OPPENHEIMER HOLDINGS INC 10-Q

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BACKGROUND The condensed consolidated financial statements include the accounts of Oppenheimer Holdings Inc. and its consolidated subsidiaries (together, the "Company", "Firm", "Parent", "we", "our" or "us"). The Company's condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto which appear elsewhere in this quarterly report. 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 securities industry, including retail securities brokerage, institutional sales and trading, market-making, research, investment banking (both corporate and public finance), investment advisory and asset management services and trust services. Its principal subsidiaries are Oppenheimer & Co. Inc. ("Oppenheimer") and Oppenheimer Asset Management Inc. ("OAM"). As of March 31, 2025, we provided our services from 89 offices in 25 states located throughout the United States and offices in Puerto Rico, Tel Aviv, Israel, Hong Kong, China, London, England, St. Helier, Isle of Jersey and Geneva, Switzerland. The Company provides investment advisory services through OAM and Oppenheimer Investment Management LLC ("OIM") and Oppenheimer's financial advisor directed programs. At March 31, 2025, client assets under management ("AUM") totaled $48.9 billion. AUM includes the total market value of client investments in discretionary and non-discretionary advisory programs as well as the net asset value of private placements of alternative investments offered by and held by clients of the Firm. Client assets under administration ("CAUA") as of March 31, 2025 totaled $129.9 billion. CAUA includes AUM and the other assets held for which the Firm provides services. We also provide trust services and products through Oppenheimer Trust Company of Delaware and limited discount brokerage services through Freedom Investments, Inc. ("Freedom"). Through OPY Credit Corp., we conduct our secondary trading activities related to the purchase and sale of loans and trade claims, primarily on a riskless principal basis. At March 31, 2025, the Company employed 3,012 employees (2,974 full-time and 38 part-time), of whom 933 were financial advisors. Outlook We are focused on growing our wealth management business through strategic additions of experienced financial advisors in our existing branch system and employment of experienced money management personnel in our asset management business as well as deploying our capital for expansion through targeted acquisitions or strategic partnerships. We are increasingly creating and investing in private market opportunities on our own behalf and on behalf of qualified clients. We are also focused on opportunities in our capital market businesses, including integrating new technology platforms to expand the suite of services offered to our clients and onboarding experienced personnel and/or small units that will improve our ability to attract institutional clients in both equities and fixed income without significantly raising our risk profile. In investment banking, we are committed to growing our footprint by adding experienced bankers within our existing industry practices as well as new industry practices where we believe we can be successful. We continuously invest in and improve our technology platform to support client service and to remain competitive, while simultaneously managing expenses. The Company's long-term growth plan is to continue to expand existing offices by hiring experienced professionals as well as expand through the purchase of operating branch offices from other broker-dealers or the opening of new branch offices in attractive locations, and to continue to grow and develop the existing trading, investment banking, investment advisory and other divisions. We recognize employee work habits have changed in a post-pandemic world. As a result, we are continuously reviewing our physical footprint on lease renewals, and in many cases reducing office size and configuration. We are committed to continuing to improve our capabilities to ensure compliance with industry regulations, support client service and expand our wealth management and capital markets capabilities. We recognize the importance of compliance with applicable regulatory requirements and are committed to performing rigorous and ongoing assessments of our compliance and risk management effort, and investing in people and programs, while providing a platform with first class investment programs and services. The Company also reviews its full service business model to determine the opportunities available to build or acquire closely related businesses in areas where others have shown some success. Equally important is the search for viable acquisition candidates. Our long-term intention is to pursue growth by acquisition where we can find a comfortable match in terms of corporate goals and personnel at a price that would provide our stockholders with incremental value. We review potential acquisition opportunities from time to time with the aim of fulfilling the Company's strategic goals, 34 Table of Contents while evaluating and managing our existing businesses. In addition, the Company may from time to time acquire a controlling financial interest in a business or make minority private investments out of excess capital in allied or unrelated businesses with the goal of either syndicating the investment to eligible clients or retaining ownership because we believe them to be an attractive investment or offer products and services aligned with the Company's long-term business