PIPR 10-K & 10-Q changes, risk factors and insider trading

•In 2024,2025, our business generallyperformed benefitedwell fromagainst continueda U.S.backdrop economicof strengthstrong equity markets and moderationa insignificant the pace of inflation, which led to anoverall increase in businessinvestment andbanking clientactivity activity.from 2024. Nevertheless, overallat certain times during the year, financial market activity continueddeclined toin remain somewhat subdued compared to historical levels dueresponse to uncertainty concerning futurearound U.S. Federalpolicy, Reserveespecially policythe use or threatened use of tariffs, and the potential forresponses aby resurgencemajor oftrading inflation.partners. We believe that the trajectory of market conditions in 20252026 will be dependent on several factors, including U.S. tariff policy and trade disputes with major trading partners, including the European Union and China, a continued moderation of the pace of inflation, the ability of the U.S. Federal Reserve to continue to cut interest rates, market confidence in the independence of the Federal Reserve, the effects of, or market uncertainty concerning the effects of tariffs, tax, regulatory and other policies or executive orders of the new U.S. presidential administration, 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 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 investment banking revenues from our advisory and equity capital markets businesses are directly related to macroeconomic conditions and corresponding financial market activity. Our 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 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, and our business may suffer reduced revenues as a result. If the outlook for macroeconomic conditions in 20252026 were to deteriorate, the level of financial market activity could significantly decrease, which would reduce our 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 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, widespread uncertainty concerning the impact of artificial intelligence on company or sector valuations, 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 investment banking business and our overall results of operations.

•Our investment banking business focuses on specific sectors, including healthcare, financial services, energy and power, consumer, services and industrials, energy, power & infrastructure, 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 investment banking results, even if general economic conditions were strong. 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.

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. InOur 2024,$120 we renewed ourmillion unsecured revolving credit facility andhas increasedbeen the size from $100 million to $120 million to useestablished for working capital and general corporate purposes. On August 23, 2024, we entered into aOur $30 million secured revolving credit facility relatedhas tobeen established for our private capital advisory business. We elected not to renew our one-year $50 million committed revolving secured credit facility, which terminated on December 6, 2024.

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 believe that the integration of artificial intelligence technologies ("AI") into our business, operations, and administrative functions will represent a critical opportunity for increased efficiency. If we are unable to deploy AI to the same extent and as effectively as our competitors, and manage the attendant risks relating to cyber and information security, it could negatively impact our results of operations and competitive positioning. In addition to AI, we have an ongoing need to upgrade and improve our various technology systems, including our data and transaction processing, financial, risk management, human capital, 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.

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. SomeThese ofand the publicizedfuture breaches have involvedand will involve 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, use of AI, and other means. There have also been several highly publicized cases where hackers have requested "ransom" payments in exchange for not disclosing customer information.

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., Germany, and Hong Kong.ADGM. 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,LLC and 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.

Item 7 in this Form 10-K includes financial measures that are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). 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 resultsfinancial measures should be considered in addition to, not as a substitute for, themeasures resultsof financial performance prepared in accordance with U.S. GAAP. See "Explanation and Reconciliation of Non-GAAP Financial Measures" for a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures and a reconciliation of U.S. GAAP to adjusted, non-GAAP financial information.

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.internationally. We operate through one reportable business 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.

•Growing our investment banking platform through marketcontinued shareinvestment gains, accretive combinations, developing internal talent, and continuedin sector, product and geographic expansion.expansion via corporate development, strategic hiring and development of internal talent. We alsoare believespecifically there is an opportunity to continue to capitalizefocused on the strength ofstrengthening our U.S.technology franchisessector byand expanding in Europe;

•As part of our growth strategy, onOn August 23, 2024, we completed the acquisition of Aviditi Capital Advisors, LLC ("Aviditi Advisors"), an alternative investment bank providing full lifecycle services to financial sponsors, global alternative investment managers and limited partner investors. The transaction addsadded private capital advisory capabilities to our platform.

•We grewelevated our fixedinstitutional incomebrokerage servicesplatform teamby duringinvesting thein yeartalent that expanded our product expertise and enhanced our client relationships, notably with the strategic build out of our algorithmic trading strategies, structured product capabilities and municipalthrough trading.the addition of a private markets equities trading group. Additionally, our continued investment in our research services and specialized sales and trading and research teams are key differentiators in supporting our finance activity.

