Oppenheimer Holdings Inc 10-Q for FY2021 Q1

Oppenheimer Holdings Inc (OPY)

10-Q 2021-04-30 For: 2021-03-31

Added on April 11, 2026

About this 10-Q

Oppenheimer Holdings Inc filed this 10-Q on April 30, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $373.28M; up 59.0% from $234.77M a year earlier
Net income: $38.66M; up 394.5% from net income of $7.82M a year earlier
Diluted EPS: $2.91; up 401.7% from $0.58 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
Class A non-voting common stock	OPY	The New York Stock Exchange



		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	4
	Condensed Consolidated Income Statements for the three months ended March 31, 2021 and 2020	5
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020	6
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2021 and 2020	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	53
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53
Item 6.	Exhibits	54
	Signatures	55


(Expressed in thousands, except number of shares and per share amounts)	March 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	28,545	$	35,424
Deposits with clearing organizations	77,294		83,343
Receivable from brokers, dealers and clearing organizations	233,915		203,494
Receivable from customers, net of allowance for credit losses of $1,919 ($410 in 2020)	1,152,499		1,110,835

Securities purchased under agreements to resell	25,937		—
Securities owned, including amounts pledged of $336,488 ($440,531 in 2020), at fair value	605,330		610,517
Notes receivable, net	48,847		46,161
Furniture, equipment and leasehold improvements, net of accumulated depreciation of $91,741 ($90,958 in 2020)	26,835		27,762
Right-of-use lease assets, net of accumulated amortization of $56,837 ($50,336 in 2020)	155,658		153,502
Goodwill	137,889		137,889
Intangible assets	32,100		32,100
Other assets	184,302		272,876
Total assets	$	2,709,151	$	2,713,903
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Drafts payable	$	12,392	$	—
Bank call loans	75,100		82,000
Payable to brokers, dealers and clearing organizations	421,413		259,911
Payable to customers	462,450		502,807
Securities sold under agreements to repurchase	7,150		342,438
Securities sold but not yet purchased, at fair value	360,486		126,171
Accrued compensation	207,300		298,263
Income tax payable	15,776		9,726
Accounts payable and other liabilities	57,220		44,791
Lease liabilities	194,771		193,373
Senior secured notes, net of debt issuance costs of $1,114 ($1,154 in 2020)	123,886		123,846
Deferred tax liabilities, net of deferred tax assets of $42,979 ($44,104 in 2020)	51,467		44,909
Total liabilities	1,989,411		2,028,235
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, 12,586,043 and 12,381,778 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	43,008		39,200
Class B voting common stock, par value $0.001 per share, 99,665 shares authorized, issued and outstanding as of March 31, 2021 and December 31, 2020	133		133
	43,141		39,333
Contributed capital	35,429		41,481
Retained earnings	638,558		601,406
Accumulated other comprehensive income	2,612		3,448
Total stockholders' equity	719,740		685,668
Total liabilities and stockholders' equity	$	2,709,151	$	2,713,903



	For the Three Months Ended March 31,
(Expressed in thousands, except number of shares and per share amounts)		2021		2020
REVENUE
Commissions		$	113,471	$	103,249
Advisory fees		104,496		86,164
Investment banking		124,501		25,728
Bank deposit sweep income		4,008		18,826
Interest		8,666		10,890
Principal transactions, net		10,865		(868)
Other		7,275		(9,219)
Total revenue		373,282		234,770
EXPENSES
Compensation and related expenses		255,601		157,676
Communications and technology		20,607		19,891
Occupancy and equipment costs		15,182		16,078
Clearing and exchange fees		6,275		5,659
Interest		2,647		6,550
Other		20,843		18,693
Total expenses		321,155		224,547
Pre-tax income		52,127		10,223
Income taxes		13,469		2,405
Net income		$	38,658	$	7,818

Earnings per share
Basic		$	3.07	$	0.61
Diluted		$	2.91	$	0.58

Weighted average shares
Basic		12,579,130		12,895,729
Diluted		13,299,243		13,456,233


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


☐			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)		2021		2020
Net income		$	38,658	$	7,818
Other comprehensive loss, net of tax
Currency translation adjustment		(836)		(537)
Comprehensive income		$	37,822	$	7,281



