Piper Sandler Companies

NYSE:PIPR

Earnings Call Analysis

Company's Q3 Financial Performance and Dividend

In the third quarter of 2023, the company experienced a 10% revenue increase from the prior quarter to $306 million but saw a decrease of 9% compared to the same quarter last year. Overall, net revenues decreased by 16% year-over-year to $873 million. The operating margin was at 15.3% for the quarter, with a compensation ratio of 63.9%. Non-compensation expenses were below forecasts at $57 million, and the income tax rate for the quarter was 30.2%, while year-to-date was 13.7%, affected by $16 million of tax benefits from stock vestings. The expected tax rate for Q4, excluding stock vesting impacts, is 27-29%. Diluted EPS stood at $1.76 for the quarter, accumulating to $5.24 for the first nine months. The company has been consistent in returning capital to shareholders, with $14 million in dividends this quarter. The next dividend payout is set at $0.60 per share, scheduled for December 8.

Piper Sandler Third Quarter 2023 Sees Best Adjusted Net Revenues Amidst Headwinds

Despite persistent challenging market conditions in the third quarter of 2023, Piper Sandler reported its strongest quarter of the year with $306 million in adjusted net revenues and a 15.3% operating margin. The company attributes this resilience to its diversified product capabilities and relative strength across various business units. While geopolitical concerns and economic uncertainties pose potential threats to future progress, the company remains cautiously optimistic.

Corporate Investment Banking and Diverse Industries Bolster Revenues

The firm's corporate investment banking sector was a significant contributor, bringing in $192 million in revenues. A robust restructuring activity signaled a resilient market, and equity financing showed signs of recovery. The firm highlighted its strategy of scaling industry groups and adding new capabilities to adapt to mixed economic conditions.

Advisory Services Show Improvement, Driven By Key Sectors

With M&A and debt markets gradually improving, advisory services revenue reached $155 million, making up 50% of the company's adjusted net revenues. Financial services and healthcare teams led the performance, supported by consumer, energy and power, and restructuring groups. The healthcare sector, in particular, has been a growth area for the company, alongside its robust financial services efforts.

Reduced Market Activity Yet Strong Positioning in M&A Advisory

Overall M&A market activity has declined by 30% to 40% compared to last year, yet Piper Sandler has experienced a smaller decrease of 23% in advisory revenues. The company remains the second-ranked advisor for US M&A transactions under $1 billion and is optimistic about a stronger fourth quarter with several large deals expected to close by year-end.

Market-Leading Healthcare Franchise Drives Corporate Financing Growth

Equity financing markets have improved since last year, with the firm registering $37 million in corporate financing revenues. The healthcare franchise, in particular, led to the completion of 21 equity and debt financings worth $5 billion. The economic fees from companies with market caps under $5 billion surged by approximately 88%, reflecting the firm's top-five ranking in healthcare investment banking for smaller markets.

Strategic Expansion and Executive Transition

The company ended the quarter with 168 managing directors, increasing net headcount by nine. As the firm prepares for future growth, executives anticipate improvements by 2024. Amidst these developments, the company also announced a senior executive transition with CFO Tim Carter retiring and Kate Clune scheduled to take over the role.

Public Finance and Brokerage Revenues Provide Steady Streams

The public finance business posted $20 million in revenues, with significant deals despite a lower-than-average market issuance awaiting interest rate stabilization. Equity brokerage maintained $50 million in revenue, with an optimistic view of the fourth quarter typically being the strongest. The quarter's trading volume amounted to 2.5 billion shares highlighting the firm's robust research and platform capabilities.

Fixed Income Sees Modest Growth Amidst Market Headwinds

The fixed income sector generated $40 million, a modest increase from the previous quarter, as clients begin to engage more with higher-yielding securities. The firm is cautiously optimistic about the path to a more constructive fixed income market, looking to selectively expand market reach across client verticals.

