Piper Jaffray Cos PJC
Q2 2012 Earnings Call Transcript

Transcript Call Date 07/25/2012

Operator: Good morning, ladies and gentlemen, and welcome to the Piper Jaffray Companies Conference Call to Discuss the Financial Results for the Second Quarter of 2012.

During the question-and-answer session, securities industry professionals may ask questions of management. The Company has asked that I remind you, statements on this call that are not historical or current facts, including statements about beliefs and expectations are forward-looking statements that involve inherent risks and uncertainties. Factors that could cause actual results to differ materially from those anticipated are identified in the Company's earnings release and reports on file with the SEC, which are available on the Company's website at, and on the SEC's website at

As a reminder, this call is being recorded.

Now, I'd like to turn the call over to Mr. Andrew Duff. Mr. Duff, you may begin your call.

Andrew S. Duff - Chairman and CEO: Good morning and thank you for joining us to review our second quarter results. This morning I'll provide remarks on three areas, our performance in the quarter, our decision to exit the Hong Kong market, and our outlook.

In the second quarter, Hong Kong capital markets results continued to weigh on our overall performance as the business generated a $4 million pre-tax operating loss. I'll come back to our decision in a moment. Setting aside the impact from Hong Kong, our main businesses performed reasonably well against more difficult operating conditions. Total investment banking revenues held up well led by very solid public finance revenues, which rose 57% compared to the sequential first quarter. Given the low interest rate environment, public finance refinancing activity continued to represent a large percentage of the issuance during the quarter, both for us, and the industry.

We had several notable transactions during the quarter, including our California school short-term note program, which this year totaled just over $800 million; a $180 million sole managed lease transaction for Rowan University in New Jersey; a $104 million sole managed bond issue for new senior living project in Minnesota; and a $300 million lead managed general obligation issue for the City of Phoenix. Our public finance market share is 4.8%, up 100 basis points or 26% through the first 6 months of 2012 compared to the full year of 2011.

Also for the first half of 2012, we were ranked number 10 nationally in par value of senior managed negotiated issues. Both metrics are evidence of our growing national franchise.

Turning to corporate advisory, we were encouraged that we closed more transactions compared to the sequential first quarter reflected in higher revenues. Our healthcare and TMT groups were more active in the quarter, and consumer also contributed. We still expect that a significant portion of our corporate advisory revenues for 2012 will be generated in the second half of the year. The more difficult operating environment, negatively impacted our ability to raise equity capital for our clients, particularly through IPOs. Within the industry, no IPO was issued for 39 owing to Facebook IPO in mid-May and until the last week of June, when there were just six IPOs issued.

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