(a)Sourcea.Source: Refinitiv and Piper Sandler & Co. (transactions with reported deal value between $100 million and $1 billion and transactions with anless undisclosedthan $1 billion deal value that had a financial advisor).

(b)Sourceb.Source: Dealogic and Piper Sandler & Co. Equity Capital Markets (IPOs, follow-on offerings and convertible offerings with reported deal value greater than $10 million).

(c)Sourcec.Source: Dealogic and Piper Sandler & Co. Equity Capital Markets (offerings with reported deal value greater than $10 million).

(d)Sourced.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).

(e)Sourcee.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).

(f)Sourcef.Source: Refinitiv (sole/senior negotiated and private placement transactions for the overall market).

(g)Sourceg.Source: Refinitiv (sole/senior negotiated and private placement transactions for sub-$500 million).

(h)Calculatedh.Calculated based on the 10-year MMD index rate divided by the 10-year treasury rate.

Our equity brokerage results benefited from strong volumes and volatility during 2025. Our equity brokerage business continues to benefit from the quality of our trade execution and research product andas tradewe execution.assist We experienced strong client activityclients in 2024navigating asperiods equity markets steadily climbed higher during the year on better volumes and with generally mutedof volatility. We expect our 20252026 equity brokerage revenues to be similar to 2024.2025.

N/M —– Not meaningful

Investment banking revenues comprise all of the revenues generated through advisory services activities, which include mergers and acquisitions ("M&A"),A, equity and debt private placements, debt,debt capital markets advisory, restructuring and private capital 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.

For the year ended December 31, 2024,2025, institutional brokerage revenues increasedwere to $401.4$433.2 million, up 7.9 percent compared with $377.5$401.4 million in the prior-year period. In 2024, equityEquity brokerage revenues were $215.3$230.3 million,million in 2025, up 2.87.0 percent compared with $209.5$215.3 million in 2023,2024, due to increased client activity across our full suite of trading and research products. For the year ended December 31, 2024,2025, fixed income services revenues were $186.2$202.9 million, up 10.89.0 percent compared withto $168.0$186.2 million in the prior-year period, driven by increased clientactivity activity,from particularlyour depository clients resulting from an improved interest rate outlook as well as growth with our depositoryasset clients. Market conditions for fixed income improved during the second half of the year following the action of the U.S. Federal Reserve to reduce short-term benchmark interest ratesmanagement and thepublic normalizationentity of the yield curve.clients.

Interest income represents amounts earned from holding long inventory positions and cash balances, as well as interest earned on installment fee receivables. ForInterest income for the year ended December 31, 2024, interest income2025 increased to $32.9$36.9 million, compared with $26.7$32.9 million in 2023,the prior-year period, primarily due to higher interest ratesearned on ourinstallment cashfee balances.receivables.

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, 2024,2025, we recorded investment income of $33.2 million, compared to an investment loss of $7.9 million, compared to investment income of $30.0 million in 2023.the year-ago period. In 2024,2025, we recorded unrealized lossesgains 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 $7.2$12.9 million infor 2024,the year ended December 31, 2025, compared with $7.1$7.2 million infor 2023.the year ended December 31, 2024.

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 certain short-term financing arrangements. ForInterest expense for the year ended December 31, 2024, interest expense2025 decreased to $5.7$4.8 million, compared with $10.1$5.7 million in 2023.the Theprior-year decrease was primarily due to lower interest paid on long-term financing arrangements as we repaid $125 million of Class B unsecured fixed rate senior notes upon maturity on October 15, 2023.period.

Compensation and benefits expenses, which are the largest component of our expenses, include salaries, incentive compensation, benefits, stock-based compensation, employment taxes, the 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, restricted cash with service conditions, and restricted mutual fund shares of investment funds ("MFRS Awards") 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.

For the year ended December 31, 2024,2025, compensation and benefits expenses increased 11.918.1 percent to $1.19 billion, compared with $1.00 billion from $897.0 million in 2023,2024, due to higher revenues and profitability. Compensation and benefits expenses as a percentage of net revenues wasdecreased to 62.5 percent in 2025, compared to 65.8 percent in 2024, comparedprimarily withdue 66.5 percent in 2023. The lower compensation ratio was driven byto higher net revenuesrevenues, offset in part by anincluding investment lossincome attributableon toour investments and the noncontrolling interests in the alternative asset management funds that we manage in the current year compared to an investment income attributable to noncontrolling interestsloss in 2023.2024. Our adjusted compensation ratio decreased to 61.4 percent in 2025, compared with 62.0 percent in 2024, comparedprimarily withdue 63.6 percent in 2023 driven byto higher adjusted net revenues.