GAAP Results Impacted by Regulatory Costs

On the GAAP front, Piper Sandler's results were affected by a $16.4 million non-compensation expense related to a potential regulatory settlement with the SEC on recordkeeping requirements. This one-time expense pertains to business-related communications and forms part of the overall financial considerations for the quarter.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, and welcome to the Piper Sandler Companies conference call to discuss the financial results for the third quarter of 2023.During the question-and-answer session, securities industry professionals may ask questions of management. The company will make forward-looking statements on this call that are not historical or current facts, including statements about beliefs and expectations and 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 www.pipersandler.com and on the SEC website at ww.sec.gov.This call will also include statements regarding certain non-GAAP financial measures. The non-GAAP measures should be considered in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. Please refer to the company's earnings release issued today for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure. The earnings release is available on the Investor Relations page of the company's website and at the SEC website.As a reminder, this call is being recorded. And now, I'd like to turn the call over to Mr. Chad Abraham. Mr. Abraham, you may begin your call.

[Chad Abraham, executive]

Good morning, everyone. Thanks for joining us today to talk about our third quarter results. I'm here with Deb Schoneman, our President; and Tim Carter, our CFO.Market conditions continued to be challenging during the third quarter. Our broad product capabilities and industry diversification has provided some resiliency to our results. And our relative performance was strong in several of our businesses. Against this backdrop, we are pleased with our momentum and we recorded our best quarter of the year in terms of adjusted net revenues and operating margin.We generated adjusted net revenues of $306 million, an operating margin of 15.3% and adjusted EPS of $1.76. Although activity incrementally improved during the third quarter, current geopolitical concerns as well as the continued macro-economic uncertainties could impact this progress in the fourth quarter and into 2024.Turning to corporate investment banking. We generated $192 million of corporate investment banking revenues, our best quarter of the year thus far. Highlighting the benefits of our diversified product set, revenues from M&A and debt capital raises increased sequentially. Restructuring activity continues to be robust, and equity financing reflects a gradually improving market. As we've stated previously, scaling our industry groups and adding new product capabilities have enhanced our ability to deliver strong results against mixed economic conditions.Specific to advisory services, revenues of $155 million for the quarter reflect a moderate improvement to M&A and debt markets. We completed 51 advisory transactions during the quarter and benefited from a higher average fee and aggregate transaction value. Performance was led by our financial services and health care teams with solid contributions from our consumer, energy and power, and restructuring groups. Advisory services accounted for 50% of adjusted net revenues during the third quarter.Healthcare remains a very large and continually evolving component of the economy and a more substantial share of the overall banking fee pool. With one of the largest and most experienced teams in the marketplace, we continue to gain market share as we leverage our deep sector expertise to advise clients.Financial services is another large and critical component of the economy where we have leading market share. For the 9-month period of 2023, we maintained our #1 rank based on both the number and deal value of announced U.S. bank M&A transactions, and advised on 7 of the 10 largest completed deals. In addition, we have grown our nonbank verticals within the financial services group over the last few years. And the third quarter represents another quarter with significant contributions from asset management, insurance and specialty finance.Overall, our performance on a relative basis remains solid. Completed U.S. M&A market activity is down approximately 30% to 40% compared to the first 9 months of last year, while our advisory revenues are down 23%. On a year-to-date basis, we maintained our ranking as the #2 adviser on announced U.S. M&A transactions under $1 billion.In terms of outlook, we are encouraged by the direction of advisory activity, and the fourth quarter has historically been our strongest quarter. We have a number of large announced deals expected to close by year-end. And absent events that could cause a delay in the closing of these and other transactions in our pipeline, we expect that advisory revenues for the fourth quarter will continue to show sequential improvement.Turning to corporate financing. The market for equity financing has improved relative to last year. However, activity continues to remain below historic levels. We generated $37 million of corporate financing revenues during the third quarter of 2023, consistent with the improved results we generated for the second quarter. We completed 21 equity and debt financings, raising $5 billion in capital for corporate clients. Activity was driven by our market-leading Healthcare franchise. The team ran the books on all 12 deals they completed during the quarter.Highlighting our strong relative performance on a year-to-date basis, our economic fees from sub $5 billion market cap companies increased approximately 88% over last year compared to a 26% increase in the fee pool for this market. In addition, we ranked as a top 5 investment bank based on the number of book-run deals for healthcare companies with less than $5 billion of market cap. As we start the fourth quarter, corporate financing activity during October has been similar to our third quarter run rate.Turning to investment banking managing director headcount. We finished the quarter with 168 managing directors. Over the last few years, we have significantly grown our MD headcount. We are up net 9 managing directors on a year-to-date basis. With this significant growth, we're focused on strategically managing headcount and driving productivity while continuing to look at opportunities to strengthen our sector coverage and product capabilities.As we look ahead, we expect sequential improvement during the fourth quarter. It's difficult to predict when market activity will return to the more normalized levels, but we currently expect improvement in 2024. The macro backdrop remains uncertain, but our priorities have not changed. We remain focused on executing our strategy of scaling industry groups, expanding reach and share, increasing transaction fee size, and adding new MDs and verticals to our platform.Before handing it off to Deb, I'd like to highlight a senior executive transition we announced on September 12. After a long successful 28-year career at Piper Sandler, Tim Carter will be retiring in the first quarter of next year. At the same time, we announced that Kate Clune has been selected to succeed Tim as Chief Financial Officer. Kate will join the firm in November and is expected to take over as CFO on January 1.With that, I will turn the call over to Deb to discuss our public finance and brokerage businesses.

