Oppenheimer Holdings Inc. Reports Second Quarter 2023 Earnings
- None.
- None.
Albert G. Lowenthal, Chairman and CEO commented, "The growth in our total revenue highlighted the ability of our diversified business mix to successfully operate in a mixed but still growing economy. While our operating businesses performed quite well, the Company's overall results were adversely impacted by the accrual of a significant legal reserve related to a previously disclosed matter. We believe that this reserve will permit us to cover anticipated costs related to the matter, even though the reserve created a net loss for the quarter. During the quarter, the markets performed better than expected, as the S&P 500 and Nasdaq continued to advance upward in large part due to investor enthusiasm for generative A.I. tech stocks. On the economic front, unemployment hovered near historic lows and strong consumer spending on travel and services continued to buoy the economy along with increases in wages. The Federal Reserve continued its 15-month tightening campaign, though at a moderated pace, owing to encouraging inflationary trends and general reservations about over-tightening in light of the earlier regional bank failures.
These conditions strongly aided our Wealth Management business, where interest sensitive margin interest and sweep revenue registered large increases from the prior year and AUM began approaching levels reached prior to last year's market decline. The lack of speculative activity resulted in continued lower transaction-based commission revenue. Capital Markets' operating results showed modest improvement with higher M&A advisory fees, equities underwriting and sales and trading revenue offsetting lower fixed income underwriting revenue, as continued uncertainty and higher interest rates limited issuances.
The Company's balance sheet and capital position remain strong, with ample levels of liquidity. During the second quarter, the Company purchased 96,135 shares (
Summary Operating Results (Unaudited) | ||
('000s, except per share amounts or otherwise indicated) | ||
Firm | 2Q-23 | 2Q-22 |
Revenue | $ 306,189 | $ 237,222 |
Compensation Expense | $ 187,224 | $ 177,979 |
Non-compensation Expense | $ 130,664 | $ 65,412 |
Pre-Tax (Loss) | $ (11,699) | $ (6,169) |
Income Tax (Benefit) | $ (2,131) | $ (1,449) |
Net (Loss) (1) | $ (9,400) | $ (3,874) |
(Loss) Per Share (Basic) (1) | $ (0.85) | $ (0.32) |
(Loss) Per Share (Diluted) (1) | $ (0.85) | $ (0.32) |
Book Value Per Share | $ 71.77 | $ 68.57 |
Tangible Book Value Per Share (2) | $ 56.29 | $ 53.62 |
Private Client | ||
Revenue | $ 201,245 | $ 144,471 |
Pre-Tax Income | $ 20,794 | $ 38,800 |
Assets Under Administration (billions) | $ 113.2 | $ 104.0 |
Asset Management | ||
Revenue | $ 22,198 | $ 24,315 |
Pre-Tax Income | $ 6,534 | $ 8,120 |
Assets Under Management (billions) | $ 41.2 | $ 37.1 |
Capital Markets | ||
Revenue | $ 79,582 | $ 71,274 |
Pre-Tax (Loss) | $ (14,051) | $ (17,935) |
(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 second quarter of 2023 is primarily driven by a rise in interest sensitive income, including margin interest and bank deposit sweep income
- The second quarter 2023 net loss is primarily attributable to an increase in non-compensation expenses, which was mostly driven by the accrual of a significant legal reserve associated with a previously disclosed matter
- Assets under administration and under management were both at higher levels at June 30, 2023 when compared with the same period last year, benefiting from market appreciation and positive net asset flows
- The Company repurchased 96,135 shares of Class A Stock during the second quarter of 2023 under its previously announced share repurchase program, or approximately
1% of shares outstanding at year-end - The Company also launched a "Dutch auction" tender offer, which resulted in the repurchase and retirement of an additional 437,183 shares of Class A non-voting common stock when the transaction closed in July 2023
- Book value and tangible book value per share increased from the prior year period primarily as a result of share repurchases
Private Client
Private Client reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
2Q-23 | 2Q-22 | |
Revenue | $ 201,245 | $ 144,471 |
Commissions | $ 45,377 | $ 45,916 |
Advisory Fees | $ 78,811 | $ 83,085 |
Bank Deposit Sweep Income | $ 44,060 | $ 14,845 |
Interest | $ 22,403 | $ 10,369 |
Other | $ 10,594 | $ (9,744) |
Total Expenses | $ 180,451 | $ 105,671 |
Compensation | $ 99,528 | $ 77,342 |
Non-compensation | $ 80,923 | $ 28,329 |
Pre-Tax Income | $ 20,794 | $ 38,800 |
Compensation Ratio | 49.5 % | 53.5 % |
Non-compensation Ratio | 40.2 % | 19.6 % |
Pre-Tax Margin | 10.3 % | 26.9 % |
Assets Under Administration (billions) | $ 113.2 | $ 104.0 |
Cash Sweep Balances (billions) | $ 3.9 | $ 7.5 |
Revenue:
- Retail commissions were flat compared with the prior year quarter due to continued lower retail trading activity
- Advisory fees decreased