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. OutsideFor the year ended December 31, 2025, outside services expenses increased 7.75.2 percent to $58.7 million, compared with $55.8 million in 2024, compared with $51.8 million in 2023, primarily due to higher recruitinglegal fees and placementincreased fees.professional fees associated with technology consulting services.

For the year ended December 31, 2024,2025, occupancy and equipment expenses increased 3.410.4 percent to $66.5$73.5 million, compared with $64.4$66.5 million in 2023,2024, primarily due to incremental occupancy costs related to our acquisition of Aviditi Advisors. Our occupancy and equipment expenses will increase in 2025 as a result of relocating our Minneapolis corporate headquarters to a new building. Our occupancy and equipment expenses will increase in 2026 as a result of relocating our office space in New York City, New York.

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. InFor 2024,the year ended December 31, 2025, marketing and business development expenses increased 11.911.7 percent to $42.2$47.2 million, compared with $37.7$42.2 million forin the year ended December 31, 2023. The increase was2024, primarily due to higher travel expenses associated with increased business activity.

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. OtherFor the year ended December 31, 2025, other operating expenses were $23.7 million, compared with $20.7 million in 2024, compared with $46.4 million in 2023.2024. Other operating expenses for 2024 included a $4.0 million reduction in the accrual for civil penalties related to our regulatory settlements with the SEC and CFTC regarding recordkeeping requirements for business-related communications. Other operating expenses for 2023 included a $20.0 million accrual recorded for estimated civil penalties related to our 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 financing business.

Pre-tax margin for 2024the year ended December 31, 2025 increased to 19.7 percent, compared to 14.3 percent for the year ended December 31, 2024. Adjusted pre-tax margin for the year ended December 31, 2025 increased to 21.9 percent, compared with 9.1 percent for 2023. Adjusted operating margin increased to 19.7 percent in 2024, compared with 16.0 percent in 2023.2024. In the current year,2025, the increase in pre-tax margin on both a U.S. GAAP and adjusted operating marginbasis was primarily due to higher net revenues as well as a lower compensation ratio and non-compensation ratio.

ForOur provision for income taxes was $80.6 million and our effective tax rate was 21.5 percent for the year ended December 31, 2024,2025. ourOur adjusted provision for income taxes was $61.0$92.6 million,million whichand our adjusted effective tax rate was 22.6 percent for the year ended December 31, 2025. The provision for income taxes on both a U.S. GAAP and adjusted basis included $14.5$29.6 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,benefits, our adjusted effective tax rate was 31.229.8 percent. The effective tax rate for 2024 was impacted by non-deductible employee compensation expense, including limitations on the deduction of employee compensation expense enacted with the American Rescue Plan Act of 2021.

ForOur provision for income taxes was $61.0 million and our effective tax rate was 27.9 percent for the year ended December 31, 2023,2024. ourOur adjusted provision for income taxes was $23.6$75.5 million,million whichand our adjusted effective tax rate was 24.9 percent for the year ended December 31, 2024. The provision for income taxes on both a U.S. GAAP and adjusted basis included $16.6$14.5 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,benefits, our adjusted effective tax rate was 36.829.6 percent. The effective tax rate foron 2023both includeda theU.S. impact of estimated civil penalties related to our regulatory settlements with the SECGAAP and theadjusted CFTC regarding recordkeeping requirementsbasis for business-related communications, which2024 was non-deductibleimpacted for income tax purposes, as well asby non-deductible employee compensation expense.expense, including limitations on the deduction of employee compensation expense enacted with the American Rescue Plan Act of 2021.

In Item 7 in this Form 10-K, we have included financial measures that are not prepared in accordance with U.S. GAAP. Adjustments to these non-GAAP financial measures include (1) the exclusion of investment (income)/loss and non-compensation expenses related to noncontrolling interests, (2) the exclusion of interest expense on long-term financing from net revenues, (3) the exclusion of compensation and non-compensation expenses from acquisition-related agreements, (43) the exclusion of restructuring and integration costs related to acquisitions and/or headcount reductions, (54) the exclusion of amortization of intangible assets related to acquisitions, (65) the exclusion of non-compensation expenses from regulatory settlements (see Note 15 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for further information) and (76) the income tax impact allocated to the adjustments. For U.S. GAAP purposes, these items are included in each of their respective line items on the consolidated statements of operations.

