Oppenheimer Holdings Inc. Reports Fourth Quarter and Record Full Year 2021 Earnings
Oppenheimer Holdings reported a net income of $62.9 million ($4.99 per share) for Q4 2021, a decrease from $81.9 million ($6.56 per share) in Q4 2020. Revenue fell by 13.7% to $365.1 million, affected by a $109.4 million drop in incentive fee income. For the full year 2021, net income rose to $159 million ($12.57 per share), with revenue increasing by 16.3% to $1.4 billion. Capital Markets saw a record performance, although significant legal and regulatory costs rose in Q4 2021.
- Full year 2021 net income increased by 29.2% to $159 million.
- Capital Markets reported record revenue of $625.7 million, up 46.6% year-over-year.
- Assets under management reached a record $46.2 billion.
- Q4 2021 revenue decreased by 13.7% compared to Q4 2020.
- Net income in Q4 2021 declined by 23.3% from Q4 2020.
- Legal and regulatory costs increased, reversing a previous downward trend.
NEW YORK, Jan. 28, 2022 /PRNewswire/ - Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported net income of
For the year ended December 31, 2021, the Company reported net income of
Summary Operating Results (Unaudited) | |||||||||
('000s, except per share amounts or otherwise indicated) | |||||||||
Firm | 4Q-21 | 4Q-20 | FY-21 | FY-20 | |||||
Revenue | $ | 365,118 | $ | 422,908 | $ | 1,394,035 | $ | 1,198,667 | |
Compensation Expense | $ | 193,787 | $ | 244,073 | $ | 886,840 | $ | 770,997 | |
Non-compensation Expense | $ | 79,379 | $ | 65,040 | $ | 282,554 | $ | 258,670 | |
Pre-Tax Income | $ | 91,952 | $ | 113,795 | $ | 224,641 | $ | 169,000 | |
Income Taxes | $ | 29,055 | $ | 31,915 | $ | 65,677 | $ | 46,014 | |
Net Income | $ | 62,897 | $ | 81,880 | $ | 158,964 | $ | 122,986 | |
Earnings Per Share - Basic | $ | 4.99 | $ | 6.56 | $ | 12.57 | $ | 9.73 | |
Earnings Per Share - Diluted | $ | 4.61 | $ | 6.17 | $ | 11.70 | $ | 9.30 | |
Book Value Per Share | $ | 65.66 | $ | 54.93 | $ | 65.66 | $ | 54.93 | |
Tangible Book Value Per Share (1) | $ | 52.11 | $ | 41.31 | $ | 52.11 | $ | 41.31 | |
(1) Represents book value less goodwill and intangible assets divided by number of shares outstanding. | |||||||||
Highlights
- Record revenue for the full year 2021
- Record pre-tax income and net income for the full year 2021
- Record basic and diluted earnings per share for the full year 2021
- Record revenue and earnings in Capital Markets segment for the fourth quarter and full year 2021 driven by record investment banking results
- Stockholders' equity attributable to Oppenheimer Holdings Inc. reached a record of
$823.8 million as of December 31, 2021 - Book value and tangible book value per share reached record levels at December 31, 2021
- Client assets under administration and under management were both at record levels at December 31, 2021
Albert G. Lowenthal, Chairman and CEO commented, "The record results for the full year 2021 demonstrate the strength of our franchise and the countercyclical and balanced nature of our businesses. The record results in our Capital Markets business helped offset the significantly lower incentive fees from alternative investments and bank deposit sweep income in Wealth Management. Despite this, the Wealth Management business had record management fees and steady commission revenue contributing to very solid results during the year. I am very pleased with the performance of the Investment Banking division which helped propel the Capital Markets business to record revenue and earnings for the year on very strong equity underwriting and M&A advisory fees. The operating results of Capital Markets were also positively impacted by the establishment of a deferred compensation plan in December 2021. Operating results were negatively impacted by an increase in legal and regulatory costs during the fourth quarter reversing a trend of decreases in those costs over the past several years.
Concerns impacting market sentiment continue to persist around inflation, higher oil prices, and the Federal Reserve's tapering of bond buying. However, the prospects of moderately higher interest rates, a strong economy, and low unemployment, should provide a constructive backdrop for investors. While our comparative operating results for the quarter were significantly impacted by the outsized impact of incentive fees in the fourth quarter of 2020, the overall business performed exceptionally well with record contributions from our Investment Bank and strong results across the board from our other businesses. I am extremely proud of the outstanding performance of our employees during a very difficult period and want to thank them for the fifth consecutive year of increased operating results and the second year in a row of record operating results."