objectives. Short-term Interest Rate Environment After reducing the federal funds rate by 1 percentage point to a target range of 4.25% - 4.50% through a series of rate cuts in the latter half of 2024, the Federal Reserve (the “FED”) held rates steady at their first two meetings of 2025. The current pause is driven by the FED’s desire to wait for further clarity on the economy, as uncertainty around the economic outlook has increased in light of recent policy changes impacting trade, immigration and government spending. Recent announcements around the imposition of universal and targeted tariffs have significantly impacted investor sentiment leading to major declines in market averages. Such disruption often leads to FED intervention. The FED’s forecast continues to pencil in two rate cuts for 2025, though this is subject to change. Potential decreases to the federal funds rate may impact our interest-based revenues. While decreases in interest rates will lower fees the Company earns from FDIC-insured deposits of clients through a program offered by the Company, such decreases may be offset to a degree if the cash sweep balances increase as clients find fewer higher-yielding alternatives to deploy these balances. Future rate decreases will also reduce the rates the Company charges on customer margin loans and earns on other interest-sensitive assets, which will have a negative impact on our earnings. Israel-Hamas War and Conflict with Hezbollah and Iran On October 7, 2023, Hamas initiated an unprovoked invasion of Israel from the Gaza Strip, resulting in thousands of casualties. Israel formally declared war on Hamas in response to the attack and initiated several military operations in an effort to clear militants from the area. The war has now finished its second year and has seen a significant escalation in a longstanding conflict between Israel and Hezbollah, the Lebanese-based militant group. The conflict was further intensified in 2024 by the direct entry of Iran, which launched a missile attack on Israel. The expiration of a cease-fire and the resumption of hostilities is likely to increase the calls for peace and may interfere with Israel’s relations with the rest of the world. Given the continued unrest, there remains a risk that these conflicts could expand into a wider regional war which could have an adverse impact on the worldwide economy, financial markets and thus on our business. At this time, these conflicts have not yet had a material impact on our business operations in Israel or elsewhere. EXECUTIVE SUMMARY The Firm’s solid performance for the quarter underscores the ability of our diversified businesses to deliver profitable operating results in increasingly uncertain macroeconomic conditions. During the quarter, all major indices receded from prior quarter highs as the financial markets digested the new administration’s swift policy changes on trade, immigration and government spending as well as initiatives on decreased regulation. Concerns that recently enacted tariffs would likely provoke a wider trade war and spur “stagflation” – a combination of slower growth and higher inflation – produced increased volatility and lower valuations for equity securities as well as pressure on the U.S. dollar. The likelihood of a recession has increased significantly, coupled with reduced consumer confidence and expectations for higher inflation resulting from increased import prices. There are dimmed hopes for a resumption of active capital market activity with little probability of increased corporate issuances of common stock through IPOs or secondaries. Should market declines persist, this will also negatively impact our assets under management ("AUM") and fees earned from that activity. We hope that recent market turbulence will convince policy makers that recent “on-off” announcements of market-moving policy is significantly impacting likely economic outcomes and that they will significantly reduce such activity. Notwithstanding the increasingly negative market sentiment, our Wealth Management business delivered strong results with a number of improvements over the prior year. The volatile markets spurred robust trading by our clients, driving higher retail commissions. Asset-based advisory fees also increased since AUM, while slightly reduced from recently established all-time highs, remained well above AUMs outstanding during the comparable period. A decline in our interest-sensitive revenues, partially offset these improvements due to lower short term interest rates and reduced FDIC sweep balances. 35 Table of Contents Our Capital Markets revenues exceeded prior year levels despite challenging market conditions that saw lower underwriting activity amid postponed transactions by corporate clients owing to policy uncertainties and volatile markets that put a damper on deal making activities and new issuance levels. Institutional trading volumes increased in the volatile markets seen during the latter part of the 1 st quarter, which were favorable to our sales and trading revenues. RESULTS OF OPERATIONS The Company reported net income of $30.7 million or $2.93 basic earnings per share for the first quarter of 2025, compared with net income of $26.1 million or $2.50 per share for the first quarter of 2024. Revenue for the first quarter of 2025 was $367.8 million, an increase of 4.2%, compared to revenue of $353.1 million for the first quarter of 2024. (Expressed in thousands, except Per Share Amounts or otherwise indicated) 1Q-2025 1Q-2024 Change % Change Revenue $ 367,825 $ 353,138 $ 14,687 4.2 Compensation expense $ 