Oppenheimer Holdings Inc 10-Q for FY2020 Q1

Oppenheimer Holdings Inc (OPY)

10-Q 2020-05-01 For: 2020-03-31

Added on April 11, 2026

About this 10-Q

Oppenheimer Holdings Inc filed this 10-Q on May 1, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $234.77M; down 6.8% from $251.77M a year earlier
Net income: $7.82M; down 30.2% from net income of $11.19M a year earlier
Diluted EPS: $0.58; down 28.4% from $0.81 a year earlier

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Delaware	98-0080034
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	OPY	The New York Stock Exchange



Large accelerated filer	o	Accelerated filer	x

Non-accelerated filer	o	Smaller reporting company	o

Emerging growth company	o




		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3
	Condensed Consolidated Income Statements for the three months ended March 31, 2020 and 2019	4
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019	5
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	53
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 6.	Exhibits	57
	Signatures	58



(Expressed in thousands, except number of shares and per share amounts)	March 31, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	23,540	$	79,550
Deposits with clearing organizations	119,580		48,415
Receivable from brokers, dealers and clearing organizations	198,417		163,293
Receivable from customers, net of allowance for credit losses of $528 ($451 in 2019)	964,772		796,934
Income tax receivable	6,283		5,170
Securities owned, including amounts pledged of $150,547 ($357,120 in 2019), at fair value	309,346		799,719
Notes receivable, net of accumulated amortization and allowance for uncollectibles of $31,188 and $3,908 respectively ($38,355 and $3,673, respectively, in 2019)	44,960		43,670
Furniture, equipment and leasehold improvements, net of accumulated depreciation of $96,742 ($94,773 in 2019)	30,646		31,377
Right-of-use lease assets, net of accumulated amortization of $31,398 ($25,186 in 2019)	156,040		160,297
Goodwill	137,889		137,889
Intangible assets	32,100		32,100
Other assets	116,060		166,341
Total assets	$	2,139,633	$	2,464,755
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Drafts payable	$	19,066	$	—
Bank call loans	203,100		—
Payable to brokers, dealers and clearing organizations	239,583		520,975
Payable to customers	413,646		334,735
Securities sold under agreements to repurchase	124,103		287,265
Securities sold but not yet purchased, at fair value	34,639		100,571
Accrued compensation	102,407		207,358
Accounts payable and other liabilities	43,645		44,725
Lease liabilities	197,728		203,140
Senior secured notes, net of debt issuance costs of $432 ($485 in 2019)	148,142		149,515
Deferred tax liabilities, net of deferred tax assets of $37,080 ($43,630 in 2019)	26,844		23,749
Total liabilities	1,552,903		1,872,033
Commitments and contingencies (note 13)
Stockholders' equity
Share capital
Class A non-voting common stock, par value $0.001 per share, 50,000,000 shares authorized, 12,610,740 and 12,698,703 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	44,173		46,424
Class B voting common stock, par value $0.001 per share, 99,665 shares authorized, issued and outstanding as of March 31, 2020 and December 31, 2019	133		133
	44,306		46,557
Contributed capital	37,945		47,406
Retained earnings	503,255		496,998
Accumulated other comprehensive income	1,224		1,761
Total stockholders' equity	586,730		592,722
Total liabilities and stockholders' equity	$	2,139,633	$	2,464,755



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




	For the Three Months Ended March 31
(Expressed in thousands, except number of shares and per share amounts)	2020			2019
REVENUE
Commissions	$	103,249		$	79,409
Advisory fees	86,164			73,647
Investment banking	25,728			28,043
Bank deposit sweep income	18,826			33,968
Interest	10,890			12,727
Principal transactions, net	(868		)	11,438
Other	(9,219		)	12,538
Total revenue	234,770			251,770
EXPENSES
Compensation and related expenses	157,676			160,355
Communications and technology	19,891			20,086
Occupancy and equipment costs	16,078			15,273
Clearing and exchange fees	5,659			5,332
Interest	6,550			12,986
Other	18,693			21,686
Total expenses	224,547			235,718
Income before income taxes	10,223			16,052
Income taxes	2,405			4,858
Net income	$	7,818		$	11,194

Net income per share
Basic	$	0.61		$	0.86
Diluted	$	0.58		$	0.81

Weighted average shares
Basic	12,895,729			13,020,344
Diluted	13,456,233			13,851,321




