NEW YORK, April 28, 2017 /PRNewswire/ - Oppenheimer
Holdings Inc. (NYSE: OPY) today reported a net loss of $4.8 million or $0.36 basic net loss per share for the first
quarter of 2017 compared with a net loss of $3.8 million or $0.29 basic net loss per share for the first
quarter of 2016. Loss before income taxes from continuing
operations was $7.0 million for the
first quarter of 2017, significantly impacted by a charge in the
amount of $6.4 million, compared with
a loss before income taxes from continuing operations of
$7.3 million for the first quarter of
2016. The charge was related to a value-added tax ("VAT")
assessment levied by the Israel VAT Authority for the period from
August 2008 to the present on the
Oppenheimer Israel business. Net income from discontinued
operations was $587,000 for the first
quarter of 2017 compared with a net loss from discontinued
operations of $617,000 for the first
quarter of 2016. Revenue from continuing operations for the
first quarter of 2017 was $213.3
million compared with revenue from continuing operations of
$215.0 million for the first quarter
of 2016. Revenue from discontinued operations for the first
quarter of 2017 was $998,000 compared
with revenue from discontinued operations of $3.7 million for the first quarter of 2016.
Summary Operating
Results (Unaudited)
|
('000s, except Per
Share Amounts)
|
|
|
For the 3-Months
Ended
|
|
|
3/31/2017
|
|
3/31/2016
|
|
%
Change
|
Revenue
|
|
$
|
213,261
|
|
$
|
214,956
|
|
(0.8)
|
Expenses
(1)
|
|
220,286
|
|
222,296
|
|
(0.9)
|
Loss Before Income
Taxes from Continuing Operations
|
|
(7,025)
|
|
(7,340)
|
|
(4.3)
|
Income
Taxes
|
|
(1,687)
|
|
(4,048)
|
|
(58.3)
|
Net Loss from
Continuing Operations
|
|
(5,338)
|
|
(3,292)
|
|
62.2
|
Net Income (Loss)
from Discontinued Operations
|
|
587
|
|
(617)
|
|
*
|
Net Loss
|
|
(4,751)
|
|
(3,909)
|
|
21.5
|
Less Net Income
(Loss) Attributable to Non-Controlling Interest, Net of
Tax
|
|
96
|
|
(62)
|
|
*
|
Net Loss Attributable
to Oppenheimer Holdings Inc.
|
|
$
|
(4,847)
|
|
$
|
(3,847)
|
|
26.0
|
|
|
|
|
|
|
Basic Net Income
(Loss) Per Share (2)
|
|
|
|
|
|
|
Continuing
Operations
|
|
$
|
(0.40)
|
|
$
|
(0.25)
|
|
60.0
|
|
Discontinued
Operations
|
|
0.04
|
|
(0.04)
|
|
*
|
|
Net Loss Per
Share
|
|
$
|
(0.36)
|
|
$
|
(0.29)
|
|
24.1
|
|
|
|
|
|
|
Diluted Net Income
(Loss) Per Share (2)
|
|
|
|
|
|
|
Continuing
Operations
|
|
$
|
(0.40)
|
|
$
|
(0.25)
|
|
60.0
|
|
Discontinued
Operations
|
|
0.04
|
|
(0.04)
|
|
*
|
|
Net Loss Per
Share
|
|
$
|
(0.36)
|
|
$
|
(0.29)
|
|
24.1
|
|
|
|
|
|
|
Weighted Average
Number of Common Shares Outstanding
|
|
|
|
Basic
|
|
13,399
|
|
13,380
|
|
0.1
|
|
Diluted
|
|
13,399
|
|
13,380
|
|
0.1
|
|
|
As
of
|
|
|
3/31/2017
|
|
3/31/2016
|
|
%
Change
|
Book Value Per
Share
|
|
$
|
37.70
|
|
$
|
38.12
|
|
(1.1)
|
Tangible Book Value
Per Share
|
|
$
|
24.93
|
|
$
|
25.43
|
|
(2.0)
|
*
|
Not
comparable
|
(1)
|
During an examination
in 2013, the Israel VAT Authority asserted that an existing written
agreement between Oppenheimer Israel and the VAT Authority was not
valid. Oppenheimer Israel filed an administrative appeal in
the Tel Aviv District Court which was due to be heard in the third
quarter of 2017. During the first quarter of 2017, in four
separate court decisions related to other companies, the Israeli
courts found in favor of the VAT Authority including one case with
substantially similar factual underpinnings. Based on these
new developments, the Company determined that the best course of
action was to settle the matter and has an agreement in principle
with the VAT Authority to do so. During the first quarter of
2017, the Company recorded a charge of $6.4 million related to this
matter.