227,091 $ 221,713 $ 5,378 2.4 Non-compensation expense $ 99,358 $ 93,970 $ 5,388 5.7 Pre-tax Income $ 41,376 $ 37,455 $ 3,921 10.5 Income tax provision $ 10,721 $ 11,711 $ (990) (8.5) Net Income (1) $ 30,655 $ 26,054 $ 4,601 17.7 Earnings per share (basic) (1) $ 2.93 $ 2.50 $ 0.43 17.2 Earnings per share (diluted) (1) $ 2.72 $ 2.37 $ 0.35 14.8 Book Value Per Share $ 82.87 $ 77.47 $ 5.40 7.0 Tangible Book Value Per Share (2) $ 65.85 $ 60.41 $ 5.44 9.0 Class A Shares Outstanding 10,425,830 10,247,197 178,633 1.7 AUA ($ billions) $ 129.9 $ 124.9 $ 5.0 4.0 AUM ($ billions) $ 48.9 $ 46.6 $ 2.3 4.9 (1) Attributable to Oppenheimer Holdings Inc. (2) Represents book value less goodwill and intangible assets divided by number of shares outstanding. Highlights • Increased revenue for the first quarter of 2025 was primarily driven by significantly higher advisory fees attributable to a rise in billable AUM and an increase in transaction-based commissions as well as sales and trading revenue • Assets under administration and under management at March 31, 2025 modestly decreased below recently established records • Compensation expenses increased from the prior year quarter largely as a result of inflationary pressures on wages and higher production-related expenses • Non-compensation expenses increased from the prior year quarter primarily due to higher interest and technology related expenses and higher clearing and exchange costs attributable to higher volumes • Total stockholders' equity, book value and tangible book value per share reached new record highs as a result of positive earnings 36 Table of Contents BUSINESS SEGMENTS The table below presents information about the reported revenue and pre-tax income (loss) of the Company's reportable business segments for the three months ended March 31, 2025 and 2024: (Expressed in thousands) For the Three Months Ended March 31, 2025 2024 % Change Revenue Wealth Management $ 241,986 $ 237,961 1.7 Capital Markets 123,261 112,083 10.0 Corporate/Other 2,578 3,094 (16.7) Total $ 367,825 $ 353,138 4.2 Pre-Tax Income (Loss) Wealth Management $ 67,864 $ 75,785 (10.5) Capital Markets (5,097) (6,702) (23.9) Corporate/Other (21,391) (31,628) (32.4) Total $ 41,376 $ 37,455 10.5 Wealth Management Wealth Management reported revenue for the current quarter of $242.0 million, 1.7% higher compared with a year ago. Pre-tax income was $67.9 million in the current quarter, a decrease of 10.5% compared with a year ago. Financial advisor headcount at the end of the current quarter was 933, compared to 936 and 931 at the end of the first quarter of 2024 and fourth quarter of 2024, respectively. ('000s unless otherwise indicated) 1Q-2025 1Q-2024 Change % Change Revenue $ 241,986 $ 237,961 $ 4,025 1.7 Commissions $ 56,911 $ 52,794 $ 4,117 7.8 Advisory fee revenue $ 128,792 $ 114,836 $ 13,956 12.2 Bank deposit sweep income $ 30,075 $ 36,685 $ (6,610) (18.0) Interest $ 21,485 $ 20,196 $ 1,289 6.4 Other $ 4,723 $ 13,450 $ (8,727) (64.9) Total Expenses $ 174,122 $ 162,176 $ 11,946 7.4 Compensation $ 119,648 $ 115,572 $ 4,076 3.5 Non-compensation $ 54,474 $ 46,604 $ 7,870 16.9 Pre-Tax Income $ 67,864 $ 75,785 $ (7,921) (10.5) Compensation Ratio 49.4 % 48.6 % 0.8 % 1.6 Non-compensation Ratio 22.5 % 19.6 % 2.9 % 14.8 Pre-Tax Margin 28.0 % 31.8 % (3.8) % (11.9) Asset Under Administration (billions) $ 129.9 $ 124.9 $ 5.0 4.0 Asset Under Management (billions) $ 48.9 $ 46.6 $ 2.3 4.9 Cash Sweep Balances (billions) $ 2.9 $ 3.2 $ (0.3) (9.4) 37 Table of Contents • Retail commissions increased 7.8% from a year ago primarily due to higher retail trading activity • Advisory fees increased 12.2% due to higher AUM during the billing period • Bank deposit sweep income decreased $6.6 million from a year ago due to lower cash sweep balances and lower short-term interest rates • Interest revenue increased 6.4% from the prior year period due to higher average margin loan balances • Other revenue decreased from a year ago primarily due to a decline in the cash surrender value of Company-owned life insurance policies, which fluctuates based on changes in the fair value of the policies' underlying investments • Compensation expenses increased 3.5% from a year ago primarily due to higher production related expenses, partially offset by lower deferred compensation expenses and decreased costs associated with share appreciation rights • Non-compensation expenses increased 16.9% from a year ago primarily due to an increase in legal expenses and higher external portfolio management costs, which are directly related to the increase in AUM The following table provides a breakdown of the change in assets under management for the three months ended March 31, 2025: (Expressed in millions) For the Three Months Ended March 31, 2025 Fund Type Beginning Balance Contributions Redemptions/Profit Distribution Appreciation (Depreciation) Ending Balance Traditional (1) $ 43,039 $ 2,361 $ (2,052) $ (635) $ 42,713 Institutional Fixed Income (2) 916 4 (43) 19 895 Alternative Investments: Hedge funds (3) 4,015 35 (161) (94) 3,794 Private Equity Funds (4) 1,185 55 (3) 58 1,295 Portfolio Enhancement Program (5) 228 6 (3) 231 Other — $ 2 $ — $ — 2 $ 49,383 $ 2,462 $ (2,262) $ (652) $ 48,930 (1) Traditional investments include third party advisory programs, Oppenheimer financial advisor managed and advisory programs, and Oppenheimer Asset Management taxable and tax-exempt portfolio management strategies. (2) Institutional fixed income provides solutions to institutional investors including: Taft-Hartley Funds, Public Pension Funds, Corporate Pension Funds, and Foundations and Endowments. (3) Hedge funds represent investments in strategies including long/short equity, global macro, event driven, merger arbitrage, multi-strategy and credit. They may be single manager or fund of funds. (4) Private equity funds include portfolios focused on technology, infrastructure, real estate, natural resources and specific co-investment opportunities. (5) The portfolio enhancement program sells uncovered, out-of-money puts and calls on the S&P 500 Index. The program is market neutral and uncorrelated to the index. Valuation is based on collateral requirements for a series of contracts representing the investment strategy. 