Segment Results (Unaudited) | ||||||||
('000s, except per share amounts or otherwise indicated) | ||||||||
4Q-21 | 4Q-20 | FY-21 | FY-20 | |||||
Private Client | ||||||||
Revenue | $ | 173,310 | $ | 217,743 | $ | 665,060 | $ | 642,083 |
Pre-Tax Income | $ | 17,784 | $ | 39,362 | $ | 101,146 | $ | 122,844 |
Assets Under Administration ($Bn) | $ | 122.1 | $ | 104.8 | $ | 122.1 | $ | 104.8 |
Asset Management | ||||||||
Revenue | $ | 27,930 | $ | 72,851 | $ | 104,598 | $ | 130,274 |
Pre-Tax Income | $ | 10,270 | $ | 56,911 | $ | 35,874 | $ | 71,625 |
Asset Under Management ($Bn) | $ | 46.2 | $ | 38.8 | $ | 46.2 | $ | 38.8 |
Capital Markets | ||||||||
Revenue | $ | 165,575 | $ | 131,651 | $ | 625,704 | $ | 426,752 |
Pre-Tax Income | $ | 96,838 | $ | 41,894 | $ | 204,090 | $ | 83,442 |
Fourth Quarter Results
Private Client
Private Client reported revenue of
('000s, except otherwise indicated) | ||
4Q-21 | 4Q-20 | |
Revenue | ||
Commissions | ||
Advisory Fees | ||
Bank Deposit Sweep Income | $ 3,928 | $ 4,262 |
Interest | $ 7,954 | $ 6,393 |
Other | ||
Total Expenses | ||
Compensation | ||
Non-compensation | ||
Pre-Tax Income | ||
Compensation Ratio | 69.5 % | 69.7 % |
Non-compensation Ratio | 20.2 % | 12.2 % |
Pre-Tax Margin | 10.3 % | 18.1 % |
Assets Under Administration ($Bn) | $ 122.1 | $ 104.8 |
Cash Sweep Balances ($Bn) | $ 7.9 | $ 7.3 |
Revenue:
- Retail commissions increased
3.1% from a year ago primarily driven by higher client option trading activity - Advisory fees decreased
32.0% due to a significant decrease in incentive fees from alternative investments partially offset by higher management fees from advisory programs during the current year - Incentive fees allocated to this segment were
$1.1 million for the current quarter versus$61.6 million in the fourth quarter of last year - Bank deposit sweep income decreased
$0.3 million or7.8% from a year ago due to lower short-term interest rates partially offset by higher average cash sweep balances - Interest revenue increased
24.4% from a year ago due to higher average margin balances partially offset by lower short-term interest rates - Other revenue decreased
22.8% compared with a year ago primarily due to lower increases in the cash surrender value of Company-owned life insurance policies when compared to the fourth quarter of 2020.
Total Expenses:
- Compensation expenses decreased
20.6% compared with a year ago primarily due to decreased payouts associated with the lower incentive fees from alternative investments (referred to above) as well as lower deferred and share-based compensation costs partially offset by higher incentive compensation costs - Non-compensation expenses increased
31.7% compared with a year ago primarily due to an increase in legal reserves
Asset Management
Asset Management reported revenue of
('000s, except otherwise indicated) | ||
4Q-21 | 4Q-20 | |
Revenue | $ 27,930 | $ 72,851 |
Advisory Fees | $ 27,926 | $ 70,847 |
Other | $ 4 | $ 2,004 |
Total Expenses | $ 17,660 | $ 15,940 |
Compensation | $ 8,172 | $ 7,104 |
Non-compensation | $ 9,488 | $ 8,836 |
Pre-Tax Income | $ 10,270 | $ 56,911 |
Compensation Ratio | 29.3 % | 9.8 % |
Non-compensation Ratio | 34.0 % | 12.1 % |
Pre-Tax Margin | 36.8 % | 78.1 % |
AUM ($Bn) | $ 46.2 | $ 38.8 |
Revenue:
- Advisory fee revenue decreased
60.6% due to a significant decrease in incentive fees from alternative investments partially offset by higher management fees from advisory programs during the current quarter - Incentive fees allocated to this segment were
$1.1 million for the current quarter versus$49.2 million in the fourth quarter of last year
Assets under Management (AUM):
- AUM hit a record level of
$46.2 billion at December 31, 2021, which is the basis for advisory fee billings for January 2022 - The increase in AUM was comprised of higher asset values of
$6.4 billion on existing client holdings and a net contribution of new assets of$1.0 billion
Total Expenses:
- Compensation expenses were up
15.0% driven primarily by higher incentive compensation costs - Non-compensation expenses were up
7.4% when compared with a year ago primarily due to higher external portfolio management costs which are directly related to the increase in AUM
Capital Markets
Capital Markets reported revenue of
('000s) | ||
4Q-21 | 4Q-20 | |
Revenue | ||
Investment Banking | $ 78,048 | |
Advisory Fees | $ 56,503 | $ 32,749 |
Equities Underwriting | $ 46,434 | $ 39,205 |
Fixed Income Underwriting | $ 9,541 | $ 5,474 |
Other | $ 169 | $ 620 |
Sales and Trading | $ 52,536 | $ 52,723 |
