8-K
Oppenheimer Holdings Inc (OPY)
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As filed with the Securities and Exchange Commission on October 25, 2024
___________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 25, 2024
OPPENHEIMER HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Commission File Number 1-12043
| Delaware | 98-0080034 |
|---|---|
| (State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization) | Identification No.) |
85 Broad Street
New York, New York 10004
(Address of principal executive offices) (Zip Code)
(212) 668-8000
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CRF 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| 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 |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
SECTION 2 – FINANCIAL INFORMATION
ITEM 2.02. Results of Operations and Financial Condition.
(a)On October 25, 2024, Oppenheimer Holdings Inc. (the “Company”) issued a press release announcing its third quarter 2024 earnings. A copy of the October 25, 2024 press release is furnished as Exhibit 99.1 to this Report and is incorporated herein by reference.
The information contained in this Item 2.02 and the related exhibit attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information or such exhibit be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. The information set forth in this Item 2.02 or any exhibit related to this Item 2.02 on this Form 8-K shall not be deemed an admission as to the materiality of any information in the referenced items.
SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01. Financial Statements and Exhibits.
(d)Exhibits:
The following exhibit is furnished (not filed) with this Current Report on Form 8-K:
99.1 Oppenheimer Holdings Inc.'s Press Release dated October 25, 2024
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Oppenheimer Holdings Inc.
| Date: October 25, 2024<br><br>By: /s/ Brad M. Watkins <br>---------------------------------<br>Brad M. Watkins <br>Chief Financial Officer<br>(Duly Authorized Officer) |
|---|
EXHIBIT INDEX
| Exhibit Number | Description |
|---|---|
| 99.1 | Oppenheimer Holdings Inc.'s Press Release datedOctober25, 2024 |
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Document
Exhibit 99.1
Oppenheimer Holdings Inc. Reports Third Quarter 2024 Earnings
New York, October 25, 2024 – Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported net income of $24.5 million or $2.38 basic earnings per share for the third quarter of 2024, compared with net income of $13.9 million or $1.32 basic earnings per share for the third quarter of 2023. Revenue for the third quarter of 2024 was $373.4 million, an increase of 19.4%, compared to revenue of $312.7 million for the third quarter of 2023.
Albert G. Lowenthal, Chairman and CEO commented, "The Firm delivered strong operating results for the quarter in a still-resilient economic environment. During the third quarter, all major indices reached new highs, mostly spurred by the Federal Reserve’s long-awaited decision to reduce the Federal Funds rate by one half percent with the view that lower borrowing costs will slow the uptick in unemployment without rekindling higher inflation. Based on recent economic indicators, it appears that the U.S. economy is headed for a soft landing, amidst continued growth in the economy as we move into 2025.
The continued outperformance of the equity markets aided our Wealth Management franchise by driving better than expected retail trading volumes and related commission revenues during what is typically a seasonally slower summer trading period. The markets also propelled our assets under management (“AUM”) to our third consecutive record, resulting in higher asset-based advisory fees. Additionally, higher average margin loans drove a meaningful improvement in our interest revenues from the prior year, though our interest sensitive sweep income was somewhat reduced due to lower average sweep balances.
Our investment banking revenues also rose due to an uptick in our advisory fees, particularly in our restructuring practice. Equity underwriting fees were adversely impacted by lower issuance levels as we have seen economic uncertainty restrict issuances despite the general improvement in market breadth and market averages. We believe that that Firm is well positioned to benefit as issuance volumes improve.