38 Table of Contents Capital Markets Capital Markets reported revenue for the current quarter of $123.3 million, 10.0% higher when compared with the prior year period. Pre-tax loss was $5.1 million compared with a pre-tax loss of $6.7 million a year ago. ('000s) 1Q-2025 1Q-2024 Change % Change Revenue $ 123,261 $ 112,083 $ 11,178 10.0 Investment Banking $ 44,980 $ 47,918 $ (2,938) (6.1) Advisory fees $ 25,962 $ 31,868 $ (5,906) (18.5) Equities underwriting $ 13,399 $ 13,179 $ 220 1.7 Fixed income underwriting $ 5,301 $ 2,447 $ 2,854 116.6 Other $ 318 $ 424 $ (106) (25.0) Sales and Trading $ 76,879 $ 63,659 $ 13,220 20.8 Equities $ 41,744 $ 30,266 $ 11,478 37.9 Fixed Income $ 35,135 $ 33,393 $ 1,742 5.2 Other $ 1,402 $ 506 $ 896 177.1 Total Expenses $ 128,358 $ 118,785 $ 9,573 8.1 Compensation $ 87,344 $ 81,588 $ 5,756 7.1 Non-compensation $ 41,014 $ 37,197 $ 3,817 10.3 Pre-Tax Loss $ (5,097) $ (6,702) $ 1,605 * Compensation Ratio 70.9 % 72.8 % (1.9) % (2.6) Non-compensation Ratio 33.3 % 33.2 % 0.1 % 0.3 Pre-Tax Margin (4.1) % (6.0) % 1.9 % (31.7) *Percentage not meaningful • Advisory fees earned from investment banking activities decreased 18.5% compared with a year ago primarily due to fewer private placement transactions • Equities underwriting fees were flat when compared to the prior year period • Fixed income underwriting fees increased 116.6% compared with prior year period primarily due to higher public finance transaction revenue • Equities sales and trading revenue increased 37.9% compared with the prior year period mostly due to higher trading volumes and greater options-related revenue • Fixed income sales and trading revenue increased 5.2% compared with a year ago largely due to higher interest income on trading inventory • Compensation expenses increased 7.1% compared with a year ago largely due to costs associated with opportunistic new hires and greater production related expense • Non-compensation expenses were 10.3% higher than a year ago primarily due to an increase in communication and technology expenses and execution-related fees 39 Table of Contents CRITICAL ACCOUNTING POLICIES The Company's condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Reference is also made to the Company's condensed consolidated financial statements and notes thereto found in its Annual Report on Form 10-K for the year ended December 31, 2024. The Company's accounting policies are essential to understanding and interpreting the financial results reported on the condensed consolidated financial statements. The significant accounting policies used in the preparation of the Company's condensed consolidated financial statements are summarized in note 2 to those statements and the notes thereto found in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Certain of those policies are considered to be particularly important to the presentation of the Company's financial results because they require management to make difficult, complex or subjective judgments, often as a result of matters that are inherently uncertain. During the three months ended March 31, 2025, there were no material changes to matters discussed under the heading "Critical Accounting Polices" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024. New Accounting Pronouncements The following Accounting Standards Updates (“ASU”) issued by the Financial Accounting Standards Board ("FASB") have not yet been adopted by the Company: ASU 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures The FASB issued this ASU in December of 2023 to enhance the transparency and decision usefulness of income tax disclosures. The amendments require certain entities to enhance the annual reconciliation of its statutory income tax rate to its effective tax rate by mandating the disclosure of the impact associated with specific categories and requiring separate disclosure for reconciling items exceeding certain quantitative thresholds. The amendments also require entities to annually disclose the amount of taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes, with separate disclosure of individual jurisdictions exceeding 5% of total income taxes paid. The new guidance, which becomes effective in 2025, will not have an impact on our financial position or results of operations since it only amends certain disclosures. ASU 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses The FASB issued this ASU in November of 2024 which will require public business entities to disclose specified information about certain costs and expenses, including employee compensation, depreciation and intangible asset amortization at each interim and annual reporting period. The new guidance, which becomes effective in 2027, will not have an impact on our financial position or results of operations since it only amends certain disclosures. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2025, total assets increased by 5.6% from December 31, 2024. The Company satisfies its need for financing from internally generated funds and collateralized and uncollateralized borrowings, consisting primarily of bank call loans, stock loans, and uncommitted lines of credit. We finance our trading in government securities through the use of securities sold under repurchase agreements. Oppenheimer has uncommitted arrangements with banks for borrowings on a fully collateralized basis. The amount of Oppenheimer's bank borrowings fluctuates in response to changes in the level of the Company's securities inventories and customer margin debt, changes in notes receivable from employees, investment in furniture, equipment and leasehold improvements, and changes in stock loan balances and financing through repurchase agreements. At March 31, 2025, the Company had an outstanding bank call loan balance of $439.6 million compared to $252.1 million at December 31, 2024. The Company also has some availability of short-term bank financing on an unsecured basis. The Company's overseas subsidiaries, Oppenheimer Europe Ltd. and Oppenheimer Investments Asia Limited, are subject to local regulatory capital requirements that restrict our ability to utilize their capital for other purposes. 40 Table of Contents The regulatory capital requirements for Oppenheimer Europe Ltd. and Oppenheimer Investments Asia Limited were $6.1 million and $385,718, respectively, at March 31, 2025. The liquid assets at Oppenheimer Europe Ltd. are primarily comprised of cash deposits in bank accounts. The liquid assets at Oppenheimer Investments Asia Limited are primarily comprised of investments in U.S. Treasuries and cash deposits in bank accounts. Any transfer of these liquid assets from Oppenheimer Europe Ltd. and Oppenheimer Investments Asia Limited to the Company or its other subsidiaries would be limited by regulatory capital requirements. The Company permanently reinvests eligible earnings of its foreign subsidiaries and, accordingly, does not accrue any U.S. income taxes that would arise if these earnings were repatriated. The unrecognized deferred tax liability associated with the outside basis difference of its foreign subsidiaries is estimated at $3.4 million for those subsidiaries. We have continued to reinvest permanently the excess earnings of Oppenheimer Israel (OPCO) Ltd. in its own business and in the businesses in Europe and Asia to support business initiatives in those regions. We will continue to review our historical treatment of these earnings to determine whether our historical practice will continue or whether a change is warranted. Liquidity For the most part, the Company's assets consist of cash and cash equivalents and assets that it can readily convert into cash. The receivable from brokers, dealers and clearing organizations represents deposits for securities borrowed transactions, margin deposits and current transactions awaiting settlement. The receivable from customers represents margin balances and amounts due on transactions awaiting settlement. Our receivables are, for the most part, collateralized by marketable securities. Our collateral maintenance policies and procedures are designed to limit our exposure to credit risk. Securities owned are mainly comprised of actively traded readily marketable securities. We issued $2.6 million in forgivable notes (which are inherently illiquid) to employees during the three months ended March 31, 2025 ($4.5 million for the three months ended March 31, 2024) as upfront or backend inducements to commence or continue employment as the case may be. The amount of funds allocated to such inducements will vary with hiring activity and retention initiatives. We satisfy our need for liquidity from internally generated funds, collateralized and uncollateralized bank borrowings, stock loans and repurchase agreements. Bank borrowings are uncommitted in nature and, in most cases, collateralized by Firm and customer securities. We obtain short-term borrowings primarily through bank call loans. Bank call loans are generally payable on demand, uncommitted in nature and bear interest at various rates. At March 31, 2025, the Company had $359.5 million of bank call loans ($252.1 million at December 31, 2024). The average daily bank loan outstanding for the three months ended March 31, 2025 was $277.3 million ($57.8 million for the three months ended March 31, 2024). The largest daily bank loans outstanding for the three months ended March 31, 2025 was $491.7 million ($164.9 million for the three months ended March 31, 2024). At March 31, 2025, securities loan balances totaled $360.9 million ($235.5 million at December 31, 2024 and $298.0 million at March 31, 2024). The average daily securities loan balances outstanding for the three months ended March 31, 2025 were $359.2 million ($303.4 million for the three months ended March 31, 2024). The largest daily stock loan balance for the three months ended March 31, 2025 was $436.8 million ($335.7 million for the three months ended March 31, 2024). We finance our government trading operations through the use of securities purchased under reverse repurchase agreements and repurchase agreements. Except as described below, repurchase and reverse repurchase agreements, primarily involving government and agency securities, are carried at amounts at which securities subsequently will be resold or reacquired as specified in the respective agreements and include accrued interest. Repurchase and reverse repurchase agreements are presented on a net-by-counterparty basis, when the repurchase and reverse repurchase agreements are executed with