Piper Sandler Companies (PIPR) Earnings

Management highlights

- Core Business Strategy Validation * The quarter marked the 11th consecutive quarter of year-over-year revenue growth, demonstrating the durability of Piper Sandler's diversified business model that combines deep sector expertise with a full product suite to support clients across business cycles. * Growth was broad-based, with nearly all sectors and product lines contributing to performance. * Financial services and healthcare remain the two largest franchises, both delivering strong quarterly results. - Advisory Segment Highlights * Middle market M&A volume improved even as large-scale M&A activity remained muted. Piper Sandler ranked as the number one advisor for U.S. bank M&A by both announced deal count and deal value in H1 2026, reinforcing its market-leading position in the depository practice. * The insurance and asset management franchises delivered strong growth, driven by prior years' investments and closer alignment with the firm's broader private equity network. * The private capital advisory group recorded its best ever quarter on Piper Sandler's platform, led by the secondary business, and is well positioned to gain share in this high-growth segment. * The MedTech sub-segment within healthcare advised on several of the sector's largest announced deals, driving strong segment performance. Advisory revenue from private equity clients grew 10% year-over-year, outperforming the broader U.S. private equity market. Two senior leaders were recently transitioned from the services and industrial group to expand focus on private equity advisory, covering debt capital markets, continuation vehicles, and IPOs. - Talent and Operational Strategy * The firm ended Q2 with 193 investment banking managing directors, a 6% year-over-year increase, adding 12 new MDs via hiring and promotion since the start of 2026. Management remains focused on adding top producers to offset retirements and departures of less productive bankers to align the platform for long-term growth. * The firm maintains operating discipline: the compensation ratio held at 61.5% for both Q2 and H1 2026, improving year-over-year, while non-compensation expenses as a percentage of net revenue improved 230 basis points year-over-year to 17.5% in H1 2026, demonstrating the model's inherent scalability. H1 2026 operating income grew 42% year-over-year, outpacing 22% H1 revenue growth. - Capital Return * In Q2 2026, the firm repurchased 391,000 common shares for $31 million and paid $14 million in quarterly cash dividends. Aggregate shareholder returns reached $215 million in H1 2026.

Guidance

- Management expects third quarter 2026 net revenues to be in line with third quarter 2025 levels - The firm enters the second half of 2026 with a healthy transaction pipeline and high levels of active client engagement - Advisory back-half of 2026 year-over-year growth rates will not match the strong growth seen in the first half of 2026 due to very strong comparative results in the back half of 2025, but management remains confident in full-year 2026 growth, with multiple large fee transactions expected to close in Q4 2026 - Management notes that the backlog for equity capital markets (heavily focused on healthcare/biotech) is strong, and biotech stock pricing performance is supportive for a strong full-year ECM performance

Segment performance

1. Corporate Investment Banking: Q2 2026 revenues of $312 million, up 31% year-over-year, accounting for approximately 63.5% of total adjusted net revenues. H1 2026 total revenues for the segment hit $636 million, up 30% year-over-year, marking the strongest first-half performance on record. Within this segment: - Advisory Services: Q2 2026 revenues hit a record $274 million, up 34% year-over-year (sixth consecutive quarter of year-over-year growth). H1 2026 advisory revenues reached $525 million, up 25% year-over-year, and accounted for 55% of Piper Sandler's total net revenue. The segment completed 83 advisory transactions, a 17% volume increase year-over-year, with larger average fees. - Corporate Financing / Capital Markets: H1 2026 revenues were $111 million, up 65% year-over-year, driven by a 33% increase in book-run transactions and higher average fees. 28 financings were completed in Q2, raising $13 billion for clients, primarily in healthcare. 2. Public Finance: Municipal financing revenues increased 7% year-over-year in H1 2026, outpacing the 4% par value growth in the broader municipal market. The segment set a new half-year revenue record. 3. Equity Brokerage: H1 2026 revenues exceeded $123 million, a 10% increase year-over-year, and hit a new half-year revenue high.

Risks & headwinds

- Large-scale M&A activity remains muted, creating pressure on overall deal volume - If short-term rates rise again from current levels, it would put pressure on the firm's fixed income client base, which is concentrated in banks focused on the fed funds to 5-year maturity range - Quarterly revenue results can be meaningfully impacted by the timing of large individual fees, particularly in the equity capital markets segment, which makes quarterly benchmarking difficult - Large banks have recently announced renewed focus on the middle market advisory and banking space, increasing competitive pressure in the segment

Analyst Q&A

• Q: Middle market M&A activity is improving gradually, but is there a meaningful shift in client dialogue and pipeline that gives management confidence in sustained middle market growth? /

  A: Activity levels remain uneven across the segment, with deal volume still impacted by higher interest rates than historical averages. The firm has seen steady incremental improvement rather than a sharp shift in momentum, and continues to gain share in the segment thanks to its sector-focused, middle market-focused positioning.

• Q: If short-term rates move higher from current levels, what impact would that have on the firm's fixed income brokerage and municipal underwriting businesses? /

  A: Around half of the firm's fixed income business serves clients that benefit from current short-term rate levels, so a renewed increase would put direct pressure on this client segment. Municipal underwriting is far more exposed to long-term 10-to-30 year rate trends rather than short-term movements, so long-term rate expectations will have a far larger impact on that business than shifts in short-term rates.

• Q: Given first half 2026 advisory momentum, will the back half of 2026 see the typical historical year-over-year growth ramp relative to the first half? /

  A: Back half 2025 produced extremely strong results for the firm, so comparative comps are much tougher for the back half of 2026, and year-over-year growth will not match the first half rate. Management still expects solid full-year growth, with multiple large depository deals already announced that are scheduled to close in the back half.

• Q: How is management planning for AI-related technology investments, and will non-compensation expenses rise to fund these investments? /

  A: The firm is already investing in AI tools, but is rolling out new technology in controlled batches rather than making large upfront wholesale investments, and auditing efficiency gains as it scales. This approach allows the firm to capture AI benefits while maintaining expense discipline.