|
(2)
|
Attributable to
Oppenheimer Holdings Inc.
|
U.S. equities markets increased 5.6% during the first quarter of
2017 extending the rally that began after the U.S. presidential
election which was based on expectations of lower tax rates,
reduced regulatory requirements, higher inflation, and increased
spending on infrastructure. Optimism in the equity markets
waned in March after the new administration withdrew its healthcare
reform bill which called into question the ability to make progress
on other initiatives. The period also saw increased inflation
as well as a pullback in the U.S. dollar compared to other
currencies. The Federal Reserve followed up its December 2016 rate increase with another 25 basis
point increase in March 2017. Effects of geopolitical
uncertainties and weaker economic indicators caused renewed flight
away from risk as the quarter ended causing the 10-Year Treasury
yield to decline during the period to 2.39% after beginning the
period at 2.45%.
Albert G. Lowenthal, Chairman and
CEO commented, "Oppenheimer continued to make meaningful progress
during the first quarter with increased hiring of financial
advisers and stronger results in investment banking as higher
M&A advisory fees helped offset the continued weakness in the
U.S. equities underwriting market. The hiring of senior
investment bankers in healthcare and technology sectors during the
first quarter will hopefully help us build off of this
momentum. The fee-based business continued to perform well
given the strong equity markets and continued adoption of fee-based
strategies by our retail clients. Spreads increased on our
interest rate sensitive products as we saw short term interest
rates increase during the period with the likelihood of further
increases as the year progresses. The institutional
commission business continued to be negatively impacted by low
volatility in the equity markets leading to lower volumes in our
institutional equities business. Retail commissions also
continued to be disappointing reflecting a continued change in
investor behavior away from active trading into passive
strategies. Regrettably, the unexpected events related to the
Israeli VAT issue significantly impacted what would have otherwise
been an improving quarter. Otherwise, our legal and
regulatory costs continued to decline during the period, as many of
our new compliance related initiatives begin to have a positive
effect."
Financial Highlights
- Commission revenue was $86.7
million for the first quarter of 2017, a decrease of 16.5%
compared with $103.8 million for the
first quarter of 2016 due to reduced transaction volumes from
retail and institutional investors and a lower financial adviser
headcount during the first quarter of 2017.
- Advisory fees were $69.4 million
for the first quarter of 2017, an increase of 5.1% compared with
$66.0 million for the first quarter
of 2016 due to a higher level of client assets under
management.
- Investment banking revenue increased 45.5% to $18.0 million for the first quarter of 2017
compared with $12.4 million for the
first quarter of 2016 due to higher merger and acquisition advisory
fees and higher debt and equity underwriting income during the
first quarter of 2017.
- Principal transactions revenue decreased 18.8% to $5.4 million for the first quarter of 2017
compared with $6.6 million for the
first quarter of 2016 due to changes in the fair value of auction
rate securities partially offset by increases in the value of firm
investments.
- The Company's results were significantly impacted by a charge
in the amount of $6.4 million related
to a VAT assessment levied by the Israel VAT Authority on its
Oppenheimer Israel business.
|
Business Segment
Results (Unaudited)
|
('000s)
|
|
|
|
|
|
|
For the 3-Months
Ended
|
|
|
3/31/2017
|
|
3/31/2016
|
|
%
Change
|
Revenue
|
|
|
|
|
|
|
|
|
Private Client
(1)
|
|
$
|
137,389
|
|
$
|
127,544
|
|
|
7.7
|
|
Asset Management
(1)
|
|
18,666
|
|
|
22,974
|
|
(18.8)
|
|
Capital
Markets
|
|
55,903
|
|
|
61,065
|
|
(8.5)
|
|
Corporate/Other
|
|
1,303
|
|
|
3,373
|
|
(61.4)
|
|
|
213,261
|
|
|
214,956
|
|
(0.8)
|
Income (Loss)
Before Income Taxes from Continuing Operations
|
|
Private
Client(1)
|
|
28,762
|
|
|
16,317
|
|
76.3
|
|
Asset
Management(1)
|
|
3,711
|
|
|
6,768
|
|
(45.2)
|
|
Capital
Markets
|
|
(12,614)
|
|
|
(6,798)
|
|
85.6
|
|
Corporate/Other
|
|
(26,884)
|
|
|
(23,627)
|
|
13.8
|
|
|
$
|
(7,025)
|
|
$
|
(7,340)
|
|
(4.3)
|
(1)
|
Effective January 1,
2017, the allocation of advisory fees between Private Client and
Asset Management changed from 77.5% and 22.5% to 90.0% and 10.0%,
respectively.
