Piper Jaffray Companies (PJC)

PJC 
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Piper Jaffray Companies (PJC)

F1Q09 Earnings Call

April 15, 2009 9:00 am ET

Executives

Andrew Duff – Chairman & CEO

Debbra Schoneman – Chief Financial Officer

Analysts

Steve Stelmach – FBR Capital

David Trone – Fox-Pitt

Daniel Harris – Goldman Sachs

Lauren Smith – KBW

Brian Hagler – Kennedy Capital

[Tom Cullen] – Unidentified Company

Presentation

Operator

(Operator Instructions) Welcome to the Piper Jaffray Companies conference call to discuss the financial results for the first quarter of 2009. During the question and answer session securities industry professionals may ask questions of management. The company has asked that I remind you that statements on this call that are not historical or current facts including statements about beliefs and expectations are forward looking statements that involve inherent risk and uncertainties.

Factors that could cause actual results to differ materially from those anticipated are identified in the company’s reports on file with the SEC which are available on the company’s website at www.PiperJaffray.com and on the SEC website at www.SEC.gov. Now, I’d like to turn the call over to Mr. Andrew Duff.

Andrew Duff

I would like to update you on the two top priorities for our firm as we navigate the near term environment. Our first priority was to appropriately adjust our cost structure. The actions we took in 2008 and additional expense discipline in the first quarter had the intended effect. We achieved a pre-tax profit of $3.5 million for the first quarter of this year. Our revenues were 12% below the year ago period yet we were able to generate a pre-tax profit compared to a $1.1 million pre-tax loss last year.

Our second priority is to make sure that we are well positioned to capitalize on the turmoil in the competitive landscape. We have several examples of early progress. In the first quarter we selectively added senior talent to strengthen our fixed income services, investment banking, and equity businesses. We are in active dialogue with a number of potential hires that would bring experience, client relationships, and be a strong cultural fit. We are keeping a close eye on our costs and will continue to add talent judiciously.

I have remarked on our last couple of calls that I believe we have a real opportunity to gain business in the current environment. We are seeing early evidence that bears this out. First, our municipal teams are demonstrating their ability to differentiate themselves to clients and grow our business. We served as the lead manager on a $476 million issue for the City of Houston, Texas. This transaction marked our largest senior managed long term negotiated issue to date. We completed a $250 million general obligation bond offering for the City of Chandler, Arizona. This was the largest competitive issue underwritten by our firm.

As the direct result of new talent we added last year so far in 2009 we have priced over $260 million in new issues in the State of Connecticut. This is a new market for us and as a result of this increased activity we were the top underwriter of local government obligations in New England in the first quarter. Finally, we executed a $58 million issue for the University of Minnesota, marking the first time the University has used a non-New York investment bank as a lead underwriter.

On the investment banking front we advised Lionsgate in their acquisition of TV Guide. This deal was executed by our Media Entertainment and Telecom team which was a new vertical we added last year. We also added new fixed income trading talent and restructured this business. Scaling back high yield and discontinuing our tender option bond program. All of these actions have led to significantly improved results.

Overall, we’re very encouraged by these early successes. Looking ahead, equity investment banking activity remains soft and we expect activity will remain so for some time. While the markets have recently trended upward they are still volatile and we remain cautious on the outlook. We anticipate that equity sales and trading will remain solid. We have confidence that our renewed focus in fixed income and trading is working. We do believe that very favorable trading environment we experienced in fixed income in the first quarter will moderate.

Now I’d like to turn the call over to Deb to review the financial results in more detail.

Debbra Schoneman

In the first quarter of 2009 we recorded pre-tax income of $3.5 million compared to a pre-tax loss of $1.1 million in the same quarter last year. On an after tax basis we reported a net loss from continuing operations of $2.7 million or $0.17 per diluted share. In the first quarter of last year continuing operations generated a net loss of $1.4 million or $0.09 per diluted share.

In the first quarter of 2009 we recorded tax expense of $6.3 million which moved us into a loss position. The amount of tax expense compared to the earnings was due to the distribution of results between US and non-US entities and approximately $3 million of one time items. First quarter 2009 net revenues were $83.9 million compared to $95.7 million in the year ago period and $59.4 million for the fourth quarter of 2008.

As we anticipated, industry wide equity market conditions remained weak in the first quarter as reflected in our continued low revenues in equity financing and mergers and acquisitions. In the US just one IPO was completed industry wide. Likewise, US M&A transactions of less then $500 million for the quarter remained well below the average level of the last two years in terms of both the number and value of completed deals.

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