10-Q 1 opy-20220331.htm 10-Q opy-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
 
FORM 10-Q
  
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
 
Commission File Number 1-12043
 
OPPENHEIMER HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
Delaware98-0080034
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

85 Broad Street
New York, NY 10004
(Address of principal executive offices) (Zip Code)

(212668-8000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
 


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A non-voting common stockOPYThe New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated Filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  
The number of shares of the Company's Class A non-voting common stock and Class B voting common stock (being the only classes of common stock of the Company) outstanding on April 29, 2022 was 12,131,656 and 99,665 shares, respectively.



OPPENHEIMER HOLDINGS INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q

 
 Page No.
PART I
Item 1.
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 6.



PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(Expressed in thousands, except number of shares and per share amounts)March 31, 2022December 31, 2021
ASSETS
Cash and cash equivalents$47,453 $213,759 
Deposits with clearing organizations101,371 66,968 
Restricted cash127,781 127,765 
Receivable from brokers, dealers and clearing organizations209,437 169,902 
Receivable from customers, net of allowance for credit losses of $3,311 ($3,326 in 2021)
1,261,305 1,221,450 
Securities purchased under agreements to resell 935 
Securities owned, including amounts pledged of $551,736 ($266,428 in 2021), at fair value
689,046 634,504 
Notes receivable, net57,879 53,983 
Furniture, equipment and leasehold improvements, net of accumulated depreciation of $94,745 ($92,785 in 2021)
28,530 28,036 
Right-of-use lease assets, net of accumulated amortization of $69,923 ($76,462 in 2021)
151,150 150,121 
Goodwill137,889 137,889 
Intangible assets32,100 32,100 
Other assets175,516 205,838 
Total assets$3,019,457 $3,043,250 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Bank call loans$78,150 $69,500 
Payable to brokers, dealers and clearing organizations319,503 422,057 
Payable to customers506,988 456,958 
Securities sold under agreements to repurchase481,151 277,322 
Securities sold but not yet purchased, at fair value97,371 71,958 
Accrued compensation115,731 342,125 
Income tax payable13,158 13,536 
Accounts payable and other liabilities97,201 76,655 
Lease liabilities194,102 192,019 
Senior secured notes, net of debt issuance costs of $863 ($926 in 2021)
124,137 124,074 
Deferred tax liabilities, net of deferred tax assets of $50,191 ($54,957 in 2021)
47,254 44,016 
Total liabilities2,074,746 2,090,220 
Commitments and contingencies (note 14)
Redeemable noncontrolling interests127,765 127,765 
Stockholders' equity
Share capital
Class A non-voting common stock, par value $0.001 per share, 50,000,000 shares authorized, 12,156,174 and 12,447,036 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
22,495 36,309 
Class B voting common stock, par value $0.001 per share, 99,665 shares authorized, issued and outstanding as of March 31, 2022 and December 31, 2021
133 133 
22,628 36,442 
Contributed capital39,829 41,603 
Retained earnings748,323 740,926 
Accumulated other comprehensive income3,611 4,225 
Total Oppenheimer Holdings Inc. stockholders' equity814,391 823,196 
Noncontrolling interest2,555 2,069 
Total Stockholders' Equity816,946 825,265 
Total Liabilities, Redeemable Noncontrolling Interests and Stockholders' Equity$3,019,457 $3,043,250 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS (unaudited)
For the Three Months Ended
March 31,
(Expressed in thousands, except number of shares and per share amounts)20222021
REVENUE
Commissions$98,321 $113,471 
Advisory fees115,766 104,496 
Investment banking38,470 124,501 
Bank deposit sweep income4,354 4,008 
Interest9,517 8,666 
Principal transactions, net2,364 10,865 
Other(2,764)7,275 
Total revenue266,028 373,282 
EXPENSES
Compensation and related expenses186,031 255,601 
Communications and technology21,585 20,607 
Occupancy and equipment costs14,690 15,182 
Clearing and exchange fees5,976 6,275 
Interest2,512 2,647 
Other21,021 20,843 
Total expenses251,815 321,155 
Pre-tax income14,213 52,127 
Income taxes4,435 13,469 
Net income$9,778 $38,658 
Net income attributable to noncontrolling interest, net of tax486  
Net income attributable to Oppenheimer Holdings Inc.$9,292 $38,658 
Earnings per share attributable to Oppenheimer Holdings Inc.
Basic$0.75 $3.07 
Diluted$0.69 $2.91 
Weighted average shares outstanding
Basic12,467,632 12,579,130 
Diluted13,499,334 13,299,243 


The accompanying notes are an integral part of these condensed consolidated financial statements.
4


OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
For the Three Months Ended
March 31,
(Expressed in thousands)20222021
Net income $9,778 $38,658 
Other comprehensive income (loss), net of tax
Currency translation adjustment(614)(836)
Comprehensive income9,164 37,822 
Less net income attributable to noncontrolling interests486  
Comprehensive income attributable to Oppenheimer Holdings Inc.$8,678 $37,822 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5



OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)

For the Three Months Ended
March 31,
(Expressed in thousands, except per share amounts)20222021
Share capital
Balance at beginning of period$36,442 $39,333 
Issuance of Class A non-voting common stock2,344 3,808 
Repurchase of Class A non-voting common stock for cancellation(16,158) 
Balance at end of period22,628 43,141 
Contributed capital
Balance at beginning of period41,603 41,481 
Share-based expense2,821 2,460 
Vested employee share plan awards(4,595)(8,512)
Balance at end of period39,829 35,429 
Retained earnings
Balance at beginning of period740,926 601,406 
Net income (1)
9,292 38,658 
Dividends paid(1,895)(1,506)
Balance at end of period748,323 638,558 
Accumulated other comprehensive income
Balance at beginning of period4,225 3,448 
Currency translation adjustment(614)(836)
Balance at end of period3,611 2,612 
Total Oppenheimer Holdings Inc. stockholders' equity$814,391 $719,740 
Noncontrolling interest
Balance at beginning of period2,069  
Net income attributable to non-controlling interest486  
Balance at end of period2,555  
Total stockholders' equity$816,946 $719,740 
Redeemable Noncontrolling Interests
Balance at beginning of period127,765  
Contributions during the year  
Balance at end of period$127,765 $ 
Dividends paid per share$0.15 $0.12 
(1) Attributable to Oppenheimer Holdings Inc.

The accompanying notes are an integral part of these condensed consolidated financial statements.
6

OPPENHEIMER HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE THREE MONTHS ENDED MARCH 31,
(Expressed in thousands)20222021
Cash flows from operating activities
Net income$9,778 $38,658 
Adjustments to reconcile net income to net cash (used in)/provided by operating activities
Non-cash items included in net income:
Depreciation and amortization of furniture, equipment and leasehold improvements1,996 1,926 
Deferred income taxes3,162 1,885 
Amortization of notes receivable3,735 3,438 
Amortization of debt issuance costs63 62 
Provision for credit losses5 1,509 
Share-based compensation2,910 10,598 
Amortization of right-of-use lease assets6,570 6,501 
Decrease (increase) in operating assets:
Deposits with clearing organizations(34,403)6,049 
Receivable from brokers, dealers and clearing organizations(39,535)(30,421)
Receivable from customers(39,860)(43,173)
Securities purchased under agreements to resell935 (25,937)
Securities owned(54,542)5,187 
Notes receivable(7,631)(6,124)
Other assets29,708 87,739 
Increase (decrease) in operating liabilities:
Drafts payable 12,392 
Payable to brokers, dealers and clearing organizations(102,554)161,502 
Payable to customers50,030 (40,357)
Securities sold under agreements to repurchase203,829 (335,288)
Securities sold but not yet purchased25,413 234,315 
Accrued compensation(226,483)(99,101)
Income tax payable (378)6,050 
Accounts payable and other liabilities15,106 9,858 
Cash (used in)/provided by operating activities(152,146)7,268 
Cash flows from investing activities
Purchase of furniture, equipment and leasehold improvements(2,490)(999)
Cash used in investing activities(2,490)(999)
Cash flows from financing activities
Cash dividends paid on Class A non-voting and Class B voting common stock(1,895)(1,506)
Repurchase of Class A non-voting common stock for cancellation(16,158) 
Payments for employee taxes withheld related to vested share-based awards(2,251)(4,720)
Debt issuance costs (22)
Increase/(decrease) in bank call loans, net8,650 (6,900)
Cash used in financing activities(11,654)(13,148)
Net decrease in cash, cash equivalents and restricted cash(166,290)(6,879)
Cash, cash equivalents and restricted cash, beginning of period341,524 35,424 
Cash, cash equivalents and restricted cash, end of period$175,234 $28,545 
Reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets:20222021
Cash and cash equivalents$47,453 $28,545 
Restricted cash127,781  
Total cash, cash equivalents and restricted cash$175,234 $28,545 
Schedule of non-cash financing activities
Employee share plan issuance$3,809 $6,228 
Supplemental disclosure of cash flow information
Cash paid during the period for interest$4,135 $4,578 
Cash paid during the period for income taxes, net$1,675 $797 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