|
Private Client
Private Client reported revenue of $137.4
million for the first quarter of 2017, 7.7% higher than the
first quarter of 2016 due to increased advisory fee revenue, higher
fees earned on client deposits in the FDIC-insured bank deposit
program and positive changes in the cash surrender value of
Company-owned life insurance offset by lower retail commissions
during the first quarter of 2017. Income before income taxes
was $28.8 million for the first
quarter of 2017, an increase of 76.3% compared with the first
quarter of 2016 due to the aforementioned and lower
production-related compensation costs as well as lower technology
costs offset by higher deferred compensation costs during the first
quarter of 2017.
- Client assets under administration were $80.2 billion at March 31,
2017 compared with $77.2
billion at December 31, 2016,
an increase of 2.6%.
- Financial adviser headcount was 1,159 at the end of the first
quarter of 2017 (1,158 at the end of the fourth quarter of 2016),
down from 1,223 at the end of the first quarter of 2016. The
decline in financial adviser headcount from the first quarter of
2016 has been a result of the Company's attention to productivity
and compliance leading to attrition for less productive financial
advisers and the elimination of financial advisers with
compliance-related issues. The decline in headcount also has
been impacted by retirements and normal attrition.
- Retail commissions were $51.8
million for the first quarter of 2017, a decrease of 13.5%
from the first quarter of 2016 due to reduced transaction volumes
from retail investors and a lower financial adviser headcount
during the first quarter of 2017.
- Advisory fee revenue on traditional and alternative managed
products was $51.4 million for the
first quarter of 2017, an increase of 15.0% from the first quarter
of 2016 (see Asset Management below for further information).
The increase in advisory fees was due to the increase in the value
of client assets under management ("AUM") and the change in the
allocation of advisory fees between the Private Client and Asset
Management segments, effective January 1,
2017, which contributed to an increase of $5.2 million in revenue in the Private Client
segment.
- Fees earned on client cash deposits in the FDIC-insured bank
deposit program were $14.1 million
during the first quarter of 2017 versus $7.5
million for the first quarter of 2016. The increase
primarily was due to higher short-term interest rates during the
first quarter of 2017.
Asset Management
Asset Management reported revenue of $18.7 million for the first quarter of 2017,
18.8% lower than the first quarter of 2016 due to the change in
revenue allocation (see below). Income before income taxes
was $3.7 million for the first
quarter of 2017, a decrease of 45.2% compared with the first
quarter of 2016.
- Advisory fee revenue on traditional and alternative managed
products was $18.0 million for the
first quarter of 2017, a decrease of 15.5% over the first quarter
of 2016. Advisory fees are calculated based on the value of
AUM at the end of the prior quarter which totaled $24.8 billion at December
31, 2016 ($24.1 billion at
December 31, 2015) and are allocated
to the Private Client and Asset Management business segments.
Advisory fees decreased $5.2 million
due to the change in the allocation of advisory fees between the
Private Client and Asset Management segments which became effective
January 1, 2017.
- AUM increased 8.9% to $25.8
billion at March 31, 2017
compared with $23.7 billion at
March 31, 2016, which is the basis
for advisory fee billings for the second quarter of 2017. The
increase in AUM was comprised of asset appreciation of $1.6 billion and net contributions of assets of
$0.5 billion.
Capital Markets
Capital Markets reported revenue of $55.9
million for the first quarter of 2017, 8.5% lower than the
first quarter of 2016 due to lower institutional equities and fixed
income commissions partially offset by higher advisory fees from
investment banking activities during the first quarter of
2017. Loss before income taxes was $12.6 million for the first quarter of 2017, an
increase of 85.6% compared with a loss before income taxes of
$6.8 million for the first quarter of
2016 due primarily to the aforementioned charge of $6.4 million related to the VAT tax assessment on
the Oppenheimer Israel business.
- Institutional equities commissions decreased 18.6% to
$24.0 million for the first quarter
of 2017 compared with the first quarter of 2016 due to lower levels
of portfolio activity by institutional clients.
- Advisory fees from investment banking activities increased
44.0% to $7.2 million in the first
quarter of 2017 compared with the first quarter of 2016 due to an
increase in completed mergers and acquisitions activity during the
first quarter of 2017.
- Equity underwriting fees increased 21.0% to $3.4 million for the first quarter of 2017
compared with the first quarter of 2016.