the same counterparty, have the same explicit settlement date, are executed in accordance with a master netting arrangement, the securities underlying the repurchase and reverse repurchase agreements exist in "book entry" form and certain other requirements are met. At March 31, 2025, the gross balances of reverse repurchase agreements and repurchase agreements were $292.9 million and $1,159.3 million, respectively. The average daily balance of reverse repurchase agreements and repurchase agreements on a gross basis for the three months ended March 31, 2025 was $370.5 million and $1,044 million, respectively ($122.9 million and $809.3 million, respectively, for the three months ended March 31, 2024). The largest amount of reverse repurchase agreements and repurchase agreements outstanding on a gross basis during the three 41 Table of Contents months ended March 31, 2025 was $633.5 million and $1,220 million, respectively ($578.4 million and $1.1 billion, respectively, for the three months ended March 31, 2024). Liquidity Management We manage our liquidity to meet our current obligations and upcoming liquidity needs as well as to ensure compliance with regulatory requirements. Our liquidity needs may be affected by market conditions, increased inventory positions, business expansion and other unanticipated occurrences. In the event that existing financial resources do not satisfy our liquidity needs, we may have to seek additional external financing. The availability of such additional external financing may depend on market factors outside our control. We have Company-owned life insurance policies which are utilized to fund certain non-qualified deferred compensation plans. Certain policies which could provide additional liquidity if needed had a cash surrender value of $97.0 million as of March 31, 2025. We regularly review our sources of liquidity and financing, both on a short term and long term basis, and conduct internal stress analyses to determine the impact on the Company of events that could remove sources of liquidity or financing and to plan actions the Company could take in the case of such an eventuality. Regulators are increasingly focused on liquidity management and we have seen increased regulatory scrutiny of liquidity management by our industry. Should a disruption occur in our liquidity and financing sources, we have developed a contingency funding plan that we believe would result in a reduction of assets through liquidation that would significantly reduce the Company's need for external financing. Our primary long-term cash requirements are related to $171.5 million of operating lease obligations. The total cash requirement for interest expense related to operating lease obligations is estimated to be $8.8 million for the remainder of 2025. Funding Risk (Expressed in thousands) For the Three Months Ended March 31, 2025 2024 Cash provided by (used in) operating activities $ (91,740) $ (79,048) Cash used in investing activities (359) (258) Cash provided by financing activities 95,645 78,132 Net decrease in cash, cash equivalents and restricted cash $ 3,546 $ (1,174) Management believes that funds from operations, combined with our capital base and available credit facilities, are sufficient for our liquidity needs for the foreseeable future. Under some circumstances, banks including those on whom we rely may back away from providing funding to the securities industry. Such a development might impact our ability to finance our day-to-day activities or increase the costs to acquire funding. We may or may not be able to pass such increased funding costs on to our clients. During periods of high volatility such as the current environment, we see increased calls for deposits of collateral to offset perceived risk between the Company's settlement liability to industry clearinghouses such as the Options Clearing Corporation (“OCC”) and National Securities Clearing Corp. (“NSCC”) as well as more stringent collateral arrangements with our bank lenders. The recent reduction of the settlement cycle for security transactions in the U.S. have substantially reduced settlement risks. All such requirements have been and will be met in the ordinary course with available collateral. CYBERSECURITY Cybersecurity presents significant challenges to the business community in general, including to the financial services industry. Increasingly, bad actors, both domestic and international, attempt to steal personal data and/or interrupt the normal functioning of businesses through accessing individuals' and companies' files and equipment connected to the internet. Recent incidents have reflected the increasing sophistication of intruders and their intent to steal personally identifiable information as well as funds and securities. These intruders sometimes use instructions that are seemingly from authorized parties but, in fact are from parties intent on attempting to steal. In other instances these intruders 42 Table of Contents attempt to bypass normal safeguards and disrupt or steal significant amounts of information and then either release it to the Internet or hold it for ransom. Regulators are increasingly requiring companies to provide heightened levels of sophisticated defenses. The Company maintains processes and systems with an aim to preventing any such attack from disrupting its services to clients as well as to prevent any loss of data concerning its clients, their financial affairs, as well as Company privileged information. Our management is actively involved in the oversight of our cybersecurity risk management program. We