Piper Jaffray Companies Stock

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, Deb 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 2 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 -- 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 2 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 3 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.

[Operator Instructions] We'll go first to Devin Ryan with Citizens Bank.

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. And are you seeing a more meaningful shift from dialogue and pitching? And does the current level of activity give you confidence that the middle market M&A can build from here? And what are your expectations on the second half of the year?

Yes. Obviously, we've seen sort of results all over the place from the peers. So I do think it matters and depends on kind of what sectors you look at. Obviously, our 2 biggest sectors are Financial Services and Healthcare. And in those 2 spaces, the middle markets have been pretty good, and we're outweighted in those 2 spaces. And so obviously, that's driving results. We did sort of say in the release that the sponsor business, it depends on what data source you look at. Is it down? Is it flat? Obviously, ours was up a little bit. So we do think we're gaining some share.

But yes, there are still parts of the middle market in Consumer, parts of Industrial, others that are tougher. I still think it's a pretty good market. It's just not great and robust. But the pitch calendars, new mandates, things look pretty good for the back half. It will just depend on close rates. I do think across the industry, I've seen some data from various auctions where the 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 is that changing activity levels? And how would you think about the potential impacts across fixed income brokerage and then the municipal underwriting business?

Yes. So I would say one of the things that is very important for depositories, which is about half of our fixed income business is very focused on that client set and the Fed funds to 5 years finally got into positive territory, which is good for banks. So if we see that turn around again, that's going to put some pressure on that segment of our client base for sure. I would say when you think about the municipal business, which was another part of your question and how rates ultimately impact that, of course, that we're looking out at longer-term rates, right? You think about all the way out to 30 years. So that's going to have less of an impact there. It's really what does that do to overall sentiment and where do rates go 10-year out to 30 year that's going to have a bigger impact on the municipal financing business. I don't know if I've answered all your questions there, if you have a follow-up.

We'll go next to James Yaro with Goldman Sachs.

Chad, the ECM business has -- your ECM business specifically 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, I would say that you actually probably got some of both. Q1 was sort of huge outperformance relative to the market. Q2 is now pretty obviously underperformance. I think for the first half, in total, it's pretty good. It's really hard to benchmark on the quarter. If we happen to have a high single-digit biotech fee come into a quarter out of a quarter, it can impact those numbers. I do think we feel pretty good about the back half because the lion's share of our ECM business is biotech, health care related. I think that backlog is good, where those indices and stocks is trading is good.

And obviously, if we had a second half like we had first half, it would be in total, a pretty good ECM year. Some of the other spaces, we're a little underrepresented in some of the industrial, industrial tech, some of the aerospace, defense, where you've seen some ECM pockets. So I think you really got to look sector by sector. But in total for us, the majority of our ECM business is Healthcare and the part of health care related to biotech is quite healthy.

Excellent. You have continued to deliver robust cost discipline, which I would say is notably better than many of your peers, in particular, this quarter. Could you just update us on your approach to managing costs and maybe what's allowed you to offset some of the upward structural drivers of cost such as AI spend and data so effectively?

Yes. Maybe we'll split this up. I'll take, obviously, the biggest part of cost is comp. I think we've talked about this before. It really helps us to sort of have a pretty diversified business with depositories and energy, which are sometimes different cycles than tech and health care. Obviously, we're still a little underweight in tech. Parts of the tech and software market have been tough for people. So in total, our mix of industries and business and products has been quite good, which helps us on the comp rate. Plus we're just -- for many years, we run a very variable comp rate, which is it's pay for performance. Bankers that produce, get paid really well, don't have a ton of fixed contracts. And so you have the ups and downs with that, but that does allow you to manage that comp ratio more tightly.

I'll take the non-comp side, James. A couple of things. We had a little bit of pressure through 2025 with the double expense with the move from Minneapolis. So not having that bleed into 2026 has given us some natural offset. In addition to that, I think we have talked about some of the pressure we're seeing from the renewal of data contracts, et cetera. So I think it's really just about good hygiene on a day-to-day basis there. We've seen some upward pressure. We are going to continue to see some pressure while we are out of the window where we're paying double expense for Minnesota. This is the first quarter where we have a little bit of double expense for New York, and I expect that to trend a bit higher through the end of '26 and into '27. So I'd say we've got some upward pressure with occupancy expense with an offset from a one-time expense last year. And then on the data side, the tech side, the AI side, I think it's just about good hygiene, good control, good transparency internally in terms of how we're choosing to deploy those resources.

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

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 just wondering how much of that kind of average fee expansion was structural versus kind of deal mix driven or the sustainability of that -- of the higher fee?

Yes. Yes, I do think relative to some of my comments on some of the sectors still being a little tougher in the middle market probably impacts that total volume. And I would say I don't think we think we're going to see the same total deal volume uptick we saw last year necessarily in the back half. But our mix of larger fees is actually quite good and larger fees in the pipeline. So it will just come down to how many of those actually get announced and close in Q4. So I do think this year is going to be a little more of a fee size story than just volume.

Okay. Got it. And then on municipal kind of a nice uptick sequentially. I guess how much of that was either timing or pull forward or maybe kind of leaked in from last quarter versus like genuine demand recovery there?

Yes. I would say there was both some demand recovery, but also some nice large transactions that came together in the same quarter. Normally, we would see, if you go pre-2025, we would see a steady increase quarter-over-quarter, this sort of cyclical trend of improving quarter-over-quarter throughout the year. Last year, we saw second quarter strong due to some fear of tax law changes, which drove some demand. I would say for us, this quarter, it was really just a number of larger transactions coming together in the same quarter, which is again going to make this year look more like last year in terms of trends than maybe historically.

We'll go next to Steven Chubak with Wolfe Research.

This is [ Kenny ] on for Stephen. I just had a quick question on the outlook for advisory. So in prior years, you've seen meaningful growth in the back half of the year relative to the first half. And given the momentum in the business, so 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 '26 similar to prior years?

Yes. I think -- I mean, obviously, for us, our back half last year was really, really strong. And so the comps get much tougher. So no, we do not think the growth rate on the back half is going to be the same. As on the front half, I would say, as I just said, some of that's going to depend on this big list of larger fee transactions closing in Q4. We have had some good depository announcements, which will close in the back half. So we feel -- we still feel really good about our growth for the year, but this is a hard business to look always at just quarter-over-quarter growth.

[Operator Instructions] We'll go next to Gabriel [ Angeli ] with Bank of America.

Maybe to just ask on the non-compensation costs in a slightly different way. Obviously, the 230 basis point year-over-year improvement in the first half is encouraging, but I think some of your peers have highlighted maybe accelerated investments and growth there just because of the generational shift that we're going through in terms of technology with AI. So maybe if you can talk to us about how you're thinking about some of the investments there and whether you thought about maybe taking advantage of the strong revenue backdrop to accelerate some investments.

Thank you for the question. Yes, AI is something, obviously, we're focused on. We have started that spend and investment. I think the firm has done a really nice job of prioritizing the way we're thinking about that, rolling things out in batches rather than wholesale and then doing some auditing in terms of how we're using the tooling in the most efficient way to deploy it from there. So I think we're starting to see the impacts from that investment, but I think we're going to continue to be measured given how quickly that technology is evolving.