	For the Three Months Ended March 31,
(Expressed in thousands, except per share amounts)		2021		2020
Share capital
Balance at beginning of period		$	39,333	$	46,557
Issuance of Class A non-voting common stock		3,808		6,183
Repurchase of Class A non-voting common stock for cancellation		—		(8,434)
Balance at end of period		43,141		44,306
Contributed capital
Balance at beginning of period		41,481		47,406
Share-based expense		2,460		2,062
Vested employee share plan awards		(8,512)		(11,523)
Balance at end of period		35,429		37,945
Retained earnings
Balance at beginning of period		601,406		496,998
Net income		38,658		7,818
Dividends paid		(1,506)		(1,561)

Balance at end of period		638,558		503,255
Accumulated other comprehensive income
Balance at beginning of period		3,448		1,761
Currency translation adjustment		(836)		(537)
Balance at end of period		2,612		1,224
Total stockholders' equity		$	719,740	$	586,730

Dividends paid per share		$	0.12	$	0.12


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


(Expressed in thousands)
	As of March 31, 2021

2021	$	1,064
2020	644
2019	444
2018	173
2017	662
2016 and prior	3,491
Total	$	6,478


(Expressed in thousands)
	For the Three Months Ended
	March 31, 2021
Beginning balance	$	4,234
Additions and other adjustments	532
Ending balance	$	4,766


	As of
	March 31, 2021	December 31, 2020

Weighted average remaining lease term (in years)	7.66	7.84
Weighted average discount rate	7.32%	7.43%


(Expressed in thousands)
	For the Three Months Ended March 31,
		2021		2020
Operating lease costs:
Real estate leases - Right-of-use lease asset amortization		$	6,056	$	5,740
Real estate leases - Interest expense		3,596		3,911
Equipment leases - Right-of-use lease asset amortization		445		473
Equipment leases - Interest expense		39		54


(Expressed in thousands)	For the Three Months Ended March 31, 2021
	Reportable Segments
	Private Client		Asset Management		Capital Markets		Corporate/Other		Total
Revenue from contracts with customers:
Commissions from sales and trading	$	48,398	$	—	$	55,800	$	(3)	$	104,195
Mutual fund income	9,198		—		2		76		9,276
Advisory fees	80,254		24,227		3		12		104,496
Investment banking - capital markets	8,510		—		80,069		—		88,579
Investment banking - advisory	—		—		35,922		—		35,922
Bank deposit sweep income	4,008		—		—		—		4,008
Other	3,120		—		559		14		3,693
Total revenue from contracts with customers	153,488		24,227		172,355		99		350,169
Other sources of revenue:
Interest	6,476		—		2,152		38		8,666
Principal transactions, net	630		—		8,954		1,281		10,865
Other	3,429		3		138		12		3,582
Total other sources of revenue	10,535		3		11,244		1,331		23,113
Total revenue	$	164,023	$	24,230	$	183,599	$	1,430	$	373,282


(Expressed in thousands)
	As of
	March 31, 2021		December 31, 2020
2021	$	31,480	$	40,981
2022	38,610		36,999
2023	35,592		33,984
2024	30,916		29,425
2025	25,377		23,872
After 2025	94,474		92,069
Total lease payments	$	256,449	$	257,330
Less interest	(61,678)		(63,957)
Present value of lease liabilities	$	194,771	$	193,373


(Expressed in thousands)
	Fair Value		Unfunded Commitments		Redemption Frequency	Redemption Notice Period
Hedge funds (1)	$	1,112	$	—	Quarterly - Annually	30 - 120 Days
Private equity funds (2)	3,709		3,011		N/A	N/A
	$	4,821	$	3,011


(Expressed in thousands)
	Fair Value Measurements as of March 31, 2021
	Level 1		Level 2		Level 3		Total
Assets

Deposits with clearing organizations	$	25,899	$	—	$	—	$	25,899
Securities owned:
U.S. Treasury securities	427,489		—		—		427,489
U.S. Agency securities	—		18,339		—		18,339
Sovereign obligations	—		409		—		409
Corporate debt and other obligations	—		21,227		—		21,227
Mortgage and other asset-backed securities	—		5,541		—		5,541
Municipal obligations	—		40,296		—		40,296
Convertible bonds	—		18,782		—		18,782
Corporate equities	41,364		—		—		41,364
Money markets	413		—		—		413
Auction rate securities	—		—		31,470		31,470
Securities owned, at fair value	469,266		104,594		31,470		605,330
Investments (1)	—		4,440		—		4,440

