PR Newswire | Oct 29, 2021 08:01AM EDT

10/29 07:00 CDT

Oppenheimer Holdings Inc. Reports Third Quarter 2021 Earnings NEW YORK, Oct. 29, 2021

NEW YORK, Oct. 29, 2021 /PRNewswire/ - Oppenheimer Holdings Inc. (NYSE: OPY) (the "Company" or "Firm") today reported net income of $26.3 million or $2.07 basic earnings per share for the third quarter of 2021, an increase of 67.8%, compared with net income of $15.6 million or $1.25 basic earnings per share for the third quarter of 2020. Revenue for the third quarter of 2021 was $315.3 million, an increase of 14.1%, compared to revenue of $276.3 million for the third quarter of 2020.

Albert G. Lowenthal, Chairman and CEO commented, "The results for the quarter reflect the significant impact of our investment in the Capital Markets franchise over the past several years. Robust demand for investment banking services continues to propel revenue and earnings in the Capital Markets business. These results, coupled with the continued steady performance of our Wealth Management business, led to the Firm's best first nine months in its history.Wealth management continued to deliver solid results driven by near record AUM and strong net investor flows, despite being negatively impacted by lower interest rates, while a significant increase in M&A advisory and placement fees in Capital Markets topped off a very successful quarter. Concerns around inflation, higher oil prices, the Federal Reserve's tapering of bond buying, and congressional uncertainty weighed on equity markets during the period.These concerns drove up the yield on the 10-Year Treasury to 1.52% as the period of ultra-low interest rates may be coming to an end."

Summary Operating Results (Unaudited)

('000s, except per share amounts or otherwise indicated)

Firm 3Q-21 3Q-20

Revenue $315,342 $276,259

Compensation Expense $206,312 $189,654

Non-compensation Expense $71,636 $64,887

Pre-Tax Income $37,394 $21,718

Income Taxes $11,144 $6,079

Net Income $26,250 $15,639

Earnings Per Share (Basic) $2.07 $1.25

Earnings Per Share (Diluted) $1.92 $1.19

Book Value Per Share $61.43 $49.20

Tangible Book Value Per Share^ (1) $47.95 $35.61

Private Client

Revenue $160,864 $141,097

Pre-Tax Income $37,426 $25,764

Assets Under Administration (billions) $117.8 $94.3

Asset Management

Revenue $26,894 $20,632

Pre-Tax Income $9,412 $6,426

Assets Under Management (billions) $43.6 $34.5

Capital Markets

Revenue $128,585 $114,289

Pre-Tax Income $17,888 $19,369



(1) Represents book value less goodwill and intangible assets divided by number of shares outstanding.

Highlights

* Record revenue, net income, and earnings per share for the first nine months of the year * Record third quarter gross revenue was driven by investment banking revenue and advisory fees from near record high assets under management * Record revenue in Capital Markets segment for the third quarter was driven by strong M&A advisory and placement fees in investment banking * Client assets under administration at record level while client assets under management near record level at September 30, 2021 * Shareholders' Equity reached a record high of $775.0 million at September 30, 2021 * Book value and tangible book value per share reached record levels at September 30, 2021

Private Client

Private Client reported revenue for the current quarter of $160.9 million, 14.0% higher than the previous year. Pre-tax income of $37.4 million in the current quarter resulted in a pre-tax profit margin of 23.3%.

