National (NHLD) 15 Aug 192019 Q3 Earnings call transcript

Good morning and welcome to National Holdings Corporation's Third Quarter Fiscal 2019 Earnings Call. My name is Chelsea Nantz, our Senior Vice President of Corporate Communications.

Joining me on today's call are National’s Chairman and Chief Executive Officer, Michael Mullen; and Glenn Worman, National’s President and Chief Financial Officer.

On today's call, we will update you on the company's third quarter results, after which we’ll open the line up for some questions.

Before we begin, I'd like to read our company's Safe Harbor statement:

which provided posted to a measures. release www.yournational.com, our non-GAAP earnings have we reconciliation our is on now website financial In of GAAP urge conjunction information We review call. today's in to you with this during like also forward-looking that by may remind I this would call to conference remarks you made management statements. include

that associated are current our statements on do based from and such the uncertainties update described in of of a believe with may forward-looking of and statements risks management National report are materially available and anticipate, and obligation National Forward-looking statements with and unduly investors filings are These expressly beliefs be forward-looking by because annual time-to-time, any website. are not website actual SEC's on the be such words. and on SEC not to different www.yournational.com These factors. Form required again so. other that’s law typically disclaims XXK our on the as statements. which estimate such expectations on results as may caution risks Except words rely makes We the variety and to other expect, other and or in does

Michael like the to this of At I'd time, and call Mullen, over Chief turn to Chairman National. Officer Executive

Thank and Earnings to welcome Good Call. you, morning Chelsea. National’s Fiscal Quarter Third

government by U.S. hoped had second Our the which we materially quarter from our fiscal fiscal impacted as rebounded third quarter results were shutdown.

quarter million $XXX,XXX. cash reported $X.X and $X and million we equivalent finished million. of reported $XX.X of with profit debt. in Overall, a adjusted pre-tax income $XX.X of cash net the We revenue and no million, EBITDA of We

of a over worked company together even team our upgraded have and our the years, of last service to how performance and few all effort, significant a though our grow of we proud I'm This value clients. team well we the was portion

and market delayed bit. quite highlights, investment this shutdown us out many were with calendar as on we by had global hoped. closed volatile this offerings The a and banking SEC the past shutdown. the a investment behind Some We advisory shutdown quarter, pushed less banking of that quarter the rebounded our government

focus private grow vertical, private end robust Our which noting transactions. Slack have of It's important continue the we and pipeline returns to to clients. continues we a this liquidated built quarter, of as at on our for we shares shares future business the generated significant worth SPV our

wirehouse scaling The successfully intelligently Our on our to our to platform of differentiated onboard focus high paramount advisors. breadth quality solutions us remains us. has allowed business

billion We recruiting year any strongest represented have over point at knowledge. the this this onboarded $X my in history AUM alone pipeline company’s our in to than and is

growth focus of overall improve continued to company. look on power scale recurring forward business in calls. the I This earnings us on future our the our will and updates of sharing on side revenue additions allow our successful

last few continues from to face for note, exited we over legal most years. registered the expenditures. company accruals spend personnel have A the Our legal been legacy and our has of on settlements issues headwinds previously with positive

overall management, apparent. more do will to expense earnings it risk to and I due expect this organization be of power our decline eventually our when the true does, enterprise

culture on Glenn Worman of focus our expenses. share in operating growing focus and on so we details shortly. Our business decline remains operating doing also our expense our a But on will compliance. more

platform. out our Management we Customer to the differentiated successfully components Services are important of Financial This which the CRM, Salesforce rolled Relationship continue implement. platform that Lastly, technology past was solutions National we and our tool, develop Cloud built services quarter, on

importantly expenses productivity of Suite rollout operating enhances implementation but in developed will help further our have of G And framework. and more Suite, tools cloud-based us the G The reduce cybersecurity significantly the collaboration by it future we recently quarters, begun Google.

Finally, allow on Workday, more future ledger to October expect This Xst. quarter live report with new will to general calls Ledger, these we us timely. update General new results our go and host

call Chief you turn the Worman, Financial now our to me share over Glenn? our with and to President the Officer Glenn details results. financial let Now of

Thanks, Mike. Good everyone. morning,

Mike had of XXXX. quarter a with in As noted, improving categories solid our most nicely experienced the headwinds that second quarter from the National of revenue we

$X.X Revenue second of investment the strength and accounting. $XX.X million investment from million preparation banking, advisory in on increased quarter and tax to

quarter $XX.X fiscal from third XXXX. declined million in Revenue by of million $X.X the

difference difference the third extraordinary investment fee I'll two year That we this in advisory individual in discuss as significant an banking quarter revenue third million category recorded last periods is year. shortly. for the However, ago between net that $X.X created misleading quarter period. the was quarter

From quarter of second million $XX.X approximately $X.X the an expenses $X in total million expense XXXX. the third of an declined this year of revenue quarter on perspective, from versus increase and

rates Our the under variable and product attention helped and power our margins. compensation overall our gross target has diversity of continue expenses costs, to to increased ratios increasing platform to our due stay

and fees The arbitration, corporate continues provisions to stable the current in issues and for challenged legacy benefit several of by be provisions, margins litigation year. products’ increasing gross then for some and legal