1.    Organization
Oppenheimer Holdings Inc. ("OPY" or the "Parent") is incorporated under the laws of the State of Delaware. The condensed consolidated financial statements include the accounts of OPY and its consolidated subsidiaries (together, the "Company"). Oppenheimer Holdings Inc., through its operating subsidiaries, is a leading middle market investment bank and full service broker-dealer that is engaged in a broad range of activities in the financial services industry, including retail securities brokerage, institutional sales and trading, investment banking (corporate and public finance), equity and fixed income research, market-making, trust services, and investment advisory and asset management services.
The Company is headquartered in New York and has 93 retail branch offices in the United States and institutional businesses located in London, Tel Aviv, and Hong Kong. The principal subsidiaries of OPY are Oppenheimer & Co. Inc. ("Oppenheimer"), a registered broker-dealer in securities and investment adviser under the Investment Advisers Act of 1940; Oppenheimer Asset Management Inc. ("OAM") and its wholly-owned subsidiary, Oppenheimer Investment Management LLC, both registered investment advisers under the Investment Advisers Act of 1940; Oppenheimer Trust Company of Delaware ("Oppenheimer Trust"), a limited purpose trust company that provides fiduciary services such as trust and estate administration and investment management; OPY Credit Corp., which offers syndication as well as trading of issued corporate loans; Oppenheimer Europe Ltd., based in the United Kingdom, with offices in the Isle of Jersey, Germany and Switzerland, which provides institutional equities and fixed income brokerage and corporate finance and is regulated by the Financial Conduct Authority; and Oppenheimer Investments Asia Limited, based in Hong Kong, China, which provides fixed income and equities brokerage services to institutional investors and is regulated by the Securities and Futures Commission.
Oppenheimer owns Freedom Investments, Inc. ("Freedom"), a registered broker dealer in securities, which provides discount brokerage services, and Oppenheimer Israel (OPCO) Ltd., which is engaged in offering investment services in the State of Israel. Oppenheimer holds a trading permit on the New York Stock Exchange.
2.    Summary of significant accounting policies and estimates
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America ("U.S. GAAP") for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 (the "Form 10-K"). The accompanying condensed consolidated balance sheet data was derived from the audited consolidated financial statements but does not include all disclosures required by U.S. GAAP for annual financial statement purposes. The accompanying condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the financial statements and the accompanying disclosures. Although these estimates are based on management's knowledge of current events and actions that the Company may undertake in the future, actual results may differ materially from the estimates. The condensed consolidated results of operations for the three-month period ended March 31, 2022 are not necessarily indicative of the results to be expected for any future interim or annual period.

On January 30, 2020, the spread of the novel coronavirus ("COVID-19") was declared a Public Health Emergency of International Concern by the World Health Organization ("WHO"). Subsequently, on March 11, 2020, the WHO characterized the COVID-19 outbreak as a pandemic (the "COVID-19 Pandemic"). The COVID-19 Pandemic coupled with the current market volatility has created an economic environment that may have significant accounting and financial reporting implications. The disruption of businesses around the globe due to COVID-19 may be a "trigger event" for companies to reassess valuation and accounting estimates and assumptions such as, impairment of goodwill, valuation allowances of deferred tax assets, fair value of investments and collectability of receivables.



8


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

The Company has reviewed the assumptions on which it values its goodwill, as well as valuation allowances on certain assets and the collectability of its receivables as of March 31, 2022, which did not result in any impairment or write-off.
Oppenheimer Acquisition Corp. I

On October 26, 2021, Oppenheimer Acquisition Corp. I (“OHAA”) consummated its $126.5 million initial public offering (the “OHAA IPO”). OHAA is a special purpose acquisition company, incorporated in Delaware for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (a “Business Combination”). Oppenheimer Acquisition LLC I (the “Sponsor”), a Delaware series limited liability company and the Company’s subsidiary, is the sponsor of OHAA. The Company and its employees control OHAA through the Sponsor’s ownership of Class A founder shares of OHAA. As a result, both OHAA and the Sponsor are consolidated in the Company’s financial statements.

Funds totaling $127.8 million, including proceeds from the OHAA IPO of $126.5 million and $1.3 million in investment from the Sponsor, are held in a trust account until the earlier of (i) the completion of a Business Combination or (ii) ten business days after April 29, 2023, 18 months from the closing of the OHAA IPO (“Combination Period”). The cash held in the trust account is recorded in “Restricted Cash” on the consolidated balance sheet.

Transaction costs, which consisted of a net underwriting fee of $2.5 million and $0.5 million of other offering costs, were charged during fourth quarter of 2021 against the gross proceeds of the OHAA IPO consistent with SEC Staff Accounting Bulletin (SAB) Topic 5.