('000s, except otherwise indicated)

3Q-21 3Q-20



Revenue $160,864$141,097

Commissions $51,348 $48,839

Advisory Fees $89,849 $67,949

Bank Deposit Sweep Income $3,909 $4,618

Interest $7,624 $5,940

Other $8,134 $13,751



Total Expenses $123,438$115,333

Compensation $97,522 $89,562

Non-compensation $25,916 $25,771



Financial Advisers (#) 1,003 1,010

Assets Under Administration (billions)$117.8 $94.3

Cash Sweep Balances (billions) $7.7 $6.6

Revenue:

* Retail commissions increased 5.1% from a year ago amidst continued elevated client trading activity * Advisory fees increased 32.2% due to higher assets under management during the billing period for the third quarter of 2021 compared with that of the third quarter of 2020 * Bank deposit sweep income decreased $0.7 million or 15.4% from a year ago due to lower short-term interest rates partially offset by higher average cash sweep balances which are at record levels * Interest revenue increased 28.4% from a year ago due to higher average margin balances partially offset by lower short-term interest rates * Other revenue decreased 40.8% primarily due to decreases in the cash surrender value of Company-owned life insurance policies during the current quarter compared to a year ago

Total Expenses:

* Compensation expenses increased 8.9% from a year ago primarily due to increased production-related compensation costs partially offset by lower share-based and deferred compensation costs * Non-compensation expenses increased 0.6% from a year ago.

Asset Management

Asset Management reported revenue for the current quarter of $26.9 million, 30.4% higher compared with a year ago. Pre-tax income was $9.4 million, an increase of 46.5% compared with the prior year.

('000s, except otherwise indicated)

3Q-21 3Q-20



Revenue $26,894$20,632

Advisory Fees $26,890$20,632

Other $4 $-



Total Expenses $17,482$14,206

Compensation $6,120 $5,997

Non-compensation$11,362$8,209



AUM (billions) $43.6 $34.5

Revenue:

* Advisory fee revenue increased 30.3% due to higher assets under management during the billing period for the third quarter of 2021 compared with that of the third quarter of 2020

Assets under Management (AUM):

* AUM was $43.6 billion at September 30, 2021, which is the basis for advisory fee billings for October 2021 * The increase in AUM was comprised of higher asset values of $7.7 billion on existing client holdings and a net contribution of assets of $1.4 billion

Total Expenses:

* Compensation expenses were up 2.1% from a year ago which was primarily due to increases in incentive compensation * Non-compensation expenses were up 38.4% when compared to the prior period due to higher portfolio management costs in line with the increase in AUM

Capital Markets

Capital Markets reported revenue for the current quarter of $128.6 million, 12.5% higher when compared with the prior year. Pre-Tax income was $17.9 million compared with pre-tax income of $19.4 million a year ago.

('000s)

3Q-21 3Q-20



Revenue $128,585$114,289



Investment Banking $82,012 $62,890

Advisory Fees $51,815 $30,706

Equities Underwriting $26,348 $27,969

Fixed Income Underwriting$3,140 $3,608

Other $709 $607



Sales and Trading $46,262 $50,679

Equities $30,861 $30,497

Fixed Income $15,401 $20,182



Other $311 $720



Total Expenses $110,697$94,920

Compensation $81,690 $71,328

Non-compensation $29,007 $23,592

Revenue:

Investment Banking

* Advisory fees earned from investment banking activities increased 68.7% compared with a year ago driven by higher M&A advisory and placement fees * Equity underwriting fees decreased 5.8% compared with a year ago as underwriting activity tapered off in August and September 2021 * Fixed income underwriting fees decreased 13.0% compared with a year ago primarily driven by lower fees from public finance transactions during the current period

Sales and Trading

* Equities sales and trading revenue increased 1.2% compared with a year ago due to increased trading activity by our institutional clients * Fixed Income sales and trading decreased 23.7% compared with a year ago primarily driven by lower income from municipal commissions and trading during the current period

Total Expenses:

* Compensation expenses increased 14.5% compared with a year ago primarily due to increased salary and incentive compensation partially offset by lower production-related compensation * Non-compensation expenses were 23.0% higher than a year ago due to increased underwriting expenses related to high transaction volumes and higher costs associated with business travel and entertainment and conferences

Other Matters

(In millions, except number of shares and per share amounts)

