Oppenheimer Holdings Inc. Reports Fourth Quarter and Full Year 2020 Earnings
Oppenheimer Holdings reported a significant rise in Q4 2020, with net income of $81.9 million ($6.56 EPS), up from $25.4 million ($1.99 EPS) in Q4 2019. Q4 revenue increased by 42.9% to $422.9 million, while FY 2020 net income rose to $123.0 million ($9.73 EPS), compared to $53.0 million in FY 2019. Revenue for FY 2020 was $1.2 billion, a 16.0% increase year-over-year. Record performance was noted in both the Asset Management and Capital Markets segments, attributed to high volatility and strong equity markets.
- Net income for Q4 2020 increased to $81.9 million, a 222.5% rise from Q4 2019.
- Revenue for Q4 2020 reached $422.9 million, marking a 42.9% year-over-year increase.
- FY 2020 net income rose to $123.0 million, a 132.1% increase compared to FY 2019.
- Asset Management revenue for Q4 2020 surged by 107.1% to $72.9 million.
- Capital Markets revenue rose by 56.8% to $131.7 million in Q4 2020.
- Private Client revenue declined by 1.7% for FY 2020 compared to FY 2019.
- Bank Deposit Sweep Income decreased significantly by 81.2% in Q4 2020 due to lower interest rates.
NEW YORK, Jan. 29, 2021 /PRNewswire/ - Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported net income of
For the year ended December 31, 2020, the Company reported net income of
Summary Operating Results (Unaudited) | ||||||||||||
('000s, except per share amounts or otherwise indicated) | ||||||||||||
Firm | 4Q-20 | 4Q-19 | FY-20 | FY-19 | ||||||||
Revenue | $ | 422,908 | $ | 295,881 | $ | 1,198,667 | $ | 1,033,379 | ||||
Compensation Expense | $ | 244,073 | $ | 190,292 | $ | 770,997 | $ | 657,714 | ||||
Non-compensation Expense | $ | 65,040 | $ | 70,616 | $ | 258,670 | $ | 300,753 | ||||
Pre-Tax Income | $ | 113,795 | $ | 34,973 | $ | 169,000 | $ | 74,912 | ||||
Income Taxes | $ | 31,915 | $ | 9,538 | $ | 46,014 | $ | 21,959 | ||||
Net Income | $ | 81,880 | $ | 25,435 | $ | 122,986 | $ | 52,953 | ||||
Earnings Per Share - Basic | $ | 6.56 | $ | 1.99 | $ | 9.73 | $ | 4.10 | ||||
Earnings Per Share - Diluted | $ | 6.17 | $ | 1.84 | $ | 9.30 | $ | 3.82 | ||||
Book Value Per Share | $ | 54.93 | $ | 46.31 | $ | 54.93 | $ | 46.31 | ||||
Tangible Book Value Per Share (1) | $ | 41.31 | $ | 33.03 | $ | 41.31 | $ | 33.03 | ||||
(1) Represents book value less goodwill and intangible assets divided by number of shares outstanding | ||||||||||||
Annual Highlights
- Record gross revenue for the fourth quarter and full year
- Record pre-tax income and net income for the fourth quarter and full year
- Record basic and diluted earnings per share for the fourth quarter and full year
- Record revenue and earnings for the fourth quarter and full year in Asset Management segment driven by record incentive fees from alternative investments
- Record revenue and earnings in Capital Markets segment for the fourth quarter and full year driven by record investment banking results
- Shareholders' Equity reached a record of
$685.6 million as of December 31, 2020 - Book value and tangible book value per share reached record levels at December 31, 2020
- Client assets under administration and under management were both at record levels at December 31, 2020
Albert G. Lowenthal, Chairman and CEO commented, "The results for the fourth quarter and full year 2020 were outstanding and really showcased the strength of the platform and the dedication and commitment from our employees throughout this COVID-19 impacted year. The combination of a low interest rate environment, high volatility, and a robust rally in equities over the last nine months provided the impetus for extremely favorable results for the year. Our Capital Markets business continued to outperform with a record quarter and year for revenue and earnings, while the Wealth Management business continued to produce solid operating returns based on increased commission activity and higher fee income from assets under management. The Wealth Management business got a significant boost from the record performance of the hedge funds that we sponsor which led to an increase in incentive fees from alternative investments in the fourth quarter of 2020 which are measured and earned at the end of each year.
