Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. PIPER JAFFRAY COMPANIES (1230245) 10-Q published on May 08, 2019 at 2:09 pm
Reporting Period: Mar 30, 2019
The Company recognizes a right-of-use ("ROU") lease asset and lease liability on the consolidated statements of financial position 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 took into consideration a current financing arrangement that is 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 applied the portfolio approach in determining the discount rates for its leases. The weighted-average discount rate was 4.0 percent at March 31, 2019.
Market conditions remain conducive to advisory engagements, especially in the U.S. middle market, our primary market. Advisory activity has been driven by solid economic growth domestically, ample financing availability, and secular changes in technology and innovation driving the need for strategic acquisitions and divestment activity. We believe our full year advisory pipeline remains strong and, consistent with prior years, will be more weighted to the second half of the year. Advisory services revenues for any given quarter are impacted by the timing and size of the deals closing, which can result in fluctuations in revenues period over period. Equity capital raising started 2019 slowly due to the extended federal government shut down and steep sell-off in the fourth quarter of 2018. Heading into the second quarter, market conditions have improved and are more conducive for equity capital raising, which should allow us to execute on our strong pipeline. If we experience sustained bouts of higher volatility or a material market correction, our advisory services and equity capital raising businesses may suffer.
In the first quarter of 2019, investment banking revenues increased 17.3 percent to $141.5 million, compared with $120.7 million in the corresponding period of the prior year. For the three months ended March 31, 2019, advisory services revenues were $114.9 million, up 52.5 percent compared to $75.3 million in the first quarter of 2018. We completed 35 transactions with an aggregate enterprise value of $11.9 billion in the first quarter of 2019, compared with 36 transactions with an aggregate enterprise value of $5.2 billion in the first quarter of 2018. Although the number of completed transactions was essentially flat year-over-year, the increase in revenues was driven by the closing of two larger deals. The uneven distribution of the number and size of deals results in revenue fluctuations from quarter to quarter. For the three months ended March 31, 2019, equity financing revenues were $13.5 million, down 64.1 percent compared with $37.6 million in the first quarter of 2018, driven by fewer completed transactions which was exacerbated by fewer bookrun deals. We completed 7 bookrun deals in the first quarter of 2019 compared with 17 bookrun deals in the year-ago period. Equity financing activity started slow in 2019 as the federal government shut down extended into late January 2019 and market participants were hesitant after the market volatility in the fourth quarter of 2018. During the first quarter of 2019, we completed 12 equity financings, raising $5.2 billion for our clients, compared with 25 equity financings, raising $4.5 billion for our clients in the comparable year-ago period. Debt financing revenues for the three months ended March 31, 2019 were $13.1 million, up 70.2 percent compared with $7.7 million in the historical slow year-ago period, which was impacted by federal tax reform. Municipal issuance volumes were up on a year-over-year basis, but remain low on a historical basis. During the first quarter of 2019, we completed 77 negotiated municipal issues with a total par value of $1.7 billion, compared with 59 negotiated municipal issues with a total par value of $1.6 billion during the prior-year period.
For the three months ended March 31, 2019, institutional brokerage revenues were $39.4 million, an increase of 14.7 percent compared with $34.3 million in the prior-year period, as higher fixed income institutional brokerage revenues were partially offset by lower equity institutional brokerage revenues. Equity institutional brokerage revenues were $15.7 million in the first quarter of 2019, down 12.7 percent compared with $18.0 million in the corresponding period of 2018. Although equity market indices were up in the first quarter of 2019, volatility and volumes were relatively subdued, which negatively impacted our performance. Additionally, revenues in the first quarter of 2018 were positively impacted by more block trade activity. For the three months ended March 31, 2019, fixed income institutional brokerage revenues were $23.7 million, up 44.9 percent compared with $16.3 million in the prior-year period, due to increased client activity at the start of the year and improved overall trading performance. Also, market conditions in this business improved significantly compared to the year-ago period, driven by strong returns in the municipal asset class. In the first quarter of 2018, industry returns for municipal bonds were the worst in nearly a decade.