5.1% from a year ago primarily due to lower AUM during the billing period for the current quarter when compared to the second quarter of last year - Bank deposit sweep income increased
$29.2 million 197% from a year ago due to higher short-term interest rates partially offset by lower cash sweep balances - Interest revenue approached record level and increased
116.1% from a year ago due to higher short-term interest rates - Other revenue increased primarily due to increases in the cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in fair value of the policies' underlying investments
Total Expenses:
- Compensation expenses increased
28.7% from a year ago primarily due to higher share-based and deferred compensation costs - Non-compensation expenses increased substantially (
185.7% ) from a year ago primarily due to additional accrual of a significant legal reserve associated with a previously disclosed matter
Asset Management
Asset Management reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
2Q-23 | 2Q-22 | |
Revenue | $ 22,198 | $ 24,315 |
Advisory Fees | $ 22,196 | $ 24,311 |
Other | $ 2 | $ 4 |
Total Expenses | $ 15,664 | $ 16,195 |
Compensation | $ 6,283 | $ 6,697 |
Non-compensation | $ 9,381 | $ 9,498 |
Pre-Tax Income | $ 6,534 | $ 8,120 |
Compensation Ratio | 28.3 % | 27.5 % |
Non-compensation Ratio | 42.3 % | 39.1 % |
Pre-Tax Margin | 29.4 % | 33.4 % |
AUM (billions) | $ 41.2 | $ 37.1 |
Revenue:
- Advisory fees decreased
8.7% from a year ago due to reduced management fees resulting from the lower net value of billable AUM during the quarter
Assets under Management (AUM):
- AUM increased to
$41.2 billion - The increase in AUM was comprised of higher asset values of
$3.7 billion $0.4 billion
Total Expenses:
- Compensation expenses were down
6.2% from a year ago which was primarily related to decreases in incentive compensation - Non-compensation expenses were down
1.2% when compared to the prior year period mostly due to lower external portfolio management costs which are directly related to the decrease in billable AUM, partially offset by higher communication and technology expenses
Capital Markets
Capital Markets reported revenue for the current quarter of
('000s) | ||
2Q-23 | 2Q-22 | |
Revenue | $ 79,582 | $ 71,274 |
Investment Banking | $ 18,749 | $ 14,699 |
Advisory Fees | $ 10,945 | $ 8,284 |
Equities Underwriting | $ 5,478 | $ 2,751 |
Fixed Income Underwriting | $ 1,867 | $ 3,259 |
Other | $ 459 | $ 405 |
Sales and Trading | $ 60,216 | $ 55,978 |
Equities | $ 34,453 | $ 37,126 |
Fixed Income | $ 25,763 | $ 18,852 |
Other | $ 617 | $ 597 |
Total Expenses | $ 93,633 | $ 89,209 |
Compensation | $ 61,255 | $ 67,172 |
Non-compensation | $ 32,378 | $ 22,037 |
Pre-Tax (Loss) | $ (14,051) | $ (17,935) |
Compensation Ratio | 77.0 % | 94.2 % |
Non-compensation Ratio | 40.7 % | 30.9 % |
Pre-Tax Margin | (17.7) % | (25.2) % |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities increased
32.1% compared with a year ago due to an increase in M&A transactions - Equities underwriting fees modestly increased by
$2.7 million - Fixed income underwriting fees were down
42.7% compared with a year ago primarily driven by lower deal volumes during the second quarter of 2023
Sales and Trading
- Equities sales and trading revenue decreased
7.2% compared with a year ago due to reduced volumes as a result of lower market volatility - Fixed income sales and trading revenue increased by
36.7% compared with a year ago primarily due to an increase in trading income attributable to higher volumes
Total Expenses:
- Compensation expenses decreased
8.8% compared with a year ago primarily due to decreased incentive compensation - Non-compensation expenses were
46.9% higher than a year ago primarily due to an increase in interest expense in financing inventories
Other Matters
(In millions, except number of shares and per share amounts) | ||
2Q-23 | 2Q-22 | |
Capital | ||
Stockholders' Equity (1) | $ 788.3 | $ 779.7 |
Regulatory Net Capital (2) | $ 417.5 | $ 435.6 |
Regulatory Excess Net Capital (2) | $ 394.7 | $ 404.0 |
Common Stock Repurchases | ||
Repurchases | $ 3.6 | $ 30.2 |
Number of Shares | 96,135 | 885,230 |
Average Price Per Share | $ 37.43 | $ 34.13 |
Period End Shares | 10,984,240 | 11,370,609 |
Effective Tax Rate | 18.2 % | 23.5 % |
(1) Attributable to Oppenheimer Holdings Inc | ||
(2) Attributable to Oppenheimer & Co. Inc. broker-dealer | ||
- The Board of Directors announced a quarterly dividend in the amount of
$0.15 - Compensation expense as a percentage of revenue was lower at
61.1% during the current period versus75.0% during the same period last year due to revenue increasing by a higher rate than compensation expenses - The effective tax rate for the current period was
18.2% compared with23.5% for the prior year period and was impacted by permanent items and nondeductible foreign losses
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
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, 2022 and Factors Affecting "Forward-Looking Statements" in Part I, Item 2 in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.