Investment banking had its best quarter ever as the Firm increased its market share during a robust period for equities issuance in the U.S. capital markets. M&A activity also picked up significantly during the fourth quarter with several notable advisory and placement fees. Equities and fixed income sales and trading activity continued to be brisk as volatility remained elevated during the period. The broader equities markets finished the year at record levels and were up
Non-compensation expenses remained under close control and we were able to manage our operating environment throughout this year of remote work. At year-end we continued to operate with about
Segment Results (Unaudited) | ||||||||||||
('000s, except per share amounts or otherwise indicated) | ||||||||||||
4Q-20 | 4Q-19 | FY-20 | FY-19 | |||||||||
Private Client | ||||||||||||
Revenue | $ | 217,743 | $ | 175,900 | $ | 642,083 | $ | 653,409 | ||||
Pre-Tax Income | $ | 39,362 | $ | 42,416 | $ | 122,844 | $ | 163,917 | ||||
Assets Under Administration ($Bn) | $ | 104.8 | $ | 91.0 | $ | 104.8 | $ | 91.0 | ||||
Asset Management | ||||||||||||
Revenue | $ | 72,851 | $ | 35,179 | $ | 130,274 | $ | 88,755 | ||||
Pre-Tax Income | $ | 56,911 | $ | 19,114 | $ | 71,625 | $ | 31,606 | ||||
Asset Under Management ($Bn) | $ | 38.8 | $ | 32.1 | $ | 38.8 | $ | 32.1 | ||||
Capital Markets | ||||||||||||
Revenue | $ | 131,651 | $ | 83,982 | $ | 426,752 | $ | 290,830 | ||||
Pre-Tax Income (Loss) | $ | 41,894 | $ | (2,891) | $ | 83,442 | $ | (13,724) | ||||
Fourth Quarter Results
Private Client
Private Client reported revenue of
('000s, except otherwise indicated) | ||||||
4Q-20 | 4Q-19 | |||||
Revenue | $ | 217,743 | $ | 175,900 | ||
Commissions | $ | 53,383 | $ | 48,407 | ||
Advisory Fees | $ | 133,562 | $ | 83,205 | ||
Bank Deposit Sweep Income | $ | 4,262 | $ | 22,729 | ||
Interest | $ | 6,393 | $ | 8,110 | ||
Other | $ | 20,143 | $ | 13,449 | ||
Total Expenses | $ | 178,381 | $ | 133,484 | ||
Compensation | $ | 151,774 | $ | 103,649 | ||
Non-compensation | $ | 26,607 | $ | 29,835 | ||
Assets Under Administration ($Bn) | $ | 104.8 | $ | 91.0 | ||
Cash Sweep Balances ($Bn) | $ | 7.3 | $ | 4.9 | ||
Revenue:
- Retail commissions increased
10.3% from a year ago as a result of increased volatility and client participation - Advisory fees increased
60.5% due to higher assets under management at September 30, 2020 compared with September 30, 2019 as well as higher incentive fees from alternative investments - Incentive fees allocated to this segment were
$61.6 million for the current quarter versus$20.4 million last year - Bank deposit sweep income decreased
$18.5 million or81.2% from a year ago due to lower short-term interest rates partially offset by higher average cash sweep balances - Interest revenue declined
21.2% from a year ago due to lower short-term interest rates partially offset by higher average margin balances - Other revenue increased
49.8% compared with a year ago primarily due to increases in the cash surrender value of Company-owned life insurance policies
Total Expenses:
- Compensation expenses increased
46.4% compared with a year ago primarily due to increased production and deferred compensation costs which are directly tied to commissionable revenue. - During the current quarter, the Company incurred
$9.4 million in expenses (versus a credit of$2.1 million in the prior quarter) related to its stock appreciate rights plan which tracks the Company's stock price - Non-compensation expenses decreased
10.8% compared with a year ago primarily due to lower interest costs associated with the bank deposit sweep program
Asset Management
Asset Management reported revenue of
('000s, except otherwise indicated) | ||||||
