Oppenheimer Holdings Inc. (OPY) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Stockholders of Oppenheimer Holdings, Inc. [Operator Instructions] It is now my pleasure to turn today's meeting over to Albert Lowenthal, Chairman and CEO of Oppenheimer Holdings. Mr. Lowenthal, the floor is yours.

Good afternoon, ladies and gentlemen. I want to welcome you to the 2025 Annual Meeting of Oppenheimer Holdings, Inc. This meeting is again being held virtually. I am Bud Lowenthal, and I will be chairing the meeting. It is now 4:30 p.m., and I would ask that the meeting come to order. I ask Mr. Dennis McNamara, the Secretary of the Corporation, to act as Secretary of the meeting and Ms. Erica Ortiz-Indart of Computershare Shareholder Services, our transfer agent, to act as Inspector of Election. Ms. Ortiz Indart has executed an affidavit to execute her duties as the inspector faithfully. I direct that the secretary attach the affidavit to the minutes of this meeting. The meeting will first address the formalities as described in our recent proxy statement. We have posted to our virtual meeting site a copy of our recent proxy statement and our annual report for the 2024 fiscal year, consisting of the annual report and the SEC Form 10-K. And I hope that each of you had an opportunity to review them. The first order of business today will be to address the meeting's formalities, after which I will make a presentation and answer questions. The notice calling this meeting, together with the proxy statement was mailed to stockholders on March 17, 2025. I have before me an affidavit of mailing of William Valentin of Computershare relating to the proof of mailing of the notice calling this meeting and the proxy statement in accordance with the bylaws of the corporation and I direct that this affidavit of mailing be filed with the minutes of this meeting. I have before me a certified list of the holders of the Class B voting stock at the close of business on March 7, 2025, the record date fixed by the Board of Directors for the purpose of determining the stockholders entitled to vote at this meeting, which has been certified by [ Rodolfo Sotelo ] of Computershare, our transfer agent. The list indicates that there are 99,665 shares of Class B voting common stock entitled to vote at this meeting. The list will be open for inspection by any stockholder of the corporation for the duration of this meeting. The Inspector of Elections report has now been received. The number of shares of Class B voting common stock represented in person by shareholders at this meeting is 0. The number of shares of Class B voting common stock represented by proxies received from stockholders is 97,348 for a total of 97,348, being a sufficient representation for a quorum. The total number of shares of Class B voting common stock represented at the meeting represent approximately 98% of the issued and outstanding Class B voting common stock of the corporation. Legal notice of the meeting having been given and a quorum being present, I now declare the meeting lawfully called and convened and ready for the transaction of business. I propose to proceed with the formalities of this meeting before addressing you with respect to the year ended December 31, 2024, and the current year and answering any questions you may have. The first order of business is the nomination and election of directors. The nominating Corporate Governance Committee in accordance with its charter has recommended the 9 persons named in the proxy statement, all of whom currently serve as directors, be nominated. I now will ask a holder of Class B voting shares to nominate the slate of nominees named in the proxy statement for election as directors of the corporation.

I nominate the following persons for election as members of the Board of Directors of the corporation to serve until the next Annual Meeting of Stockholders and until their successors have been elected and qualified. Evan Behrens; Tim Dwyer; Paul Friedman; Teresa Glasser; Stacy Kanter; Albert Lowenthal; Robert Lowenthal, Larry Roth; Suzanne Spaulding.

Is there a second to the motion?

I second the motion.

Are there any other nominees? If not, I will entertain a motion that nominees be closed.

I move that nominations be closed.

Is there a second to the motion?

I second the motion.