	For the Three Months Ended March 31,
(Expressed in thousands)	2020			2019
Net income	$	7,818		$	11,194
Other comprehensive income (loss), net of tax
Currency translation adjustment	(537		)	563
Comprehensive income	$	7,281		$	11,757




	For the Three Months Ended March, 31
(Expressed in thousands, except per share amounts)	2020			2019
Share capital
Balance at beginning of period	$	46,557		$	53,392
Issuance of Class A non-voting common stock	6,183			1,162
Repurchase of Class A non-voting common stock for cancellation	(8,434		)	(2,035		)
Balance at end of period	44,306			52,519
Contributed capital
Balance at beginning of period	47,406			41,776
Share-based expense	2,062			1,889
Vested employee share plan awards	(11,523		)	(2,176		)
Balance at end of period	37,945			41,489
Retained earnings
Balance at beginning of period	496,998			449,989
Net income	7,818			11,194
Dividends paid	(1,561		)	(1,432		)
Balance at end of period	503,255			459,751
Accumulated other comprehensive income
Balance at beginning of period	1,761			165
Currency translation adjustment	(537		)	563
Balance at end of period	1,224			728
Total stockholders' equity	$	586,730		$	554,487

Dividends paid per share	$	0.12		$	0.11



Table of Contents
OPPENHEIMER HOLDINGS INC. Notes to Condensed Consolidated Financial Statements (unaudited)



(Expressed in thousands)
	As of March 31, 2020

2020	$	—
2019	555
2018	186
2017	769
2016	875
2015 and prior	2,933
Total	$	5,318



(Expressed in thousands)

Beginning balance, January 1, 2020 upon adoption of ASU 2016-13	$	3,673
Additions	235
Ending balance, March 31, 2020	$	3,908




	As of
	March 31, 2020	December 31, 2019

Weighted average remaining lease term (in years)	8.16	8.31
Weighted average discount rate	7.85%	7.89%



(Expressed in thousands)	For the Three Months Ended March 31, 2020
	Reportable Segments
	Private Client			Asset Management		Capital Markets		Corporate/Other			Total
Revenue from contracts with customers:
Commissions from sales and trading	$	47,105		$	—	$	46,287	$	20		$	93,412
Mutual fund income	9,827			3		3		4			9,837
Advisory fees	66,883			19,270		2		9			86,164
Investment banking - capital markets	3,950			—		11,942		—			15,892
Investment banking - advisory	—			—		9,836		—			9,836
Bank deposit sweep income	18,826			—		—		—			18,826
Other	3,131			—		640		101			3,872
Total revenue from contracts with customers	149,722			19,273		68,710		134			237,839
Other sources of revenue:
Interest	7,680			—		2,824		386			10,890
Principal transactions, net	(2,715		)	—		3,984		(2,137		)	(868		)
Other	(13,269		)	3		24		151			(13,091		)
Total other sources of revenue	(8,304		)	3		6,832		(1,600		)	(3,069		)
Total revenue	$	141,418		$	19,276	$	75,542	$	(1,466	)	$	234,770



(Expressed in thousands)
	As of
	March 31, 2020			December 31, 2019

2020	$	31,798		$	42,585
2021	38,115			37,531
2022	33,959			33,416
2023	31,424			31,187
2024	27,463			27,234
After 2025	108,112			108,098
Total lease payments	$	270,871		$	280,051
Less interest	(73,143		)	(76,911		)
Present value of lease liabilities	$	197,728		$	203,140


(1)	Commission recorded on trade date but not yet settled.


(4)	Fees earned from FDIC-insured bank deposit program but not yet received.



(Expressed in thousands)	For the Three Months Ended March 31, 2019
	Reportable Segments
	Private Client		Asset Management			Capital Markets		Corporate/Other			Total
Revenue from contracts with customers:
Commissions from sales and trading	$	37,477	$	—		$	32,316	$	2		$	69,795
Mutual fund income	9,614		(6		)	1		5			9,614
Advisory fees	57,044		16,589			5		9			73,647
Investment banking - capital markets	2,749		—			8,593		—			11,342
Investment banking - advisory	—		—			16,701		—			16,701
Bank deposit sweep income	33,968		—			—		—			33,968
Other	3,278		—			319		256			3,853
Total revenue from contracts with customers	144,130		16,583			57,935		272			218,920
Other sources of revenue:
Interest	9,408		—			2,835		484			12,727
Principal transactions, net	1,684		—			10,157		(403		)	11,438
Other	8,305		3			34		343			8,685
Total other sources of revenue	19,397		3			13,026		424			32,850
Total revenue	$	163,527	$	16,586		$	70,961	$	696		$	251,770


(3)	Management and performance fees earned but not yet received.


