Good morning, ladies and gentlemen, and welcome to the Piper Jaffray Companies Conference Call to discuss the financial results of the third quarter of 2014. [Operator Instructions] The company has asked that I remind you that statements on this call are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements that 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.piperjaffray.com and on the SEC website at www.sec.gov. This call will also include statements regarding certain non-GAAP financial measures. Please refer to the company's earnings release issued today for a reconciliation of these non-GAAP financial measures to the most comparable GAAP measure. The earnings release is available on the Investor Relations page of the company's website or at the SEC website. As a reminder, this call is being recorded. And now I'd like to turn the call over to Mr. Andrew Duff. Mr. Duff, you may begin your call.

Good morning, and thank you for joining us to review our third quarter results. I will spend a few minutes discussing the market environment and the performance of our businesses, and then hand the call over to Deb, to review our financial results. The firm produced solid results for the quarter, which contributed to a 10.2% ROE for the last 12 months. The diversity of our business mix enabled us to generate these strong results in the context of markets that were generally neutral to negative for our businesses. Specifically, we took advantage of favorable M&A markets to produce record advisory revenues that drove our overall performance. In a broad sense, equity and fixed income markets in the U.S. were subject to countervailing pressures, which led to an environment void of a clear direction for markets during the quarter. Strong macroeconomic growth reported for the second quarter, together with healthier employment conditions for the current quarter, suggested accelerating U.S. growth. Concurrent with stronger growth, we would expect equity markets to perform well and interest rates to climb. However, significant geopolitical uncertainty, plus perceived weakness in the major European and Chinese economies had a dampening effect on equity markets. In addition, these factors helped to reinforce the U.S. status as a safe haven for international investors, which place downward pressure on interest rates. The equity markets demonstrated a balancing act in the context of conflicting influences. Broad indices were essentially flat for the quarter, while small cap stocks experienced a 5% to 10% decline in value. These conditions adversely impacted capital raising during the quarter, particularly in smaller growth-oriented stocks. With valuations at relatively attractive levels and generally low volatility, M&A activity was healthy. Low market volatility had a dampening effect on trading volumes as investors waited for a clearer direction…

Thanks, Andrew. In the third quarter of 2014, continuing operations generated net revenues on a GAAP basis of $159 million, a 24% increase compared to the year ago period and a 6% decrease compared to the sequential quarter. Net income for the quarter was $15 million or $0.90 per diluted common share, and our pretax operating margin was 16.1%. In addition to our GAAP results, we have presented non-GAAP financial measures to provide a more meaningful basis for comparison of our core operating results. The non-GAAP measures exclude revenues and expenses related to noncontrolling interests, amortization of intangible assets related to acquisition, compensation for acquisition-related agreements and restructuring and acquisition integration costs. The remainder of my remarks will be based on these non-GAAP financial measures. In the third quarter of 2014, continuing operations generated adjusted net revenues of $156 million; adjusted net income of $17 million or $1.03 per diluted common share; and our adjusted pretax operating margin was 17.3%. For the third quarter, adjusted compensation and benefits expenses were 61.5% of adjusted net revenues, compared to 62.7% in the third quarter of 2013 and 61% in the second quarter of 2014. The compensation ratio decreased compared to the year ago period due to an increased revenue base and increased 50 basis points sequentially due to lower net revenues. Adjusted noncompensation expenses were $33 million for the third quarter compared to $29 million in the year ago period and essentially flat sequentially. Noncompensation expenses increased compared to the year ago period, primarily due to onetime occupancy cost related to our office based in New York City, higher third-party marketing fees associated with our Asset Management business and higher professional fees. On a non-GAAP basis, our effective tax rate from continuing operations was 37.2% for the third quarter, consistent with our…

[Operator Instructions] Your first question comes from the line of Douglas Sipkin of Susquehanna.

So I wanted to just spend a little more time on the M&A. Obviously, really good number and definitely some surprise. Maybe, if you can just shed some light on some of the things you've done there in the last year or 2 years. And then maybe, how should we be thinking about the line going forward? I know it's a volatile line of in and of itself, but it clearly looks like you guys are just sort of building momentum. So I'm just trying to gauge for modeling purposes. How should we be thinking about, maybe, fourth quarter and into '15?