Great. And maybe just one on the competitive backdrop. I think recently, several money center banks have announced a renewed focus on middle market banking and advisory. So maybe you can just give us a mark-to-market on how you're thinking about the competitive backdrop there and whether the reentry of some of these larger banks would change your view of the competitive environment?

Yes. I mean this answer might sound a little sarcastic, but I've been doing this 35 years, and this is probably the sixth or seventh cycle where I've seen these sort of big bank announcements coming into the middle market. And so honestly, I don't think we take it lightly, but I'm not too worried about that. I mean it's really important. I always try to make this point in the middle market with sponsors, especially getting hired is about deal flow. It's not just about sort of showing up at one meeting with a good banker that knows the space. So it takes several years to sort of build up that deal flow and you get paid back by winning new transactions. So it's not that easy in that world to just come in and out of. But I certainly acknowledge on select transactions here or there that could increase competition. But in general, that's not a trend I'm worried about.

At this time, there are no further questions. I'd like to hand the call back to Chad Abraham for any additional or closing remarks.

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.

Good morning, and welcome to the Piper Sandler Company's First 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 First Quarter 2026 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 First 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 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 us. We posted a strong start to the year, generating first quarter adjusted net revenues of $470 million, our tenth consecutive quarter of year-over-year growth, a 20% operating margin and adjusted EPS of $1. Corporate Investment Banking achieved a first quarter record with revenues of $324 million, up 30% year-over-year due to robust corporate financing activity as well as solid contributions across advisory services. .

Our Healthcare franchise produced an exceptionally strong quarter, setting a new high watermark in terms of revenues. Results were driven by our medtech and biopharma teams as well as meaningful contributions from Healthcare IT and Services, 2 areas where we have invested in strengthening our capabilities.

Within U.S. medtech M&A, we rank as the top adviser based on number of announced deals. Our Financial Services group also registered a strong quarter as they closed several significant bank M&A transactions. We ranked as the #1 adviser in U.S. bank M&A based on deal value announced during the quarter. Our Insurance and Asset Management subsectors also contributed to the strong performance.

Advisory revenues were a first quarter record of $251 million, up 16% year-over-year due to the strong performance from Healthcare and Financial Services, and contributions from our Services and Industrials and Energy teams. For the quarter, we ranked as the #2 adviser in U.S. M&A based on announced deals under $2 billion and ranked #3 based on announced deals under $5 billion. In addition, our non-M&A advisory teams remain active and are a growing component of our performance.

Our Debt Capital Markets Advisory business recorded a strong start to the year and was a meaningful contributor to this growth. Our deep product expertise, trusted relationships with market participants and close collaboration with our industry teams continue to deliver consistent, high-quality execution for our clients. We are also seeing positive momentum within our Private Capital Advisory Group, where we are leveraging our sponsor relationships and sector expertise to grow market share. As market conditions evolve, we continue to benefit from our broad industry coverage and comprehensive product capabilities.

Looking ahead, our industry and product teams are busy advising clients and pipelines remain strong. However, the timing of these transactions may be influenced by market conditions. We expect second quarter advisory revenues to be similar to the first quarter.

Turning to Corporate Financing. The equity underwriting market was resilient during the quarter despite the volatility with the fee pool up 73% year-over-year, driven mainly by the Healthcare sector. Corporate Financing revenues for the quarter for $73 million, up 122% from the first quarter of last year. We completed 36 equity, debt and preferred financings raising $14 billion for corporate clients. Activity was led by our Healthcare team, which served as bookrunner on all 23 equity deals they priced during the quarter.

Our absolute and relative outperformance was driven by strong equity issuance for biopharma companies. In this sector, we ranked as the #2 investment bank based on the number of book-run deals. Over the last decade, we've built a scaled biopharma platform with deep expertise and products across banking, research, capital markets and sales, positioning us to capture share and drive strong results. As we look ahead, we expect second quarter corporate financing revenues to decline from a strong first quarter.

Shifting to talent. We finished the quarter with 192 investment banking managing directors, the highest number in firm history. Development of our internal talent, along with identifying talented partners to join our platform, continues to be a priority as we strengthen our product and sector teams. During the quarter, we promoted 6 of our bankers to Managing Director, and we hired 3 MDs that strengthen our advisory capabilities in Healthcare, IT, European Life Sciences and Upstream Energy.

Let me close with a few final points. While the near-term macroeconomic environment remains uncertain, our core strategy is unchanged. We remain focused on advising clients with deep expertise and providing a comprehensive suite of capital market solutions. We are committed to expanding our platform for continued growth while delivering strong margins to our shareholders.

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 $24 million of Municipal Financing revenues for the quarter, down 9% year-over-year. Revenues were balanced between our governmental and specialty businesses. During the first quarter, we underwrote 98 municipal negotiated transactions, raising $3 billion of par value for our clients. As we look ahead, our pipelines are strong with clients looking to access the market. We anticipate that second quarter revenues will improve modestly from the first quarter, aligning with the typical seasonality of this business.

Turning to our Equity Brokerage business, higher volatility drove increased trading volumes in response to geopolitical events, resulting in record first quarter revenues of $60 million, an 11% increase from the prior year. Performance was broad-based across our trading desks, including our derivatives desk as clients increase their hedging activity. Our platform offers clients many execution and payment channels to take advantage of our differentiated research and trading capabilities. Looking ahead, our results will continue to be correlated with market volatility and trading volumes. We expect our second quarter revenues to decline from the record first quarter levels.

While volatility helped our Equity Brokerage business, it negatively impacted our fixed income business. As the quarter progressed, the day-to-day volatility during March significantly reduced our regular-way client activity. We were able to mitigate this reduction by completing balance sheet restructuring trades in conjunction with the closing of bank M&A transactions.

We produced fixed income revenues of $50 million in the first quarter, up 6% from the prior year period. The diversification of our product capabilities and client relationships, coupled with our capital-light model, provided a level of resiliency to our results. The near-term fixed income outlook remains challenging. We've experienced a slow start to the second quarter as ongoing geopolitical developments are keeping many clients on the sidelines.

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. As a reminder, we affected a 4-for-1 forward stock split of our common stock on March 23, and our common stock began trading on a split-adjusted basis at the start of trading on March 24. All share and per share amounts discussed on the call have been retrospectively adjusted to reflect the impact of the stock split.

For the first quarter of 2026, we generated net revenues of $470 million, operating income of $94 million and an operating margin of 20%. Net income totaled $72 million and diluted EPS was $1. Net revenues for the first quarter of 2026 declined from the seasonally strong fourth quarter of 2025, but increased 22% over the first quarter of last year. The year-over-year growth was driven by a 30% increase in Corporate Investment Banking revenues. Advisory Services delivered the strongest first quarter on record and Corporate Financing activity was robust. In addition, our Equity Brokerage business achieved strong results. Margin expansion remains a strategic priority as we continue to scale our platform. Current quarter operating income grew 37% over the first quarter of 2025, outpacing our year-over-year revenue growth of 22%.

