Connecting capital with opportunity
As a leading investment bank, we enable growth and success for our
clients through deep sector expertise, candid advice and a differentiated,
highly productive culture.
OUR VALUES
We create and implement superior financial solutions for
our clients.
Serving clients is our fundamental purpose.
We earn our clients' trust by delivering the best guidance
and service.
Great people working together as a team are our
competitive advantage.
As we serve, we are committed to these core values:
• Always place our clients' interests first
• Conduct ourselves with integrity and treat others
with respect
• Work in partnership with our clients and each other
• Attract, retain and develop a diverse group of the best
people in a high-quality, inclusive environment
• Contribute our talents and resources to serve the
communities in which we live and work
Financial highlights
Piper Sandler recorded adjusted net revenues of $1.3 billion and adjusted earnings per diluted share of $9.28 for
2023 despite challenging market conditions for most of the year. Our results reflect the resiliency of our scaled and
diversified platform, continued market share gains and strong operating discipline. In addition, we returned $155
million to shareholders through share repurchases and dividends as we remain focused on balancing near-term
returns with investments in the business to elevate our market presence and long-term earnings capacity.
Summary of Adjusted Financial Results*
($ in millions, except per share data)
2019
2020
2021
2022
2023
Adjusted net revenues
Advisory services
Corporate financing
Municipal financing
Equity brokerage
Fixed income services
Investment income
Interest income, net of expense
$440.7
105.3
83.4
87.6
80.3
11.5
16.8
$443.3
$1,026.1
$776.4
$709.3
295.3
119.8
161.4
196.3
10.4
8.5
362.8
164.3
154.1
233.5
35.0
4.7
125.3
107.7
210.3
195.0
1.6
17.4
131.1
83.4
209.5
168.0
7.1
21.8
Adjusted net revenues
$825.6
$1,235.0
$1,980.5
$1,433.7
$1,330.2
Adjusted operating income
Adjusted operating margin
Adjusted net income
Adjusted earnings per diluted
common share
Total dividend per share related to fiscal
year adjusted net income
Total capital returned through share
repurchases and dividends paid
$138.2
16.7%
$106.2
$250.3
20.3%
$177.6
$550.0
27.8%
$399.0
$269.2
18.8%
$201.3
$212.9
16.0%
$166.4
$7.36
$10.02
$21.92
$11.26
$9.28
$2.25
$3.10
$9.45
$3.65
$3.40
$86.2
$50.1
$169.3
$294.9
$155.1
ADJUSTED NET REVENUES*
($ in millions)
ADJUSTED DILUTED EPS*
* Financial measures presented above and included in the following letter to our fellow shareholders are on a non-GAAP, adjusted basis. The non-GAAP measures
are not meant to be considered in isolation or as a substitute for the corresponding U.S. GAAP measures. Please refer to the Appendix for a reconciliation of these
non-GAAP financial measures to the most directly comparable U.S. GAAP measure.
To our fellow shareholders:
Over the last five years we have nearly doubled our business. Our
success has been driven by strategically broadening our industry sector
coverage as well as expanding our product capabilities and expertise to
create synergies across the firm and provide clients with a differentiated
level of service. The resulting scale and durability of our platform has
elevated our earnings capacity and market presence, helping to drive
long-term shareholder returns across market cycles.
For 2023, we generated adjusted net revenues of $1.3 billion, our third
strongest year on record, against a backdrop of reduced activity and
declining fee pools in most of the markets in which we operate.
Performance for the year was led by advisory services which generated
53% of total adjusted net revenues, the third consecutive year with a
contribution in excess of 50%. We recorded adjusted net income of
$166 million for 2023 and adjusted earnings per diluted common share
of $9.28.
Our results were strong relative to our peer group. We benefited from
the diverse sector expertise, product capabilities and client base of our
platform as well as market share gains. Strong revenue performance
combined with continued operating discipline resulted in our adjusted
earnings per diluted common share for 2023 decreasing 18% compared
to 2022 versus an average decline of 52% for our peer group.
We effectively gained market share in a number of our businesses.
Advisory services revenues for 2023 declined 9% from 2022 against a
32% drop in middle-market M&A activity. Our relative performance in
equity capital raising for 2023 was strong with fees from sub $5 billion
market cap companies increasing 46% over the last year versus a 17%
increase in the market fee pool. Our equity brokerage revenues for
2023 were consistent with 2022 as market share gains offset the
declines from lower market volatility and volumes.
We also managed profitability effectively during 2023 against a
challenging operating environment with continued inflationary
pressures. Our adjusted compensation ratio for 2023 was 63.6%
compared to our peer group average adjusted compensation ratio of
70.5%. Our compensation philosophy is focused on balancing
employee retention and opportunities to invest in new talent with
delivering appropriate margins and returns to shareholders. Adjusted
non-compensation expenses totaled $271 million, up only 1%
compared to 2022, another strong result relative to our peer set which
had an average increase in adjusted non-compensation costs of 13%.
$1.3 billion
2023 adjusted net revenues
61%
Increase over 2019
$709 million
2023 advisory services
revenues
61%
Increase over 2019
$166 million
2023 adjusted net income
57%
Increase over 2019
$9.28
2023 adjusted diluted EPS
26%
Increase over 2019
2023 Annual Report | 1
Adjusted operating income of $213 million for 2023 and adjusted operating margin of 16% represent a solid result
on an absolute basis as we remain focused on providing shareholders near-term value through strong operating
discipline while still growing the platform. These results also demonstrate strong relative performance as our peer
set delivered an average adjusted operating margin of 7.3%. When we acquired Sandler O’Neill at the beginning
of 2020, we set a goal to generate an adjusted operating margin in the high teens. Since then, we have delivered
an average adjusted operating margin of 20.7%, reaching or exceeding that goal in three of the last four years.
We have continued to make investments to grow the business through strategic acquisitions as well as targeted
hires and internal promotions. In particular, our differentiated corporate development strategy is a key driver of our
growth. Over the last five years we have selectively added seven distinct firms to our platform. These investments
have expanded our industry and product coverage in financial services, chemicals, technology, consumer and
restructuring as well as our investment banking presence in Europe. In addition, we have added premier equity
trading capabilities, world-class macro research and built out our fixed income client verticals. Our corporate
development team has a proven track record of successfully sourcing, integrating and further developing these
businesses which allows us to accelerate our return on investment and increase overall value. During this period
of investment, our productive capacity increased significantly with investment banking managing director
headcount growing from 90 to 169. As we continue to build market leadership and create a more durable
business, we have become a destination of choice for top-tier talent.
In September 2023, we announced the planned retirement of Tim Carter, former chief financial officer, and that
Kate Clune had been selected to succeed Tim. We welcomed Kate Clune to the firm in November 2023 and she
was named chief financial officer on January 1, 2024. Kate joins us from Evercore Inc., and we look forward to
leveraging her strategic and tactical skillset to drive the next phase of our growth.
ADJUSTED NET REVENUES, NET INCOME AND DILUTED EPS
($ in millions, except per share data)
Advisory Services
Corporate & Municipal Financing
Institutional Brokerage
Investment Income & Net Interest Income
$157
$172
$198
$155
$204
$210
$147
$165
$83
$162
$186
$305
$155
$191
$443
$125
$195
$394
$388
$527
$405
$233
$378
$214
$1,026
$776
$709
$358
$415
$168
$189
$441
$443
Adjusted Net Income
Adjusted Diluted EPS
2013
$38
$2.24
2018
$87
$5.72
2023
$166
$9.28
2 | Piper Sandler Companies
Strong Relative Performance
M&A ADVISORY
(2023 VS. 2022)
EQUITY CAPITAL MARKETS
(2023 VS. 2022)
EQUITY BROKERAGE
(2023 VS. 2022)
Strong Operating Discipline
ADJUSTED COMPENSATION RATIO
(2023)
ADJUSTED NON-COMPENSATION
EXPENSE GROWTH
(2023 VS. 2022)
ADJUSTED OPERATING MARGIN
(2023)
Strong Shareholder Returns
5-YEAR TSR
In addition to investing in the platform, we remain
committed to returning capital to drive shareholder
returns through our dividend policy and repurchasing
shares of our common stock. During 2023, we deployed
$155 million of capital towards share repurchases and
dividends paid. We repurchased approximately 495,000
shares of our common stock which more than offset the
dilution from our 2023 annual grants. Total dividends for
fiscal year 2023 were $3.40 per share of common stock,
or a payout ratio of 37% of adjusted net income.
Additionally, we repaid $125 million of senior notes upon
maturity which completes the repayment of our long-term
financing procured for the acquisition of Sandler O’Neill.
Our total shareholder return for the five-year period ending December 31, 2023, inclusive of dividends, was 214%
which ranks No. 2 among our peer set and double the return of the S&P 500. We have worked hard to deliver
value and strengthen our capital position for our shareholders while fulfilling our commitment to putting our clients’
interests first.
2023 Annual Report | 3
Investment Banking
Investment banking, which consists of advisory services and corporate financing, delivered revenues of $840
million for 2023, down 7% from 2022 but favorable relative to the overall market. In the face of volatile market
conditions, we benefited from our comprehensive set of products and sector coverage. Contributions for the year
were led by our market-leading healthcare and financial services franchises, followed by another strong year from
the energy & power team and record results from our restructuring and debt advisory groups.
Performance within healthcare was powered by strong med-tech advisory activity and increasing market share in
biopharma equity capital raising which drove a year-over-year increase in revenues for the team. The healthcare
industry remains a large and growing fee pool, and with one of the largest and most respected teams in the
marketplace, we are well-positioned to benefit further from this growth.
Within financial services, our performance was led by depositories. For 2023, we were the No. 1 advisor in U.S.
M&A for banks based on both the number of announced transactions and aggregate deal value, and we advised
on seven of the 10 largest bank mergers and acquisitions completed during the year. 2023 marks the third
consecutive year of record revenues from our insurance team, which has continued to leverage our broad client
relationships and robust financial sponsor coverage to win larger mandates. Contributions from our asset & wealth
management team continues to grow as well.
Our energy & power team delivered another strong year. We retained our leadership in energy services where we
were one of the top advisors based on number of completed deals in 2023. We continue to feel confident about
our market position in this space with one of the largest and most tenured teams on the Street.
Growing our investment banking platform continues to be a key focus area. We finished the year with 169
managing directors, up 10 on a net basis from 2022. A significant component of our growth was driven by internal
promotions across our industry and product teams, highlighting our success at retaining and developing talent. We
also remain focused on building a culture of growth that makes us a destination of choice for top-tier talent. Over
the last 10 years, we have grown our managing director headcount by an average of 13% annually. Given this
growth, we remain intentional about strategically managing headcount and driving productive capacity while
consistently looking for opportunities to strengthen the platform.
INVESTMENT BANKING REVENUES
($ in millions)
Advisory Services
Corporate Financing
$363
$100
$123
$105
$295
$1,026
$443
$394
$441
$443
$125
$131
$776
$709
$110
$198
$114
$210
$72
$305
$94
$83
4 | Piper Sandler Companies
169
Investment banking
managing directors
No. 2
Advisor in U.S. M&A
based on # of
announced deals < $1B
(ranked No. 26 in 2013)
No. 1
Advisor in U.S. bank
M&A based on # of
announced deals
(ranked No. 1 in 2013)
269
Advisory transactions
completed during 2023
Over the last decade we have executed on our strategic vision and
delivered strong growth by building a diverse and resilient platform with
significant scale. Since 2013, we have increased our investment
banking revenues nearly fivefold, or at a CAGR of 17%. We remain
focused on growing our annual investment banking revenues to
$2 billion by continuing to advance corporate development, gaining
market share in technology, increasing our product delivery to private
equity clients and continuing to build out our equity capital markets
business with a disciplined focus in each of our industry sectors.
ADVISORY SERVICES
Advisory services generated revenues of $709 million for 2023, a 9%
decline from 2022 but significantly stronger than middle market M&A
activity, which was down 32%. Our results were bolstered by fourth
quarter advisory services revenues of $284 million, the second
strongest quarter on record, accounting for 62% of total adjusted net
revenues. We completed 269 advisory transactions during 2023 and
maintained our rank as the No. 2 advisor based on number of
announced U.S. M&A deals < $1 billion. Our strong performance was
driven by our sector and product diversification and well-balanced
coverage of both strategic and private equity clients.
Our advisory revenues from private equity clients grew in 2023 despite
decreased activity in the market, highlighting the scale and increased
relevance of our platform to a broader universe of financial sponsors. A
key contributor to our strong performance with private equity clients was
our debt advisory business. Our debt advisory team excels at finding
creative and tailored financing solutions to help clients navigate a
challenging leveraged finance landscape.
In addition, we benefited from our restructuring group’s record annual
revenues, including advising the FDIC on the sale of substantially all of
the deposits and loans of both Silicon Valley Bank and Signature Bank
in March 2023. This team, combined with our market-leading industry
groups, are fostering strong collaboration across the firm and
positioning us to continue to win high-profile assignments.
We remain focused on growing our advisory business by leveraging our
strong market presence and sector coverage, increasing our fee share
across our various product lines and strengthening our talent base
through strategic recruiting and investments.
2023 Annual Report | 5
$20 billion
Capital raised for
corporate clients in 2023
88
Completed equity and
debt financings
No. 5
Bookrunner of equity
underwritings for biopharma
companies with < $5 billion
of market cap
(ranked No. 11 in 2013)
CORPORATE FINANCING
Corporate financing markets remained challenging during 2023.
Although the overall corporate equity fee pool increased from 2022, it
remains well below historical levels at approximately 51% of the
average over the last 10 years. In addition, the debt financing market for
financial services companies was essentially shutdown.
Against this backdrop, we generated $131 million of corporate financing
revenues, up 5% from 2022. Equity financing revenues for 2023
increased 28%, partly offset by a decline in debt financing activity within
financial services. We completed a total of 88 equity and debt
financings, raising $20 billion in capital for corporate clients. Our
performance in equity capital raising for 2023 was very strong with
economic fees from sub $5 billion market cap companies increasing
46% over 2022, in comparison to a 17% increase in the market fee
pool.
Healthcare maintained its strong position as a book run franchise and
led our overall equity issuance activity, serving as bookrunner on 45 of
46 deals priced in 2023. In addition, Piper Sandler ranked as a top five
investment bank based on the number of book run deals for sub
$5 billion market cap companies within the biopharma space.
6 | Piper Sandler Companies
413
Municipal negotiated
issuances priced during
2023
$12 billion
Par value raised for
clients through municipal
negotiated issues during
2023
4%
Par value market share
for municipal negotiated
transactions
(3.3% in 2013)
Public Finance
Our public finance franchise continued to forge through turbulent market
conditions during 2023 which resulted from higher interest rates,
inflationary concerns for issuers and depressed investor demand. Overall
market issuance declined 3% in 2023 after being down 19% in 2022, only
the third time the market has experienced consecutive years of
decreased issuance volumes since the 1980s. In addition, the number of
new issues in the overall market declined 13% from 2022 while the
middle market saw a year-over-year decline of 16% and the high-yield
market decreased 21%.
For 2023, we generated $83 million of municipal financing revenues,
down 23% from 2022 given our focused efforts in the middle market and
high-yield sectors where we lead with expertise and add the most value
for clients. Our diversified platform is a key differentiator in the
marketplace. In total we underwrote 413 municipal negotiated
transactions, maintaining our No. 2 ranking for the fourth consecutive
year, raising more than $12 billion of par value for clients. Though
conditions were challenging, our robust, national platform provided some
highlights including Texas, Washington and the Midwest as well as
significant transactions in the hospitality, transportation, senior living,
private school and economic development sectors.
In September 2023, we appointed Dustin Avey and Jeremy Gerber as
co-heads of public finance, each bringing tenured experience and new
perspectives to the business. We remain focused on continuing to
advance our leadership in both our geographic and specialty markets.
Our premier talent, diversified model and longstanding commitment to
this business make us a natural choice for partners looking to best serve
their clients and we see increased opportunities to grow our platform and
market share.
MUNICIPAL FINANCING REVENUES
($ in millions)
2023 Annual Report | 7
Institutional Brokerage
Institutional brokerage delivered $378 million of revenues for 2023, a decrease of 7% over the prior year, as we
helped clients navigate a challenging market landscape. Through successful execution and integration of strategic
acquisitions and new hires, we have significantly increased the scale and diversification across our institutional
brokerage businesses. The breadth of our client footprint, product capabilities and market leadership provided
counterbalance to overall challenging markets during 2023.
Essential to the investment banking business, our team of over 160 sales professionals in both equities and fixed
income are instrumental in distributing our clients’ equity and debt new issue deals. In addition, our brokerage
businesses provide diversified revenue streams to the overall firm, generate adjacent revenue opportunities and
create broader solution sets for our clients. Over the last five years, our growth strategy has resulted in efficiencies
in our cost and capital usage and meaningful expansion in our operating margins and returns in these businesses.
With the consistency in our strategy and success, we see opportunity to leverage hires made in 2023 and to make
more targeted hires in 2024 to continue elevating our platform.
INSTITUTIONAL BROKERAGE REVENUES
($ in millions)
Equity Brokerage
Fixed Income
$196
$234
$195
$168
$58
$89
$75
$82
$76
$79
$74
$88
$75
$80
$48
$77
$80
$88
$161
$154
$210
$210
EQUITY BROKERAGE
Our equity brokerage business generated revenues of $210 million, flat
year-over-year, as our continued market share gains offset the softer
market conditions with lower volatility and reduced volumes. Our
performance was broad-based with high-touch, program and derivatives
trading all generating strong activity. We traded 10.7 billion shares
during 2023 for over 1,700 unique clients.
Strong collaboration between our fundamental analysts and our macro
research analysts continues to bring a differentiated value to our clients
recognized by increasing client votes. Our company-specific research
maintains 1,000 domestic stocks under coverage and ranks as one of
the largest U.S. research platforms in the small- to mid-cap category. In
addition, our macro research analysts are consistently ranked in the top
three on the Street.
10.7 billion
Equity shares traded for
1,700+ unique clients
during 2023
1,000
U.S. companies covered by
our research platform
8 | Piper Sandler Companies
No. 12
Institutional brokerage
in the U.S. equities
cash trading
(ranked No. 21 in 2013)
253%
Increase in fixed income
revenues over the last
five years
43%
Reduction in fixed income
inventory over the last
five years
Over the last five years, we have made a concerted effort to expand our
equity brokerage footprint while many of our competitors on the Street
were contracting. Our transformative acquisitions of Weeden and
Cornerstone Macro have contributed to our outperformance of overall
market trends and consistent market share gains. We remain focused
on continuing to increase our market share and expanding our product
depth and geographic distribution to keep us well-positioned to mitigate
a declining market wallet.
FIXED INCOME
Fixed income revenues of $168 million for 2023 declined 14% over
2022 as market conditions remained challenging during most of the
year. Interest rate uncertainty and an increased focus to maintain higher
levels of liquidity resulted in a decline in activity among our depository
clients relative to the prior year. The diversification of our client verticals
provided some resiliency to our revenues for 2023 as activity among
our insurance, registered investment advisor and public entity clients
increased compared to 2022. In addition, the perception that interest
rate increases have concluded helped move depository clients from the
sidelines during the fourth quarter of 2023 and they became more
active repositioning portfolios, leading to numerous balance sheet yield
optimization assignments.
Our capital-light fixed income strategy continues to lead with our
differentiated advice-driven model, allowing us to operate with minimal
risk or strain on the firm’s balance sheet. Over the last five years, we
have reduced fixed income inventory by 43% while revenues have more
than doubled.
Additionally, we continued to broaden our product depth and client
specialization by making several new hires in both the trading and
distribution capabilities of the firm’s non-agency structured credit
business. We see the current market disruption as an opportunity to
continue our targeted hiring as we work to deepen the coverage of our
client verticals and expand product expertise across our growing
platform.
2023 Annual Report | 9
As an investment bank, our business is susceptible to unpredictable market conditions and macro environments.
Throughout our 128-year history, we have made great strides elevating the earnings power and reach of our
platform despite market cycles. Each business is more diversified and scaled, with deeper and broader client
relationships, and we have notably increased our market position across our businesses. Against challenging
market conditions in 2023, our strategic focus, operating discipline and strong productive capacity positioned us to
navigate these challenges and continue to gain market share.
We are excited to further execute our long-term strategic objectives to drive revenue growth, expand our market
presence, continue to gain market share and maximize shareholder value. To advance these objectives, we are
focused on the following:
• Continuing to expand our business through strategic investments and selectively adding partners who share
our client-centric culture and who can leverage our platform to better serve clients;
• Growing our investment banking platform through market share gains, accretive combinations, developing
internal talent, and continued sector, product and geographic expansion. We also believe there is an
opportunity to continue to capitalize on the strength of our U.S. franchises by expanding in Europe;
• Leveraging the scale within the equity brokerage and fixed income services platforms, driven by our expanded
client base and product offerings, to continue to grow market share; and
• Prudently managing capital to maintain our balance sheet strength with ample liquidity and flexibility through all
market conditions.
Our success is and continues to be driven by the industrious and entrepreneurial nature of our employees. We
thank our colleagues for their unwavering dedication to serving our clients, and we congratulate them on an
impressive outcome in a challenging year.
On behalf of our fellow partners across Piper Sandler, we would like to thank you, our shareholders, for the trust
you place in us. We look forward to continuing to serve the best interests of our clients, employees, shareholders
and communities.
Chad Abraham
Chairman and Chief Executive Officer
Debbra Schoneman
President
10 | Piper Sandler Companies
Our Culture
Our 128-year legacy has perpetuated because of the partnerships we forge—among our clients, our employees
and the communities where we live and work. Our empowered entrepreneurial culture recognizes the value of our
individual employees and gives them the flexibility to pursue opportunities.
We are collaborative, not prescriptive across teams rendering unique solutions. Our teams are intelligent and
industrious—we consistently roll up our sleeves to dig deeper and go farther for clients and we know where to
focus our resources for maximum return. We commit to encouraging and valuing inclusivity because every partner
contributes unique perspectives.
Diversity, Equity & Inclusion (DEI)
We believe diverse, equitable and inclusive teams with unique backgrounds, skills and experiences create an ideal
environment in which our employees can thrive, personally and professionally, while contributing their unique and
valuable perspectives to the firm.
We strive to enable bright, committed people to work in partnership within an inclusive environment that allows
each person to achieve personal success and add value to our teams and communities. By living up to the values
of our organization we support our employees and benefit our clients and shareholders.
STRATEGIC FOCUS AREAS
• Accountability – Through performance goals, engagement surveys and our DEI Council, we drive awareness
and accountability for DEI across the firm.
• Representation – Through tailored undergraduate and graduate programs, focused community partnerships
and thoughtful onboarding processes, we strive to attract, recruit and retain a diverse and talented workforce
that fully reflects our clients and communities.
• Advancement – Through training, mentorship and sponsorship and intentional talent management processes,
we seek to provide equitable access to career growth and advancement.
•
Inclusion – Through training, engagement and employee resource group communities, we create a culture that
embraces, celebrates and leverages differences.
2023 Annual Report | 11
DEI COUNCIL
The DEI Council serves as an advisory board charged with driving and guiding policies, initiatives and programs
that support the firm’s diversity, equity and inclusion objectives.
EMPLOYEE RESOURCE GROUPS
Available to all interested employees, the firm has cultivated five employee resource groups that work in
partnership with the DEI Council:
• Multicultural Network – Unlocks the power of multicultural diversity and inclusion by promoting racial and
cultural awareness within our firm and our communities.
• Pride Network – Dedicated to fostering the inclusion of LGBTQ+ employees and their allies through awareness,
education, empowerment and involvement with the communities in which we live and work.
• Veterans Network – This group serves as an internal resource for community engagement, training, events,
recruiting initiatives and assisting veterans in their transition to the corporate workforce.
• Women’s Network – An inclusive, companywide network designed to foster gender equity through networking,
career development, philanthropy and informal mentorship.
• Young Professionals Network – Provides a forum for employees to develop professionally, build lasting
connections, foster collaboration across the firm, and enrich the communities in which we live and work.
ENHANCING DIVERSITY & INCLUSION IN OUR PROFESSION
We maintain two internal programs focused on enhancing diversity and inclusion in our profession.
• Career Exploration Program (CEP) is a two-day program for undergraduate students to learn more about Piper
Sandler and our opportunities and start to develop skills as future young professionals in financial services. The
CEP is designed for talented undergraduate sophomore students whose life experiences, demonstrated
interests and achievements can contribute to our commitment to diversity, equity and inclusion.
• Piper Sandler MBA Fellowship Program is within our MBA summer associate internship and targets talented
MBA students whose life experiences, demonstrated interests and achievements can contribute to our
commitment to diversity, inclusion and excellence.
These programs are open to all interested candidates and serve as a direct pipeline for summer internship
opportunities that have the potential to convert to full-time positions. We consider all aspects of diversity during the
selection process.
12 | Piper Sandler Companies
Community Leadership
Community giving has always been integral to the values and guiding
principles of Piper Sandler. We offer both employee and corporate giving
programs and funding to nonprofit organizations to make a positive
impact on the communities where we live and work.
EMPLOYEE GIVING & CORPORATE MATCHING
One of our core guiding principles is to contribute our talents and
resources to serve the communities in which we live and work. We
encourage and support our employees’ individual philanthropic interests
through the Matching Gifts Program and our Annual Charitable Giving
Campaign. We also provide Disaster Relief through funds set up to assist
employees, clients or partners who live or work in an area directly
affected by a disaster. Disaster Relief funds benefit specific,
predetermined nonprofits, and all employee contributions are matched by
Piper Sandler.
EMPLOYEE VOLUNTEER PROGRAMS
$7 million
Charitable contributions
made by Piper Sandler and
employees in 2023
1,800+
Organizations reached
during 2023 through
employee efforts
We support the organizations in which our employees donate their time and resources through grant opportunities.
The Community Leader Grant encourages and supports sustained volunteerism for employees who contribute
more than 40 hours annually to a qualifying nonprofit and serve as a member of its board of directors. The
Volunteer Program Grant provides direct gifts to qualifying nonprofit organizations where an employee volunteers
40 hours or more in a year.
CORPORATE GIVING & COMMUNITY SUPPORT
Piper Sandler provides corporate funding to nonprofits that are aligned with our focus on increasing education
opportunities for underserved communities to help create development and employment opportunities for these
students.
Piper Sandler contributes a consistent percentage of its pre-tax earnings to the community as part of the
Minnesota Keystone Program, a voluntary initiative promoting corporate support for communities. We have been a
member of this program for more than 40 years.
Environmental, Social & Governance (ESG)
Piper Sandler is applying a strategic approach to ESG by prioritizing our efforts to create the greatest impact.
Integration of ESG in our business activities is firmly rooted in our ability to serve our clients and remain
responsive to their ever-evolving industries. Our ESG reporting focuses on specific priority issues that we have
identified based on internal and external stakeholders’ expectations and perspectives. We continue to monitor and
assess our ESG priorities through input received from leading frameworks and ratings, internal and external
stakeholders and industry-specific topic assessments. These identified priorities inform our ESG reporting and are
an input for future planning efforts as we continue to develop our governance, strategy and assessments of risk
and opportunity for our business relating to ESG.
2023 Annual Report | 13
Board of Directors
Leadership Team
Chad R. Abraham
Chairman and Chief Executive Officer
Debbra L. Schoneman
President
James P. Baker
Global Co-Head of Investment Banking
and Capital Markets
John Beckelman
Head of Fixed Income
Katherine P. Clune
Chief Financial Officer
Michael R. Dillahunt
Global Co-Head of Investment Banking
and Capital Markets
Jonathan J. Doyle
Vice Chairman and Head of Financial Services
Christine N. Esckilsen
Chief Human Capital Officer
John W. Geelan
General Counsel and Secretary
J.P. Peltier
Global Group Head of Healthcare
Investment Banking
Shawn C. Quant
Chief Information and Operations Officer
Thomas P. Schnettler
Vice Chairman of Piper Sandler & Co.
Chad R. Abraham
Chairman and Chief Executive Officer
Piper Sandler Companies
Jonathan J. Doyle
Vice Chairman and Head of Financial Services
Piper Sandler Companies
William R. Fitzgerald
Former Chairman and Chief Executive Officer
Ascent Capital Group, Inc.
Victoria M. Holt
Former President and Chief Executive Officer
Proto Labs, Inc.
Robbin Mitchell
Senior Advisor
Boston Consulting Group
Thomas S. Schreier Jr.
Former Chairman
Nuveen Asset Management
Sherry M. Smith
Former Executive Vice President
and Chief Financial Officer
SUPERVALU INC.
Philip E. Soran (Lead Independent Director)
Former President, Chief Executive Officer
and Director
Compellent Technologies, Inc.
Brian R. Sterling
Former Managing Director
Piper Sandler Companies
Scott C. Taylor
Former Executive Vice President
and General Counsel
NortonLifeLock Inc. (formerly Symantec Corp.)
14 | Piper Sandler Companies
Appendix
Reconciliation of U.S. GAAP financial measures to adjusted, non-GAAP
financial measures
The financial highlights and letter to shareholders include non-GAAP, or ‘‘adjusted,’’ financial measures. The
corresponding reconciliations of these non-GAAP financial measures to the most comparable U.S. GAAP financial
measures are included below.
The non-GAAP financial measures include adjustments to exclude: (1) investment (income)/loss and non-
compensation expenses related to noncontrolling interests, (2) interest expense on long-term financing from net
revenues, (3) amortization of intangible assets related to acquisitions, (4) compensation and non-compensation
expenses from acquisition-related agreements, (5) restructuring and integration costs related to acquisitions
and/or headcount reductions, (6) non-compensation expenses related to potential regulatory settlements with the
Securities and Exchange Commission and the Commodity Futures Trading Commission regarding compliance
with recordkeeping requirements for business-related communications, (7) the impact from remeasuring deferred
tax assets resulting from changes to the U.S. federal tax code, (8) the impact of a deferred tax asset valuation
allowance, (9) discontinued operations, and (10) the income tax effect of the adjustments. The adjusted weighted
average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share
contains an adjustment to include the common shares for unvested restricted stock awards with service conditions
granted pursuant to all acquisitions since January 1, 2020.
Management believes that presenting results and measures on this adjusted basis alongside U.S. GAAP
measures provides the most meaningful basis for comparison of its operating results across periods, and
enhances the overall understanding of our current financial performance by excluding certain items that may not
be indicative of our core operating results. The non-GAAP financial measures should be considered in addition to,
not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.
2023 Annual Report | 15
NET REVENUES
A reconciliation of U.S. GAAP net revenues to adjusted net revenues for the years ended December 31:
($ in millions)
U.S. GAAP net revenues
Adjustments:
2023
$1,348.0
2022
$1,425.6
2021
$2,031.1
2020
$1,238.2
2019
$834.6
Investment (income)/loss related to noncontrolling interests
Interest expense on long-term financing
Adjusted net revenues
(22.9)
5.1
1.6
6.5
(59.1)
(12.9)
(10.8)
8.4
9.6
1.8
$1,330.2
$1,433.7
$1,980.5
$1,235.0
$825.6
($ in millions)
U.S. GAAP net revenues
Adjustments:
2018
2013
$741.0 $823.6 $693.2 $602.3 $567.8 $443.5
2016
2014
2017
2015
Investment (income)/loss related to noncontrolling interests
Interest expense on long-term financing
Adjusted net revenues
(3.6)
4.9
(5.3)
(11.1)
(9.8)
(15.7)
7.2
8.2
6.4
5.5
(8.8)
5.8
$742.2 $825.5 $690.3 $598.9 $557.6 $440.5
COMPENSATION EXPENSES
A reconciliation of U.S. GAAP compensation and benefits to adjusted compensation and benefits for the years
ended December 31:
($ in millions)
U.S. GAAP compensation and benefits
Adjustment:
2023
$897.0
2022
$983.5
2021
$1,305.2
2020
$877.5
2019
$516.1
Compensation from acquisition-related agreements
(51.1)
(87.5)
(116.8)
(113.4)
(5.1)
Adjusted compensation and benefits
$846.0
$896.0
$1,188.4
$764.1
$511.0
NON-COMPENSATION EXPENSES
A reconciliation of U.S. GAAP non-compensation expenses to adjusted non-compensation expenses for the years
ended December 31:
($ in millions)
U.S. GAAP non-compensation expenses
Adjustments:
2023
$328.3
2022
$307.7
2021
$284.4
2020
$292.2
2019
$199.5
Non-compensation expenses related to noncontrolling interests
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related
agreements
Non-compensation expenses from potential regulatory
settlements
Adjusted non-compensation expenses
(9.4)
(7.7)
(19.4)
(7.9)
(11.4)
(15.4)
(7.2)
(4.7)
(30.1)
(4.0)
(10.8)
(44.7)
(4.3)
(14.3)
(4.3)
1.1
(4.5)
(0.2)
(12.1)
(0.1)
(21.5)
-
-
-
-
$271.3
$268.6
$242.1
$220.6
$176.5
Note: amounts presented in the tables above are rounded to millions and may not foot.
16 | Piper Sandler Companies
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE
A reconciliation of U.S. GAAP income from continuing operations before income tax expense to adjusted income
before adjusted income tax expense for the years ended December 31:
($ in millions)
U.S. GAAP income from continuing operations before
income tax expense
Adjustments:
Investment (income)/loss related to noncontrolling interests
Interest expense on long-term financing
Non-compensation expenses related to noncontrolling
interests
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related
agreements
Non-compensation expenses from potential regulatory
settlements
Adjusted operating income
2023
2022
2021
2020
2019
$122.6
$134.4
$441.5
$68.5
$119.0
(22.9)
5.1
9.4
51.1
7.7
19.4
(1.1)
21.5
1.6
6.5
7.9
87.5
11.4
15.4
(59.1)
(12.9)
(10.8)
8.4
7.2
9.6
4.0
116.8
113.4
4.7
30.1
10.8
44.7
1.8
4.3
5.1
14.3
4.3
4.5
0.2
12.1
0.1
-
-
-
-
$212.9
$269.2
$550.0
$250.3
$138.2
Interest expense on long-term financing
(5.1)
(6.5)
(8.4)
(9.6)
(1.8)
Adjusted income before adjusted income tax expense
$207.8
$262.7
$541.5
$240.7
$136.4
NET INCOME ATTRIBUTABLE TO PIPER SANDLER COMPANIES
A reconciliation of U.S. GAAP net income attributable to Piper Sandler Companies to adjusted net income for the
years ended December 31:
($ in millions)
U.S. GAAP net income attributable to Piper Sandler
Companies
Adjustment to exclude net income from discontinued
operations
2023
2022
2021
2020
2019
2018
2013
$85.5 $110.7 $278.5
$40.5 $111.7
$57.0
$45.1
-
-
-
-
23.8
1.4
12.5
Net income from continuing operations
$85.5 $110.7 $278.5
$40.5
$87.9
$55.6
$32.6
Adjustments:
Compensation from acquisition-related agreements
40.6
66.7
93.1
85.9
4.1
22.0
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related
agreements
Non-compensation expenses from potential regulatory
settlements
Impact of the Tax Cuts and Jobs Act legislation
Impact of deferred tax asset valuation allowance
5.7
8.9
3.5
8.7
10.8
14.3
11.8
23.6
33.4
3.3
-
3.7
(0.8)
3.3
0.2
9.0
0.1
0.5
21.1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1.0
4.7
1.0
2.9
1.0
-
-
-
-
Adjusted net income
$166.4 $201.3 $399.0 $177.6 $106.2
$87.4
$37.5
Note: amounts presented in the tables above are rounded to millions and may not foot.
2023 Annual Report | 17
EARNINGS PER DILUTED COMMON SHARE
A reconciliation of U.S. GAAP earnings per diluted common share to adjusted earnings per diluted common share
for the years ended December 31:
U.S. GAAP earnings per diluted common share
Adjustment to exclude net income from discontinued
operations
2023
$4.96
2022
2021
$6.52 $16.43
2020
$2.72
2019
$7.69
2018
$3.72
2013
$2.70
-
-
-
-
1.65
0.09
0.75
Income from continuing operations
$4.96
$6.52 $16.43
$2.72
$6.05
$3.63
$1.95
Adjustment related to participating shares (1)
Adjustment for inclusion of unvested acquisition-
related stock
-
-
-
-
0.04
(0.38)
(0.60)
(1.62)
(1.89)
-
-
-
-
-
$4.58
$5.92 $14.81
$0.83
$6.09
$3.63
$1.95
Adjustments:
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to
acquisitions
Non-compensation expenses from acquisition-related
agreements
Non-compensation expenses from potential regulatory
settlements
Impact of the Tax Cuts and Jobs Act legislation
Impact of deferred tax asset valuation allowance
2.36
0.33
3.93
0.53
5.49
0.21
5.76
0.58
0.29
0.75
1.44
-
0.06
0.17
0.83
0.69
1.40
2.24
0.23
0.24
0.06
(0.05)
0.19
0.01
0.61
0.01
0.04
1.23
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.06
0.31
-
-
-
-
Adjusted earnings per diluted common share
$9.28 $11.26 $21.92 $10.02
$7.36
$5.72
$2.24
1) For periods prior to 2020, Piper Sandler Companies calculated earnings per common share using the two-class method, which required
the allocation of consolidated adjusted net income between common shareholders and participating security holders, which in the case of
Piper Sandler Companies, represented unvested stock with non-forfeitable dividend rights. No allocation of undistributed earnings was
made for periods in which a loss was incurred, or for periods in which the special cash dividend exceeded adjusted net income resulting
in an undistributed loss.
WEIGHTED AVERAGE DILUTED COMMON SHARE OUTSTANDING
A reconciliation of U.S. GAAP weighted average diluted common shares outstanding to adjusted weighted
average diluted common shares outstanding for the years ended December 31:
(Amounts in millions)
U.S. GAAP weighted average diluted common shares
outstanding
Adjustment:
Unvested acquisition-related restricted stock with
service conditions
Adjusted weighted average diluted common shares
outstanding
2023
2022
2021
2020
2019
2018
2013
17.2
17.0
17.0
14.9
13.9
13.4
15.1
0.7
0.9
1.3
2.8
-
-
-
17.9
17.9
18.2
17.7
13.9
13.4
15.1
18 | Piper Sandler Companies
Peer Group Performance
The peer group referenced within the annual shareholder letter includes Evercore Inc. (EVR), Houlihan Lokey, Inc.
(HLI), Lazard, Inc. (LAZ), Moelis & Company (MC) and PJT Partners Inc. (PJT). The peer group also includes the
Capital Markets segment of Raymond James Financial, Inc. (RJF) and the Institutional Group segment of Stifel
Financial Corp. (SF) as these segments are a more direct comparison to Piper Sandler. The two business
segments for RJF and SF are excluded from the diluted earnings per share peer group average as segment
diluted earnings per share is not available.
Financial measures are obtained from reports on file with the SEC and reflect the twelve month period ending
December 31, 2023.
Market Share Positions & Market Data
Market share positions and market data presented within the letter to shareholders are referenced from the
following independent sources:
MERGERMARKET
•
No. 2 advisor in U.S. M&A based on number of announced transactions during 2023 with a reported deal
value of < $1 billion; same criteria for 2013 ranking of No. 26
S&P CAPITAL IQ PRO
•
•
•
Total shareholder return for the five-year period ending December 31, 2023, inclusive of dividends, for
Piper Sandler (214%, No. 2 among our peer group), Peer Group Average (158%) and the S&P 500 (102%);
peer group average includes EVR, HLI, LAZ, MC, PJT, RJF and SF
No. 1 advisor in U.S. M&A for banks & thrifts based on both the number and aggregate value of announced
transactions during 2023; No. 1 advisor in U.S. M&A for banks & thrifts based on the number of announced
transactions during 2013
Advised on 7 of the 10 largest U.S. bank & thrift M&A transactions completed during 2023
DEALOGIC
• Overall equity capital markets fee pool for 2023 was 51% lower compared to the average market fee pool over
the last 10 years; includes IPOs, follow-ons and converts > $10 million, and PIPE/RDs > $5 million in value
•
•
•
No. 5 underwriter based on the number of book run equity deals completed during 2023 for biopharma
companies with < $5 billion of market cap; includes IPOs, follow-ons and converts > $10 million, and
PIPE/RDs > $5 million in value; same criteria for 2013 ranking of No. 11
Equity capital markets fee pool for 2023 increased 17% compared to 2022; includes IPOs, follow-ons and
converts > $10 million, and PIPE/RDs > $5 million in value for companies < $5 billion of market cap
Piper Sandler economic fees for 2023 increased 46% compared to 2022; includes IPOs, follow-ons and
converts > $10 million, and PIPE/RDs > $5 million in value for companies < $5 billion of market cap
2023 Annual Report | 19
REFINITIV
•
U.S. middle market M&A activity declined 32% in 2023 compared to 2022; reflects aggregate value of
completed M&A transactions with a reported deal value between $100 million and $1 billion with a U.S. based
target company
• Overall municipal market issuance volumes decreased 3% (2023 vs. 2022) after being down 19% (2022 vs.
2021), and the number of new issues in the overall market declined 13% from 2022; based on issues maturing
in 1.09 years or longer, private placements and municipal forward sales are included, taxable bonds issued
directly by electric cooperative utilities are included
•
•
•
Number of middle-market new issues declined 16% compared to 2022; based on municipal new issues with a
par value < $500 million
4.0% par value market share of U.S. sole/senior negotiated and private placement transactions during 2023;
same criteria for 2013 par value market share of 3.3%
No. 2 underwriter based on number of U.S. sole/senior negotiated and private placement transactions during
2023
BLOOMBERG
•
Number of high-yield new issues decreased 21% compared to 2022; includes issues rated below BBB
THOMSON REUTERS
•
No. 2 equity research platform based on number of U.S. stocks covered in the small- to mid-cap (< $5 billion)
category for 2023
MCLAGAN
• Market wallet for U.S. equities cash trading for 2023 decreased 6% compared to 2022
•
No. 12 in U.S. equities cash trading for 2023; same criteria for 2013 ranking of No. 21
INSTITUTIONAL INVESTOR ALL-AMERICAN RESEARCH SURVEY
• Our macro research analysts are consistently ranked in the top 3 on the Street
20 | Piper Sandler Companies
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2023
Commission File No. 001-31720
PIPER SANDLER COMPANIES
(Exact Name of Registrant as specified in its Charter)
(State or Other Jurisdiction of Incorporation or Organization)
(IRS Employer Identification No.)
Delaware
30-0168701
800 Nicollet Mall, Suite 900
Minneapolis, Minnesota
(Address of Principal Executive Offices)
55402
(Zip Code)
(Registrant's Telephone Number, Including Area Code)
(612) 303-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share
PIPR
The New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☑
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the
filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the 17,182,267 shares of the registrant's Common Stock, par value $0.01 per share, held by non-affiliates based upon
the last sale price, as reported on the New York Stock Exchange, of the Common Stock on June 30, 2023 was approximately $2.2 billion.