have devoted significant financial and personnel resources to implement and maintain security measures to meet regulatory requirements and customer expectations. We have incorporated cybersecurity processes to assess, identify and manage risks from cybersecurity threats into our overall risk assessment process. The Company maintains a cybersecurity program that is designed to identify, protect from, detect, respond to, and recover from cybersecurity threats and risks, and protect the confidentiality, integrity, and availability of its information systems, including the information residing on such systems. The National Institute of Standards and Technology Cybersecurity Framework helps the Company inform its cybersecurity agenda and prioritize its cybersecurity activities. The Company takes a risk-based approach to cybersecurity, which begins with the identification and evaluation of cybersecurity risks or threats that could affect the Company’s operations, finances, legal or regulatory compliance, or reputation. The Company has processes in place for assessing, identifying and managing material risks from cybersecurity threats along with risk assessment procedures designed to allow such processes to remain responsive to emerging risks. Our processes include, but are not limited to, the following: • we engage third-party cybersecurity firms and tools to assist with network monitoring, endpoint protection, vulnerability assessments and penetration testing; • we engage cyber security consultants and auditors to perform tabletop exercises and evaluate our cyber processes including an assessment of our incident response procedures. Identified risks are formally tracked until mitigated or eliminated; • we perform regular scanning of our systems to identify and resolve critical vulnerabilities; • we provide periodic training and testing, including phishing tests, to help our employees understand cybersecurity risks and their responsibility in mitigating those risks; and • we insure against potential losses from cyber incidents by maintaining cybersecurity insurance. We have a written incident response plan that identifies the steps to be taken in response to a cybersecurity incident that includes investigation, escalation and remediation provisions. The incident response plan includes standard processes for reporting and escalating cybersecurity incidents to senior management. We have processes to evaluate third party service providers and vendors that have access to sensitive systems and Company and customer data, which does include the use of cybersecurity questionnaires and due diligence procedures such as assessments of that service provider’s cybersecurity posture. Management’s Role Management has implemented risk management structures, policies and procedures, and manages our risk exposure on a day-to-day basis. The Company has a dedicated cybersecurity organization within its technology department that focuses on current and emerging cybersecurity matters. The Company’s cybersecurity function is led by the Company’s Chief Information Officer ("CIO") and the Company’s Chief Information Security Officer ("CISO"), who reports to the Company’s CIO. The CIO and his direct reports, including the CISO, discuss action items related to risks at a standing monthly meeting. The CISO and many members of his team have multiple decades of cybersecurity related experience. Risk reporting is provided at monthly meetings of the Firm's cross-business Cybersecurity Committee and periodic presentations to the Firm’s Risk Management Committee, at which many members of the Company’s senior management are present. The CEO meets regularly with the CIO to discuss cybersecurity threats and existing and potentially new technology systems including those related to cybersecurity. The CIO and CISO have a standing monthly meeting with the President and General Counsel to discuss potential vulnerabilities in the cyber environment. The President formerly ran the Information Technology Department at the Firm and as a result has significant systems experience including experience related to cybersecurity. Board Oversight 43 Table of Contents The Board of Directors, both directly and through the Audit Committee, oversees management’s responsibility of ensuring proper functioning of our cybersecurity risk management program. In particular, the Audit Committee assists the Board in its oversight of management’s responsibility to assess, manage and mitigate cybersecurity risks. Recently the Audit Committee added a member with significant cybersecurity experience. The Audit Committee receives a cybersecurity update at each regular meeting of the Board covering cybersecurity risks, cybersecurity staffing and staff development including certifications and training. These updates are given either in person by the CIO and CISO or in written presentations created by them. As of the date of this filing, the Company has not identified any cybersecurity threats that have materially affected or are reasonably anticipated to have a material effect on the Company’s business strategy, results of operations or financial condition. Although the Company has not experienced cybersecurity incidents that are individually, or in the aggregate, material, the Company has experienced cyberattacks in the past, which the Company believes have thus far been mitigated by preventative, detective, and responsive measures put in place by the Company. Given the continuing reports of cyber incidents in general, we believe that the Company will most likely continue to be a target of cybersecurity