[Debbra Schoneman, executive]

Thanks, Chad, and congratulations to Tim. During the third quarter of 2023, our public finance business generated $20 million of municipal financing revenues, up modestly compared to the second quarter. Market conditions remain challenging with higher nominal rates, interest rate volatility, and weak investor demand.For the quarter, we underwrote 108 municipal negotiated transactions, raising $4 billion of par value for our clients. We completed several significant deals during the quarter, including 2 landmark deals in Texas, as well as a large senior living offering and an affordable housing deal. Though activity was episodic, these transactions highlight the strength and breadth of our platform and ability to get deals done in a tough market.As we look ahead, we expect market issuance will be lower than historical levels until rates stabilize, issuers adjust to higher nominal rates and more investors return to the municipal investment space.Moving to our equity brokerage business. We generated $50 million of revenues for the third quarter, flat compared to the second quarter. Equity markets experienced lower average volatility, which moderated volumes down 3% sequentially. Despite softer conditions, we performed well, driven by quality research and the broad capabilities of our platform. During the quarter, we traded 2.5 billion shares on behalf of our clients.Client research votes continue to increase. Our most recent vote ranking is the highest in our history, which should drive further market share gains in this business over time. Historically, the fourth quarter has been our best quarter of the year for equity brokerage revenues, and we expect to finish 2023 strong as clients position their portfolios for 2024.Moving to fixed income. Market conditions continue to be challenging. Long-term yields moved higher during the quarter, with the 10-year treasury increasing 73 basis points to end the quarter at 4.6%. For the third quarter of 2023, we generated revenues of $40 million, up modestly compared to the second quarter.Clients are beginning to take advantage of higher-yielding securities, and we are increasingly being engaged to assist clients with balance sheet yield optimization. While we expect the near-term outlook to remain challenging, we are starting down the path to more constructive fixed income market.The stability, scale and vision of our fixed income platform makes us a natural destination of choice for talented fixed income professionals. Interest in our firm continues to be robust, and as a result, we see opportunities to selectively expand our market reach across all of our client verticals.Now, I will turn the call over to Tim to review our financial results and provide an update on capital use.

[Timothy Carter, executive]