As of February 20, 2024, the registrant had 17,682,577 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the
registrant's Proxy Statement for its 2024 Annual Meeting of Shareholders to be held on May 23, 2024.
Table of Contents
Part I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Reserved
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
Management's Report on Internal Control Over Financial Reporting
Reports of Independent Registered Public Accounting Firm (PCAOB ID 42)
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibit and Financial Statement Schedules
Form 10-K Summary
Signatures
Item 9.
Item 9A.
Item 9B.
Item 9C.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Item 16.
3
8
22
23
24
24
24
25
27
28
57
58
58
59
62
67
111
112
112
112
112
113
113
113
113
113
114
116
117
Piper Sandler Companies | 2
Table of Contents
Part I
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the year ended December 31, 2023 (this "Form 10-K") contains forward-looking
statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are
forward-looking statements. These forward-looking statements include, among other things, statements other than
historical information or statements of current conditions and may relate to our future plans and objectives and results,
and also may include our belief regarding the effect of various legal proceedings, as set forth under "Legal Proceedings"
in Part I, Item 3 of this Form 10-K and in our subsequent reports filed with the Securities and Exchange Commission
("SEC"). Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual
results to differ materially from those anticipated, including those factors discussed below under "Risk Factors" in Part I,
Item 1A of this Form 10-K, as well as those factors discussed under "External Factors Impacting Our Business" included
in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this
Form 10-K and in our subsequent reports filed with the SEC. Forward-looking statements speak only as of the date they
are made, and we undertake no obligation to update them in light of new information or future events.
Item 1. Business.
OVERVIEW
Piper Sandler Companies is an investment bank and institutional securities firm, serving the needs of corporations,
private equity groups, public entities, non-profit entities and institutional investors in the United States ("U.S.") and
internationally. Founded in 1895, Piper Sandler Companies provides a broad set of products and services, including
financial advisory services; equity and debt capital markets products; public finance services; institutional brokerage
services; fundamental equity and macro research services; fixed income services; and alternative asset management
strategies. Our headquarters are located in Minneapolis, Minnesota and we have offices across the U.S. and
international locations in London, Aberdeen and Hong Kong.
OUR BUSINESS
We operate in one reportable segment providing investment banking services, institutional sales and trading services for
various equity and fixed income products, and research services. We are organized as one reportable segment in order
to maximize the value we provide to clients by leveraging our diversified expertise and broad relationships of the
experienced professionals across our company.
Investment Banking
For our corporate clients and financial sponsors, we provide advisory services, which includes mergers and acquisitions
("M&A"); equity and debt private placements; and debt and restructuring advisory. We also help raise capital through
equity and debt financings. We operate in the following focus sectors: healthcare; financial services; energy and power;
services and industrials; consumer; technology; and chemicals, primarily focusing on middle-market clients. For our
government and non-profit clients, we underwrite municipal issuances, provide municipal financial advisory and loan
placement services, and offer various over-the-counter derivative products. Our public finance investment banking
capabilities focus on state and local governments, cultural and social service non-profit entities, special districts, project
finance, and the education, healthcare, hospitality, senior living, housing and transportation sectors.
Piper Sandler Companies | 3
Table of Contents
Equity and Fixed Income Institutional Brokerage
We offer both equity and fixed income advisory and trade execution services for institutional investors, corporations, and
government and non-profit entities. Integral to our capital markets efforts, we have equity sales and trading relationships
with institutional investors in North America and Europe that invest in our core sectors. Our fundamental equity research
analysts provide investment ideas and support to our trading clients on approximately 1,000 companies. Our macro
research teams provide a comprehensive overview of global trends, such as economic and energy trends, as well as
policy actions and political developments. Fixed income services provides advice on balance sheet management,
investment strategy and customized portfolio solutions. We provide fixed income sales and trading solutions to banks,
registered investment advisors, public entities, credit unions, asset managers, and insurance companies. We principally
engage in trading activities to facilitate customer activity.
Alternative Asset Management Funds
We have created alternative asset management funds in merchant banking and healthcare in order to invest firm capital
and to manage capital from outside investors.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
As of December 31, 2023, the substantial majority of our net revenues and long-lived assets were located in the U.S.
COMPETITION
Our business is subject to intense competition driven by large Wall Street and international firms, regional broker
dealers, boutique and niche-specialty firms and alternative trading systems that effect securities transactions through
various electronic venues. Competition is based on a variety of factors, including price, quality of advice and service,
reputation, product selection, transaction execution, financial resources and investment performance. Many of our large
competitors have greater financial and technology resources than we have and may have greater capacity for risk and
potential innovation as well as more flexibility to offer a broader set of products and services than we can.
In addition, there is significant competition within the securities industry for obtaining and retaining the services of
qualified employees. Our business is a human capital business, and attracting and retaining employees depends,
among other things, on our company's culture, management, work environment, geographic locations and
compensation.
HUMAN CAPITAL
Piper Sandler Companies connects capital with opportunity to create value and build a better future, and our employees
have been critical to achieving this mission throughout our operating history of more than 125 years. We believe that
great people working together as a team are our competitive advantage, and it is crucial that we continue to attract and
retain talented employees. As part of these efforts, we strive to offer a competitive compensation and benefits program;
provide training and development opportunities; foster a community where everyone feels included and empowered to
do their best work; and give employees the opportunity to give back to their communities.
As of December 31, 2023, we had 1,725 full-time employees, of which 1,632 were employed in the U.S. and 93 in the
United Kingdom ("U.K.") and Hong Kong. Approximately 1,330 of our employees were registered with the Financial
Industry Regulatory Authority, Inc. ("FINRA") as of December 31, 2023. One key metric we use to benchmark our firm to
industry peer companies is the number of investment banking managing directors. At December 31, 2023, we had 169
corporate investment banking managing directors.
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Compensation and Benefits Program
Our compensation program is designed to attract, reward and retain employees who possess the skills necessary to
support our business objectives and assist in the achievement of our strategic goals. We provide employees with
competitive compensation packages that include base salary, annual incentive bonuses, length of service awards, and
equity awards. For further information on the restricted shares we grant to employees as part of year-end
compensation, see Note 19 to our consolidated financial statements in Part II, Item 8 of this Form 10-K. In addition to
cash and equity compensation, we offer benefits such as life and health (medical, dental and vision) insurance, paid
time off, tuition reimbursement and a 401(k) plan. We also offer family support services, such as paid parental leave,
fertility benefits and adoption assistance, as well as various health and wellness programs. We believe our programs
align both individual employees and long-term company performance with shareholder interests.
Training and Development
A core tenet of our talent system is to develop talent from within our company and to supplement with external
candidates. We provide opportunities for employees to grow and build their careers through various training and
development programs. We also have a talent and succession planning process, which is reviewed annually with our
board of directors.
Diversity, Equity and Inclusion ("DEI")
We believe that diverse teams with unique backgrounds, skills and experiences yield more innovative solutions. This is
reflected in our commitment to engage, attract, retain and develop a diverse and talented workforce in a high-quality,
equitable and inclusive environment.
We maintain several programs and partnerships to help us attract a diverse array of great talent, including the Career
Exploration Program, the Piper Sandler MBA Fellowship Program and community partnerships with organizations that
focus on coaching, training and mentorship to help close the career opportunity gaps for underrepresented college
students. The Career Exploration Program and the Piper Sandler MBA Fellowship Program are designed to attract
talented undergraduate students and MBA students, respectively, whose life experiences, demonstrated interests, and
achievements will contribute to our commitment to DEI. These programs, which consider all aspects of diversity during
the selection process, serve as a direct pipeline for summer internship opportunities that have the potential to convert to
full-time positions.
We are focused on building an inclusive culture through a variety of initiatives supported by our DEI council, including
mentorship and training. Our employee resource groups also serve as a source of inclusion and engagement for our
employees, in addition to supporting our efforts to recruit a diverse workforce. Our employee resource groups consist of
Multicultural, Pride, Veterans, Women's, and Young Professionals networks, and each employee resource group is open
to all employees and is sponsored and supported by senior leaders across the firm.
Community Leadership
We are committed to contributing our talents and resources to serve the communities in which we live and work through
the Piper Sandler Foundation, various charitable campaigns, employee programs and volunteerism. We believe this
commitment assists in our efforts to attract and retain employees. In 2023, we donated a total of $7.1 million through
employee donations, our corporate matching gifts programs and corporate grants. Our employees supported 1,885
causes in 2023 through our Annual Charitable Giving Campaign, a two-week campaign when Piper Sandler Companies
matches each employee's donations up to $5,000.
REGULATION
As a participant in the financial services industry, our business is regulated by U.S. federal and state regulatory
agencies, by self-regulatory organizations ("SROs") and securities exchanges, and by foreign governmental agencies,
financial regulatory bodies and securities exchanges. We are subject to complex and extensive regulation of most
aspects of our business, including the manner in which securities transactions are effected, net capital requirements,
financial and electronic recordkeeping and reporting procedures, relationships and conflicts with customers, conduct,
experience and training requirements for certain employees, and the manner in which we prevent and detect money-
laundering and bribery activities. The regulatory framework of the financial services industry is designed primarily to
safeguard the integrity of the capital markets and to protect customers, not creditors or shareholders.
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The laws, rules and regulations comprising this regulatory framework can (and do) change frequently, as can the
interpretation and enforcement of existing laws, rules and regulations. Conditions in the global financial markets and
economy can cause legislators and regulators to increase the examination, enforcement and rule-making activity
directed toward the financial services industry. The intensity of the regulatory environment may correlate with the level
and nature of our legal proceedings for a given period, and increased intensity could have an adverse effect on our
business, financial condition, and results of operations.
Our U.S. broker dealer subsidiary (Piper Sandler & Co.) is registered as a securities broker dealer with the SEC and is a
member of various SROs and securities exchanges. FINRA serves as the primary SRO of Piper Sandler & Co., and the
New York Stock Exchange ("NYSE") has oversight over NYSE-related market activities. FINRA regulates many aspects
of our U.S. broker dealer business, including registration, education and conduct of our broker dealer employees,
examinations, rulemaking, enforcement of these rules and the federal securities laws, trade reporting and the
administration of dispute resolution between investors and registered firms. We have agreed to abide by the rules of
FINRA (as well as those of the NYSE and other SROs), and FINRA has the power to expel, fine and otherwise discipline
Piper Sandler & Co. and its officers, directors and employees. Among the rules that apply to Piper Sandler & Co. are the
uniform net capital rule of the SEC (Rule 15c3-1) and the net capital rule of FINRA. Both rules set a minimum level of
net capital a broker dealer must maintain and also require that a portion of the broker dealer's assets be relatively liquid.
Under the applicable FINRA rule, FINRA may prohibit a member firm from expanding its business or paying cash
dividends if resulting net capital falls below FINRA requirements. In addition, Piper Sandler & Co. is subject to certain
notification requirements related to withdrawals of excess net capital. As a result of these rules, our ability to make
withdrawals of capital from Piper Sandler & Co. may be limited. In addition, Piper Sandler & Co. is licensed as a broker
dealer in each of the 50 states, requiring us to comply with applicable laws, rules and regulations of each state. Any
state may revoke a license to conduct a securities business and fine or otherwise discipline broker dealers and their
officers, directors and employees.
We also operate one entity that is authorized, licensed and regulated by the Financial Conduct Authority of the U.K. and
registered under the laws of England and Wales, as well as an entity that is authorized, licensed and regulated by the
Hong Kong Securities and Futures Commission and registered under the laws of Hong Kong. The Financial Conduct
Authority of the U.K. and the Hong Kong Securities and Futures Commission regulate these entities (in their respective
jurisdictions) in areas of capital adequacy, customer protection and business conduct, among others. We also have a
subsidiary organized in Guernsey and regulated by the Guernsey Financial Services Commission ("GFSC").
Entities in the jurisdictions identified above are also subject to anti-money laundering regulations. Piper Sandler & Co. is
subject to the USA PATRIOT Act of 2001, which contains anti-money laundering and financial transparency laws and
mandates the implementation of various regulations requiring us to implement standards for verifying client identification
at the time the client relationship is initiated, monitoring client transactions and reporting suspicious activity. Our entities
in Hong Kong, the U.K. and Guernsey are subject to similar anti-money laundering laws and regulations in those
jurisdictions. We are also subject to the U.S. Foreign Corrupt Practices Act as well as other anti-bribery and anti-
corruption laws in the jurisdictions in which we operate. These laws generally prohibit companies and their
intermediaries from engaging in bribery or making other improper payments to foreign officials for the purpose of
obtaining or retaining business or gaining an unfair business advantage.
We maintain subsidiaries that are registered as investment advisors with the SEC and subject to regulation and
oversight by the SEC. PSC Capital Partners LLC, Piper Sandler Advisors LLC, Piper Heartland Healthcare Capital LLC
and Piper Sandler Finance Management LLC are asset management subsidiaries and registered investment advisors.
As registered investment advisors, these entities are subject to requirements that relate to, among other things, fiduciary
duties to clients, maintaining an effective compliance program, solicitation agreements, conflicts of interest, financial and
electronic recordkeeping and reporting requirements, disclosure requirements, limitations on agency cross and principal
transactions between the advisor and advisory clients, as well as general anti-fraud prohibitions. Piper Sandler & Co. is
also a registered investment advisor and subject to these requirements. Parallel General Partner Limited is the general
partner of several private equity limited partnerships; it and the limited partnerships are registered and regulated by the
GFSC.
Certain of our businesses also are subject to compliance with laws and regulations of U.S. federal and state
governments, non-U.S. governments, their respective agencies or various SROs or exchanges governing the privacy of
client information, as applicable. Any failure with respect to our practices, procedures and controls in any of these areas
could subject us to regulatory consequences, including fines, and potentially other significant liabilities.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Information regarding our executive officers and their ages as of February 20, 2024, are as follows:
Name
Chad R. Abraham
Debbra L. Schoneman
Katherine P. Clune
James P. Baker
Michael R. Dillahunt
Jonathan J. Doyle
John W. Geelan
Age
Position(s)
55
55
43
56
55
58
48
Chief Executive Officer
President
Chief Financial Officer
Global Co-Head of Investment Banking and Capital Markets
Global Co-Head of Investment Banking and Capital Markets
Vice Chairman and Head of Financial Services Group
General Counsel and Secretary
Chad R. Abraham is our chief executive officer, a position he has held since January 2018. He previously served as
global co-head of investment banking and capital markets from October 2010 to December 2017. Prior to that, he
served as head of equity capital markets since November 2005. Mr. Abraham joined Piper Sandler Companies in 1991
in our investment banking group and was promoted to managing director and head of technology investment banking in
1999.
Debbra L. Schoneman is our president, a position she has held since January 2018. She previously served as chief
financial officer from May 2008 to December 2017, and global head of equities from June 2017 to December 2017. Prior
to that, she served as treasurer from August 2006 until May 2008; and as finance director of our corporate and
institutional services business from July 2002 until July 2004 when the role was expanded to include our public finance
services division. Ms. Schoneman joined Piper Sandler Companies in 1990 in our accounting department.
Katherine P. Clune is our chief financial officer, a position she has held since January 2024. She most recently served
as senior vice president of finance from November 2023 to January 2024. Before joining Piper Sandler Companies, Ms.
Clune was treasurer and head of planning and strategy at Evercore Inc., from June 2022 to November 2023, and global
head of financial planning and analysis at Morgan Stanley from June 2020 to June 2022. Prior to that, Ms. Clune served
in various capacities with Morgan Stanley from 2005 through June 2022, including global head, liquidity coverage and
planning, and chief financial officer, U.S. banks.
James P. Baker is our global co-head of investment banking and capital markets, a position he has held since January
2019. Prior to that, he served as our co-head of energy investment banking from February 2016 to December 2018. Mr.
Baker joined Piper Sandler Companies in February 2016 in connection with our acquisition of Simmons & Company
International, where Mr. Baker came to serve as a managing director and leader of its midstream/downstream
investment banking group after joining in 2001. Prior to that, Mr. Baker was a director and chief financial officer at Koch
Industries and led corporate finance and corporate development for Koch’s energy businesses, and a director for Alton
Geoscience where he provided consulting services to refining and marketing companies on the West Coast.
Michael R. Dillahunt is our global co-head of investment banking and capital markets, a position he has held since
March 2021. Prior to that, he served as co-head of our services and industrials group from 2011 to 2020, and as vice
chairman of investment banking and chairman of M&A and private equity coverage from 2020 to March 2021. Mr.
Dillahunt joined Piper Sandler Companies in 1998, prior to which he had been an M&A and corporate attorney at
Milbank LLP.
Jonathan J. Doyle is our vice chairman, senior managing principal and head of the financial services group, a position
he has held since January 2020. Mr. Doyle joined Piper Sandler Companies in connection with our acquisition of
Sandler O'Neill, where Mr. Doyle served as a senior managing principal since January 2012, and partner since January
1995. Mr. Doyle began his career at Marine Midland Bank.
John W. Geelan is our general counsel and secretary. He served as assistant general counsel and assistant secretary
from November 2007 until becoming general counsel in January 2013. Mr. Geelan joined Piper Sandler Companies in
2005.
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ADDITIONAL INFORMATION
Our principal executive offices are located at 800 Nicollet Mall, Suite 900, Minneapolis, Minnesota 55402, and our
general telephone number is (612) 303-6000. We maintain an Internet Web site at http://www.pipersandler.com. The
information contained on and connected to our Web site is not incorporated into this Form 10-K. We make available free
of charge on or through our Web site our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and all other reports we file with the SEC, as soon as
reasonably practicable after we electronically file these reports with, or furnish them to, the SEC. Such reports are also
available on the SEC's Web site at http://www.sec.gov. "Piper Sandler," the "Company," "registrant," "we," "us" and "our"
refer to Piper Sandler Companies and our subsidiaries. The Piper Sandler logo and the other trademarks, tradenames
and service marks of Piper Sandler Companies mentioned in this report or elsewhere, including, but not limited to,
PIPER SANDLER®, PIPER JAFFRAY®, REALIZE THE POWER OF PARTNERSHIP®, CORNERSTONE MACRO®,
SIMMONS ENERGY | A DIVISION OF PIPER SANDLER®, SIMMONS ENERGY | A DIVISION OF PIPER JAFFRAY®,
SIMMONS ENERGY®, SIMMONS & COMPANY
INTERNATIONAL®, SIMMONSCO-INTL®, PIPER SANDLER
FINANCESM, BIOINSIGHTS®, TAKING STOCK WITH TEENS®, HEALTHY ACTIVE AND SUSTAINABLE LIVING® and
GUIDES FOR THE JOURNEY®, are the property of Piper Sandler & Co., a subsidiary of Piper Sandler Companies.
Item 1A. Risk Factors.
In the normal course of our business activities, we are exposed to a variety of strategic risks, market risks, human
capital risks, liquidity risks, credit risks, operational risks, and legal and regulatory risks. A description of each of these
principal areas of risk, as well as the primary risk management processes that we use to mitigate our risk exposure in
each, is discussed below under the caption "Risk Management" included in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Part II, Item 7 of this Form 10-K.
The following discussion sets forth risk factors that we have identified in each principal area of risk as being the most
material to our business, future financial condition, and results of operations. Although we discuss these risk factors
primarily in the context of their potential effects on our business, financial condition or results of operations, it should be
understood that these effects can have further negative implications such as: reducing the price of our common stock;
reducing our capital, which can have regulatory and other consequences; affecting the confidence that our clients and
other counterparties have in us, with a resulting negative effect on our ability to conduct and grow our business; and
reducing the attractiveness of our securities to potential purchasers, which may adversely affect our ability to raise
capital and secure other funding or the prices at which we are able to do so. Further, additional risks beyond those
discussed below and elsewhere in this Form 10-K or in other of our reports filed with, or furnished to, the SEC could
adversely affect us. We cannot provide assurance that the risk factors herein or elsewhere in our other reports filed with,
or furnished to, the SEC address all potential risks that we may face.
These risk factors also serve to describe factors which may cause our results to differ materially from those described in
forward-looking statements included in this Form 10-K or in other documents or statements that make reference to this
Form 10-K. Forward-looking statements, as further described in this Form 10-K under the heading "Cautionary Note
Regarding Forward-Looking Statements," and other factors that may affect future results are discussed below under
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this Form
10-K.
STRATEGIC AND MARKET RISK
Our business success depends in large part upon the strategic decisions made by our executive management, the
alignment of business plans developed to act upon those decisions, and the quality of implementation of these business
plans. Strategic risk represents the risk associated with our executive management failing to develop and execute on
the appropriate strategic vision which demonstrates a commitment to our culture, leverages our core competencies,
appropriately responds to external factors in the marketplace, and is in the best interests of our company. In setting out
and executing upon a strategic vision for our business, we are faced with a number of inherent risks, including risks
relating to external events, market and economic conditions, competition, and business performance that could all
negatively affect our ability to execute on our strategic decisions and, therefore, our future financial condition or results
of operations. The risks related to external events and overall market and economic conditions are referred to as market
risk. The following are material risk factors that could pose a risk to our strategic vision, and the market risks that may
impact execution of our strategy.
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Developments in market and economic conditions have in the past adversely affected, and may in the future
adversely affect, our business and profitability and cause volatility in our results of operations.
Economic and market conditions have had, and will continue to have, a direct and material impact on our results of
operations and financial condition because performance in the financial services industry is heavily influenced by the
overall strength of economic conditions and financial market activity. For example:
•
In 2023, our business continued to be impacted by the U.S. Federal Reserve's efforts to reduce inflation. Although
market volatility trended lower, equity indices saw a significant rally as the pace of inflation fell, and the U.S.
economy remained relatively resilient, overall financial market activity remained subdued compared to historical
levels. During the first half of the year, the U.S. Federal Reserve raised rates four times, which brought the fed
funds rate to a 22-year high. These higher interest rates, persistent inflation, and tightened lending standards
following two high-profile bank failures in the first quarter of 2023 contributed to macroeconomic uncertainty and
muted client activity across our businesses, including advisory, equity capital markets, fixed income institutional
brokerage, and public finance. We believe that the trajectory of market conditions in 2024 will be dependent on
several factors, including a continued moderation of the pace of inflation, whether the U.S. Federal Reserve is able
to cut interest rates, whether the U.S. economy enters a recession and its magnitude and duration, and the effects
of macroeconomic or political uncertainty in the U.S. or abroad. Widespread concern or doubts in the market about
U.S. or global economic conditions, the potential for financial contagion or widespread corporate or government
defaults, the U.S. presidential election, the possibility of the broader outbreak of armed conflict in the Middle East or
Eastern Europe, geopolitical tensions concerning Taiwan, or the pace, impact, or effectiveness of the actions by the
U.S. Federal Reserve with respect to interest rates, or the efficacy or adequacy of government measures enacted
to support the U.S. and global economy, could erode the outlook for macroeconomic conditions, economic growth,
and business confidence, which would negatively impact our businesses.
• Our equities investment banking revenues from our advisory and equity capital markets businesses are directly
related to macroeconomic conditions and corresponding financial market activity. Our equities investment banking
business overall, but especially our capital markets business, benefits from cycles of strong financial market activity
and company valuations. As an example, a significant portion of our equities investment banking revenues in recent
years has been derived from advisory and capital markets engagements in our focus sectors and from financial
sponsor clients, and activity in these areas is highly correlated to market conditions and the macroeconomic
environment. During periods of heightened economic uncertainty, financial market activity can significantly decline,
as we experienced in 2023, and our business may suffer reduced revenues as a result. If the outlook for
macroeconomic conditions in 2024 were to remain depressed, or deteriorate further, the level of financial market
activity could continue to decrease, which would reduce our equities investment banking revenues more generally.
In addition, market volatility or uncertainty related to a decline in the U.S. or global macroeconomic outlook could
cause financial market activity to decrease, which would also negatively affect our equities investment banking
revenues. Global macroeconomic conditions and U.S. financial markets also remain vulnerable to the potential risks
posed by exogenous shocks, which could include, among other things, political or social unrest or economic
uncertainty in the U.S. and the European Union, including the potential for financial contagion or widespread
corporate or government defaults, renewed concern about China's economy or financial sector, the wider outbreak
of armed conflict in the Middle East or Eastern Europe, geopolitical tensions concerning Taiwan, and complications
involving terrorism and armed conflicts around the world, or other challenges to global trade. More generally,
because our business is closely correlated to the macroeconomic outlook, a significant deterioration in that outlook
or an exogenous shock would likely have an immediate and significant negative impact on our equities investment
banking business and our overall results of operations.
It is difficult to predict the economic and market conditions for 2024, which are dependent upon global and U.S.
economic conditions and geopolitical events globally. Our smaller scale and the cyclical nature of the economy and the
financial services industry leads to volatility in our financial results, including our operating margins, compensation
ratios, business mix, and revenue and expense levels. Our financial performance may be limited by the fixed nature of
certain expenses, the impact from unanticipated losses or expenses during the year, our business mix, and the inability
to scale back costs in a timeframe to match decreases in revenue-related changes in market and economic conditions.
As a result, our financial results may vary significantly from quarter to quarter and year to year.
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Developments in specific business sectors and markets in which we conduct our business have in the past
adversely affected, and may in the future adversely affect, our business and profitability.
Our results for a particular period may be disproportionately impacted by declines in specific sectors of the U.S. or
global economy, or for certain products within the financial services industry, due to our business mix and focus areas.
For example:
• Our equities investment banking business focuses on specific sectors, including healthcare, financial services,
energy and power, services and industrials, consumer, technology, and chemicals. Volatility, uncertainty, or
slowdowns in any of these sectors may adversely affect our business, sometimes disproportionately, and may
cause volatility in the net revenues we receive from our corporate advisory and capital markets activities. Both the
healthcare and financial services sectors are significant contributors to our overall results, and negative
developments in either of these sectors, including negative developments that result from legislative or regulatory
actions, would materially and disproportionately impact our equities investment banking results, even if general
economic conditions were strong. In 2023, the financial services sector suffered a significant decline in activity
following two high-profile bank failures, which negatively impacted our results of operations. In addition, we may not
participate, or may participate to a lesser degree than other firms, in sectors that experience significant activity,
such as real estate, and our operating results may not correlate with the results of other firms that participate in
these sectors.
• Our public finance investment banking business depends heavily upon conditions in the municipal market. It
focuses on investment banking activity in sectors that include state and local governments, cultural and social
service non-profit entities, special districts, project finance, and the education, healthcare, hospitality, senior living,
housing and transportation sectors, with an emphasis on transactions with a par value of $500 million or less. Both
refunding and specialty high-yield new issuances have contributed a significant portion of our public finance
investment banking revenues in recent years. During 2023, higher nominal rates and interest rate volatility had a
disproportionately negative impact on the level of refunding issuances and investor demand for high-yield products
as compared to other municipal issuances, which impacted our results of operations. To the extent that those
conditions continue or worsen in 2024, and to the extent that there is concern about U.S. economic growth,
refunding activity and high-yield sectors may continue to be disproportionately affected, which would impact our
results of operations. In addition, our public finance banking business is currently concentrated in the middle
market, and to the extent that market conditions for our clients results in lower activity as compared to larger
issuers, our results of operations will be negatively impacted.
• Our fixed income institutional business derives its revenue from sales and trading activity in the municipal and
taxable markets and from hybrid preferreds and U.S. government agency products. Our operating results for our
fixed income institutional business may not correlate with the results of other firms or the fixed income market
generally because we do not participate in significant segments of the fixed income markets such as credit default
swaps, corporate high-yield bonds, currencies or commodities. Our client activity in the fixed income institutional
business is currently concentrated in the depositories sector.
Financing and advisory services engagements are transactional in nature and do not generally provide for
subsequent engagements.
Even though we work to represent our clients at every stage of their lifecycle, we are typically retained on a short-term,
engagement-by-engagement basis in connection with specific advisory or capital markets transactions. As a
consequence, the timing of when fees are earned varies, and, therefore, our financial results from advisory and capital
markets activities may experience volatility quarter to quarter based on equity market conditions as well as the
macroeconomic business cycle more broadly. In particular, our revenues related to advisory transactions tend to be
more unpredictable from quarter to quarter due to the one-time nature of the transaction and the size of the fee. As a
result, high levels of revenue in one quarter will not necessarily be predictive of continued high levels of revenue in any
subsequent period. If we are unable to generate a substantial number of new engagements and generate fees from the
successful completion of those transactions, our business and results of operations could be adversely affected.
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We may make strategic acquisitions, enter into new business opportunities, or engage in joint ventures that
could cause us to incur unforeseen expenses, have disruptive effects on our business and may not yield the
benefits we expect.
A significant portion of our growth in recent years has come through corporate development activities, including
acquisitions. There are a number of risks associated with these activities. Costs or difficulties relating to a transaction,
including integration of products, employees, technology systems, accounting systems and management controls, or
entry into a new business line, may be difficult to predict accurately and be greater than expected causing our estimates
to differ from actual results. Importantly, we may be unable to retain key personnel after a transaction, including
personnel who are critical to the success of the ongoing business. We may incur unforeseen liabilities of an acquired
company or from entry into a new business line that could impose significant and unanticipated legal costs on us. We
will need to successfully manage these risks in order to fully realize the anticipated benefits of these transactions.
Our corporate development activities may require increased costs in the form of management personnel, financial and
management systems and controls and facilities, which, in the absence of continued revenue growth, could cause our
operating margins to decline. In addition, when we acquire a business, a substantial portion of the purchase price is
often allocated to goodwill and other identifiable intangible assets. Our goodwill and intangible assets are tested at least
annually for impairment. If, in connection with that test, we determine that a reporting unit's fair value is less than its
carrying value, we would be required to recognize an impairment to the goodwill associated with that reporting unit.
More generally, any difficulties that we experience could disrupt our ongoing business, increase our expenses and
adversely affect our operating results and financial condition. We also may be unable to achieve anticipated benefits
and synergies from a transaction as fully as expected or within the expected time frame.
Our long-term strategic growth plan relies upon corporate development, and our ability to realize that growth will be
dependent on our ability to identify and execute on accretive opportunities. To the extent that we are unable to do so,
our long-term growth may be negatively impacted.
We may not be able to compete successfully with other companies in the financial services industry that have
significantly greater resources than we do.
The financial services industry remains highly competitive, and our revenues and profitability may suffer if we are unable
to compete effectively. We generally compete on the basis of such factors as quality of advice and service, reputation,
price, product selection, transaction execution and financial resources. Pricing and other competitive pressures in
investment banking, including the use of multiple book runners, co-managers, and multiple financial advisors handling
transactions, have affected and could continue to adversely affect our revenues.
We remain at a competitive disadvantage given our relatively small size compared to some of our competitors. Large
financial services firms generally have a larger capital base, greater access to capital, and greater technology
resources, affording them greater capacity for risk and potential for innovation, an extended geographic reach and
flexibility to offer a broader set of products. For example, some of these firms are able to use their larger capital base to
offer additional products or services to their investment banking clients, which can be a competitive advantage. With
respect to our fixed income institutional brokerage and public finance investment banking businesses, it is more difficult
for us to diversify and differentiate our product set, and our fixed income business mix currently is concentrated in
investment grade fixed income products, potentially with less opportunity for growth than other firms which have grown
their fixed income businesses by investing in, developing and offering non-traditional products (e.g., credit default
swaps, interest rate products and currencies and commodities).
Our institutional brokerage business is subject to pricing and competitive pressures.
The ability to execute trades electronically and through alternative trading systems and competitive pressures on our
clients have increased the pressure on trading commissions and spreads within the equities institutional brokerage
business over the past few years. We expect to continue to experience pricing and other competitive pressures in our
equities and fixed income institutional brokerage businesses in the future. In addition, we will need to continue to invest
in these businesses in order to continue to meet our clients’ needs and maintain sufficient scale.
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Our inability to identify and address actual, potential, or perceived conflicts of interest may negatively impact
our reputation and have a material adverse effect on our business.
We regularly address actual, potential or perceived conflicts of interest in our business, including situations where our
services to a particular client or our own investments or other interests conflict, or are perceived to conflict, with the
interests of another client. Appropriately identifying and dealing with conflicts of interest is complex and difficult, and we
face the risk that our current policies, controls and procedures do not timely identify or appropriately manage such
conflicts of interest. It is possible that actual, potential or perceived conflicts could give rise to client dissatisfaction,
litigation or regulatory enforcement actions. Our reputation could be damaged if we fail, or appear to fail, to deal
appropriately with potential or actual conflicts of interest. Client dissatisfaction, litigation, or regulatory enforcement
actions arising from a failure to adequately deal with conflicts of interest, and the reputational harm suffered as a
consequence, could have a material adverse effect on our business.
Damage to our reputation could harm our business.
Maintaining our reputation is critical to attracting and maintaining clients, customers, investors, and employees. If we fail
to deal with, or appear to fail to deal with, issues that may give rise to reputational risk, such failure or appearance of
failure could have a material adverse effect on our business and stock price. These issues include appropriately dealing
with potential conflicts of interest, legal and regulatory requirements, perceptions of our environmental, social and
governance practices or business selection, ethical issues, money laundering, cybersecurity, and the proper
identification of the strategic, market, human capital, liquidity, credit, operational, legal and regulatory risks inherent in
our business and products.
The number of anticipated investment banking transactions may differ from actual results.
The completion of anticipated investment banking transactions in our pipeline is uncertain and partially beyond our
control, and our investment banking revenue is typically earned only upon the successful completion of a transaction. In
most cases, we receive little or no payment for investment banking engagements that do not result in the successful
completion of a transaction. For example, a client's acquisition transaction may be delayed or terminated because of a
failure to agree upon final terms with the counterparty, failure to obtain necessary regulatory consents or director or
shareholder approvals, failure to secure necessary financing, adverse market conditions or unexpected financial or
other issues in the client's or counterparty's business. More importantly, anticipated advisory or capital markets
transactions may be delayed or terminated as a result of a decline in or uncertainty surrounding market or economic
conditions. If parties fail to complete a transaction on which we are advising or an offering in which we are participating,
we could earn little or no revenue from the transaction and may have incurred significant expenses (e.g., travel and
legal expenses) associated with the transaction. Accordingly, our business is highly dependent on market and economic
conditions as well as the decisions and actions of our clients and interested third parties, and the number of
engagements we have at any given time (and any characterization or description of our deal pipelines) is subject to
change and may not necessarily result in future revenues.
HUMAN CAPITAL RISK
Our business is a human capital business, and, therefore, our future financial condition and results of operations are
significantly dependent upon our employees and their actions. Our success depends on the skills, expertise, and
performance of our employees. Human capital risks represent the risks posed if we fail to attract and retain qualified
individuals who are motivated to serve the best interests of our clients, thereby serving the best interests of our
company, as well as the risks posed if our culture fails to encourage such behavior. Human capital risk is also present
where we fail to detect and prevent employees from acting contrary to our policies and procedures, for example, if an
employee were to inadequately safeguard or misuse our clients' confidential information. Any failure by us in creating
and maintaining a culture that emphasizes serving our clients' best interests or detecting or preventing employees from
engaging in behaviors that run counter to that culture might lead to reputational damage for our firm. The following are
material human capital risk factors that could pose a risk to us.
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Our ability to attract, develop and retain highly skilled and productive employees, develop the next generation
of our business leadership, and instill and maintain a culture of ethics is critical to the success of our business.
Historically, the market for qualified employees within the financial services industry has been marked by intense
competition, and the performance of our business may suffer to the extent we are unable to attract, retain, and develop
productive employees, given the relatively small size of our company and our employee base compared to some of our
competitors and the geographic locations in which we operate. The primary sources of revenue in each of our business
lines are fees earned on advisory and underwriting transactions and customer accounts managed by our employees,
who have historically been recruited by other firms and in certain cases are able to take their client relationships with
them when they change firms. In some areas of our business, a small number of employees are responsible for
producing a significant amount of revenue, and the loss of any of these employees could adversely affect our results of
operations.
Further, recruiting and retention success often depends on the ability to deliver competitive compensation, and we may
be at a disadvantage to some competitors given our size and financial resources. Our inability or unwillingness to meet
compensation needs or demands may result in the loss of some of our professionals or the inability to recruit additional
professionals at compensation levels that are within our target range for compensation and benefits expense. Our ability
to retain and recruit also may be hindered if we limit our aggregate annual compensation and benefits expense as a
percentage of annual net revenues.
A vibrant and ethical corporate culture is critical to ensuring that our employees put our clients' interests first and are
able to identify and manage potential conflicts of interest, while also creating an environment in which each of our
employees feels empowered to develop and pursue their full potential. Our expectations for our corporate culture and
ethics are instilled and maintained by the "tone at the top" set by our management and board of directors. Lapses in our
corporate culture could lead to reputational damage or employee loss, either of which could adversely affect our results
of operations.
Our business success depends in large part on the strategic decisions made by our leadership team, and the business
plans developed and implemented by our senior business leaders. Our ability to identify, develop, and retain future
senior business leaders, and our ability to develop and implement successful succession plans for our leadership team
and other senior business leaders, is critical to our future success and results of operations.
Our inability to effectively integrate and retain personnel in connection with our acquisitions may adversely
affect our financial condition and results of operations.
We invest time and resources in carefully assessing opportunities for acquisitions, and we have made acquisitions in
the past several years to broaden the scope and depth of our human capital in various businesses. Despite diligence
and integration planning, acquisitions still present certain risks, including the difficulties in integrating and bringing
together different work cultures and employees, and retaining those employees for the period of time necessary to
realize the anticipated benefits of the acquisition. Difficulties in integrating our acquisitions, including attracting and
retaining talent to realize the expected benefits of these acquisitions, may adversely affect our financial condition and
results of operations.
LIQUIDITY AND CREDIT RISK
Two of our principal categories of risk as a broker dealer are liquidity and credit risk, each of which can have a material
impact on our results of operations and viability as a business. We believe that the effective management of liquidity and
credit is fundamental to the financial health of our firm. With respect to liquidity risk, it impacts our ability to timely
access necessary funding sources in order to operate our business and our ability to timely divest securities that we
hold in connection with our market-making and sales and trading activities. Credit risk, as distinguished from liquidity
risk, is the potential for loss due to the default or deterioration in credit quality of a counterparty, customer, client,
borrower, or issuer of securities we hold in our trading inventory. The nature and amount of credit risk depends on the
type of transaction, the structure and duration of that transaction and the parties involved. The following are material
liquidity and credit risk factors that could pose a risk to us.
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An inability to access capital readily or on terms favorable to us could impair our ability to fund operations and
could jeopardize our financial condition and results of operations.
Liquidity, or ready access to funds, is essential to our business. To fund our business, we rely on financing provided by
Pershing LLC ("Pershing") under our fully disclosed clearing agreement and Canadian Imperial Bank of Commerce
("CIBC") under a clearing arrangement with bank financing, as well as other bank financing. The financing provided by
Pershing and CIBC is at their discretion (i.e., uncommitted) and could be denied. In December 2023, we renewed our
unsecured revolving credit facility and increased the size from $75 million to $100 million to use for working capital and
general corporate purposes. We also renewed our committed line in December 2023 for an additional twelve months
and decreased the size from $80 million to $50 million.
Our access to funding sources, particularly uncommitted funding sources, is dependent on factors we cannot control,
such as economic downturns, the disruption of financial markets, the failure or consolidation of other financial
institutions, and negative news about the financial industry generally or us specifically. We could experience disruptions
with our credit facilities in the future, including the loss of liquidity sources or increased borrowing costs, if lenders or
investors develop a negative perception of our short- or long-term financial prospects, which could result from
decreased business activity. Our liquidity also could be impacted by the activities resulting in concentration of risk,
including investments in specific markets or products without liquidity. Our access to funds also may be impaired if
regulatory authorities take significant action against us, or if we discover that one of our employees has engaged in
serious unauthorized or illegal activity.
In the future, we may need to incur debt or issue equity in order to fund our working capital requirements, as well as to
execute our growth initiatives that may include acquisitions and other investments. Similarly, our access to funding
sources may be contingent upon terms and conditions that may limit or restrict our business activities and growth
initiatives. In addition, we currently do not have a credit rating, which could adversely affect our liquidity and competitive
position by increasing our borrowing costs and limiting access to sources of liquidity that require a credit rating as a
condition to providing funds.
If we are unable to obtain necessary funding, or if the funding we obtain is on terms and conditions unfavorable to us, it
could negatively affect our business activities and operations, and our ability to pursue certain growth initiatives and
make certain capital decisions, including the decision whether to pay future dividends to our shareholders, as well as
our future financial condition or results of operations.
The use of estimates and valuations in measuring fair value involve significant estimation and judgment by
management.
We make various estimates that affect reported amounts and disclosures. Broadly, those estimates are used in
measuring fair value of certain financial instruments, investments in private companies, accounting for goodwill and
intangible assets, establishing provisions for potential losses that may arise from litigation, and regulatory proceedings
and tax examinations. Estimates are based on available information and judgment. Therefore, actual results could differ
from our estimates and that difference could have a material effect on our consolidated financial statements. With
respect to accounting for goodwill and intangible assets, we complete our annual goodwill and intangible asset
impairment testing in the fourth quarter of each year (or earlier if impairment indicators are present). Impairment
charges resulting from this valuation analysis could materially adversely affect our results of operations.
Financial instruments and other inventory positions owned, and financial instruments and other inventory positions sold
but not yet purchased, are recorded at fair value, and unrealized gains and losses related to these financial instruments
are reflected on our consolidated statements of operations. The fair value of a financial instrument is the amount at
which the instrument could be exchanged in a transaction between market participants at the measurement date.
Where available, fair value is based on observable market prices or parameters or derived from such prices or
parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation
techniques involve management estimation and judgment, the degree of which is dependent on the price transparency
for the instruments or market and the instruments' complexity. Difficult market environments may cause financial
instruments to become substantially more illiquid and difficult to value, increasing the use of valuation models. Our
future results of operations and financial condition may be adversely affected by the valuation adjustments that we apply
to these financial instruments.
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Investments in private companies are valued based on an assessment of each underlying security, considering rounds
of financing, the financial condition and operating results of the private company, third-party transactions and market-
based information, including comparable company transactions, trading multiples (e.g., multiples of revenue and
earnings before interest, taxes, depreciation, and amortization ("EBITDA")), discounted cash flow analyses and changes
in market outlook, among other factors. These valuation techniques require significant management estimation and
judgment.
Concentration of risk increases the potential for significant losses.