4Q-20 | 4Q-19 | |||||
Revenue | $ | 72,851 | $ | 35,179 | ||
Advisory Fees | $ | 70,847 | $ | 35,176 | ||
Other | $ | 2,004 | $ | 3 | ||
Total Expenses | $ | 15,940 | $ | 16,065 | ||
Compensation | $ | 7,104 | $ | 7,806 | ||
Non-compensation | $ | 8,836 | $ | 8,259 | ||
AUM ($Bn) | $ | 38.8 | $ | 32.1 | ||
Revenue:
- Advisory fee revenue increased
101.4% due to higher assets under management at September 30, 2020 compared with September 30, 2019 as well as higher incentive fees from alternative investments - Incentive fees allocated to this segment were
$49.2 million for the current quarter versus$16.3 million last year
Assets under Management (AUM):
- AUM hit a record level of
$38.8 billion at December 31, 2020, which is the basis for advisory fee billings for the first quarter of 2021 - The increase in AUM was comprised of higher asset values of
$6.0 billion on existing client holdings and a net contribution of assets of$0.7 billion
Total Expenses:
- Compensation expenses were down
9.0% and non-compensation expenses were up7.0% when compared with a year ago
Capital Markets
Capital Markets reported revenue of
('000s) | ||||||
4Q-20 | 4Q-19 | |||||
Revenue | $ | 131,651 | $ | 83,982 | ||
Investment Banking | $ | 78,048 | $ | 40,633 | ||
Advisory Fees | $ | 32,749 | $ | 13,211 | ||
Equities Underwriting | $ | 39,205 | $ | 12,916 | ||
Fixed Income Underwriting | $ | 5,474 | $ | 14,281 | ||
Other | $ | 620 | $ | 225 | ||
Sales and Trading | $ | 52,723 | $ | 42,903 | ||
Equities | $ | 34,546 | $ | 24,859 | ||
Fixed Income | $ | 18,177 | $ | 18,044 | ||
Other | $ | 880 | $ | 446 | ||
Total Expenses | $ | 89,757 | $ | 86,873 | ||
Compensation | $ | 67,070 | $ | 59,911 | ||
Non-compensation | $ | 22,687 | $ | 26,962 | ||
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities increased
147.9% compared with a year ago driven by increased M&A activity and fees associated with a significant number of capital raising transactions (PIPEs) in the healthcare and technology sectors completed during the period - Equities underwriting fees increased
203.5% compared with a year ago due to significantly higher levels of capital issuances in the equity markets - Fixed income underwriting fees were down
61.7% compared with a year ago primarily due to lower levels of emerging market issuances partially offset by increases in public finance issuances
Sales and Trading
- Equities sales and trading increased
39.0% compared with a year ago due to continued elevated volatility in the equities markets and an increase in market share - Fixed Income sales and trading increased
0.7% compared to the prior year
Total Expenses:
- Compensation expenses increased
11.9% compared with the prior year primarily due to increased production and incentive compensation tied to increases in revenue - Non-compensation expenses decreased
15.9% compared with a year ago due to decreased interest costs and reduced costs associated with business travel and entertainment
Full Year Results
Private Client
Private Client reported revenue of
('000s) | ||||||
FY-20 | FY-19 | |||||
Revenue | $ | 642,083 | $ | 653,409 | ||
Commissions | $ | 209,447 | $ | 188,690 | ||
Advisory Fees | $ | 326,858 | $ | 264,839 | ||
Bank Deposit Sweep Income | $ | 34,829 | $ | 117,422 | ||
Interest | $ | 25,148 | $ | 35,811 | ||
Other | $ | 45,801 | $ | 46,647 | ||
Total Expenses | $ | 519,239 | $ | 489,492 | ||
Compensation | $ | 412,021 | $ | 362,665 | ||
Non-compensation | $ | 107,218 | $ | 126,827 | ||
Revenue:
- Retail commissions increased
11.0% from a year ago as a result of increased volatility and client participation in active equities-related markets including options - Advisory fees increased