Thanks, Deb. Before reviewing our non-GAAP financial results, let me discuss an item impacting our GAAP results this quarter. For the third quarter of 2023, our GAAP results include $16.4 million of non-compensation expense related to a potential regulatory settlement with the SEC regarding recordkeeping requirements for business-related communications, as well as the related legal costs. At this time, we do not believe the final penalty amount will vary materially from the expense recorded in the third quarter.Now let me turn to our adjusted non-GAAP financial results, which should be considered in addition to and not a substitute for the corresponding GAAP financial measures. We generated net revenues of $306 million for the third quarter of 2023, up 10% from the prior quarter and down 9% compared with the third quarter of last year. Market conditions continue to remain challenging for most of our businesses. However, strong relative performance combined with the diversification of our platform within and across our businesses led to the strongest net revenue quarter of the year.For the first 9 months of 2023, net revenues totaled $873 million, down 16% year-over-year. We continue to generate solid operating results despite the tough markets, but don't believe these results reflect the full earnings power of our platform. We remain focused on managing the business to reflect current market conditions while balancing our long-term strategic growth objectives.Turning to operating expenses and margin. Our compensation ratio for the third quarter of 2023 was 63.9%, slightly higher compared to the sequential quarter, driven by revenue mix. For the first 9 months of 2023, our compensation ratio was 63.7%. We maintain our philosophy of managing compensation levels to balance employee retention and opportunities to invest in new talent while delivering appropriate operating margins and shareholder returns. Based on our current outlook and mix, we expect our compensation ratio for the fourth quarter to be around 64%.Non-compensation expenses for the third quarter of 2023, excluding reimbursed deal expenses, were $57 million, below our guided range due to reduced travel and lower professional fees. On a year-to-date basis, excluding reimbursed deal costs, non-compensation expenses totaled $183 million, up 5% compared to the prior year. There is some variation in non-compensation expenses from quarter-to-quarter depending on the timing of certain items.We anticipate our fourth quarter non-compensation costs, excluding reimbursed deal expenses, to be closer to our guided range of $62 million per quarter. During the third quarter of 2023, we generated operating income of $47 million and an operating margin of 15.3%. For the first 9 months of 2023, operating income totaled $114 million with an operating margin of 13%.Our income tax rate was 30.2% for the third quarter of 2023 and 13.7% for the 9-month period. Income tax expense for the year-to-date period was reduced by $16 million of tax benefits related to restricted stock vestings. Excluding these benefits, our year-to-date tax rate was 28.2%. We expect our tax rate for the fourth quarter of 2023 to be within a range of 27% to 29%, excluding the impact from stock vestings. During the third quarter of 2023, we generated net income of $31 million and diluted EPS of $1.76. For the first 9 months of this year, net income totaled $94 million and diluted EPS was $5.24.Let me finish with an update on capital allocation. We remain committed to returning capital to shareholders through market cycles. During the third quarter of 2023, we returned an aggregate of $14 million to shareholders primarily through our quarterly cash dividend. For the first 9 months of 2023, we returned an aggregate of $142 million to shareholders. This includes the repurchase of approximately 474,000 shares of our common stock or $68 million, which more than offset the share count dilution from this year's annual stock grants. It also includes an aggregate of $74 million or $3.05 per share paid to our shareholders through our quarterly and special cash dividends.In addition, today, the Board approved a quarterly cash dividend of $0.60 per share to be paid on December 8 to shareholders of record as of the close of business on November 21. Finally, given our continued strong cash generation and capital-light business model, on October 13, we repaid the $125 million of our Class B notes upon maturity. With this repayment, we've extinguished the full $175 million of long-term financing procured in late 2019 for the acquisition of Sandler O'Neill.Before we move to Q&A, I'd like to end with a few points. We continue to execute on our strategy to deliver strong revenue, margin and returns to our shareholders. Second, we are focused on investing in our people and broadening our platform. To that end, I'm excited to welcome Kate Clune to our executive team and we look forward to working with her in the coming months.With that, we'll open up the call for questions.

[Operator]

[Operator Instructions] We'll take our first question from Steven Chubak from Wolfe Research.

[Brendan O'Brien, analyst]

This is Brendan O'Brien filling in for Steven. I guess to start on the advisory outlook, we've seen a number of large strategic transactions announced over the past couple of months, which, along with the positive news on antitrust -- on the antitrust front, such as the approval of Activision, Microsoft suggests that the environment is relatively favorable for larger strategic transactions.At the same time, commentary from the public suggests that activity at sponsors is likely to remain subdued in the near to intermediate term. So, I wanted to get a sense as to like how dialogues are between sponsors and strategics at the moment? I don't know if there's any difference on the sponsor side, given your focus on smaller -- the sub-billion dollar space. But any color you could provide would be great.