Concentration of risk increases the potential for significant losses in our sales and trading, alternative asset
management, credit underwriting and syndication platform, and underwriting businesses. We have committed capital to
these businesses, and we may take substantial positions in particular types of securities or issuers. This concentration
of risk may cause us to suffer losses even when economic and market conditions are generally favorable for our
competitors. Further, disruptions in the credit markets can make it difficult to hedge exposures effectively and
economically.
Our businesses, profitability and liquidity may be adversely affected by deterioration in the credit quality of, or
defaults by, third parties who owe us money, securities or other assets.
The nature of our businesses exposes us to credit risk, or the risk that third parties who owe us money, securities or
other assets will not perform their obligations. These parties may default on their obligations to us due to bankruptcy,
lack of liquidity, operational failure or other reasons. Deterioration in the credit quality of securities or obligations we hold
could result in losses and adversely affect our ability to rehypothecate or otherwise use those securities or obligations
for liquidity purposes. A significant downgrade in the credit ratings of our counterparties could also have a negative
impact on our results. Default rates, downgrades and disputes with counterparties as to the valuation of collateral tend
to increase in times of market stress and illiquidity. Although we review credit exposures to specific clients and
counterparties and to specific industries that we believe may present credit concerns, default risk may arise from events
or circumstances that are difficult to detect or foresee. Also, concerns about, or a default by, one institution generally
leads to losses, liquidity problems, or defaults by other institutions, which in turn could adversely affect our business.
Particular activities or products within our business expose us to increased credit risk, including inventory positions,
nonstandard settlements, interest rate swap contracts with customer credit exposure, counterparty risk with one major
financial institution related to customer interest rate swap contracts without customer credit exposure, investment
banking and advisory fee receivables, liquidity providers on variable rate demand notes we remarket, and similar
activities. With respect to interest rate swap contracts with customer credit exposure, we have retained the credit
exposure with four non-publicly rated counterparties totaling $6.7 million at December 31, 2023 as part of our matched-
book interest rate swap program. In the event of a termination of the contract, the counterparty would owe us the
applicable amount of the credit exposure. If our counterparty is unable to make its payment to us, we would still be
obligated to pay our hedging counterparty, resulting in credit losses. Non-performance by our counterparties, clients and
others, including with respect to our inventory positions and interest rate swap contracts with customer credit exposures,
could result in losses, potentially material, and thus have a significant adverse effect on our business and results of
operations.
In addition, reliance on revenues from hedge funds and hedge fund advisors, which are less regulated than many
investment company and investment advisor clients, may expose us to greater risk of financial loss from unsettled
trades than is the case with other types of institutional investors. Concentration of risk may result in losses to us even
when economic and market conditions are generally favorable for others in our industry.
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An inability to readily divest trading positions may result in financial losses to our business.
Timely divestiture of our trading positions, including equity, fixed income and other securities positions, can be impaired
by decreased trading volume, increased price volatility, rapid changes in interest rates, concentrated trading positions,
limitations on the ability to divest positions in highly specialized or structured transactions and changes in industry and
government regulations. While we hold a security, we are vulnerable to valuation fluctuations and may experience
financial losses to the extent the value of the security decreases and we are unable to timely divest or hedge our trading
position in that security. The value may decline as a result of many factors, including issuer-specific, market or
geopolitical events. In addition, in times of market uncertainty, the inability to divest inventory positions may have an
impact on our liquidity as funding sources generally become more restrictive, which could limit our ability to pledge the
underlying security as collateral. Our liquidity may also be impacted if we choose to facilitate liquidity for specific
products and voluntarily increase our inventory positions in order to do so, exposing ourselves to greater market risk
and potential financial losses from the reduction in value of illiquid positions.
Our underwriting and alternative asset management activities expose us to risk of loss.
We engage in a variety of activities in which we commit or invest our own capital, including underwriting and alternative
asset management. In our role as underwriter for equity and fixed income securities, we commit to purchase securities
from the issuer or one or more holders of the issuer's securities, and we then sell those securities to other investors or
into the public markets, as applicable. Our underwriting activities, including bought deal transactions and equity block
trading activities, expose us to the risk of loss if the price of the security falls below the price we purchased the security
before we are able to sell all of the securities that we purchased. For example, as an underwriter, or, with respect to
equity securities, a block positioner, we may commit to purchasing securities from an issuer or one or more holders of
the issuer's securities without having found purchasers for some or all of the securities. In those instances, we may find
that we are unable to sell the securities at a price equal to or above the price at which we purchased the securities, or
with respect to certain securities, at a price sufficient to cover our hedges. With respect to alternative asset
management, our ability to withdraw our capital from these investments may be limited, and we may not be able to
realize our investment objectives by sale or disposition at attractive prices, increasing our risk of losses. Our joint
venture entities or other alternative asset management entities that underwrite and syndicate client debt may hold a
portion of such debt after syndication, and our invested capital is exposed to a risk of loss to the extent that the debt is
ultimately not repaid.
Our results from these activities may vary from quarter to quarter. We may incur significant losses from our underwriting
and alternative asset management activities due to equity or fixed income market fluctuations and volatility from quarter
to quarter, or from a deterioration in specific business subsectors or the economy more generally. In addition, we may
engage in hedging transactions that, if not successful, could result in losses, and the hedges we purchase to
counterbalance market rate changes in certain inventory positions are not perfectly matched to the positions being
hedged, which could result in losses.
Use of derivative instruments as part of our financial risk management techniques may not effectively hedge
the risks associated with activities in certain of our businesses.
We use interest rate swaps and credit default swaps, interest rate locks, U.S. treasury bond futures and options, and
equity option contracts as a means to manage risk in certain inventory positions and to facilitate customer transactions.
With respect to risk management, we enter into derivative contracts to hedge interest rate and market value risks
associated with our security positions, including fixed income inventory positions that we hold for facilitating client
activity. Generally, we do not hedge all of our interest rate risk. In addition, these hedging strategies may not work in all
market environments and as a result may not be effective in mitigating interest rate and market value risk, especially
when market volatility reduces the correlation between a hedging vehicle and the securities inventory being hedged.
There are risks inherent in our use of these products, including counterparty exposure and basis risk. Counterparty
exposure refers to the risk that the amount of collateral in our possession on any given day may not be sufficient to fully
cover the current value of the swaps if a counterparty were to suddenly default. Basis risk refers to risks associated with
swaps where changes in the value of the swaps may not exactly mirror changes in the value of the cash flows they are
hedging. We may incur losses from our exposure to derivative interest rate products and the increased use of these
products in the future.
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OPERATIONAL RISK
Operational risk is the risk of loss, or damage to our reputation, resulting from inadequate or failed processes, people
and systems or from external events. Such loss or reputational damage could negatively impact our future financial
condition and results of operations. The following are material operational risk factors that could pose a risk to us.
Our information and technology systems, including outsourced systems, are critical components of our
operations, and failure of those systems or other aspects of our operations infrastructure may disrupt our
business, cause financial loss and constrain our growth.
We typically transact thousands of securities trades on a daily basis across multiple markets. Our data and transaction
processing, financial, accounting and other technology and operating systems are essential to this task. A system
malfunction (due to hardware failure, capacity overload, security incident, data corruption, or similar event) or mistake
made relating to the processing of transactions could result in financial loss, liability to clients, regulatory intervention,
reputational damage and constraints on our ability to grow.
We operate under a fully disclosed model for all of our client clearing activities and for all of our securities inventories
with the exception of convertible securities. In a fully disclosed model, we act as an introducing broker for most
customer transactions and rely on a clearing broker dealer to handle clearance and settlement of our customers'
securities transactions. The clearing services provided by our clearing broker dealer, Pershing, are critical to our
business operations, and similar to other important outsourced operations, any failure by the clearing agent with respect
to the services we rely on it to provide could significantly disrupt and negatively impact our operations and financial
results. We also contract with third parties for market data services, which constantly broadcast news, quotes, analytics
and other relevant information to our employees, as well as other critical data processing activities. In the event that any
of these service providers fails to adequately perform such services or the relationship between that service provider
and us is terminated, we may experience a significant disruption in our operations, including our ability to timely and
accurately process transactions or maintain complete and accurate records of those transactions.
Adapting or developing our technology systems to meet new regulatory requirements, client needs, geographic
expansion and industry demands also is critical for our business. The introduction of new technologies presents new
challenges on a regular basis. We have an ongoing need to upgrade and improve our various technology systems,
including our data and transaction processing, financial, accounting, risk management, compliance, and trading
systems. This need could present operational issues or require significant capital spending. It also may require us to
make additional investments in technology systems and may require us to reevaluate the current value or expected
useful lives of our technology systems, which could negatively impact our results of operations.
A disruption in the infrastructure that supports our business due to fire, natural disaster, health emergency (e.g., a
pandemic), power or communication failure, act of terrorism or war may affect our ability to service and interact with our
clients. If we are not able to implement contingency plans effectively, any such disruption could harm our results of
operations.
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Protection of our sensitive and confidential information is critical to our operations, and failure of those
systems may disrupt our business, damage our reputation, and cause financial losses.
Our clients routinely provide us with sensitive and confidential information. Secure processing, storage and transmission
of confidential and other information in our internal and outsourced computer systems and networks is critically
important to our business. We take protective measures and endeavor to modify them as circumstances warrant.
However, our computer systems, software and networks, and those of our clients, vendors, service providers,
counterparties and other third parties, may be vulnerable to unauthorized access, cyber attacks, security breaches,
computer viruses or other malicious code, inadvertent, erroneous or intercepted transmission of information (including
by e-mail), human error, and other events that could have an information security impact. We work with our employees,
clients, vendors, service providers, counterparties and other third parties to develop and implement measures designed
to protect against such an event, but we may not be able to fully protect against such an event, and do not have, and
may be unable to put in place, secure capabilities with all of these third parties and we may not be able to ensure that
these third parties have appropriate controls in place to protect the confidentiality of the information. If one or more of
such events occur, this potentially could jeopardize our or our clients' or counterparties' confidential and other
information processed and stored in, and transmitted through, our computer systems and networks, or those of third
parties, or otherwise cause interruptions or malfunctions in our, our clients', our counterparties' or third parties'
operations. We may be required to expend significant additional resources to modify our protective measures or to
investigate and remediate vulnerabilities or other exposures, and we may be subject to reputational harm as well as
litigation, regulatory penalties, and financial losses that are either not insured against or not fully covered through any
insurance maintained by us.
A failure to protect our computer systems, networks and information, and our clients' information, against
cyber attacks, data breaches, and similar threats could impair our ability to conduct our businesses, result in
the disclosure, theft or destruction of confidential information, damage our reputation and cause significant
financial and legal exposure.
Our operations rely on the secure processing, storage and transmission of confidential and other information in our
computer systems and networks. There have been several highly publicized cases involving financial services
companies, consumer-based companies and other companies, as well as governmental and political organizations,
reporting breaches in the security of their websites, networks or other systems. Some of the publicized breaches have
involved sophisticated and targeted cyber attacks intended to obtain unauthorized access to confidential information,
destroy data, disrupt or degrade service, sabotage systems or cause other damage, including through the introduction
of computer viruses, malware, ransomware, phishing, denial-of-service, and other means. There have also been several
highly publicized cases where hackers have requested "ransom" payments in exchange for not disclosing customer
information.
A successful penetration or circumvention of the security of our systems could cause serious negative consequences for
us, including significant disruption of our operations and those of our clients, customers and counterparties;
misappropriation of our confidential information or that of our clients, customers, counterparties or employees; or
damage to our computers or systems and those of our clients, customers and counterparties. A cyber attack or other
information security events could result in violations of applicable privacy and other laws, financial loss to us or to our
customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and
reputational harm, all of which could have a material adverse effect on us.
We continuously monitor and develop our systems to protect our technology infrastructure and data from
misappropriation or corruption. Despite our efforts to ensure the integrity of our systems and information, we may not be
able to anticipate, detect or implement effective preventive measures against all cyber threats, especially because the
techniques used are increasingly sophisticated, change frequently, and are often not recognized until months after the
attack. Cyber attacks can originate from a variety of sources, including third parties who are affiliated with foreign
governments or other actors or employees acting negligently or in a manner adverse to our interests. Third parties may
seek to gain access to our systems either directly or using equipment or security passwords belonging to employees,
customers, third-party service providers or other users of our systems. In addition, due to our interconnectivity with third-
party vendors, central agents, exchanges, clearing houses and other financial institutions, we could be adversely
impacted if any of them are subject to a successful cyber attack or other information security event.
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Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems,
software and networks have been and may be vulnerable to unauthorized access, misuse, computer viruses or other
malicious code and other events that could have a security impact. We may be required to expend significant additional
resources to modify our protective measures or to investigate and remediate vulnerabilities, exposures, or information
security events. Due to the complexity and interconnectedness of our systems, the process of enhancing our protective
measures can itself create a risk of systems disruptions and security issues.
The increased use of cloud technologies can heighten these and other operational risks. Certain aspects of the security
of such technologies are unpredictable or beyond our control, and this lack of transparency may inhibit our ability to
discover a failure by cloud service providers to adequately safeguard their systems and prevent cyber attacks that could
disrupt our operations and result in misappropriation, corruption or loss of confidential and other information. In addition,
there is a risk that encryption and other protective measures, despite their sophistication, may be defeated, particularly
to the extent that new computing technologies vastly increase the speed and computing power available.
Risk management processes may not fully mitigate exposure to the various risks that we face.
We refine our risk management techniques, strategies and assessment methods on an ongoing basis. However, risk
management techniques and strategies, both ours and those available to the market generally, may not be fully effective
in identifying and mitigating our risk exposure in all economic market environments or against all types of risk. For
example, we may fail to identify or anticipate particular risks that our systems are capable of identifying, or the systems
that we use, and that are used within the industry generally, may not be capable of identifying certain risks, or every
economic and financial outcome, or the specifics and timing of such outcomes. In addition, our risk management
techniques and strategies seek to balance our ability to profit from our market-making and investing positions with our
exposure to potential losses. Some of our strategies for managing risk are based upon our use of observed historical
market behavior. We apply statistical and other tools to these observations to quantify our risk exposure. Any failures in
our risk management techniques and strategies to accurately quantify our risk exposure could limit our ability to manage
risks. In addition, any risk management failures could cause our losses to be significantly greater than the historical
measures indicate. Further, our quantified modeling does not take all risks into account. Our more qualitative approach
to managing those risks could prove insufficient, exposing us to material unanticipated losses.
The financial services industry and the markets in which we operate are subject to systemic risk that could
adversely affect our business and results.
Participants in the financial services industry and markets increasingly are closely interrelated as a result of credit,
trading, clearing, technology and other relationships between them. A significant adverse development with one
participant (such as a bankruptcy or default) may spread to others and lead to significant concentrated or market-wide
problems (such as defaults, liquidity problems or losses) for other industry participants, including us. Further, the control
and risk management infrastructure of the markets in which we operate often is outpaced by financial innovation and
growth in new types of securities, transactions and markets. Systemic risk is inherently difficult to assess and quantify,
and its form and magnitude can remain unknown for significant periods of time.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could
materially affect our business.
We have documented and tested our internal control procedures in order to satisfy the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"), which requires annual management assessments of the
effectiveness of our internal controls over financial reporting and a report by our independent auditors regarding our
internal control over financial reporting. We are in compliance with Section 404 of the Sarbanes-Oxley Act as of
December 31, 2023. However, if we fail to maintain the adequacy of our internal controls, as such standards are
modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an
ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act. Failure to maintain an effective internal control environment could materially adversely affect our
business.
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LEGAL AND REGULATORY RISK
Legal and regulatory risk includes the risk of non-compliance with applicable legal and regulatory requirements and the
loss to our reputation we may suffer as a result of failure to comply with laws, regulations, rules, related SRO standards
and codes of conduct applicable to our business activities. It also includes the risk that legislation could reduce or
eliminate certain business activities that we are currently engaged in, which could harm our future financial condition or
results of operations. The following are material legal and regulatory risk factors that could pose a risk to us.
Our business is subject to extensive regulation in the jurisdictions in which we operate, and a significant
regulatory action against our company may have a material adverse financial effect on, cause significant
reputational harm to, or result in other collateral consequences for our company.
As a participant in the financial services industry, we are subject to complex and extensive regulation of many aspects
of our business by U.S. federal and state regulatory agencies, SROs (including securities exchanges) and by foreign
governmental agencies, regulatory bodies and securities exchanges. Specifically, our operating subsidiaries include
broker dealer and related securities entities organized in the U.S., the U.K., and Hong Kong. Each of these entities is
registered or licensed with the applicable local regulator and is subject to all the applicable rules and regulations
promulgated by those authorities. In addition, our asset management subsidiaries, PSC Capital Partners LLC, Piper
Sandler Advisors LLC, Piper Heartland Healthcare Capital LLC and Piper Sandler Finance Management LLC, as well as
Piper Sandler & Co., are registered as investment advisors with the SEC and are subject to the regulation and oversight
by the SEC, and we have an additional asset management subsidiary subject to regulation in Guernsey.
Generally, the requirements imposed by our regulators are designed to ensure the integrity of the financial markets and
to protect customers and other third parties who deal with us. These requirements are not designed to protect our
shareholders. Consequently, broker dealer regulations often serve to limit our activities, through net capital, customer
protection, market conduct requirements and other restrictions on the businesses in which we may operate or invest.
We also must comply with numerous regulations, including requirements related to fiduciary duties to clients, record-
keeping, reporting and customer disclosures. Compliance with many of these regulations entails a number of risks,
particularly in areas where applicable regulations may be newer or unclear. Regulatory authorities in all jurisdictions in
which we conduct business may examine or investigate aspects of our business, and responding to examinations or
investigations could increase regulatory costs and adversely affect our results of operations. For example, in 2023, we
disclosed ongoing investigations by the SEC and the Commodity Futures Trading Commission (the "CFTC") regarding
our compliance with recordkeeping requirements for business-related communications sent over unapproved electronic
messaging channels. In addition, we and our employees could be fined or otherwise disciplined for violations or
prohibited from engaging in some of our business activities.
Our business also subjects us to the complex income and payroll tax laws of the national and local jurisdictions in which
we have business operations, and these tax laws may be subject to different interpretations by the taxpayer and the
relevant governmental taxing authorities. We must make judgments and interpretations about the application of these
inherently complex tax laws when determining the provision for income and other taxes. We are subject to contingent
tax risk that could adversely affect our results of operations, to the extent that our interpretations of tax laws are
disputed upon examination or audit, and are settled in amounts in excess of established reserves for such
contingencies.
The effort to combat money laundering also has become a high priority in governmental policy with respect to financial
institutions. The obligation of financial institutions, including ourselves, to identify their customers, watch for and report
suspicious transactions, respond to requests for information by regulatory authorities and law enforcement agencies,
and share information with other financial institutions has required the implementation and maintenance of internal
practices, procedures and controls which have increased, and may continue to increase, our costs. Any failure with
respect to our programs in this area could subject us to serious regulatory consequences, including substantial fines
and potentially other liabilities.
Piper Sandler Companies | 20
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Our industry is exposed to significant legal liability, which could lead to substantial damages.
We face significant legal risks in our businesses. These risks include potential liability under securities laws and
regulations in connection with our capital markets, asset management and other businesses. The volume and amount
of damages claimed in litigation, arbitrations, regulatory enforcement actions and other adversarial proceedings against
financial services firms has historically been intense. Our experience has been that adversarial proceedings against
financial services firms typically increase during and following a market downturn. We also are subject to claims from
disputes with our employees and our former employees under various circumstances. Risks associated with legal
liability often are difficult to assess or quantify, and their existence and magnitude can remain unknown for significant
periods of time, making the amount of legal reserves related to these legal contingencies difficult to determine and
subject to future revision. Legal or regulatory matters involving our directors, officers or employees in their individual
capacities also may create exposure for us because we may be obligated or may choose to indemnify the affected
individuals against liabilities and expenses they incur in connection with such matters to the extent permitted under
applicable law. In addition, like other financial services companies, we may face the possibility of employee fraud or
misconduct. The precautions we take to prevent and detect this activity may not be effective in all cases, and there can
be no assurance that we will be able to deter or prevent fraud or misconduct. Exposures from and expenses incurred
related to any of the foregoing actions or proceedings could have a negative impact on our results of operations and
financial condition. In addition, future results of operations could be adversely affected if reserves relating to these legal
liabilities are required to be increased or legal proceedings are resolved in excess of established reserves.
Legislative and regulatory proposals could significantly curtail the revenue from certain products or services
that we currently provide or could otherwise have a material adverse effect on our results of operations.
Proposed changes in laws or regulations relating to our business could decrease, perhaps significantly, the revenue that
we receive from certain products or services that we provide, or otherwise have a material adverse effect on our results
of operations. Both the healthcare and financial services sectors are significant contributors to our overall results, and
negative developments in either of these sectors, including negative developments that result from legislative or
regulatory actions, could negatively affect our results of operations, even when general economic conditions are strong.
The business operations that we conduct outside of the U.S. subject us to unique risks.
When we conduct business outside the U.S., we are subject to risks, including the risk that we will be unable to provide
effective operational support to these business activities, the risk of noncompliance with foreign laws and regulations,
and the general economic and political conditions in countries where we conduct business, which may differ significantly
from those in the U.S. For example, the effect of Brexit is still developing and could require us to obtain additional
regulatory licenses or impose additional restrictions on our ability to conduct business in Europe. In addition, our
international operations require compliance with anti-bribery and anti-corruption laws, including the U.S. Foreign Corrupt
Practices Act and the U.K. Bribery Act 2010. These laws generally prohibit companies and their intermediaries from
engaging in bribery or making other improper payments to foreign officials for the purpose of obtaining or retaining
business or gaining an unfair business advantage. While our employees and agents are required to comply with these
laws, we cannot ensure that our internal controls policies and procedures will always protect us from intentional,
reckless or negligent acts committed by our employees or agents, which acts could subject our company to fines or
other regulatory consequences that could disrupt our operations and negatively impact our results of operations.
Regulatory capital requirements may limit our ability to expand or maintain our present levels of business or
impair our ability to meet our financial obligations.
We are subject to the SEC's uniform net capital rule (Rule 15c3-1) and the net capital rule of FINRA, which may limit our
ability to withdraw capital from Piper Sandler & Co. The uniform net capital rule sets the minimum level of net capital a
broker dealer must maintain and also requires that a portion of its assets be relatively liquid. FINRA may prohibit a
member firm from expanding its business or paying cash dividends if resulting net capital falls below its requirements.
Underwriting commitments require a charge against net capital and, accordingly, our ability to make underwriting
commitments may be limited by the requirement that we must at all times be in compliance with the applicable net
capital regulations.
Piper Sandler Companies, our holding company, depends on dividends, distributions and other payments from our
subsidiaries to fund its obligations. The regulatory restrictions described above may impede access to funds our holding
company needs to make payments on any such obligations.
Piper Sandler Companies | 21
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OTHER RISKS TO OUR SHAREHOLDERS
The following are additional risk factors that could pose a material risk to us or our shareholders.
We may change our dividend policy at any time and there can be no assurance that we will continue to declare
cash dividends.
Our current dividend policy is to return between 30 percent and 50 percent of our fiscal year adjusted net income to
shareholders. Although we expect to pay dividends to our shareholders in accordance with our dividend policy, we have
no obligation to pay any dividend, and our dividend policy may change at any time without notice. The declaration and
payment of dividends is at the discretion of our board of directors in accordance with applicable law after taking into
account various factors, including our financial condition, operating results, current and anticipated cash needs and
capital uses, limitations imposed by our indebtedness, legal requirements and other factors that our board of directors
deems relevant. As a result, we may not pay dividends at any rate or at all.
Our stock price may fluctuate as a result of several factors, including changes in our revenues, operating
results, and return on equity.
We have experienced, and expect to experience in the future, fluctuations in the market price of our common stock due
to factors that relate to the nature of our business, including changes in our revenues, operating results, earnings per
share, and return on equity. Our business, by its nature, does not produce steady and predictable earnings on a
quarterly basis, which may cause fluctuations in our stock price that may be significant. Other factors that have affected,
and may further affect, our stock price include changes in or news related to economic, political, or market events or
conditions, changes in market conditions in the financial services industry, including developments in regulation
affecting our business, a predominantly passive or quantitative shareholder base among the Company's top twenty
shareholders, failure to meet the expectations of market analysts, changes in recommendations or outlooks by market
analysts, and aggressive short selling.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and of
Delaware law may prevent or delay an acquisition of our company, which could decrease the market value of
our common stock.
Our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law contain
provisions that are intended to deter abusive takeover tactics by making them unacceptably expensive to a potential
raider and to encourage prospective acquirors to negotiate with our board of directors rather than to attempt a hostile
takeover. These provisions include limitations on our shareholders' ability to act by written consent and to call special
meetings. Delaware law also imposes some restrictions on mergers and other business combinations between us and
any holder of 15 percent or more of our outstanding common stock. We believe these provisions protect our
shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our
board of directors and by providing our board of directors with more time to assess any acquisition proposal, and are not
intended to make our company immune from takeovers. However, these provisions apply even if the offer may be
considered beneficial by some shareholders and could delay or prevent an acquisition that our board of directors
determines is not in the best interests of our company and our shareholders.
Item 1B. Unresolved Staff Comments.
None.
Piper Sandler Companies | 22
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Item 1C. Cybersecurity.
As a trusted advisor to our clients and a regulated financial services firm, information and cybersecurity are critical to
our operations and reputation. Our management team takes an active role in identifying, assessing, monitoring and
managing material risks from information and cybersecurity threats. Management’s assessment of information and
cybersecurity threats is incorporated into our enterprise risk management processes, which include assessing inherent
risks posed by the internal operating environment and external factors, assessing the adequacy and design of controls,
testing controls, determining residual risk and comparing it to risk appetite thresholds, and taking steps to further
mitigate risks as needed. Our board of directors is actively engaged in the oversight of cybersecurity and information
technology risks, with primary oversight responsibility delegated to the audit committee of the board of directors. The
audit committee is composed of board members with the appropriate expertise, including risk management,
cybersecurity and finance, to oversee these risks as well as management's cybersecurity processes and protocols.
Our chief information and operations officer is a member of our leadership team and has been in this role for 15 years.
With more than 25 years of experience in information technology in the investment banking industry, he is responsible
for overseeing more than 100 employees in our information security and technology departments who possess relevant
educational and industry experience. The information security and technology departments are responsible for various
functions of our information and cybersecurity program, including implementing and maintaining policies and
procedures; developing, implementing and governing various service level agreements; ratifying security standards;
reviewing project implementations; performing third-party vendor assessments; and operating programs such as threat
intelligence, vulnerability management, security information event management, and information governance.
Our information and cybersecurity program utilizes the National Institute of Standards and Technology ("NIST")
Cybersecurity Framework, and our security controls are mapped to the NIST Cybersecurity Framework to ensure
alignment with recognized industry best practices. Annually, we engage a third-party consultant to conduct an
assessment of the effectiveness of our information and cybersecurity program against the NIST Cybersecurity
Framework. This assessment is reviewed with the audit committee, and opportunities for further maturation are
incorporated into our information and cybersecurity roadmap.
Additionally, we regularly engage consultants and other third parties to evaluate specific priority areas of our information
and cybersecurity program based on our assessment of the current cybersecurity threat landscape. Examples of our
engagement with consultants include external penetration testing, application security assessment and cybersecurity
incident response tabletop exercises.
Our third-party vendor management program has a tiered approach to assess vendors based on risk profile. We review
each third-party vendor’s architectures, security practices and data flows, and integrate stringent contractual terms
encompassing breach notifications and other security requirements. The risk profiles associated with our service level
agreements are monitored by senior employees in our information security and technology departments. Our vendor
management program also includes an annual reassessment of the risk profile of each vendor and interim vendor
reviews are completed if service alterations occur.
Senior information security and technology employees, including the chief information and operations officer, meet
regularly to discuss potential information and cybersecurity threats that have been identified by our systems, employees
or otherwise made known to us by our third-party service providers, vendors and other external users, and to formulate
the appropriate response to any identified material information and cybersecurity threats. When high-priority information
or cybersecurity risks are identified, certain employees in our information security, privacy, technology, legal and
compliance departments meet or communicate to review potential threats in accordance with our internal cybersecurity
incident response process.
Potential threats, our response to such threats, and our evaluation of any residual risk are communicated quarterly to
the audit committee. As necessary, the chief information and operations officer provides interim updates to the audit
committee and, as appropriate, the board of directors, concerning high-priority or material information or cybersecurity
threats. Our chief information and operations officer also provides a quarterly update to the audit committee regarding
our ongoing information and cybersecurity initiatives; the current cybersecurity landscape and emerging threats; and
metrics on the effectiveness of certain aspects of our information and cybersecurity program.
Piper Sandler Companies | 23
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Employees, including representatives of management, conduct an annual cybersecurity incident response tabletop
exercise to review our processes and procedures in the event of a material information or cybersecurity incident,
including the process for assessing the materiality of an incident and communication of an incident to the audit
committee and, as appropriate, the board of directors. In addition, to promote a company-wide culture of cybersecurity
risk management, we conduct regular phishing email simulations for employees to enhance awareness and
responsiveness to possible threats and other kinds of preparedness training. We also require all employees to complete
an annual cybersecurity and privacy awareness training.
We believe that we have implemented a comprehensive, cross-functional approach to identifying, preventing and
mitigating cybersecurity threats and incidents, as well as controls and procedures that provide for the prompt escalation
of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can
be made by management in a timely manner.
We are not aware of any cybersecurity threats, including as a result of any previous cybersecurity incidents, that have
materially affected or are reasonably likely to affect our company, including our business strategy, results of operations
or financial condition. However, we cannot provide assurance that a future cybersecurity incident would not materially
affect our business strategy, results of operations or financial condition. Additional information regarding risks related to
cybersecurity is included under "Risk Factors" in Part I, Item 1A of this Form 10-K.
Item 2. Properties.
As of February 20, 2024, we conducted our operations through 59 principal offices in 31 states, and the District of
Columbia, and in London, Aberdeen and Hong Kong. All of our offices are leased. Our principal executive office is
located at 800 Nicollet Mall, Suite 900, Minneapolis, Minnesota 55402 and, as of February 20, 2024, comprises
approximately 124,000 square feet of space under a lease which expires November 30, 2025. In December 2022, we
entered into a 15-year lease agreement which comprises approximately 113,000 square feet of space for our future
principal executive office located at 350 N. 5th Street, Minneapolis, Minnesota 55401.
Item 3. Legal Proceedings.
The discussion of our legal proceedings contained in Note 16 to our consolidated financial statements included in Part
II, Item 8 of this Form 10-K is incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
Piper Sandler Companies | 24
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Part II
Item 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities.
MARKET INFORMATION
Our common stock is listed on the New York Stock Exchange under the symbol "PIPR."
SHAREHOLDERS
We had 8,473 shareholders of record and approximately 47,559 beneficial owners of our common stock as of
February 20, 2024.
DIVIDEND POLICY
Our board of directors has approved a dividend policy with the intention of returning between 30 percent and 50 percent
of our fiscal year adjusted net income to shareholders.
Our board of directors has declared a special cash dividend on our common stock of $1.00 per share related to 2023
adjusted net income. This special dividend will be paid on March 15, 2024, to shareholders of record as of the close of
business on March 4, 2024. Including this special cash dividend, we will have returned $3.40 per share, or
approximately 37 percent of our fiscal year 2023 adjusted net income to shareholders. In addition, our board of directors
has declared a quarterly cash dividend on our common stock of $0.60 per share to be paid on March 15, 2024, to
shareholders of record as of the close of business on March 4, 2024.
Our board of directors is free to change our dividend policy at any time. Restrictions on our U.S. broker dealer
subsidiary's ability to pay dividends are described in Note 24 to the consolidated financial statements included in Part II,
Item 8 of this Form 10-K.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Information about securities authorized for issuance under our equity compensation plans is included in Part III, Item 12
of this Form 10-K, and is incorporated herein by reference.
Piper Sandler Companies | 25
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ISSUER PURCHASES OF EQUITY SECURITIES
The table below sets forth the information with respect to purchases made by or on behalf of Piper Sandler Companies
or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common stock during the
quarter ended December 31, 2023:
Total Number of Shares
Approximate Dollar
Purchased as Part of
Value of Shares Yet to be
Total Number of
Average Price
Publicly Announced
Purchased Under the
Shares Purchased Paid per Share
Plans or Programs
Plans or Programs (1)
14,088 $
144.13
— $
138 million
1,787 $
152.51
— $
138 million
4,326 $
20,201 $
174.87
151.45
— $
— $
138 million
138 million
Period
Month #1
October 1, 2023 to
October 31, 2023
Month #2
November 1, 2023 to
November 30, 2023
Month #3
December 1, 2023 to
December 31, 2023
Total
(1) Effective May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million of common stock through December 31,
2024.
Piper Sandler Companies | 26
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STOCK PERFORMANCE GRAPH
This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18
of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be
incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the
Exchange Act.
The following graph compares the performance of an investment in our common stock from December 31, 2018 through
December 31, 2023, with the S&P 500 Index and the S&P 500 Diversified Financials Index. The graph assumes $100
was invested on December 31, 2018 in each of our common stock, the S&P 500 Index and the S&P 500 Diversified
Financials Index, and that all dividends were reinvested on the date of payment without payment of any commissions.
The performance shown in the graph represents past performance and should not be considered an indication of future
performance.
Five Year Total Return
Company/Index
Piper Sandler Companies
S&P 500 Index
S&P 500 Diversified Financials
12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023
$
100 $ 123.88 $
160.60 $
297.64 $
227.96 $
314.08
100
100
131.49
124.57
155.68
138.73
200.37
188.49
164.08
167.25
207.21
193.24
Item 6. Reserved.
Piper Sandler Companies | 27
PIPRS&P 500 IndexS&P 500 Diversified Financials12/31/201812/31/201912/31/202012/31/202112/31/202212/31/2023$0$50$100$150$200$250$300$350
Table of Contents
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following information should be read in conjunction with the accompanying audited consolidated financial
statements and related notes and exhibits included elsewhere in this Form 10-K. Certain statements in this Form 10-K
may be considered forward-looking. See "Cautionary Note Regarding Forward-Looking Statements" in this Form 10-K
for additional information regarding such statements and related risks and uncertainties.
Item 7 in this Form 10-K discusses our 2023 and 2022 results and the year-over-year comparisons between 2023 and
2022. Discussion of our 2021 results and the year-over-year comparisons between 2022 and 2021 can be found in
"Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our
Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.
EXPLANATION OF NON-GAAP FINANCIAL MEASURES
We have included financial measures that are not prepared in accordance with U.S. generally accepted accounting
principles ("GAAP"). These non-GAAP financial measures include adjustments to exclude (1) investment (income)/loss
and non-compensation expenses related to noncontrolling interests, (2) interest expense on long-term financing from
net revenues, (3) amortization of intangible assets related to acquisitions, (4) compensation and non-compensation
expenses from acquisition-related agreements, (5) restructuring and integration costs related to acquisitions and/or
headcount reductions and (6) the income tax expense/(benefit) allocated to the adjustments. For the year ended
December 31, 2023, the U.S. GAAP financial measures include $21.5 million of non-compensation expenses related to
potential regulatory settlements with the SEC and the CFTC regarding compliance with recordkeeping requirements for
business-related communications. We anticipate the resolution of these matters will include the payment of civil money
penalties and have accrued estimated civil penalties of $20.0 million, which are included in other operating expenses on
the consolidated statements of operations. Additionally, we have incurred $1.5 million of related outside services
expenses in connection with these matters. The non-GAAP financial measures for the year ended December 31, 2023
exclude the non-compensation expenses related to these potential regulatory settlements. The adjusted weighted
average diluted shares outstanding used in the calculation of non-GAAP earnings per diluted common share contains
an adjustment to include the common shares for unvested restricted stock awards with service conditions granted
pursuant to all acquisitions since January 1, 2020. These adjustments affect the following financial measures: net
revenues, compensation expenses, non-compensation expenses, income tax expense, net income attributable to Piper
Sandler Companies, earnings per diluted common share, total non-interest expenses, pre-tax income and pre-tax
margin. Management believes that presenting these results and measures on an adjusted basis in conjunction with the
corresponding U.S. GAAP measures provides the most meaningful basis for comparison of our operating results across
periods and enhances the overall understanding of our current financial performance by excluding certain items that
may not be indicative of our core operating results. The non-GAAP financial measures should be considered in addition
to, not as a substitute for, measures of financial performance prepared in accordance with U.S. GAAP.
EXECUTIVE OVERVIEW
Overview of Operations
Our business principally consists of providing investment banking and institutional brokerage services to corporations,
private equity groups, public entities, non-profit entities and institutional investors in the U.S. and Europe. We operate
through one reportable business segment.
Investment banking services include financial advisory services, management of and participation in underwritings, and
municipal financing activities. Revenues are generated through the receipt of advisory and financing fees. Institutional
sales, trading and research services focus on the trading of equity and fixed income products with institutions,
corporations, and government and non-profit entities. Revenues are generated through commissions and sales credits
earned on equity and fixed income institutional sales activities, net interest revenues on trading securities held in
inventory, profits and losses from trading these securities, and fees for research services and corporate access
offerings. In order to invest firm capital and to manage capital from outside investors, we have created alternative asset
management funds in merchant banking and healthcare. We receive management and performance fees for managing
these funds, and also record investment gains and losses.
Piper Sandler Companies | 28
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Our Business Strategy
Our long-term strategic objectives are to drive revenue growth, expand our market presence, continue to gain market
share, and maximize shareholder value. In order to meet these objectives, we are focused on the following:
•
Continuing to expand our business through strategic investments and selectively adding partners who share our
client-centric culture and who can leverage our platform to better serve clients;
• Growing our investment banking platform through market share gains, accretive combinations, developing internal
talent, and continued sector, product and geographic expansion. We also believe there is an opportunity to continue
to capitalize on the strength of our U.S. franchises by expanding in Europe;
•
•
Leveraging the scale within the equity brokerage and fixed income services platforms, driven by our expanded
client base and product offerings, to continue to grow market share; and
Prudently managing capital to maintain our balance sheet strength with ample liquidity and flexibility through all
market conditions.
Strategic Activities
We have taken the following important steps in the execution of our business strategy:
•
Our corporate investment banking managing directors increased to 169, up 6.3 percent from 2022, with a significant
portion of the growth driven by internal promotions. We also strengthened and broadened our industry and product
coverage in 2023, notably in healthcare services, real estate, asset and wealth management, and restructuring.
• We expanded our fixed income services team in 2023 with the strategic build out of our trading and distribution
capabilities of our non-agency structured credit business. Additionally, our continued investment in our research
services and specialized sales and trading teams are key differentiators in supporting our finance activity.
•
In 2023, we grew our market share in our advisory services, equity corporate financing and equity brokerage
businesses.
• We demonstrated the strength of our differentiated advisory product offerings in 2023 through the generation of
record revenues from our restructuring advisory services and agented debt business.
• We completed the following acquisitions in 2022 as part of our growth strategy:
• On October 7, 2022, we completed the acquisition of DBO Partners Holding LLC, including its subsidiary,
DBO Partners LLC (collectively, "DBO Partners"), a technology investment banking firm. The transaction
expanded the scale of our technology sector and added general partner advisory services.
• On June 10, 2022, we completed the acquisition of Stamford Partners LLP ("Stamford Partners"), a
specialist investment bank offering mergers and acquisitions advisory services to European food and
beverage and related consumer sectors. The transaction expanded our presence in Europe.
• On February 4, 2022, we completed the acquisition of Cornerstone Macro Research LP, including its
subsidiary, Cornerstone Macro LLC (collectively, "Cornerstone Macro"), a research firm focused on
providing macro research and equity derivatives trading to institutional investors. The transaction added a
macro research platform and increased the scale of our equity brokerage operations.
Piper Sandler Companies | 29
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Financial Highlights
(Amounts in thousands, except per share data)
U.S. GAAP
Net revenues
Compensation and benefits
Non-compensation expenses
Income before income tax expense
Net income attributable to Piper Sandler Companies
Year Ended December 31,
2023
2022
2023
v2022
$ 1,347,967
$ 1,425,638
(5.4) %
897,034
328,347
122,586
85,491
983,524
307,745
134,369
110,674
(8.8)
6.7
(8.8)
(22.8)
(23.9)
Earnings per diluted common share
$
4.96
$
6.52
Ratios and margin
Compensation ratio
Non-compensation ratio
Pre-tax margin
Effective tax rate
Non-GAAP(1)
Adjusted net revenues
66.5 %
24.4 %
9.1 %
19.3 %
69.0 %
21.6 %
9.4 %
24.7 %
$ 1,330,197
$ 1,433,713
(7.2) %
Adjusted compensation and benefits
Adjusted non-compensation expenses
Adjusted operating income
Adjusted net income attributable to Piper Sandler Companies
845,976
271,278
212,943
166,393
895,999
268,561
269,153
201,317
Adjusted earnings per diluted common share
$
9.28
$
11.26
(5.6)
1.0
(20.9)
(17.3)
(17.6)
Adjusted ratios and margin
Adjusted compensation ratio
Adjusted non-compensation ratio
Adjusted operating margin
Adjusted effective tax rate
See the "Results of Operations" section for additional information.