3Q-21 3Q-20

Capital

Senior Secured Notes $124.0 $123.9

Shareholders' Equity $775.0 $615.2

Regulatory Net Capital ^(1) $372.6 $268.7

Regulatory Excess Net Capital ^(1) $345.6 $242.9



Common Stock Repurchases

Repurchases $4.7 $2.0

Number of Shares 108,494 84,290

Average Price $43.46 $23.28



Period End Shares 12,615,39912,504,092

Effective Tax Rate 29.8 %28.0 %



^(1) Attributable to Oppenheimer & Co. Inc. broker-dealer

* Shareholders' Equity reached a record high of $775.0 million on September 30, 2021 * The Board of Directors announced a quarterly dividend of $0.15 per share effective for the third quarter of 2021 payable on November 26, 2021 to holders of Class A non-voting and Class B voting common stock of record on November 12, 2021 * The Company repurchased 108,494 shares of Class A non-voting common stock during the period under the Company's stock repurchase program * Moody's upgraded the Company's Corporate Family rating and rating of the Senior Secured Notes from "B1" with a stable outlook to "Ba3" with a stable outlook * Level 3 assets, comprised of auction rate securities, were $31.8 million as of September 30, 2021 compared with $30.7 million as of September 30, 2020 * Compensation expense as a percentage of revenue was lower at 65.4% during the current quarter versus 68.7% last year * The effective tax rate for the current quarter was 29.8% compared with 28.0% for the prior year period due to favorable permanent items in the third quarter of 2020

Coronavirus ("COVID-19") Pandemic

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 and 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 was reliant on the continued ability to have the vast majority of employees work remotely. Due to the widespread distribution and inoculation of the U.S. population with vaccines that have proven to be safe and effective, the Company implemented a re-entry plan for our fully vaccinated employees at our corporate headquarters in New York City on October 4, 2021. For employees outside of our corporate headquarters, the Company will be implementing a re-entry plan for other locations in the U.S. that will be in accordance with applicable state and local regulations. Vaccinated employees have begun re-engaging with clients and traveling for business purposes.

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 other 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 Nine Months Ended September 30, September 30,

2021 2020 % Change2021 2020 % Change

REVENUE

Commissions $90,889 $92,241 (1.5) $300,531$297,1261.1

Advisory fees 116,751 88,595 31.8 332,399 250,740 32.6

Investment 86,901 66,245 31.2 316,144 138,159 128.8 banking

Bank deposit 3,909 4,619 (15.4) 11,629 30,567 (62.0) sweep income

Interest 9,340 7,540 23.9 26,915 24,650 9.2

Principal transactions, 4,494 7,703 (41.7) 21,664 18,899 14.6 net

Other 3,058 9,316 (67.2) 19,635 15,618 25.7

Total revenue 315,342 276,259 14.1 1,028,917775,759 32.6

EXPENSES

Compensation and related 206,312 189,654 8.8 693,053 526,924 31.5 expenses

Communications19,718 19,474 1.3 59,497 60,689 (2.0) and technology

Occupancy and equipment 14,964 15,199 (1.5) 45,371 46,611 (2.7) costs

Clearing and 5,237 6,211 (15.7) 16,667 18,061 (7.7) exchange fees

Interest 2,468 3,461 (28.7) 7,563 12,901 (41.4)

Other 29,249 20,542 42.4 74,077 55,368 33.8

Total expenses277,948 254,541 9.2 896,228 720,554 24.4

Pre-Tax Income 37,394 21,718 72.2 132,689 55,205 140.4

Income taxes 11,144 6,079 83.3 36,622 14,099 159.7

Net income $26,250 $15,639 67.8 $96,067 $41,106 133.7



Earnings per share

Basic $2.07 $1.25 65.6 $7.59 $3.24 134.3

Diluted $1.92 $1.19 61.3 $7.10 $3.12 127.6



Weighted average number of common shares outstanding

Basic 12,690,38612,553,8021.1 12,653,31012,696,143(0.3)

Diluted 13,664,21413,146,5863.9 13,539,37313,194,4342.6

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SOURCE Oppenheimer Holdings Inc.