Our results drove yet another fresh record in our book value per share levels and provided us with the opportunity to further strengthen our balance sheet as we announced our plans to redeem all outstanding senior secured notes ($113.05 million) at their par amounts, and retired the notes on October 10, 2024. Access to capital for expansion will continue to be available as needed. "
| Summary Operating Results (Unaudited) | ||||
|---|---|---|---|---|
| ('000s, except per share amounts or otherwise indicated) | ||||
| Firm | 3Q-24 | 3Q-23 | ||
| Revenue | $ | 373,352 | $ | 312,667 |
| Compensation Expenses | $ | 237,935 | $ | 195,684 |
| Non-compensation Expenses | $ | 100,047 | $ | 95,396 |
| Pre-Tax Income | $ | 35,370 | $ | 21,587 |
| Income Tax Provision | $ | 10,862 | $ | 7,808 |
| Net Income (1) | $ | 24,508 | $ | 13,861 |
| Earnings Per Share (Basic) (1) | $ | 2.38 | $ | 1.32 |
| Earnings Per Share (Diluted) (1) | $ | 2.16 | $ | 1.21 |
| Book Value Per Share | $ | 81.10 | $ | 75.01 |
| Tangible Book Value Per Share (2) | $ | 64.03 | $ | 58.65 |
| Private Client | ||||
| Revenue | $ | 218,787 | $ | 193,254 |
| Pre-Tax Income | $ | 62,894 | $ | 65,249 |
| Assets Under Administration (billions) | $ | 129.8 | $ | 110.7 |
| Asset Management | ||||
| Revenue | $ | 27,262 | $ | 20,830 |
| Pre-Tax Income | $ | 9,121 | $ | 4,951 |
| Assets Under Management (billions) | $ | 49.1 | $ | 40.4 |
| Capital Markets | ||||
| Revenue | $ | 124,030 | $ | 94,576 |
| Pre-Tax Loss | $ | (6,144) | $ | (15,254) |
| (1) Attributable to Oppenheimer Holdings Inc. | ||||
| (2) Represents book value less goodwill and intangible assets divided by number of shares outstanding. |
Highlights
•Increased revenue for the third quarter of 2024 was primarily driven by significantly higher advisory fees attributable to a rise in billable assets under management ("AUM"), an increase in transaction-based commissions as well as improved investment banking and interest revenues
•Announced plans to further strengthen balance sheet through the redemption of all outstanding Senior Secured Notes which occurred on October 10, 2024
•Assets under administration and under management were both at record levels at September 30, 2024, benefiting from market appreciation
•Compensation expenses increased from the prior year quarter largely as a result of higher incentive compensation, deferred compensation and production-related expenses.
•Non-compensation expenses increased from the prior year quarter primarily due to higher interest and technology related expenses partially offset by lower legal costs
•Total stockholder's equity, book value and tangible book value per share reached new record highs as a result of positive earnings
Private Client
Private Client reported revenue for the current quarter of $218.8 million, 13.2% higher compared with a year ago mostly due to higher advisory fees driven by appreciation in AUM and an increase in commission revenue due to higher transactional volume. Pre-tax income of $62.9 million in the current quarter resulted in a pre-tax margin of 28.8%. Financial advisor headcount at the end of the current quarter was 928 compared to 946 at the end of the third quarter of 2023.
Revenue:
•Retail commissions increased 23.6% from a year ago primarily due to higher retail trading activity
•Advisory fees increased 13.8% due to higher AUM during the billing period for the current quarter when compared to the third quarter of last year
•Bank deposit sweep income decreased $7.4 million from a year ago due to lower cash sweep balances
•Interest revenue increased 14.5% from the prior year period due to higher interest earned from margin loans
•Other revenue increased from a year ago primarily due to increases in the cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in the fair value of the policies' underlying investments
Total Expenses:
•Compensation expenses increased 28.5% from a year ago primarily due to higher production related expenses and deferred compensation costs
•Non-compensation expenses increased 4.5% from a year ago primarily due to higher interest expense
| ('000s, except otherwise indicated) | ||||||
|---|---|---|---|---|---|---|
| 3Q-24 | 3Q-23 | |||||
| Revenue | $ | 218,787 | $ | 193,254 | ||
| Commissions | $ | 54,872 | $ | 44,385 | ||
| Advisory Fees | $ | 94,187 | $ | 82,774 | ||
| Bank Deposit Sweep Income | $ | 34,875 | $ | 42,304 | ||
| Interest | $ | 24,331 | $ | 21,248 | ||
| Other | $ | 10,522 | $ | 2,543 | ||
| Total Expenses | $ | 155,893 | $ | 128,005 | ||
| Compensation | $ | 118,674 | $ | 92,383 | ||
| Non-compensation | $ | 37,219 | $ | 35,622 | ||
| Pre-Tax Income | $ | 62,894 | $ | 65,249 | ||
| Compensation Ratio | 54.2 | % | 47.8 | % | ||
| Non-compensation Ratio | 17.0 | % | 18.4 | % | ||
| Pre-Tax Margin | 28.8 | % | 33.8 | % | ||
| Assets Under Administration (billions) | $ | 129.8 | $ | 110.7 | ||
| Cash Sweep Balances (billions) | $ | 2.8 | $ | 3.5 |
Asset Management
Asset Management reported revenue for the current quarter of $27.3 million, 30.9% higher compared with a year ago. Pre-tax income was $9.1 million, an increase of 84.2% compared with the prior year period.