Turning to expenses. We reported a compensation ratio of 61.6% for the quarter, an improvement of 90 basis points from the first quarter of last year, driven by increased net revenues. This improvement in our ratio reflects our continued commitment to exercising operating discipline, while balancing employee retention and investment opportunities.

For the first quarter of 2026, non-compensation expenses were $86 million, up 15% over last year, in part due to an $8.5 million litigation-related expense taken during the quarter. This expense relates to the pending settlement of the California lawsuit originally filed in 2014, specific to variable rate demand notes within our Municipal Finance business. Excluding the $8.5 million litigation expense, non-compensation costs for the quarter increased 4% year-over-year driven by higher underwriting expenses associated with increased corporate financing activity and were 16.6% of net revenues. This ratio reflects an improvement of 300 basis points from the first quarter of last year as we continue to drive leverage from higher revenues.

Moving to income tax expense. For the first quarter of 2026, our income tax expense was reduced by $7 million of tax benefits related to the vesting of restricted stock awards, which resulted in an income tax rate of 23.4%. Excluding these benefits, our effective tax rate was 30.8%.

Now finishing with capital. Our consistent operating discipline and capital-light approach continued to result in strong cash generation to deploy in order to drive shareholder returns. During the first quarter, we returned an aggregate of $171 million to shareholders, which included dividends totaling $101 million or $1.45 per share paid to shareholders through our quarterly and special cash dividends. It also includes repurchases of approximately 884,000 shares of our common stock were $70 million, which offset a significant portion of the share count dilution from this year's annual grants.

Lastly, I'm pleased to announce that effective today, the Board approved a quarterly cash dividend of $0.20 per share, a 14% increase from our previous quarterly cash dividend. The dividend will be paid on June 12 to shareholders of record as of the close of business on May 29. We are pleased with our start to 2026 and remain focused on driving long-term growth and further elevating the durability of the platform while generating best-in-class returns.

With that, we can open the call up for questions.

[Operator Instructions]

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

Chad, I'd love to just get an update from you on whether the upward sloping trend of activity in bank M&A has slowed at all in your opinion or continues? And then maybe to the degree you could also comment on the recent rate vol in the forward curve in particular and whether that should have an impact on the Bank Hedging business and Fixed Income?

Okay. Well, why don't I take the first question, James, and I'll let Deb take the second one. But on bank M&A, we had a good Q1 with a significant amount of closings. I would say on the announced bank M&A, I do think it's a little slower than we anticipated. We announced a couple more transactions this week. So I would say we're seeing decent volume on some of the smaller transactions, just haven't seen the pace we were seeing on a little bit of the larger transactions. Just as a reminder, that happened a little bit last year, and it picked up as well. So we'll have to see.

Yes. And then on your question relative to hedging activity with banks, our derivative desk has been incredibly busy relative to conversations. We've seen some increased actual activity of transactions being completed. But I think one of the things that you see is when there's volatility while you might naturally think, boy, there should be a lot of hedging, it also makes it challenging to determine how they want to position given that volatility. So definitely, a lot of activity going on there, but nothing that's necessarily outside of the norm.

That's super helpful. Maybe just on the equity capital market side. You talked about strength in Healthcare. That's obviously been 1 of the 2 sectors alongside Industrials that has performed very well so far this year. I'd love to just get your sense on based on your backlogs, how sustainable you think the equity capital markets activity could be? And specifically, as it relates to the Healthcare business, which is driving a lot of that, I believe?

Yes. So it was a good quarter for the market, but it was a particularly good quarter for us just with market share. That happens sometimes with -- if we have a handful of larger fees. Obviously, we specifically said in the commentary we thought capital markets would be down. It's just hard for us to maintain sort of that super outsized market share performance in Q2, but that market remains open and especially how biotech trades. Sometimes that market trades just differently than the overall market. So we feel pretty good about that backdrop, but do not think that, that first quarter market share is sustainable. .

We'll next go to Steven Chubak with Wolfe Research.

Absolutely. Yes. So I wanted to start with unpacking some of the comments around the Advisory outlook. You mentioned Advisory fees should be down sequentially, not surprising given the choppy macro. I was hoping to get some perspective on which sectors you're seeing the biggest slowdown in deal activity. And based on your current visibility into the backlog, just how long do you expect this moderation or let's call it somewhat of an air pocket to persist?

Yes. So obviously, in our commentary, we said Advisory would be similar. So I would say I think it sort of depends on the sector. We obviously talked about banks and with announcement volume down in Q2 -- or Q1, obviously, that has some impact on the go forward. We had a spectacular Q1 in parts of Healthcare and Medtech that are sort of hard to repeat. So some of that is just relative to our own performance.

But I would say, in the overall market, especially on the sponsor side, while I think sponsors pitch activity has been good. I think the question is how quickly do they launch and do they transact? And so while I don't think there's any real panic, there's also not tremendous urgency. So I think it's -- I think the market is fine. I don't think it's accelerating. And those 3 combinations of things probably drove our commentary.

Understood. I mean with regard to sponsors, it certainly feels like Waiting for Godot. Maybe just to switch gears and focus on the Software side, just given Technology has been a meaningful contributor to your M&A business historically, we're all hearing of emerging concerns on AI disruption, the SaaSpocalypse, was probably good to speak to your outlook for Software M&A and the willingness of these corporates to consider inorganic growth or even consolidation amidst some of the growing AI fears?

Yes. So obviously, for us, Technology is one of the areas we've been investing heavily in, but on a historic basis, it's out of our 7 history teams, one of the smallest. So I think on a relative basis, we will be impacted less. But no question, we will be impacted. We actually had a decent Q1 in Technology up from last year. And what I would say with the Software transactions, I think I think the market's slowly figuring out where is the real disruption going to be, where does sort of the data and vertical expertise really sort of find its way through in the new tech market, but there is no question, especially on the larger deal side, things are going to be slower, folks are going to be cautious, valuations are down and valuations are down versus prior financing levels, which makes it hard to transact.

I do think that -- we've seen that in other tech cycles. We will see that work its way through the system. And then like you said, just with AI and technology shifts for the survivors, that will probably accelerate other activity. But that's going to take a while to take -- to work out. So I think our expectations are fairly cautious for our Tech and Software business this year.

We'll next go to Devin Ryan with Citizens Bank.

Want to stay on Advisory and maybe talk a little bit about some of the non-M&A businesses. Obviously, it sounds like private capital is continuing to gain steam. We're still hearing restructuring is relatively active. Can you talk about kind of contribution that you're seeing from non-M&A? And then just more broadly, how that impacts kind of the outlook as you look out over the next year or even 2?

Yes. Sure. We had a good Q1 in non-M&A. Obviously, we've got the major pieces of that DCM advisory, restructuring and then private capital advisory. For us, sort of the real bright spot in Q1 is even after a good end of the year, our Debt Capital Markets Advisory business had a very good Q1. I would say, restructuring and private capital were fine, but the outsized performance was driven by Debt Capital Markets. I do think relative to private capital advisory now that we're kind of 1.5 years into our acquisition, I'm pretty encouraged by what we're seeing on some of the continuation and other transactions as we've now closed a few, and we have -- and frankly, we have a few more, and it's really across all of our industry teams, which I think -- which is good for us to see. And over time, I think that's going to be more and more of a contributor for us.