63.6 %
20.4 %
16.0 %
19.9 %
62.5 %
18.7 %
18.8 %
23.4 %
Piper Sandler Companies | 30
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(1) Reconciliation of U.S. GAAP to adjusted non-GAAP financial information:
(Amounts in thousands, except per share data)
Net revenues:
Net revenues – U.S. GAAP basis
Adjustments:
Investment (income)/loss related to noncontrolling interests
Interest expense on long-term financing
Adjusted net revenues
Compensation and benefits:
Compensation and benefits – U.S. GAAP basis
Adjustment:
Compensation from acquisition-related agreements
Adjusted compensation and benefits
Non-compensation expenses:
Non-compensation expenses – U.S. GAAP basis
Adjustments:
Non-compensation expenses related to noncontrolling interests
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related agreements
Non-compensation expenses from potential regulatory settlements
Adjusted non-compensation expenses
Income before income tax expense:
Income before income tax expense – U.S. GAAP basis
Adjustments:
Investment (income)/loss related to noncontrolling interests
Interest expense on long-term financing
Non-compensation expenses related to noncontrolling interests
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related agreements
Non-compensation expenses from potential regulatory settlements
Adjusted operating income
Interest expense on long-term financing
Adjusted income before adjusted income tax expense
Income tax expense:
Income tax expense – U.S. GAAP basis
Tax effect of adjustments:
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related agreements
Non-compensation expenses from potential regulatory settlements
Adjusted income tax expense
Net income attributable to Piper Sandler Companies:
Net income attributable to Piper Sandler Companies – U.S. GAAP basis
Adjustments:
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related agreements
Non-compensation expenses from potential regulatory settlements
Year Ended December 31,
2023
2022
$
1,347,967 $
1,425,638
(22,916)
5,146
1,330,197 $
1,575
6,500
1,433,713
897,034 $
983,524
(51,058)
845,976 $
(87,525)
895,999
328,347 $
307,745
(9,434)
(7,749)
(19,440)
1,102
(21,548)
271,278 $
(7,919)
(11,440)
(15,375)
(4,450)
—
268,561
122,586 $
134,369
(22,916)
5,146
9,434
51,058
7,749
19,440
(1,102)
21,548
212,943 $
(5,146)
207,797 $
1,575
6,500
7,919
87,525
11,440
15,375
4,450
—
269,153
(6,500)
262,653
23,613 $
33,189
10,467
2,053
5,152
(292)
411
41,404 $
20,872
2,528
3,599
1,148
—
61,336
85,491 $
110,674
$
$
$
$
$
$
$
$
$
$
$
40,591
5,696
14,288
(810)
21,137
66,653
8,912
11,776
3,302
—
201,317
Piper Sandler Companies | 31
Adjusted net income attributable to Piper Sandler Companies
$
166,393 $
Table of Contents
(Amounts in thousands, except per share data)
Earnings per diluted common share:
Earnings per diluted common share – U.S. GAAP basis
Adjustment for inclusion of unvested acquisition-related stock
Adjustments:
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related agreements
Non-compensation expenses from potential regulatory settlements
Adjusted earnings per diluted common share
Weighted average diluted common shares outstanding:
Weighted average diluted common shares outstanding – U.S. GAAP basis
Adjustment:
Unvested acquisition-related restricted stock with service conditions
Adjusted weighted average diluted common shares outstanding
External Factors Impacting Our Business
$
$
$
Year Ended December 31,
2023
2022
4.96 $
(0.38)
4.58 $
2.36
0.33
0.83
(0.05)
1.23
9.28 $
6.52
(0.60)
5.92
3.93
0.53
0.69
0.19
—
11.26
17,224
16,965
715
17,939
909
17,874
Performance in the financial services industry in which we operate is highly correlated to the overall strength of
macroeconomic conditions, financial market activity and the effect of geopolitical events. Overall market conditions are a
product of many factors, which are beyond our control, often unpredictable and at times inherently volatile. These
factors may affect the financial decisions made by investors, including their level of participation in the financial markets.
In turn, these decisions may affect our business results. With respect to financial market activity, our profitability is
sensitive to a variety of factors, including the demand for investment banking services as reflected by the number and
size of advisory transactions, equity and debt corporate financings, and municipal financings; the relative level of
volatility of the equity and fixed income markets; changes in interest rates and credit spreads (especially rapid and
extreme changes); overall market liquidity; the level and shape of various yield curves; the volume and value of trading
in securities; and overall equity valuations.
Factors that differentiate our business within the financial services industry also may affect our financial results. For
example, our capital markets business focuses on specific industry sectors while serving principally a middle-market
clientele. If the business environment for our focus sectors is impacted adversely, our business and results of operations
could reflect these impacts. In addition, our business, with its specific areas of focus and investment, may not track
overall market trends. Given the variability of the capital markets and securities businesses, our earnings may fluctuate
significantly from period to period, and results for any individual period should not be considered indicative of future
results.
Piper Sandler Companies | 32
Table of Contents
Market Data
The following table provides a summary of relevant market data:
U.S. Market Indices
S&P 500 (a)
Nasdaq (a)
Year Ended December 31,
2023
2022
2023
v2022
4,770
15,011
3,840
10,466
24.2 %
43.4
U.S. Middle Market Mergers and Acquisitions
Announced transactions (number of transactions) (b)
2,774
3,714
(25.3)
U.S. Equity Capital Markets
Completed public equity offerings (number of transactions) (c)
Completed initial public offerings (number of transactions) (d)
Equity fee pool for overall market (in millions) (e)
Equity fee pool for sub-$5 billion (in millions) (f)
U.S. Municipal Negotiated Issuances
Completed issuances (number of transactions) (g)
Aggregate par value (in billions) (g)
Average CBOE Volatility Index (VIX)
Average Daily Number of Shares Traded
$
$
$
NYSE (shares in millions)
Nasdaq (shares in millions)
Interest Rates
3-month treasury average rate
10-year treasury average rate
Average 10-year MMD to 10-year Treasury Ratio (h)
(a) Data provided is at period end.
$
$
$
566
90
4,681
2,820
4,921
313
17
2,185
1,822
521
156
3,517
2,404
5,854
313
26
2,355
2,083
5.28 %
3.96 %
0.67
2.09 %
2.95 %
0.83
8.6
(42.3)
33.1
17.3
(15.9)
—
(34.6)
(7.2)
(12.5)
152.6
34.2
(19.3)
(b) Source: Refinitiv (transactions with reported deal value between $100 million and $1 billion and transactions with an undisclosed
deal value that had a financial advisor).
(c) Source: Dealogic and Piper Sandler & Co. Equity Capital Markets (IPOs, follow-on offerings and convertible offerings with
reported deal value greater than $10 million).
(d) Source: Dealogic and Piper Sandler & Co. Equity Capital Markets (offerings with reported deal value greater than $10 million).
(e) Source: Dealogic and Piper Sandler & Co. Equity Capital Markets (IPOs, follow-on offerings and convertible offerings with deal
values greater than $10 million and PIPEs/RDs greater than $5 million; SPAC IPO fees are represented as the standard two
percent upfront fee unless noted differently on the IPO cover).
(f) Source: Dealogic and Piper Sandler & Co. Equity Capital Markets (IPOs, follow-on offerings and convertible offerings with deal
values greater than $10 million and PIPEs/RDs greater than $5 million for sub-$5 billion market cap issuers; SPAC IPO fees are
represented as the standard two percent upfront fee unless noted differently on the IPO cover).
(g) Source: Refinitiv (sole/senior negotiated and private placement transactions).
(h) Calculated based on the 10-year MMD index rate divided by the 10-year treasury rate.
Piper Sandler Companies | 33
Table of Contents
Outlook for 2024
We believe U.S. monetary policy will remain a factor impacting the economy and financial markets in 2024. The U.S.
Federal Reserve held its short-term benchmark interest rate steady in the fourth quarter of 2023 and is expected to
begin reducing rates in 2024, however the timing remains uncertain. Inflation moderated in 2023, however prices for
goods and services remain elevated and, combined with labor shortages and tightened lending standards, continue to
strain the economy. Geopolitical concerns, including the conflicts in the Middle East and Eastern Europe, could
negatively impact financial market activity in 2024. Additionally, the 2024 U.S. presidential election may influence the
volatility or direction of the markets based on investors' assessment of the outcome and the overall political outlook in
the U.S.
We estimate M&A market activity was down 20 to 30 percent in 2023 as compared to 2022. We experienced more
resilient advisory services results compared to the market in 2023 as we benefited from our sector and product
diversification, along with balanced coverage of strategic and private equity clients. We experienced an elevated close
rate in the fourth quarter of 2023 driven by a slight improvement in market conditions. Our advisory pipeline remains
strong and we expect advisory services revenues to strengthen with improving market conditions in 2024.
While equity financing activity improved relative to the prior year, the market activity continues to remain below historical
levels. We expect equity and debt capital markets activity to increase in 2024 as clients require access to capital in
order to execute on their strategic plans.
The equity markets experienced lower average volatility and moderated volumes in 2023. Despite these softer market
conditions, our equity brokerage revenue was consistent with the prior year reflecting market share gains. Our client
research votes continue to increase, which we believe will drive further market share gains over time. In 2024, we
anticipate a more challenging market environment with a lower research and trading services fee pool, as well as
expectations of lower volatility.
Market conditions for our fixed income services business were challenging during the first nine months of 2023 as
interest rate volatility and liquidity concerns for banking institutions muted client activity. However, in the fourth quarter
we experienced increased client activity from our depository clients resulting from the expectation that the U.S. Federal
Reserve will not raise rates further. We expect this higher client activity to continue in 2024 as our clients take
advantage of higher yielding securities.
Market conditions were challenging for our municipal financing business for most of the year due to higher interest rates
and volatility, as well as weakened investor demand. In 2023, the number of new municipal negotiated issuances in the
overall market declined approximately 13 percent from the prior year and the number of new high-yield municipal
negotiated issuances decreased approximately 21 percent. While market conditions continue to be challenging, we
experienced an improvement in the fourth quarter stemming from declining rates and increased investor demand, and
we believe the market for municipal financing will continue to improve as 2024 progresses.
Piper Sandler Companies | 34
Table of Contents
RESULTS OF OPERATIONS
Financial Summary
The following table provides a summary of the results of our operations on a U.S. GAAP basis and the results of our
operations as a percentage of net revenues for the periods indicated:
Year Ended December 31,
Year Ended December 31,
As a Percentage of
Net Revenues for the
(Amounts in thousands)
2023
2022
2021
Revenues
2023
v2022
2022
v2021
2023
2022
2021
Investment banking
$ 923,812 $ 1,009,509 $ 1,553,219
(8.5) %
(35.0) %
68.5 %
70.8 %
76.5 %
Institutional brokerage
377,539
405,267
387,577
(6.8)
4.6
28.0
28.4
19.1
Interest income
Investment income/(loss)
26,723
30,039
20,365
6,967
(23)
94,032
Total revenues
Interest expense
Net revenues
1,358,113
1,435,118
2,041,795
10,146
9,480
10,734
1,347,967
1,425,638
2,031,061
Non-interest expenses
Compensation and benefits
897,034
983,524
1,305,166
Outside services
Occupancy and equipment
Communications
Marketing and business
development
Deal-related expenses
Trade execution and clearance
Restructuring and integration
costs
Intangible asset amortization
Other operating expenses
51,754
64,356
52,718
37,734
28,189
19,972
7,749
19,440
46,435
53,189
64,252
50,565
42,849
31,874
20,185
11,440
15,375
18,016
45,942
56,946
44,008
20,902
42,921
16,533
31.2
N/M
(5.4)
7.0
(5.4)
(8.8)
(2.7)
0.2
4.3
(11.9)
(11.6)
(1.1)
4,724
(32.3)
142.2
30,080
26.4
22,327
157.7
Total non-interest expenses
1,225,381
1,291,269
1,589,549
(5.1)
Income before income tax
expense
122,586
134,369
441,512
(8.8)
Income tax expense
23,613
33,189
111,144
(28.9)
Net income
98,973
101,180
330,368
(2.2)
Net income/(loss) attributable to
noncontrolling interests
Net income attributable to
Piper Sandler Companies
N/M — Not meaningful
13,482
(9,494)
51,854
N/M
N/M
$ 85,491 $ 110,674 $ 278,514
(22.8)
(60.3)
15.8
12.8
14.9
105.0
(25.7)
22.1
(48.9)
(19.3)
(18.8)
(69.6)
(70.1)
(69.4)
192.3
N/M
2.0
2.2
1.4
0.0
0.3
4.6
(29.7)
100.8
100.7
100.5
(11.7)
0.8
0.7
0.5
(29.8)
100.0
100.0
100.0
(24.6)
66.5
69.0
64.3
3.8
4.8
3.9
2.8
2.1
1.5
0.6
1.4
3.4
3.7
4.5
3.5
3.0
2.2
1.4
0.8
1.1
1.3
2.3
2.8
2.2
1.0
2.1
0.8
0.2
1.5
1.1
90.9
90.6
78.3
9.1
1.8
7.3
1.0
6.3
9.4
2.3
7.1
21.7
5.5
16.3
(0.7)
2.6
7.8
13.7
Piper Sandler Companies | 35
Table of Contents
For the year ended December 31, 2023, we recorded net income attributable to Piper Sandler Companies of
$85.5 million. Net revenues for the year ended December 31, 2023 decreased 5.4 percent to $1.35 billion, compared
with $1.43 billion in the year-ago period. In 2023, investment banking revenues decreased 8.5 percent to $923.8 million,
compared with $1.01 billion in 2022, primarily driven by a decrease in advisory services revenues, as well as lower
municipal financing revenues, offset in part by higher corporate financing revenues. For the year ended December 31,
2023, institutional brokerage revenues were $377.5 million, down 6.8 percent compared with $405.3 million in 2022,
primarily due to lower fixed income services revenues. In 2023, net interest income was $16.6 million, compared to
$10.9 million in 2022, resulting from an increase in interest income on our long inventory and cash balances. For the
year ended December 31, 2023, we recorded investment income of $30.0 million primarily related to gains on our
investments and the noncontrolling interests in the alternative asset management funds that we manage. Non-interest
expenses were $1.23 billion for the year ended December 31, 2023, down 5.1 percent compared to $1.29 billion in the
prior year, primarily due to decreased compensation expenses resulting from lower revenues, offset in part by higher
other operating expenses.
Consolidated Non-Interest Expenses
Compensation and Benefits
Compensation and benefits expenses, which are the largest component of our expenses, include salaries, incentive
compensation, benefits, stock-based compensation, employment taxes, reversal of expenses associated with the
forfeiture of stock-based compensation and other employee-related costs. A significant portion of compensation
expense is comprised of variable incentive arrangements, including discretionary incentive compensation, the amount of
which fluctuates in proportion to the level of business activity, increasing with higher revenues and operating profits and
decreasing with lower revenues and operating profits. Other compensation costs, primarily base salaries and benefits,
are more fixed in nature. The timing of incentive compensation payments, which is generally in February, has a greater
impact on our cash position and liquidity than is reflected on our consolidated statements of operations. In conjunction
with our acquisitions, we have granted restricted stock and restricted cash with service conditions, which are amortized
to compensation expense over the service period. We have also entered into forgivable loans with service conditions,
which are amortized to compensation expense over the loan term. Additionally, expense estimates related to revenue-
based earnout arrangements with service conditions entered into as part of our acquisitions are amortized to
compensation expense over the service period.
The following table summarizes our future acquisition-related compensation expense for restricted stock and forgivable
loans with service conditions, as well as expense estimates related to revenue-based earnout arrangements:
(Amounts in thousands)
2024
2025
2026
2027
Total
$
$
40,275
21,910
14,627
9,366
86,178
For the year ended December 31, 2023, compensation and benefits expenses decreased 8.8 percent to $897.0 million
from $983.5 million in 2022, due to lower revenues. Compensation and benefits expenses as a percentage of net
revenues was 66.5 percent in 2023, compared with 69.0 percent in 2022. Excluding the impact of noncontrolling
interests, our compensation ratio decreased to 67.7 percent in 2023, compared with 68.9 percent in 2022, primarily due
to a decline in acquisition-related compensation expenses.
Outside Services
Outside services expenses include securities processing expenses, outsourced technology functions, outside legal fees,
fund expenses associated with our consolidated alternative asset management funds and other professional fees.
Outside services expenses decreased 2.7 percent to $51.8 million in 2023, compared with $53.2 million in 2022,
primarily due to lower professional fees.
Occupancy and Equipment
For the year ended December 31, 2023, occupancy and equipment expenses increased slightly to $64.4 million,
compared with $64.3 million in 2022.
Piper Sandler Companies | 36
Table of Contents
Communications
Communication expenses include costs for telecommunication and data communication, primarily consisting of
expenses for obtaining third-party market data information. For the year ended December 31, 2023, communication
expenses increased 4.3 percent to $52.7 million, compared with $50.6 million in 2022, primarily due to higher market
data services expenses.
Marketing and Business Development
Marketing and business development expenses include travel and entertainment costs, advertising and third-party
marketing fees. In 2023, marketing and business development expenses decreased 11.9 percent to $37.7 million,
compared with $42.8 million for the year ended December 31, 2022. The decrease was primarily due to lower travel
expenses.
Deal-Related Expenses
Deal-related expenses include costs we incurred over the course of a completed investment banking deal, which
primarily consist of legal fees, offering expenses, and travel costs. For the year ended December 31, 2023, deal-related
expenses were $28.2 million, compared with $31.9 million for the year ended December 31, 2022. The amount of deal-
related expenses is principally dependent on the level and mix of deal activity and may vary from period to period as the
recognition of deal-related costs typically coincides with the closing of a transaction.
Trade Execution and Clearance
For the year ended December 31, 2023, trade execution and clearance expenses decreased slightly to $20.0 million,
compared with $20.2 million for the year ended December 31, 2022.
Restructuring and Integration Costs
For the year ended December 31, 2023, we incurred restructuring and integration costs of $7.7 million. The expenses
primarily consisted of $6.7 million of severance benefits related to headcount reductions and $0.9 million for vacated
leased office space associated with our acquisitions of Cornerstone Macro and The Valence Group ("Valence").
For the year ended December 31, 2022, we incurred acquisition-related restructuring and integration costs of
$11.4 million. The expenses consisted of $5.2 million of transaction costs primarily related to our 2022 acquisitions,
$5.6 million for vacated leased office space associated with our acquisitions of Valence and Cornerstone Macro and
$0.6 million of severance benefits.
Intangible Asset Amortization
Intangible asset amortization includes the amortization of definite-lived intangible assets. For the year ended December
31, 2023, intangible asset amortization was $19.4 million, compared with $15.4 million in 2022. The increase was
primarily due to higher intangible asset amortization expense associated with our acquisition of DBO Partners.
The following table summarizes the future aggregate amortization expense of our intangible assets with determinable
lives:
(Amounts in thousands)
2024
2025
2026
2027
2028
Thereafter
Total
$
9,445
7,887
7,253
3,480
2,191
541
$
30,797
Piper Sandler Companies | 37
Table of Contents
Other Operating Expenses
Other operating expenses primarily include insurance costs, license and registration fees, expenses related to our
charitable giving program and litigation-related expenses, which consist of the amounts we accrue for and/or pay out
related to legal and regulatory matters. Other operating expenses were $46.4 million in 2023, compared with
$18.0 million in 2022. The increase was primarily due to the $20.0 million we accrued for estimated civil penalties
related to our potential regulatory settlements with the SEC and CFTC regarding recordkeeping requirements for
business-related communications, as well as the write-off of a $7.5 million uncollectible receivable in our municipal
finance business.
Income Taxes
For the year ended December 31, 2023, our provision for income taxes was $23.6 million, which included $16.6 million
of tax benefits related to stock-based compensation awards vesting at values greater than the grant price and accrued
forfeitable dividends paid on vested restricted stock related to acquisitions. Excluding the impact of these benefits and
noncontrolling interests, our effective tax rate was 36.8 percent. The effective tax rate was impacted by non-deductible
expenses, including estimated civil penalties related to our potential regulatory settlements with the SEC and the CFTC
regarding recordkeeping requirements for business-related communications, as well as non-deductible covered
employee compensation expense.
For the year ended December 31, 2022, our provision for income taxes was $33.2 million, which included a $5.6 million
tax benefit related to stock-based compensation awards vesting at values greater than the grant price and a one-time
tax benefit of $4.6 million related to the full reversal of our U.K. subsidiary's deferred tax valuation allowance, as a result
of improved operating results in the U.K. Excluding the impact of these benefits and noncontrolling interests, our
effective tax rate was 30.2 percent.
Piper Sandler Companies | 38
Table of Contents
Financial Performance
Our activities as an investment bank and institutional securities firm constitute a single business segment.
Throughout this section, we have presented results on both a U.S. GAAP and non-GAAP basis. Management believes
that presenting results and measures on an adjusted, non-GAAP basis in conjunction with the corresponding U.S.
GAAP measures provides a more meaningful basis for comparison of its operating results and underlying trends
between periods, and enhances the overall understanding of our current financial performance by excluding certain
items that may not be indicative of our core operating results. The non-GAAP results should be considered in addition
to, not as a substitute for, the results prepared in accordance with U.S. GAAP.
The adjusted financial results exclude (1) investment (income)/loss and non-compensation expenses related to
noncontrolling interests, (2) interest expense on long-term financing from net revenues, (3) amortization of intangible
assets related to acquisitions, (4) compensation and non-compensation expenses from acquisition-related agreements,
(5) restructuring and integration costs related to acquisitions and/or headcount reductions and (6) non-compensation
expenses from potential regulatory settlements. For U.S. GAAP purposes, these items are included in each of their
respective line items on the consolidated statements of operations.
Adjusted operating income and adjusted operating margin present the results of operations excluding the impact
resulting from the consolidation of noncontrolling interests in alternative asset management funds. Consolidation of
these funds results in the inclusion of the proportionate share of the income or loss attributable to the equity interests in
consolidated funds that are not attributable, either directly or indirectly, to us (i.e., noncontrolling interests). This
proportionate share is reflected in net income/(loss) attributable to noncontrolling interests in the accompanying
consolidated statements of operations, and has no effect on our overall financial performance, as ultimately, this income
or loss is not income or loss for us. Included in adjusted operating income and adjusted operating margin is the actual
proportionate share of the income or loss attributable to us as an investor in such funds.
The adjusted, non-GAAP financial results also exclude amortization of intangible assets and compensation and non-
compensation expenses from acquisition-related agreements. These amounts are excluded on a non-GAAP basis as
they represent expenses specifically related to acquisitions and therefore are not part of our ongoing operations. The
restructuring and integration costs excluded from the adjusted financial results represent charges that resulted from
severance benefits related to acquisitions or headcount reductions, as well as acquisition-related costs associated with
contract termination, vacating redundant leased office space and professional fees related to the respective transaction.
Excluding these restructuring and integration costs from our non-GAAP financial measures provides a better
understanding of our core non-compensation expenses. The non-compensation expenses from potential regulatory
settlements represent amounts accrued for estimated civil penalties with the SEC and CFTC regarding compliance with
recordkeeping requirements for business-related communications, and the related outside services expenses.
Excluding these non-compensation expenses from potential regulatory settlements from our non-GAAP financial
measures provides a better understanding of our core non-compensation expenses. Interest expense on long-term
financing includes interest on our Class B unsecured fixed rate senior notes ("Class B Notes"), and is an adjustment
from net revenues as this arrangement was used to fund the acquisition of SOP Holdings, LLC and its subsidiaries,
including Sandler O'Neill & Partners, L.P. (collectively, "Sandler O'Neill"). Management believes that presenting adjusted
financial results excluding the acquisition-related amounts provides clarity on the financial results generated by the core
operating components of our business.
Piper Sandler Companies | 39
Table of Contents
The following table sets forth the adjusted, non-GAAP financial results and adjustments necessary to reconcile to our
consolidated U.S. GAAP financial results for the periods presented:
Year Ended December 31,
2023
Adjustments (1)
2022
Adjustments (1)
(Amounts in thousands)
Adjusted
Interests
Adjustments
GAAP
Adjusted
Interests
Adjustments
GAAP
Total
Noncontrolling
Other
U.S.
Total
Noncontrolling
Other
U.S.
Revenues
Investment banking:
Advisory services
$ 709,316 $
— $
— $ 709,316 $ 776,428 $
— $
— $ 776,428
Corporate financing
131,077
Municipal financing
83,419
Total investment
banking
923,812
Institutional
brokerage:
Equity brokerage
209,512
Fixed income
services
Total institutional
brokerage
Interest income
Investment income/
(loss)
168,027
377,539
26,723
7,123
Total revenues
1,335,197
Interest expense
5,000
Net revenues
1,330,197
—
—
—
—
—
—
—
22,916
22,916
—
22,916
—
—
—
—
—
—
—
—
—
131,077
83,419
125,342
107,739
923,812
1,009,509
209,512
210,314
168,027
194,953
377,539
405,267
26,723
20,365
30,039
1,552
1,358,113
1,436,693
5,146
10,146
2,980
—
—
—
—
—
—
—
(1,575)
(1,575)
—
—
—
125,342
107,739
—
1,009,509
—
—
—
—
—
—
210,314
194,953
405,267
20,365
(23)
1,435,118
6,500
9,480
(5,146)
1,347,967
1,433,713
(1,575)
(6,500)
1,425,638
Total non-interest
expenses
1,117,254
9,434
98,693
1,225,381
1,164,560
7,919
118,790
1,291,269
Pre-tax income
$ 212,943 $
13,482 $
(103,839) $ 122,586 $ 269,153 $
(9,494) $
(125,290) $ 134,369
Pre-tax margin
16.0 %
9.1 %
18.8 %
9.4 %
(1) The following is a summary of the adjustments needed to reconcile our consolidated U.S. GAAP financial results to the adjusted, non-GAAP
financial results:
Noncontrolling interests – The impacts of consolidating noncontrolling interests in our alternative asset management funds are not included in our
adjusted financial results.
Other adjustments – The following items are not included in our adjusted financial results:
(Amounts in thousands)
Other adjustments
Year Ended December 31,
2023
2022
Interest expense on long-term financing
$
5,146 $
6,500
Other adjustments to total non-interest expenses:
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related agreements
Non-compensation expenses from potential regulatory settlements
Total other adjustments to total non-interest expenses
51,058
7,749
19,440
(1,102)
21,548
98,693
87,525
11,440
15,375
4,450
—
118,790
Total other adjustments
$
103,839 $
125,290
Piper Sandler Companies | 40
Table of Contents
Net revenues on a U.S. GAAP basis were $1.35 billion for the year ended December 31, 2023, compared with
$1.43 billion in the prior-year period. For the year ended December 31, 2023, adjusted net revenues were $1.33 billion,
compared with $1.43 billion for the year ended December 31, 2022. The variance explanations for net revenues and
adjusted net revenues are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise.
The following table provides supplemental business information:
Advisory services
Completed M&A and restructuring transactions
Completed capital advisory transactions
Total completed advisory transactions
Corporate financings
Total equity transactions priced
Book run equity transactions priced
Total debt and preferred transactions priced
Book run debt and preferred transactions priced
Municipal negotiated issues
Aggregate par value of issues priced (in billions)
Total issues priced
Equity brokerage
Number of shares traded (in billions)
Year Ended December 31,
2023
2022
213
56
269
73
65
15
7
218
84
302
55
45
30
19
$
12.4 $
413
14.6
570
10.7
11.0
Investment banking revenues comprise all of the revenues generated through advisory services activities, which include
M&A, equity and debt private placements, debt and restructuring advisory, and municipal financial advisory transactions.
Collectively, debt advisory transactions and equity and debt private placements are referred to as capital advisory
transactions. Investment banking revenues also include equity and debt corporate financing activities and municipal
financings.
In 2023, investment banking revenues were $923.8 million, down 8.5 percent compared to $1.01 billion in the prior-year
period. For the year ended December 31, 2023, advisory services revenues were $709.3 million, down 8.6 percent
compared with $776.4 million in 2022, due to fewer completed transactions, offset in part by a higher average fee. Our
advisory services activity during the year was relatively diverse across our sectors led by our financial services and
healthcare sectors with strong contributions from the energy & power and restructuring groups. The diversification of our
sectors and products provided some resiliency to our results despite the challenging M&A and debt markets we
experienced during most of the year driven by macroeconomic uncertainty. For the year ended December 31, 2023,
corporate financing revenues were $131.1 million, up 4.6 percent compared to $125.3 million in the prior-year period,
driven by an increase in completed equity financings, which more than offset the decline in financial services debt and
preferred transactions. Although our equity financings increased from the prior year driven by lower volatility levels and
increased investor demand, overall market activity remains below historic levels. Activity for us during the year was
principally in the healthcare sector, and we served as book runner on 45 of 46 completed healthcare equity deals.
Municipal financing revenues for the year ended December 31, 2023 were $83.4 million, down 22.6 percent compared
to $107.7 million in the year-ago period, driven by a decline in municipal negotiated issuances. Market conditions
remained challenging during most of the year due to increased interest rates and volatility, combined with weakened
investor demand, which has reduced market issuances, particularly refinancing activity and high-yield issuances.
Institutional brokerage revenues comprise all of the revenues generated through trading activities, which principally
consist of facilitating customer trades, as well as fees received for our research services and corporate access offerings.
Our results may vary from quarter to quarter as a result of changes in trading margins, trading gains and losses, net
interest spreads, trading volumes and the timing of fees received for research services.
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For the year ended December 31, 2023, institutional brokerage revenues decreased to $377.5 million, compared with
$405.3 million in the prior-year period. In 2023, equity brokerage revenues were $209.5 million, essentially flat
compared with $210.3 million in 2022 as market share gains offset the decline in market volumes resulting from reduced
market volatility. For the year ended December 31, 2023, fixed income services revenues were $168.0 million, down
13.8 percent compared with $195.0 million in the prior-year period, due to a decline in activity among our depository
clients. The market conditions for fixed income remained challenging during most of the year driven by interest rate
uncertainty and an increased focus to maintain higher levels of liquidity for depository institutions.
Interest income represents amounts earned from holding long inventory positions and cash balances. For the year
ended December 31, 2023, interest income increased to $26.7 million, compared with $20.4 million in 2022, reflecting
higher interest rates on our long inventory and cash balances.
Investment income/(loss) includes realized and unrealized gains and losses on investments, including amounts
attributable to noncontrolling interests, in our alternative asset management funds, as well as management and
performance fees generated from those funds. For the year ended December 31, 2023, we recorded investment income
of $30.0 million, compared to an investment loss of $23 thousand in 2022. In 2023, we recorded gains on our
investments and the noncontrolling interests in the alternative asset management funds that we manage. Excluding the
impact of noncontrolling interests, adjusted investment income was $7.1 million in 2023, compared with $1.6 million in
2022.
Interest expense represents amounts associated with financing, economically hedging and holding short inventory
positions, including interest paid on our short- and long-term financing arrangements, as well as commitment fees on
our committed line and revolving credit facility. For the year ended December 31, 2023, interest expense increased to
$10.1 million, compared with $9.5 million in 2022. The increase was primarily due to higher interest rates on our short
inventory balances, partially offset by lower interest paid on long-term financings. We repaid our $125 million of Class B
Notes upon maturity on October 15, 2023. As a result, we do not currently incur interest expense on long-term financing
arrangements.
Pre-tax margin for 2023 decreased to 9.1 percent, compared with 9.4 percent for 2022 due to lower net revenues and
higher non-compensation expenses related to potential regulatory settlements with the SEC and the CFTC regarding
recordkeeping requirements for business-related communications, offset in part by a lower compensation ratio. Adjusted
pre-tax margin decreased to 16.0 percent in 2023, compared with 18.8 percent in 2022 resulting from lower adjusted net
revenue and a higher adjusted compensation ratio.
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The following table sets forth the adjusted, non-GAAP financial results and adjustments necessary to reconcile to our
consolidated U.S. GAAP financial results for the periods presented:
Year Ended December 31,
2022
Adjustments (1)
2021
Adjustments (1)
(Amounts in thousands)
Adjusted
Interests
Adjustments
GAAP
Adjusted
Interests
Adjustments
GAAP
Total
Noncontrolling
Other
U.S.
Total
Noncontrolling
Other
U.S.
Revenues
Investment banking:
Advisory services
$ 776,428 $
— $
— $ 776,428 $ 1,026,138 $
— $
— $ 1,026,138
Corporate financing
125,342
Municipal financing
107,739
Total investment
banking
1,009,509
Institutional
brokerage:
Equity brokerage
210,314
Fixed income
services
Total institutional
brokerage
Interest income
Investment income/
(loss)
194,953
405,267
20,365
1,552
Total revenues
1,436,693
Interest expense
2,980
—
—
—
—
—
—
—
(1,575)
(1,575)
—
—
—
125,342
107,739
362,797
164,284
—
1,009,509
1,553,219
—
—
—
—
—
—
210,314
154,067
194,953
233,510
405,267
387,577
20,365
6,967
(23)
34,982
1,435,118
1,982,745
6,500
9,480
2,288
Net revenues
1,433,713
(1,575)
(6,500)
1,425,638
1,980,457
—
—
—
—
—
—
—
59,050
59,050
—
59,050
—
—
362,797
164,284
—
1,553,219
—
—
—
—
—
—
154,067
233,510
387,577
6,967
94,032
2,041,795
8,446
10,734
(8,446)
2,031,061
Total non-interest
expenses
1,164,560
7,919
118,790
1,291,269
1,430,505
7,196
151,848
1,589,549
Pre-tax income
$ 269,153 $
(9,494) $
(125,290) $ 134,369 $ 549,952 $
51,854 $
(160,294) $ 441,512
Pre-tax margin
18.8 %
9.4 %
27.8 %
21.7 %
(1) The following is a summary of the adjustments needed to reconcile our consolidated U.S. GAAP financial results to the adjusted, non-GAAP
financial results:
Noncontrolling interests – The impacts of consolidating noncontrolling interests in our alternative asset management funds are not included in our
adjusted financial results.
Other adjustments – The following items are not included in our adjusted financial results:
(Amounts in thousands)
Other adjustments
Year Ended December 31,
2022
2021
Interest expense on long-term financing
$
6,500 $
8,446
Other adjustments to total non-interest expenses:
Compensation from acquisition-related agreements
Restructuring and integration costs
Amortization of intangible assets related to acquisitions
Non-compensation expenses from acquisition-related agreements
Total other adjustments to total non-interest expenses
87,525
11,440
15,375
4,450
118,790
116,795
4,724
30,080
249
151,848
Total other adjustments
$
125,290 $
160,294
Discussion of the year-over-year comparisons between 2022 and 2021 can be found in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the
year ended December 31, 2022, filed with the SEC on February 24, 2023.
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RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements are set forth in Note 3 to our consolidated financial statements included in Part II,
Item 8 of this Form 10-K, and are incorporated herein by reference.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accounting and reporting policies comply with U.S. GAAP and conform to practices within the securities industry.
The preparation of financial statements in compliance with U.S. GAAP and industry practices requires us to make
estimates and assumptions that could materially affect amounts reported in our consolidated financial statements.
Critical accounting policies are those policies that we believe to be the most important to the portrayal of our financial
condition and results of operations and that require us to make estimates that are difficult, subjective or complex. Most
accounting policies are not considered by us to be critical accounting policies. Several factors are considered in
determining whether or not a policy is critical, including whether the estimates are significant to the consolidated
financial statements taken as a whole, the nature of the estimates, the ability to readily validate the estimates with other
information (e.g., third-party or independent sources), the sensitivity of the estimates to changes in economic conditions
and whether alternative accounting methods may be used under U.S. GAAP.
For a full description of our significant accounting policies, see Note 2 to our consolidated financial statements included
in Part II, Item 8 of this Form 10-K. We believe that of our significant accounting policies, the following are our critical
accounting policies and estimates.
Valuation of Financial Instruments
Financial instruments and other inventory positions owned, financial instruments and other inventory positions sold, but
not yet purchased, and investments on our consolidated statements of financial condition consist of financial
instruments recorded at fair value, as required by accounting guidance. Unrealized gains and losses related to these
financial instruments are reflected on our consolidated statements of operations.
The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly
transaction between market participants at the measurement date (i.e., the exit price). Based on the nature of our
business and our role as a "dealer" in the securities industry or as a manager of alternative asset management funds,
the fair values of our financial instruments are determined internally. See Note 2 and Note 6 to our consolidated financial
statements for additional information on the valuation of our financial instruments and our fair value processes, including
specific control processes to determine the reasonableness of the fair value of our financial instruments.
Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 820, "Fair Value
Measurement," establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or
liabilities (i.e., Level I measurements) and the lowest priority to inputs with little or no pricing observability (i.e., Level III
measurements). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant
to the fair value measurement. Substantially all of our financial instruments categorized as Level III are investments
related to our alternative asset management funds. These investments in private companies are valued based on an
assessment of each underlying security, considering rounds of financing, the financial condition and operating results of
the private company, third-party transactions and market-based information, including comparable company
transactions, trading multiples (e.g., multiples of revenue and EBITDA), discounted cash flow analyses and changes in
market outlook, among other factors. See Note 6 to our consolidated financial statements for additional discussion of
our assets and liabilities in the fair value hierarchy.
Goodwill and Intangible Assets
We record all assets acquired and liabilities assumed in acquisitions, including goodwill and other intangible assets, at
fair value. Determining the fair value of assets and liabilities acquired requires certain management estimates. At
December 31, 2023, we had goodwill of $301.8 million and intangible assets of $116.2 million.
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We are required to perform impairment tests of goodwill and indefinite-lived intangible assets annually and on an interim
basis when circumstances exist that could indicate possible impairment. We have elected to test goodwill for impairment
in the fourth quarter of each calendar year. We have the option to first assess qualitative factors to determine whether it
is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after making an
assessment, we determine it is not more likely than not that the fair value of a reporting unit is less than its carrying
amount, then further analysis is unnecessary. However, if we conclude otherwise, then we are required to perform a
quantitative goodwill test, which requires management to make judgments in determining what assumptions to use in
the calculation. The quantitative goodwill test compares the fair value of the reporting unit to its carrying value, including
allocated goodwill. An impairment is recognized for the excess amount of a reporting unit's carrying value over its fair
value. See Note 2 and Note 11 to our consolidated financial statements for additional information on our impairment
testing.
The initial recognition of goodwill and other intangible assets and the subsequent quantitative impairment analysis
involves significant judgment in determining the estimates of future cash flows, discount rates, economic forecast and
other assumptions which are then used in acceptable valuation techniques, such as the market approach (e.g., earnings
and/or transaction multiples) and/or the income approach (e.g., discounted cash flow method). Changes in these
estimates and assumptions could have a significant impact on the fair value and any resulting impairment of goodwill.
Our estimated cash flows, by their nature, are difficult to determine over an extended time period. Events and factors
that may significantly affect the estimates include, among others, competitive forces and changes in revenue growth
trends, cost structures, technology and market conditions. To assess the reasonableness of cash flow estimates and
validate assumptions used in our estimates, we review historical performance of the underlying assets or similar assets.
In assessing the fair value of our reporting unit, the volatile nature of the securities markets and our industry requires us
to consider the business and market cycle and assess the stage of the cycle in estimating the timing and extent of future
cash flows. In addition to discounted cash flows, we consider earnings multiples of comparable public companies and
multiples of recent M&A transactions of similar businesses in our subsequent impairment analysis.
We elected to perform a qualitative assessment to test goodwill for impairment. The following relevant events and
circumstances were evaluated in concluding that it was not more likely than not that goodwill was impaired:
macroeconomic conditions, industry and market considerations and the overall financial performance of our reporting
unit. Our annual goodwill impairment testing, performed as of October 31, 2023, resulted in no impairment.
We also evaluated our indefinite-lived intangible assets and concluded there was no impairment in 2023.
Stock-Based Compensation Plans
As part of our compensation to employees and directors, we use stock-based compensation, consisting of restricted
stock, restricted stock units and stock options. We account for equity awards in accordance with FASB Accounting
Standards Codification Topic 718, "Compensation–Stock Compensation," ("ASC 718"), which requires all share-based
payments to employees, including grants of employee stock options, to be recognized on the consolidated statements
of operations at grant date fair value. Compensation expense related to share-based awards that require future service
are amortized over the service period of the award. Forfeitures of awards with service conditions are accounted for
when they occur. Share-based awards that do not require future service are recognized in the year in which the awards
are deemed to be earned.
See Note 19 to our consolidated financial statements for additional information about our stock-based compensation
plans.
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Income Taxes
We file a consolidated U.S. federal income tax return, which includes all of our qualifying subsidiaries. We also are
subject to income tax in various states and municipalities and those foreign jurisdictions in which we operate. Amounts
provided for income taxes are based on income reported for financial statement purposes and do not necessarily
represent amounts currently payable. Deferred tax assets and liabilities are recognized for the expected future tax
consequences attributable to temporary differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis and for tax loss carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. Deferred income taxes are provided for
temporary differences in reporting certain items, principally restricted compensation (i.e., restricted stock, restricted
stock units, restricted mutual fund shares, and deferred compensation). The realization of deferred tax assets is
assessed and a valuation allowance is recognized to the extent that it is more likely than not that any portion of the
deferred tax asset will not be realized. We believe that our future taxable profits will be sufficient to recognize our
deferred tax assets. However, if our projections of future taxable profits do not materialize, we may conclude that a
valuation allowance is necessary, which would impact our results of operations in that period. In the fourth quarter of
2022, we reversed the full amount of our U.K. subsidiary's deferred tax asset valuation allowance based upon improved
operating results in the U.K. This resulted in a $4.6 million tax benefit to our results of operations for the year ended
December 31, 2022.
We record deferred tax benefits for future tax deductions expected upon the vesting of stock-based compensation. We
recognize the income tax effects of stock-based compensation awards in the income statement when the awards vest. If
deductions reported on our tax return for stock-based compensation (i.e., the value of the stock-based compensation at
the time of vesting) exceed the cumulative cost of those instruments recognized for financial reporting (i.e., the grant
date fair value of the compensation computed in accordance with ASC 718), we record the excess tax benefit as income
tax benefit. Conversely, if deductions reported on our tax return for stock-based compensation are less than the
cumulative cost of those instruments recognized for financial reporting, the deficiency is recorded as income tax
expense. Additionally, we record a tax benefit related to accrued forfeitable dividends paid on restricted stock upon
vesting. For the year ended December 31, 2023, we recorded $16.6 million of tax benefits related to stock-based
compensation awards vesting at values greater than the grant date fair value and accrued forfeitable dividends paid on
vested restricted stock related to acquisitions. As of February 20, 2024, approximately 726,000 shares have vested at
share prices greater than the grant date fair values, resulting in an income tax benefit of $10.6 million recorded in the
first quarter of 2024, including accrued forfeitable dividends paid on vested restricted stock related to acquisitions.
We establish reserves for uncertain income tax positions in accordance with FASB Accounting Standards Codification
Topic 740, "Income Taxes," when it is not more likely than not that a certain position or component of a position will be
ultimately upheld by the relevant taxing authorities. Significant judgment is required in evaluating uncertain tax positions.
Our tax provision and related accruals include the impact of estimates for uncertain tax positions and changes to the
reserves that are considered appropriate. To the extent the probable tax outcome of these matters changes, such
change in estimate will impact the income tax provision in the period of change and, in turn, our results of operations. As
of December 31, 2023, we have a $1.8 million liability recorded for uncertain state income tax positions.
LIQUIDITY, FUNDING AND CAPITAL RESOURCES
We regularly monitor our liquidity position, which is of critical importance to our business. Accordingly, we maintain a
liquidity strategy designed to enable our business to continue to operate even under adverse circumstances, although
there can be no assurance that our strategy will be successful under all circumstances. Insufficient liquidity resulting
from adverse circumstances contributes to, and may be the cause of, financial institution failure.
The majority of our tangible assets consist of assets readily convertible into cash. Financial instruments and other
inventory positions owned are stated at fair value and are generally readily marketable in most market conditions.
Receivables and payables with brokers, dealers and clearing organizations usually settle within a few days. As part of
our liquidity strategy, we emphasize diversification of funding sources to the extent possible while considering tenor and
cost. Our assets are financed by our cash flows from operations, equity capital and our funding arrangements. The
fluctuations in cash flows from financing activities are directly related to daily operating activities from our various
businesses. One of our most important risk management disciplines is our ability to manage the size and composition of
our balance sheet. While our asset base changes due to client activity, market fluctuations and business opportunities,
the size and composition of our balance sheet reflect our overall risk tolerance, our ability to access stable funding
sources and the amount of equity capital we hold.