Revenue:
•Advisory fee revenue increased 8.9% from a year ago due to increased management fees resulting from the higher net value of billable AUM during the current quarter
Assets under Management (AUM):
▪AUM increased to $49.1 billion at September 30, 2024, the third consecutive record high, which is the basis for advisory fee billings for October 2024
▪The increase in AUM was comprised of higher asset values of $9.4 billion on existing client holdings, partially offset by payments of $0.7 billion
Total Expenses:
•Compensation expenses were up 18.1% from a year ago primarily resulting from increases in incentive compensation
•Non-compensation expenses were up 12.2% when compared to the prior year period mostly due to higher external portfolio management costs which are directly related to the increase in AUM
| ('000s, except otherwise indicated) | ||||||
|---|---|---|---|---|---|---|
| 3Q-24 | 3Q-23 | |||||
| Revenue | $ | 27,262 | $ | 20,830 | ||
| Advisory Fees | $ | 27,432 | $ | 25,188 | ||
| Other | $ | (170) | $ | (4,358) | ||
| Total Expenses | $ | 18,141 | $ | 15,879 | ||
| Compensation | $ | 6,596 | $ | 5,585 | ||
| Non-compensation | $ | 11,545 | $ | 10,294 | ||
| Pre-Tax Income | $ | 9,121 | $ | 4,951 | ||
| Compensation Ratio | 24.2 | % | 26.8 | % | ||
| Non-compensation Ratio | 42.3 | % | 49.4 | % | ||
| Pre-Tax Margin | 33.5 | % | 23.8 | % | ||
| AUM (billions) | $ | 49.1 | $ | 40.4 |
Capital Markets
Capital Markets reported revenue for the current quarter of $124.0 million, 31.1% higher when compared with the prior year period. Pre-tax loss was $6.1 million compared with a pre-tax loss of $15.3 million a year ago.
Revenue:
Investment Banking
•Advisory fees earned from investment banking activities increased 82.2% compared with a year ago primarily due to higher restructuring-related transaction activity
•Equity underwriting fees decreased 17.4% when compared with a year ago due to lower new issuance levels
•Fixed income underwriting fees were modestly higher than the prior year period
Sales and Trading
•Equities sales and trading revenue increased 7.5% compared with the prior year period mostly due to higher volumes
•Fixed income sales and trading revenue increased 45.5% compared with a year ago primarily due to an increase in trading income attributable to higher interest rates and volumes
Total Expenses:
•Compensation expenses increased 20.2% compared with a year ago largely due to costs associated with opportunistic new hires and higher incentive compensation
•Non-compensation expenses were 15.3% higher than a year ago primarily due to an increase in interest expense in financing trading inventories
| ('000s) | |||||
|---|---|---|---|---|---|
| 3Q-24 | 3Q-23 | ||||
| Revenue | $ | 94,576 | |||
| Investment Banking | $ | 36,000 | |||
| Advisory Fees | $ | 18,001 | |||
| Equities Underwriting | $ | 15,246 | |||
| Fixed Income Underwriting | $ | 2,049 | |||
| Other | $ | 704 | |||
| Sales and Trading | $ | 58,102 | |||
| Equities | $ | 30,985 | |||
| Fixed Income | $ | 27,117 | |||
| Other | $ | 474 | |||
| Total Expenses | $ | 109,830 | |||
| Compensation | $ | 72,933 | |||
| Non-compensation | $ | 36,897 | |||
| Pre-Tax Loss | (6,144) | $ | (15,254) | ||
| Compensation Ratio | 70.7 | % | 77.1 | % | |
| Non-compensation Ratio | 34.3 | % | 39.0 | % | |
| Pre-Tax Margin | (5.0) | % | (16.1) | % |
All values are in US Dollars.
Other Matters
•The Board of Directors announced a quarterly dividend to $0.18 per share payable on November 22, 2024 to holders of Class A non-voting and Class B voting common stock of record on November 8, 2024
•Compensation expense as a percentage of revenue at 63.7% was relatively flat with the same period last year
•On October 10, 2024, the Company completed its redemption of all Senior Secured Notes outstanding ($113.05 million) at their par amounts plus accrued and unpaid interest
•The effective tax rate for the current period was 30.7% compared with 36.2% for the prior year period. The effective tax rate for the third quarter of 2024 was positively impacted by fewer non-deductible expenses when compared to the prior year period.
| (In millions, except number of shares and per share amounts) | ||||||
|---|---|---|---|---|---|---|
| 3Q-24 | 3Q-23 | |||||
| Capital | ||||||
| Stockholders' Equity (1) | $ | 837.8 | $ | 779.3 | ||
| Regulatory Net Capital (2) | $ | 487.5 | $ | 437.1 | ||
| Regulatory Excess Net Capital (2) | $ | 464.6 | $ | 415.4 | ||
| Common Stock Repurchases | ||||||
| Repurchases | $ | 0.3 | $ | 6.5 | ||
| Number of Shares | 5,981 | 168,904 | ||||
| Average Price | $ | 49.30 | $ | 38.30 | ||
| Period End Shares | 10,331,401 | 10,388,898 | ||||
| Effective Tax Rate | 30.7 | % | 36.2 | % | ||
| (1) Attributable to Oppenheimer Holdings Inc. | ||||||
| (2) Attributable to Oppenheimer & Co. Inc. broker-dealer |
Company Information
Oppenheimer Holdings Inc., through its operating subsidiaries, is a leading middle market investment bank and full service broker-dealer that is engaged in a broad range of activities in the financial services industry, including retail securities brokerage, institutional sales and trading, investment banking (corporate and public finance), equity and fixed income research, market-making, trust services, and investment advisory and asset management services. With roots tracing back to 1881, the Company is headquartered in New York and has 89 retail branch offices in the United States and institutional businesses located in London, Tel Aviv, and Hong Kong.