The non-compensation expenses from regulatory settlements for the year ended December 31, 2024 include the reversal of other operating expenses of $4.0 million, as we reduced the accrual for civil penalties related to the regulatory settlements with the SEC and the CFTC.Commodity TheFutures non-compensationTrading expensesCommission from regulatory settlements for (the year ended December 31, 2023 include a $20.0 million accrual of other operating expenses for estimated civil penalties related to the regulatory settlements with the SEC and CFTC."CFTC"). In connection with these matters, we also incurred $1.0 million and $1.5 million of outside services expenses for the yearsyear ended December 31, 20242024. andManagement 2023,believes respectively.that Excludingexcluding thesethe non-compensation expenses from regulatory settlements from our adjusted, non-GAAP financial measures provides a better understanding of our core non-compensation expenses.

Reconciliation of U.S. GAAP to adjustedadjusted, non-GAAP financial information:

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.value. Unrealized gains and losses related to these financial instruments are reflected on our consolidated statements of operations.

While the near-term macroeconomic environment remains uncertain,characterized by uncertainty, the overall market backdrop continuesreflects to bea constructive withtrend strongsupported by the resilience of the equity markets,markets solidand corporatesustained investment banking activity and a more accommodative regulatory environment.activity. Monetary policy in the U.S. remains a prevalent factor impacting the economy and financial markets. The U.S. Federal Reserve heldcontinues to hold its short-term benchmark interest rate steady in the first quarter of 2026 as it balances its goals of maximum employment and stable prices against persistent inflation and higher energy prices. Heightened concerns over geopolitical conflicts, including recent escalations in the Middle East, as well as ongoing tensions in Eastern Europe and Taiwan, could negatively impact financial market activity. In addition, higher U.S. tariffs and shifts in trade policy, along with retaliatory actions by global trading partners, including the European Union and China, continue to contribute to elevated financial market uncertainty and upward pressure on inflation and supply chain costs. A significant decrease in uncertainty, or resolutions to geopolitical concerns and trade disputes, would likely be constructive for overall economic conditions, and consequently, our client and business activity.

Our advisory services results continued to benefit from our broad industry coverage andcoverage, comprehensive product capabilitiescapabilities, asand wellmore as an improvingconstructive market environmentconditions for mergers and acquisitions ("M&A") activity.activity, Whileparticularly thewithin pipelines for our industryhealthcare and productmiddle-market teams remain strong, the timing of these transactions may be influenced by market conditions. We anticipate our second quarter advisory services revenues to be similar to the first quarter.depositories.

Our strong equity brokerage results were strongperformance in the firstsecond quarter of 2026 aswas higherdriven volatility droveby increased trading volumesvolumes, including the unique convergence of benchmark rebalancing events in response to geopolitical events.June. Our equity brokerage business continues to benefit from theour quality of ourhigh-quality trade execution and research product as we assist clients in navigating periods of heightened volatility. Our results will continue to be correlated with market volatility and trading volumes.product. We expect our secondthird quarter equity brokerage revenues towill declinefollow fromhistorical firsttrends, quarterwhich levels.typically reflect a seasonal decline.

Our municipal financing activityresults declinedimproved in the firstsecond quarter of 2026 driven by reducedthe municipalstrength negotiated issuance volumes inof our specialty sector business and the resiliency of our governmental business. Our pipeline is strong with clients lookingSimilar to access the market.prior Weyear, we anticipate secondour third quarter municipal financing revenues will improve modestlydecline from the firstrobust quarter.second quarter of 2026.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCHJUNE 31,30, 2026 AND 2025

Net revenues on a U.S. GAAP basis were $474.4$495.5 million for the three months ended MarchJune 31,30, 2026, compared with $357.3$396.8 million in the prior-year period. For the three months ended MarchJune 31,30, 2026, adjusted net revenues were $469.5$491.1 million, compared with $383.3$405.4 million in the firstsecond quarter of 2025. 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. See "Explanation and Reconciliation of Non-GAAP Financial Measures" for a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures and a reconciliation of U.S. GAAP to adjusted, non-GAAP financial information.

