For the quarter ended September 30, 2024, Oppenheimer Holdings Inc. reported net income of $23.1 million, or $0.23 per diluted share, compared to net income of $14.1 million, or $0.14 per diluted share, for the same period in 2023. The company’s total revenue increased 12% to $444.1 million, driven by growth in its wealth management and capital markets businesses. The company’s assets under management (AUM) increased 10% to $234.1 billion, and its net new assets (NNA) were $4.4 billion. The company’s operating expenses increased 15% to $341.4 million, primarily due to higher compensation and benefits expenses. The company’s financial condition remains strong, with a debt-to-equity ratio of 0.35 and a cash and cash equivalents balance of $1.1 billion.
Executive Summary
The Firm delivered strong operating results for the third quarter of 2024 in a still-resilient economic environment. All major indices reached new highs, mostly spurred by the Federal Reserve’s decision to reduce the federal funds rate by one half percent. Based on recent economic indicators, it appears the U.S. economy is headed for a soft landing, with continued growth as we move into 2025.
The outperformance of the equity markets aided the Wealth Management franchise by driving better than expected retail trading volumes and higher asset-based advisory fees. Investment banking revenues also rose due to an uptick in advisory fees, particularly in the restructuring practice. However, equity underwriting fees were adversely impacted by lower issuance levels.
The results drove a fresh record in book value per share and provided the opportunity to further strengthen the balance sheet through the redemption of all outstanding senior secured notes. Access to capital for expansion will continue to be available as needed.
Results of Operations
The Company reported net income of $24.5 million or $2.38 basic earnings per share for the third quarter of 2024, compared to $13.9 million or $1.32 per share a year ago. Revenue increased 19.4% to $373.4 million.
Metric | 3Q-2024 | 3Q-2023 | Change | % Change |
---|---|---|---|---|
Revenue | $373,352 | $312,667 | $60,685 | 19.4% |
Compensation Expense | $237,935 | $195,684 | $42,251 | 21.6% |
Non-Compensation Expense | $100,047 | $95,396 | $4,651 | 4.9% |
Pre-Tax Income | $35,370 | $21,587 | $13,783 | 63.8% |
Net Income | $24,508 | $13,861 | $10,647 | 76.8% |
Earnings per Share (Basic) | $2.38 | $1.32 | $1.06 | 80.3% |
Book Value Per Share | $81.10 | $75.01 | $6.09 | 8.1% |
Tangible Book Value Per Share | $64.03 | $58.65 | $5.38 | 9.2% |
Highlights:
Business Segments
Metric | 3Q-2024 | 3Q-2023 | % Change |
---|---|---|---|
Private Client | |||
Revenue | $218,787 | $193,254 | 13.2% |
Pre-Tax Income | $62,894 | $65,249 | (3.6%) |
Asset Management | |||
Revenue | $27,262 | $20,830 | 30.9% |
Pre-Tax Income | $9,121 | $4,951 | 84.2% |
Capital Markets | |||
Revenue | $124,030 | $94,576 | 31.1% |
Pre-Tax Loss | $(6,144) | $(15,254) | (59.7%) |
Private Client The Private Client segment reported a 13.2% increase in revenue to $218.8 million, driven by higher advisory fees and commissions. Pre-tax income was $62.9 million, resulting in a pre-tax margin of 28.8%. Financial advisor headcount declined slightly to 928.
Asset Management Asset Management revenue increased 30.9% to $27.3 million, and pre-tax income rose 84.2% to $9.1 million. AUM reached a record $49.1 billion, up 21.5% from a year ago, driven by market appreciation.
Capital Markets Capital Markets revenue increased 31.1% to $124.0 million, and the pre-tax loss narrowed to $6.1 million. Advisory fees from investment banking activities rose 82.2%, while equity underwriting fees declined 17.4% due to lower new issuance levels.
Liquidity and Capital Resources
The Company satisfies its short-term financing needs through internally generated funds, bank borrowings, stock loans and repurchase agreements. At September 30, 2024, the Company had $206.7 million in bank call loans outstanding.
The Company announced plans to redeem all $113.05 million in outstanding senior secured notes on October 10, 2024. This will further strengthen the balance sheet.
The Company’s overseas subsidiaries are subject to local regulatory capital requirements that restrict the ability to utilize their capital for other purposes. The liquid assets at these subsidiaries are primarily comprised of cash and U.S. Treasuries.
Cybersecurity
Cybersecurity presents significant challenges, and the Company maintains a comprehensive program to identify, protect against, detect, respond to and recover from cybersecurity threats and risks. This includes engaging third-party firms, performing vulnerability assessments, providing employee training, and maintaining cybersecurity insurance.
The Board of Directors, through the Audit Committee, oversees the Company’s cybersecurity risk management program. The Chief Information Officer and Chief Information Security Officer report on cybersecurity matters to senior management and the Board.
While the Company has experienced cyber incidents in the past, none have had a material impact on the business. However, the threat of future attacks remains, and the Company continues to enhance its cybersecurity measures in response.
Regulatory Matters and Developments
The Company has implemented changes to comply with Regulation Best Interest (Reg BI), which imposes a federal standard of conduct on broker-dealers when dealing with retail clients. Reg BI requires enhanced documentation, the cessation of certain practices, and increased compliance costs.
The Department of Labor (DOL) also finalized a prohibited transaction exemption and new fiduciary rules in 2024 that impact investment advice for ERISA plans and IRAs. The Company believes many of the steps taken to comply with Reg BI have enabled it to also comply with the DOL’s new requirements.
All of the Company’s active regulated domestic and international subsidiaries had net capital in excess of minimum requirements as of September 30, 2024.
Outlook and Risks
The Company believes the U.S. economy is headed for a soft landing, with continued growth expected in 2025. However, there are several risks that could impact the business:
The Company has plans in place to manage these risks and maintain liquidity, but there can be no assurance that all potential impacts will be avoided. Overall, the Firm appears well-positioned to benefit from the current economic environment, but must remain vigilant in addressing the various challenges it faces.