Derivative contracts:
TBAs	—		83		—		83


Total	$	495,165	$	109,117	$	31,470	$	635,752
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	324,612	$	—	$	—	$	324,612
U.S. Agency securities	—		5		—		5
Sovereign obligations	—		1,609		—		1,609
Corporate debt and other obligations	—		6,199		—		6,199
Mortgage and other asset-backed securities	—		1		—		1

Convertible bonds	—		5,873		—		5,873
Corporate equities	22,187		—		—		22,187

Securities sold but not yet purchased, at fair value	346,799		13,687		—		360,486

Derivative contracts:
Futures	296		—		—		296

TBAs	—		56		—		56
ARS purchase commitments	—		—		65		65
Derivative contracts, total	296		56		65		417
Total	$	347,095	$	13,743	$	65	$	360,903


(Expressed in thousands)
	Fair Value Measurements as of December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets


Deposits with clearing organizations	$	23,991	$	—	$	—	$	23,991
Securities owned:
U.S. Treasury securities	448,312		—		—		448,312
U.S. Agency securities	—		24,616		—		24,616
Sovereign obligations	—		367		—		367
Corporate debt and other obligations	—		23,977		—		23,977
Mortgage and other asset-backed securities	—		3,103		—		3,103
Municipal obligations	—		25,190		—		25,190
Convertible bonds	—		17,497		—		17,497
Corporate equities	36,554		—		—		36,554
Money markets	200		—		—		200
Auction rate securities	—		—		30,701		30,701
Securities owned, at fair value	485,066		94,750		30,701		610,517
Investments (1)	—		4,181		—		4,181

Derivative contracts:
TBAs	—		15		—		15


Total	$	509,057	$	98,946	$	30,701	$	638,704
Liabilities
Securities sold but not yet purchased:
U.S. Treasury securities	$	93,261	$	—	$	—	$	93,261
U.S. Agency securities	—		9		—		9
Sovereign obligations	—		623		—		623
Corporate debt and other obligations	—		5,283		—		5,283



Corporate equities	17,892		—		—		17,892

Securities sold but not yet purchased, at fair value	111,153		15,018		—		126,171

Derivative contracts:
Futures	22		—		—		22

TBAs	—		3		—		3
ARS purchase commitments	—		—		195		195
Derivative contracts, total	22		3		195		220
Total	$	111,175	$	15,021	$	195	$	126,391


(Expressed in thousands)
	Level 3 Assets and Liabilities
	For the Three Months Ended March 31, 2021
			Total Realized
	Beginning		and Unrealized		Purchases		Sales and		Transfers		Ending
	Balance		Gains (Losses)(3)(4)		and Issuances		Settlements		In (Out)		Balance
Assets
Auction rate securities (1)	$	30,701	$	(131)	$	1,875	$	(975)	$	—	$	31,470

Liabilities
ARS Purchase Commitments (2)	195		—		—		(130)		—		65


(Expressed in thousands)			Fair Value Measurement: Assets
	Carrying Value		Level 1		Level 2		Level 3		Total
Cash	$	28,545	$	28,545	$	—	$	—	$	28,545
Deposits with clearing organization	51,395		51,395		—		—		51,395
Receivable from brokers, dealers and clearing organizations:
Securities borrowed	109,763		—		109,763		—		109,763
Receivables from brokers	32,994		—		32,994		—		32,994
Securities failed to deliver	62,193		—		62,193		—		62,193
Clearing organizations	28,221		—		28,221		—		28,221
Other	717		—		717		—		717
	233,888		—		233,888		—		233,888
Receivable from customers	1,152,499		—		1,152,499		—		1,152,499
Securities purchased under agreements to resell	25,937		—		25,937		—		25,937
Notes receivable, net	48,847		—		48,847		—		48,847
Investments (1)	88,963		—		88,963		—		88,963