Equities | $ 33,728 | $ 34,546 |
Fixed Income | $ 18,808 | $ 18,177 |
Other | $ 392 | $ 880 |
Total Expenses | $ 68,737 | $ 89,757 |
Compensation | $ 39,568 | $ 67,070 |
Non-compensation | $ 29,169 | $ 22,687 |
Pre-Tax Income | $ 96,838 | $ 41,894 |
Compensation Ratio | 23.9 % | 50.9 % |
Non-compensation Ratio | 17.6 % | 17.2 % |
Pre-Tax Margin | 58.5 % | 31.8 % |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities increased
72.5% compared with a year ago driven by large M&A advisory and placement fees from transactions in the healthcare, technology and financial institution sectors - Equity underwriting fees increased
18.4% compared with a year ago due to continued robust levels of capital issuances in the equity markets - Fixed income underwriting fees were up
74.3% compared with a year ago primarily driven by public finance issuances
Sales and Trading
- Equities sales and trading decreased
2.4% compared with a year ago due to decreases in income from international equities and event trading partially offset by increases in agency and convertible bonds - Fixed Income sales and trading increased
3.5% compared to the prior year due to increased income from municipal bonds partially offset by lower client activity as investors contemplated new commitments in a continued low interest rate environment
Total Expenses:
- Compensation expenses decreased
41.0% compared with the prior year primarily due to the establishment of a deferred compensation plan during the current quarter and the release of incentive compensation reserves accrued during the first three quarters of 2021 which will be accrued over the service period of three years beginning in 2022 - Non-compensation expenses increased
28.6% compared with a year ago due to increased costs associated with finalizing a legacy regulatory settlement and higher travel and entertainment expenses as business travel ramped up during the period
Full Year Results
Private Client
Private Client reported revenue of
('000s) | ||
FY-21 | FY-20 | |
Revenue | ||
Commissions | ||
Advisory Fees | ||
Bank Deposit Sweep Income | ||
Interest | ||
Other | ||
Total Expenses | ||
Compensation | ||
Non-compensation | ||
Pre-Tax Income | ||
Compensation Ratio | 67.2 % | 64.2 % |
Non-compensation Ratio | 17.6 % | 16.7 % |
Pre-Tax Margin | 15.2 % | 19.1 % |
Assets Under Administration ($Bn) | $ 122.1 | $ 104.8 |
Cash Sweep Balances ($Bn) | $ 7.9 | $ 7.3 |
Revenue:
- Retail commissions increased
4.0% from the prior year primarily due to increased client activity in mutual funds, options, annuities, and mortgage backed securities partially offset by lower commission income on municipal bonds - Advisory fees increased
6.0% due to increases in management fees from advisory programs partially offset by significantly lower incentive fees from alternative investments - Incentive fees allocated to this segment were
$0.6 million for the 2021 year versus$61.7 million for the prior year - Bank deposit sweep income decreased
$19.3 million or55.3% from the prior year due to lower short-term interest rates partially offset by higher average cash sweep balances - Interest revenue increased
16.5% from the prior year due to higher average margin balances partially offset by lower short-term interest rates - Other revenue increased
22.1% primarily due to increases in selling concessions on equity underwriting transactions and the cash surrender value of Company-owned life insurance policies
Total Expenses:
- Compensation expenses increased
8.5% from the prior year primarily due to increased production, share-based and incentive compensation costs - Non-compensation expenses increased
9.1% from the prior year primarily due to higher legal costs
Asset Management
Asset Management reported revenue of
('000s) | ||
FY-21 | FY-20 | |
Revenue | $ 104,598 | $ 130,274 |
Advisory Fees | $ 104,584 | $ 128,258 |
Other | $ 14 | $ 2,016 |
Total Expenses | $ 68,724 | $ 58,649 |
Compensation | $ 27,811 | $ 25,128 |
Non-compensation | $ 40,913 | $ 33,521 |
Pre-Tax Income | $ 35,874 | $ 71,625 |
Compensation Ratio | 26.6 % | 19.3 % |
Non-compensation Ratio | 39.1 % | 25.7 % |
Pre-Tax Margin | 34.3 % | 55.0 % |
AUM ($Bn) | $ 46.2 | $ 38.8 |
Revenue:
- Advisory fee revenue decreased
18.5% from the prior year due to significantly lower incentive fees from alternative investments partially offset by higher management fees from advisory programs - Incentive fees allocated to this segment were
$1.8 million for the 2021 year versus$49.4 million for the prior year
Assets under Management (AUM):