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Certain market conditions can impact the liquidity of our inventory positions, requiring us to hold larger inventory
positions for longer than expected or requiring us to take other actions that may adversely impact our results.
A significant component of our employees' compensation is paid in annual discretionary incentive compensation. The
timing of these incentive compensation payments, which is generally in February, has a significant impact on our cash
position and liquidity.
Our dividend policy is intended to return between 30 percent and 50 percent of our fiscal year adjusted net income to
shareholders. Our board of directors determines the declaration and payment of dividends and is free to change our
dividend policy at any time. Our board of directors declared the following dividends on shares of our common stock:
Declaration Date
Dividend Per Share
Record Date
Payment Date
Related to 2020:
February 4, 2021 (1)
$
Related to 2021:
February 4, 2021
April 30, 2021
July 30, 2021
October 29, 2021 (1)
October 29, 2021
February 10, 2022 (1)
Related to 2022:
February 10, 2022
April 29, 2022
July 29, 2022
October 28, 2022
February 3, 2023 (1)
Related to 2023:
February 3, 2023
May 2, 2023
July 28, 2023
October 27, 2023
February 2, 2024 (1)
Related to 2024:
February 2, 2024
(1) Represents a special cash dividend.
1.85
0.40
0.45
0.55
3.00
0.55
4.50
0.60
0.60
0.60
0.60
1.25
0.60
0.60
0.60
0.60
1.00
0.60
March 3, 2021
March 12, 2021
March 3, 2021
May 28, 2021
August 27, 2021
November 23, 2021
November 23, 2021
March 2, 2022
March 2, 2022
May 27, 2022
August 26, 2022
November 23, 2022
March 3, 2023
March 3, 2023
May 26, 2023
August 25, 2023
November 21, 2023
March 4, 2024
March 12, 2021
June 11, 2021
September 10, 2021
December 10, 2021
December 10, 2021
March 11, 2022
March 11, 2022
June 10, 2022
September 9, 2022
December 9, 2022
March 17, 2023
March 17, 2023
June 9, 2023
September 8, 2023
December 8, 2023
March 15, 2024
March 4, 2024
March 15, 2024
Our board of directors has declared a special cash dividend on our common stock of $1.00 per share related to 2023
adjusted net income. This special dividend will be paid on March 15, 2024, to shareholders of record as of the close of
business on March 4, 2024. Including this special cash dividend, we will have returned $3.40 per share, or
approximately 37 percent of our fiscal year 2023 adjusted net income to shareholders.
As part of our capital management strategy, we repurchase our common stock over time in order to offset the dilutive
effect of our employee stock-based compensation awards and our grants of acquisition-related restricted stock, as well
as to return capital to shareholders.
Effective May 6, 2022, our board of directors authorized the repurchase of up to $150.0 million in common shares
through December 31, 2024. In 2023, we did not repurchase any shares of our common stock related to this
authorization. At December 31, 2023, we had $138.2 million remaining under this authorization. Effective January 1,
2022, our board of directors authorized the repurchase of up to $150.0 million in common shares through December 31,
2023, and we repurchased the full amount of this authorization during 2022.
We also purchase shares of common stock from restricted stock award recipients upon the award vesting as recipients
sell shares to meet their employment tax obligations. During 2023, we purchased 494,555 shares of our common stock
at an average price of $142.92 per share for an aggregate purchase price of $70.7 million for these purposes.
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Cash Flows
Cash and cash equivalents at December 31, 2023 were $383.1 million, an increase of $17.5 million from December 31,
2022. Operating activities provided $275.6 million of cash, primarily driven by cash generated from earnings and a
decrease in operating assets. The decrease in operating assets was primarily due to a decline in receivables from
brokers, dealers and clearing organizations of $88.5 million, as well as a decrease in other assets of $28.8 million driven
by lower fee receivables. In 2023, investing activities used $10.1 million for the purchase of fixed assets. Cash of
$249.6 million was used in financing activities, as we repaid the $125 million of Class B Notes upon maturity on October
15, 2023. In addition, we paid $84.4 million in dividends and repurchased $70.7 million of common stock during 2023.
Cash and cash equivalents at December 31, 2022 were $365.6 million, a decrease of $605.3 million from December 31,
2021. Operating activities used $224.9 million of cash, driven by a decrease in operating liabilities. The decrease in
operating liabilities was primarily due to a decrease in accrued compensation of $296.4 million, the result of lower
compensation costs in 2022 from decreased revenues and operating profits. In 2022, investing activities used
$127.1 million, of which $96.5 million was used for the acquisitions of DBO Partners, Stamford Partners and
Cornerstone Macro. We also used $30.6 million for the purchase of fixed assets. Cash of $250.1 million was used in
financing activities, as we paid $107.5 million in dividends and repurchased $187.3 million of common stock during
2022.
Leverage
The following table presents total assets, adjusted assets, total shareholders' equity and tangible common shareholders'
equity with the resulting leverage ratios:
(Dollars in thousands)
Total assets
Deduct: Goodwill and intangible assets
Deduct: Right-of-use lease assets
Deduct: Assets from noncontrolling interests
Adjusted assets
Total shareholders' equity
Deduct: Goodwill and intangible assets
Deduct: Noncontrolling interests
Tangible common shareholders' equity
Leverage ratio (1)
Adjusted leverage ratio (2)
December 31, December 31,
2023
2022
$
2,140,983 $
2,181,557
(417,957)
(436,788)
(69,387)
(87,730)
(217,411)
(201,541)
$
1,436,228 $
1,455,498
$
1,299,473 $
1,254,028
(417,957)
(213,975)
(436,788)
(199,955)
$
667,541 $
617,285
1.6
2.2
1.7
2.4
(1) Leverage ratio equals total assets divided by total shareholders' equity.
(2) Adjusted leverage ratio equals adjusted assets divided by tangible common shareholders' equity.
Adjusted assets and tangible common shareholders' equity are non-GAAP financial measures. Goodwill and intangible
assets are subtracted from total assets and total shareholders' equity in determining adjusted assets and tangible
common shareholders' equity, respectively, as we believe that goodwill and intangible assets do not constitute operating
assets that can be deployed in a liquid manner. Right-of-use lease assets are also subtracted from total assets in
determining adjusted assets as these are not operating assets that can be deployed in a liquid manner. Amounts
attributable to noncontrolling interests are subtracted from total assets and total shareholders' equity in determining
adjusted assets and tangible common shareholders' equity, respectively, as they represent assets and equity interests
in consolidated entities that are not attributable, either directly or indirectly, to Piper Sandler Companies. We view the
resulting measure of adjusted leverage, also a non-GAAP financial measure, as a more relevant measure of financial
risk when comparing financial services companies.
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Funding and Capital Resources
The primary goal of our funding activities is to ensure adequate funding over a wide range of market conditions. Given
the mix of our business activities, funding requirements are fulfilled through a diversified range of financing
arrangements. We attempt to ensure that the tenor of our borrowing liabilities equals or exceeds the expected holding
period of the assets being financed. Our ability to support increases in total assets is largely a function of our ability to
obtain funding from external sources. Access to these external sources, as well as the cost of that financing, is
dependent upon various factors, including market conditions, the general availability of credit and credit ratings. We
currently do not have a credit rating, which could adversely affect our liquidity and competitive position by increasing our
financing costs and limiting access to sources of liquidity that require a credit rating as a condition to providing the
funds.
Our day-to-day funding and liquidity is obtained primarily through the use of cash from our operating activities, as well
as through the use of a clearing arrangement with Pershing, a clearing arrangement with bank financing, and a bank
line of credit, which are typically collateralized by our securities inventory. These funding sources are critical to our
ability to finance and hold inventory, which is a necessary part of our institutional brokerage business. The majority of
our inventory is liquid and is therefore funded by short-term facilities or cash from our operating activities. Our
committed line has been established to mitigate changes in the liquidity of our inventory based on changing market
conditions, and is available to us regardless of changes in market liquidity conditions through the end of its term,
although there may be limitations on the type of securities available to pledge. Our funding sources are also dependent
on the types of inventory that our counterparties are willing to accept as collateral and the number of counterparties
available. Funding is generally obtained at rates based upon the federal funds rate.
Pershing Clearing Arrangement
We have established an arrangement to obtain financing from Pershing related to the majority of our trading activities.
Under our fully disclosed clearing agreement, all of our securities inventories with the exception of convertible securities,
and all of our customer activities are held by or cleared through Pershing. Financing under this arrangement is secured
primarily by securities, and collateral limitations could reduce the amount of funding available under this arrangement.
Our clearing arrangement activities are recorded net of trading activity and reported within receivables from or payables
to brokers, dealers and clearing organizations. The funding is at the discretion of Pershing (i.e., uncommitted) and could
be denied without a notice period. Our fully disclosed clearing agreement includes a covenant requiring Piper Sandler &
Co., our U.S. broker dealer subsidiary, to maintain excess net capital of $120 million. At December 31, 2023, we had
$0.2 million of financing outstanding under this arrangement.
Clearing Arrangement with Bank Financing
We have established a financing arrangement with a U.S. branch of Canadian Imperial Bank of Commerce ("CIBC")
related to our convertible securities inventories. Under this arrangement, our convertible securities inventories are
cleared through a broker dealer affiliate of CIBC and held by CIBC. We generally economically hedge changes in the
market value of our convertible securities inventories using the underlying common stock or the stock options of the
underlying common stock. Financing under this arrangement is secured primarily by convertible securities and collateral
limitations could reduce the amount of funding available. The funding is at the discretion of CIBC (i.e., uncommitted) and
could be denied subject to a notice period. This arrangement is reported within receivables from or payables to brokers,
dealers and clearing organizations, net of trading activity. At December 31, 2023, we had $80.6 million of financing
outstanding under this arrangement.
Revolving Credit Facility
We elected to increase our unsecured revolving credit facility with U.S. Bank N.A. from $75 million to $100 million in the
fourth quarter of 2023. The credit agreement will terminate on December 18, 2026, unless otherwise terminated, and is
subject to a one-year extension exercisable at our option. This credit facility has been in place since 2019 and was
renewed in the fourth quarter of 2023. At December 31, 2023, there were $30.0 million of advances against this credit
facility. We repaid the outstanding balance on this credit facility in January 2024.
This credit facility includes customary events of default and covenants that, among other things, require Piper Sandler &
Co. to maintain a minimum regulatory net capital of $120 million, limit our leverage ratio, require maintenance of a
minimum ratio of operating cash flow to fixed charges, and impose certain limitations on our ability to make acquisitions
and make payments on our capital stock. At December 31, 2023, we were in compliance with all covenants.
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Committed Line
We elected to decrease our committed line from $80 million to $50 million in the fourth quarter of 2023. Advances under
this facility are secured by certain marketable securities. The facility includes a covenant that requires Piper Sandler &
Co. to maintain a minimum regulatory net capital of $120 million, and the unpaid principal amount of all advances under
the facility will be due on December 6, 2024. This credit facility has been in place since 2008 and was renewed for
another one-year term in the fourth quarter of 2023. At December 31, 2023, we had no advances against this line of
credit.
The following tables present the average balances outstanding for our various funding sources by quarter for 2023 and
2022:
(Amounts in millions)
Funding source
Average Balance for the Three Months Ended
Dec. 31, 2023 Sept. 30, 2023 June 30, 2023 Mar. 31, 2023
Pershing clearing arrangement
Clearing arrangement with bank financing
Revolving credit facility
Total
$
$
27.5 $
7.1 $
26.8 $
43.5
40.5
96.1
—
99.6
—
111.5 $
103.2 $
126.4 $
8.5
55.2
—
63.7
(Amounts in millions)
Funding source
Average Balance for the Three Months Ended
Dec. 31, 2022 Sept. 30, 2022 June 30, 2022 Mar. 31, 2022
Pershing clearing arrangement
Clearing arrangement with bank financing
Total
$
$
8.5 $
62.3
38.8 $
69.0
19.7 $
83.3
70.8 $
107.8 $
103.0 $
3.8
110.3
114.1
The average funding in the fourth quarter of 2023 increased to $111.5 million, compared with $70.8 million during the
fourth quarter of 2022, as we borrowed on our revolving credit facility in the fourth quarter of 2023.
The following table presents the maximum daily funding amount by quarter for 2023 and 2022:
(Amounts in millions)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Long-Term Financing
2023
2022
$
146.6 $
370.1
224.2
550.8
366.3
409.5
996.5
246.2
In 2019, we entered into unsecured fixed rate senior notes with certain entities advised by Pacific Investment
Management Company ("PIMCO"). The Class B Notes of $125 million were repaid in full on the October 15, 2023
maturity date.
Given our level of capital and earnings, we did not enter into any new long-term financing arrangements.
Contractual Obligations
In December 2022, we entered into a lease agreement for approximately 113,000 square feet of office space related to
our future corporate headquarters location in Minneapolis, Minnesota. Our contractual rental obligations over the 15-
year lease term are $53.1 million. For further discussion of our contractual rental obligations, see Note 15 to our
consolidated financial statements included in Part II, Item 8 of this Form 10-K.
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Capital Requirements
As a registered broker dealer and member firm of FINRA, Piper Sandler & Co. is subject to the uniform net capital rule
of the SEC and the net capital rule of FINRA. We have elected to use the alternative method permitted by the uniform
net capital rule which requires that we maintain minimum net capital of $1.0 million. Advances to affiliates, repayment of
subordinated liabilities, dividend payments and other equity withdrawals are subject to certain approvals, notifications
and other provisions of the uniform net capital rules. We expect that these provisions will not impact our ability to meet
current and future obligations. At December 31, 2023, our net capital under the SEC's uniform net capital rule was
$247.9 million, and exceeded the minimum net capital required under the SEC rule by $246.9 million.
Although we operate with a level of net capital substantially greater than the minimum thresholds established by FINRA
and the SEC, a substantial reduction of our capital would curtail many of our capital markets revenue producing
activities.
Our committed line and revolving credit facility include covenants requiring Piper Sandler & Co. to maintain a minimum
regulatory net capital of $120 million. Our fully disclosed clearing agreement with Pershing includes a covenant
requiring Piper Sandler & Co. to maintain excess net capital of $120 million.
At December 31, 2023, Piper Sandler Ltd., our broker dealer subsidiary registered in the U.K., was subject to, and was
in compliance with, the capital requirements of the Prudential Regulation Authority and the Financial Conduct Authority
pursuant to the Financial Services Act of 2012.
Piper Sandler Hong Kong Limited is licensed by the Hong Kong Securities and Futures Commission, which is subject to
the liquid capital requirements of the Securities and Futures (Financial Resources) Rule promulgated under the
Securities and Futures Ordinance. At December 31, 2023, Piper Sandler Hong Kong Limited was in compliance with the
liquid capital requirements of the Hong Kong Securities and Futures Commission.
OFF-BALANCE SHEET ARRANGEMENTS
In the ordinary course of business we enter into various types of off-balance sheet arrangements. The following table
summarizes the notional contract value of our off-balance sheet arrangements for the periods presented:
Expiration Per Period at December 31,
Total Contractual Amount
(Amounts in thousands)
2024
2025
2026
Customer matched-book
2027
- 2028
2029
- 2030
December 31, December 31,
Later
2023
2022
derivative contracts (1) (2) $ 56,190 $
— $
6,960 $ 48,876 $ 101,392 $ 1,143,506 $
1,356,924 $
1,354,881
Trading securities
derivative contracts (2)
191,250
Investment
commitments (3)
—
—
—
—
—
—
—
—
—
5,000
196,250
134,750
—
95,142
96,280
(1) Consists of interest rate swaps. We have minimal market risk related to these matched-book derivative contracts; however, we do have
counterparty risk with one major financial institution, which is mitigated by collateral deposits. In addition, we have a limited number of
counterparties (contractual amount of $150.2 million at December 31, 2023) who are not required to post collateral. The uncollateralized amounts,
representing the fair value of the derivative contracts, expose us to the credit risk of these counterparties. At December 31, 2023, we had
$6.7 million of credit exposure with these counterparties, including $5.8 million of credit exposure with one counterparty.
(2) We believe the fair value of these derivative contracts is a more relevant measure of the obligations because we believe the notional or contract
amount overstates the expected payout. At December 31, 2023 and 2022, the net fair value of these derivative contracts approximated
$6.9 million and $7.8 million, respectively.
(3) The investment commitments have no specified call dates. The timing of capital calls is based on market conditions and investment opportunities.
Derivatives
Derivatives' notional or contract amounts are not reflected as assets or liabilities on our consolidated statements of
financial condition. Rather, the fair value of the derivative transactions are reported on the consolidated statements of
financial condition as assets or liabilities in financial instruments and other inventory positions owned and financial
instruments and other inventory positions sold, but not yet purchased, as applicable. For a discussion of our activities
related to derivative products, see Note 7 to our consolidated financial statements included in Part II, Item 8 of this Form
10-K.
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Investment Commitments
We have investments, including those made as part of our alternative asset management activities, in limited
partnerships or limited liability companies that make direct or indirect equity or debt investments in companies. We
commit capital and/or act as the managing partner of these entities. We have committed capital of $95.1 million to
certain entities and these commitments generally have no specified call dates. For additional information on our
activities related to these types of entities, see Note 9 to our consolidated financial statements included in Part II, Item 8
of this Form 10-K.
REPLACEMENT OF INTERBANK OFFERED RATES ("IBORs"), INCLUDING THE LONDON INTERBANK
OFFERED RATE ("LIBOR")
Central banks and regulators in a number of major jurisdictions (e.g., U.S., U.K., European Union, Switzerland and
Japan) have implemented replacements for IBORs. Effective July 1, 2023 all LIBOR tenors have ceased publication.
The replacement of LIBOR did not impact our financing arrangements, as each arrangement either transitioned to a
replacement rate prior to LIBOR ceasing publication, or included terms that identified a replacement rate (e.g., Secured
Overnight Financing Rate) that became effective when LIBOR ceased publication.
Our limited number of contractual agreements that previously used LIBOR are principally within our customer matched-
book derivatives portfolio. The International Swaps and Derivatives Association ("ISDA") created the IBOR Fallback
Protocol to facilitate amending references to benchmark interest rates in derivative contracts governed by Master ISDA
Agreements. If a benchmark interest rate is no longer published, it will "fall back" to a new benchmark interest rate in
those contracts where both counterparties have agreed to adhere to the protocol. All of our clients had adhered to the
protocol when LIBOR ceased publication. As a result, the transition from LIBOR to a replacement rate did not impact our
operations.
RISK MANAGEMENT
Risk is an inherent part of our business. The principal risks we face in operating our business include: strategic risk,
market risk, liquidity risk, credit risk, operational risk, human capital risk, and legal and regulatory risk. The extent to
which we properly identify and effectively manage each of these risks is critical to our financial condition and profitability.
We have a formal risk management process to identify, assess and monitor each risk and mitigating controls in
accordance with defined policies and procedures. The risk management functions are independent of our business
lines. Our management takes an active role in the risk management process, and the results are reported to senior
management and the board of directors.
The audit committee of the board of directors oversees management's processes for identifying and evaluating our
major risks, and the policies, procedures and practices employed by management to govern its risk assessment and
risk management processes. The nominating and governance committee of the board of directors oversees the board of
directors' committee structures and functions as they relate to the various committees' responsibilities with respect to
oversight of our major risk exposures. With respect to these major risk exposures, the audit committee is responsible for
overseeing management's monitoring and control of our major risk exposures relating to market risk, credit risk, liquidity
risk, legal and regulatory risk, operational risk (including cybersecurity, as further described in Part I, Item 1C of this
Form 10-K), and human capital risk relating to misconduct, fraud, and legal and compliance matters. Our compensation
committee is responsible for overseeing management's monitoring and control of our major risk exposures relating to
compensation, organizational structure, and succession. Our board of directors is responsible for overseeing
management's monitoring and control of our major risk exposures related to our corporate strategy. Our Chief Executive
Officer and Chief Financial Officer meet with the audit committee on a quarterly basis to discuss our market, liquidity,
and legal and regulatory risks, and provide updates to the board of directors, audit committee, and compensation
committee concerning the other major risk exposures on a regular basis.
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We use internal committees to assist in governing risk and ensure that our business activities are properly assessed,
monitored and managed. Our executive financial risk committee manages our market, liquidity and credit risks;
oversees risk management practices related to these risks, including defining acceptable risk tolerances and approving
risk management policies; and responds to market changes in a dynamic manner. Membership is comprised of senior
leadership, including our Chief Executive Officer, President, Chief Financial Officer, Treasurer, Head of Market and
Credit Risk, and Head of Fixed Income Trading and Risk. Other committees that help evaluate and monitor risk include
underwriting, leadership team and operating committees. These committees help manage risk by ensuring that
business activities are properly managed and within a defined scope of activity. Our valuation committees, comprised of
members of senior management and risk management, provide oversight and overall responsibility for the internal
control processes and procedures related to fair value measurements. Additionally, our operational risk committees
address and monitor risk related to information systems and security, legal, regulatory and compliance matters, and
third parties such as vendors and service providers.
With respect to market risk and credit risk, the cornerstone of our risk management process is daily communication
among traders, trading department management and senior management concerning our inventory positions and
overall risk profile. Our risk management functions supplement this communication process by providing their
independent perspectives on our market and credit risk profile on a daily basis. The broader objectives of our risk
management functions are to understand the risk profile of each trading area, to consolidate risk monitoring company-
wide, to assist in implementing effective hedging strategies, to articulate large trading or position risks to senior
management, and to ensure accurate fair values of our financial instruments.
Risk management techniques, processes and strategies may not be fully effective in mitigating our risk exposure in all
market environments or against all types of risk, and any risk management failures could expose us to material
unanticipated losses.
Strategic Risk
Strategic risk represents the risk associated with executive management failing to develop and execute on the
appropriate strategic vision which demonstrates a commitment to our culture, leverages our core competencies,
appropriately responds to external factors in the marketplace, and is in the best interests of our clients, employees and
shareholders.
Our leadership team is responsible for managing our strategic risks. The board of directors oversees the leadership
team in setting and executing our strategic plan.
Market Risk
Market risk represents the risk of losses, or financial volatility, that may result from the change in value of a financial
instrument due to fluctuations in its market price. Our exposure to market risk is directly related to our role as a financial
intermediary for our clients and to our market-making activities. The scope of our market risk management policies and
procedures includes all market-sensitive cash and derivative financial instruments.
Our different types of market risk include:
Interest Rate Risk
Interest rate risk represents the potential volatility from changes in market interest rates. We are exposed to interest rate
risk arising from changes in the level and volatility of interest rates, changes in the slope of the yield curve, changes in
credit spreads, and the rate of prepayments on our interest-earning assets (e.g., inventories) and our funding sources
(e.g., short-term financing) which finance these assets. Interest rate risk is managed by selling short U.S. government
securities, agency securities, corporate debt securities and derivative contracts. See Note 7 to our consolidated financial
statements included in Part II, Item 8 of this Form 10-K for additional information on our derivative contracts. Our
interest rate hedging strategies may not work in all market environments and as a result may not be effective in
mitigating interest rate risk. Also, we establish limits on our long fixed income securities inventory, monitor these limits
on a daily basis and manage within those limits. Our limits include but are not limited to the following: position and
concentration size, dollar duration (i.e., DV01), credit quality and aging.
We estimate that a parallel 50 basis point adverse change in the market would result in a decrease of approximately
$0.3 million in the carrying value of our fixed income securities inventory as of December 31, 2023, including the effect
of the hedging transactions.
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We also measure and monitor the aging and turnover of our long fixed income securities inventory. Turnover is
evaluated based on a five-day average by category of security. The vast majority of our fixed income securities
inventory generally turns over within three weeks.
In addition to the measures discussed above, we monitor and manage market risk exposure through evaluation of
spread DV01 and the MMD basis risk for municipal securities to movements in U.S. treasury securities. All metrics are
aggregated by asset concentration and are used for monitoring limits and exception approvals. In times of market
volatility, we may also perform ad hoc stress tests and scenario analysis as market conditions dictate.
Equity Price Risk
Equity price risk represents the potential loss in value due to adverse changes in the level or volatility of equity prices.
We are exposed to equity price risk through our trading activities primarily in the U.S. market. We attempt to reduce the
risk of loss inherent in our market-making and in our inventory of equity securities by establishing limits on our long
inventory, monitoring these limits on a daily basis, and by managing net position levels within those limits.
Foreign Exchange Risk
Foreign exchange risk represents the potential volatility to earnings or capital arising from movement in foreign
exchange rates. A modest portion of our business is conducted in currencies other than the U.S. dollar, and changes in
foreign exchange rates relative to the U.S. dollar can therefore affect the value of non-U.S. dollar net assets, revenues
and expenses.
Liquidity Risk
Liquidity risk is the risk that we are unable to timely access necessary funding sources in order to operate our business,
as well as the risk that we are unable to timely divest securities that we hold in connection with our market-making and
sales and trading activities. We are exposed to liquidity risk in our day-to-day funding activities, by holding potentially
illiquid inventory positions and in our role as a remarketing agent for variable rate demand notes.
Our inventory positions subject us to potential financial losses from the reduction in value of illiquid positions. Market
risk can be exacerbated in times of trading illiquidity when market participants refrain from transacting in normal
quantities or at normal bid-offer spreads. Depending on the specific security, the structure of the financial product, or
overall market conditions, we may be forced to hold a security for substantially longer than we had planned or forced to
liquidate into a challenging market if funding becomes unavailable.
See the section entitled "Liquidity, Funding and Capital Resources" for information regarding our liquidity and how we
manage liquidity risk.
Credit Risk
Credit risk refers to the potential for loss due to the default or deterioration in credit quality of a counterparty, customer,
borrower or issuer of securities we hold in our trading inventory. The nature and amount of credit risk depends on the
type of transaction, the structure and duration of that transaction and the parties involved. Credit risk also results from
an obligor's failure to meet the terms of any contract with us or otherwise fail to perform as agreed. This may be
reflected through issues such as settlement obligations or payment collections.
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A key tenet of our risk management procedures related to credit risk is the daily monitoring of the credit quality of our
long fixed income securities inventory. These rating trends and the credit quality mix are regularly reviewed with the
executive financial risk committee. The following table summarizes the credit rating for our long corporate fixed income
securities, taxable and tax-exempt municipal securities, and U.S. government and agency securities as a percentage of
the total of these asset classes as of December 31, 2023:
Corporate fixed income securities
Taxable and tax-exempt municipal
securities
U.S. government and agency securities
AAA
AA
A
BBB
BB
Not Rated
— %
— %
— %
— %
— %
— %
20.8
—
28.0
22.3
22.6
—
1.5
—
—
—
4.4
0.4
20.8 %
50.3 %
22.6 %
1.5 %
— %
4.8 %
Corporate fixed income securities represent less than 0.1% of the total of the asset classes above as of December 31,
2023. Convertible and preferred securities are excluded from the table above as they are typically unrated.
Our different types of credit risk include:
Credit Spread Risk
Credit spread risk arises from the possibility that changes in credit spreads will affect the value of financial instruments.
Credit spreads represent the credit risk premiums required by market participants for a given credit quality (e.g., the
additional yield that a debt instrument issued by a AA-rated entity must produce over a risk-free alternative). Changes in
credit spreads result from potential changes in an issuer's credit rating or the market's perception of the issuer's
creditworthiness. We are exposed to credit spread risk with the debt instruments held in our trading inventory. We enter
into transactions to hedge our exposure to credit spread risk with derivatives and certain other financial instruments.
These hedging strategies may not work in all market environments and as a result may not be effective in mitigating
credit spread risk.
Deterioration/Default Risk
Deterioration/default risk represents the risk due to an issuer, counterparty or borrower failing to fulfill its obligations. We
are exposed to deterioration/default risk in our role as a trading counterparty to dealers and customers, as a holder of
securities, and as a member of exchanges. The risk of default depends on the creditworthiness of the counterparty or
issuer of the security. We mitigate this risk by establishing and monitoring individual and aggregate position limits for
each counterparty relative to potential levels of activity, holding and marking to market collateral on certain transactions.
Our risk management functions also evaluate the potential risk associated with institutional counterparties with whom
we hold derivatives, TBAs and other documented institutional counterparty agreements that may give rise to credit
exposure.
Collections Risk
Collections risk arises from ineffective management and monitoring of collecting outstanding debts and obligations,
including those related to our customer trading activities. Our client activities involve the execution, settlement and
financing of various transactions. Client activities are transacted on a delivery versus payment, cash or margin basis.
Our credit exposure to institutional client business is mitigated by the use of industry-standard delivery versus payment
through depositories and clearing banks. Our risk management functions have credit risk policies establishing
appropriate credit limits and collateralization thresholds for our customers and counterparties.
Concentration Risk
Concentration risk is the risk due to concentrated exposure to a particular product; individual issuer, borrower or
counterparty; financial instrument; or geographic area. We are subject to concentration risk if we hold large individual
securities positions, execute large transactions with individual counterparties or groups of related counterparties, or
make substantial underwriting commitments. Potential concentration risk is monitored through review of counterparties
and borrowers and is managed using policies and limits established by senior management.
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We have concentrated counterparty credit exposure with four non-publicly rated entities totaling $6.7 million at
December 31, 2023. This counterparty credit exposure is part of our matched-book derivative program related to our
public finance business, consisting primarily of interest rate swaps. One derivative counterparty represented 87.5
percent, or $5.8 million, of this exposure. Credit exposure associated with our derivative counterparties is driven by
uncollateralized market movements in the fair value of the interest rate swap contracts and is monitored regularly by our
financial risk committee. We attempt to minimize the credit (or repayment) risk in derivative instruments by entering into
transactions with high-quality counterparties that are reviewed periodically by senior management.
Operational Risk
Operational risk is the risk of loss, or damage to our reputation, resulting from inadequate or failed processes, people
and systems or from external events. We rely on the ability of our employees and our systems, both internal and at
computer centers operated by third parties, to process a large number of transactions. Our systems may fail to operate
properly or become disabled as a result of events that are wholly or partially beyond our control. In the event of a
breakdown or improper operation of our systems or improper action by our employees or third-party vendors, we could
suffer financial loss, a disruption of our businesses, regulatory sanctions and damage to our reputation. We also face
the risk of operational failure or termination of our relationship with any of the exchanges, fully disclosed clearing firms,
or other financial intermediaries we use to facilitate our securities transactions. Any such failure or termination could
adversely affect our ability to effect transactions and manage our exposure to risk.
Our operations rely on secure processing, storage and transmission of confidential and other information in our internal
and outsourced computer systems and networks. Our computer systems, software and networks may be vulnerable to
unauthorized access, computer viruses or other malicious code, internal misconduct or inadvertent errors and other
events that could have an information security impact. The occurrence of one or more of these events could jeopardize
our or our clients' or counterparties' confidential and other information processed and stored in, and transmitted through,
our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our clients', our
counterparties' or third parties' operations. We take protective measures and endeavor to modify them as circumstances
warrant. A further discussion of our procedures for cybersecurity risk management is included in Part I, Item 1C of this
Form 10-K.
In order to mitigate and control operational risk, we have developed and continue to enhance policies and procedures
that are designed to identify and manage operational risk at appropriate levels throughout the organization. Important
aspects of these policies and procedures include segregation of duties, management oversight, internal control over
financial reporting and independent risk management activities within such functions as Risk Management, Compliance,
Operations, Internal Audit, Treasury, Finance, Information Technology and Legal. Internal Audit oversees, monitors,
evaluates, analyzes and reports on operational risk across the firm. We also have business continuity plans in place that
we believe will cover critical processes on a company-wide basis, and redundancies are built into our systems as we
have deemed appropriate. These control mechanisms attempt to ensure that operational policies and procedures are
being followed and that our various businesses are operating within established corporate policies and limits.
We operate under a fully disclosed clearing model for all of our securities inventories with the exception of convertible
securities, and for all of our client clearing activities. In a fully disclosed clearing model, we act as an introducing broker
for client transactions and rely on Pershing, our clearing broker dealer, to facilitate clearance and settlement of our
clients' securities transactions. The clearing services provided by Pershing are critical to our business operations, and
similar to other services performed by third-party vendors, any failure by Pershing with respect to the services we rely
upon Pershing to provide could cause financial loss, significantly disrupt our business, damage our reputation, and
adversely affect our ability to serve our clients and manage our exposure to risk.
Human Capital Risk
Our business is a human capital business and our success is dependent upon the skills, expertise and performance of
our employees. Human capital risks represent the risks posed if we fail to attract and retain qualified individuals who are
motivated to serve the best interests of our clients, thereby serving the best interests of our company. Attracting and
retaining employees depends, among other things, on our company's culture, management, work environment,
geographic locations and compensation. There are risks associated with the proper recruitment, development and
rewards of our employees to ensure quality performance and retention.
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Legal and Regulatory Risk
Legal and regulatory risk includes the risk of non-compliance with applicable legal and regulatory requirements and loss
to our reputation we may suffer as a result of failure to comply with laws, regulations, rules, related self-regulatory
organization standards and codes of conduct applicable to our business activities. We are generally subject to extensive
regulation in the various jurisdictions in which we conduct our business. We have established procedures that are
reasonably designed to achieve compliance with applicable statutory and regulatory requirements, such as public
company reporting obligations, regulatory net capital requirements, sales and trading practices, potential conflicts of
interest, anti-money laundering, privacy, and financial and electronic recordkeeping. We have also established
procedures that are reasonably designed to achieve compliance with our policies relating to ethics and business
conduct. The legal and regulatory focus on the financial services industry presents a continuing business challenge for
us.
Our business also subjects us to the complex income tax laws of the jurisdictions in which we have business operations,
and these tax laws may be subject to different interpretations by the taxpayer and the relevant governmental taxing
authorities. We must make judgments and interpretations about the application of these inherently complex tax laws
when determining the provision for income taxes.
EFFECTS OF INFLATION
Because our assets are liquid and generally short-term in nature, they are not significantly affected by inflation.
However, the rate of inflation affects our expenses, such as employee compensation, office space occupancy costs,
communications charges and travel costs, which may not be readily recoverable in the price of services we offer to our
clients. To the extent inflation results in rising interest rates and has adverse effects upon the securities markets, it may
adversely affect our financial position and results of operations.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.
The information under the caption "Risk Management" in Part II, Item 7 of this Form 10-K entitled, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," is incorporated herein by reference.
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Item 8. Financial Statements and Supplementary Data.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting.
Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with U.S. generally accepted
accounting principles. All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on its assessment
and those criteria, management has concluded that we maintained effective internal control over financial reporting as
of December 31, 2023.
Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements
of Piper Sandler Companies included in this Annual Report on Form 10-K, has issued an attestation report on internal
control over financial reporting as of December 31, 2023. Their report, which expresses an unqualified opinion on the
effectiveness of Piper Sandler Companies' internal control over financial reporting as of December 31, 2023, is included
herein.
Piper Sandler Companies | 58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Piper Sandler Companies
Opinion on Internal Control Over Financial Reporting
We have audited Piper Sandler Companies’ internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Piper Sandler Companies (the
Company) maintained, in all material respects, effective internal control over financial reporting as of December 31,
2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated statements of financial condition of the Company as of December 31, 2023 and
2022, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity and
cash flows for each of the three years in the period ended December 31, 2023, and the related notes and our report
dated February 26, 2024, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 26, 2024
Piper Sandler Companies | 59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Piper Sandler Companies
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of Piper Sandler Companies (the
Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive
income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31,
2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated February 26, 2024 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in
the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Piper Sandler Companies | 60
Description of
the Matter
Valuation of Investments at Fair Value
At December 31, 2023, the Company’s investments at fair value totaled $285.9 million, primarily
consisting of investments in private companies. These investments are held in consolidated alternative
asset management funds, which include $211.1 million of noncontrolling interests attributable to
unrelated third party ownership. Of the total investments at fair value, $224.3 million are categorized
as Level III within the fair value hierarchy. As described in Notes 2 and 6 of the consolidated financial
statements, management determines the fair values of these investments internally using the best
information available. These investments in private companies are valued based on an assessment of
each underlying security, considering rounds of financing, the financial condition and operating results
of the private company, third party transactions and market-based information, including comparable
company transactions, trading multiples (e.g., multiples of revenue and earnings before interest, taxes,
depreciation and amortization (EBITDA)), discounted cash flow analyses and changes in market
outlook, among other factors.
Auditing the fair value of the Company’s investments related to its alternative asset management
funds was complex, as the inputs and assumptions used by the Company are highly judgmental and
could have a significant effect on the fair value measurements of such investments.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of
controls over the Company’s investment valuation process. This included controls over management’s
assessment of the valuation methodologies, the inputs and assumptions used in determining fair value
measurements, and the valuation committees' reviews of investment valuations on a quarterly basis.
To test the valuation of the Company’s investments related to its alternative asset management funds,
our procedures included, among others, involving internal valuation specialists to assist in our
evaluation of the Company’s valuation methodologies, testing the significant inputs and assumptions
used by the Company in determining the fair values, and testing the mathematical accuracy of the
Company’s valuation calculations. For example, we agreed model inputs to source information
including capital structure, investee-provided financial information or projections, and publicly available
information on comparable transactions (e.g., transaction multiples). We assessed the issuer’s
financial projections by comparing them to historical performance, obtaining an understanding of key
events impacting the issuer and performing sensitivity analyses as needed to evaluate the impact to
fair value that would result from changes in these projections. To the extent available, we evaluated
subsequent events and other information and considered whether it corroborated or contradicted the
Company’s year-end valuations.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2003.
Minneapolis, Minnesota
February 26, 2024
Piper Sandler Companies | 61
Table of Contents
Piper Sandler Companies
Consolidated Statements of Financial Condition
(Amounts in thousands, except share data)
Assets
Cash and cash equivalents
Receivables from brokers, dealers and clearing organizations
Financial instruments and other inventory positions owned:
Financial instruments and other inventory positions owned
Financial instruments and other inventory positions owned and pledged as
collateral
Total financial instruments and other inventory positions owned
Investments (including noncontrolling interests of $211,096 and $200,687,
respectively)
Fixed assets (net of accumulated depreciation and amortization of $91,378 and
$75,759, respectively)
Right-of-use lease assets
Goodwill
Intangible assets (net of accumulated amortization of $150,487 and $131,047,
respectively)
Net deferred income tax assets
Other assets
Total assets
Liabilities and Shareholders' Equity
Short-term financing
Long-term financing
Payables to brokers, dealers and clearing organizations
Financial instruments and other inventory positions sold, but not yet purchased
Accrued compensation
Accrued lease liabilities
Other liabilities and accrued expenses
Total liabilities
Shareholders' equity:
Common stock, $0.01 par value:
December 31, December 31,
2023
2022
$
383,098 $
212,004
365,624
300,463
341,780
282,501
92,777
434,557
57,478
339,979
298,048
285,726
60,770
69,387
301,760
68,220
87,730
301,151
116,197
179,207
85,955
2,140,983 $
135,637
191,002
106,025
2,181,557
30,000 $
—
979
148,980
486,145
93,727
81,679
841,510
—
125,000
4,622
60,836
565,738
109,771
61,562
927,529
$
$
Shares authorized: 100,000,000 at December 31, 2023 and December 31, 2022;
Shares issued: 19,553,101 at December 31, 2023 and 19,544,507 at
December 31, 2022;
Shares outstanding: 15,200,149 at December 31, 2023 and 13,673,064 at
December 31, 2022
Additional paid-in capital
Retained earnings
Less: Common stock held in treasury, at cost: 4,352,952 shares at December 31,
2023 and 5,871,443 shares at December 31, 2022
Accumulated other comprehensive loss
Total common shareholders' equity
Noncontrolling interests
Total shareholders' equity
195
988,136
454,358
(356,297)
(894)
1,085,498
213,975
1,299,473
195
1,044,719
453,311
(441,653)
(2,499)
1,054,073
199,955
1,254,028
Total liabilities and shareholders' equity
$
2,140,983 $
2,181,557
See Notes to the Consolidated Financial Statements
Piper Sandler Companies | 62
Table of Contents
Piper Sandler Companies
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
Revenues
Investment banking
Institutional brokerage
Interest income
Investment income/(loss)
Total revenues
Interest expense
Net revenues
Non-interest expenses
Compensation and benefits
Outside services
Occupancy and equipment
Communications
Marketing and business development
Deal-related expenses
Trade execution and clearance
Restructuring and integration costs
Intangible asset amortization
Other operating expenses
Total non-interest expenses
Income before income tax expense
Income tax expense
Net income
Net income/(loss) attributable to noncontrolling interests
Year Ended December 31,
2023
2022
2021
$
923,812 $
1,009,509 $
1,553,219
377,539
26,723
30,039
405,267
20,365
(23)
387,577
6,967
94,032
1,358,113
1,435,118
2,041,795
10,146
9,480
10,734
1,347,967
1,425,638
2,031,061
897,034
983,524
1,305,166
51,754
64,356
52,718
37,734
28,189
19,972
7,749
19,440
46,435
53,189
64,252
50,565
42,849
31,874
20,185
11,440
15,375
18,016
45,942
56,946
44,008
20,902
42,921
16,533
4,724
30,080
22,327
1,225,381
1,291,269
1,589,549
122,586
23,613
98,973
13,482
134,369
33,189
101,180
(9,494)
441,512
111,144
330,368
51,854
Net income attributable to Piper Sandler Companies
$
85,491 $
110,674 $
278,514
Earnings per common share
Basic
Diluted
Dividends declared per common share
$
$
$
5.72 $
4.96 $
7.92 $
6.52 $
19.52
16.43
3.65 $
6.90 $
6.80
Weighted average number of common shares outstanding
Basic
Diluted
14,958
17,224
13,982
16,965
14,265
16,955
See Notes to the Consolidated Financial Statements
Piper Sandler Companies | 63
Table of Contents
Piper Sandler Companies
Consolidated Statements of Comprehensive Income
(Amounts in thousands)
Net income
Other comprehensive income/(loss), net of tax — Foreign
currency translation adjustment
Comprehensive income
Comprehensive income/(loss) attributable to noncontrolling
interests
Comprehensive income attributable to Piper Sandler
Companies
Year Ended December 31,
2023
2022
2021
$
98,973 $
101,180 $
330,368
1,605
100,578
(1,535)
99,645
(767)
329,601
13,482
(9,494)
51,854
$
87,096 $
109,139 $
277,747
See Notes to the Consolidated Financial Statements
Piper Sandler Companies | 64
Table of Contents
Piper Sandler Companies
Consolidated Statements of Changes in Shareholders' Equity
Accumulated
Total
Common
Additional
Other
Common
Total
(Amounts in thousands,
Shares
Common
Paid-In
Retained
Treasury
Comprehensive Shareholders' Noncontrolling Shareholders'
except share amounts)
Outstanding
Stock
Capital
Earnings
Stock
Loss
Equity
Interests
Equity
Balance at
December 31, 2020
Net income
Dividends
Amortization/issuance of
restricted stock (1)
Repurchase of common
stock through share
repurchase program
Issuance of treasury
shares for restricted
stock vestings
Repurchase of common
stock from employees
Shares reserved/issued for
director compensation
Other comprehensive loss
Fund capital
contributions, net
Balance at
December 31, 2021
Net income/(loss)
Dividends
Amortization/issuance of
restricted stock (1)
Repurchase of common
stock through share
repurchase program
Issuance of treasury
shares for restricted
stock vestings
Repurchase of common
stock from employees
Shares reserved/issued for
director compensation
Other comprehensive loss
Fund capital
contributions, net
Balance at
December 31, 2022
Net income
Dividends
Amortization/issuance of
restricted stock (1)
Issuance of treasury
shares for restricted
stock vestings
Repurchase of common
stock from employees
Shares reserved/issued for
director compensation
Other comprehensive
income
Fund capital
contributions, net
Balance at
December 31, 2023
13,776,025 $
195 $ 847,785 $ 271,001 $ (289,359) $
(197) $
829,425 $
96,657 $
926,082
—
—
—
(417,903)
918,024
(154,117)
7,490
—
—
—
—
—
—
—
—
—
—
—
—
278,514
—
(99,350)
123,270
—
—
—
—
—
—
(52,250)
(46,687)
—
46,687
—
—
(17,651)
1,019
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(767)
—
278,514
(99,350)
123,270
(52,250)
—
(17,651)
1,019
(767)
51,854
330,368
—
—
—
—
—
—
—
(99,350)
123,270
(52,250)
—
(17,651)
1,019
(767)
—
16,134
16,134
14,129,519 $
195 $ 925,387 $ 450,165 $ (312,573) $
(964) $
1,062,210 $
164,645 $
1,226,855
—
—
—
(1,245,221)
953,293
(172,156)
7,629
—
—
—
—
—
—
—
—
—
—
—
—
110,674
—
(107,528)
176,645
—
—
—
—
—
—
(161,811)
(58,254)
—
58,254
—
941
—
—
—
(25,523)
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,535)
110,674
(107,528)
176,645
(161,811)
—
(25,523)
941
(1,535)
(9,494)
101,180
—
—
—
—
—
—
—
(107,528)
176,645
(161,811)
—
(25,523)
941
(1,535)
—
—
44,804
44,804
13,673,064 $
195 $ 1,044,719 $ 453,311 $ (441,653) $
(2,499) $
1,054,073 $
199,955 $
1,254,028
—
—
—
—
—
—
—
85,491
—
(84,444)
98,285
—
—
—
—
2,013,046
—
(156,036)
—
156,036
(494,555)
8,594
—
—
—
—
—
—
—
—
(70,680)
1,168
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,605
—
85,491
(84,444)
98,285
—
(70,680)
1,168
1,605
—
13,482
—
—
—
—
—
—
538
98,973
(84,444)
98,285
—
(70,680)
1,168
1,605
538
15,200,149 $
195 $ 988,136 $ 454,358 $ (356,297) $
(894) $
1,085,498 $
213,975 $
1,299,473
(1)
Includes amortization of restricted stock issued in conjunction with the Company's acquisitions.