(Expressed in thousands)			Fair Value Measurement: Liabilities
	Carrying Value		Level 1		Level 2		Level 3		Total
Drafts payable	$	12,392	$	12,392	$	—	$	—	$	12,392
Bank call loans	75,100		—		75,100		—		75,100
Payables to brokers, dealers and clearing organizations:
Securities loaned	257,342		—		257,342		—		257,342
Payable to brokers	1,336		—		1,336		—		1,336
Securities failed to receive	38,100		—		38,100		—		38,100
Other	124,339		—		124,339		—		124,339
	421,117		—		421,117		—		421,117
Payables to customers	462,450		—		462,450		—		462,450
Securities sold under agreements to repurchase	7,150		—		7,150		—		7,150
Senior secured notes	125,000		—		129,375		—		129,375


(Expressed in thousands)
	Fair Value of Derivative Instruments as of March 31, 2021
	Description	Notional		Fair Value
Assets:
Derivatives not designated as hedging instruments (1)
Other contracts	TBAs	$	40,550	$	83


		$	40,550	$	83
Liabilities:
Derivatives not designated as hedging instruments (1)
Commodity contracts	Futures	$	2,860,000	$	296

Other contracts	TBAs	34,884		56


	ARS purchase commitments	435		65
		$	2,895,319	$	417


(Expressed in thousands)
	Overnight and Open
Repurchase agreements:
U.S. Government and Agency securities	$	301,882
Securities loaned:
Equity securities	257,342
Gross amount of recognized liabilities for repurchase agreements and securities loaned	$	559,224


As of March 31, 2021
(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	$	320,669	$	(294,732)	$	25,937	$	(25,937)	$	—	$	—
Securities borrowed (1)	109,763		—		109,763		(107,957)		—		1,806
Total	$	430,432	$	(294,732)	$	135,700	$	(133,894)	$	—	$	1,806


							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	$	301,882	$	(294,732)	$	7,150	$	—	$	—	$	7,150
Securities loaned (2)	257,342		—		257,342		(253,320)		—		4,022
Total	$	559,224	$	(294,732)	$	264,492	$	(253,320)	$	—	$	11,172


As of December 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	$	88,349	$	(88,349)	$	—	$	—	$	—	$	—
Securities borrowed (1)	110,932		—		110,932		(109,922)		—		1,010
Total	$	199,281	$	(88,349)	$	110,932	$	(109,922)	$	—	$	1,010


(Expressed in thousands)
	As of March 31, 2021
	Total VIE Assets (1)		Carrying Value of the Company's Variable Interest				Capital Commitments		Maximum Exposure to Loss in Non-consolidated VIEs
			Assets		Liabilities
Hedge funds	$	546,555	$	—	$	—	$	—	$	—
Special Purpose Acquisition Companies	1,365		—		—		—		—
Total	$	547,920	$	—	$	—	$	—	$	—


(Expressed in thousands)
Issued	Maturity Date	March 31, 2021		December 31, 2020
5.50% Senior Secured Notes	10/1/2025	$	125,000	$	125,000

Unamortized Debt Issuance Costs		(1,114)		(1,154)
		$	123,886	$	123,846


(Expressed in thousands, except Per Share Amounts or otherwise indicated)
	1Q-2021		1Q-2020		Change		% Change
Revenue	$	373,282	$	234,770	$	138,512	59.0
Compensation expense	$	255,601	$	157,676	$	97,925	62.1
Non-compensation expense	$	65,554	$	66,871	$	(1,317)	(2.0)
Pre-Tax Income	$	52,127	$	10,223	$	41,904	409.9
Income Taxes	$	13,469	$	2,405	$	11,064	460.0
Net Income	$	38,658	$	7,818	$	30,840	394.5

Earnings per share (basic)	$	3.07	$	0.61	$	2.46	403.3
Earnings per share (diluted)	$	2.91	$	0.58	$	2.33	401.7

Book Value Per Share	$	56.74	$	46.16	$	10.58	22.9
Tangible Book Value Per Share	$	43.34	$	32.79	$	10.55	32.2

CAUA ($ billions)	$	111.4	$	79.1	$	32.3	40.8
AUM ($ billions)	$	40.2	$	28.0	$	12.2	43.6