(5)	Underwriting revenue and advisory fees earned but not yet received.


(6)	Retainer fees and fees earned from certain advisory transactions where the performance obligations have not yet been satisfied.



(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds ⁽¹⁾	$	1,164	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds ⁽²⁾	3,815		1,399		N/A	N/A
	$	4,979	$	1,399


(1)	Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies.


(2)	Includes private equity funds and private equity fund of funds with a focus on diversified portfolios, real estate and global natural resources.



(Expressed in thousands)
	Fair Value Measurements as of March 31, 2020
	Level 1		Level 2		Level 3		Total
Assets
Deposits with clearing organizations	$	36,593	$	—	$	—	$	36,593
Securities owned:
U.S. Treasury securities	156,304		—		—		156,304
U.S. Agency securities	2,642		9,854				12,496
Sovereign obligations	—		1,776		—		1,776
Corporate debt and other obligations	—		16,463		—		16,463
Mortgage and other asset-backed securities	—		2,243		—		2,243
Municipal obligations	—		45,448		—		45,448
Convertible bonds	—		21,781		—		21,781
Corporate equities	25,582		—		—		25,582
Money markets	917		—		—		917
Auction rate securities	—		26,336		—		26,336
Securities owned, at fair value	185,445		123,901		—		309,346
Derivative contracts:
TBAs	—		638		—		638
Total	$	222,038	$	124,539	$	—	$	346,577
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	10,679	$	—	$	—	$	10,679
U.S. Agency securities	—		8		—		8
Sovereign obligations	—		1,389		—		1,389
Corporate debt and other obligations	—		5,131		—		5,131
Convertible bonds	—		3,880		—		3,880
Corporate equities	13,552		—		—		13,552
Securities sold but not yet purchased, at fair value	24,231		10,408		—		34,639
Derivative contracts:
Futures	1,161		—		—		1,161
Foreign exchange forward contracts	31		—		—		31
TBAs	—		643		—		643
ARS purchase commitments	—		887		—		887
Derivative contracts, total	1,192		1,530		—		2,722
Total	$	25,423	$	11,938	$	—	$	37,361



(Expressed in thousands)
	Fair Value Measurements as of December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets
Deposits with clearing organizations	$	25,118	$	—	$	—	$	25,118
Securities owned:
U.S. Treasury securities	613,030		—		—		613,030
U.S. Agency securities	19,917		15,974		—		35,891
Sovereign obligations	—		11,405		—		11,405
Corporate debt and other obligations	—		8,310		—		8,310
Mortgage and other asset-backed securities	—		2,697		—		2,697
Municipal obligations	—		40,260		—		40,260
Convertible bonds	—		29,816		—		29,816
Corporate equities	32,215		—		—		32,215
Money markets	781		—		—		781
Auction rate securities	—		25,314		—		25,314
Securities owned, at fair value	665,943		133,776		—		799,719
Total	$	691,061	$	133,776	$	—	$	824,837
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	52,882	$	—	$	—	$	52,882
U.S. Agency securities	—		18		—		18
Sovereign obligations	—		6,405		—		6,405
Corporate debt and other obligations	—		664		—		664
Convertible bonds	—		—		—		—
Corporate equities	21,978		—		—		21,978
Securities sold but not yet purchased, at fair value	74,860		25,711		—		100,571
Derivative contracts:
Futures	267		—		—		267
Foreign exchange forward contracts	—		—		—		—
TBAs	—		124		—		124
ARS purchase commitments	—		1,023		—		1,023
Derivative contracts, total	267		1,147		—		1,414
Total	$	75,127	$	26,858	$	—	$	101,985



(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	23,540	$	23,540	$	—	$	—	$	23,540
Deposits with clearing organization	82,987		82,987		—		—		82,987
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	102,844		—		102,844		—		102,844
Receivables from brokers	37,588		—		37,588		—		37,588
Securities failed to deliver	26,694		—		26,694		—		26,694
Clearing organizations	28,463		—		28,463		—		28,463
Other	2,833		—		2,833		—		2,833
	198,422		—		198,422		—		198,422
Receivable from customers	964,772		—		964,772		—		964,772
Notes receivable, net	44,960		—		44,960		—		44,960
Investments ⁽¹⁾	60,631		—		60,631		—		60,631