In the firstsecond quarter of 2026, investment banking revenues increased 26.028.7 percent to $348.2$361.5 million, compared with $276.3$281.0 million in the prior-year period. For the three months ended MarchJune 31,30, 2026, advisory services revenues were $251.0$274.2 million, up 15.833.9 percent compared to $216.8$204.8 million in the firstsecond quarter of 2025, driven primarily by more completed transactions.M&A transactions and a higher average fee. Our advisory services performance during the quarter was led by our healthcare and financial services groupsgroup with solid contributions from our healthcare and services & industrials and energy, power & infrastructure teams. For the three months ended MarchJune 31,30, 2026, corporate financing revenues were $73.3$37.8 million, up 121.810.4 percent compared with $33.1$34.2 million for the three months ended MarchJune 31,30, 2025, resulting from more completed equity financings and a higher average fee.financings. Performance during the firstsecond quarter of 2026 was led by the healthcare sector, and we served as book runner on all 23 completed healthcare equity deals.sector. Municipal financing revenues for the three months ended MarchJune 31,30, 2026 were $23.9$49.5 million, downup 9.418.1 percent compared to $26.4$41.9 million in the prior-year period, driven by reducedthe municipalstrong negotiatedperformance issuance activity infrom our specialty sectorsectors, business.which more than offset a decline in issuances among our governmental clients.

For the three months ended MarchJune 31,30, 2026, institutional brokerage revenues were $110.8$111.5 million, updown 8.82.6 percent compared with $101.9$114.5 million in the prior-year period. Equity brokerage revenues were $60.5$62.9 million in the firstsecond quarter of 2026, up 11.58.3 percent compared with $54.3$58.1 million in the corresponding period of 2025, driven by increased client activity resulting from higher market volatility.activity. For the three months ended MarchJune 31,30, 2026, fixed income services revenues were $50.4$48.6 million, updown 5.713.8 percent compared to $47.7$56.4 million in the prior-year period.period, Revenuesdue forto the current quarter benefited from several balance sheet restructuring trades, which offset a decline inreduced client activity resulting from interest rate volatility. In addition, fixed income services revenues in the second quarter of 2025 benefited from the execution of several balance sheet restructuring trades.

Interest income represents amounts earned from holding long inventory positions and cash balances, as well as interest earned on installment fee receivables. For the three months ended MarchJune 31,30, 2026, interest income increased to $11.6$9.1 million, compared with $10.0$7.9 million for the three months ended MarchJune 31,30, 2025, reflecting higher interest income on our 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 three months ended MarchJune 31,30, 2026, we recorded investment income of $4.5$14.1 million, compared to an investment loss of $29.6$4.8 million in the corresponding period of 2025. In the firstsecond quarter of 2026, we recorded gains on our investments and the noncontrolling interests in the alternative asset funds that we manage primarily due to higher public company equity valuations. Excluding the impact of noncontrolling interests, adjusted investment lossincome was $0.4$9.7 million for the three months ended MarchJune 31,30, 2026, compared with $3.6$3.8 million for the three months ended MarchJune 31,30, 2025.

Interest expense represents amounts associated with financing, economically hedging and holding short inventory positions, including interest paid on our financing arrangements, as well as commitment fees on certain short-term financing arrangements. For the three months ended MarchJune 31,30, 2026, interest expense decreased to $0.7 million, compared with $1.3$1.8 million in the prior-year period.

Non-interest expenses on a U.S. GAAP basis were $386.5$395.1 million for the three months ended MarchJune 31,30, 2026, compared to $327.8$347.9 million in the prior-year period. For the three months ended MarchJune 31,30, 2026, adjusted non-interest expenses were $375.7$384.0 million, compared with $314.8$332.0 million for the firstsecond quarter of 2025. The variance explanations for non-interest expenses and adjusted non-interest expenses are consistent on both a U.S. GAAP and non-GAAP basis unless stated otherwise. See "Explanation and Reconciliation of Non-GAAP Financial Measures" for a detailed explanation of the adjustments made to the corresponding U.S. GAAP measures and a reconciliation of U.S. GAAP to adjusted, non-GAAP financial information.