Got it. Maybe one for Deb here. On fixed income revenues, you mentioned kind of resiliency with balance sheet restructuring trades with the bank closings, but 2Q started slowly with clients on the sidelines. Can you just help us understand kind of the moving parts of that? Is that bank M&A, was that interest rates? Is that just market volatility? Just trying to think about what needs to change to kind of bring people off the sidelines?

Yes. I think the biggest thing that needs to change is just volatility needs to come down. Some vol is great for trading businesses, but it's been too extreme, and I think part of that's rate, part of that just is looking at what's happening in the geopolitical environment. So I would say that's the biggest thing that we just need to see some sustained reduction in just volatility in the marketplace relative to the bank restructurings, and that's going to follow the closings of M&A transactions. So that's just something to watch there.

And as Chad talked about a little bit of a slowdown in some of the announcements. This is an industry-wide phenomenon, actually. That does ultimately impact our opportunities in, say, the next quarter to be able to have more of those. So I think -- let me know if there's anything else I can add color on there, but I think those are the biggest components.

Yes. That's great. Maybe if I could just squeeze one in to get Kate involved. Just on the comp ratio and kind of the outlook, obviously, I appreciate the year is still somewhat uncertain, but you started the year with nice revenue growth, some comp leverage, I think, down 90 basis points from the beginning of 2025. So how are you thinking about the ability to drive -- you've been incredibly consistent on the comp ratio, which is great. But like the ability to continue to drive leverage from here off of a better jumping off point for 2026 relative to 2025?

Thanks, Devin. So we're now sort of consistently at the low end of the range that we had previously guided to, which was 61.5% to 62.5%. So pleased with that progress. And also pleased with the leverage we were able to drive in the first quarter, given the improvement in the top line revenue number. That being said, we do have a highly variable comp model, which has allowed us to be as consistent as we have been through the cycle. So while we'll certainly look to drive leverage where opportunities present of certain parts of our comp expense base, that leverage could be a little bit more modest than perhaps you'd see elsewhere. And we're also always looking for additive investment opportunities. So it's a bit of a balance. But we intend to continue to operate within the low end of the range or just below as we have for the first quarter here for the rest of the year.

[Operator Instructions]

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

Chad, if we think about your Advisory pipeline, there's probably traditionally some activity as you go from winter to spring some inflows, a little bit of outflows. Can you comment at all how winter to spring activity happened this year? Did it kind of stop recently with the war? I'm just trying to get a sense of how different the activity was this year versus more normal years?

Yes. Thanks, Grondy. What I would say is Q1 is always a challenge for us because it's just seasonally down. And then especially, we had such a just -- Q4 is always good, but last Q4 was really, really strong. So you never know exactly how that's going to impact Q1 pace. So I think the fact that on a relative Q1 basis it was a record, and it was so good. I think we were especially excited just given that was off of a really strong I do think the combination of those 2 quarters, you're always looking at what you're adding and what you're taking. And I think that, that probably drove some of our commentary about why we thought advisory would be similar in Q2. But other than that, nothing sort of extraordinary there.

Okay. And then -- what do you think the markets need to see to kind of get back on an upward slope. Is it the Iran war? Is it lower oil prices? Is there -- if you had to call out 2 or 3 things, what do you think it is?

Yes. I mean, it's hard to just talk about the whole market. I mean, honestly, our -- each of our sort of segments is driven by certain things. I mean in our Energy business now, things are rock and they've got a lot of interesting things going on. We talked a little bit about it. I think in bank land, one of the things that's pretty important is just what's the starting point of stock prices. They're down a little bit and that's not a perfect time to transact.

And then just, yes, relative to the sponsor business, I think it's just going to be some stability. It's not like we're not transacting, but sort of a -- and there's really 3 decision points for sponsors. And April is always our heaviest pitch month, and that's true today. So we know what's coming, but then there's a decision point of do you launch before the decision point of do you transact. And so I think it's just certainty of close. And so do we get some resolution on a global macro and do people feel like they're going to hit their valuation points. And we'll learn a lot in the next couple of months here.

But the good part is, I think people are at least confident enough in sponsor land to do the pitch, start the process, but there'll be another big decision point this summer about do we launch.

And at this time, we have no further questions. I would like to turn the call back over to Chad Abraham for closing remarks.

Thank you, Margo, and thanks to everyone that joined us this morning. We look forward to updating you on our second quarter results this summer. Have a great day.

And this does conclude today's call. We thank you for your participation. You may now disconnect.

Good morning, and welcome to the Piper Sandler Companies Fourth Quarter and Full Year 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 Companies Fourth Quarter and Full Year 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 Fourth Quarter and Full Year 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 pipersanler.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 us. Our business performed well during 2025, driven by strong execution and improving market conditions. We had a strong finish to the year with record adjusted net revenues of $635 million in the fourth quarter, a 27.2% operating margin and adjusted EPS of $6.88. On a full year basis, adjusted net revenues were $1.9 billion, achieving a 21.9% operating margin and adjusted EPS of $17.74. There are a number of highlights from 2025. Adjusted net revenues grew 22% with contributions from all businesses, resulting in a 39% increase in adjusted net income compared to 2024.

We delivered a record year in advisory with over $1 billion of revenues, representing 55% of total net revenues. We grew our investment banking MD headcount to 187 managing directors and meaningfully increased productivity per banker. We completed the acquisition of G Squared complementing other key hires to expand and strengthen our technology investment banking practice. We generated record revenues in equity brokerage and recorded our second best year in both public finance and fixed income brokerage. We returned $239 million to shareholders through share repurchases and dividends. 2025 marks another successful year for Piper Sandler. We have now achieved 9 consecutive quarters of year-over-year growth, underscoring our strong execution and sustained momentum.

This progress is supported by our ongoing investments in the business, the diversification of our sector and product capabilities and an improving market backdrop. 2025 also marked our firm's 130th anniversary. The foundation of our success is serving the best interest of clients, employees, shareholders and the communities where we live and work. I'd like to thank my employee partners for their continued hard work and dedication to providing best-in-class service to our clients.

Turning now to Corporate Investment Banking. During the fourth quarter, we generated $469 million of revenues, up meaningfully over the prior year driven by robust M&A activity as well as solid debt capital markets advisory activity. For the year, Corporate Investment Banking revenues totaled $1.3 billion, representing a 28% increase from the prior year. Sector contributions were diverse as 5 out of 7 industry teams grew revenues versus 2024. Within Corporate Investment Banking, Advisory revenues for the quarter were $403 million, up 44% year-over-year. Our financial services and services and industrial teams led sector performance. For the year, Advisory Services generated $1 billion in revenues, up 28% from 2024 and exceeded our previous high watermark from 2021.