Oppenheimer Holdings Inc | ||||||||||||
Condensed Consolidated Income Statements (Unaudited) | ||||||||||||
('000s, except number of shares and per share amounts) | ||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||
2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||
REVENUE | ||||||||||||
Commissions | $ 88,544 | $ 94,378 | (6.2) | $ 175,241 | $ 192,699 | (9.1) | ||||||
Advisory fees | 101,015 | 107,405 | (5.9) | 201,559 | 223,171 | (9.7) | ||||||
Investment banking | 19,978 | 16,653 | 20.0 | 57,943 | 55,123 | 5.1 | ||||||
Bank deposit sweep income | 44,060 | 14,845 | 196.8 | 92,969 | 19,199 | 384.2 | ||||||
Interest | 27,320 | 11,789 | 131.7 | 52,261 | 21,306 | 145.3 | ||||||
Principal transactions, net | 16,253 | 1,258 | 1,192.0 | 29,743 | 3,622 | 721.2 | ||||||
Other | 9,019 | (9,106) | * | 18,152 | (11,870) | * | ||||||
Total revenue | 306,189 | 237,222 | 29.1 | 627,868 | 503,250 | 24.8 | ||||||
EXPENSES | ||||||||||||
Compensation and related expenses | 187,224 | 177,979 | 5.2 | 393,516 | 364,010 | 8.1 | ||||||
Communications and technology | 22,783 | 20,896 | 9.0 | 45,223 | 42,481 | 6.5 | ||||||
Occupancy and equipment costs | 16,440 | 14,554 | 13.0 | 32,341 | 29,244 | 10.6 | ||||||
Clearing and exchange fees | 5,927 | 6,242 | (5.0) | 12,190 | 12,218 | (0.2) | ||||||
Interest | 17,467 | 3,628 | 381.4 | 30,609 | 6,140 | 398.5 | ||||||
Other | 68,047 | 20,092 | 238.7 | 106,639 | 41,113 | 159.4 | ||||||
Total expenses | 317,888 | 243,391 | 30.6 | 620,518 | 495,206 | 25.3 | ||||||
Pre-tax Income (Loss) | (11,699) | (6,169) | 89.6 | 7,350 | 8,044 | (8.6) | ||||||
Income taxes provision (benefit) | (2,131) | (1,449) | 47.1 | 2,454 | 2,986 | (17.8) | ||||||
Net Income (Loss) | $ (9,568) | $ (4,720) | 102.7 | $ 4,896 | $ 5,058 | (3.2) | ||||||
Less: Net loss attributable to non- | (168) | (846) | (80.1) | (321) | (360) | (10.8) | ||||||
Net income (loss) attributable to | $ (9,400) | $ (3,874) | 142.6 | $ 5,217 | $ 5,418 | (3.7) | ||||||
Earnings (Loss) per share attributable to Oppenheimer Holdings Inc | ||||||||||||
Basic | $ (0.85) | $ (0.32) | 165.6 | $ 0.47 | $ 0.44 | 6.8 | ||||||
Diluted | $ (0.85) | $ (0.32) | 165.6 | $ 0.44 | $ 0.41 | 7.3 | ||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 11,016,430 | 11,980,115 | (8.0) | 11,054,306 | 12,222,527 | (9.6) | ||||||
Diluted | 11,016,430 | 11,980,115 | (8.0) | 11,911,379 | 13,141,538 | (9.4) | ||||||
Period end number of common | 10,984,240 | 11,370,609 | (3.4) | 10,984,240 | 11,370,609 | (3.4) | ||||||
* Percentage not meaningful | ||||||||||||
Media Contact:
oppenheimer@haventower.com
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SOURCE Oppenheimer Holdings Inc.
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