(Expressed in thousands)			Fair Value Measurement: Liabilities
	Carrying Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	19,066	$	19,066	$	—	$	—	$	19,066
Bank call loans	203,100		—		203,100		—		203,100
Payables to brokers, dealers and clearing organizations:
Securities loaned	181,745		—		181,745		—		181,745
Payable to brokers	5,079		—		5,079		—		5,079
Securities failed to receive	45,593		—		45,593		—		45,593
Other	6,005		—		6,005		—		6,005
	238,422		—		238,422		—		238,422
Payables to customers	413,646		—		413,646		—		413,646
Securities sold under agreements to repurchase	124,103		—		124,103		—		124,103
Senior secured notes	148,574		—		140,624		—		140,624



(Expressed in thousands)
	Fair Value of Derivative Instruments as of March 31, 2020
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments⁽¹⁾
Other contracts	TBAs	$	18,900	$	638
		$	18,900	$	638
Liabilities:
Derivatives not designated as hedging instruments ⁽¹⁾
Commodity contracts	Futures	$	1,555,000	$	1,161
Other contracts	Foreign exchange forward contracts	800		31
Other contracts	TBAs	18,900		643
	ARS purchase commitments	6,074		887
		$	1,580,774	$	2,722


(1)	See "Derivative Instruments and Hedging Activities" above for description of derivative financial instruments. Such derivative instruments are not subject to master netting agreements, thus the



(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended March 31, 2020
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(8,093	)
Other contracts	Foreign exchange forward contracts	Other revenue	2
	TBAs	Principal transactions revenue	(12		)
	ARS purchase commitments	Principal transactions revenue	136
			$	(7,967	)

(Expressed in thousands)
	The Effect of Derivative Instruments in the Income Statement
	For the Three Months Ended March 31, 2019
		Recognized in Income on Derivatives (pre-tax)
Types	Description	Location	Net Gain (Loss)
Commodity contracts	Futures	Principal transactions revenue	$	(576	)
Other contracts	Foreign exchange forward contracts	Other revenue	(2		)
	TBAs	Principal transactions revenue	10
	ARS purchase commitments	Principal transactions revenue	(18		)
			$	(586	)



(Expressed in thousands)
	Overnight and Open
Repurchase agreements:
U.S. Government and Agency securities	$	135,870
Securities loaned:
Equity securities	181,745
Gross amount of recognized liabilities for repurchase agreements and securities loaned	$	317,615



As of March 31, 2020
(Expressed in thousands)								Gross Amounts Not Offset on the Balance Sheet
	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet			Net Amounts of Assets Presented on the Balance Sheet		Financial Instruments			Cash Collateral Received		Net Amount
Reverse repurchase agreements	$	11,767	$	(11,767	)	$	—	$	—		$	—	$	—
Securities borrowed ⁽¹⁾	102,844		—			102,844		(97,039		)	—		5,805
Total	$	114,611	$	(11,767	)	$	102,844	$	(97,039	)	$	—	$	5,805


(1)	Included in receivable from brokers, dealers and clearing organizations on the condensed consolidated balance sheet.



								Gross Amounts Not Offset on the Balance Sheet
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset on the Balance Sheet			Net Amounts of Liabilities Presented on the Balance Sheet		Financial Instruments			Cash Collateral Pledged		Net Amount
Repurchase agreements	$	135,870	$	(11,767	)	$	124,103	$	(123,506	)	$	—	$	597
Securities loaned ⁽²⁾	181,745		—			181,745		(174,038		)	—		7,707
Total	$	317,615	$	(11,767	)	$	305,848	$	(297,544	)	$	—	$	8,304


(2)	Included in payable to brokers, dealers and clearing organizations on the condensed consolidated



As of December 31, 2019
(Expressed in thousands)								Gross Amounts Not Offset on the Balance Sheet
	Gross Amounts of Recognized Assets		Gross Amounts Offset on the Balance Sheet			Net Amounts of Assets Presented on the Balance Sheet		Financial Instruments			Cash Collateral Received		Net Amount
Reverse repurchase agreements	$	55,927	$	(55,927	)	$	—	$	—		$	—	$	—
Securities borrowed ⁽¹⁾	99,635		—			99,635		(97,702		)	—		1,933
Total	$	155,562	$	(55,927	)	$	99,635	$	(97,702	)	$	—	$	1,933