This reflected a strong relative performance compared to a 7% growth rate in overall M&A activity in the middle market. During 2025, we completed 335 advisory transactions. 16% more than the prior year and earned higher average fees. Advisory revenues from both corporate and sponsor clients were up meaningfully year-over-year. We were ranked as the #2 adviser based on a number of announced U.S. M&A deals under $1 billion. In addition, non-M&A advisory generated another record year and increasingly constitutes a meaningful amount of our total advisory revenues. Industry team contributions were led by financial services, followed by a record year from services and industrials and solid contributions from our healthcare, energy, power and infrastructure and consumer sectors. Our performance within Financial Services was led by depositories where a more accommodating regulatory environment bolstered a resurgence in bank M&A activity.

We were the #1 adviser in U.S. Bank M&A based on the number of announced transactions during 2025. Additionally, we saw solid contributions from our insurance, asset management and specialty finance subsectors. Record performance from our services and industrials team in 2025 and was driven by larger transactions generating higher average fees. These results reflect investments we've made in this sector, developing and recruiting exceptional bankers with deep client relationships particularly with the financial sponsors community. In addition, our non-M&A advisory teams have been a key driver of performance. In recent years, we have made substantial investments in these advisory capabilities to expand client offerings and increase market share, especially with private equity.

The most meaningful components of our non-M&A advisory revenues, our debt capital markets advisory, private capital advisory and restructuring. Non-M&A revenues have outpaced the growth of our M&A revenues for several years and exceeded 25% of total advisory revenues in 2025. Our debt capital markets advisory business has been a significant contributor to this growth as it recorded its third consecutive year of record revenues, benefiting from higher average fees as well as a broader and more diversified client base. We also have significant opportunities within our private capital advisory group to leverage our sponsor relationships and sector expertise to further grow market share.

Looking ahead, while several larger advisory transactions closed in the last week of 2025, our pipeline of engagement mandates is building, and we expect to see another strong year of advisory revenue in 2026. Corporate financing markets were solid throughout the quarter, and we generated $67 million of revenues. We completed 31 financings, raising $15 billion for corporate clients with activity centered in health care and depository sectors. For the year, corporate financing revenues of $217 million increased 25% from 2024, driven by a strong second half of the year. During 2025, we completed 122 equity, debt and preferred financings, raising $48 billion for corporate clients.

Sector contributions for the year were again led by our healthcare team. which served as book runner on 37 of the 38 equity deals they priced during 2025, and we participated in all 6 med tech IPOs that priced in the market. Our financial services team also contributed a strong underwriting performance in 2025, pricing 65 transactions that raised $19 billion in capital for our clients. As we look ahead, January financing activity has been strong. Our pipeline of new issues is healthy, and we are seeing strong demand from institutional investors looking to deploy capital across sectors.

Shifting to talent. We finished the year with 187 investment banking managing directors, while our net MD headcount increased modestly from 2024 levels, we strengthened our talent base and improved productivity helping to drive profitability in the business. Over the last 10 years, we have grown MD headcount at a 10% CAGR. We're consistently looking for talented partners who strengthen the platform and position us for growth in our product and sector teams, expand our geographic reach or add additional capabilities to support our clients. Overall, our 2025 results were strong, and we're pleased with our performance. The combination of improved activity levels, strong execution across business lines and a constructive market environment resulted in excellent financial returns. We've entered 2026 with good momentum strong client engagement and an accommodative regulatory environment and meaningful opportunities to gain share.

Before handing it off to Deb, I'd like to highlight a recent leadership announcement. In January, we named JP Peltier as Co-Head of Investment Banking and Capital Markets. JP will co-head the group alongside Mike Delahunt and James Baker, who have served together as Global Heads of Investment Banking and Capital Markets since 2021. JP is a 25-year veteran of Piper Sandler, an exceptional banker and growth-oriented team builder. He recently served as Co-Head of the Healthcare Investment Banking Group where his leadership helped build a market-leading franchise. I'm confident that JP, Mike and James will successfully lead our corporate investment banking business to accomplish the medium-term goal of growing annual revenues to $2 billion plus in the coming years. With that, I will turn the call over to Deb to discuss our public finance and brokerage business.

Thanks, Chad. I'll be with an update on our public finance business where market conditions remain favorable with record issuance levels driven by funding needs for infrastructure upgrades and strong investor demand. We generated $39 million of municipal financing revenues for the quarter, flat sequentially and down 5% compared to the strong prior year quarter. For 2025, we generated $146 million of municipal financing revenues, our second strongest year on record. These results reflect the diversification of our business and strong relative performance. Our revenues increased 19% over last year, exceeding the municipal negotiated market issuance growth of 12%. We underwrote 555 municipal negotiated transactions during 2025, raising $19 billion of par value for our clients.

Additionally, we maintained our position as the #2 underwriter based on a number of transactions. Activity was solid across both our governmental and specialty businesses, reflective of our client and geographic reach. Performance was broad-based with strong results in Texas, California, Oregon and the Midwest as well as our special district, healthcare and hospitality sectors. In addition to revenue growth, we focused on local market relationships and knowledge to strengthen our market leadership in our core sectors. Our special district team has 50% market share in the states in which they compete, and we ranked #2 nationally in K-12 education by number of issues and paramount. In terms of outlook for 2026, we anticipate public finance market conditions to remain favorable with similar issuance volumes to 2025, albeit back to the more normalized seasonality.

Our equity brokerage business finished 2025 at record highs, following a year with strong volumes and volatility. Fourth quarter 2025 equity brokerage revenues of $64 million, a quarterly record led to record revenues of $230 million for the full year. These results demonstrate successful collaboration and the integration of products and investments across our platform. The strength of our platform attracted approximately 1,700 unique clients, and we traded 11 billion shares on their behalf in 2025. As we look forward to 2026, we expect our equity brokerage revenues to be similar to 2025. And last, we generated $48 million of fixed income revenues for the fourth quarter down from both a strong third quarter and year ago period. For 2025, we generated $203 million of fixed income revenues, up 9% from the prior year, driven by robust activity with our depository clients.

The increase in bank M&A activity during the year, aligned with depository clients adjusting to the changing rate environment provided more opportunities to advise on balance sheet repositioning. We also experienced healthy growth across other client verticals, including asset managers and public entities. From a product perspective, both municipal and taxable fixed income showed significant growth year-over-year. We continue to elevate the platform by investing in talent that expands our product expertise and enhances client relationships, allowing us to provide differentiated advice. In our municipal franchise, we've established ourselves as a trusted adviser with a specialized sales force able to find liquidity for our institutional clients.

In the taxable space, we have expanded our expertise in structured products with experienced talent and leadership. As we look to 2026, we expect clients to be more active in anticipation of further rate cuts and anticipate additional work stemming from a robust M&A environment. 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 fourth quarter of 2025, we generated net revenues of $635 million, operating income of $172 million and an operating margin of 27.2%. Net income totaled $123 million and diluted EPS was $6.88. For 2025, net revenues totaled $1.9 billion, operating income was $411 million and our operating margin was 21.9%. We generated $318 million of net income and $17.74 of diluted EPS. Net revenues for the fourth quarter of 2025 increased 39% from the sequential quarter and grew 27% over the fourth quarter of last year. This growth was driven by robust advisory revenues, the second strongest quarter on record.