Forward-Looking Statements
This press release includes certain "forward-looking statements" relating to anticipated future performance. For a discussion of the factors that could cause future performance to be different than anticipated, reference is made to Factors Affecting "Forward-Looking Statements" and Part 1A – Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
| Oppenheimer Holdings Inc. | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Consolidated Income Statements (Unaudited) | |||||||||||
| ('000s, except number of shares and per share amounts) | |||||||||||
| For the Three Months Ended<br>September 30, | For the Nine Months Ended<br>September 30, | ||||||||||
| 2024 | 2023 | % Change | 2024 | 2023 | % Change | ||||||
| REVENUE | |||||||||||
| Commissions | $ | 103,079 | $ | 83,933 | 22.8 | $ | 295,984 | $ | 259,174 | 14.2 | |
| Advisory fees | 121,631 | 107,969 | 12.7 | 353,675 | 310,214 | 14.0 | |||||
| Investment banking | 52,185 | 37,411 | 39.5 | 131,841 | 95,354 | 38.3 | |||||
| Bank deposit sweep income | 34,875 | 42,304 | (17.6) | 106,406 | 135,273 | (21.3) | |||||
| Interest | 38,034 | 26,430 | 43.9 | 99,605 | 78,691 | 26.6 | |||||
| Principal transactions, net | 14,364 | 16,892 | (15.0) | 42,672 | 46,635 | (8.5) | |||||
| Other | 9,184 | (2,272) | * | 26,896 | 15,195 | 77.0 | |||||
| Total revenue | 373,352 | 312,667 | 19.4 | 1,057,079 | 940,536 | 12.4 | |||||
| EXPENSES | |||||||||||
| Compensation and related expenses | 237,935 | 195,684 | 21.6 | 680,375 | 589,200 | 15.5 | |||||
| Communications and technology | 24,602 | 22,590 | 8.9 | 73,860 | 67,813 | 8.9 | |||||
| Occupancy and equipment costs | 16,240 | 17,281 | (6.0) | 47,604 | 49,622 | (4.1) | |||||
| Clearing and exchange fees | 7,125 | 6,051 | 17.7 | 19,747 | 18,241 | 8.3 | |||||
| Interest | 24,103 | 19,744 | 22.1 | 66,631 | 50,353 | 32.3 | |||||
| Other | 27,977 | 29,730 | (5.9) | 80,172 | 136,369 | (41.2) | |||||
| Total expenses | 337,982 | 291,080 | 16.1 | 968,389 | 911,598 | 6.2 | |||||
| Pre-Tax Income | 35,370 | 21,587 | 63.8 | 88,690 | 28,938 | 206.5 | |||||
| Income tax provision | 10,862 | 7,808 | 39.1 | 28,172 | 10,262 | 174.5 | |||||
| Net Income | $ | 24,508 | $ | 13,779 | 77.9 | $ | 60,518 | $ | 18,676 | 224.0 | |
| Less: Net loss attributable to non-controlling interest, net of tax | — | (82) | * | (310) | (403) | * | |||||
| Net income attributable to Oppenheimer Holdings Inc. | $ | 24,508 | $ | 13,861 | 76.8 | $ | 60,828 | $ | 19,079 | 218.8 | |
| Earnings per share attributable to Oppenheimer Holdings Inc. | |||||||||||
| Basic | $ | 2.38 | $ | 1.32 | 80.3 | $ | 5.87 | $ | 1.75 | 235.4 | |
| Diluted | $ | 2.16 | $ | 1.21 | 78.5 | $ | 5.45 | $ | 1.62 | 236.4 | |
| Weighted average number of common shares outstanding | |||||||||||
| Basic | 10,332,927 | 10,519,431 | (1.8) | 10,355,982 | 10,874,055 | (4.8) | |||||
| Diluted | 11,277,865 | 11,440,229 | (1.4) | 11,156,536 | 11,746,337 | (5.0) | |||||
| Period end number of common shares outstanding | 10,331,401 | 10,388,898 | (0.6) | 10,331,401 | 10,388,898 | (0.6) |
* Percentage not meaningful
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