attacks by bad actors. For additional information on how risks from cybersecurity threats may adversely affect the Company see “Item 1A. Risk Factors-Risks Related to Our Business” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. REGULATORY MATTERS AND DEVELOPMENTS See the discussion of the regulatory environment in which we operate and the impact on our operations of certain rules and regulations in Item 1 “Business - Regulation” in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 for additional information. Oppenheimer and many of its affiliates are each subject to various regulatory capital requirements. As of March 31, 2025, all of our active regulated domestic and international subsidiaries had net capital in excess of minimum requirements. See note 15 to the condensed consolidated financial statements in Item 1 for further information on regulatory capital requirements. On December 20, 2024, the SEC adopted rule amendments to SEC Rule 15c3-3 (the customer protection rule) to require certain broker-dealers, including those with average total credits (amounts owed to customers) equal to or greater than $500 million, to increase the frequency with which they perform computation of the net cash they owe customers and proprietary accounts of other broker-dealers ("PAB") from weekly to daily. Impacted entities must perform the customer and PAB reserve computations daily beginning no later than December 31, 2025. We anticipate that the new amendments will impact our principal broker dealer and may result in an increase in required staffing levels. The Organization for Economic Co-operation and Development (“OECD”) issued the Global Anti-Base Erosion Model Rules (“Pillar II”), which among its provisions, requires companies to pay a minimum corporate tax rate of 15% in each jurisdiction in which they do business. While we have foreign affiliates that operate within the scope of Pillar II, we do not believe that it will have a material impact on our consolidated results of operations or effective income tax rate. 44 Table of Contents FACTORS AFFECTING "FORWARD-LOOKING STATEMENTS" From time to time, the Company may publish or make oral statements that constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 which provides a safe harbor for forward-looking statements. These forward-looking statements may relate to such matters as anticipated financial performance, future revenues, earnings, liabilities or expenses, business prospects, projected ventures, new products, anticipated market performance, and similar matters. The Company cautions readers that a variety of factors could cause the Company’s actual results to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. These risks and uncertainties, many of which are beyond the Company’s control, include, but are not limited to: (i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) changes in regulatory requirements that could affect the cost and method of doing business, (v) general economic conditions, both domestic and international, including inflation, recession, stagflation, and changes in consumer confidence and spending, (vi) competition from existing financial institutions, new entrants and other participants in the securities markets and financial services industry, (vii) potential cybersecurity threats and attacks, (viii) legal developments affecting the litigation experience of the securities industry and the Company, (ix) changes in foreign, federal and state tax laws that could affect the popularity of products sold by the Company or impose taxes on securities transactions, (x) the adoption and implementation of the SEC’s “Regulation Best Interest” and other regulations adopted in recent years, (xi) war, terrorist acts and nuclear confrontation as well as political unrest, including events relating to the Israel-Hamas war, the conflict with Hezbollah and Iran and related unrest in the Middle East and Russia's invasion of Ukraine and related Western sanctions, (xii) the Company’s ability to achieve its business plan, (xiii) the effects of the economy on the Company’s ability to find and maintain financing options and liquidity, (xiv) credit, operational, legal and regulatory risks, (xv) risks related to foreign operations, (xvi) the effect of technological innovation on the financial services industry and securities business, (xvii) risks related to election results, Congressional gridlock, political and social unrest, government shutdowns and investigations, government spending, immigration, impact of tariffs and trade wars, bank failures, changes in or uncertainty surrounding regulation, and the potential for default by the U.S. government on the nation's debt, (xviii) risks related to changes in capital requirements under international standards that may cause banks to back away from providing funding to the securities industry and (xix) economic, market, political and social impact of, and uncertainty relating to, any catastrophic events, including pandemics, epidemics or other outbreaks of disease, climate-related risks such as natural disasters and extreme weather events. There can be no assurance that the Company has correctly or completely identified and assessed all of the factors affecting the Company's business. See “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. 45 Table of Contents Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK During the three months ended March 31, 2025, there were no material changes to the information contained in Part II, Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2024. 46 Table of Contents