Oppenheimer Holdings Inc. Reports Second Quarter 2024 Earnings
Rhea-AI Summary
Oppenheimer Holdings Inc. (NYSE: OPY) reported net income of $10.3 million or $0.99 basic earnings per share for Q2 2024, compared to a net loss of $(9.4) million in Q2 2023. Revenue increased 8.0% to $330.6 million. The company benefited from strong equity markets, driving retail trading activity and AUM to new records. However, high interest rates led to a decline in FDIC sweep balances and related fees. Investment banking saw less capital market activity compared to Q1. The Private Client segment reported revenue of $208.7 million, up 3.7% year-over-year, while the Asset Management segment's revenue increased 16.3% to $25.8 million. The Capital Markets segment's revenue rose 15.8% to $92.1 million but reported a pre-tax loss of $21.8 million.
Positive
- Net income of $10.3 million in Q2 2024, compared to a net loss in Q2 2023
- Revenue increased 8.0% year-over-year to $330.6 million
- Assets under administration and management reached record levels
- Private Client segment revenue up 3.7% to $208.7 million
- Asset Management segment revenue increased 16.3% to $25.8 million
- Capital Markets segment revenue rose 15.8% to $92.1 million
- Book value and tangible book value per share reached new record highs
- 20% increase in quarterly dividend to $0.18 per share
Negative
- Decline in FDIC sweep balances and related fees due to high interest rates
- Less capital market activity in investment banking compared to Q1
- Capital Markets segment reported a pre-tax loss of $21.8 million
- Compensation expenses increased due to higher incentive compensation and new hires
- Effective tax rate increased to 35.3% from 18.2% in the prior year period
News Market Reaction
On the day this news was published, OPY declined 8.63%, reflecting a notable negative market reaction.
Data tracked by StockTitan Argus on the day of publication.
Albert G. Lowenthal, Chairman and CEO commented, "The Firm was profitable for the second quarter during a mostly favorable business environment. During the quarter, continued investor interest in artificial intelligence ("AI") stocks allowed all major indices to reach fresh records, despite continuing concerns about high interest rates and weakening employment data. Strong equity markets provided a backdrop for greater retail trading activity and drove our AUM to yet another new record, benefiting both our transaction driven revenues and AUM-based advisory fees.
The elevated interest rate environment resulted in improved interest revenue though the high interest rates also contributed to a significant decline in our FDIC sweep balances and related fees as clients sought higher returns elsewhere. The environment was also less favorable for our investment banking business, which saw less capital market activity when compared to the first quarter.
While we are somewhat disappointed in our earnings for the quarter, they were particularly impacted by the lack of follow through in underwriting revenue after a strong first quarter. We continue to believe that our investment in senior personnel will pay off in future quarters as those markets strongly re-open. Results from the Wealth Management business continue to be strong amidst the background of a very strong equity market.
The Company ended the quarter with a strong balance sheet and record book value per share levels. We remain focused on both attracting new financial advisors and retaining existing advisors while concurrently attracting qualified professionals to our investment banking platform and building our Equity and Fixed Income groups in order to position us well for growth as we move into the second half of 2024."
Summary Operating Results (Unaudited) | ||
('000s, except per share amounts or otherwise indicated) | ||
Firm | 2Q-24 | 2Q-23 |
Revenue | $ 330,589 | $ 306,189 |
Compensation Expenses | $ 220,727 | $ 187,224 |
Non-compensation Expenses | $ 93,997 | $ 130,664 |
Pre-Tax Income (Loss) | $ 15,865 | $ (11,699) |
Income Tax Provision (Benefit) | $ 5,599 | $ (2,131) |
Net Income (Loss) (1) | $ 10,266 | $ (9,400) |
Earnings Per Share (Basic) (1) | $ 0.99 | $ (0.85) |
Earnings Per Share (Diluted) (1) | $ 0.92 | $ (0.85) |
Book Value Per Share | $ 78.63 | $ 71.77 |
Tangible Book Value Per Share (2) | $ 61.56 | $ 56.29 |
Private Client | ||
Revenue | $ 208,701 | $ 201,245 |
Pre-Tax Income | $ 55,537 | $ 20,794 |
Assets Under Administration (billions) | $ 126.0 | $ 113.2 |
Asset Management | ||
Revenue | $ 25,826 | $ 22,198 |
Pre-Tax Income | $ 8,694 | $ 6,534 |
Assets Under Management (billions) | $ 47.5 | $ 41.2 |
Capital Markets | ||
Revenue | $ 92,141 | $ 79,582 |
Pre-Tax Loss | $ (21,775) | $ (14,051) |
(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 2024 was primarily driven by significantly higher advisory fees attributable to a rise in billable assets under management ("AUM") as well as improved investment banking and interest revenues
- Assets under administration and under management were both at record levels at June 30, 2024, benefiting from market appreciation and positive net asset flows