23.4% due to increases in management fees from advisory programs and incentive fees from alternative investments during the year - Incentive fees allocated to this segment were
$61.7 million for the 2020 year versus$20.8 million last year - Bank deposit sweep income decreased
$82.6 million or70.3% from a year ago due to lower short-term interest rates partially offset by higher average cash sweep balances - Interest revenue declined
29.8% from a year ago due to lower short-term interest rates partially offset by higher average margin balances - Other revenue decreased
1.8% primarily due to decreases in the cash surrender value of Company-owned life insurance policies
Total Expenses:
- Compensation expenses increased
13.6% from a year ago primarily due to increased production and share-based compensation costs partially offset by lower deferred compensation - Non-compensation expenses decreased
15.5% from a year ago primarily due to lower interest, legal and regulatory as well as travel and entertainment costs
Asset Management
Asset Management reported revenue of
('000s) | ||||||
FY-20 | FY-19 | |||||
Revenue | $ | 130,274 | $ | 88,755 | ||
Advisory Fees | $ | 128,258 | $ | 88,748 | ||
Other | $ | 2,016 | $ | 7 | ||
Total Expenses | $ | 58,649 | $ | 57,149 | ||
Compensation | $ | 25,128 | $ | 25,180 | ||
Non-compensation | $ | 33,521 | $ | 31,969 | ||
AUM ($Bn) | $ | 38.8 | $ | 32.1 | ||
Revenue:
- Advisory fee revenue increased
44.5% from a year ago due to higher assets under management during the year as well as higher incentive fees from alternative investments - Incentive fees allocated to this segment were
$49.4 million for the 2020 year versus$16.7 million last year
Assets under Management (AUM):
- AUM hit a record level of
$38.8 billion at December 31, 2020, which is the basis for advisory fee billings for the first quarter of 2021 - The increase in AUM was comprised of higher asset values of
$6.0 billion on existing client holdings and a net contribution of assets of$0.7 billion
Total Expenses:
- Compensation expenses were down
0.2% and non-compensation expenses were up4.9% when compared to the prior year
Capital Markets
Capital Markets reported revenue of
('000s) | ||||||
FY-20 | FY-19 | |||||
Revenue | $ | 426,752 | $ | 290,830 | ||
Investment Banking | $ | 206,098 | $ | 113,369 | ||
Advisory Fees | $ | 80,534 | $ | 53,424 | ||
Equities Underwriting | $ | 103,276 | $ | 40,813 | ||
Fixed Income Underwriting | $ | 20,394 | $ | 18,447 | ||
Other | $ | 1,894 | $ | 685 | ||
Sales and Trading | $ | 217,711 | $ | 175,616 | ||
Equities | $ | 130,668 | $ | 99,848 | ||
Fixed Income | $ | 87,043 | $ | 75,768 | ||
Other | $ | 2,943 | $ | 1,845 | ||
Total Expenses | $ | 343,310 | $ | 304,554 | ||
Compensation | $ | 251,697 | $ | 193,861 | ||
Non-compensation | $ | 91,613 | $ | 110,693 | ||
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities increased
50.7% compared with a year ago driven by increased M&A activity and fees associated with a significant number of capital raising transactions (PIPES) in the healthcare and technology sectors completed during the year - Equities underwriting fees increased
153.0% compared with a year ago due to significantly higher levels of capital issuances in the equity markets particularly in healthcare and technology sectors - Fixed income underwriting fees were up
10.6% compared with a year ago primarily driven by public finance issuances during the year, partially offset by lower underwriting fees in emerging markets
Sales and Trading
- Equities sales and trading increased
30.9% compared with a year ago due to elevated volatility in the equities markets during the year - Fixed Income sales and trading increased