Each holder of shares of Class B voting common stock entitled to vote will have the right to 1 vote for each share recorded in his or her name. The 9 nominees for director receiving the highest number of votes shall be elected. Any Class B common shareholder who wishes to vote in person by ballot should submit their vote by pressing the Vote button on your screen now. [Voting]

The inspector's report having been filed, I report on the voting as follows: each of the 9 nominees for director has been elected to serve as a director of the corporation until the next Annual Meeting of Stockholders and until his or her respective successor has been elected and qualified. Each nominee having received at least 97,348 votes in favor of his or her election. I now propose to move to the ratification of the appointment of auditors for this fiscal year. The Audit Committee of your Board of Directors has, pursuant to its charter, the sole authority and responsibility to appoint independent auditors for ratification by the stockholders. The Audit Committee has selected Deloitte & Touche LLP for appointment as the corporation's independent registered public accounting firm for 2025. Accordingly, I request that a holder of Class B voting common stock move that the selection by the Audit Committee of Deloitte & Touche LLP as the corporation's auditors for the 2024 fiscal year be ratified.

I move that Deloitte & Touche LLP be appointed as the corporation's independent registered public accounting firm for the corporation's 2025 fiscal year at a remuneration to be fixed by the Audit Committee.

Is there a second to the motion?

I second the motion.

Each holder of shares of Class B voting common stock entitled to vote will have the right to 1 vote for each share recorded in his or her name. To pass, this matter requires the approval of a simple majority of the votes cast by the holders of Class B voting stock represented in person or by proxy at this meeting. Any Class B common stockholder who wishes to vote in person by ballot should submit their vote by pressing the Vote button on your screen now. [Voting]

The inspector's report having been filed, I report that the appointment of Deloitte & Touche LLP as the corporation's independent registered public accounting firm for the corporation's 2025 fiscal year at a rate of remuneration to be set by the Audit Committee has been ratified, having received 97,348 votes in favor of the proposal. Is there any additional business to properly come before the meeting? There being no additional business, I ask that a holder of Class B voting common stock move that the meeting be adjourned. Thereafter, I will address those present and answer any questions you may have.

I move that the meeting be adjourned.

Is there a second to the motion?

I second the motion.

All in favor, please say aye.

Aye.

Aye.