“Redeemable noncontrolling interests” of $127.8 million associated with the publicly held OHAA Class A ordinary shares are recorded on the Company’s consolidated balance sheet as of March 31, 2022 at redemption value and classified as temporary equity in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity”. Changes in redemption value are recognized immediately as they occur and will adjust the carrying value of redeemable noncontrolling interests to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable noncontrolling interests shall be affected by charges to additional paid-in-capital and noncontrolling interests attributable to certain members of the Sponsor on a pro rata ownership basis.

The public warrants and private warrants exercisable for OHAA Class A ordinary shares that were issued in connection with the OHAA IPO (the “OHAA Warrants”) qualify for equity accounting treatment under FASB ASC Topic 815.
Oppenheimer Principal Investments LLC
Oppenheimer Principal Investments LLC ("OPI") is a Delaware special purpose "Series" limited liability company formed in December 2020 and designed to retain and reward talented employees of the Company, primarily in connection with the deployment of Company capital into successful private market investments, and also in connection with the Company's receipt of non-cash compensation from investment banking assignments. OPI is designed to promote alignment of Company, client and employee interests as they relate to profitable investment opportunities. This program acts as an incentive for senior employees to identify attractive private investments for the Company and its clients, and as a retention tool for key employees of the Company. OPI treats its members as partners for tax purposes generally and with respect to the separate Series formed to participate in (i) the incentive fees generated by successful client investments in the Company's Private Market Opportunities program, or (ii) principal investments made by the Company or a portion of the gains thereon, either through the outright purchase of an investment or consideration earned in lieu of an investment banking fee or other transaction fee. Employees who become members of a Series receive a "profit interest", as that term is used in IRS regulations, and receive an allocation of capital appreciation of the investment held by the particular Series that exceeds a threshold amount established for each Series. Participating employees are also subject to vesting and forfeiture requirements for each Series investment. The Company’s policy is to consolidate those entities where it owns the majority voting interests. The Company owns the majority voting interest of OPI through Oppenheimer Alternative Investment Management (“OAIM”), the managing member of OPI and a subsidiary of OAM. Pursuant to the Company’s policy for consolidation, the Company consolidates OPI.

9


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

Noncontrolling Interests

Noncontrolling interests represents ownership interests in the Sponsor of OHAA which includes OHAA Class A founder and Class A ordinary shares held by management and employees of the Company as well as OHAA Class B shares held by directors and officers of OHAA and an employee of the Company. Noncontrolling interests also include publicly held warrants to purchase OHAA Class A ordinary shares. Additionally, noncontrolling interests also includes the profits allocated to employees who have profit interests in OPI's Series.

Restricted Cash

Restricted cash represents OHAA deposits held in trust as indicated above.


3.    Financial Instruments - Credit Losses

The Company can elect to use an approach to measure the allowance for credit losses using the fair value of collateral where the borrower is required to, and reasonably expected to, continually adjust and replenish the amount of collateral securing the instrument to reflect changes in the fair value of such collateral. The Company has elected to use this approach for securities borrowed, margin loans and reverse repurchase agreements. No material historical losses have been reported on these assets. See note 9 for details.

As of March 31, 2022, the Company had $57.9 million of notes receivable ($54.0 million as of December 31, 2021). Notes receivable represents recruiting and retention payments generally in the form of upfront loans to financial advisors and key revenue producers as part of the Company's overall growth strategy. These notes generally amortize over a service period of 3 to 10 years from the initial date of the note or based on productivity levels of the respective employees. All such notes are contingent on the employees' continued employment with the Company. The unforgiven portion of the notes becomes due on demand in the event the employee departs during the service period. At this point, any uncollected portion of the notes is reclassified into a defaulted notes category.

The allowance for uncollectibles is a valuation account that is deducted from the amortized cost basis of the defaulted notes balance to present the net amount expected to be collected. Balances are charged-off against the allowance when management deems the amount to be uncollectible.

The Company reserves 100% of the uncollected balance of defaulted notes which are five years and older and applies an expected loss rate to the remaining balance. The expected loss rate is based on historical collection rates of defaulted notes. The expected loss rate is adjusted for changes in market conditions such as changes in unemployment rates, changes in interest rates and other relevant factors. For the three months ended March 31, 2022 no adjustments were made to the expected loss rates. The Company will continuously monitor the effect of these factors on the expected loss rate and adjust it as necessary.

The allowance is measured on a pool basis as the Company has determined that the entire defaulted portion of notes receivable has similar risk characteristics.

As of March 31, 2022, the uncollected balance of defaulted notes was $7.6 million and the allowance for uncollectibles was $5.2 million. The allowance for uncollectibles consisted of $3.5 million related to defaulted notes balances (five years and older) and $1.7 million related to defaulted notes balances (under five years).

