Oppenheimer(US:OPY)2024-10-25 12:11PART I FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents Oppenheimer Holdings Inc.'s unaudited condensed consolidated financial statements for the periods ended September 30, 2024, detailing balance sheets, income statements, and cash flows Condensed Consolidated Balance Sheets As of September 30, 2024, total assets increased to $3.37 billion from $2.87 billion at December 31, 2023, primarily driven by increases in 'Receivable from customers' and 'Securities owned', while total liabilities also rose to $2.53 billion from $2.09 billion, largely due to increases in 'Bank call loans' and 'Securities sold under agreements to repurchase', with total stockholders' equity growing to $837.8 million from $789.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $3,367,285 | $2,874,816 | | Receivable from customers, net | $1,296,339 | $1,059,892 | | Securities owned, at fair value | $1,067,452 | $795,312 | | Total Liabilities | $2,529,447 | $2,085,577 | | Bank call loans | $206,700 | $0 | | Securities sold under agreements to repurchase | $765,102 | $640,382 | | Total Stockholders' Equity | $837,838 | $789,239 | Condensed Consolidated Income Statements For the third quarter of 2024, the company reported total revenue of $373.4 million and net income of $24.5 million, a significant increase from $312.7 million in revenue and $13.8 million in net income in Q3 2023, with diluted EPS for Q3 2024 at $2.16, up from $1.21 in Q3 2023 Income Statement Summary (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $373,352 | $312,667 | $1,057,079 | $940,536 | | Commissions | $103,079 | $83,933 | $295,984 | $259,174 | | Advisory fees | $121,631 | $107,969 | $353,675 | $310,214 | | Investment banking | $52,185 | $37,411 | $131,841 | $95,354 | | Pre-tax Income | $35,370 | $21,587 | $88,690 | $28,938 | | Net Income | $24,508 | $13,779 | $60,518 | $18,676 | | Diluted EPS | $2.16 | $1.21 | $5.45 | $1.62 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, net cash used in operating activities was $182.9 million, compared to $84.2 million in the prior year period, with cash provided by financing activities at $185.8 million, primarily due to a $206.7 million increase in bank call loans, resulting in a net increase in cash of $3.4 million for the period Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(182,880) | $(84,226) | | Net cash provided by (used in) investing activities | $455 | $(10,309) | | Net cash provided by financing activities | $185,832 | $13,290 | | Net increase (decrease) in cash | $3,407 | $(81,245) | Notes to Condensed Consolidated Financial Statements The notes provide detailed information on the company's accounting policies, business segments, financial instruments, and contingencies, including revenue disaggregation, debt redemption, and legal proceedings - The company's revenue is primarily derived from the Private Client segment, which generated $640.5 million for the nine months ended Sep 30, 2024, followed by Capital Markets with $328.3 million138 - On October 10, 2024, the company completed the redemption of all $113.05 million of its outstanding 5.50% Senior Secured Notes due 2025115 - The company estimates a range of aggregate loss for certain legal and regulatory proceedings of up to $5 million in excess of amounts already accrued, including ongoing Horizon-related arbitrations and a settlement in principle with the SEC for a $1.2 million civil penalty127128130 - As of September 30, 2024, 497,893 shares remained available for purchase under the company's share repurchase program, with 243,806 shares repurchased for $9.6 million during the first nine months of 2024121 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q3 2024 results to a resilient economy and equity market outperformance, highlighting significant revenue and net income growth, and record AUM, AUA, and book value per share Q3 2024 vs Q3 2023 Performance Highlights (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $373,352 | $312,667 | 19.4% | | Pre-tax Income | $35,370 | $21,587 | 63.8% | | Net Income | $24,508 | $13,861 | 76.8% | | Diluted EPS | $2.16 | $1.21 | 78.5% | | AUM ($ billions) | $49.1 | $40.4 | 21.5% | - The company's strategic outlook focuses on growing private client and asset management businesses, creating private market opportunities, expanding capital markets services through technology, and growing its investment banking footprint144 - The company announced plans and subsequently redeemed all $113.05 million of its outstanding Senior Secured Notes on October 10, 2024, to further strengthen its balance sheet154157 Business Segments In Q3 2024, the Private Client segment's revenue grew 13.2% to $218.8 million, the Asset Management segment saw revenue increase 30.9% to $27.3 million with AUM reaching a record $49.1 billion, and the Capital Markets segment's revenue rose 31.1% to $124.0 million, narrowing its pre-tax loss to $6.1 million from $15.3 million a year ago Segment Revenue and Pre-Tax Income (Loss) - Q3 2024 (in thousands) | Segment | Revenue | % Change YoY | Pre-Tax Income (Loss) | Change YoY | | :--- | :--- | :--- | :--- | :--- | | Private Client | $218,787 | 13.2% | $62,894 | $(2,355) | | Asset Management | $27,262 | 30.9% | $9,121 | $4,170 | | Capital Markets | $124,030 | 31.1% | $(6,144) | $9,110 | Liquidity and Capital Resources The company's total assets increased by 17.1% to $3.37 billion at September 30, 2024, with liquidity managed through internally generated funds and various financing methods, including $206.7 million in bank call loans, and all $113.05 million in Senior Secured Notes redeemed on October 10, 2024 - The company's primary sources of short-term financing are internally generated funds, bank call loans, stock loans, and repurchase agreements173 - At September 30, 2024, the company had bank call loans of $206.7 million, compared to zero at December 31, 2023181 - All outstanding $113.05 million of 5.50% Senior Secured Notes were redeemed on October 10, 2024176 Quantitative and Qualitative Disclosures About Market Risk The company states that there were no material changes to the information regarding market risk as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to market risk disclosures were reported for the nine months ended September 30, 2024209 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2024, with no material changes in internal controls over financial reporting during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period211 - There were no changes in internal control over financial reporting during the nine months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls214 PART II OTHER INFORMATION Legal Proceedings The company is involved in various legal actions, including FINRA arbitrations related to the Horizon Private Equity fraud and an SEC settlement, with an estimated aggregate loss of up to $5 million in excess of accruals - The company is a respondent in numerous arbitrations related to the Horizon Private Equity, III, LLC fraud, with all but two cases, alleging losses of approximately $2.75 million in aggregate, having been settled or resolved221 - On January 30, 2024, the company reached an agreement in principle with the SEC to settle litigation by paying a civil penalty of $1.2 million, subject to obtaining a waiver of certain statutory disqualifications224 - For legal proceedings where a loss is reasonably possible, the company estimates a range of aggregate loss up to $5 million in excess of accrued amounts220 Risk Factors The company reports that there were no material changes to the risk factors disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes to risk factors were reported for the three months ended September 30, 2024226 Unregistered Sales of Equity Securities and Use of Proceeds During the third quarter of 2024, the company repurchased 5,981 shares of its Class A Stock at an average price of $49.30 per share as part of its publicly announced share repurchase program, with 497,893 shares remaining available for purchase as of September 30, 2024 Share Repurchases in Q3 2024 | Period | Total Shares Purchased | Average Price Paid | Shares Purchased as Part of Program | Max Shares Remaining Under Program | | :--- | :--- | :--- | :--- | :--- | | July 2024 | 0 | $— | 0 | 503,874 | | August 2024 | 0 | $— | 0 | 503,874 | | September 2024 | 5,981 | $49.30 | 5,981 | 497,893 | Other Information The company disclosed that during the third quarter of 2024, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer of the Company adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter228 Exhibits This section lists the exhibits filed with the quarterly report, including certifications by the CEO and CFO as required by the Sarbanes-Oxley Act, and interactive data files (XBRL) - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32) and Interactive Data Files (101, 104)230