For the year, net revenues increased 22% compared to 2024, powered by a 28% growth in advisory revenues as well as strong performance across the rest of our businesses. Turning to expenses. We reported a compensation ratio of 60.1% for the fourth quarter of 2025 and 61.4% for the full year. Both ratios improved from the comparable periods of 2024, driven by increased net revenues and continued operating discipline. We continue to drive leverage where possible while balancing employee retention and strategic investment opportunities. We expect our 2026 compensation ratio to be similar to 2025. For the fourth quarter of 2025, noncompensation expenses, excluding reimbursed deal costs were $67 million, including reimbursed deal expenses, non-compensation costs were $81 million or 12.7% of net revenues.

This ratio improved 440 basis points from the third quarter and 270 basis points from the fourth quarter of last year. Non-compensation costs for 2025, excluding reimbursed deal expenses, were $271 million, an increase of 8% compared to last year. The increase in expenses was driven by 3 factors: increased business activity, relocating our Minneapolis headquarters office and investments in the business, including technology and related consulting fees. Including reimbursed deal costs, non-compensation expenses were $315 million for the year, and our non-compensation ratio was 16.7%, an improvement of 160 basis points versus 2024. Looking ahead to 2026, we anticipate a modest increase to non-compensation expenses with the most notable driver being the relocation of our New York office.

Our diligent management of the fixed controllable costs continues to be a key driver of leverage. Going forward, we expect our full year noncompensation expense ratio to be similar to the 2025 level with some variability across quarters depending on the timing of expenses. Moving to income tax expense. Our income tax rate for the fourth quarter was 28.5%. For the year, income tax expense was reduced by $30 million of tax benefits related to divesting of restricted stock awards, which resulted in an income tax rate of 22.6%. Excluding the $30 million benefit, our effective tax rate was 29.8% for 2025. We continue to expect our full year tax rate to be around 30%, excluding the impact from divesting of restricted stock awards. Now finishing with capital. During the quarter, we returned an aggregate of $35 million of capital to our shareholders through stock repurchases and quarterly dividends paid.

In 2025, we returned an aggregate of $239 million to shareholders, which includes repurchases of approximately 421,000 shares of our common stock or $125 million related to employee tax withholding on divesting of restricted stock awards as well as in the open market. These repurchases offset the share count dilution for this year's annual grants. It also includes an aggregate of $114 million or $5.70 per share in dividends paid to shareholders during 2025 through our quarterly and special cash dividends. Given our level of earnings today, the Board approved a special cash dividend of $5 per share related to our full year 2025 results, including this special cash dividend and our quarterly dividends paid, our total dividend for 2025 equals $7.70 per share of common stock or a payout ratio of 43% of adjusted net income.

In addition, the Board approved a quarterly cash dividend of $0.70 per share. Both the special and the quarterly cash dividends will be paid on March 13 to shareholders of record as of the close of business on March 3. Lastly, as part of our ongoing commitment to delivering shareholder value, I'm pleased to announce that the Board has approved a 4-for-1 forward split of our common stock to increase liquidity and help make our stock more accessible to a wider range of investors. The split will be accompanied by a proportionate increase in the number of shares of our authorized common stock. Our common stock will begin trading on a split-adjusted basis at the start of trading on March 24, 2026.

2025 marked another successful year for Piper Sandler. We grew revenues and profitability while furthering the strategic expansion of our businesses. Looking ahead, we remain focused on executing on our strategic priorities to drive continued growth and strong returns for our shareholders. With that, we can open up the call for questions.

[Operator Instructions] We'll take our first question from Devin Ryan with Citizens Bank.

Great. I want to start on the advisory business. Obviously, I think terrific results on the year, revenue is up 28% even though we had quite a bit of volatility earlier in the year and then sponsors seem like they're just starting to really come back and reengage in a more meaningful way. So -- and at the same time, bank M&A is really picking up. So it'd be great to just maybe talk through kind of those 2 components, like how much more activity you're seeing with sponsor clients today relative to maybe 6 months ago and then the other piece we get questions from investors around is like order of magnitude in a more functioning bank consolidation backdrop, like how much incremental revenue could that be for Piper relative to maybe what you were doing previously? I know there a couple of hundred million dollars on top? Or just any way to kind of think that piece through.

Yes. Thanks, Devin. Yes, maybe just to step back relative to the 28% growth, 2024 was a pretty good year for us. But on relative performance, we were a little probably off where we wanted to be in financial services and healthcare obviously, if those are your 2 biggest businesses that has a big impact. Both those teams had very good years in 2025, which given our concentration in those sectors that leads to outperformance when that happens. I would say relative to the sponsor business, I do think we outperformed. I think it's been frankly, a pretty good market for a good 6 months here relative to deals we're getting done, deals we're getting closed. And I think that's really just emphasized by probably the team that had like the biggest year, not in total revenues, but just in sort of step functions was our diversified services and industrials team, which is pretty much entirely a private equity sponsor business.

And then relative to bank M&A, obviously, that was a big contributor for us, both in M&A starting to refinance the balance sheet, we see that continued pace. There's obviously a big deal recently announced, but I always do have to sort of stress it's part of our advisory business, which is part of the total and depositories is only half of our financial services. So while it's important, it's a big part of the business, it's hard for just depositories to move the top line in any meaningful way.

Got it. I appreciate it. And then just a follow-up on kind of capital allocation, but also kind of M&A opportunities for the firm. You obviously generating a lot of capital right now, potentially accelerating. Can you talk about potentially appetite to, I guess, one, buy back more stock in this environment, particularly with the stock being more liquid and creating more capital. And then two, as an outlet, you've been very active over the years on the M&A side, been able to do some really nice tuck-ins. What are you seeing on that front right now? And is that another kind of good use of capital? And could we potentially see some bigger deals in 2026. Just curious kind of how that fits in as you're thinking about capital allocation into 2026.

Yes. And I would say relative to capital, I think for the last few years, we've been pretty consistent. We sort of need all the tools in the toolbox with the sort of cash we're generating and sort of not much of a need for new capital sort of besides investing in growth and acquisitions. Obviously, sort of in this order, we're always focused on the quarterly dividend. I do think as our liquidity has improved as many of these acquisitions have matured, it's also helped our float obviously, with the stock split.

So I think there'll be a chance for us to probably lean into the buyback a little more than we have in the past, just because we've always been conscious of that float. But I would say we really need all of those tools. And then number 1 is just we've delivered great returns in terms of the acquisitions and deals we've done and I think we're in a really good environment for that from the perspective of we're doing really well. We've added a lot of products. I think the platform is appealing but also some of these relationships we build over a few years and the time to transact those transactions, while sometimes partners have to transact when things are tougher. They don't really choose to do that either. And so now that some of the boutiques and sectors we're seeing are seeing a bit of a recovery I think there's a lot more interest on the sell side. So I'm pretty optimistic about the pipeline there.