[Chad Abraham, executive]

Yes. Maybe I'll start with the sponsor side and private equity. We've definitely seen more transactions as sell-side processes start. There's definitely interest. We can definitely get bids. You get to the end of a process, instead of multiple parties, you're down to a couple of parties still closing the sort of the ask -- the bid-ask gap. But financing is definitely there and better. So, I would say on the sponsor side it's improved, but slowly. It's not like it's snapping back, but certainly just narrowing that bid-ask spread and getting financing has helped for a lot of the deals of quality.On the strategic side, we definitely have good activity. Obviously, there's been some big news on some larger strategics relative to antitrust. But I would just also say across the board, we have more situations that are challenged with antitrust and second reviews and things than we usually do. I would say it's extending some time lines. It hasn't killed that many transactions. Obviously, it's also challenged in financial services. But it's not like it's markedly better on the strategic side from antitrust.

[Brendan O'Brien, analyst]

That's helpful. And then I guess on fixed income brokerage, the commentary I think is trading in the right direction, is encouraging. And it sounds like you see potential for market share gains. I know in the past that you pointed to $200 million as being around the right level for a normalized revenues on an annual basis for the business post Sandler. But given the benefit from higher rates and the share gain opportunities you highlighted, I want to get a sense as to whether that's still the appropriate way to think about normalized revenues in the business or if it could potentially be even higher?

[Debbra Schoneman, executive]

Yes. Well, here's what I'd say. Currently, as you can see in the numbers that our revenues have been more depressed, as you pointed out. We're seeing some pickup in that. If you look at our overall business, the non-depository clients, they're -- actually our business with those clients is relatively flat. So this is about banks and credit unions and their lack of liquidity and what's happening in their own bond portfolios.So to your question about whether $200 million is the right number, I think as we look at the business today -- that's in a -- I guess I'd say that's in the right range of where we think it's going. However, we're doing a lot to also invest in the business, and we'll continue to look at that to build that business over time. But right now, focused on doing what we can to help these clients in this tough interest rate environment. And need this -- need to see more certainty in interest rates and to see the top hit here on the interest rate increases.

[Brendan O'Brien, analyst]

Tim, congrats on the retirement. It's been a pleasure. And yes, wishing you all the best.

[Timothy Carter, executive]

Thank you.

[Operator]

And we'll next go to Devin Ryan with JMP Securities.

[Devin Ryan, analyst]

I'll echo those comments, Tim. Best wishes in the future here. I guess just want to start on muni underwriting. And yes, I've heard comments just obviously need rates to stabilize to see that business pick up. I guess if we do stabilize, but we're stabilizing at higher levels, do issuers still have the same needs to fund their projects, so therefore kind of the volumes really shouldn't be affected much? Or do these issuers still kind of have some rate sensitivity to what they want to do so they'll restrict activities just given more expensive rates. So, I'm just trying to think about ultimately kind of what a recovery looks like? Is it a recovery, but it's kind of [indiscernible] sort of more muted level? Or just really what a more normal year could look like assuming we level out at a little bit higher rates than we've seen historically?

[Debbra Schoneman, executive]

Yes, it is very dependent, Devin, on which part of our business that you're looking at. But if you think holistically about higher rates, obviously, the refinancing side of the business which has largely gone awry. There's some of that still happening as projects mature and they can refinance. But for the most part, you are looking at new money. So the question about whether or not higher rates limits that, to some degree, it will. And that's partly because the size of things might be smaller, right? So they still have a need, but projects might come in smaller one.The other things that these issuers are dealing with is just higher construction costs. So whether it's building a new school or other development, that is also impacting. So that's just something else to watch, I think, in terms of these issuers ability to actually get these new projects done. So I guess a little more muted from what it would have been on higher rates until we get maybe some of this inflationary pressure out of the marketplace.

[Chad Abraham, executive]

Yes. And I would just add, Devin, to what Deb said. I mean, there's no question the muni financing business of all of our business segments is the most challenged, and it's mostly on the specialty side. And it makes sense to what Deb said when you think a lot of that is project-based. Some of it is project financing.And if rates are much higher, it costs more to do the project. There's a question of, does the return work for the developer? Do they need more financing? But also in that world, you need fund flows into high-yield muni funds. And those flows have been -- there's a lot of other places where people are getting good fixed income returns. So a lot of that money hasn't come back. That will -- the spreads will adjust, but that's a big part of why that's been very difficult for us this year.