- Compensation expenses increased from the prior year quarter largely as a result of higher incentive compensation expenses, share-based compensation costs and production-related expenses
- Non-compensation expenses decreased from the prior year quarter primarily due to lower legal costs partially offset by higher interest expense
- 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
('000s, except otherwise indicated) | ||
2Q-24 | 2Q-23 | |
Revenue | ||
Commissions | ||
Advisory Fees | ||
Bank Deposit Sweep Income | ||
Interest | ||
Other | $ 8,410 | |
Total Expenses | ||
Compensation | ||
Non-compensation | ||
Pre-Tax Income | ||
Compensation Ratio | 56.3 % | 49.5 % |
Non-compensation Ratio | 17.1 % | 40.2 % |
Pre-Tax Margin | 26.6 % | 10.3 % |
Assets Under Administration (billions) | $ 126.0 | $ 113.2 |
Cash Sweep Balances (billions) | $ 2.9 | $ 3.9 |
Revenue:
- Retail commissions increased
16.5% from a year ago primarily due to higher retail trading activity - Advisory fees increased
15.4% due to higher AUM during the billing period for the current quarter when compared to the second quarter of last year - Bank deposit sweep income decreased
$9.2 million - Interest revenue decreased modestly from the prior year period due to lower stock borrow income
- Other revenue decreased from a year ago primarily due to smaller movements 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
18.0% from a year ago primarily due to higher production related and share-based compensation expenses - Non-compensation expenses decreased
55.8% from a year ago primarily due to lower legal costs
Asset Management
Asset Management reported revenue for the current quarter of
('000s, except otherwise indicated) | ||
2Q-24 | 2Q-23 | |
Revenue | $ 25,826 | $ 22,198 |
Advisory Fees | $ 26,241 | $ 22,196 |
Other | $ (415) | $ 2 |
Total Expenses | $ 17,132 | $ 15,664 |
Compensation | $ 6,120 | $ 6,283 |
Non-compensation | $ 11,012 | $ 9,381 |
Pre-Tax Income | $ 8,694 | $ 6,534 |
Compensation Ratio | 23.7 % | 28.3 % |
Non-compensation Ratio | 42.6 % | 42.3 % |
Pre-Tax Margin | 33.7 % | 29.4 % |
AUM (billions) | $ 47.5 | $ 41.2 |
Revenue:
- Advisory fee revenue increased
18.2% 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
$47.5 billion - The increase in AUM was comprised of higher asset values of
$6.1 billion $0.2 billion
Total Expenses:
- Compensation expenses were down
2.6% from a year ago primarily resulting from decreases in incentive compensation - Non-compensation expenses were up
17.4% when compared to the prior year period mostly due to higher external portfolio management costs which are directly related to the increase in AUM
Capital Markets
Capital Markets reported revenue for the current quarter of
('000s) | ||
2Q-24 | 2Q-23 | |
Revenue | ||
Investment Banking | ||
Advisory Fees | ||
Equities Underwriting | $ 5,478 | |
Fixed Income Underwriting | $ 2,815 | $ 1,867 |
Other | $ 386 | $ 459 |
Sales and Trading | ||
Equities | ||
Fixed Income | ||
Other | $ 676 | $ 617 |
Total Expenses | ||
Compensation | ||
Non-compensation | ||
Pre-Tax Loss | ||
Compensation Ratio | 79.5 % | 77.0 % |
Non-compensation Ratio | 44.1 % | 40.7 % |
Pre-Tax Margin | (23.6) % | (17.7) % |
Revenue:
Investment Banking
- Advisory fees earned from investment banking activities increased
12.3% compared with a year ago due to higher M&A volumes - Equity underwriting fees increased
104.6% when compared with a year ago due to higher new issuance volumes - Fixed income underwriting fees were modestly higher than the prior year period
Sales and Trading
- Equities sales and trading revenue was relatively flat when compared with the prior year period
- Fixed income sales and trading revenue increased
22.3% 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
19.6% compared with a year ago primarily due to costs associated with opportunistic new hires and higher incentive compensation - Non-compensation expenses were
25.5% higher than a year ago primarily due to an increase in interest expense in financing trading inventories
Other Matters
(In millions, except number of shares and per share amounts) | ||
2Q-24 | 2Q-23 | |
Capital | ||
Stockholders' Equity (1) | $ 812.1 | $ 788.3 |
Regulatory Net Capital (2) | $ 460.7 | $ 417.5 |
Regulatory Excess Net Capital (2) | $ 439.7 | $ 394.7 |
Common Stock Repurchases | ||
Repurchases | $ 0.9 | $ 3.6 |
Number of Shares | 23,102 | 96,135 |
Average Price | $ 40.01 | $ 37.43 |
Period End Shares | 10,327,510 | 10,984,240 |
Effective Tax Rate | 35.3 % | 18.2 % |
(1) Attributable to Oppenheimer Holdings Inc. | ||
(2) Attributable to Oppenheimer & Co. Inc. broker-dealer | ||
- The Board of Directors announced a
$0.03 20% increase in the quarterly dividend to$0.18 - Compensation expense as a percentage of revenue was higher at
66.8% during the current period versus61.1% during the same period last year due to opportunistic new hires and increased share based compensation costs - The effective tax rate for the current period was
35.3% compared with18.2% for the prior year period. The effective tax rate for the second quarter of 2024 was negatively impacted by permanent items and non-deductible losses in non-U.S. businesses.