Okay, so I'll start with the last couple of years, where it's been a priority, and I think we spoke to it fairly frequently and have invested in it both internally and externally. From an internal perspective, more dedicated resources, specific programs to develop principles into MDs, some consistency and discipline around minimum fees and, importantly, right bankers and right sectors. From an external perspective, 2 acquisitions: Edgeview; as well as a group in San Francisco called PCG; and some additional modest hiring, but all very high-quality, very additive. And finally, what I would say is success begets success, it's a bit of a fly wheel. We're bringing to the marketplace and executing more and more attractive transactions, which enables us to deepen our relationships and get invited into more and more business. From an outward perspective, our backlog going into the fourth quarter and early 2015 is very solid. Looks more like the first half of the year then the even higher revenues of the third quarter, but it is broad and solid.

Great. That's very helpful. And then maybe shifting gears a little bit. I know you guys have been, for the most part, positioned for higher rates. And I'm wondering if -- just listening to your comments, didn't get the sense there is going to be a change. But I'm wondering, given in light of sort of the recent moves that we've seen in the bond market, if you guys were maybe reevaluating that, thinking maybe that we can stand a longer rate environment for longer and may adjust some of your positioning. Or are you still sticking with you believe rates are kind of generally moving higher into '15?

I would say it's more of a rate neutral position that we've been in. We think that the traction is relatively uncertain, while on the one hand, you've got arguably some strengthening in our domestic economy that has countervailing pressures coming from declines and the other major global economies, and again, potentially, fight to quality. So our interest rate perspective continues to be relatively neutral. Having said that, in the third quarter, we believe there were opportunity for spread increases, and we could be opportunistic, and that continues to be our outlook.

Great. And then just last question. Obviously, third quarter excluding a really strong ECM business for you guys this year. I'm just curious how the backlog looks and what will it take to sort of get a step-up again. Obviously, it's the summer, so some expectation for a slower third quarter's there. But I'm imagining the market played a little bit of a roll. So maybe some color on how it looks, the backlog, if the environment, once again, got a little more favorable.

Okay, so from -- again, from a backlog perspective, I would say we continue to have a strong and broad pipeline. In fact, have several high-quality transactions on the road as we speak. Influencing capital raising will always be the broader indices, which have been more volatile. And then volatility, in and of itself, the mix [ph] did get up and break up 30%, but it's already back down to 17%. So our outlook, barring some extreme volatility, is constructive.

Your next question comes from the line of Hugh Miller from Macquarie.

So had a question with regards to the Asset Management segment. You gave some color to the flows, but am I correct in assuming that the fees are typically generated based on the prior quarter's ending balance for the AUM?

It's really -- primarily, it varies by product. Some of it is primarily driven by the ending quarter values.

Okay, because -- as we look at that, then there would seem to be a little bit of a fee compression in the quarter. I'm wondering if that's a function of, maybe, timing or a mix between MLP and equity, but can you provide any color there?

Yes, I think it's less around fee compression. Just more around the outflows that may have happened during the quarter, or just the -- not even just the market impact during the quarter versus any real fee compression.

Okay. That may just be a function of kind of whatever assets that may price based on the actual quarter's ending balance versus the prior quarter.

Yes. Sometimes it's hard with flows in and out during the quarter, and certain clients do want a pro rata basis based on flows. It's had to do the absolute math just based on ending assets and revenues.

Okay. And as we think about kind of the gyrations in the market in kind of October so far, it didn't seem like you made any comments about it. But is there any risk to principal losses, just given position and may have been on kind of the wrong side of the trade or anything like that so far in October?

Yes. So overall, as Andrew have spoken to, really, trying to manage a very neutral position overall as there is so much uncertainty both in rates and spreads. We have really been managing our risk appetite down. Just to give you some perspective, VAR, which is value at risk, which is one measure of that. We've actually -- our VAR has declined sequentially quarter-after-quarter for the last 5 quarters. So we are really managing on a very tight basis, I guess, from our risk perspective.

Okay. And as we think about kind of the compression or the yield curve, and your ability to kind of see trading activity in generating commissions off of that. How should we think about kind of spreads on those commissions, just given kind of the compression we've seen in the yield curve over last month?

So I would say that, that continues to be a challenge and has really been, if you would, kind of in that zone for the last 4 or 5 quarters. The combination of uncertainty to rate direction has led to many investors staying in the short end of the curve, and there is very little spread there.

Okay. And what's the duration look like of your inventory portfolio now? And how does that compare to last couple of quarters?

I don't have that specifically other than to say, again, with hedging, we try to remain very neutral overall. So that impact isn't as significant.

[Operator Instructions] There are no further audio questions registered at this time.

All right. I'd like to wrap up the call and thank all my partners for their hard work and commitment that helped produced these strong results for ourselves and our shareholders. And as increased volatility reemerges in the markets, we'll continue to carefully manage our business while looking for opportunities that may arise. Thank you all very much.

Thank you, ladies and gentlemen. That does conclude today's conference. You may now disconnect.