I declare the meeting adjourned. We have now completed the formalities of the meeting, and I will now address the year ended December 31, 2024, and the current year and answer any questions you may have. Welcome to our presentation. Slide #4. As previously announced, Albert Lowenthal will be stepping down as CEO, but will remain as Executive Chairman. Robert Lowenthal will assume the role as CEO in addition to his title of President of Oppenheimer. He has been with the company since 1999. And during that period, he has successfully held the roles of Head of IT from 1999 through 2008, Head of Global Fixed Income from 2008 to 2016 and Head of Investment Banking from 2016 to the present. He joined the Board of Directors in 2013 and was named President in 2021. He is eminently qualified for his new role as CEO of the company. Looking at 2024, as you know, Oppenheimer is a leading investment bank and full-service investment firm, providing financial services and advice to high net worth investors, individuals, businesses and institutions. For 2024, 69% of our revenue came from the Wealth Management segment or $972 million and 31% came from capital markets or $447.6 million. At the end of March of 2025, our shareholders' equity reached a high of $872.3 million. Our book value per share also reached a high of $82.87 with tangible book value per share of $65.85. Our earnings for the first quarter was $2.93. At quarter's end, we had 3,012 employees compared to 3,018 at year-end 12/31/24. At the end of the first quarter, we had 933 financial advisers connected with the company. Our client assets under administration at the end of the first quarter was $129.9 billion, and our assets under management was $48.9 billion. Pictured on this slide is a map of the United States with our offices around the country. We had 89 retail branches in the U.S. at quarter's end. There's 3,012 employees, 933 of whom are financial advisers, 165 of whom are institutional sales professionals with 35 senior research analysts. Outside of the U.S., we have offices in Europe, in London, Geneva and St. Helier on the Isle of Jersey. We have an office in the Middle East in Tel Aviv and an office in Hong Kong, China. Our revenues for 12/31/24 was $1.4 billion with net income of $71.6 million and our basic earnings per share were $6.91 for the full year. We had record revenue for the full year, largely driven by higher advisory fees attributable to a rise in billable assets under management as well as an increase in transaction-based commissions and significantly improved investment banking and interest revenue. Compensation expenses increased from the prior year, largely a result of higher production-related expenses, incentive compensation accruals and elevated costs associated with stock appreciation rights as our share price moved up substantially during 2024. We had lower noncompensation expenses for the full year, primarily reflecting lower legal and regulatory costs, partially offset by higher interest expense on short-term borrowings. During the year 2024, the company repurchased 243,806 shares of Class A nonvoting common stock during the full year under our share repurchase program. During the first quarter, we had total revenues of $367.825 million, an increase of 4.2% and our net income attributable to Oppenheimer Holdings was $30.655 million versus $26.054 million during the same period of 2024, an increase of 17.7%. Our earnings per share were $2.93 compared to $2.50, an increase of 17.2% for the period. Our increased revenue was primarily driven by significantly higher advisory fees attributable to a rise in billable assets under management as well as an increase in transaction-based commissions as well as sales and trading revenue. Our total stockholders' equity, book value and tangible book value reached new record highs as a result of these positive earnings. Looking at the charts pictured here. As you can see, our revenues for 2024 were $1.432 billion compared to $1.248 billion in the prior year of 2023. Our net income, moving to the next chart, was $71.6 million in 2024 versus $30.2 million in 2023. For the quarter, we had revenue of $367.8 million for the first quarter of 2025. Our revenues -- our net income for the first quarter was $30.7 million. Earnings per share in 2024 was $6.91 compared to $6.31 in the prior year, and our income was $2.93 for the first quarter, diluted was $2.72. Stockholders' equity at the end of the first quarter of '25 reached an all-time record of $872 million compared to $850 million at the end of 2024. The chart pictured is a chart of our stock price through April 23, 2025. As you can see, we had a sharp increase in the price of the shares of Oppenheimer during the latter part of 2024, which was partially offset by a decrease in the share price during the first quarter of 2025. Our total assets on our balance sheet at the end of March of 2025 was $3.572 billion with shareholders' equity of $872 million. Our regulatory net capital was $384.1 million with our excess capital being $355.4 million. Book value reached $82.87 and tangible book value of $65.85 per share. Looking at the lower left-hand quadrant, you can see that we paid off our long-term borrowings, which were $112 million at the end of 2023, which was fully paid off during that year, leaving us with no outstanding long-term borrowings at the end of 2024. Interest and fee revenue has always been an important component of our revenue. FDIC bank deposit program had $2.9 billion in total assets at 3/31/25 with income -- producing income of $132.2 million for the trailing 12 months ending 3/31/25. On the margin lending side, our average customer margin debits were $1.295 billion for the trailing 12 months ending 3/31/25, producing $87.9 million of revenue for the period. Our segment revenue of 2024 versus 2023, as you