('000s, except Financial advisor headcount or otherwise indicated)
	1Q-2021		1Q-2020		Change		% Change
Revenue	$	164,023	$	141,418	$	22,605	16.0
Retail commissions	$	57,596	$	56,931	$	665	1.2
Advisory fee revenue	$	80,254	$	66,882	$	13,372	20.0
Bank deposit sweep income	$	4,008	$	18,826	$	(14,818)	(78.7)
Interest	$	6,476	$	7,681	$	(1,205)	(15.7)
Other	$	15,689	$	(8,902)	$	24,591	*

Total Expenses	$	139,760	$	108,049	$	31,711	29.3
Compensation	$	111,395	$	80,173	$	31,222	38.9
Non-compensation	$	28,365	$	27,876	$	489	1.8

Client Asset Under Administration (billions)	$	111.4	$	79.1	$	32.3	40.8
Cash Sweep Balances (billions)	$	7.4	$	6.4	$	1.0	26.0
Financial Advisor Headcount	1,000		1,029		(29)		(2.8)


('000s unless otherwise indicated)	1Q-2021		1Q-2020		Change		% Change
Revenue	$	24,230	$	19,276	$	4,954	25.7
Advisory fee revenue	$	24,227	$	19,270	$	4,957	25.7
Other	$	3	$	6	$	(3)	(50.0)

Total Expenses	$	16,677	$	14,971	$	1,706	11.4
Compensation	$	7,259	$	6,351	$	908	14.3
Non-compensation	$	9,418	$	8,620	$	798	9.3

AUM (billions)	$	40.2	$	28.0	$	12.2	43.6


(Expressed in millions)
	For the Three Months Ended March 31, 2021
	Beginning Balance						Appreciation (Depreciation)		Ending Balance
Fund Type			Contributions		Redemptions
Traditional (1)	$	23,349	$	6,648	$	(6,150)	$	9,688	$	33,535
Institutional Fixed Income (2)	744		86		(79)		58		809
Alternative Investments:
Hedge funds (3)	3,167		736		(507)		1,375		4,771
Private Equity Funds (4)	308		169		(35)		252		694
Portfolio Enhancement Program (5)	422		6		(39)		—		389
	$	27,990	$	7,645	$	(6,810)	$	11,373	$	40,198


('000s)	1Q-2021		1Q-2020		Change		% Change
Revenues	$	183,599	$	75,542	$	108,057	143.0

Investment Banking	$	116,836	$	22,036	$	94,800	430.2
Advisory fees	$	35,922	$	9,836	$	26,086	265.2
Equities underwriting	$	74,582	$	8,315	$	66,267	797.0
Fixed income underwriting	$	5,487	$	3,627	$	1,860	51.3
Other	$	845	$	258	$	587	227.5

Sales and Trading	$	66,063	$	52,840	$	13,223	25.0
Equities	$	43,556	$	30,990	$	12,566	40.5
Fixed Income	$	22,507	$	21,850	$	657	3.0

Other	$	700	$	666	$	34	5.1

Total Expenses	$	133,608	$	75,685	$	57,923	76.5
Compensation	$	111,930	$	51,004	$	60,926	119.5
Non-compensation	$	21,678	$	24,681	$	(3,003)	(12.2)


(Expressed in thousands)
			Less than 1 Year						More than 5 Years
	Total				1-3 Years		3-5 Years
Operating Lease Obligations (1)(2)	$	272,614	$	40,721	$	107,634	$	53,360	$	70,899
Committed Capital (3)	3,011		3,011		—		—		—
Senior Secured Notes (4)(5)	157,656		8,594		20,625		128,437		—
ARS Purchase Commitments (3)	435		435		—		—		—
Total	$	433,716	$	52,761	$	128,259	$	181,797	$	70,899


31.1			Certification of Albert G. Lowenthal

31.2			Certification of Jeffrey J. Alfano

32			Certification of Albert G. Lowenthal and Jeffrey J. Alfano

101			Interactive data files pursuant to Rule 405 of Regulation S-T (unaudited): (i) the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020, (ii) the Condensed Consolidated Income Statements for the three months ended March 31, 2021 and 2020, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020, (iv) the Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2021 and 2020, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020, and (vi) the notes to the Condensed Consolidated Financial Statements.*

*			This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.