Siebert(SIEB) - 2023 Q3 - Quarterly Report

Financial Performance - Commissions and fees for Q3 2023 were $1,986,000, an increase of $236,000 compared to Q3 2022, primarily due to market conditions [161]. - Interest, marketing, and distribution fees for Q3 2023 were $7,194,000, up by $1,990,000 from the same period last year, driven by rising interest rates [162]. - Principal transactions and proprietary trading for Q3 2023 totaled $3,753,000, an increase of $2,800,000 from Q3 2022 [163]. - Employee compensation and benefits for Q3 2023 were $8,723,000, an increase of $1,433,000 from the prior year, mainly due to higher commission payouts [170]. - Commissions and fees for the nine months ended September 30, 2023 were $5,839,000, a decrease of $104,000 (2%) from the prior year [178]. - Interest, marketing, and distribution fees for the nine months ended September 30, 2023 were $21,583,000, an increase of $10,866,000 (101%) from the prior year [179]. - Principal transactions and proprietary trading for the nine months ended September 30, 2023 were $9,207,000, an increase of $7,440,000 (404%) from the prior year [180]. - The provision for income taxes for the nine months ended September 30, 2023 was $3,621,000, an increase of $4,457,000 from the prior year [193]. Customer Metrics - Retail customer net worth increased to $14.6 billion as of September 30, 2023, up from $13.5 billion at the end of 2022 [158]. - Retail customer accounts grew to 128,727 as of September 30, 2023, compared to 122,394 at the end of 2022 [158]. Assets and Liabilities - Total assets as of September 30, 2023 were $771,146,000, an increase of $43,098,000 (6%) from December 31, 2022 [196]. - Total liabilities as of September 30, 2023 were $699,581,000, an increase of $21,453,000 (3%) from December 31, 2022 [197]. - Cash and cash equivalents decreased to $4.9 million as of September 30, 2023, down from $23.7 million as of December 31, 2022 [201]. Capital and Funding - The net capital infusion from Kakaopay to Siebert from the First Tranche was approximately $15.4 million, enhancing regulatory capital [199]. - The company maintains capital and segregated cash reserves in excess of regulatory requirements, ensuring compliance with SEC rules [207]. - The company has adequate reserves and contingency funding plans to meet regulatory requirements, with sufficient net capital reported for both MSCO and RISE [208]. Expenses - Rent and occupancy expenses for Q3 2023 were $467,000, a decrease of $95,000 from the prior year due to the termination of certain short-term leases [172]. - Professional fees for the three months ended September 30, 2023 were $979,000, an increase of $105,000 (12%) from the prior year [173]. - Interest expense for the three months ended September 30, 2023 was $40,000, a decrease of $68,000 (63%) from the prior year [174]. Cash Flow - For the nine months ended September 30, 2023, the company reported negative operating cash flow primarily due to changes in receivables and payables, as well as securities borrowed and loaned [210]. - The company had investing cash outflows related to the build-out of the Miami office building and technology initiatives for both the nine months ended September 30, 2023 and 2022 [210][211]. Tax Matters - As of September 30, 2023, the company recorded an uncertain tax position of $1,596,000 related to various tax matters, included in "Taxes payable" on the financial statements [217]. Regulatory Compliance - Customer transactions are cleared through brokers on a fully disclosed basis, with regular monitoring for compliance with margin requirements [224]. - The company does not engage in derivative transactions and has no liabilities for the debt of another entity [221]. - There were no material losses for unsettled customer transactions for the three and nine months ended September 30, 2023 and 2022 [214]. Agreements and Contracts - MSCO entered into a five-year service agreement with Broadridge Securities Processing Solutions, with a total minimum expense estimated at approximately $1.3 million [213]. - The company entered into a Capital on Demand Sales Agreement with JonesTrading for an aggregate offering amount of up to $9.6 million, but did not sell any shares under this agreement for the three and nine months ended September 30, 2023 and 2022 [206]. Shareholder Information - Siebert's largest stockholders, the Gebbia Stockholders, control approximately 43% of the outstanding equity securities prior to the closing of the Second Tranche [149].