- AUM hit a record level of
$46.2 billion at December 31, 2021, which is the basis for advisory fee billings for January 2022 - The increase in AUM was comprised of higher asset values of
$6.4 billion on existing client holdings and a net contribution of assets of$1.0 billion
Total Expenses:
- Compensation expenses were up
10.7% when compared to the prior year driven primarily by higher incentive compensation costs - Non-compensation expenses were up
22.1% when compared to the prior year primarily due to higher external portfolio management costs which are directly related to the increase in AUM
Capital Markets
Capital Markets reported revenue of
('000s) | ||
FY-21 | FY-20 | |
Revenue | $ 625,704 | $ 426,752 |
Investment Banking | $ 410,539 | $ 206,098 |
Advisory Fees | $ 194,753 | $ 80,534 |
Equities Underwriting | $ 186,736 | $ 103,276 |
Fixed Income Underwriting | $ 27,004 | $ 20,394 |
Other | $ 2,046 | $ 1,894 |
Sales and Trading | $ 213,491 | $ 217,711 |
Equities | $ 138,363 | $ 130,668 |
Fixed Income | $ 75,128 | $ 87,043 |
Other | $ 1,674 | $ 2,943 |
Total Expenses | $ 421,614 | $ 343,310 |
Compensation | $ 318,850 | $ 251,697 |
Non-compensation | $ 102,764 | $ 91,613 |
Pre-Tax Income | $ 204,090 | $ 83,442 |
Compensation Ratio | ||
Non-compensation Ratio | ||
Pre-Tax Margin |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities increased
141.8% compared with the prior year 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
80.8% compared with the prior year due to significantly higher levels of capital issuances in the equity markets particularly in healthcare and technology sectors - Fixed income underwriting fees were up
32.4% compared with the prior year primarily driven by public finance issuances during the year
Sales and Trading
- Equities sales and trading increased
5.9% compared with the prior year due to higher income from institutional agency and convertible bonds - Fixed Income sales and trading decreased
13.7% compared with the prior year driven by lower income from investment grade, high yield, emerging markets, and municipal bonds partially offset by higher income from corporate and convertible bonds
Total Expenses:
- Compensation expenses increased
26.7% compared with the prior year primarily due to increased incentive compensation costs during the year tied to significant increases in revenue - Non-compensation expenses were
12.2% higher compared with the prior year due to increased legal, underwriting, travel and entertainment, and conference costs partially offset by reduced interest costs
Other Matters
(In millions, except percentages, number of shares and per share | ||
FY-21 | FY-20 | |
Capital | ||
Senior Secured Notes | $ 124.1 | $ 123.8 |
Shareholders' Equity | $ 823.8 | $ 685.6 |
Regulatory Net Capital (1) | $ 422.8 | $ 274.5 |
Regulatory Excess Net Capital (1) | $ 388.0 | $ 250.1 |
Common Stock Repurchases | ||
Repurchases | $ 7.7 | $ 15.0 |
Number of Shares | 177,192 | 718,522 |
Average Price | $ 43.67 | $ 20.94 |
Period End Shares | 12,546,701 | 12,481,443 |
Effective Tax Rate | 29.2 % | 27.2 % |
(1) Attributable to Oppenheimer & Co. Inc. broker-dealer | ||
- Stockholders' equity attributable to Oppenheimer Holdings Inc. reached a record high of
$823.8 million at December 31, 2021 - During the fourth quarter of 2021, the Company sponsored a special purpose acquisition company (SPAC), OPY Acquisition Corp. I (NASDAQ GM: "OHAA"), which completed an initial public offering on October 26, 2021. Redeemable noncontrolling interests of
$127.8 million associated with the publicly held OHAA Class A Shares are recorded on the Company's consolidated statement of financial condition at December 31, 2021 at redemption value and classified as temporary equity - The Board of Directors announced a quarterly dividend in the amount of
$0.15 per share for the fourth quarter of 2021 payable on February 25, 2022 to holders of Class A non-voting and Class B voting common stock of record on February 11, 2022 - 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 31, 2021 totaling$12.6 million - Level 3 assets, comprised of auction rate securities, were
$31.8 million as of December 31, 2021 - Compensation expense as a percentage of revenue was lower at
63.6% during the current year versus64.3% last year - The effective tax rate for the current year was
29.2% compared with27.2% for the prior year. The higher tax rate in the current year was primarily due to an increase in apportionment factors in state and local jurisdictions with higher statutory tax rates.