See Notes to the Consolidated Financial Statements
Piper Sandler Companies | 65
Table of Contents
(Amounts in thousands)
Operating Activities
Net income
Piper Sandler Companies
Consolidated Statements of Cash Flows
Year Ended December 31,
2023
2022
2021
$
98,973 $
101,180 $
330,368
Adjustments to reconcile net income to net cash provided by/
(used in) operating activities:
Depreciation and amortization of fixed assets
Deferred income taxes
Stock-based compensation
Amortization of intangible assets
Amortization of forgivable loans
Decrease/(increase) in operating assets:
Receivables from brokers, dealers and clearing organizations
Net financial instruments and other inventory positions owned
Investments
Other assets
Increase/(decrease) in operating liabilities:
Payables to brokers, dealers and clearing organizations
Accrued compensation
Other liabilities and accrued expenses
Net cash provided by/(used in) operating activities
Investing Activities
Business acquisitions, net of cash acquired
Purchases of fixed assets, net
Net cash used in investing activities
Financing Activities
Net change in short-term financing
Repayment of long-term financing
Payment of cash dividend
Increase in noncontrolling interests
Repurchase of common stock
17,932
11,426
93,768
19,440
10,816
88,459
(6,434)
(12,322)
28,756
15,639
(32,802)
131,203
15,375
9,322
(43,392)
(58,859)
(33,681)
(5,216)
(3,643)
(8,625)
(74,689)
(296,369)
3,147
275,629
(18,682)
(224,907)
12,630
(53,981)
171,447
30,080
9,505
(32,639)
30,238
(68,866)
(34,913)
(5,344)
330,883
(12,321)
707,087
—
(10,051)
(10,051)
(96,504)
(30,600)
(127,104)
—
(20,577)
(20,577)
30,000
(125,000)
(84,444)
538
(70,680)
—
—
(107,528)
44,804
(187,334)
—
(70,000)
(99,350)
16,134
(69,901)
Net cash used in financing activities
(249,586)
(250,058)
(223,117)
Currency adjustment:
Effect of exchange rate changes on cash
1,482
(3,272)
(363)
Net increase/(decrease) in cash and cash equivalents
17,474
(605,341)
463,030
Cash and cash equivalents at beginning of year
365,624
970,965
Cash and cash equivalents at end of year
$
383,098 $
365,624 $
507,935
970,965
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest
Income taxes
$
$
10,163 $
19,446 $
9,481 $
10,777
85,428 $
165,910
See Notes to the Consolidated Financial Statements
Piper Sandler Companies | 66
Table of Contents
Index
Note 1
Note 2
Note 3
Note 4
Note 5
Note 6
Note 7
Note 8
Note 9
Piper Sandler Companies
Notes to the Consolidated Financial Statements
Organization and Basis of Presentation
Summary of Significant Accounting Policies
Recent Accounting Pronouncements
Acquisitions
Receivables from and Payables to Brokers, Dealers and Clearing Organizations
Fair Value of Financial Instruments
Financial Instruments and Other Inventory Positions
Investments
Variable Interest Entities
Note 10
Fixed Assets
Note 11
Goodwill and Intangible Assets
Note 12
Other Assets
Note 13
Short-Term Financing
Note 14
Long-Term Financing
Note 15
Leases
Note 16
Contingencies, Commitments and Guarantees
Note 17
Shareholders' Equity
Note 18
Revenues and Business Information
Note 19
Compensation Plans
Note 20
Employee Benefit Plans
Note 21
Restructuring and Integration Costs
Note 22
Income Taxes
Note 23
Earnings Per Share
Note 24
Net Capital Requirements and Other Regulatory Matters
Note 25
Parent Company Only and PSLS
68
69
74
74
78
78
85
87
87
88
89
90
90
90
91
91
93
95
96
103
103
104
107
107
108
Piper Sandler Companies | 67
Table of Contents
Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 1 | ORGANIZATION AND BASIS OF PRESENTATION
Organization
Piper Sandler Companies is the parent company of Piper Sandler & Co., a securities broker dealer and investment
banking firm; Piper Sandler Ltd., a firm providing securities brokerage and mergers and acquisitions services in the
United Kingdom ("U.K."); Piper Sandler Finance LLC, which facilitates corporate debt underwriting in conjunction with
affiliated credit vehicles; Piper Sandler Investment Group Inc., PSC Capital Management LLC, PSC Capital
Management II LLC and PSC Capital Management III LLC, entities providing alternative asset management services;
Piper Sandler Loan Strategies, LLC ("PSLS"), which provides management services for primary and secondary market
liquidity transactions of loan and servicing rights; Piper Sandler Hedging Services, LLC, an entity that assists clients with
hedging strategies; Piper Sandler Financial Products Inc. and Piper Sandler Financial Products II Inc., entities that
facilitate derivative transactions; and other immaterial subsidiaries.
Piper Sandler Companies and its subsidiaries (collectively, the "Company") operate in one reporting segment providing
investment banking services and institutional sales, trading and research services. Investment banking services include
financial advisory services, management of and participation in underwritings, and municipal financing activities.
Revenues are generated through the receipt of advisory and financing fees. Institutional sales, trading and research
services focus on the trading of equity and fixed income products with institutions, corporations, government and non-
profit entities. Revenues are generated through commissions and sales credits earned on equity and fixed income
institutional sales activities, net interest revenues on trading securities held in inventory, profits and losses from trading
these securities, and fees for research services and corporate access offerings. Also, the Company has created
alternative asset management funds in merchant banking and healthcare in order to invest firm capital and to manage
capital from outside investors. The Company records gains and losses from investments in these funds and receives
management and performance fees.
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with United States generally
accepted accounting principles ("U.S. GAAP") and include the accounts of Piper Sandler Companies, its wholly owned
subsidiaries, and all other entities in which the Company has a controlling financial interest. Noncontrolling interests
represent equity interests in consolidated entities that are not attributable, either directly or indirectly, to Piper Sandler
Companies. Noncontrolling interests include the minority equity holders' proportionate share of the equity in the
Company's alternative asset management funds. All material intercompany balances have been eliminated.
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates
and assumptions are based on the best information available, actual results could differ from those estimates.
Piper Sandler Companies | 68
Table of Contents
Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 2 | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The Company consolidates entities in which it has a controlling financial interest. The Company determines whether it
has a controlling financial interest in an entity by first evaluating whether the entity is a variable interest entity ("VIE") or
a voting interest entity.
VIEs are entities in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities
independently or (ii) the at-risk equity holders do not have the normal characteristics of a controlling financial interest. A
controlling financial interest in a VIE is present when an enterprise has one or more variable interests that have both (i)
the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (ii) the
obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to
the VIE. The enterprise with a controlling financial interest is the primary beneficiary and consolidates the VIE.
Voting interest entities lack one or more of the characteristics of a VIE. The usual condition for a controlling financial
interest is ownership of a majority voting interest for a corporation or a majority of kick-out or participating rights for a
limited partnership.
When the Company does not have a controlling financial interest in an entity but exerts significant influence over the
entity's operating and financial policies, the Company's investment is accounted for under the equity method of
accounting. If the Company does not have a controlling financial interest in, or exert significant influence over, an entity,
the Company accounts for its investment at fair value, if the fair value option was elected, or at cost.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments with maturities of 90 days or less at the date of
origination.
Fair Value of Financial Instruments
Financial instruments and other inventory positions owned and financial instruments and other inventory positions sold,
but not yet purchased on the consolidated statements of financial condition consist of financial instruments (including
securities with extended settlements and derivative contracts) recorded at fair value. Unrealized gains and losses
related to these financial instruments are reflected on the consolidated statements of operations. Securities (both long
and short), including securities with extended settlements, are recognized on a trade-date basis. Additionally, the
Company's investments on the consolidated statements of financial condition are principally recorded at fair value.
Fair Value Measurement – Definition and Hierarchy
Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 820, "Fair Value
Measurement," ("ASC 820") defines fair value as the amount at which an instrument could be exchanged in an orderly
transaction between market participants at the measurement date (i.e., the exit price). ASC 820 establishes a fair value
hierarchy based on the inputs used to measure fair value. The fair value hierarchy maximizes the use of observable
inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available.
Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data
obtained from independent sources. Unobservable inputs reflect management's assumptions that market participants
would use in pricing the asset or liability developed based on the best information available in the circumstances. The
hierarchy is broken down into three levels based on the observability of inputs as follows:
Level I – Quoted prices (unadjusted) are available in active markets for identical assets or liabilities as of the report
date. A quoted price for an identical asset or liability in an active market provides the most reliable fair value
measurement because it is directly observable to the market.
Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly
observable as of the report date. The nature of these financial instruments include instruments for which quoted
prices are available but traded less frequently, instruments whose fair value has been derived using a model where
inputs to the model are directly observable in the market, or can be derived principally from or corroborated by
observable market data, and instruments that are fair valued using other financial instruments, the parameters of
which can be directly observed.
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Notes to the Consolidated Financial Statements – Continued
Level III – Instruments that have little to no pricing observability as of the report date. These financial instruments
are measured using management's best estimate of fair value, where the inputs into the determination of fair value
require significant management judgment or estimation.
Valuation of Financial Instruments
Based on the nature of the Company's business and its role as a "dealer" in the securities industry or as a manager of
alternative asset management funds, the fair values of its financial instruments are determined internally. When
available, the Company values financial instruments at observable market prices, observable market parameters, or
broker or dealer prices (i.e., bid and ask prices). In the case of financial instruments transacted on recognized
exchanges, the observable market prices represent quotations for completed transactions from the exchange on which
the financial instrument is principally traded.
A substantial percentage of the fair value of the Company's financial instruments and other inventory positions owned
and financial instruments and other inventory positions sold, but not yet purchased, is based on observable market
prices, observable market parameters, or derived from broker or dealer prices. The availability of observable market
prices and pricing parameters can vary from product to product. Where available, observable market prices and pricing
or market parameters in a product may be used to derive a price without requiring significant judgment. In certain
markets, observable market prices or market parameters are not available for all products, and fair value is determined
using techniques appropriate for each particular product. These techniques involve some degree of judgment. Results
from valuation models and other techniques in one period may not be indicative of future period fair value
measurement.
For investments in illiquid or privately held securities that do not have readily determinable fair values, the determination
of fair value requires the Company to estimate the value of the securities using the best information available. Among
the factors considered by the Company in determining the fair value of such financial instruments are the cost, terms
and liquidity of the investment, the financial condition and operating results of the issuer, the quoted market price of
publicly traded securities with similar quality and yield, and other factors generally pertinent to the valuation of
investments. In addition, even where the Company derives the value of a security based on information from an
independent source, certain assumptions may be required to determine the security's fair value. For instance, the
Company assumes that the size of positions in securities that it holds would not be large enough to affect the quoted
price of the securities if the Company sells them, and that any such sale would happen in an orderly manner. The actual
value realized upon disposition could be different from the currently estimated fair value.
Investments
The Company's investments include equity investments in private companies and partnerships, as well as mutual funds
held by the grantor trust for the Company's nonqualified deferred compensation plan. Equity investments in private
companies and mutual funds held by the grantor trust are accounted for at fair value. Investments in partnerships are
accounted for under the equity method, which is generally the net asset value.
Fixed Assets
Fixed assets include furniture and equipment, software, and leasehold improvements. Furniture and equipment and
software are depreciated using the straight-line method over estimated useful lives of three to ten years. Leasehold
improvements are amortized over ten years or the life of the lease, whichever is shorter.
Leases
A lease is a contract, or part of a contract, that conveys the right to control the use of identified property or equipment for
a period of time in exchange for consideration. In making this determination, the Company considers if it obtains
substantially all of the economic benefits from the use of the underlying asset and directs how and for what purpose the
asset is used during the term of the contract.
The Company leases its corporate headquarters and other offices under various non-cancelable leases, all of which are
operating leases. In addition to rent, the leases require payment of real estate taxes, insurance and common area
maintenance. Some of the leases contain renewal and/or termination options, escalation clauses, rent-free holidays and
operating cost adjustments. The original terms of the Company's lease agreements generally range up to 12 years.
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Notes to the Consolidated Financial Statements – Continued
The Company recognizes a right-of-use ("ROU") lease asset and lease liability on the consolidated statements of
financial condition for all leases with a term greater than 12 months. The lease liability represents the Company’s
obligation to make future lease payments and is recorded at an amount equal to the present value of the remaining
lease payments due over the lease term. The ROU lease asset, which represents the right to use the underlying asset
during the lease term, is measured based on the carrying value of the lease liability, adjusted for other items, such as
lease incentives and uneven rent payments.
The discount rate used to determine the present value of the remaining lease payments reflects the Company’s
incremental borrowing rate, which is the rate the Company would have to pay to borrow on a collateralized basis over a
similar term in a similar economic environment. In calculating its discount rates, the Company takes into consideration
financing arrangements that are on a secured (i.e., collateralized) basis, as well as market interest rates and spreads,
other reference points, and the respective tenors of the Company’s designated lease term ranges. The Company
applies the portfolio approach in determining the discount rates for its leases.
For leases that contain escalation clauses or rent-free holidays, the Company recognizes the related rent expense on a
straight-line basis from the date the Company takes possession of the property to the end of the initial lease term. The
Company records any difference between the straight-line rent expense and amounts paid under the leases as part of
the amortization of the ROU lease asset.
Cash or lease incentives received upon entering into certain leases are recognized on a straight-line basis as a
reduction of rent expense from the date the Company takes possession of the property or receives the cash to the end
of the initial lease term. Lease incentives, which initially reduce the ROU lease asset, are a component of the
amortization of the ROU lease asset.
Rent expense for leases with a term of 12 months or less is recorded on a straight-line basis over the lease term in the
consolidated statements of operations.
Goodwill and Intangible Assets
Goodwill represents the fair value of the consideration transferred in excess of the fair value of identifiable net assets at
the acquisition date. The Company tests goodwill and indefinite-lived intangible assets for impairment on an annual
basis and on an interim basis when circumstances exist that could indicate possible impairment. The Company tests for
impairment at the reporting unit level, which is generally one level below its operating segment. The Company has
identified one reporting unit. When testing for impairment, the Company has the option to first assess qualitative factors
to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If,
after making an assessment, the Company determines it is not more likely than not that the fair value of a reporting unit
is less than its carrying amount, then further analysis is unnecessary. However, if the Company concludes otherwise,
then the Company is required to perform a quantitative goodwill test, which requires management to make judgments in
determining what assumptions to use in the calculation. The quantitative goodwill test compares the fair value of the
reporting unit to its carrying value, including allocated goodwill. An impairment is recognized for the excess amount of a
reporting unit's carrying value over its fair value. The estimated fair value of the reporting unit is derived based on
valuation techniques that a market participant would use. The Company estimates the fair value of the reporting unit
using the income approach (e.g., discounted cash flow method) and market approach (e.g., earnings and/or transaction
multiples).
At December 31, 2023, intangible assets with determinable lives consisted of customer relationships that are amortized
over their original estimated useful lives ranging from two to eight years. The pattern of amortization reflects the timing
of the realization of the economic benefits of such intangible assets. The Sandler trade name is an indefinite-lived
intangible asset, which is not amortized and is evaluated for impairment annually, at a minimum, or on an interim basis if
events or circumstances indicate a possible inability to realize the carrying amount.
Other Assets
Other assets include receivables and prepaid expenses. Receivables primarily include fee receivables and loans made
to employees, typically in connection with their recruitment. Employee loans are forgiven based on continued
employment and are amortized to compensation and benefits expense using the straight-line method over the
respective terms of the loans, which generally range from one to five years.
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Contingencies
Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The Company is involved in various pending and potential legal proceedings related to its business, including litigation,
arbitration and regulatory proceedings. The Company establishes accruals for potential losses to the extent that claims
are probable of loss and the amount of the loss can be reasonably estimated. The determination of the outcome and
accrual amounts requires significant judgment on the part of the Company's management.
Revenue Recognition
Investment Banking
Investment banking revenues, which include advisory and underwriting fees, are recorded when the performance
obligation for the transaction is satisfied under the terms of each engagement. Expenses associated with such
transactions are deferred until the related revenue is recognized or the engagement is otherwise concluded. Investment
banking revenues are presented gross of related client reimbursed deal expenses. Expenses for completed deals are
reported separately in deal-related expenses on the consolidated statements of operations. Expenses related to
investment banking deals not completed are recognized as non-interest expenses in their respective category on the
consolidated statements of operations.
The Company's advisory fees generally consist of a nonrefundable up-front fee and a success fee. The nonrefundable
fee is recorded as deferred revenue upon receipt and recognized at a point in time when the performance obligation is
satisfied, or when the transaction is deemed by management to be terminated. Management's judgment is required in
determining when a transaction is considered to be terminated. Certain engagements, such as restructuring advisory
fees, consist of services provided on an ongoing basis, and are recognized over time as the performance obligation is
satisfied.
The substantial majority of the Company's advisory and underwriting fees (i.e., the success-related advisory fee) is
considered variable consideration and recognized when it is probable that the variable consideration will not be
reversed in a future period. The variable consideration is considered to be constrained until satisfaction of the
performance obligation. The Company's performance obligation is generally satisfied at a point in time upon the closing
of a strategic transaction, completion of a financing or underwriting arrangement, or some other defined outcome (e.g.,
providing a fairness opinion). At this time, the Company has transferred control of the promised service and the
customer obtains control. As these arrangements represent a single performance obligation, allocation of the
transaction price is not necessary. The Company has elected to apply the following optional exemptions regarding
disclosure of its remaining performance obligations: (i) the Company's performance obligation is part of a contract that
has an original expected duration of one year or less and/or (ii) the variable consideration is allocated entirely to a
wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.
Institutional Brokerage
Institutional brokerage revenues include (i) commissions received from customers for the execution of brokerage
transactions in listed and over-the-counter ("OTC") equity, fixed income and convertible debt securities, which are
recognized at a point in time on the trade date because the customer has obtained the rights to the underlying security
provided by the trade execution service, (ii) trading gains and losses, recorded based on changes in the fair value of
long and short security positions in the reporting period, (iii) fees earned by PSLS related to the brokering of loans and
servicing rights in market liquidity transactions, which are recognized at a point in time on the trade date, and (iv) fees
received by the Company for research services and corporate access offerings. The Company permits institutional
customers to allocate a portion of their gross commissions to pay for research products and other services provided by
third parties. The amounts allocated for those purposes are commonly referred to as commission share agreements or
"soft dollar" arrangements. As the Company is not acting as a principal in satisfying the performance obligation for these
arrangements, expenses relating to soft dollars are netted against commission revenues and included in other liabilities
and accrued expenses on the consolidated statements of financial condition.
Interest Revenue and Expense
The Company nets interest expense within net revenues to mitigate the effects of fluctuations in interest rates on the
Company's consolidated statements of operations. The Company recognizes contractual interest on financial
instruments owned and financial instruments sold, but not yet purchased (excluding derivative instruments) on an
accrual basis as a component of interest revenue and expense. The Company accounts for interest related to its short-
term and long-term financing arrangements on an accrual basis with related interest recorded as interest expense.
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Notes to the Consolidated Financial Statements – Continued
Investment Income/(Loss)
Investment income/(loss) includes realized and unrealized gains and losses from the Company's investments, as well
as management and performance fees generated from the Company’s alternative asset management funds.
The performance obligation related to the transfer of management and investment advisory services is satisfied over
time and the related management fees are recognized under the output method, which reflects the fees that the
Company has a right to invoice based on the services provided during the period. Fees are defined as a percentage of
committed and/or invested capital. Amounts related to remaining performance obligations are not disclosed as the
Company applies the output method.
Performance fees, if earned, are recognized when it is probable that such revenue will not be reversed in a future
period. Management will consider such factors as the remaining assets and residual life of the fund to conclude whether
it is probable that a significant reversal of revenue will not occur in the future.
See Note 18 for revenues from contracts with customers disaggregated by major business activity.
Stock-Based Compensation
FASB Accounting Standards Codification Topic 718, "Compensation – Stock Compensation," ("ASC 718") requires all
stock-based compensation to be expensed on the consolidated statements of operations based on the grant date fair
value of the award. Compensation expense related to stock-based awards that do not require future service are
recognized in the year in which the awards were deemed to be earned. Stock-based awards that require future service
are amortized over the relevant service period. Forfeitures of awards with service conditions are accounted for when
they occur. See Note 19 for additional information on the Company's accounting for stock-based compensation.
Income Taxes
The Company files a consolidated United States ("U.S.") federal income tax return, which includes all of its qualifying
subsidiaries. The Company is also subject to income tax in various states and municipalities and those foreign
jurisdictions in which it operates. Income taxes are provided for using the asset and liability method. Deferred tax assets
and liabilities are recognized for the expected future tax consequences attributable to temporary differences between
amounts reported for income tax purposes and financial statement purposes, using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
realization of deferred tax assets is assessed and a valuation allowance is recognized to the extent that it is more likely
than not that any portion of a deferred tax asset will not be realized. Tax reserves for uncertain tax positions are
recorded in accordance with FASB Accounting Standards Codification Topic 740, "Income Taxes" ("ASC 740").
Earnings Per Share ("EPS")
Basic earnings per common share is computed by dividing net income attributable to Piper Sandler Companies by the
weighted average number of common shares outstanding for the period. Diluted earnings per common share is
calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive stock
options, restricted stock units and restricted shares. The Company uses the treasury stock method to calculate diluted
earnings per common share. See Note 23 for additional information on the Company's calculation of EPS.
Foreign Currency Translation
The Company consolidates foreign subsidiaries which have designated their local currency as their functional currency.
Assets and liabilities of these foreign subsidiaries are translated at period-end rates of exchange. The gains or losses
resulting from translating foreign currency financial statements are included in other comprehensive income/(loss).
Gains or losses resulting from foreign currency transactions are included in net income.
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Notes to the Consolidated Financial Statements – Continued
NOTE 3 | RECENT ACCOUNTING PRONOUNCEMENTS
Future Adoption of New Applicable Accounting Standards
Improvements to Reportable Segment Disclosures
In November 2023, the FASB issued Accounting Standards Update ("ASU") No. 2023-07, "Improvements to Reportable
Segment Disclosures" ("ASU 2023-07"). This guidance improves reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods
beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024. Early
adoption is permitted. The Company is currently assessing the impact of ASU 2023-07 on its financial statement
disclosures.
Improvements to Income Tax Disclosures
In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures" ("ASU 2023-09").
This guidance enhances the annual income tax disclosure requirements by requiring disaggregated information related
to the effective tax rate reconciliation and income taxes paid, as well as other disclosure requirements. ASU 2023-09 is
effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is
currently assessing the impact of ASU 2023-09 on its financial statement disclosures.
NOTE 4 | ACQUISITIONS
The following acquisitions were accounted for pursuant to FASB Accounting Standards Codification Topic 805,
"Business Combinations." Accordingly, the purchase price of each acquisition was allocated to the acquired assets and
liabilities assumed based on their estimated fair values as of the respective acquisition dates. The excess of the
purchase price over the net assets acquired was allocated between goodwill and intangible assets. The fair value of the
retention-related restricted stock was determined using the market price of the Company's common stock on the date of
the respective acquisition.
DBO Partners Holding LLC
On October 7, 2022, the Company completed the acquisition of DBO Partners Holding LLC, including its subsidiary,
DBO Partners LLC (collectively, "DBO Partners"), a technology investment banking firm. The acquisition expanded the
scale of the Company's technology sector and added general partner advisory services.
The purchase price of $66.3 million consisted of cash consideration of $64.6 million and contingent consideration of
$1.7 million, as detailed in the net assets acquired table below. As part of the acquisition, the Company granted 368,957
restricted shares valued at $39.9 million on the acquisition date. The restricted shares are subject to graded vesting,
beginning on the second anniversary of the acquisition date, so long as the applicable employee remains continuously
employed by the Company for such period. Compensation expense is amortized on a straight-line basis over the
requisite service period of five years. As discussed in Note 19, the Company also entered into acquisition-related
compensation arrangements with certain employees of $17.4 million in restricted stock for retention purposes. These
restricted shares are subject to ratable vesting and employees must fulfill service requirements in exchange for the
rights to the restricted shares. Compensation expense is amortized on a straight-line basis over the requisite service
period (a weighted average service period of 4.9 years). As both restricted share grants compensate employees for
future services, the value of the shares was not part of the purchase price.
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Notes to the Consolidated Financial Statements – Continued
Additional cash of up to $25.0 million may be earned (the "DBO Earnout") if a net revenue target is achieved during the
performance period from January 1, 2023 to December 31, 2024. Of the total amount, up to $20.0 million may be
earned by former partners with no service requirements. The Company recorded a $1.7 million liability as of the
acquisition date for the fair value of this contingent consideration, which was included in the purchase price.
Adjustments to this liability after the acquisition date are recorded as non-compensation expense on the consolidated
statements of operations. As of December 31, 2023, the Company does not expect the portion of the DBO Earnout with
no service requirements will be earned. As a result, the Company recorded a $1.7 million reversal of other operating
expenses for the year ended December 31, 2023 related to this additional cash payment. The remaining $5.0 million
may be earned by certain employees, whom are now employees of the Company, in exchange for service requirements.
As this amount compensates employees for future services, the value was not part of the purchase price. Amounts
estimated to be payable, if any, will be recorded as compensation expense on the consolidated statements of
operations over the requisite service period. As of December 31, 2023, the Company has no accrual recorded for the
portion of the DBO Earnout with service requirements. If earned, the DBO Earnout will be paid by March 31, 2025.
The Company recorded $57.3 million of goodwill on the consolidated statements of financial condition, all of which is
expected to be deductible for income tax purposes. In management's opinion, the goodwill represents the reputation
and operating expertise of DBO Partners. Identifiable intangible assets purchased by the Company consisted of
customer relationships with an acquisition-date fair value of $10.4 million.
Transaction costs of $1.5 million were incurred for the year ended December 31, 2022, and are included in restructuring
and integration costs on the consolidated statements of operations.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of the
acquisition, including measurement period adjustments:
(Amounts in thousands)
Assets
Cash and cash equivalents
Fixed assets
Right-of-use lease assets
Goodwill
Intangible assets
Other assets
Total assets acquired
Liabilities
Accrued compensation
Accrued lease liabilities
Other liabilities and accrued expenses
Total liabilities assumed
$
575
1,353
3,760
57,337
10,390
414
73,829
1,167
3,760
2,603
7,530
Net assets acquired
$
66,299
Stamford Partners LLP ("Stamford Partners")
On June 10, 2022, the Company completed the acquisition of Stamford Partners, a specialist investment bank offering
mergers and acquisitions advisory services to European food and beverage and related consumer sectors. The
acquisition expanded the Company's presence in Europe. The purchase price consisted of cash consideration, and
restricted stock was granted for retention purposes.
The Company recorded $7.3 million of goodwill on the consolidated statements of financial condition, none of which is
expected to be deductible for income tax purposes. In management's opinion, the goodwill represents the reputation
and operating expertise of Stamford Partners. Identifiable intangible assets purchased by the Company consisted of
customer relationships with an acquisition-date fair value of $1.8 million.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
Cornerstone Macro Research LP
On February 4, 2022, the Company completed the acquisition of Cornerstone Macro Research LP, including its
subsidiary, Cornerstone Macro LLC (collectively, "Cornerstone Macro"), a research firm focused on providing macro
research and equity derivatives trading to institutional investors. The acquisition added a macro research team and
increased the scale of the Company's equity brokerage operations.
The purchase price of $34.1 million consisted of cash consideration of $32.5 million and contingent consideration of
$1.6 million, as detailed in the net assets acquired table below. As part of the acquisition, the Company granted 64,077
restricted shares valued at $9.7 million on the acquisition date. The restricted shares are subject to graded vesting on
the fourth and fifth anniversaries of the acquisition date, so long as the applicable employee remains continuously
employed by the Company for the respective vesting period. As these shares contain service conditions, the value of
the shares was not part of the purchase price. Compensation expense is amortized on a straight-line basis over the
requisite service period of five years.
The Company also entered into acquisition-related compensation arrangements with certain employees of $10.7 million,
which consisted of restricted stock ($7.5 million) and forgivable loans ($3.2 million), for retention purposes. As
employees must fulfill service requirements in exchange for the rights to the restricted shares, compensation expense is
amortized on a straight-line basis over the requisite service period (a weighted average service period of 3.4 years).
See Note 19 for further discussion. The loans will be forgiven, so long as the applicable employee remains continuously
employed for the loan term. Compensation expense is amortized on a straight-line basis over the respective loan term
(a weighted average period of 3.6 years).
Additional cash of up to $27.8 million may be earned if a net revenue target is achieved during the performance period
from July 1, 2022 to December 31, 2023. Of the total amount, up to $6.0 million may be earned by Cornerstone Macro's
equity owners with no service requirements. The Company recorded a $1.6 million liability as of the acquisition date for
the fair value of this contingent consideration, which was included in the purchase price. Adjustments to this liability after
the acquisition date are recorded as non-compensation expense on the consolidated statements of operations. As of
December 31, 2023, the Company has accrued the maximum amount of $6.0 million related to this additional cash
payment, which will be paid by March 31, 2024. The Company recorded $4.4 million in other operating expenses related
to this additional cash payment for the year ended December 31, 2022. The remaining amount may be earned by the
equity owners, whom are now employees of the Company, and certain employees in exchange for service
requirements. As this amount compensates employees for future services, the value was not part of the purchase price.
Amounts estimated to be payable, if any, will be recorded as compensation expense on the consolidated statements of
operations over the requisite service period, and will be paid by June 30, 2025 and June 30, 2026. As of December 31,
2023, the Company has accrued $1.9 million related to this additional cash payment. Compensation expense related to
this additional cash payment was immaterial for the year ended December 31, 2023 and $1.9 million for the year ended
December 31, 2022.
The Company recorded $9.6 million of goodwill on the consolidated statements of financial condition, all of which is
expected to be deductible for income tax purposes. In management's opinion, the goodwill represents the reputation
and operating expertise of Cornerstone Macro. Identifiable intangible assets purchased by the Company consisted of
customer relationships with an acquisition-date fair value of $19.0 million.
Transaction costs of $1.1 million and $0.5 million were incurred for the years ended December 31, 2022 and 2021,
respectively, and are included in restructuring and integration costs on the consolidated statements of operations.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of the
acquisition, including measurement period adjustments:
(Amounts in thousands)
Assets
Cash and cash equivalents
Receivables from brokers, dealers and clearing organizations
Fixed assets
Right-of-use lease assets
Goodwill
Intangible assets
Other assets
Total assets acquired
Liabilities
Accrued compensation
Accrued lease liabilities
Other liabilities and accrued expenses
Total liabilities assumed
$
6,885
2,941
286
7,026
9,574
19,000
4,451
50,163
4,672
7,026
4,401
16,099
Net assets acquired
$
34,064
Pro Forma Financial Information
The results of operations of DBO Partners, Stamford Partners and Cornerstone Macro have been included in the
Company's consolidated financial statements prospectively beginning on the respective acquisition dates. The
acquisitions have been fully integrated with the Company's existing operations. Accordingly, post-acquisition revenues
and net income are not discernible. The following unaudited pro forma financial data is presented on a combined basis
and includes DBO Partners and Cornerstone Macro. Pro forma financial information for Stamford Partners is not
presented as the acquisition is not material.
Based on the respective acquisition dates, the unaudited pro forma financial data assumes that the DBO Partners and
Cornerstone Macro acquisitions had occurred on January 1, 2020. Pro forma results have been prepared by adjusting
the Company's historical results to include the results of operations of DBO Partners and Cornerstone Macro adjusted
for the following significant changes: amortization expense was adjusted to account for the acquisition-date fair value of
intangible assets; compensation and benefits expenses were adjusted to reflect the restricted stock issued as part of the
respective acquisition, the restricted stock and forgivable loans issued for retention purposes, the earnouts with service
conditions, and the cost that would have been incurred had certain employees been included in the Company's
employee compensation arrangements; and the income tax effect of applying the Company's statutory tax rates to the
results of operations of the respective acquisitions. The Company's consolidated unaudited pro forma information
presented does not necessarily reflect the results of operations that would have resulted had the acquisitions been
completed at the beginning of the applicable period presented, does not contemplate client account overlap and
anticipated operational efficiencies of the combined entities, nor does it indicate the results of operations in future
periods.
(Amounts in thousands)
Net revenues
Net income attributable to Piper Sandler Companies
Year Ended December 31,
2022
2021
$
1,493,620 $
2,136,637
109,043
276,178
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 5 | RECEIVABLES FROM AND PAYABLES TO BROKERS, DEALERS AND CLEARING
ORGANIZATIONS
(Amounts in thousands)
Receivables from brokers, dealers and clearing organizations
Receivable from clearing organizations
Receivable from brokers and dealers
Other
December 31, December 31,
2023
2022
$
199,143 $
285,957
9,176
3,685
10,942
3,564
Total receivables from brokers, dealers and clearing organizations
$
212,004 $
300,463
Payables to brokers, dealers and clearing organizations
Payable to brokers and dealers
Total payables to brokers, dealers and clearing organizations
$
$
979 $
979 $
4,622
4,622
Under the Company's fully disclosed clearing agreement, all of its securities inventories with the exception of convertible
securities, and all of its customer activities are held by or cleared through Pershing LLC ("Pershing"). The Company has
established an arrangement to obtain financing from Pershing related to the majority of its trading activities. The
Company also has a clearing arrangement with bank financing related to its convertible securities inventories. Financing
under these arrangements is secured primarily by securities, and collateral limitations could reduce the amount of
funding available under these arrangements. The funding is at their discretion and could be denied. The Company's
clearing arrangement activities are recorded net of trading activity. The Company's fully disclosed clearing agreement
includes a covenant requiring Piper Sandler & Co. to maintain excess net capital of $120 million.
NOTE 6 | FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on the nature of the Company's business and its role as a "dealer" in the securities industry or as a manager of
alternative asset management funds, the fair values of its financial instruments are determined internally. The
Company's processes are designed to ensure that the fair values used for financial reporting are based on observable
inputs wherever possible. In the event that observable inputs are not available, unobservable inputs are developed
based on an evaluation of all relevant empirical market data, including prices evidenced by market transactions, interest
rates, credit spreads, volatilities and correlations and other security-specific information. Valuation adjustments related
to illiquidity or counterparty credit risk are also considered. In estimating fair value, the Company may utilize information
provided by third-party pricing vendors to corroborate internally-developed fair value estimates.
The Company employs specific control processes to determine the reasonableness of the fair value of its financial
instruments. The Company's processes are designed to ensure that the internally-estimated fair values are accurately
recorded and that the data inputs and the valuation techniques used are appropriate, consistently applied, and that the
assumptions are reasonable and consistent with the objective of determining fair value. Individuals outside of the trading
departments perform independent pricing verification reviews as of each reporting date. The Company has established
parameters which set forth when the fair value of securities is independently verified. The selection parameters are
generally based upon the type of security, the level of estimation risk of a security, the materiality of the security to the
Company's consolidated financial statements, changes in fair value from period to period, and other specific facts and
circumstances of the Company's securities portfolio. In evaluating the initial internally-estimated fair values made by the
Company's traders, the nature and complexity of securities involved (e.g., term, coupon, collateral, and other key drivers
of value), level of market activity for securities, and availability of market data are considered. The independent price
verification procedures include, but are not limited to, analysis of trade data (both internal and external where available),
corroboration to the valuation of positions with similar characteristics, risks and components, or comparison to an
alternative pricing source, such as a discounted cash flow model. The Company's valuation committees, comprised of
members of senior management and risk management, provide oversight and overall responsibility for the internal
control processes and procedures related to fair value measurements.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following is a description of the valuation techniques used to measure fair value.
Cash Equivalents
Cash equivalents include highly liquid investments with original maturities of 90 days or less. Actively traded money
market funds are measured at their net asset value and classified as Level I.
Financial Instruments and Other Inventory Positions
The Company records financial instruments and other inventory positions owned and financial instruments and other
inventory positions sold, but not yet purchased at fair value on the consolidated statements of financial condition with
unrealized gains and losses reflected on the consolidated statements of operations.
Equity Securities
Exchange traded equity securities are valued based on quoted prices from the exchange for identical assets or liabilities
as of the period-end date. To the extent these securities are actively traded and valuation adjustments are not applied,
they are categorized as Level I.
Convertible Securities
Convertible securities are valued based on observable trades, when available, and therefore are generally categorized
as Level II.
Corporate Fixed Income Securities
Fixed income securities include corporate bonds which are valued based on recently executed market transactions of
comparable size, internally-developed fair value estimates based on observable inputs, or broker quotations.
Accordingly, these corporate bonds are categorized as Level II.
Taxable Municipal Securities
Taxable municipal securities are valued using recently executed observable trades or market price quotations and
therefore are generally categorized as Level II.
Tax-Exempt Municipal Securities
Tax-exempt municipal securities are valued using recently executed observable trades or market price quotations and
therefore are generally categorized as Level II. Certain illiquid tax-exempt municipal securities are valued using market
data for comparable securities (e.g., maturity and sector) and management judgment to infer an appropriate current
yield or other model-based valuation techniques deemed appropriate by management based on the specific nature of
the individual security and therefore are categorized as Level III.
Short-Term Municipal Securities
Short-term municipal securities include variable rate demand notes and other short-term municipal securities. Variable
rate demand notes and other short-term municipal securities are valued using recently executed observable trades or
market price quotations and therefore are generally categorized as Level II.
Asset-Backed Securities
Asset-backed securities are valued using recently executed observable trades, when available, and therefore are
generally categorized as Level II. Certain asset-backed securities are valued using models where inputs to the model
are directly observable in the market, or can be derived principally from or corroborated by observable market data.
Accordingly, these asset-backed securities are categorized as Level II.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
U.S. Government Agency Securities
U.S. government agency securities include agency debt bonds and mortgage bonds. Agency debt bonds are valued by
using either direct price quotes or price quotes for comparable bond securities and are categorized as Level II.
Mortgage bonds include bonds secured by mortgages, mortgage pass-through securities, agency collateralized
mortgage-obligation ("CMO") securities and agency interest-only securities. Mortgage pass-through securities, CMO
securities and interest-only securities are valued using recently executed observable trades or other observable inputs,
such as prepayment speeds and therefore are generally categorized as Level II. Mortgage bonds are valued using
observable market inputs, such as market yields on spreads over U.S. treasury securities, or models based upon
prepayment expectations. These securities are categorized as Level II.
U.S. Government Securities
U.S. government securities include highly liquid U.S. treasury securities which are generally valued using quoted market
prices and therefore are categorized as Level I. The Company does not transact in securities of countries other than the
U.S. government.
Derivative Contracts
Derivative contracts include interest rate swaps, interest rate locks, and U.S. treasury bond futures. These instruments
derive their value from underlying assets, reference rates, indices or a combination of these factors. The majority of the
Company's interest rate derivative contracts, including both interest rate swaps and interest rate locks, are valued using
market standard pricing models based on the net present value of estimated future cash flows. The valuation models
used do not involve material subjectivity as the methodologies do not entail significant judgment and the pricing inputs
are market observable, including contractual terms, yield curves and measures of volatility. These instruments are
classified as Level II within the fair value hierarchy. Certain interest rate locks transact in less active markets and are
valued using valuation models that include the previously mentioned observable inputs and certain unobservable inputs
that require significant judgment, such as the premium over the Municipal Market Data ("MMD") curve. These
instruments are classified as Level III.