[Debbra Schoneman, executive]

Yes. A great point.

[Devin Ryan, analyst]

And I just want to come back to the advisory business for a moment. And just talk a little bit about kind of how you think about the capacity of that business today relative to maybe where you were a couple of years ago heading into the record 2021? So obviously, you guys have been very aggressive on recruiting, not just this year, but even going back a couple of years, you've done some acquisitions, so you kind of rounded out your sector coverage.So just like how you feel like you're competing in the market today and how that's evolved even over the past couple of years? And then where you'd it still feels like there's room, and obviously, there's always going to be some areas of white space, but where there's maybe bigger holes where you could kind of really turn to lever and still do quite a bit more?

[Chad Abraham, executive]

And we agree. I mean, lots of people have been doing quite a bit of hiring this year. We've actually been going quite a bit slower this year, but some of that's just been -- we've been on a pretty steady pace for 5 years. And if you just look back a few years ago, we had 130 MDs and now we're closer to 170 MDs. So yes, we absolutely feel like as the M&A market, even if it slowly returns here in '24, that we've got the capacity to do quite a bit more pretty much on every industry team because we've added white space.When I think about big, big opportunities still for us, we still think about tech and software in that relative to our market-leading franchises in financials and healthcare. That business can be as big. We've added a lot of MDs. We have the sectors that DBO brought us into, and it maybe has been the most challenged of the markets in M&A. So, I think there's still a lot of upside there and there's a lot of room for us to add many more MDs in the tech world as well.

[Devin Ryan, analyst]

Maybe I'll just squeeze one more in here on expenses. So, comp ratio is running a little bit higher this year, but much more contained than we're seeing in some others in the industry, and I think that speaks to kind of the diversification of the business. And just overall, as you kind of look out, thinking about some of the puts and takes on expenses. We're kind of in this inflationary environment, you guys have navigated that well. At the same time, you'll see, hopefully, business-related expenses come back in when investment banking picks back up.So just want to think about kind of how much expense inflation in your mind is kind of sticky? And if there's any view of impact on kind of normalized margins when we get back to maybe a market that's a little bit more conducive than we've been in like new margins revert back to where they were pre -- the last couple of years? Or how are you guys thinking about kind of normalized margins, just given the puts and takes and some of the inflation that we're all dealing with?

[Timothy Carter, executive]

Yes. Devin, maybe I'll take that. I mean I think we've talked about the different components in the past in terms of the comp rate to start with. And certainly, as we get back to more normalized levels, from a top line perspective, we should have the ability to lever down the comp rate by a couple of points. I think we've also talked, look, longer term, we see comp rates somewhere between 60 and 65, right? Revenues are depressed. We're closer up to that 64, 65 when revenues are at more normalized levels or even a little bit better or closer to 60. So, I think there's certainly a couple of points in the comp rate, that is as we get more normalized, we would get that back from a margin perspective.And then there's some level of leverage that we are going to get on non-comps, and yes, you might see the absolute level rise with increased business activity, but we're still going to get some leverage there. So yes, I guess we get back to -- all the way back to the Sandler deal and we said, look, with that and sort of that scale, we should be in the high teens. I think now as we continue to grow and scale the business back to that 20% margin, maybe low 20s is really more of the focus in the area that we think the margin should run.

[Operator]

And next, we'll go to James Yaro with Goldman Sachs.

[James Yaro, analyst]

Firstly, Tim, congratulations. It's been great working with you and best wishes. Turning to M&A, Chad. Maybe we could just touch on the question of how long it takes to get back to normalized level. Obviously, results have not been that strong. I think for peers so far this quarter, and it does sound like there are some headwinds there. So just maybe you could just talk about some of the puts and takes around the time line, and whether this is going to look more like historic cycles versus the 2020 -- 2021 cycle?