10


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

The following table presents the disaggregation of defaulted notes by year of default as of March 31, 2022:
(Expressed in thousands)
As of March 31, 2022
2022$598 
20212,334 
2020585 
2019365 
2018138 
2017 and prior3,567 
Total$7,587 

The following table presents activity in the allowance for uncollectibles of defaulted notes for the three months ended
March 31, 2022 and 2021:

(Expressed in thousands)
For the Three Months Ended
March 31
20222021
Beginning balance$4,923 $4,234 
      Additions and other adjustments324 532 
Ending balance$5,247 $4,766 
4.    Leases

The Company and its subsidiaries have operating leases for office space and equipment expiring at various dates through 2034. The Company leases its corporate headquarters at 85 Broad Street, New York, New York which houses its executive management team and many administrative functions for the firm as well as its research, trading, investment banking, and asset management divisions and an office in Troy, Michigan, which among other things, houses its payroll and human resources departments. In addition, the Company has 93 retail branch offices in the United States as well as offices in London, England, St. Helier, Isle of Jersey, Geneva, Switzerland, Munich, Germany, Tel Aviv, Israel and Hong Kong, China.

The Company is constantly assessing its needs for office space and, on a rolling basis, has many leases that expire in any given year.

The majority of the leases are held by the Company's subsidiary, Viner Finance Inc., which is a consolidated subsidiary and 100% owned by the Company.

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Most leases include an option to renew and the exercise of lease renewal options is at the Company's sole discretion. The Company did not include the renewal options as part of the right of use assets and liabilities.

The depreciable life of assets and leasehold improvements is limited by the expected lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants.




11


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

As of March 31, 2022, the Company had right-of-use operating lease assets of $151.2 million (net of accumulated amortization of $69.9 million) which are comprised of real estate leases of $148.6 million (net of accumulated amortization of $67.5 million) and equipment leases of $2.6 million (net of accumulated amortization of $2.4 million). As of March 31, 2022, the Company had operating lease liabilities of $194.1 million which are comprised of real estate lease liabilities of $191.5 million and equipment lease liabilities of $2.6 million. The Company had no finance leases or embedded leases as of March 31, 2022.

As most of the Company's leases do not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. The Company used the incremental borrowing rate as of the lease commencement date for the operating leases that commenced subsequent to January 1, 2019.

The following table presents the weighted average lease term and weighted average discount rate for the Company's operating leases as of March 31, 2022 and December 31, 2021, respectively:
As of
March 31, 2022December 31, 2021
Weighted average remaining lease term (in years)7.237.38
Weighted average discount rate6.79%6.89%

The following table presents operating lease costs recognized for the three months ended March 31, 2022 and March 31, 2021, respectively, which are included in occupancy and equipment costs on the condensed consolidated income statements:    
(Expressed in thousands)
For the Three Months Ended
March 31,
20222021
Operating lease costs:
   Real estate leases - Right-of-use lease asset amortization$6,157 $6,056 
   Real estate leases - Interest expense3,356 3,596 
   Equipment leases - Right-of-use lease asset amortization414 445 
   Equipment leases - Interest expense32 39 

The maturities of lease liabilities as of March 31, 2022 and December 31, 2021 are as follows:    
(Expressed in thousands)
As of
March 31, 2022December 31, 2021
2022$31,884 $41,696 
202340,149 38,477 
202435,214 33,573 
202529,689 27,703 
202628,354 26,342 
After 202681,720 78,593 
Total lease payments$247,010 $246,384 
Less interest(52,908)(54,365)
Present value of lease liabilities$194,102 $192,019 

12


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

As of March 31, 2022, the Company had $15.9 million of additional operating leases that have not yet commenced ($16.2 million as of December 31, 2021).
5.    Revenue from contracts with customers
Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring the promised goods or services to customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company's progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer obtains control over the promised good or service.
The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for those promised goods or services (i.e., the "transaction price"). In determining the transaction price, the Company considers multiple factors, including the effects of variable consideration. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainties with respect to the amount are resolved. In determining when to include variable consideration in the transaction price, the Company considers the range of possible outcomes, the predictive value of its past experiences, the time period during which uncertainties are expected to be resolved and the amount of consideration that is susceptible to factors outside of the Company's influence, such as market volatility or the judgment and actions of third parties.

The Company earns revenue from contracts with customers and other sources (principal transactions, interest and other). The following provides detailed information on the recognition of the Company's revenue from contracts with customers:
Commissions
Commissions from Sales and Trading — The Company earns commission revenue by executing, settling and clearing transactions with clients primarily in exchange-traded and over-the-counter corporate equity and debt securities, money market instruments and exchange-traded options and futures contracts. A substantial portion of the Company's revenue is derived from commissions from private clients through accounts with transaction-based pricing. Trade execution and clearing services, when provided together, represent a single performance obligation, as the services are not separately identifiable in the context of the contract. Commission revenue associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, is recognized at a point in time on trade date when the performance obligation is satisfied.