can see in the upper pie chart, we had $972 million of revenue in 2024 or 68% compared to $890.2 million in the lower chart or 71% during 2023. Our capital markets revenue in 2024 was $447.6 million or 31% compared to $345.9 million or 28% for all of 2023. Our pretax income from Wealth Management in 2024 was $265.7 million compared to $218.5 million during the full year of 2023. On the capital markets side, we had $39.6 million of loss from capital markets in 2024, a reduction from $63 million in 2023. Clearly, we were disappointed with the level of capital markets activity due to the uncertainty in the marketplace during all of calendar year '24 as well as '23. Looking at the first quarter of 2025 versus the first quarter of 2023. Our first quarter total revenue was $367.8 million, of which $242 million or 66% came from Wealth Management and $123.3 million or 34% came from capital markets. This compared with revenue of $353 million during the first quarter of 2024, of which $238 million or 68% came from Wealth Management and $112 million or 32% came from capital markets. Our pretax income for the first quarter showed $75.8 million of pretax income coming from Wealth Management compared to 67 -- I'm sorry, I got that backward. $67.9 million came from -- in the first quarter of '25 compared to $75.8 million in the first quarter of '24. In Capital Markets, we had a loss of $5.1 million in the first quarter compared to $6.7 million in 2024. Our well-recognized brand name and -- makes us one of the few independent nonbank broker-dealers with full-service capabilities. We offer a wide variety of services in Wealth Management. Our Wealth Management revenue during 2024 for the full year was $972 million compared to $890 million in '23, and our first quarter revenue in Wealth Management was $242 million compared to $238 million in the first quarter of 2024. In the lower left-hand quadrant, client assets for financial advisers reached a new high of $139.2 million for the first quarter of 2025 compared to $133.4 million in the first quarter of 2024 and at year-end '24, $139.1 million. Our Wealth Management pretax margin was slightly reduced in the first quarter of '25 of 28% compared to 31.8% at the end of the first quarter of '24, but up slightly from the full year of '24, which was 27.3%. As you can see from the table on the top, we continue to increase the share of wealth management revenues coming from advisory fees, reaching 68.3% for the trailing 12 months at March 2025, 68.1% for year-end 2024, which was down slightly from the year-end 2023. Our client assets under administration were $129.9 billion, a new high at the end of the first quarter of 2025. Our client assets under management were down slightly from year-end 2024 at the end of the first quarter, reaching only $48.9 billion at the end of the first quarter of 2025. In capital markets, we continue to have a strong equity research component with 35 senior research analysts covering over 600 companies at the end of the first quarter. Our capital markets' revenue reached an all-time high in 2021. In 2024, though, we did have the best year we've had since that period in 2021, reaching $448 million. First quarter revenue was $123 million compared to $112 million in the first quarter of 2024. In fixed income, our investment banking revenues were up 49% in the first -- for 2024 and sales and trading revenues were up 19.6% in 2024 compared to 2023. The composition of our revenue breakdown for '24 was $167.6 million coming from equities or 37%, $126 million or 28% coming from investment banking and $128.8 million coming from fixed income or 29%. Our investment banking focused industries continue to be health care, technology, consumer and retail, transportation and logistics, finance and real estate and finally, energy. In conclusion, we continue to invest in our future, and we continue to be poised for growth. We had record high revenues for the full year 2024, driven by higher advisory fees, an increase in transaction-based revenue as well as significantly improved investment banking and interest income. Our strong 2024 results provided the company with the opportunity to further strengthen its balance sheet through the redemption of all of our outstanding senior secured notes totaling $113 million, which were redeemed in the fourth quarter of 2024. Our solid capital position afforded us the opportunity to both increase our quarterly dividend as well as repurchase 243,806 Class A nonvoting shares in 2024. We delivered profitable results in the first quarter of 2025 despite uncertain macroeconomic conditions, and we posted our best quarter since quarter -- the fourth quarter of 2021 when we recorded our all-time record quarterly results. Looking forward to the future, we're well positioned to provide client advice amidst rapid developments on market-moving policies enacted by the new administration, which have resulted in increasingly volatile market conditions. We're dedicated to continuing to pursue both organic and inorganic growth opportunities in areas complementary to our existing businesses. Moving to quarter -- the second quarter of 2025, advisory fees, we expect will be adversely impacted by lower billable assets under management should the recent market decline persist amidst uncertainty over tariffs and tax policy. We will opportunistically pursue hiring qualified candidates across the platform, both in wealth management as well as capital markets. With that, I conclude my prepared remarks and ask if there are any questions.

We have no questions from our Class B stockholders. Any Class A stockholders who submitted a question by e-mail, we will respond within the next 24 hours.

I thank you all for attending our 2025 Annual Meeting. And with that, we'll conclude the meeting.

This concludes the meeting. You may now disconnect.