14.9% compared with a year ago driven by robust trading in taxable fixed income during the year
Total Expenses:
- Compensation expenses increased
29.8% compared with a year ago primarily due to increased production and incentive compensation tied to increases in revenue - Non-compensation expenses were
17.2% lower compared with a year ago due to decreased interest costs and reduced costs associated with business travel and entertainment and conferences
Other Matters
(In millions, except percentages, number of shares and per share | ||||||
FY-20 | FY-19 | |||||
Capital | ||||||
Senior Secured Notes | $ | 123.8 | $ | 149.5 | ||
Shareholders' Equity | $ | 685.6 | $ | 592.7 | ||
Regulatory Net Capital (1) | $ | 274.5 | $ | 223.4 | ||
Regulatory Excess Net Capital (1) | $ | 250.1 | $ | 206.7 | ||
Common Stock Repurchases | ||||||
Repurchases | $ | 15.0 | $ | 8.4 | ||
Number of Shares | 718,522 | 323,249 | ||||
Average Price | $ | 20.94 | $ | 25.99 | ||
Period End Shares | 12,481,443 | 12,798,368 | ||||
Effective Tax Rate | 27.2 | % | 29.3 | % | ||
(1) Attributable to Oppenheimer & Co. Inc. broker-dealer | ||||||
- Shareholders' equity reached a record high of
$685.6 million at December 31, 2020 - The Board of Directors announced a quarterly dividend in the amount of
$0.12 per share for the fourth quarter of 2020 payable on February 26, 2021 to holders of Class A non-voting and Class B voting common stock of record on February 12, 2021 - The Company paid a special dividend of
$1.00 per share to holders of Class A non-voting and Class B voting common stock on December 30, 2020 in the amount of$12.5 million bringing total 2020 dividends to$1.48 per share compared to$0.48 per share in 2019 - Level 3 assets, comprised of auction rate securities, were
$30.7 million as of December 31, 2020 - Compensation expense as a percentage of revenue was higher at
64.3% during the current year versus63.6% last year - The effective tax rate for the current year was
27.2% compared with29.3% for the prior year. The lower tax rate in the current year was primarily due to significantly higher pre-tax income in the current year compared to that of the prior year while non-deductible expenses were relatively stable over the same period.
Coronavirus Pandemic ("COVID-19")
The Company continues to monitor the effects of the pandemic both on a national level as well as regionally and locally and is responding accordingly. In addition, we continue to provide frequent communications to clients, employees, and regulators. We have adopted enhanced cleaning practices and other health protocols in our offices, taken measures to significantly restrict non-essential business travel and have practices in place to mandate that employees who may have been exposed to COVID-19, or show any relevant symptoms, self-quarantine. In early March 2020, the Company executed on its Business Continuity Plan whereby the vast majority of our employees began to work remotely with only "essential" employees reporting to our offices. We accomplished this by significantly expanding the use of technology infrastructure that facilitates remote operations. Our ability to avoid significant business disruptions is reliant on the continued ability to have the vast majority of employees work remotely. To date, there have been no significant disruptions to our business or control processes as a result of this dispersion of employees. Recent outbreaks in various states indicate that COVID-19 will continue to impact the economy and, by extension, our business, well into 2021. We currently anticipate that a large number of our employees will continue to work remotely for the indefinite future until vaccinations are more widely administered.