Commission revenue is generally paid on settlement date, which is generally two business days after trade date for equity securities and corporate bond transactions and one day for government securities, options and commodities transactions. The Company records a receivable on the trade date and receives a payment on the settlement date.

Mutual Fund Income — The Company earns mutual fund income for sales and distribution of mutual fund shares, which consists of a fixed fee amount and a variable amount. The Company recognizes mutual fund income at a point in time on trade date when the performance obligation is satisfied which is when the mutual fund interest is sold to the investor. The ongoing distribution fees for distributing investment products from mutual fund companies are generally considered variable consideration because they are based on the value of AUM and are uncertain on trade date. The Company recognizes distribution fees over the investment period as the amounts become known and the portion recognized in the current period may relate to distribution services performed in prior periods. Mutual fund income is generally received within 90 days.
Advisory Fees
The Company earns management and performance (or incentive) fees in connection with the advisory and asset management services it provides to various types of funds, asset-based programs and investment vehicles through its subsidiaries. Management fees are generally based on the account value at the valuation date per the respective asset management agreements and are recognized over time as the customer receives the benefits of the services evenly throughout the term of the
13


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

contract. Performance fees are recognized when the return on client AUM exceeds a specified benchmark return or other performance targets over a 12-month measurement period are met. Performance fees are considered variable as they are subject to fluctuation and/or are contingent on a future event over the measurement period and are not subject to adjustment once the measurement period ends. Such fees are computed as of the fund's year-end when the measurement period ends and generally are recorded as earned in the fourth quarter of the Company's fiscal year. Both management and performance fees are generally received within 90 days.
Investment Banking
The Company earns underwriting revenues by providing capital raising solutions for corporate clients through initial public offerings, follow-on offerings, equity-linked offerings, private investments in public entities, and private placements. Underwriting revenues are recognized at a point in time on trade date, as the client obtains the control and benefit of the capital markets offering at that point. These fees are generally received within 90 days after the transactions are completed. Transaction-related expenses, primarily consisting of legal, travel and other costs directly associated with the transaction, are deferred and recognized in the same period as the related investment banking transaction revenue. Underwriting revenues and related expenses are presented gross on the consolidated income statements.
Revenue from financial advisory services includes fees generated in connection with mergers, acquisitions and restructuring transactions and such revenue and fees are primarily recorded at a point in time when services for the transactions are completed and income is reasonably determinable, generally as set forth under the terms of the engagement. Payment for advisory services is generally due upon completion of the transaction or milestone. Retainer fees and fees earned from certain advisory services are recognized ratably over the service period as the customer receives the benefit of the services throughout the term of the contracts, and such fees are collected based on the terms of the contracts.

Bank Deposit Sweep Income
Bank deposit sweep income consists of revenue earned from the FDIC-insured bank deposit program. Under this program, client funds are swept into deposit accounts at participating banks and are eligible for FDIC deposit insurance up to FDIC standard maximum deposit insurance amounts. Fees are earned over time and are generally received within 30 days.

14


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

Disaggregation of Revenue
The following presents the Company's revenue from contracts with customers disaggregated by major business activity and other sources of revenue for the three months ended March 31, 2022 and 2021:
(Expressed in thousands)
For the Three Months Ended March 31, 2022
Reportable Segments
Private ClientAsset ManagementCapital MarketsCorporate/OtherTotal
Revenue from contracts with customers:
Commissions from sales and trading$43,355 $ $46,636 $11 $90,002 
Mutual fund and insurance income8,322  5 (8)8,319 
Advisory fees88,527 27,113 117 9 115,766 
Investment banking - capital markets3,306  13,224  16,530 
Investment banking - advisory35  21,905  21,940 
Bank deposit sweep income4,354   4,354 
Other2,837  318 122 3,277 
Total revenue from contracts with customers150,736 27,113 82,205 134 260,188 
Other sources of revenue:
Interest8,147  1,293 77 9,517 
Principal transactions, net(1,933) 1,516 2,781 2,364 
Other(6,103)4 37 21 (6,041)
Total other sources of revenue111 4 2,846 2,879 5,840 
Total revenue$150,847 $27,117 $85,051 $3,013 $266,028 