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 regarding the impact of COVID-19 on our business. 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. Given the recent surge in COVID-19 cases related to the omicron variant, many employees from our home office and branch locations are working remotely while employees from select groups are working from office locations given the nature of their responsibilities. We anticipate employees returning to offices once the risks associated with the omicron variant subside while maintaining flexible work arrangements.
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 93 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, 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 | |||||||||||
2021 | 2020 | % Change | 2021 | 2020 | % Change | |||||||
REVENUE | ||||||||||||
Commissions | $ 101,076 | $ 97,971 | 3.2 | $ 401,607 | $ 395,097 | 1.6 | ||||||
Advisory fees | 118,798 | 204,521 | (41.9) | 451,197 | 455,261 | (0.9) | ||||||
Investment banking | 117,563 | 84,139 | 39.7 | 433,707 | 222,298 | 95.1 | ||||||
Bank deposit sweep income | 3,928 | 4,262 | (7.8) | 15,557 | 34,829 | (55.3) | ||||||
Interest | 9,567 | 8,827 | 8.4 | 36,482 | 33,477 | 9.0 | ||||||
Principal transactions, net | 4,483 | 8,975 | (50.1) | 26,147 | 27,874 | (6.2) | ||||||
Other | 9,703 | 14,213 | (31.7) | 29,338 | 29,831 | (1.7) | ||||||
Total revenue | 365,118 | 422,908 | (13.7) | 1,394,035 | 1,198,667 | 16.3 | ||||||
EXPENSES | ||||||||||||
Compensation and related expenses | 193,787 | 244,073 | (20.6) | 886,840 | 770,997 | 15.0 | ||||||
Communications and technology | 21,023 | 21,443 | (2.0) | 80,520 | 82,132 | (2.0) | ||||||
Occupancy and equipment costs | 14,698 | 15,741 | (6.6) | 60,069 | 62,352 | (3.7) | ||||||
Clearing and exchange fees | 5,639 | 4,917 | 14.7 | 22,306 | 22,978 | (2.9) | ||||||
Interest | 2,292 | 2,779 | (17.5) | 9,855 | 15,680 | (37.1) | ||||||
Other | 35,727 | 20,160 | 77.2 | 109,804 | 75,528 | 45.4 | ||||||
Total expenses | 273,166 | 309,113 | (11.6) | 1,169,394 | 1,029,667 | 13.6 | ||||||
Pre-tax income | 91,952 | 113,795 | (19.2) | 224,641 | 169,000 | 32.9 | ||||||
Income taxes | 29,055 | 31,915 | (9.0) | 65,677 | 46,014 | 42.7 | ||||||
Net Income | $ 62,897 | $ 81,880 | (23.2) | $ 158,964 | $ 122,986 | 29.3 | ||||||
Earnings per share | ||||||||||||
Basic | $ 4.99 | $ 6.56 | (23.9) | $ 12.57 | $ 9.73 | 29.2 | ||||||
Diluted | $ 4.61 | $ 6.17 | (25.3) | $ 11.70 | $ 9.30 | 25.8 | ||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 12,609,654 | 12,483,038 | 1.0 | 12,642,306 | 12,642,576 | — | ||||||
Diluted | 13,640,402 | 13,263,754 | 2.8 | 13,582,828 | 13,217,335 | 2.8 | ||||||
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SOURCE Oppenheimer Holdings Inc.
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