- Revenue from Taxable Fixed Income decreased 21.0% to
$14.3 million for the first quarter
of 2017 compared with the first quarter of 2016 due to lower
institutional trading by our clients partially offset by higher
debt capital markets activity during the first quarter of 2017.
- Public Finance and Municipal Trading revenue decreased 2.0% to
$5.0 million for the first quarter of
2017 compared with the first quarter of 2016.
Compensation and Related Expenses
Compensation and related expenses (including salaries,
production and incentive compensation, share-based compensation,
deferred compensation, and other benefit-related items) totaled
$143.9 million during the first
quarter of 2017, a decrease of 3.1% compared with the first quarter
of 2016. The decrease was due to lower salaries,
production-related, and share-based compensation expenses partially
offset by higher incentive and deferred compensation expenses
during the first quarter of 2017. Compensation and related
expenses as a percentage of revenue was 67.5% during the first
quarter of 2017 compared with 69.1% during the first quarter of
2016.
Non-Compensation Expenses
Non-compensation expenses were $76.4
million during the first quarter of 2017, an increase of
3.5% compared with $73.8 million
during the first quarter of 2016 due to the aforementioned charge
of $6.4 million related to the VAT
assessment on the Oppenheimer Israel business offset by lower legal
and regulatory costs during the first quarter of 2017.
Income Taxes
The effective income tax rate from continuing operations for the
first quarter of 2017 was 24.0% compared with 55.1% for the first
quarter of 2016 and reflects the Company's estimate of the annual
effective tax rate adjusted for certain discrete items. The
effective tax rate for the first quarter of 2017 was primarily
negatively impacted by certain foreign items for which the tax
benefit was lower.
Discontinued Operations
During 2016, the Company completed the sales of substantially
all of the assets of its Oppenheimer Multifamily Housing and
Healthcare Finance Inc. ("OMHHF") subsidiary. The following
table is a summary of revenue and expenses from discontinued
operations for the three months ended March
31, 2017 and 2016:
|
|
|
|
('000s)
|
|
|
|
|
|
For the 3-Months
Ended
|
|
|
3/31/2017
|
|
3/31/2016
|
Revenue
|
|
|
|
|
Interest
|
$
|
3
|
|
|
$
|
337
|
|
Principal
transactions, net
|
—
|
|
|
(5,087)
|
|
Other
(1)
|
995
|
|
|
8,488
|
|
Total
revenue
|
998
|
|
|
3,738
|
Expenses
|
|
|
|
|
Compensation and
related expenses
|
11
|
|
|
2,918
|
|
Communications and
technology
|
8
|
|
|
101
|
|
Occupancy and
equipment costs
|
—
|
|
|
75
|
|
Interest
|
—
|
|
|
221
|
|
Other
|
3
|
|
|
1,080
|
|
Total
expenses
|
22
|
|
|
4,395
|
Income (loss) before
income taxes
|
976
|
|
|
(657)
|
Income
taxes
|
389
|
|
|
(40)
|
Net income (loss)
from discontinued operations
|
$
|
587
|
|
|
$
|
(617)
|
|
|
(1)
|
Other revenue for the
three month period ended March 31, 2017 was primarily due to
earn-out from the sale of the pipeline business in 2016.
|
Balance Sheet and Liquidity
- At March 15, 2017, the Company
announced its intention to redeem a total of $30 million of its 8.75% Senior Secured Notes due
2018 (the "Notes") at a redemption price equal to 100% of the
principal amount of the Notes to be redeemed, plus accrued and
unpaid interest, using the net cash proceeds from the asset sales
of OMHHF. On April 15, 2017,
the Notes were redeemed plus accrued and unpaid interest.
- At March 31, 2017, total equity
was $502.6 million compared with
$513.3 million at December 31, 2016.
- At March 31, 2017, book value per
share was $37.70 (compared with
$38.22 at December 31, 2016) and tangible book value per
share was $24.93 (compared with
$25.53 at December 31, 2016).
- The Company's level 3 assets, primarily auction rate
securities, were $90.8 million at
March 31, 2017 (compared with
$86.0 million at December 31, 2016). The increase in level 3
assets was primarily due to the purchase of auction rate securities
during the first quarter of 2017.
Dividend Announcement
The Company today announced a quarterly dividend in the amount
of $0.11 per share payable on
May 26, 2017 to holders of Class A
non-voting and Class B voting common stock of record on
May 12, 2017.