We'll go next to James Yaro with Goldman Sachs.

Chad, you've had a lot of success adding new businesses in, for example, non-M&A advisory, and that's been a combination of organic and inorganic growth. Are there any other businesses you're looking at and you're interested in potentially exploring or expanding into? And would you have to use the inorganic route to get into those businesses?

Yes. I think you're obviously mostly talking about products we've added, I would say, sort of certain products ebb and flow and then there's more and more interest. I would say, right now relative to the product side, we've added quite a bit in terms of in the last 5 years, restructuring private capital advisory, obviously, longer than that 10-plus years ago, we added debt capital advisory. I think we're mostly focused right now on we've got a lot of runway in those products and sort of the collaboration. We've recently done some analysis in some of those products in terms of how many of our bankers have used the various products, and there's just still a lot of upside there. So I think we're pretty focused on continuing that penetration. But in some of our other businesses, obviously, in equities, we added some of the private stock trading. So I always think we're evaluating that the bigger, stronger the platform gets those opportunities become available.

Okay. Great. And so you delivered quite healthy corporate financing results this quarter, but the equity markets are clearly struggling. Could you help us think through the puts and takes on the equity capital markets backdrop from here?

Yes. No. And I've been doing this a long time. So I'm always reminded how quick and humbling the equity capital markets can be to your financing business. For us, the big key is just to be diversified across those sectors. Obviously, healthcare is a big part of our equity capital markets I would say, relative to the recent sell-off healthcare has performed quite a bit better. This is -- obviously, what we're in now is really led by a tech and software sell-off. So -- obviously, those financings are going to be impacted in I don't know if you say we're 1 week or 2 weeks or 3 weeks into this, but we're pretty into it, but I've seen enough markets where it only takes a couple of weeks, and then it impacts the whole market and then accounts sort of shut down on issues, but we had a very good January for ECM. But I think you're right to say we just don't spend a lot of time trying to predict more than a few weeks out, what the market environment is going to be for new financings in ECM.

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

I guess to start, I just wanted to touch on sponsors and get a sense as to how you would characterize the conversations that you're having with your sponsor clients at the moment? And just specifically, whether there's been any notable shifts in the tenor of these discussions following the recent moves in equity markets that might further delay the acceleration in activity that everybody is hoping for in 2026.

Yes. And I feel like I've been reasonably consistent on this. I mean for us, it's the last couple of years, just been a steady march of improvement sort of nothing gangbusters, but more and more sponsors trying to get liquidity on their 1 or 2 top things. I think we had a really good kind of last summer fall sort of pitch calendar, which obviously led to a really good end of the year, and some of that trickles in. But I would also say just relative to market conditions, unlike ECM the sponsor over to markets like turning the Titanic, it turned slow. We've been on that sort of slow improvement and sort of weekly jolts to interest rates or what's going on in the equity capital markets doesn't usually impact that.

So I feel like we're just still getting slow, steady improvement, and that's really coming across in lots of products, not just our sponsor M&A business, but we had a record year in our debt capital advisory business, and that's a heavy sponsor business. And we've added resources sort of in our private capital advisory business. and the continuation vehicles. And while we saw some success kind of in our first full year last year, we're now really positioned in that business for 2026.

Great. That's an excellent segue to my follow-up question, which is on your debt capital advisory and PCA businesses. Comments on the strong growth over the last couple of years, definitely caught my attention. But just given the constructive outlook for M&A, I just wanted to get a sense as to whether you think these businesses can continue to keep pace with the growth in your M&A platform? And what do you see the growth potential for the PCA and Debt Capital Markets advisory business in particular?

Yes. I mean we -- this is the first time we've sort of disclosed what that mix of business on an annual basis is just to give people a flavor of sort of the size and scale for the last several years it has outpaced. Now some of that has been -- we're also adding products and there's a lot of runway in PCA, I think part of why we disclosed that is that provides some diversification from various M&A markets. Honestly, do I think my guess is that over time, it continues to outpace the M&A market, but in a very strong M&A market, I'd be super happy if M&A outpaced that business. So some puts and takes, I think we're just trying to make the point that many of those products have become scaled. And frankly, a lot of them line up with the M&A business. Many times the debt capital advisory business is tied to an M&A transaction. .

We'll go next to Daniel Cuchara with Bank of America.

2026 was just dominated by the large cap M&A. I was just hoping you could give us a current mark-to-market on deals under $1 billion? And if you've seen any momentum in this cohort towards the end and if the momentum is kind of carried over into the first month of '26.

Yes. I would say, I mean, obviously, we get that question, people -- they just look at M&A volume, total volume and sort of forget that sometimes that's driven by whatever the top 5, 6, 10 transactions, especially if there is some large ones. So yes, we're much more focused on volume in the middle market. I think in our release, we talked about some of the data we had said that grew high single digits, obviously, with our advisory business. We outpaced that. I do feel like the M&A market in that sort of middle market range, which for a lot of -- for a lot of our stuff, north of 50% is sponsor-based. I do feel like we think that accelerated in the back half of the year. but we'll have to watch that mix. That mix is very important to us.

I mean, we get our fair share of large transactions, but the vast majority of our volume is in that middle market.

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

Congrats on a very strong finish to the year. And on that note, Chad, could you just talk a little bit about the pipeline or backlog on the advisory side? And I think you mentioned a couple larger transactions happen near year-end. How does that affect your thinking about like first half '26 versus second half '26. Just trying to think through the cadence as we kind of get into '26 here.

Yes. I mean that is a -- it's funny. I've been doing this a long time. Sometimes we're always lining up the planes for the last couple of weeks. In some years, we land most of them. In some years, we have a handful that slip. I mean I think we made the comment. We landed a lot in the last week of December. So that obviously always has a bit of an impact on January. January is never a huge month for new announcements. So it's sort of always hard to tell. But I would say our backlogs are good. Our seasonality is fairly typical. Q1 is always our toughest quarter to predict. So we'll have to see that seasonality.

Got it. And then, Deb, on the municipal side, and sort of trading side, how are you feeling about the environment and just sort of approaching priorities for 26.

Yes. So if I take that broadly across municipals from our financing standpoint, we continue to see and feel like the market will remain solid here, similar trends to what was coming out of '25. I mean part of that is we need to look at both the supply and demand side of that equation. So rates definitely matter there. I mean to the extent we see rates coming down, it could, first, more refinancing opportunities, which haven't been there yet. We also just continue to watch the fund flows as those continue to be, again, solid, watching that particularly in high yield, that's going to help support the municipal financing business.

On the trading side, I would say, holistically, this is true for municipals as well as tactical products. Spreads are really tight. And so it's just causing a little bit of a pause for investors as they look to see what might happen there. And a little nervous to step into strongly because of that. So watching spreads on the fixed income is going to be an important part for you to try to see what's happening with our business. And I guess the other thing I would just say relative to '26 is as we see bank M&A improved here in '25, we saw the repositioning of balance sheet that we're able to do as part of that continue, and that's something we see going into '26 as being likely to continue to be strong along with the bank M&A environment.