Investments
The Company's investments valued at fair value include equity investments in private companies and mutual funds held
by a grantor trust for the Company's nonqualified deferred compensation plan. Investments in private companies are
valued based on an assessment of each underlying security, considering rounds of financing, the financial condition and
operating results of the private company, third-party transactions and market-based information, including comparable
company transactions, trading multiples (e.g., multiples of revenue and earnings before interest, taxes, depreciation and
amortization ("EBITDA")), discounted cash flow analyses and changes in market outlook, among other factors. These
securities are categorized based on the lowest level of input that is significant to the fair value measurement. Certain
underlying securities, as well as investments in mutual funds, are valued based on quoted prices from the exchange for
identical assets as of the period-end date. To the extent these securities are actively traded and valuation adjustments
are not applied, they are categorized as Level I. See Note 19 to our consolidated financial statements for additional
information about the Company's nonqualified deferred compensation plan.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table summarizes the valuation of the Company's financial instruments by pricing observability levels
defined in ASC 820 as of December 31, 2023:
(Amounts in thousands)
Assets
Financial instruments and other
inventory positions owned:
Corporate securities:
Equity securities
Convertible securities
Fixed income securities
Municipal securities:
Taxable securities
Tax-exempt securities
Short-term securities
Asset-backed securities
U.S. government agency securities
U.S. government securities
Derivative contracts
Total financial instruments and
other inventory positions owned
Level I
Level II
Level III
Netting (1)
Total
Counterparty
and Cash
Collateral
$
388 $
— $
— $
— $
388
—
—
—
—
—
—
—
5,895
—
131,375
1,645
25,744
135,886
7,122
8,149
104,418
—
52,611
—
—
—
2,869
—
—
—
—
—
—
—
—
—
—
—
—
5,834
(47,379)
131,375
1,645
25,744
138,755
7,122
8,149
104,418
5,895
11,066
6,283
466,950
8,703
(47,379)
434,557
Cash equivalents
Investments at fair value (2)
343,856
61,601
—
—
—
224,280
—
—
343,856
285,881
Total assets
$
411,740 $
466,950 $
232,983 $
(47,379) $ 1,064,294
Liabilities
Financial instruments and other
inventory positions sold, but not
yet purchased:
Corporate securities:
Equity securities
$
53,857 $
— $
— $
— $
—
—
40,437
—
2,230
48,268
—
47,032
—
—
—
—
—
—
7,962
(50,806)
53,857
2,230
48,268
40,437
4,188
Fixed income securities
U.S. government agency securities
U.S. government securities
Derivative contracts
Total financial instruments and
other inventory positions sold,
but not yet purchased
$
94,294 $
97,530 $
7,962 $
(50,806) $
148,980
(1) Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as
collateral to its counterparties.
(2)
Includes noncontrolling interests of $211.1 million attributable to unrelated third-party ownership in consolidated alternative asset
management funds.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table summarizes the valuation of the Company's financial instruments by pricing observability levels
defined in ASC 820 as of December 31, 2022:
Level I
Level II
Level III
Netting (1)
Total
Counterparty
and Cash
Collateral
(Amounts in thousands)
Assets
Financial instruments and other
inventory positions owned:
Corporate securities:
Equity securities
Convertible securities
Fixed income securities
Municipal securities:
Taxable securities
Tax-exempt securities
Short-term securities
U.S. government agency securities
U.S. government securities
Derivative contracts
Total financial instruments and
other inventory positions owned
$
1,490 $
— $
— $
— $
—
—
—
—
—
—
3,800
—
94,552
4,103
28,389
147,578
14,386
28,874
—
55,844
—
—
—
3,887
—
—
—
—
—
—
—
—
—
—
4,756
(47,680)
1,490
94,552
4,103
28,389
151,465
14,386
28,874
3,800
12,920
5,290
373,726
8,643
(47,680)
339,979
Cash equivalents
Investments at fair value (2)
323,143
82,047
—
—
—
191,845
—
—
323,143
273,892
Total assets
$
410,480 $
373,726 $
200,488 $
(47,680) $
937,014
Liabilities
Financial instruments and other
inventory positions sold, but not
yet purchased:
Corporate securities:
Equity securities
Fixed income securities
U.S. government securities
Derivative contracts
Total financial instruments and
other inventory positions sold,
but not yet purchased
$
15,376 $
— $
— $
— $
—
36,415
—
3,894
—
49,838
—
—
—
—
1,082
(45,769)
15,376
3,894
36,415
5,151
$
51,791 $
53,732 $
1,082 $
(45,769) $
60,836
(1) Represents cash collateral and the impact of netting on a counterparty basis. The Company had no securities posted as
collateral to its counterparties.
(2)
Includes noncontrolling interests of $200.7 million attributable to unrelated third-party ownership in consolidated alternative asset
management funds.
The carrying values of the Company's cash, receivables and payables either from or to brokers, dealers and clearing
organizations, and short- and long-term financings approximate fair value due to either their liquid or short-term nature.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The Company's Level III assets were $233.0 million (including noncontrolling interests of $177.0 million) and
$200.5 million (including noncontrolling interests of $148.7 million), or 21.9 percent and 21.4 percent of financial
instruments measured at fair value at December 31, 2023 and 2022, respectively. There were $19.8 million of transfers
of financial assets out of Level III for the year ended December 31, 2023, primarily due to unobservable inputs
becoming observable. There were $3.6 million of transfers of financial assets into Level III for the year ended December
31, 2022, primarily due to observable inputs becoming unobservable. At December 31, 2023, the Company's Level I
investments at fair value included $5.1 million of equity securities subject to contractual sale restrictions. The sale
restrictions will expire in the second quarter of 2024.
The following table summarizes the changes in fair value associated with Level III financial instruments held at the
beginning or end of the periods presented:
Level III
Assets
Liabilities
Tax-Exempt
Municipal
Securities
Derivative
Contracts
Investments at
Fair Value
Derivative
Contracts
Balance at December 31, 2021 $
247 $
726 $
142,286 $
1,898
Purchases
Sales
Settlements
Transfers in
Transfers out
Total realized and unrealized
gains/(losses)
—
—
—
3,626
—
14
Balance at December 31, 2022 $
3,887 $
—
—
—
—
—
(1,018)
2,869 $
Purchases
Sales
Settlements
Transfers in
Transfers out
Total realized and unrealized
gains/(losses)
Balance at December 31, 2023 $
Unrealized gains/(losses) for
assets/liabilities held at:
December 31, 2022
December 31, 2023
$
$
—
—
450
—
—
3,580
4,756 $
—
—
(2,443)
—
—
3,521
5,834 $
62,695
(19,574)
—
—
(172)
6,610
191,845 $
45,954
(33,731)
—
—
(19,810)
40,022
224,280 $
—
—
680
—
—
(1,496)
1,082
—
—
(1,373)
—
—
8,253
7,962
14 $
(1,018) $
4,756 $
5,834 $
6,536 $
28,007 $
1,082
7,962
Realized and unrealized gains/(losses) related to financial instruments, with the exception of customer matched-book
derivatives, are reported in institutional brokerage on the consolidated statements of operations. Realized and
unrealized gains/(losses) related to customer matched-book derivatives are reported in investment banking. Realized
and unrealized gains/(losses) related to investments are principally reported in investment income on the consolidated
statements of operations.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table summarizes quantitative information about the significant unobservable inputs used in the fair value
measurement of the Company's Level III financial instruments as of December 31, 2023:
Valuation
Technique
Unobservable Input
Range
Average (1)
Weighted
Assets
Tax-exempt municipal securities Discounted cash flow Expected recovery rate
(% of par) (3)
Current yield (3)
Derivative contracts
Discounted cash flow Premium over the MMD curve
in basis points ("bps") (3)
Investments at fair value (2)
Market approach
Revenue multiple (3)
EBITDA multiple (3)
Market comparable valuation
multiple (3)
Discounted cash flow Discount rate (4)
0 - 25%
14%
13.4%
14%
0 - 27 bps
0 - 9 times
13.4 bps
5.1 times
11 - 17 times
14.9 times
1 - 2 times
1.4 times
19 - 25%
20.6%
Liabilities
Derivative contracts
Discounted cash flow Premium over the MMD curve
in bps (4)
0 - 31 bps
16.2 bps
(1) Unobservable inputs were weighted by the relative fair value of the financial instruments.
(2) As of December 31, 2023, the Company had $224.3 million of Level III investments at fair value, of which $39.0 million, or 17.4
percent, was valued based on a recent round of independent financing.
(3) There is uncertainty in the determination of fair value. Significant increase/(decrease) in the unobservable input in isolation would
have resulted in a significantly higher/(lower) fair value measurement.
(4) There is uncertainty in the determination of fair value. Significant increase/(decrease) in the unobservable input in isolation would
have resulted in a significantly lower/(higher) fair value measurement.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 7 | FINANCIAL INSTRUMENTS AND OTHER INVENTORY POSITIONS
(Amounts in thousands)
Financial instruments and other inventory positions owned
December 31, December 31,
2023
2022
Corporate securities:
Equity securities
Convertible securities
Fixed income securities
Municipal securities:
Taxable securities
Tax-exempt securities
Short-term securities
Asset-backed securities
U.S. government agency securities
U.S. government securities
Derivative contracts
$
388 $
131,375
1,645
25,744
138,755
7,122
8,149
104,418
5,895
11,066
Total financial instruments and other inventory positions owned
$
434,557 $
Financial instruments and other inventory positions sold, but not yet
purchased
Corporate securities:
Equity securities
Fixed income securities
U.S. government agency securities
U.S. government securities
Derivative contracts
$
53,857 $
2,230
48,268
40,437
4,188
1,490
94,552
4,103
28,389
151,465
14,386
—
28,874
3,800
12,920
339,979
15,376
3,894
—
36,415
5,151
Total financial instruments and other inventory positions sold, but not yet
purchased
$
148,980 $
60,836
At December 31, 2023 and 2022, financial instruments and other inventory positions owned in the amount of
$92.8 million and $57.5 million, respectively, had been pledged as collateral for short-term financing arrangements.
Financial instruments and other inventory positions sold, but not yet purchased represent obligations of the Company to
deliver the specified security at the contracted price, thereby creating a liability to purchase the security in the market at
prevailing prices. The Company is obligated to acquire the securities sold short at prevailing market prices, which may
exceed the amount reflected on the consolidated statements of financial condition. The Company economically hedges
changes in the market value of its financial instruments and other inventory positions owned using inventory positions
sold, but not yet purchased, interest rate derivatives, U.S. treasury bond futures and options, and equity option
contracts.
Derivative Contract Financial Instruments
Customer Matched-Book Derivatives
The Company enters into interest rate derivative contracts in a principal capacity as a dealer to satisfy the financial
needs of its customers. The Company simultaneously enters into an interest rate derivative contract with a third party for
the same notional amount to hedge the interest rate and credit risk of the initial client interest rate derivative contract. In
certain limited instances, the Company has only hedged interest rate risk with a third party, and retains uncollateralized
credit risk as described below. These instruments use rates based upon the Secured Overnight Financing Rate
("SOFR") index, the MMD index or the Securities Industry and Financial Markets Association ("SIFMA") index. Similarly,
the Company enters into a limited number of credit default swap contracts to facilitate customer transactions. These
instruments use rates based upon the Commercial Mortgage Backed Securities ("CMBX") index.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
Trading Securities Derivatives
The Company enters into interest rate derivative contracts and uses U.S. treasury bond futures and options to hedge
interest rate and market value risks primarily associated with its fixed income securities. These instruments use rates
based upon the MMD or SOFR indices. The Company also enters into equity option contracts to hedge market value
risk associated with its convertible securities.
Derivatives are reported on a net basis by counterparty (i.e., the net payable or receivable for derivative assets and
liabilities for a given counterparty) when a legal right of offset exists and on a net basis by cross product when
applicable provisions are stated in master netting agreements. Cash collateral received or paid is netted on a
counterparty basis, provided a legal right of offset exists. The total absolute notional contract amount, representing the
absolute value of the sum of gross long and short derivative contracts, provides an indication of the volume of the
Company's derivative activity and does not represent gains and losses. The following table presents the gross fair
market value and the total absolute notional contract amount of the Company's outstanding derivative instruments, prior
to counterparty netting, by asset or liability position:
(Amounts in thousands)
Derivative Category
Interest rate:
December 31, 2023
December 31, 2022
Derivative
Assets (1)
Derivative
Liabilities (2)
Notional
Amount
Derivative
Assets (1)
Derivative
Liabilities (2)
Notional
Amount
Customer matched-book $
Trading securities
54,676 $
49,293 $ 1,356,924 $
55,414 $
49,838 $ 1,354,881
3,769
5,701
196,250
5,186
1,082
134,750
$
58,445 $
54,994 $ 1,553,174 $
60,600 $
50,920 $ 1,489,631
(1) Derivative assets are included within financial instruments and other inventory positions owned on the consolidated statements of
financial condition.
(2) Derivative liabilities are included within financial instruments and other inventory positions sold, but not yet purchased on the
consolidated statements of financial condition.
The Company's derivative contracts do not qualify for hedge accounting; therefore, unrealized gains and losses are
recorded on the consolidated statements of operations. The gains and losses on the related economically hedged
inventory positions are not disclosed below as they are not in qualifying hedging relationships. The following table
presents the Company's unrealized gains/(losses) on derivative instruments:
(Amounts in thousands)
Derivative Category
Interest rate derivative contract
Interest rate derivative contract
Institutional brokerage
Investment banking
Operations Category
2023
2022
2021
Year Ended December 31,
$
$
(426) $
(1,317) $
(1,786)
(5,790)
(6,216) $
4,848
3,531 $
2,264
478
Credit risk associated with the Company's derivatives is the risk that a derivative counterparty will not perform in
accordance with the terms of the applicable derivative contract. Credit exposure associated with the Company's
derivatives is driven by uncollateralized market movements in the fair value of the contracts with counterparties and is
monitored regularly by the Company's financial risk committee. The Company considers counterparty credit risk in
determining derivative contract fair value. The majority of the Company's derivative contracts are substantially
collateralized by its counterparties, who are major financial institutions. The Company has a limited number of
counterparties who are not required to post collateral. Based on market movements, the uncollateralized amounts
representing the fair value of a derivative contract can become material, exposing the Company to the credit risk of
these counterparties. As of December 31, 2023, the Company had $6.7 million of uncollateralized credit exposure with
these counterparties (notional contract amount of $150.2 million), including $5.8 million of uncollateralized credit
exposure with one counterparty.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 8 | INVESTMENTS
(Amounts in thousands)
Investments at fair value
Investments at cost
Investments accounted for under the equity method
Total investments
December 31, December 31,
2023
2022
$
285,881 $
273,892
281
11,886
298,048
509
11,325
285,726
Less: Investments attributable to noncontrolling interests (1)
(211,096)
(200,687)
Total investments attributable to Piper Sandler Companies
$
86,952 $
85,039
(1) Noncontrolling interests are attributable to unrelated third-party ownership in consolidated alternative asset management funds.
At December 31, 2023, investments carried on a cost basis had an estimated fair market value of $0.3 million. Because
valuation estimates were based upon management's judgment, investments carried at cost would be categorized as
Level III assets in the fair value hierarchy, if they were carried at fair value.
Investments accounted for under the equity method include general and limited partnership interests. The carrying value
of these investments is based on the investment vehicle's net asset value. The net assets of investment partnerships
consist of investments in both marketable and non-marketable securities. The underlying investments held by such
partnerships are valued based on the estimated fair value determined by management in the Company's capacity as
general partner or investor and, in the case of investments in unaffiliated investment partnerships, are based on
financial statements prepared by the unaffiliated general partners.
NOTE 9 | VARIABLE INTEREST ENTITIES
The Company has investments in and/or acts as the managing partner of various partnerships and limited liability
companies. These entities were established for the purpose of investing in securities of public or private companies, and
were initially financed through the capital commitments or seed investments of the members.
VIEs are entities in which equity investors lack the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities. The determination as to whether an entity is a VIE is based
on the structure and nature of each entity. The Company also considers other characteristics such as the power through
voting rights or similar rights to direct the activities of an entity that most significantly impact the entity's economic
performance and how the entity is financed.
The Company is required to consolidate all VIEs for which it is considered to be the primary beneficiary. The
determination as to whether the Company is considered to be the primary beneficiary is based on whether the Company
has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance
and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the
VIE.
Consolidated VIEs
The Company's consolidated VIEs at December 31, 2023 included certain alternative asset management funds in which
the Company has an investment and, as the managing partner, is deemed to have both the power to direct the most
significant activities of the funds and the right to receive benefits (or the obligation to absorb losses) that could
potentially be significant to these funds.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table presents information about the carrying value of the assets and liabilities of the VIEs that are
consolidated by the Company and included on the consolidated statements of financial condition at December 31, 2023.
The assets can only be used to settle the liabilities of the respective VIE, and the creditors of the VIEs do not have
recourse to the general credit of the Company. These VIEs have a combined $56.0 million of bank line financing
available with interest rates based on SOFR plus an applicable margin. The assets and liabilities are presented prior to
consolidation, and thus a portion of these assets and liabilities is eliminated in consolidation.
(Amounts in thousands)
Assets
Investments
Other assets
Total assets
Liabilities
Other liabilities and accrued expenses
Total liabilities
Alternative Asset
Management Funds
$
$
$
$
266,508
7,031
273,539
4,857
4,857
The Company has investments in a grantor trust which was established as part of a nonqualified deferred compensation
plan. The Company is the primary beneficiary of the grantor trust. Accordingly, the assets and liabilities of the grantor
trust are consolidated by the Company on the consolidated statements of financial condition. See Note 19 for additional
information on the nonqualified deferred compensation plan.
Nonconsolidated VIEs
The Company determined it is not the primary beneficiary of certain VIEs and, accordingly, does not consolidate them.
These VIEs had net assets approximating $1.1 billion and $1.2 billion at December 31, 2023 and 2022, respectively.
The Company's exposure to loss from these VIEs is $12.2 million, which is the carrying value of its capital contributions
recorded in investments on the consolidated statements of financial condition at December 31, 2023. The Company had
no liabilities related to these VIEs at December 31, 2023 and 2022. Furthermore, the Company has not provided
financial or other support to these VIEs that it was not previously contractually required to provide as of December 31,
2023.
NOTE 10 | FIXED ASSETS
(Amounts in thousands)
Furniture and equipment
Leasehold improvements
Software
Total fixed assets
Accumulated depreciation and amortization
December 31, December 31,
2023
2022
$
55,534 $
83,587
13,027
152,148
(91,378)
53,138
78,266
12,575
143,979
(75,759)
Fixed assets, net of accumulated depreciation and amortization
$
60,770 $
68,220
For the years ended December 31, 2023, 2022 and 2021, depreciation and amortization of furniture and equipment,
leasehold improvements and software totaled $17.9 million, $15.6 million and $12.6 million, respectively, and are
included in occupancy and equipment expense on the consolidated statements of operations.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 11 | GOODWILL AND INTANGIBLE ASSETS
(Amounts in thousands)
Goodwill
Balance at December 31, 2021
Goodwill acquired
Balance at December 31, 2022
Goodwill acquired
Measurement period adjustments
Balance at December 31, 2023
Intangible assets
Balance at December 31, 2021
Intangible assets acquired
Amortization of intangible assets
Balance at December 31, 2022
Intangible assets acquired
Amortization of intangible assets
Balance at December 31, 2023
$
$
227,508
73,643
301,151
—
609
$
301,760
$
119,778
31,234
(15,375)
$
135,637
—
(19,440)
$
116,197
As discussed in Note 4, the addition of goodwill and intangible assets during the year ended December 31, 2022 related
to the acquisitions of DBO Partners, Stamford Partners and Cornerstone Macro. Management identified $10.4 million of
customer relationship intangible assets related to the acquisition of DBO Partners, which are being amortized over a
weighted average life of 1.1 years. Management identified $1.8 million of customer relationship intangible assets related
to the acquisition of Stamford Partners, which were amortized over a weighted average life of 0.8 years. Management
identified $19.0 million of customer relationship intangible assets related to the acquisition of Cornerstone Macro, which
are being amortized over a weighted average life of 7.2 years. In 2023, the Company recorded a measurement period
adjustment to increase the value of the contingent consideration and goodwill related to the acquisition of DBO
Partners. The Company also recorded a measurement period adjustment related to Stamford Partners in 2023, which
resulted in an increase to goodwill.
At December 31, 2023, intangible assets with determinable lives consisted of customer relationships. The following
table summarizes the future aggregate amortization expense of the Company's intangible assets with determinable
lives:
(Amounts in thousands)
2024
2025
2026
2027
2028
Thereafter
Total
$
9,445
7,887
7,253
3,480
2,191
541
$
30,797
Indefinite-lived intangible assets consist of the Sandler trade name of $85.4 million, which is not subject to amortization.
The Company performed its annual impairment testing as of October 31, which resulted in no impairment related to
goodwill or indefinite-lived intangible assets in 2023, 2022 and 2021.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 12 | OTHER ASSETS
(Amounts in thousands)
Fee receivables
Forgivable employee loans
Prepaid expenses
Income tax receivables
Other (1)
Total other assets
December 31, December 31,
2023
2022
$
27,765 $
15,771
22,396
5,939
14,084
42,645
20,667
18,664
—
24,049
$
85,955 $
106,025
(1) As of December 31, 2022, the Company had a $7.5 million financing receivable included in other assets. This balance was
written off in 2023 as it was deemed uncollectible. The write-off is included in other operating expenses on the consolidated
statements of operations.
NOTE 13 | SHORT-TERM FINANCING
The Company has an unsecured $100 million revolving credit facility with U.S. Bank N.A. The credit agreement will
terminate on December 18, 2026, unless otherwise terminated, and is subject to a one-year extension exercisable at
the option of the Company. The interest rate is variable and based on either the federal funds rate or prime plus an
applicable margin. This credit facility includes customary events of default and covenants that, among other things,
require the Company's U.S. broker dealer subsidiary to maintain a minimum regulatory net capital of $120 million, limit
the Company's leverage ratio, require maintenance of a minimum ratio of operating cash flow to fixed charges, and
impose certain limitations on the Company's ability to make acquisitions and make payments on its capital stock. At
December 31, 2023, there were $30.0 million of advances against this credit facility, with a weighted average interest
rate of 5.33 percent. The Company repaid the outstanding balance on the revolving credit facility in January 2024.
The Company's committed short-term bank line financing at December 31, 2023 consisted of a one-year $50 million
committed revolving credit facility with U.S. Bank N.A., which has been renewed annually in the fourth quarter of each
year since 2008. Advances under this facility are secured by certain marketable securities. The interest rate is variable
and based on the federal funds rate plus an applicable margin. The facility includes a covenant that requires the
Company's U.S. broker dealer subsidiary to maintain a minimum regulatory net capital of $120 million, and the unpaid
principal amount of all advances under this facility will be due on December 6, 2024. The Company pays a
nonrefundable commitment fee on the unused portion of the facility on a quarterly basis. At December 31, 2023, the
Company had no advances against this line of credit.
NOTE 14 | LONG-TERM FINANCING
On October 15, 2019, the Company entered into a note purchase agreement with certain entities advised by Pacific
Investment Management Company ("PIMCO"), under which the Company issued unsecured fixed rate senior notes
("Notes") in the amount of $175 million. The Notes consisted of two classes, Class A Notes and Class B Notes, with
principal amounts of $50 million and $125 million, respectively. The Class A Notes were repaid in full by the Company
upon maturity on October 15, 2021. The Class B Notes were repaid in full by the Company upon maturity on
October 15, 2023.
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NOTE 15 | LEASES
Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The Company leases office space throughout the U.S. and in a limited number of foreign countries where its
international operations reside. Aggregate minimum lease payments on an undiscounted basis for the Company's
operating leases and a reconciliation to accrued lease liabilities included on the consolidated statements of financial
condition as of December 31, 2023 were as follows:
(Amounts in thousands)
2024
2025
2026
2027
2028
Thereafter
Total operating lease payments
Less: Present value discount
Total accrued lease liabilities
$
$
25,292
24,998
22,839
18,531
10,021
20,832
122,513
(28,786)
93,727
The following table summarizes the Company's operating lease costs and sublease income:
(Amounts in millions)
Operating lease costs
Year Ended December 31,
2023
2022
2021
$
21.9 $
24.3 $
Operating lease costs related to short-term leases
Sublease income
0.5
0.2
1.3
0.4
20.7
0.9
0.7
At December 31, 2023, the weighted average remaining lease term for operating leases was 5.5 years and the
weighted average discount rate was 4.4 percent.
In December 2022, the Company entered into a lease agreement for its future corporate headquarters location in
Minneapolis, Minnesota. As the Company anticipates taking possession of the space in 2025, no ROU lease asset or
accrued lease liability is recorded in the consolidated statements of financial condition as of December 31, 2023. The
Company's contractual rent commitment over the 15-year lease term is $53.1 million.
NOTE 16 | CONTINGENCIES, COMMITMENTS AND GUARANTEES
Legal Contingencies
The Company has been named as a defendant in various legal actions, including complaints and litigation and
arbitration claims, arising from its business activities. Such actions include claims related to securities brokerage and
investment banking activities, and certain class actions that primarily allege violations of securities laws and seek
unspecified damages, which could be substantial. Also, the Company is involved from time to time in investigations and
proceedings by governmental agencies and self-regulatory organizations ("SROs") which could result in adverse
judgments, settlements, penalties, fines or other relief.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The Company accrues for potential losses resulting from pending and potential legal actions, investigations and
regulatory proceedings when such losses are probable and reasonably estimable. In many cases, however, it is
inherently difficult to determine whether any loss is probable or even possible or to estimate the amount or range of any
potential loss, particularly where proceedings may be in relatively early stages or where plaintiffs are seeking substantial
or indeterminate damages. Matters frequently need to develop before a probability of loss can be determined or range
of loss can reasonably be estimated. Given uncertainties regarding the timing, scope, volume and outcome of pending
and potential legal actions, investigations and regulatory proceedings and other factors, the amounts of accruals and
ranges of reasonably possible losses are difficult to determine and of necessity subject to future revision. Subject to the
foregoing, management of the Company believes, based on currently available information, after consultation with
outside legal counsel and taking into account any prior accruals, that pending legal actions, investigations and
regulatory proceedings will be resolved with no material adverse effect on the financial condition, results of operations
or cash flows of the Company, except as described in the next paragraph.
The Securities and Exchange Commission ("SEC") and the Commodity Futures Trading Commission (the "CFTC") are
conducting investigations of the Company regarding compliance with recordkeeping requirements for business-related
communications sent over unapproved electronic messaging channels. The SEC and the CFTC have brought
numerous enforcement actions relating to recordkeeping practices and are currently conducting numerous similar
investigations of other broker dealers and registered investment advisors. The Company is cooperating with the
investigations. The Company has engaged in settlement negotiations with the SEC and the CFTC to resolve these
investigations and anticipates that the resolution will include the payment of civil money penalties. As of December 31,
2023, the Company accrued $20.0 million as estimated civil penalties related to these investigations, which are included
in other operating expenses on the consolidated statements of operations for the year ended December 31, 2023.
If during any period a potential adverse contingency becomes probable or is resolved for an amount in excess of the
established accrual, the results of operations and cash flows in that period and the financial condition as of the end of
that period could be materially adversely affected. At December 31, 2023, the high end of the range of reasonably
estimable losses in excess of amounts accrued was approximately $3.0 million. In addition, there can be no assurance
that material losses will not be incurred from claims that have not yet been brought to the Company's attention or are
not yet determined to be reasonably possible.
Litigation-related accrual activity included within other operating expenses was immaterial for the years ended
December 31, 2022 and 2021.
Investment Commitments
As of December 31, 2023, the Company had commitments to invest $95.1 million in limited partnerships or limited
liability companies that make direct or indirect equity or debt investments in companies.
Other Guarantees
The Company is a member of numerous exchanges. Under the membership agreements with these entities, members
generally are required to guarantee the performance of other members, and if a member becomes unable to satisfy its
obligations to the exchange, other members would be required to meet shortfalls. To mitigate these performance risks,
the exchanges often require members to post collateral. In addition, the Company identifies and guarantees certain
clearing agents against specified potential losses in connection with providing services to the Company or its affiliates.
The Company's maximum potential liability under these arrangements cannot be quantified. However, management
believes the likelihood that the Company would be required to make payments under these arrangements is remote.
Accordingly, no liability is recorded in the consolidated statements of financial condition for these arrangements.
Concentration of Credit Risk
The Company provides investment, capital-raising and related services to a diverse group of domestic and foreign
customers, including governments, corporations, and institutional investors. The Company's exposure to credit risk
associated with the non-performance of customers in fulfilling their contractual obligations pursuant to securities
transactions can be directly impacted by volatile securities markets, credit markets and regulatory changes. This
exposure is measured on an individual customer basis and on a group basis for customers that share similar attributes.
To alleviate the potential for risk concentrations, counterparty credit limits have been implemented for certain products
and are continually monitored in light of changing customer and market conditions.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 17 | SHAREHOLDERS' EQUITY
The Company's amended and restated certificate of incorporation provides for the issuance of up to 100,000,000
shares of common stock with a par value of $0.01 per share and up to 5,000,000 shares of undesignated preferred
stock with a par value of $0.01 per share.
Common Stock
The holders of the Company's common stock are entitled to one vote per share on all matters to be voted upon by the
shareholders. Subject to preferences that may be applicable to any outstanding preferred stock of Piper Sandler
Companies, the holders of its common stock are entitled to receive ratably such dividends, if any, as may be declared
out of funds legally available for that purpose. There are also restrictions on the payment of dividends as set forth in
Note 24. The Company's board of directors determines the declaration and payment of dividends and is free to change
the Company's dividend policy at any time.
Dividends
The Company's current dividend policy is intended to return a metric based on fiscal year net income to its
shareholders.
In 2023, the Company declared and paid quarterly cash dividends on its common stock, aggregating $2.40 per share,
and a special cash dividend on its common stock related to fiscal year 2022 results of $1.25 per share. Total dividends
paid, including accrued forfeitable dividends paid on restricted stock vestings, were $84.4 million for the year ended
December 31, 2023.
In 2022, the Company declared and paid quarterly cash dividends on its common stock, aggregating $2.40 per share,
and a special cash dividend on its common stock related to fiscal year 2021 results of $4.50 per share. Total dividends
paid, including accrued forfeitable dividends paid on restricted stock vestings, were $107.5 million for the year ended
December 31, 2022.
In 2021, the Company declared and paid quarterly cash dividends on its common stock, aggregating $1.95 per share, a
special cash dividend on its common stock related to fiscal year 2020 results of $1.85 per share, and a special cash
dividend on its common stock related to fiscal year 2021 results of $3.00 per share. Total dividends paid, including
accrued forfeitable dividends paid on restricted stock vestings, were $99.4 million for the year ended December 31,
2021.
On February 2, 2024, the board of directors declared both a quarterly and a special cash dividend on its common stock
of $0.60 and $1.00 per share, respectively, to be paid on March 15, 2024, to shareholders of record as of the close of
business on March 4, 2024. The special cash dividend relates to the Company's fiscal year 2023 results.
In the event that Piper Sandler Companies is liquidated or dissolved, the holders of its common stock are entitled to
share ratably in all assets remaining after payment of liabilities, subject to any prior distribution rights of Piper Sandler
Companies preferred stock, if any, then outstanding. Currently, there is no outstanding preferred stock. The holders of
the common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to Piper Sandler Companies common stock.
Share Repurchases
The Company purchases shares of common stock pursuant to share repurchase programs authorized by the
Company's board of directors. The Company also purchases shares of common stock from restricted stock award
recipients upon the award vesting as recipients sell shares to meet their employment tax obligations.
The following table summarizes the repurchase programs authorized by the Company's board of directors:
Effective Date
May 6, 2022
January 1, 2022
January 1, 2020
Authorized Amount
Expiration Date
$150.0 million
$150.0 million
$150.0 million
December 31, 2024
December 31, 2023
December 31, 2021
Remaining Authorization
at December 31, 2023
$138.2 million
$—
$—
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table summarizes the Company's repurchase activity:
Year Ended December 31,
2022
2021
2023
Shares repurchased pursuant to repurchase authorizations
Common shares repurchased
Aggregate purchase price (in millions)
Average price per share
Shares repurchased from employees related to employment
tax obligations
Common shares repurchased
Aggregate purchase price (in millions)
Average price per share
Issuance of Shares
$
$
$
$
—
1,245,221
161.8 $
417,903
52.3
129.95 $
125.03
— $
— $
494,555
172,156
70.7 $
25.5 $
154,117
17.7
142.92 $
148.25 $
114.53
The Company issues common shares out of treasury stock as a result of employee restricted share vesting and
exercise transactions as discussed in Note 19. During the years ended December 31, 2023, 2022 and 2021, the
Company issued 2,013,046 shares, 953,293 shares and 918,024 shares, respectively, related to these obligations.
Preferred Stock
The Piper Sandler Companies board of directors has the authority, without action by its shareholders, to designate and
issue preferred stock in one or more series and to designate the rights, preferences and privileges of each series, which
may be greater than the rights associated with the common stock. It is not possible to state the actual effect of the
issuance of any shares of preferred stock upon the rights of holders of common stock until the Piper Sandler
Companies board of directors determines the specific rights of the holders of preferred stock. However, the effects might
include, among other things, the following: restricting dividends on its common stock, diluting the voting power of its
common stock, impairing the liquidation rights of its common stock and delaying or preventing a change in control of
Piper Sandler Companies without further action by its shareholders.
Noncontrolling Interests
The consolidated financial statements include the accounts of Piper Sandler Companies, its wholly owned subsidiaries
and other entities in which the Company has a controlling financial interest. Noncontrolling interests represent equity
interests in consolidated entities that are not attributable, either directly or indirectly, to Piper Sandler Companies.
Noncontrolling interests represent the minority equity holders' proportionate share of the equity in the Company's
alternative asset management funds.
Ownership interests in entities held by parties other than the Company's common shareholders are presented as
noncontrolling interests within shareholders' equity, separate from the Company's own equity. Revenues, expenses and
net income or loss are reported on the consolidated statements of operations on a consolidated basis, which includes
amounts attributable to both the Company's common shareholders and noncontrolling interests. Net income or loss is
then allocated between the Company and noncontrolling interests based upon their relative ownership interests. Net
income attributable to noncontrolling interests is deducted from consolidated net income to determine net income
attributable to the Company. The Company does not have other comprehensive income or loss attributable to
noncontrolling interests.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 18 | REVENUES AND BUSINESS INFORMATION
The Company's activities as an investment bank and institutional securities firm constitute a single business segment.
The Company is organized as one reportable segment in order to maximize the value provided to clients by leveraging
the diversified expertise and broad relationships of its experienced professionals across the Company. The substantial
majority of the Company's net revenues and long-lived assets are located in the U.S.
Reportable financial results are as follows:
(Amounts in thousands)
Revenues
Investment banking:
Advisory services
Corporate financing
Municipal financing
Total investment banking
Institutional brokerage:
Equity brokerage
Fixed income services
Total institutional brokerage
Interest income
Investment income/(loss)
Total revenues
Interest expense
Net revenues
Total non-interest expenses
Pre-tax income
Year Ended December 31,
2023
2022
2021
$
709,316
131,077
83,419
$
776,428
$ 1,026,138
125,342
107,739
362,797
164,284
923,812
1,009,509
1,553,219
209,512
168,027
377,539
26,723
30,039
210,314
194,953
405,267
20,365
(23)
154,067
233,510
387,577
6,967
94,032
1,358,113
1,435,118
2,041,795
10,146
9,480
10,734
1,347,967
1,425,638
2,031,061
1,225,381
1,291,269
1,589,549
$
122,586
$
134,369
$
441,512
Pre-tax margin
9.1 %
9.4 %
21.7 %
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 19 | COMPENSATION PLANS
Stock-Based Compensation Plans
The Company has three outstanding stock-based compensation plans: the Amended and Restated 2003 Annual and
Long-Term Incentive Plan (the "Incentive Plan"), the 2020 Employment Inducement Award Plan (the "2020 Inducement
Plan") and the 2022 Employment Inducement Award Plan (the "2022 Inducement Plan"). The Company's equity awards
are recognized on the consolidated statements of operations at grant date fair value over the service period of the
award, less forfeitures.
The following table provides a summary of the Company's outstanding equity awards (in shares or units, as applicable)
as of December 31, 2023:
Restricted stock
Restricted stock related to compensation plans:
Annual grants
Sign-on grants
Inducement grants
2020 Inducement Plan grants
2022 Inducement Plan grants
Total restricted stock related to compensation plans
Restricted stock related to acquisitions (1)
Total restricted stock
Restricted stock units
Stock options
734,642
120,005
61,806
555,059
126,608
1,598,120
995,802
2,593,922
181,193
156,667
(1)
Includes restricted stock with service conditions issued in conjunction with all acquisitions since January 1, 2020. See Note 4 for
further discussion.
Incentive Plan
The Incentive Plan permits the grant of equity awards, including restricted stock, restricted stock units and non-qualified
stock options, to the Company's employees and directors for up to 10.9 million shares of common stock (1.9 million
shares remained available for future issuance under the Incentive Plan as of December 31, 2023). The Company
believes that such awards help align the interests of employees and directors with those of shareholders and serve as
an employee retention tool. The Incentive Plan provides for accelerated vesting of awards if there is a severance event,
a change in control of the Company (as defined in the Incentive Plan), in the event of a participant's death, and at the
discretion of the compensation committee of the Company's board of directors.
Restricted Stock Awards
Restricted stock grants are valued at the market price of the Company's common stock on the date of grant and are
amortized over the requisite service period. The Company grants shares of restricted stock to employees as part of
year-end compensation ("Annual Grants") and upon initial hiring or as a retention award ("Sign-on Grants" or
"Inducement Grants").
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The Company's Annual Grants are made each year in February. Annual Grants vest ratably over three years in equal
installments. The Annual Grants provide for continued vesting after termination of employment, so long as the employee
does not violate certain post-termination restrictions set forth in the award agreement or any agreements entered into
upon termination. The Company determined the service inception date precedes the grant date for the Annual Grants,
and that the post-termination restrictions do not meet the criteria for an in-substance service condition, as defined by
ASC 718. Accordingly, restricted stock granted as part of the Annual Grants is expensed in the one-year period in which
those awards are deemed to be earned, which is generally the calendar year preceding the February grant date. For
example, the Company recognized compensation expense during fiscal year 2023 for its February 2024 Annual Grant. If
an equity award related to the Annual Grants is forfeited as a result of violating the post-termination restrictions, the
lower of the fair value of the award at grant date or the fair value of the award at the date of forfeiture is recorded within
the consolidated statements of operations as a reversal of compensation expense.
Sign-on Grants are used as a recruiting tool for new employees and are issued to current employees as a retention tool.
These awards have both cliff and ratable vesting terms, and the employees must fulfill service requirements in
exchange for rights to the awards. Compensation expense is amortized on a straight-line basis from the grant date over
the requisite service period, generally three to five years. Employees forfeit unvested shares upon termination of
employment and a reversal of compensation expense is recorded.
Inducement Grants are issued as a retention tool in conjunction with certain acquisitions. During 2022, the Company
granted $9.3 million (65,125 shares) in restricted stock under the Incentive Plan in conjunction with its acquisitions of
Cornerstone Macro and Stamford Partners. These restricted shares are subject to graded vesting, and employees must
fulfill service requirements in exchange for the rights to the restricted shares. Compensation expense is amortized on a
straight-line basis over the requisite service period, generally three to four years. Employees forfeit unvested shares
upon termination of employment and a reversal of compensation expense is recorded.
Annually, the Company grants stock to its non-employee directors. The stock-based compensation paid to non-
employee directors is fully expensed on the grant date and included within outside services expense on the
consolidated statements of operations.
Restricted Stock Units
The Company grants restricted stock units to its leadership team ("Leadership Grants"). Restricted stock units will vest
and convert to shares of common stock at the end of each 36-month performance period only if the Company satisfies
predetermined performance and/or market conditions over the performance period. The performance condition requires
the Company to achieve certain average adjusted return on equity targets, as defined in the terms of the award
agreements. The market condition requires the Company to achieve a certain total shareholder return ("TSR") relative
to members of a predetermined peer group. Under the terms of these awards, the number of units that will actually vest
and convert to shares will be based on the extent to which the Company achieves the specified targets during each
performance period. The maximum payout leverage by grant year is as follows:
Grant Year
Performance Condition
Market Condition
Maximum Payout Leverage
2023
2022
2021
2020
2019
100%
75%
75%
75%
75%
100%
75%
75%
75%
75%
Total
200%
150%
150%
150%
150%
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The fair value of the performance condition portion of the award was based on the closing price of the Company's
common stock on the grant date. If the Company determines that it is probable that the performance condition will be
achieved, compensation expense is amortized on a straight-line basis over the 36-month performance period. The
Company reevaluates achievement of the performance condition by grant year each reporting period with changes in
estimated outcomes accounted for using a cumulative effect adjustment to compensation expense. Compensation
expense will be recognized only if the performance condition is met. Employees forfeit unvested restricted stock units
upon termination of employment with a corresponding reversal of compensation expense. As of December 31, 2023, the
expected payout leverage for the performance condition portion of the award by grant year is as follows:
Grant Year
2023
2022
2021
Expected Payout
Leverage
47%
—%
75%
The market condition must be met for the market condition portion of the award to vest. Compensation expense will be
recognized regardless if the market condition is satisfied, and is amortized on a straight-line basis over the 36-month
requisite service period (or earlier if age and service conditions are met, as described below). Employees forfeit
unvested restricted stock units upon termination of employment with a corresponding reversal of compensation
expense. The fair value of the market condition portion of the award was determined on the grant date using a Monte
Carlo simulation with the following assumptions:
Grant Year
Vesting Year
Risk-Free
Interest Rate
Expected Stock
Price Volatility
2023
2022
2021
2020
2019
2018
2026
2025
2024
2023
2022
2021
4.35%
1.80%
0.23%
1.40%
2.50%
2.40%
47.5%
43.8%
43.2%
27.3%
31.9%
34.8%
Because the vesting of the market condition portion of the award depends on the Company's TSR relative to a peer
group, the valuation modeled the performance of the peer group as well as the correlation between the Company and
the peer group. The expected stock price volatility assumptions were determined using historical volatility, as correlation
coefficients can only be developed through historical volatility. The risk-free interest rates were determined based on
three-year U.S. Treasury bond yields.