Company Information
Oppenheimer Holdings Inc., through its operating subsidiaries,
is a leading middle market investment bank and full service
broker-dealer that provides a wide range of financial services
including retail securities brokerage, institutional sales and
trading, investment banking (both corporate and public finance),
research, market-making, trust, and investment management.
With roots tracing back to 1881, the firm is headquartered in
New York and has 93 offices in 25
states and 5 foreign jurisdictions.
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, 2016.
|
Oppenheimer
Holdings Inc.
|
Consolidated
Statements of Operations (unaudited)
|
('000s, except Per
Share Amounts)
|
|
|
|
|
|
|
|
|
|
For the 3-Months
Ended
|
|
|
|
3/31/2017
|
|
|
3/31/2016
|
|
|
%
Change
|
REVENUE
|
|
|
|
|
|
|
|
|
|
Commissions
|
|
$
|
86,717
|
|
|
$
|
103,833
|
|
|
(16.5)
|
|
Advisory
fees
|
|
69,409
|
|
|
66,026
|
|
|
5.1
|
|
Investment
banking
|
|
18,021
|
|
|
12,383
|
|
|
45.5
|
|
Interest
|
|
10,565
|
|
|
13,042
|
|
|
(19.0)
|
|
Principal
transactions, net
|
|
5,373
|
|
|
6,618
|
|
|
(18.8)
|
|
Other
|
|
23,176
|
|
|
13,054
|
|
|
77.5
|
|
Total
revenue
|
|
213,261
|
|
|
214,956
|
|
|
(0.8)
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Compensation and
related expenses
|
|
143,878
|
|
|
148,495
|
|
|
(3.1)
|
|
Communications and
technology
|
|
17,706
|
|
|
17,680
|
|
|
0.1
|
|
Occupancy and
equipment costs
|
|
15,272
|
|
|
14,903
|
|
|
2.5
|
|
Clearing and exchange
fees
|
|
5,854
|
|
|
6,921
|
|
|
(15.4)
|
|
Interest
|
|
5,356
|
|
|
4,867
|
|
|
10.0
|
|
Other
|
|
32,220
|
|
|
29,430
|
|
|
9.5
|
|
Total
expenses
|
|
220,286
|
|
|
222,296
|
|
|
(0.9)
|
Loss before income
taxes from continuing operations
|
|
(7,025)
|
|
|
(7,340)
|
|
|
(4.3)
|
Income
taxes
|
|
(1,687)
|
|
|
(4,048)
|
|
|
(58.3)
|
Net loss from
continuing operations
|
|
(5,338)
|
|
|
(3,292)
|
|
|
62.2
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
|
|
|
|
Income (loss) from
discontinued operations
|
|
976
|
|
|
(657)
|
|
|
*
|
Income
taxes
|
|
389
|
|
|
(40)
|
|
|
*
|
Net income (loss)
from discontinued operations
|
|
587
|
|
|
(617)
|
|
|
*
|
|
|
|
|
|
|
|
Net
loss
|
|
(4,751)
|
|
|
(3,909)
|
|
|
21.5
|
Less net income
(loss) attributable to non-controlling interest, net of
tax
|
|
96
|
|
|
(62)
|
|
|
*
|
Net loss
attributable to Oppenheimer Holdings Inc.
|
|
$
|
(4,847)
|
|
|
$
|
(3,847)
|
|
|
26.0
|
|
|
|
|
|
|
|
|
Basic net income
(loss) per share attributable to Oppenheimer Holdings
Inc.
|
|
|
|
Continuing
operations
|
|
$
|
(0.40)
|
|
|
$
|
(0.25)
|
|
|
60.0
|
|
Discontinued
operations
|
|
0.04
|
|
|
(0.04)
|
|
|
*
|
|
Net loss per
share
|
|
$
|
(0.36)
|
|
|
$
|
(0.29)
|
|
|
24.1
|
Diluted net income
(loss) per share attributable to Oppenheimer Holdings
Inc.
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.40)
|
|
|
$
|
(0.25)
|
|
|
60.0
|
|
Discontinued
operations
|
|
0.04
|
|
|
(0.04)
|
|
|
*
|
|
Net loss per
share
|
|
$
|
(0.36)
|
|
|
$
|
(0.29)
|
|
|
24.1
|
Weighted Average
Number of Common Shares Outstanding
|
|
|
|
|
|
|
Basic
|
|
13,399
|
|
|
13,380
|
|
|
0.1
|
|
Diluted
|
|
13,399
|
|
|
13,380
|
|
|
0.1
|
|
|
|
|
|
|
|
*
|
Not
comparable
|
|
|
|
|
|
|
SOURCE Oppenheimer Holdings Inc.