[Chad Abraham, executive]

Yes. I think obviously, just obviously, we're all sounding like a bit of a broken record. I think in the end of '22, we all certainly thought the pace of '23 would be a little quicker. We've definitely seen in the back half more transaction starts. So, there's plenty of transactions to do plenty of backlog. They're all taking longer. There's definitely more deals dying sort of at the end when we can't quite get there. So, my feeling is we're just going to continue to see very slow improvement.We certainly can see what we have on the runway in Q4 and some of that stuff slipping into early next year. So, we certainly have visibility, and I just think this is going to be a slow M&A recovery. And for us, it sort of depends. We've got some things still going well in the energy side. Obviously, we're a market leader in healthcare, and we've had some interesting transactions there.We haven't talked about this, but long term, after a really, really tough period in depositories, we definitely expect that to pick up. But part of why the recovery is going to be slow for us in M&A is once we get those deals announced, it just takes -- it takes a while to close. So, in the depository space, it feels like our share is actually going up a little, but it's off a very, very small base. So, in general, I think we just expect to see more of the same, a very slow recovery. And -- but hopefully, it just keeps marching slowly better here.

[James Yaro, analyst]

It's not super uplifting. Maybe just on the MDs and the hiring there. The MD count did come down very slightly in the quarter. I assume that's just sort of normal attrition. But maybe you could just talk about how you're thinking about the hiring trajectory from here?

[Chad Abraham, executive]

Yes. I would say, obviously, I think it's been quite a few quarters since we were even down one or two. So it's a very small number, a couple of retirements. I would say, if anything, when the times are difficult like this, we're being -- we're being pretty discerning on production, and who can get it done, and pretty careful on hiring. So, we do use these market environments to figure out, sort of, where there's an upgrade or where there's a space we don't need to be in or where we've just got an MD that's not getting it done.I would say, relative to hiring though, our pace is -- we expect it to be the same. We sort of talk about that net 5 to 7, we've got a couple of new hires we've made that haven't been announced in strategic sector. So, we really just haven't changed that cadence. If anything, we've probably slowed it a little bit, but I always got to remind people over 5 years, we've definitely grown MD head count more than others. So, we've just taken the long-term approach and also just focused on productivity and performance. We've got plenty of MDs to drive significant revenue growth from here.

[Operator]

[Operator Instructions] We'll next go to Mike Grondahl from Northland Securities.

[Mike Grondahl, analyst]

Congrats to Tim. A bunch of my questions have been asked and answered. But Chad, can you give us just a little bit of color on the restructuring business, kind of how that's grown roughly in absolute dollars or as a percent of the advisory business?

[Chad Abraham, executive]

Yes. So, we don't break out sort of specific restructuring revenue. But just as a reminder, we had a very, very small business. We did the TRS transaction a few years ago. Since then, we've roughly doubled the number of head count there and frankly, growing revenues each year. To the point where in certain of our quarters, it's starting to matter to the total. So, we feel really good. Obviously, we were starting from a low base, every year it's growing. We're seeing more and more impact across all of our industry teams.I think it will -- given the low starting base we had it will still be a couple of years before we probably break out that mix. But while the timing didn't seem good right when we did it in '20 before '21, now it's really paying dividends, and we're really excited about the team we have and the prospects of continuing to grow that into a significant business.

[Mike Grondahl, analyst]

Then just lastly, October, any comments there? It sounds like it was kind of continuing the, I'll call it, slow recovery that you've kind of described. Anything else to call out about October?

[Chad Abraham, executive]

Yes. What I would say for us in October, we actually had a pretty good ECM month. People can see that from our dialogic. I mean we haven't talked about ECM yet. But first 9 months, we've definitely gained a lot of share, frankly, a lot of share in healthcare. I think that trends continued in October, I would say relative to our brokerage businesses, nothing materially changed in October.And then relative to our advisory business, we gave some guidance about, assuming we can get the big the planes landed on some of the larger fees, we see good sequential uptick in Q4. We had some of those deals in October and more in November, December. So, I guess that's what I'd say about October.

[Operator]

And at this time, we have no further questions. I'd like to turn the call back over to Mr. Abraham. Please go ahead.

[Chad Abraham, executive]

Thank you, operator, and everyone that joined. We look forward to updating you on our fourth quarter and full year results. Have a great day.

[Operator]

Thank you. Ladies and gentlemen, that does conclude today's conference. We appreciate your participation. Have a wonderful day.