At this time, there are no further questions. I'd like to turn the call back to Chad for any additional or closing remarks.

Okay. Thank you, operator, and thanks to everyone that joined us this morning. We look forward to updating you on our first quarter results in a few months. Have a great day. .

This does conclude today's conference. We thank you for your participation.

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 races 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 MD's 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 MD's 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 allows 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. With that, we can now open the call for questions. [Operator Instructions] We will take our first question 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?

Yes. Yes. Thank you. Yes. No, it's -- obviously, we talked last quarter, started to see the pickup over the summer, June, July, August. Clearly, when you just look at the announced transactions in September and October, that pace has accelerated. We do expect that accelerated pace to continue relative to what the size of the opportunity is, obviously, depositories is only half our FSG business and that, obviously, FSG is a percentage of the total.

So we do expect a good increased depository business, and it's not just impacting sort of the M&A but helps with the balance sheet restructurings. And so expect that pace to continue. What could derail that? I'd say the biggest thing is just what happens with stock prices. And I would say even though we're seeing an increased pace on a lot of the base sort of stock prices, a lot of the depository stocks haven't moved, which isn't a perfect starting point to do a transaction, obviously matters less if you're using equity. But I think just kind of what that base valuation is and what the market has -- is probably one of the bigger risks to that.

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 was going to -- I'll start here. Brendan, we typically guide to things that we are quite confident in and very focused on. And similar to the discussion we have around the comp ratio range, we're certainly looking for opportunities for discipline and leverage as the top line continues to improve. So is that 20% a maximum? It certainly isn't. Will we look for opportunities to accelerate that where they present themselves? Of course, we will. That was sort of our kind of first target starting point there.

And to your point, we're quite pleased with where we've been performing to date, and we'll continue to look for opportunities to enhance that as we move forward.

We will take our next question from James Yaro are 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 mean, I would say, obviously, it's been something we've been talking about for 3 or 4 years, and we've had -- we've made progress along the way. We've also sort of made some changes to the existing group. We've added some new hires. We've done some acquisitions. So I would kind of say we're halfway to where we want to be kind of on the team, but our long-term goal is this fee pool and just the backdrop and the sort of evolution should provide an opportunity for us to have as big a business as we have in financials and health care.

And so I imagine it will stay our #1 priority in the next couple of years. So I sort of view it as kind of halfway there, made good progress, starting to see the results in revenue, but still a lot of opportunity 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.

Yes. Thanks, Devin. Yes. I would say for us, it's been a pretty steady build throughout the spring and summer and into the fall. There's no question the last couple of months, especially the pitch activity and new mandates has increased significantly. Obviously, we already talked about just what's going on in bank -- the depository sector and just the volume there increasing pretty rapidly. I would say a couple of other things for us. Health care is a big sector for us. And I think we've seen -- we had a pretty tough year in health care M&A last year. We're having a much better year this year and frankly, just the pace of new engagements there has been really good, especially in med tech and some other areas within health care.

But I would also say just our areas that touch private equity. I think with some of the results, private equity is seen on some of the transactions, the longer that goes, the more and more people are going to try to get liquidity to some of the things they've had in the pipeline. And so we're definitely seeing that. And that's pretty broad. Certain parts of services, certain parts of commercial and residential services, obviously, places where tariffs don't matter. We're still having a tough time in parts of consumer. But for us, things that touch private equity really touches all of our industry groups and in those areas, we expect to pick up and not just in M&A, we're having another record year in debt advisory and a big chunk of that business is working with sponsors as well.

Great. I appreciate that color. And then one for Deb. Just trying to think about the kind of some of the underlying drivers of the fixed income brokerage business. So first off, on the depository side, I guess, probably a similar questions you guys got earlier on bank M&A. How should we think about what normalization for that part of the business looks like as rates come down and just there's more engagement? Like how much -- is there a way to frame kind of the revenue upside to normalization? Or at least how you guys think about it?

And then also, Deb, if you can just give a little more color for what you're seeing with municipal demand? And just remind us how we should think about that trending, I guess, to the extent the rates lower as well.

Great. Thanks, Devin. On the depository in fixed income, of course, as rates come down and the yield curve steepens, we -- I mean, overall see increased client engagement and that includes with depository clients as they then have an ability to reposition their balance sheets.

Now normalization is going to be tricky to figure out exactly what that looks like because the other thing we're seeing pickup are larger revenue events that come from balance sheet restructurings that are specifically tied to an M&A transaction, and that's where we've seen some of the pickup over the last couple of quarters. Those tend to be a little bit larger transactions. And so we do expect that to continue. If you think about the commentary that Chad just discussed relative to the bank M&A business. I mean those are very correlated as most often when these bank M&A transactions happen, we are seeing these restructurings happen with them.

So I would just say there's a correlation here to these larger restructurings in the M&A business. It's just a little difficult to determine the timing of them and when they'll hit. But we do expect to see positive trends in our fixed income businesses as all these dynamics continue to play out in the marketplace.

Specifically to the municipal side, we saw strong fund flows in the beginning of the year. They softened a little in the second quarter, and we saw them coming back again, and that's very helpful and healthy for the environment. On the high-yield side, one of the other things we're seeing is just investors having discipline. So even with the strong fund flows are discerning, I would say, in a good way, a healthy market for well-structured transactions to come.

Relative to rates, which was part of your question, as those rates come down, refundings will pick up. We have seen some of that really modestly start to happen in Q3. As we look out and talk to our clients now, I think many are also choosing to wait and see what happens into next year. So the refinancing activity picking up is likely more of a 2026 phenomenon than a 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 fee 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.

[Operator Instructions] 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 probably the strongest thing we had in Q3 was just our equity financing business. Now obviously, that was off really low levels in the first couple of quarters. But that was pretty diverse. We're doing, obviously, a lot in health care. And I would say we're seeing just more significant health care transactions. We -- a few large ones where we have a significant role, that's made an impact. Obviously, that's augmented by financial services and financing both on the debt and equity side. So financing was strong. I think there were just so many big things in Q3, which is just why we made the comment that I don't know if we'll get back to those levels in Q4, but still significantly better than where we've been.

And then we are obviously starting to see IPO activity and deals work, which bodes well for more IPO activity. Again, if we can get those approved and launched, will be another question with the government shutdown. But the backdrop has been pretty good for a pickup in financing across a lot of our sectors. So I'd call that out in addition to the comments I've already made about M&A.

Perfect. Perfect. And Deb, how are you feeling -- maybe not so much 4Q, but just kind of '26 in general after 2 Fed cuts and maybe a little bit more. How are you thinking about fixed income and municipal for '26?

Yes. I think as I was making the comments, when we see the rates coming down, more importantly, almost really the normalization of the yield curve. That will be the thing to watch, probably most importantly. We're just -- you will see increased activity. One of the most important things, it feels like that drives that is just more certainty when uncertainty enters the investors pause a bit. So I think it's a favorable environment from that perspective, really, again, rate cuts, but more importantly, a normalization of the yield curve.

Got it. Got it. Well, congrats on 3Q and good luck for the rest of the way this year.

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.