(Expressed in thousands)
For the Three Months Ended March 31, 2021
Reportable Segments
Private ClientAsset ManagementCapital MarketsCorporate/OtherTotal
Revenue from contracts with customers:
Commissions from sales and trading$48,398 $ $55,800 $(3)$104,195 
Mutual fund and insurance income9,198  2 76 9,276 
Advisory fees80,254 24,227 3 12 104,496 
Investment banking - capital markets8,510  80,069  88,579 
Investment banking - advisory  35,922  35,922 
Bank deposit sweep income4,008    4,008 
Other3,120  559 14 3,693 
Total revenue from contracts with customers153,488 24,227 172,355 99 350,169 
Other sources of revenue:
Interest6,476  2,152 38 8,666 
Principal transactions, net630  8,954 1,281 10,865 
Other3,429 3 138 12 3,582 
Total other sources of revenue10,535 3 11,244 1,331 23,113 
Total revenue$164,023 $24,230 $183,599 $1,430 $373,282 




15


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

Contract Balances
The timing of the Company's revenue recognition may differ from the timing of payment by its customers. The Company records receivables when revenue is recognized prior to payment and it has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied.

The Company had receivables related to revenue from contracts with customers of $28.0 million and $37.2 million at March 31, 2022 and December 31, 2021, respectively. The Company had no significant impairments related to these receivables during the three months ended March 31, 2022.
Deferred revenue relates to IRA fees received annually in advance on customers' IRA accounts managed by the Company and retainer fees and other fees earned from certain advisory transactions where the performance obligations have not yet been satisfied. Total deferred revenue was $180,000 and $235,000 at March 31, 2022 and December 31, 2021, respectively.
The following presents the Company's contract assets and deferred revenue balances from contracts with customers, which are included in other assets and other liabilities, respectively, on the consolidated balance sheet:
(Expressed in thousands)As of
March 31, 2022
December 31, 2021
Contract assets (receivables):
Commission (1)
$7,562 $2,886 
Mutual fund income (2)
6,137 6,205 
Advisory fees (3)
3,785 4,546 
Bank deposit sweep income (4)
1,188 595 
Investment banking fees (5)
6,376 17,765 
  Other2,945 5,195 
Total contract assets$27,993 $37,192 
Deferred revenue (payables):
Investment banking fees (6)
$180 $235 
Total deferred revenue$180 $235 
(1)Commission recorded on trade date but not yet settled.
(2)Mutual fund income earned but not yet received.
(3)Management and performance fees earned but not yet received.
(4)Fees earned from FDIC-insured bank deposit program but not yet received.
(5)Underwriting revenue and advisory fees earned but not yet received.
(6)Retainer fees and fees received from certain advisory transactions where the performance
obligations have not yet been satisfied.




16


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

6.    Earnings per share
Basic earnings per share are computed by dividing net income over the weighted average number of shares of Class A non-voting common stock ("Class A Stock") and Class B voting common stock ("Class B Stock") outstanding. Diluted earnings per share includes the weighted average number of shares of Class A Stock and Class B Stock outstanding and options to purchase Class A Stock and unvested restricted stock awards of Class A Stock using the treasury stock method.
Earnings per share have been calculated as follows:
(Expressed in thousands, except number of shares and per share amounts)
 For the Three Months Ended
March 31,
 20222021
Basic weighted average number of shares outstanding12,467,632 12,579,130 
Net dilutive effect of share-based awards, treasury method (1)
1,031,702 720,113 
Diluted weighted average number of shares outstanding13,499,334 13,299,243 
Net income attributable to Oppenheimer Holdings Inc.$9,292 $38,658 
Earnings per share attributable to Oppenheimer Holdings Inc.
       Basic$0.75 $3.07 
       Diluted$0.69 $2.91 
(1) For the three months ended March 31, 2022 and March 31, 2021, there was no Class A Stock granted under share-based compensation arrangements that were anti-dilutive.
    
7.    Receivable from and payable to brokers, dealers and clearing organizations
(Expressed in thousands)  
 As of
 March 31, 2022December 31, 2021
Receivable from brokers, dealers and clearing organizations consists of:
Securities borrowed$98,276 $99,752 
Receivable from brokers38,165 39,716 
Securities failed to deliver37,028 9,212 
Clearing organizations19,758 19,518 
Other16,210 1,704 
Total$209,437 $169,902 
Payable to brokers, dealers and clearing organizations consists of:
Securities loaned$300,323 $244,223 
Securities failed to receive18,614 6,457 
Payable to brokers566 2,077 
Clearing organizations and other (1)
 169,300 
Total$319,503 $422,057 
(1) The balance at December 31, 2021 primarily related to a trade/settlement date adjustment for U.S. Government Securities.
17


