Piper Jaffray Cos Earnings Call Nuggets: Asset Management, Continuing Operations

On Wednesday, Piper Jaffray Cos (NYSE:PJC) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Asset Management

Matt Fischer – CLSA: First off on the Asset Management front, the flows versus appreciation, could you give us a sense for how much wind flows…?

Debbra L. Schoneman – CFO: Yeah, between the two?

Matt Fischer – CLSA: Yeah.

Debbra L. Schoneman – CFO: So, the majority of the increase was related to market appreciation, but we did see some growth in the net new assets versus what we’ve seen historically.

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Matt Fischer – CLSA: Then any particular products or…?

Debbra L. Schoneman – CFO: It really was very much across the multiple products and both within ARI and our MLP products as well as FAMCO.

Matt Fischer – CLSA: I appreciate the color you gave within fixed income and what I guess is a reasonable recurring revenue stream. May be that delta that difference, what exactly – could you give us a bit more color in terms of that additional revenue and what is the risk that in out quarters you either beat on the upside or potentially the opposite effect where it’s a hit to that $25 million run rate. May be just provide a bit more color there.

Debbra L. Schoneman – CFO: Yeah, I would say from a quarter-over-quarter delta, just starting there, a significant portion of that was related to the fixed income strategic trading, primarily mortgages. Although as Andrew did mention in his comments, the client-related revenues were up 22% as well. Maybe a way to answer it is, if you set aside the strong MBS performance in this quarter, client-related revenues represent the majority of that fixed income institutional brokerage line. So that maybe gives you some sense of how much is strategic trading versus client flows.

Andrew S. Duff – Chairman and CEO: I would just add that we would expect the majority of revenues in our fixed income brokerage would be related to client activity.

Matt Fischer – CLSA: In terms of pipelines maybe a bit more color there for investment banking by product.

Andrew S. Duff – Chairman and CEO: So, you can look at what’s been publicly announced and we have several transactions that have already been announced in the quarter, some of which have closed, some of which have yet to close.

Matt Fischer – CLSA: Then I guess in advisory what are you thinking or what’s the sense in terms of discussion levels and when you sit here today versus the end of last quarter a year ago, how is the sentiment out there for investment banking.

Andrew S. Duff – Chairman and CEO: We would say the activity in the dialog remains pretty constructive. There is still some uncertainty related to some of the factors we mentioned and including the election, but the dialog is pretty constructive from what we are seeing with our client side.

Continuing Operations

Joel Jeffrey – KBW: Just a quick question. I must be missing something. I’m just struggling a little bit, the $0.72 you talked about from continuing operations. I’m struggling on how we are getting to that with the net income numbers or the income from continuing operations you gave us in the share count. Is there another adjustment in there that should be made?

Debbra L. Schoneman – CFO: Joel, are you familiar with bifurcation of our earnings between our diluted shares and our participating shares.

Joel Jeffrey – KBW: Yes.

Debbra L. Schoneman – CFO: Okay, because otherwise this should be consistent with that and the shares at $15.2 million or what ultimately the net income applicable to the Piper Jaffray common shareholders would be divided by.

Joel Jeffrey – KBW: Okay, I’ll go back and read around those. I guess the other question I have is just looking at sort of the industry numbers for the quarter. I mean, I didn’t seem like a terribly strong client activity number on the fixed income side. Can you just talk a little bit more about why you guys saw a relatively strong pickup in your client activity?

Andrew S. Duff – Chairman and CEO: So, it’s related to the number of things. We did have reasonable activity and we’ve also ramped our middle market sales force in particular. It’s up about 20% in the last 12 months and that’s generating additional activity for us.

Joel Jeffrey – KBW: Then so essentially it was sort of this quarter these guys have essentially ramped up to where you view their production is being sustainable?

Andrew S. Duff – Chairman and CEO: Yeah, I think that’s a fair characterization and we’re continuing to hire into the business, but the hiring in the last six to eight months is probably now essentially ramped.