For the three months ended MarchJune 31,30, 2026, compensation and benefits expenses increased 19.219.6 percent to $296.1$308.7 million, compared with $248.5$258.2 million in the corresponding period of 2025, due to higher revenues. Compensation and benefits expenses as a percentage of net revenues decreased to 62.462.3 percent in the firstsecond quarter of 2026, compared to 69.565.1 percent in the firstsecond quarter of 2025, primarily due to higher net revenues, including investment income on our investments and the noncontrolling interests in the alternative asset management funds that we manage in the current quarter compared to an investment loss in the firstsecond quarter of 2025. Our adjusted compensation ratio decreased to 61.661.5 percent in the firstsecond quarter of 2026, compared with 62.562.0 percent in the firstsecond quarter of 2025, primarily due to higher adjusted net revenues.

For the three months ended MarchJune 31,30, 2026, occupancy and equipment expenses decreasedincreased slightly12.4 percent to $18.1$19.6 million, compared with $18.2$17.4 million in the corresponding period of 2025.2025, primarily due to incremental occupancy costs resulting from our Minneapolis corporate headquarters relocation in 2025 and our planned New York City office relocation in 2027. We expect ourto incur additional occupancy andcosts equipmentthrough expensesthe willthird increase in 2026 as a resultquarter of relocating2027 related to our office space in New York City,City Newoffice York.space.

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 11.319.8 percent to $13.7$16.8 million in the firstsecond quarter of 2026, compared with $15.5$20.9 million in the corresponding period of 2025, primarily due to lower professional fees and a decline in legal fees.

Communication expenses include costs for telecommunication and data communication, primarily consisting of expenses for obtaining third-party market data information. For the three months ended MarchJune 31,30, 2026, communication expenses decreasedincreased 3.46.3 percent to $14.9$15.9 million, compared with $15.4$14.9 million in the corresponding period of 2025, primarily due to lowerhigher market data services expenses.

Marketing and business development expenses include travel and entertainment costs, advertising and third-party marketing fees. For the three months ended MarchJune 31,30, 2026, marketing and business development expenses increased modestly14.5 percent to $15.2$15.9 million, compared with $14.9$13.9 million in the corresponding period of 2025.2025 due to higher travel expenses associated with increased business activity.

For the three months ended MarchJune 31,30, 2026, trade execution and clearance expenses decreasedincreased slightly15.2 percent to $5.0$5.4 million, compared with $5.2$4.7 million in the corresponding period of 2025. The increase in trade execution and clearance expenses is reflective of higher trading volumes compared with the second quarter of 2025.

Amortization of definite-lived intangible assets was $2.1 million for the three months ended MarchJune 31,30, 2026 and 2025.

Other operating expenses primarily include underwriting expenses, 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. The amount of underwriting expenses is dependent on the level of financing deal activity and may vary from period to period. Other operating expenses were $21.5$10.7 million in the firstsecond quarter of 2026, compared with $8.1$10.6 million in the corresponding period of 2025. Other operating expenses for the first quarter of 2026 included $8.5 million in litigation-related expenses as well as higher underwriting costs associated with increased corporate financing deal activity.

Our provision for income taxes was $19.6$30.3 million and our effective tax rate was 22.330.2 percent for the three months ended MarchJune 31,30, 2026. Our adjusted provision for income taxes was $21.9$32.6 million and our adjusted effective tax rate was 23.430.5 percent for the three months ended MarchJune 31,30, 2026. The provision for income taxes on both a U.S. GAAP and adjusted basis included $7.0 million of tax benefits related to stock-based compensation awards vesting at values greater than the grant price. Excluding the impact of this benefit, our adjusted effective tax rate was 30.8 percent.

Our provision for income taxes was a benefit of $7.3$17.2 million and our effective tax rate was negative 24.935.1 percent for the three months ended MarchJune 31,30, 2025. Our adjusted provision for income taxes was a benefit of $5.0$20.6 million and our adjusted effective tax rate was negative 7.228.1 percent for the three months ended MarchJune 31,30, 2025. The provision for income taxes on both a U.S. GAAP and adjusted basis included $25.4$0.9 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, our adjusted effective tax rate was 29.829.3 percent. The effective tax rate on both a U.S. GAAP and adjusted basis was impacted by non-deductible employee compensation expense, including limitations on the deduction of employee compensation expense enacted with the American Rescue Plan Act of 2021.