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

8.    Fair value measurements
Securities owned, securities sold but not yet purchased, investments and derivative contracts are carried at fair value with changes in fair value recognized in earnings each period.
Valuation Techniques
A description of the valuation techniques applied, and inputs used in measuring the fair value of the Company's financial instruments, is as follows:
U.S. Government Obligations
U.S. Treasury securities are valued using quoted market prices obtained from active market makers and inter-dealer brokers.
U.S. Agency Obligations
U.S. agency securities consist of agency issued debt securities and mortgage pass-through securities. Non-callable agency issued debt securities are generally valued using quoted market prices. Callable agency issued debt securities are valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. The fair value of mortgage pass-through securities are model driven with respect to spreads of the comparable to-be-announced ("TBA") security.
Sovereign Obligations
The fair value of sovereign obligations is determined based on quoted market prices when available or a valuation model that generally utilizes interest rate yield curves and credit spreads as inputs.
Corporate Debt and Other Obligations
The fair value of corporate bonds is estimated using recent transactions, broker quotations and bond spread information.

Mortgage and Other Asset-Backed Securities
The Company values non-agency securities collateralized by home equity and various other types of collateral based on external pricing and spread data provided by independent pricing services. When specific external pricing is not observable, the valuation is based on yields and spreads for comparable bonds.
Municipal Obligations
The fair value of municipal obligations is estimated using recently executed transactions, broker quotations, and bond spread information.
Convertible Bonds
The fair value of convertible bonds is estimated using recently executed transactions and dollar-neutral price quotations, where observable. When observable price quotations are not available, fair value is determined based on cash flow models using yield curves and bond spreads as key inputs.
Corporate Equities
Equity securities and options are generally valued based on quoted prices from the exchange or market where traded. To the extent quoted prices are not available, fair values are generally derived using bid/ask spreads.






18


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

Auction Rate Securities ("ARS")
Background
In February 2010, Oppenheimer finalized settlements with each of the New York Attorney General's office ("NYAG") and the Massachusetts Securities Division ("MSD" and, together with the NYAG, the "Regulators") concluding proceedings by the Regulators concerning Oppenheimer's marketing and sale of ARS. Pursuant to the settlements with the Regulators, Oppenheimer agreed to extend offers to repurchase ARS from certain of its clients. As of September 30, 2021, the Company had completed its ARS purchase obligations related to the settlements with the Regulators. In addition to the settlements with the Regulators, Oppenheimer had also reached settlements of and received adverse awards in legal proceedings with various clients where the Company was obligated to purchase ARS. As of March 31, 2022, the Company no longer had any obligations to purchase ARS from such legal settlements or adverse awards.
As of March 31, 2022, the Company owned $31.8 million of ARS. This amount represents the unredeemed or unsold amount that the Company holds as a result of ARS buybacks pursuant to the settlements with the Regulators and legal settlements and awards referred to above.
Valuation
The Company’s ARS owned referred to above have, for the most part, been subject to issuer tender offers. The Company has valued the ARS securities owned at the tender offer price and categorized them in Level 3 of the fair value hierarchy due to the illiquid nature of the securities and the period of time since the last tender offer. The fair value of ARS is particularly sensitive to movements in interest rates. However, an increase or decrease in short-term interest rates may or may not result in a higher or lower tender offer in the future or the tender offer price may not provide a reasonable estimate of the fair value of the securities. In such cases, other valuation techniques might be necessary.

As of March 31, 2022, the Company had a valuation adjustment totaling $5.2 million relating to ARS owned (which is included as a reduction to securities owned on the condensed consolidated balance sheet).

Investments    
In its role as general partner in certain hedge funds and private equity funds, the Company, through its subsidiaries, holds direct investments in such funds. The Company uses the net asset value of the underlying fund as a basis for estimating the fair value of its investment.
The following table provides information about the Company's investments in Company-sponsored funds as of March 31, 2022:
(Expressed in thousands)    
 Fair ValueUnfunded
Commitments
Redemption
Frequency
Redemption
Notice Period
Hedge funds (1)
$813 $ Quarterly - Annually
30 - 120 Days
Private equity funds (2)
7,592 3,791 N/AN/A
$8,405 $3,791 
(1) Includes investments in hedge funds and hedge fund of funds that pursue long/short, event-driven, and activist strategies
(2) Includes private equity funds and private equity fund of funds with diversified portfolios focusing on but not limited to
technology companies, venture capital and global natural resources










19


OPPENHEIMER HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (unaudited)

The following table provides information about the Company's investments in Company-sponsored funds as of December 31, 2021:

(Expressed in thousands)    
 Fair ValueUnfunded
Commitments
Redemption
Frequency
Redemption
Notice Period
Hedge funds (1)
$900 $ Quarterly - Annually
30 - 120 Days
Private equity funds (2)