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, 2023.
Oppenheimer Holdings Inc. | ||||||||||||
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, | |||||||||||
2024 | 2023 | % Change | 2024 | 2023 | % Change | |||||||
REVENUE | ||||||||||||
Commissions | $ 97,055 | $ 88,544 | 9.6 | $ 192,905 | $ 175,241 | 10.1 | ||||||
Advisory fees | 117,197 | 101,015 | 16.0 | 232,044 | 201,559 | 15.1 | ||||||
Investment banking | 29,119 | 19,978 | 45.8 | 79,656 | 57,943 | 37.5 | ||||||
Bank deposit sweep income | 34,846 | 44,060 | (20.9) | 71,531 | 92,969 | (23.1) | ||||||
Interest | 34,805 | 27,320 | 27.4 | 61,571 | 52,261 | 17.8 | ||||||
Principal transactions, net | 10,074 | 16,253 | (38.0) | 28,308 | 29,743 | (4.8) | ||||||
Other | 7,493 | 9,019 | (16.9) | 17,712 | 18,152 | (2.4) | ||||||
Total revenue | 330,589 | 306,189 | 8.0 | 683,727 | 627,868 | 8.9 | ||||||
EXPENSES | ||||||||||||
Compensation and related expenses | 220,727 | 187,224 | 17.9 | 442,440 | 393,516 | 12.4 | ||||||
Communications and technology | 24,682 | 22,783 | 8.3 | 49,258 | 45,223 | 8.9 | ||||||
Occupancy and equipment costs | 15,516 | 16,440 | (5.6) | 31,364 | 32,341 | (3.0) | ||||||
Clearing and exchange fees | 6,780 | 5,927 | 14.4 | 12,622 | 12,190 | 3.5 | ||||||
Interest | 21,980 | 17,467 | 25.8 | 42,528 | 30,609 | 38.9 | ||||||
Other | 25,039 | 68,047 | (63.2) | 52,195 | 106,639 | (51.1) | ||||||
Total expenses | 314,724 | 317,888 | (1.0) | 630,407 | 620,518 | 1.6 | ||||||
Pre-Tax Income (Loss) | 15,865 | (11,699) | * | 53,320 | 7,350 | 625.4 | ||||||
Income tax provision (benefit) | 5,599 | (2,131) | * | 17,310 | 2,454 | 605.4 | ||||||
Net Income (Loss) | $ 10,266 | $ (9,568) | * | $ 36,010 | $ 4,896 | 635.5 | ||||||
Less: Net loss attributable to non-controlling interest, net of tax | — | (168) | * | (310) | (321) | * | ||||||
Net income (loss) attributable to Oppenheimer Holdings Inc. | $ 10,266 | $ (9,400) | * | $ 36,320 | $ 5,217 | 596.2 | ||||||
Earnings (loss) per share attributable to Oppenheimer Holdings Inc. | ||||||||||||
Basic | $ 0.99 | $ (0.85) | * | $ 3.49 | $ 0.47 | 642.6 | ||||||
Diluted | $ 0.92 | $ (0.85) | * | $ 3.29 | $ 0.44 | 647.7 | ||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 10,327,818 | 11,016,430 | (6.3) | 10,367,636 | 11,054,306 | (6.2) | ||||||
Diluted | 11,111,903 | 11,016,430 | 0.9 | 11,083,422 | 11,911,379 | (7.0) | ||||||
Period end number of common shares outstanding | 10,327,510 | 10,984,240 | (6.0) | 10,327,510 | 10,984,240 | (6.0) | ||||||
* Percentage not meaningful |
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SOURCE Oppenheimer Holdings Inc.
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