The compensation committee of the Company's board of directors included defined retirement provisions in its
Leadership Grants. Certain grantees meeting defined age and service requirements will be fully vested in the awards as
long as performance and post-termination obligations are met throughout the performance period. These retirement-
eligible grants are expensed in the period in which those awards are deemed to be earned, which is the calendar year
preceding the February grant date.
Stock Options
On February 15, 2023 and February 15, 2018, the Company granted options to certain executive officers. These options
are expensed on a straight-line basis over the required service period of five years, based on the estimated fair value of
the award on the respective date of grant. The exercise price per share is equal to the closing price on the respective
date of grant plus ten percent. These options are subject to graded vesting, beginning on the third anniversary of the
respective grant date, so long as the employee remains continuously employed by the Company. The maximum term of
these stock options is ten years.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The fair value of these stock option awards was estimated on the respective date of grant using the Black-Scholes
option-pricing model with the following assumptions:
Risk-free interest rate
Dividend yield
Expected stock price volatility
Expected life of options (in years)
Fair value of options granted (per share)
February 2023 February 2018
Grant
Grant
3.94 %
3.21 %
38.50 %
7.0
2.82 %
3.22 %
37.20 %
7.0
$
46.71
$
24.49
The risk-free interest rate assumption was based on the U.S. Treasury bond yield with a maturity equal to the expected
life of the options. The dividend yield assumption was based on the assumed dividend payout over the expected life of
the options. The expected stock price volatility assumption was determined using historical volatility, as correlation
coefficients can only be developed through historical volatility. The expected life of options assumption was determined
using the simplified method due to the Company's limited exercise information. The simplified method calculates the
expected term as the midpoint of the vesting term and the original contractual term of the options.
Inducement Plans
Inducement plan awards are amortized as compensation expense on a straight-line basis over each respective vesting
period. Employees forfeit unvested shares upon termination of employment and a reversal of compensation expense is
recorded.
The Company established the 2019 Employment Inducement Award Plan (the "2019 Inducement Plan") in conjunction
with its acquisition of Weeden & Co. L.P. ("Weeden & Co."). On August 2, 2019, the Company granted $7.3 million
(97,752 shares) in restricted stock. These restricted shares were subject to graded vesting through August 2, 2023. The
Company terminated the 2019 Inducement Plan in August 2023.
The Company established the 2020 Inducement Plan in conjunction with its acquisition of SOP Holdings, LLC and its
subsidiaries, including Sandler O'Neill & Partners, L.P. (collectively, "Sandler O'Neill"). On January 3, 2020, the
Company granted $96.9 million (1,217,423 shares) in restricted stock. These restricted shares have both cliff and
graded vesting terms with vesting periods of 18 months, three years or five years (with a weighted average service
period of 3.7 years). On April 3, 2020, the Company granted $5.5 million (114,000 shares) in restricted stock under the
2020 Inducement Plan in conjunction with its acquisition of The Valence Group ("Valence"). These restricted shares are
subject to graded vesting, generally beginning on the third anniversary of the grant date through April 3, 2025. On
December 31, 2020, the Company granted $2.9 million (29,194 shares) in restricted stock under the 2020 Inducement
Plan in conjunction with its acquisition of TRS Advisors LLC ("TRS"). These restricted shares were subject to ratable
vesting through December 31, 2023.
The Company established the 2022 Inducement Plan in conjunction with its acquisition of DBO Partners. On October 7,
2022, the Company granted $17.4 million (161,030 shares) in restricted stock. These restricted shares are generally
subject to ratable vesting over a five-year vesting period.
Stock-Based Compensation Activity
The following table summarizes the Company's stock-based compensation activity:
(Amounts in millions)
Stock-based compensation expense
Forfeitures
Tax benefit related to stock-based compensation expense
Year Ended December 31,
2023
2022
2021
$
92.3 $
129.9 $
1.9
17.9
1.5
17.5
170.1
1.6
23.8
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table summarizes the changes in the Company's unvested restricted stock:
December 31, 2020
Granted
Vested
Canceled
December 31, 2021
Granted
Vested
Canceled
December 31, 2022
Granted
Vested
Canceled
December 31, 2023
Unvested
Weighted Average
Restricted Stock
(in Shares)
Grant Date
Fair Value
4,312,557 $
353,753
(850,355)
(20,743)
3,795,212 $
1,330,471
(890,629)
(15,228)
4,219,826 $
336,093
(1,932,950)
(29,047)
2,593,922 $
74.99
108.21
81.29
90.27
76.59
131.69
82.95
129.10
92.43
153.89
85.62
144.34
104.89
The fair value of restricted stock that vested during the years ended December 31, 2023, 2022 and 2021 was
$165.5 million, $73.9 million and $69.1 million, respectively.
The following table summarizes the changes in the Company's unvested restricted stock units:
December 31, 2020
Granted
Vested
Canceled
December 31, 2021
Granted
Vested
Canceled
December 31, 2022
Granted
Vested
Canceled
December 31, 2023
Unvested
Restricted
Stock Units
Weighted Average
Grant Date
Fair Value
146,048 $
62,569
(50,224)
—
158,393 $
69,693
(39,758)
—
188,328 $
48,931
(56,066)
—
181,193 $
85.60
103.69
92.93
—
90.43
148.90
75.78
—
115.16
177.75
86.01
—
141.08
As of December 31, 2023, there was $93.8 million of total unrecognized compensation cost related to restricted stock
and restricted stock units expected to be recognized over a weighted average period of 2.9 years.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The following table summarizes the changes in the Company's outstanding stock options:
Weighted Average
Weighted
Remaining
Options
Average
Contractual Term
Aggregate
Outstanding Exercise Price
(in Years)
Intrinsic Value
December 31, 2020
81,667 $
99.00
7.1
$
155,167
Granted
Exercised
Canceled
Expired
—
—
—
—
—
—
—
—
December 31, 2021
81,667 $
99.00
6.1
$
6,493,343
Granted
Exercised
Canceled
Expired
December 31, 2022
Granted
Exercised
Canceled
Expired
—
—
—
—
81,667 $
75,000
—
—
—
—
—
—
—
99.00
170.76
—
—
—
5.1
$
2,547,194
December 31, 2023
156,667 $
133.35
6.5
$
6,504,325
Options exercisable at:
December 31, 2021
December 31, 2022
December 31, 2023
27,222 $
54,444 $
81,667 $
99.00
99.00
99.00
6.1
5.1
4.1
$
$
$
2,164,421
1,698,108
6,196,075
As of December 31, 2023, there was $2.9 million of unrecognized compensation cost related to stock options expected
to be recognized over a weighted average period of 4.1 years.
The Company has a policy of issuing shares out of treasury (to the extent available) to satisfy share option exercises
and restricted stock vesting. The Company expects to withhold approximately 0.3 million shares from employee equity
awards vesting in 2024, related to employee individual income tax withholding obligations on restricted stock vesting.
For accounting purposes, withholding shares to cover employees' tax obligations is deemed to be a repurchase of
shares by the Company.
Deferred Compensation Plans
The Company maintains various deferred compensation arrangements for employees.
Mutual Fund Restricted Share Investment Plan
The Mutual Fund Restricted Share Investment Plan is a fully funded deferred compensation plan which allows eligible
employees to receive a portion of their incentive compensation in restricted mutual fund shares ("MFRS Awards") of
investment funds. MFRS Awards are awarded to qualifying employees in February of each year, and represent a portion
of their compensation for performance in the preceding year similar to the Company's Annual Grants. MFRS Awards
vest ratably over three years in equal installments and provide for continued vesting after termination of employment so
long as the employee does not violate certain post-termination restrictions set forth in the award agreement or any
agreement entered into upon termination. Forfeitures are recorded as a reduction of compensation and benefits
expense within the consolidated statements of operations. MFRS Awards are owned by employee recipients (subject to
aforementioned vesting restrictions) and as such are not included on the consolidated statements of financial condition.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The Company recorded compensation expense of $75.4 million, $104.7 million and $127.3 million for the years ended
December 31, 2023, 2022 and 2021, respectively, related to employee MFRS Awards, less forfeitures. Forfeitures were
$1.3 million, $3.1 million and $3.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Nonqualified Deferred Compensation Plan
The nonqualified deferred compensation plan is an unfunded plan which allows certain highly compensated employees,
at their election, to defer a portion of their compensation. This plan was closed to future deferral elections by
participants for performance periods beginning after December 31, 2017. The amounts deferred under this plan are held
in a grantor trust. The Company invests, as a principal, in investments to economically hedge its obligation under the
nonqualified deferred compensation plan. The investments in the grantor trust consist of mutual funds which are
categorized as Level I in the fair value hierarchy. These investments totaled $18.6 million and $15.9 million as of
December 31, 2023 and 2022, respectively, and are included in investments on the consolidated statements of financial
condition. A corresponding deferred compensation liability is included in accrued compensation on the consolidated
statements of financial condition. The compensation deferred by the employees was expensed in the period earned.
Changes in the fair value of the investments made by the Company are reported in investment income and changes in
the corresponding deferred compensation liability are reflected as compensation and benefits expense on the
consolidated statements of operations.
Acquisition-Related Compensation Arrangements
In conjunction with the 2020 acquisition of Valence, additional cash was available to be earned by certain employees if a
revenue threshold was exceeded during the three-year post-acquisition period (the "Valence Earnout"). The Company
paid $10.0 million related to the Valence Earnout in 2023. Amounts payable were recorded as compensation expense
on the consolidated statements of operations over the requisite service period. The Company recorded $2.2 million and
$11.2 million in compensation expense related to the Valence Earnout for the years ended December 31, 2023 and
2021, respectively, and a $3.4 million reversal of compensation expense for the year ended December 31, 2022.
In conjunction with the 2020 acquisition of TRS, additional cash of $7.0 million may be earned by certain employees if a
revenue threshold is exceeded during the three-year post-acquisition period to the extent they are employed by the
Company at the time of payment (the "TRS Earnout"). Amounts estimated to be payable, if any, are recorded as
compensation expense on the consolidated statements of operations over the requisite service period, and will be paid
by April 3, 2024. As of December 31, 2023, the Company expects the maximum amount of $7.0 million will be earned
and has accrued $6.5 million related to this additional cash payment. The Company recorded $2.2 million, $2.1 million
and $2.2 million in compensation expense related to the TRS Earnout for the years ended December 31, 2023, 2022
and 2021, respectively.
In conjunction with the 2019 acquisition of Weeden & Co., the Company entered into acquisition-related compensation
arrangements with certain Weeden & Co. equity owners, a portion of whom are now employees of the Company.
Additional cash of up to $31.5 million was available to be earned if a net revenue target was achieved during the period
from January 1, 2020 to June 30, 2021 (the "Weeden Earnout"). The Company paid $31.5 million related to the Weeden
Earnout in 2021. Amounts payable to employees were recorded as compensation expense on the consolidated
statements of operations over the requisite service period. Amounts payable to non-employee equity holders were
recorded as a liability as of the acquisition date and adjusted through the statement of operations for any changes after
the acquisition date. The Company recorded $6.5 million in non-interest expenses related to the Weeden Earnout for
the year ended December 31, 2021.
The Company also granted restricted cash in conjunction with the acquisitions of Sandler O'Neill and Weeden & Co. for
retention purposes. The restricted cash awards were amortized as compensation expense on a straight-line basis over
each respective vesting period. The restricted cash of $17.0 million related to the acquisition of Sandler O'Neill vested
and was paid in 2021. The restricted cash of $10.1 million related to the acquisition of Weeden & Co. was subject to
graded vesting, beginning on the third anniversary of the grant date through August 2, 2023. The final payment was
made in 2023.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 20 | EMPLOYEE BENEFIT PLANS
The Company has various employee benefit plans, and substantially all employees are covered by at least one plan.
The plans include health and welfare plans and a tax-qualified retirement plan (the "Retirement Plan"). During the years
ended December 31, 2023, 2022 and 2021, the Company incurred employee benefits expenses of $35.9 million,
$33.8 million and $35.9 million, respectively.
Health and Welfare Plans
Company employees who meet certain work schedule and service requirements are eligible to participate in the
Company's health and welfare plans. The Company subsidizes the cost of coverage for employees. The health plans
contain cost-sharing features such as deductibles and coinsurance.
The Company is self-insured for losses related to health claims, although it obtains third-party stop loss insurance
coverage on both an individual and a group plan basis. Self-insured liabilities are based on a number of factors,
including historical claims experience, an estimate of claims incurred but not reported and valuations provided by third-
party actuaries. For the years ended December 31, 2023, 2022 and 2021, the Company recognized expense of
$20.9 million, $19.7 million and $20.0 million, respectively, in compensation and benefits expense on the consolidated
statements of operations related to its health plans.
Retirement Plan
The Retirement Plan is a defined contribution retirement savings plan. The defined contribution retirement savings plan
allows qualified employees, at their option, to make contributions through salary deductions under Section 401(k) of the
Internal Revenue Code. Employee contributions are 100 percent matched by the Company to a maximum of six percent
of recognized compensation up to the social security taxable wage base. The Retirement Plan also provides for a
discretionary profit sharing contribution by the Company. Payment and amount of the profit sharing contribution are
determined annually on a discretionary basis. For the years ended December 31, 2023 and 2022, the Company did not
make a profit sharing contribution. For the year ended December 31, 2021, the Company contributed two percent of
recognized compensation up to the social security taxable wage base for each eligible employee related to the profit
sharing contribution. Although the Company's matching and profit sharing contributions vest immediately, a participant
must be employed on December 31 to receive that year's employer contributions.
NOTE 21 | RESTRUCTURING AND INTEGRATION COSTS
The Company incurred the following restructuring and integration costs:
(Amounts in thousands)
Severance, benefits and outplacement
Vacated leased office space
Contract termination
Total restructuring costs
Integration costs
Year Ended December 31,
2023
2022
2021
$
6,658 $
652 $
896
109
7,663
86
5,616
—
6,268
5,172
317
3,404
—
3,721
1,003
4,724
Total restructuring and integration costs
$
7,749 $
11,440 $
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 22 | INCOME TAXES
Income tax expense is provided using the asset and liability method. Deferred tax assets and liabilities are recognized
for the expected future tax consequences attributable to temporary differences between amounts reported for income
tax purposes and financial statement purposes, using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled.
The components of income tax expense are as follows:
(Amounts in thousands)
Current
Federal
State
Foreign
Total current
Deferred
Federal
State
Foreign
Total deferred
Year Ended December 31,
2023
2022
2021
$
3,988 $
44,769 $
124,389
5,292
684
9,964
11,856
1,546
247
13,649
19,237
2,390
66,396
36,793
3,818
165,000
(20,500)
(9,207)
(3,500)
(33,207)
(41,980)
(10,874)
(1,002)
(53,856)
Total income tax expense
$
23,613 $
33,189 $
111,144
A reconciliation of federal income taxes at statutory rates to the Company's effective tax rates is as follows:
(Amounts in thousands)
Year Ended December 31,
2023
2022
2021
Federal income tax expense at statutory rates
$
25,743 $
28,218 $
92,718
Increase/(decrease) in taxes resulting from:
State income taxes, net of federal tax benefit
Net tax-exempt interest income
Foreign jurisdictions tax rate differential
Non-deductible compensation
Change in valuation allowance
Vestings of stock awards
Income/(loss) attributable to noncontrolling interests
Other, net
Total income tax expense
7,994
(1,613)
993
3,645
(159)
(13,714)
(2,831)
3,555
7,501
(1,449)
1,152
4,602
(4,935)
(5,646)
1,994
1,752
19,020
(754)
978
9,013
49
(2,732)
(10,889)
3,741
$
23,613 $
33,189 $
111,144
In accordance with ASC 740, U.S. income taxes are not provided on undistributed earnings of international subsidiaries
that are permanently reinvested. As of December 31, 2023, no deferred taxes have been provided for withholding taxes
or other taxes that would result upon repatriation of the Company's foreign earnings to the U.S.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
Deferred income tax assets and liabilities reflect the tax effect of temporary differences between the carrying amount of
assets and liabilities for financial reporting purposes and the amounts used for the same items for income tax reporting
purposes. The net deferred income tax assets consisted of the following items:
(Amounts in thousands)
Deferred tax assets
Deferred compensation
Accrued lease liabilities
Goodwill tax basis in excess of book basis
Net operating loss carryforwards
Liabilities/accruals not currently deductible
Other
Total deferred tax assets
Valuation allowance
Deferred tax assets after valuation allowance
Deferred tax liabilities
Right-of-use lease assets
Unrealized gains on firm investments
Fixed assets
Other
Total deferred tax liabilities
December 31, December 31,
2023
2022
$
131,791 $
141,160
21,850
43,630
1,301
5,616
5,336
25,428
47,463
3,659
2,667
6,781
209,524
227,158
—
(159)
209,524
226,999
16,055
5,318
8,451
493
30,317
20,010
5,532
9,891
564
35,997
Net deferred tax assets
$
179,207 $
191,002
The realization of deferred tax assets is assessed and a valuation allowance is recorded to the extent that it is more
likely than not that any portion of the deferred tax asset will not be realized. The Company believes that its future tax
profits will be sufficient to recognize its deferred tax assets.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
The Company accounts for unrecognized tax benefits in accordance with the provisions of ASC 740, which requires tax
reserves to be recorded for uncertain tax positions on the consolidated statements of financial condition. A reconciliation
of the beginning and ending amount of unrecognized tax benefits is as follows:
(Amounts in thousands)
Balance at December 31, 2020
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at December 31, 2021
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at December 31, 2022
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Balance at December 31, 2023
$
104
—
1,743
(38)
(66)
$
1,743
—
408
—
—
$
2,151
—
—
(42)
(305)
1,804
$
As of December 31, 2023 and 2022, $1.8 million and $2.2 million, respectively, of the Company's unrecognized tax
benefits included above would impact the annual effective rate, if recognized.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits as a component of
income tax expense. The Company had $0.4 million, $0.4 million and $0.3 million accrued related to the payment of
interest and penalties at December 31, 2023, 2022 and 2021, respectively. The Company or one of its subsidiaries files
income tax returns with the various states and foreign jurisdictions in which the Company operates. The Company is not
subject to examination by U.S. federal tax authorities for years before 2020 and is not subject to examination by state
and local or non-U.S. tax authorities for taxable years before 2018. The Company anticipates the majority of its
uncertain income tax positions will be resolved within the next twelve months.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 23 | EARNINGS PER SHARE
Basic earnings per common share is computed by dividing net income attributable to Piper Sandler Companies by the
weighted average number of common shares outstanding for the period. Diluted earnings per common share is
calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive stock
options, restricted stock units and restricted shares. The Company uses the treasury stock method to calculate diluted
earnings per common share.
The computation of EPS is as follows:
(Amounts in thousands, except per share data)
Year Ended December 31,
2023
2022
2021
Net income attributable to Piper Sandler Companies
$
85,491 $
110,674 $
278,514
Shares for basic and diluted calculations
Average shares used in basic computation
Stock options
Restricted stock units
Restricted shares
Average shares used in diluted computation
Earnings per common share
Basic
Diluted
14,958
13,982
14,265
25
163
2,079
17,224
16
196
2,771
16,965
14
187
2,488
16,955
$
$
5.72 $
4.96 $
7.92 $
6.52 $
19.52
16.43
The anti-dilutive effects from stock options and restricted shares were immaterial for the years ended December 31,
2023, 2022 and 2021.
NOTE 24 | NET CAPITAL REQUIREMENTS AND OTHER REGULATORY MATTERS
Piper Sandler & Co. is registered as a securities broker dealer with the SEC and is a member of various SROs and
securities exchanges. The Financial Industry Regulatory Authority, Inc. ("FINRA") serves as Piper Sandler & Co.'s
primary SRO. Piper Sandler & Co. is subject to the uniform net capital rule of the SEC and the net capital rule of FINRA.
Piper Sandler & Co. has elected to use the alternative method permitted by the SEC rule which requires that it maintain
minimum net capital of $1.0 million. Advances to affiliates, repayment of subordinated debt, dividend payments and
other equity withdrawals by Piper Sandler & Co. are subject to certain approvals, notifications and other provisions of
SEC and FINRA rules.
At December 31, 2023, net capital calculated under the SEC rule was $247.9 million, and exceeded the minimum net
capital required under the SEC rule by $246.9 million.
The Company's committed line and revolving credit facility include covenants requiring Piper Sandler & Co. to maintain
a minimum regulatory net capital of $120 million. The Company's fully disclosed clearing agreement with Pershing
includes a covenant requiring Piper Sandler & Co. to maintain excess net capital of $120 million.
Piper Sandler Ltd., a broker dealer subsidiary registered in the U.K., is subject to the capital requirements of the
Prudential Regulation Authority and the Financial Conduct Authority. As of December 31, 2023, Piper Sandler Ltd. was
in compliance with the capital requirements of the Prudential Regulation Authority and the Financial Conduct Authority.
Piper Sandler Hong Kong Limited is licensed by the Hong Kong Securities and Futures Commission, which is subject to
the liquid capital requirements of the Securities and Futures (Financial Resources) Rule promulgated under the
Securities and Futures Ordinance. At December 31, 2023, Piper Sandler Hong Kong Limited was in compliance with the
liquid capital requirements of the Hong Kong Securities and Futures Commission.
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
NOTE 25 | PARENT COMPANY ONLY AND PSLS
Parent Company Only
Condensed Statements of Financial Condition
(Amounts in thousands)
Assets
Cash and cash equivalents
Investment in and advances to subsidiaries
Other assets
Total assets
Liabilities and Shareholders' Equity
Short-term financing
Long-term financing
Accrued compensation
Other liabilities and accrued expenses
Total liabilities
December 31, December 31,
2023
2022
$
100 $
200
1,147,090
1,221,123
14,346
10,435
$
1,161,536 $
1,231,758
$
30,000 $
—
42,698
3,340
76,038
—
125,000
48,414
4,271
177,685
Shareholders' equity
1,085,498
1,054,073
Total liabilities and shareholders' equity
$
1,161,536 $
1,231,758
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Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
Condensed Statements of Operations
(Amounts in thousands)
Revenues
Dividends from subsidiaries
Interest income
Investment income/(loss)
Total revenues
Interest expense
Net revenues
Total non-interest expenses
Income before income tax expense and equity in income of
subsidiaries
Income tax expense
Income of parent company
Equity in undistributed/(distributed in excess of) income of
subsidiaries
Year Ended December 31,
2023
2022
2021
$
118,934 $
172,383 $
74,456
917
1,823
121,674
6,083
115,591
6,319
109,272
28,957
80,315
5,176
1,235
(3,461)
170,157
6,759
163,398
4,497
158,901
41,050
117,851
508
2,723
77,687
8,606
69,081
7,522
61,559
15,636
45,923
(7,177)
110,674 $
232,591
278,514
Net income attributable to Piper Sandler Companies
$
85,491 $
Condensed Statements of Cash Flows
(Amounts in thousands)
Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Stock-based compensation
Equity distributed in excess of/(in undistributed) income of
subsidiaries
Net cash provided by operating activities
Year Ended December 31,
2023
2022
2021
$
85,491 $
110,674 $
278,514
1,168
941
1,019
(5,176)
81,483
7,177
118,792
(232,591)
46,942
Financing Activities
Net change in short-term financing
Repayment of long-term financing
Advances from subsidiaries
Payment of cash dividend
Repurchase of common stock
Net cash used in financing activities
30,000
(125,000)
—
—
168,541
176,070
(84,444)
(70,680)
(81,583)
(107,528)
(187,334)
(118,792)
Net change in cash and cash equivalents
(100)
—
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
200
100 $
200
200 $
—
(70,000)
192,309
(99,350)
(69,901)
(46,942)
—
200
200
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PSLS
Piper Sandler Companies
Notes to the Consolidated Financial Statements – Continued
Condensed Statements of Financial Condition
(Amounts in thousands)
Assets
Cash and cash equivalents
Right-of-use lease assets
Fee receivables
Prepaid expenses
Other assets
Total assets
Liabilities and Shareholder's Equity
Accrued compensation
Accrued lease liabilities
Other liabilities and accrued expenses
Total liabilities
Shareholder's equity
December 31, December 31,
2023
2022
$
5,810 $
102
1,329
46
910
4,362
514
1,392
115
807
$
$
8,197 $
7,190
1,818 $
102
1,443
3,363
2,998
514
373
3,885
4,834
3,305
Total liabilities and shareholder's equity
$
8,197 $
7,190
Piper Sandler Companies | 110
Table of Contents
Piper Sandler Companies
Supplementary Data — Quarterly Information (unaudited)
2023 Fiscal Quarter
(Amounts in thousands, except per share data)
Total revenues
First
Second
Third
Fourth
$
300,544 $
291,331 $
292,031 $
474,207
Interest expense
Net revenues
Total non-interest expenses
Income/(loss) before income tax expense/(benefit)
Income tax expense/(benefit)
Net income/(loss)
Net income/(loss) attributable to noncontrolling interests
2,639
297,905
272,096
25,809
2,605
288,726
274,345
14,381
2,546
289,485
292,935
(3,450)
(7,637)
(250)
10,227
33,446
7,812
14,631
10,677
(13,677)
(17,555)
Net income attributable to Piper Sandler Companies
$
25,634 $
3,954 $
3,878 $
2,356
471,851
386,005
85,846
21,273
64,573
12,548
52,025
Earnings per common share
Basic
Diluted
Dividends declared per common share
Weighted average number of common shares
outstanding
Basic
Diluted
$
$
$
1.77 $
1.49 $
0.26 $
0.23 $
0.26 $
0.22 $
3.44
3.00
1.85 $
0.60 $
0.60 $
0.60
14,507
17,182
15,066
17,084
15,105
17,256
15,143
17,367
(Amounts in thousands, except per share data)
Total revenues
First
Second
Third
Fourth
$
352,846 $
354,546 $
334,402 $
393,324
2022 Fiscal Quarter
Interest expense
Net revenues
Total non-interest expenses
Income before income tax expense
Income tax expense
Net income
Net income/(loss) attributable to noncontrolling interests
2,201
350,645
315,008
35,637
10,979
24,658
(11,993)
2,355
352,191
315,031
37,160
9,385
27,775
6,385
2,649
331,753
312,851
18,902
8,169
10,733
(3,799)
2,275
391,049
348,379
42,670
4,656
38,014
(87)
Net income attributable to Piper Sandler Companies
$
36,651 $
21,390 $
14,532 $
38,101
Earnings per common share
Basic
Diluted
Dividends declared per common share
Weighted average number of common shares
outstanding
Basic
Diluted
$
$
$
2.53 $
2.12 $
1.53 $
1.26 $
1.05 $
0.87 $
2.79
2.25
5.10 $
0.60 $
0.60 $
0.60
14,481
17,294
14,018
16,920
13,775
16,733
13,663
16,925
Piper Sandler Companies | 111
Table of Contents
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the
participation of our principal executive officer and our principal financial officer, of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our
principal executive officer and our principal financial officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange
Act is (a) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and
(b) accumulated and communicated to our management, including our principal executive officer and our principal
financial officer, to allow timely decisions regarding disclosure.
During the fourth quarter of our fiscal year ended December 31, 2023, there was no change in our system of internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management's Report on Internal Control Over Financial Reporting and the attestation report of our independent
registered public accounting firm on management's assessment of internal control over financial reporting are included
in Part II, Item 8 of this Form 10-K entitled "Financial Statements and Supplementary Data" and are incorporated herein
by reference.
Item 9B. Other Information.
During the quarter ended December 31, 2023, no director or officer of the Company adopted or terminated any "Rule
10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of
Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections.
Not applicable.
Piper Sandler Companies | 112
Table of Contents
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information regarding our executive officers included in Part I, Item 1 of this Form 10-K under the caption
"Information About our Executive Officers" is incorporated herein by reference. The information in the definitive proxy
statement for our 2024 annual meeting of shareholders to be held on May 23, 2024, under the captions "Proposal One
— Election of Directors," "Information Regarding the Board of Directors and Corporate Governance — Committees of
the Board — Audit Committee," "Information Regarding the Board of Directors and Corporate Governance — Codes of
Ethics and Business Conduct" and "Delinquent Section 16(a) Reports" is incorporated herein by reference.
Item 11. Executive Compensation.
The information in the definitive proxy statement for our 2024 annual meeting of shareholders to be held on May 23,
2024, under the captions "Executive Compensation," "Certain Relationships and Related Transactions — Compensation
Committee Interlocks and Insider Participation," "Information Regarding the Board of Directors and Corporate
Governance — Compensation Program for Non-Employee Directors" and "Information Regarding the Board of Directors
and Corporate Governance — Non-Employee Director Compensation for 2023" is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
The information in the definitive proxy statement for our 2024 annual meeting of shareholders to be held on May 23,
2024, under the captions "Security Ownership — Beneficial Ownership of Directors, Nominees and Executive Officers,"
"Security Ownership — Beneficial Owners of More than Five Percent of Our Common Stock," "Executive Compensation
— Outstanding Equity Awards at Fiscal Year-End" and "Executive Compensation — Equity Compensation Plan
Information" is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and
Director Independence.
The information in the definitive proxy statement for our 2024 annual meeting of shareholders to be held on May 23,
2024, under the captions "Information Regarding the Board of Directors and Corporate Governance — Director
Independence," "Certain Relationships and Related Transactions — Transactions with Related Persons" and "Certain
Relationships and Related Transactions — Review and Approval of Transactions with Related Persons" is incorporated
herein by reference.
Item 14. Principal Accountant Fees and Services.
The information in the definitive proxy statement for our 2024 annual meeting of shareholders to be held on May 23,
2024, under the captions "Audit Committee Report and Payment of Fees to Our Independent Auditor — Auditor Fees"
and "Audit Committee Report and Payment of Fees to Our Independent Auditor — Auditor Services Pre-Approval
Policy" is incorporated herein by reference.
Piper Sandler Companies | 113
Table of Contents
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a)(1) FINANCIAL STATEMENTS.
The Consolidated Financial Statements are incorporated herein by reference and included in Part II, Item 8 of this Form
10-K.
(a)(2) FINANCIAL STATEMENT SCHEDULES.
All financial statement schedules for the Company have been included in the Consolidated Financial Statements or the
related footnotes, or are either inapplicable or not required.
(a)(3) EXHIBITS.
Number Description
2.1
2.2
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
Separation and Distribution Agreement dated as of December 23, 2003, between U.S. Bancorp and Piper
Sandler Companies (incorporated by reference to Exhibit 2.1 to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 2003, filed March 8, 2004). #
Agreement and Plans of Merger, dated July 9, 2019, by and among Piper Sandler Companies, SOP
Holdings, LLC, Sandler O’Neill & Partners Corp., Sandler O’Neill & Partners, L.P. and the other parties
thereto (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed July
10, 2019). #
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K, filed May 18, 2023).
Amended and Restated Bylaws (as of February 9, 2023) (incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 8-K, filed February 10, 2023).
Form of Specimen Certificate for Piper Sandler Companies Common Stock (incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017,
filed February 26, 2018).
Description of Securities (incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2019, filed February 28, 2020).
Form of director indemnification agreement between Piper Sandler Companies and its directors
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed March 17,
2014). †
Office Lease Agreement, dated May 30, 2012, by and among Piper Sandler & Co. and Wells REIT – 800
Nicollett Avenue Owner, LLC (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K, filed June 1, 2012).
Piper Sandler Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (as amended
and restated May 17, 2023) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on
Form 8-K, filed May 18, 2023). †
Form of Performance Share Unit Agreement for 2019 Leadership Team Grants under the Piper Sandler
Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2018, filed February 26, 2019). †
Form of Performance Share Unit Agreement for 2020 Leadership Team Grants under the Piper Sandler
Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019,
filed February 28, 2020). †
Form of Performance Share Unit Agreement for 2021 Leadership Team Grants under the Piper Sandler
Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020,
filed February 25, 2021). †
Piper Sandler Companies | 114
Table of Contents
Number Description
10.7
10.8
Form of Performance Share Unit Agreement for 2022 Leadership Team Grants under the Piper Sandler
Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021,
filed February 25, 2022). †
Form of Performance Share Unit Agreement for 2023 Leadership Team Grants under the Piper Sandler
Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022,
filed February 24, 2023). †
10.9
Form of Performance Share Unit Agreement for 2024 Leadership Team Grants under the Piper Sandler
Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan. †*
10.10 Piper Sandler Companies Deferred Compensation Plan for Non-Employee Directors, as amended and
restated effective May 4, 2016 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the period ended June 30, 2016, filed August 5, 2016). †
10.11 Summary of Non-Employee Director Compensation Program. †*
10.12
Form of Notice Period Agreement (incorporated by reference to Exhibit 10.16 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2006, filed March 1, 2007). †
10.13 Amended and Restated Credit Agreement, dated December 20, 2022, by and between Piper Sandler
Companies and U.S. Bank National Association (as conformed through the Second Amendment to
Amended and Restated Credit Agreement, dated December 8, 2023). *
10.14 Amended and Restated Loan Agreement, dated December 28, 2012, between Piper Sandler & Co. and
U.S. Bank National Association (as conformed through the Tenth Amendment to Amended and Restated
Loan Agreement, dated December 9, 2022) (incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed February 24, 2023).
10.15 Eleventh Amendment to Amended and Restated Loan Agreement, dated December 8, 2023, by and
between Piper Sandler & Co. and U.S. Bank National Association. *
10.16 Piper Sandler Companies Amended and Restated Mutual Fund Restricted Share Investment Plan, effective
as of November 16, 2022 (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2022, filed February 24, 2023). †
10.17
10.18
10.19
10.20
10.21
10.22
10.23
Form of Non-Qualified Stock Option Agreement for 2018 Promotional Grants under the Piper Sandler
Companies Amended and Restated 2003 Annual and Long-Term Incentive Plan (incorporated by reference
to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed February 9, 2018). †
Form of Non-Qualified Stock Option Agreement for 2023 Special Grant under the Piper Sandler Companies
Amended and Restated 2003 Annual and Long-Term Incentive Plan (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K, filed February 10, 2023). †
Form of Restricted Stock and Mutual Fund Restricted Share Agreement for Employee Grants in 2019
(related to performance in 2018) under the Piper Sandler Companies Amended and Restated 2003 Annual
and Long-Term Incentive Plan and Mutual Fund Restricted Share Investment Plan (incorporated by
reference to Exhibit 10.39 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2018, filed February 26, 2019). †
Form of Restricted Stock and Mutual Fund Restricted Share Agreement for Employee Grants in 2020
(related to performance in 2019) under the Piper Sandler Companies Amended and Restated 2003 Annual
and Long-Term Incentive Plan and Mutual Fund Restricted Share Investment Plan (incorporated by
reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, filed February 28, 2020). †
Form of Restricted Stock and Mutual Fund Restricted Share Agreement for Employee Grants in 2021
(related to performance in 2020) under the Piper Sandler Companies Amended and Restated 2003 Annual
and Long-Term Incentive Plan and Mutual Fund Restricted Share Investment Plan (incorporated by
reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2020, filed February 25, 2021). †
Form of Restricted Stock and Mutual Fund Restricted Share Agreement for Employee Grants in 2022
(related to performance in 2021) under the Piper Sandler Companies Amended and Restated 2003 Annual
and Long-Term Incentive Plan and Mutual Fund Restricted Share Investment Plan (incorporated by
reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, filed February 25, 2022). †
Form of Restricted Stock and Mutual Fund Restricted Share Agreement for Employee Grants in 2023
(related to performance in 2022) under the Piper Sandler Companies Amended and Restated 2003 Annual
and Long-Term Incentive Plan and Mutual Fund Restricted Share Investment Plan (incorporated by
reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2022, filed February 24, 2023). †
Piper Sandler Companies | 115
Table of Contents
Number Description
10.24
Form of Restricted Stock and Mutual Fund Restricted Share Agreement for Employee Grants in 2024
(related to performance in 2023) under the Piper Sandler Companies Amended and Restated 2003 Annual
and Long-Term Incentive Plan and Mutual Fund Restricted Share Investment Plan. †*
10.25 Piper Sandler Companies 2019 Employment Inducement Award Plan (incorporated by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-8, filed March 13, 2019). †
10.26
10.27
Form of Restricted Stock Agreement for Grants under the Piper Sandler Companies 2019 Employment
Inducement Award Plan (incorporated by reference to Exhibit 4.5 to the Company's Registration Statement
on Form S-8, filed March 13, 2019). †
Letter Agreement, dated July 8, 2019, by and between Piper Sandler Companies and Jonathan J. Doyle
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed January 6,
2020). †
10.28 Amendment Letter, dated March 10, 2021, by and between Piper Sandler Companies and Jonathan J.
Doyle (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 2021, filed May 6, 2021). †
10.29 Equity Consideration Restricted Stock Agreement, dated July 9, 2019, by and between Piper Sandler
Companies and Jonathan J. Doyle (incorporated by reference to Exhibit 10.39 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2019, filed February 28, 2020). †
10.30 Piper Sandler Companies 2020 Employment Inducement Award Plan (incorporated by reference to Exhibit
4.4 to the Company’s Registration Statement on Form S-8, filed November 29, 2019). †
10.31
10.32
10.33
Form of Restricted Stock Agreement for Grants under the Piper Sandler Companies 2020 Employment
Inducement Award Plan (18-Month Cliff Vesting) (incorporated by reference to Exhibit 4.5 to the Company’s
Registration Statement on Form S-8, filed November 29, 2019). †
Form of Restricted Stock Agreement for Grants under the Piper Sandler Companies 2020 Employment
Inducement Award Plan (3-Year Cliff Vesting) (incorporated by reference to Exhibit 4.6 to the Company’s
Registration Statement on Form S-8, filed November 29, 2019). †
Form of Restricted Stock Agreement for Grants under the Piper Sandler Companies 2020 Employment
Inducement Award Plan (Years 3, 4 and 5 Pro-rata Vesting) (incorporated by reference to Exhibit 4.7 to the
Company’s Registration Statement on Form S-8, filed November 29, 2019). †
10.34 Piper Sandler Companies 2022 Employment Inducement Award Plan (incorporated by reference to Exhibit
4.5 to the Company's Registration Statement on Form S-8, filed September 23, 2022). †
10.35
Letter Agreement, dated August 8, 2023, by and between Piper Sandler Companies and Katherine P. Clune
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed September
12, 2023). †
21.1
23.1
24.1
31.1
31.2
32.1
97.1
101
Subsidiaries of Piper Sandler Companies *
Consent of Ernst & Young LLP *
Power of Attorney *
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. *
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. *
Section 1350 Certifications. **
Piper Sandler Companies Incentive Compensation Recovery Policy for Accounting Restatements. *
The following financial information from our Annual Report on Form 10-K for the year ended December 31,
2023, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) the Consolidated Statements
of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of
Comprehensive Income, (iv) the Consolidated Statements of Changes in Shareholders' Equity, (v) the
Consolidated Statements of Cash Flows and (vi) the Notes to the Consolidated Financial Statements. *
104
The cover page from our Annual Report on Form 10-K for the year ended December 31, 2023, formatted in
iXBRL and included in Exhibit 101. *
The Company hereby agrees to furnish supplementally to the Commission upon request any omitted exhibit or schedule.
This exhibit is a management contract or compensatory plan or agreement.
Filed herewith.
#
†
*
** This information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the
Securities Exchange Act of 1934.
Item 16. Form 10-K Summary.
None.
Piper Sandler Companies | 116
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 26, 2024.
SIGNATURES
PIPER SANDLER COMPANIES
By
/s/ Chad R. Abraham
Name
Chad R. Abraham
Its
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on February 26, 2024.
SIGNATURE
/s/ Chad R. Abraham
Chad R. Abraham
/s/ Katherine P. Clune
Katherine P. Clune
/s/ Jonathan J. Doyle
Jonathan J. Doyle
/s/ William R. Fitzgerald
William R. Fitzgerald
/s/ Victoria M. Holt
Victoria M. Holt
/s/ Robbin Mitchell
Robbin Mitchell
/s/ Thomas S. Schreier Jr.
Thomas S. Schreier Jr.
/s/ Sherry M. Smith
Sherry M. Smith
/s/ Philip E. Soran
Philip E. Soran
/s/ Brian R. Sterling
Brian R. Sterling
/s/ Scott C. Taylor
Scott C. Taylor
TITLE
Chairman and Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Piper Sandler Companies | 117
Shareholder information
Corporate Headquarters
Piper Sandler Companies
Mail Stop J12NSH
800 Nicollet Mall, Suite 900
Minneapolis, MN 55402
612 303-6000
Company Website
www.pipersandler.com
Common Stock Listing
New York Stock Exchange (symbol: PIPR)
Stock Transfer Agent and Registrar
Broadridge acts as transfer agent and registrar for Piper
Sandler Companies and maintains all shareholder records
for the company. If you have questions regarding the Piper
Sandler Companies stock you own, stock transfers,
address corrections or changes, lost stock certificates or
duplicate mailings, please contact Broadridge.
Online:
shareholder.broadridge.com/PIPR
Telephone:
Toll-Free
Outside of U.S.
Shareowner relations specialists available
Monday through Friday, 9 a.m. to 6 p.m. ET
800 872-4409
720 501-4324
Written correspondence:
Broadridge Corporate Issuer Solutions, Inc
PO Box 1342
Brentwood, NY 11717
Certified and overnight delivery:
Broadridge Corporate Issuer Solutions, Inc
ATTN: IWS
1155 Long Island Avenue
Edgewood, NY 11717
Independent Accountants
Ernst & Young LLP
Investor Inquiries
Shareholders, securities analysts and investors seeking
more information about the company should contact Kate
Clune, chief financial officer, at 212 466-7799 or
investorrelations@psc.com; or the corporate headquarters
address.
Website Access to SEC Reports and Corporate
Governance Information
Piper Sandler Companies makes available free of charge
on its website, www.pipersandler.com, its annual reports
on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, as well as
all other reports filed by Piper Sandler Companies with the
Securities and Exchange Commission, as soon as
reasonably practicable after it electronically files them with,
or furnishes them to, the Securities and Exchange
Commission. These reports are also available at the
Securities and Exchange Commission website,
www.sec.gov.
Piper Sandler Companies also makes available free of
charge on its website the company’s codes of ethics and
business conduct, its corporate governance principles and
the charters of the audit, compensation, and nominating
and governance committees of the board of directors.
Printed copies of these materials will be mailed upon
request.
Dividends
Piper Sandler Companies began paying cash dividends on
its common stock in 2017. The decision to pay future
dividends is at the discretion of the board of directors.
Cautionary Note Regarding Forward-Looking Statements
This annual report and the preceding letter to shareholders contain forward-looking statements. Statements that are not
historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are subject
to significant risks and uncertainties that are difficult to predict. A number of these risks and uncertainties are described in our
reports filed or furnished with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the
year ended December 31, 2023. Forward-looking statements speak only as of the date they are made, and we undertake no
obligation to update them in light of new information or future events.