on. We have started that spend and investment. The firm has prioritized how we're thinking about that, rolling things out in batches rather than wholesale, and doing audits of how we're using the tooling to deploy it efficiently. We're starting to see impacts from that investment, but we will continue to be measured given how quickly the technology is evolving.
Great. Maybe one on the competitive backdrop. Several money center banks have announced renewed focus on middle market banking and advisory. How are you thinking about the competitive environment and whether the reentry of some larger banks would change your view?
I've seen similar big bank announcements many times over a 35-year career; this is probably the sixth or seventh cycle. We don't take it lightly, but I'm not too worried. In the middle market with sponsors, getting hired is about deal flow, not just a good banker showing up — it takes years to build deal flow. It's not easy to come in and out. There may be increased competition on select transactions, but that's not a trend I'm worried about broadly. All right. Thank you, operator, and 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 call. Thank you for your participation. You may now disconnect.