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 92 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 including the projected impact of COVID-19 on the Company's business, financial performance, and operating results. The following factors, among others, could cause actual results to vary from the forward-looking statements: the severity and duration of COVID-19; COVID-19's impact on the U.S. and global economies; and Federal, state and local governmental responses to COVID-19. 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, 2019 and Item 1 – Risk Factors in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020.
Oppenheimer Holdings Inc | ||||||||||||||||||||
Consolidated Income Statements (Unaudited) | ||||||||||||||||||||
('000s, except number of shares and per share amounts) | ||||||||||||||||||||
For the Three Months Ended | For the Year Ended | |||||||||||||||||||
2020 | 2019 | % Change | 2020 | 2019 | % Change | |||||||||||||||
REVENUE | ||||||||||||||||||||
Commissions | $ | 97,971 | $ | 81,182 | 20.7 | $ | 395,097 | $ | 320,114 | 23.4 | ||||||||||
Advisory fees | 204,521 | 118,430 | 72.7 | 455,261 | 353,671 | 28.7 | ||||||||||||||
Investment banking | 84,139 | 44,364 | 89.7 | 222,298 | 126,211 | 76.1 | ||||||||||||||
Bank deposit sweep income | 4,262 | 22,730 | (81.2) | 34,829 | 117,422 | (70.3) | ||||||||||||||
Interest | 8,827 | 12,102 | (27.1) | 33,477 | 50,723 | (34.0) | ||||||||||||||
Principal transactions, net | 8,975 | 8,005 | 12.1 | 27,874 | 30,094 | (7.4) | ||||||||||||||
Other | 14,213 | 9,068 | 56.7 | 29,831 | 35,144 | (15.1) | ||||||||||||||
Total revenue | 422,908 | 295,881 | 42.9 | 1,198,667 | 1,033,379 | 16.0 | ||||||||||||||
EXPENSES | ||||||||||||||||||||
Compensation and related expenses | 244,073 | 190,292 | 28.3 | 770,997 | 657,714 | 17.2 | ||||||||||||||
Communications and technology | 21,443 | 20,131 | 6.5 | 82,132 | 81,588 | 0.7 | ||||||||||||||
Occupancy and equipment costs | 15,741 | 15,342 | 2.6 | 62,352 | 62,198 | 0.2 | ||||||||||||||
Clearing and exchange fees | 4,917 | 5,483 | (10.3) | 22,978 | 21,962 | 4.6 | ||||||||||||||
Interest | 2,779 | 7,978 | (65.2) | 15,680 | 45,687 | (65.7) | ||||||||||||||
Other | 20,160 | 21,682 | (7.0) | 75,528 | 89,318 | (15.4) | ||||||||||||||
Total expenses | 309,113 | 260,908 | 18.5 | 1,029,667 | 958,467 | 7.4 | ||||||||||||||
Pre-tax income | 113,795 | 34,973 | 225.4 | 169,000 | 74,912 | 125.6 | ||||||||||||||
Income taxes | 31,915 | 9,538 | 234.6 | 46,014 | 21,959 | 109.5 | ||||||||||||||
Net Income | $ | 81,880 | $ | 25,435 | 221.9 | $ | 122,986 | $ | 52,953 | 132.3 | ||||||||||
Earnings per share | ||||||||||||||||||||
Basic | $ | 6.56 | $ | 1.99 | 229.6 | $ | 9.73 | $ | 4.10 | 137.3 | ||||||||||
Diluted | $ | 6.17 | $ | 1.84 | 235.3 | $ | 9.30 | $ | 3.82 | 143.5 | ||||||||||
Weighted average number of common shares outstanding | ||||||||||||||||||||
Basic | 12,483,038 | 12,798,368 | (2.5) | 12,642,576 | 12,904,397 | (2.0) | ||||||||||||||
Diluted | 13,263,754 | 13,860,637 | (4.3) | 13,217,335 | 13,851,832 | (4.6) | ||||||||||||||
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SOURCE Oppenheimer Holdings Inc.
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