Mike to a As of enterprise in we're our legal ultimately expenses, from show margins. platform overall business in adding not representatives higher the confident company and power approach decrease that will noted quality result our his risk elimination controls of that this registered management and did earnings remarks, in current our the

million million fiscal fee revenue million as net noted current second a third the I increased to advisory basis the revenue the the said on declined $X.X earlier. in $XX.X due year million quarter. of Again, total from ’XX For the $XX.X recorded quarter in $XX.X quarter, recorded from

XXXX the in million, X% year. of down revenues second million were XXXX, the down the a from the down quarter quarter of from period. comparison comparative recorded very significant million $XX Commissions were and related these from In $X and $XX.X fiscal first slightly this the of revenue $XX.X approximately quarter third to in million

quality unadjusted current for growth advisory, and inorganic shares future including investment that revenue several and representative private and level organic current of for believe and banking, the reasons control risk the management We to is enterprise quarters, of more offerings. investment reallocation

be levels of business our These of and impacted representatives. growth future the volatility through existing by growth market will, market recruiting levels, and course,

Investment million quarter, cover strong approximately recorded ago. shortly. million were as the million of from the a banking to banking that the expected Year-to-date up $XX.X very I'll and advisory very up quarter increased strong down investment the $X quarter million third second $X.X to the nicely year fee $XX.X numbers from that but XXXX. Again, million, $X.X from contributed in

of increase over the the a a quarter XX% to Investment XXXX, and advisory of million, increase $X.X revenues quarter increased over third significant XXXX. XX% second

enhanced Our high assets Slack Technologies the third of pricing carried market increasing for this interest liquidation under quarter. of advisory strategy of investment current the were management further the investment quarter recognition of by on our and private in valuation shares

addition from year. tax with grow new the acquisitions. the of of continues third revenue quarter strategic Accounting to Revenue increased and last up million of $X.X small million, X% $X.X

fourth the The so currently business adding third quarters season. beginning further practices this XXXX quarters are for tax before the slower and we're of on focusing

in gross down goals. these improved our generation. our X% contributed $X reduction. quarter million million, compensation XXXX. expenses $XX.X of Obviously, or third margins But, declined million are corporate this have and addition, from Variable the with well Expenses $X.X fluctuate of revenue within

immaterially, comparative our most expense a down or categories arbitration from quarter on saw fees. million quarter third the $X.X in an up were either basis and corporate increase an litigation current operating legal of increase and While of reserves

in $X.X of of million in million These income year and versus third the current XXXX. a results loss and $X.X taxes of produced million income $X.X before second quarter quarter other of income the income

taking revenue with ago. across the Now on year-to-date million related exception declined main categories $XXX.X indication a from that of $XXX.X $XX of our increased diversification revenue basis, which commissions million product the hold. the all recorded a total good year-over-year, is year Revenue and is million

down and from the fees million Commissions totaled million, period. comparative XXXX $XX.X related $XX.X

noted As to management products headwinds contributed businesses, with enterprise earlier diversification revenue in controls trend. earlier, market other has decline combined this and and to of the risk

on $X.X private Investment banking nine-month strong increased share revenue million, year-to-date. and for banking revenues traditional up period million $XX.X XX.X% to the

Investment improves $XX.X ago. to add million a advisory year $XX.X assets, of revenue million continued versus

increase As on liquidation share management the under values, results Technologies. noted, Slack equity assets in current strong continuing private investment period carried revenue rebounded interest market our of and on in

revenue tax $X.X to million million XX.X%. and up from increased Accounting ago, $X.X a year

this positive to new clients. line revenue growth, continued and the due continue on acquisitions, be exposure in to client small We to result

Total X.X%, million. expenses $X.X for million, down were the year-to-date to or period $XXX.X

of ratio on due and revenue largely quarter, As mix in our improve the has improvement as to variable our $XX.X improving in as variable million in goals line the decline continued well approximately businesses produced in an with objectives. to variable costs. This our expenses reduction expense current

tangible and acquisition-related and spend, increase $X infrastructure continuing the resulted expenses, legal operating earlier, in an mentioned expenses. As in amortization million

attributable versus $X.X loss $X.X nine declined $XX.X common net the the For year to fiscal adjusted and million a to year-to-date the EBITDA ago, million shareholders months, period from was $X.X net million XXXX. in of the loss million

value our in was The the the period. year-over-year. decline firm’s The plus the expenses the XXXX the decline liability, gross totaled EBITDA on due overall fair warrant average the to loss in revenue in adjusted legal of million net margin in by increase change is negatively $XX.X which year-ago year-to-date impacted

million. our equivalents remains of healthy million cash debt stakeholders’ and $XX.X equity no long-term outstanding, Finally, with cash balance sheet $XX.X and of

Back to you, Mike.

to I see like now there're to would (Rita), Thank up if you, any questions you call open the please. Glenn.

at Please Mr. back Mullen, turn questions your you. no have remarks. this or the time. continue we will with to call closing now I presentation

In from of Relations our Investor and accessed Thank closing, can tab website, (Rita). the conference today’s replay a release call www.yournational.com. you, be press the on

and I more advisors, want than National. the by of close employees, professionals to X,XXX thanking financial

Your means us. and to hard dedication everything work

team, support thank a for directors faith good and our day. their to I continued our stakeholders of executive of On my board our and behalf management want all firm. of of Have