B. Riley Financial (RILY) 5 Mar 192018 Q4 Earnings call transcript

Good afternoon, and welcome to B. Riley Financial’s Fourth Quarter and Full Year 2018 Earnings Call. My name is Hector, and I will be your conference operator. Earlier today, B. Riley issued a press release with its financial results. found at Investor ir.brileyfin.com. be the [ph] can website company’s copy in section the of A

made company’s As recorded. today’s be A reminder, replay on a this of call call will website. is being available the also

statements. Joining cautions remarks, Kelleher, CFO and will Tom to and call, I Co-CEO; we open will will are regarding the us the After question. Phillip I management’s conclude Mr. the And Bryant before today turn COO. Chairman call Co-CEO; Bryant Riley, Mr. and forward-looking Riley, we Ahn, necessary line proceed. provide please now for today’s over Riley.

on and XXXX ways our leverage resources you was Thanks, for B. to for and call. of expanding drive new platform. capabilities year entire on focused substantial the growth today’s Throughout Thank opportunities finding everyone. another Riley Financial. across B. better joining welcome, Riley to us we XXXX,

overall the and be on the to Markets our several also including both the respectfully. Principal growth acquisition acquisitions business will created expect that ability year, and we for we speak Capital and unique GlassRatner during the successfully to for across our our believe We businesses to continued also to Investments have of meaningful that future the which of business the year We opportunities important capitalize momentum the results us. completed contributors magicJack has

believe in our first the in the is We Liquidation, to of under portfolio we results. the losses. since take in Principal and been we with activity segment to December fourth losses in our quarter to This were growth uncharacteristic advantage and companies with our achieved quarter, clear, in core which be the and Appraisals the the in we at relates losses dislocations year-end, due business. Markets it of take to made investments position spite in segments revenue be The markets Capital the As were undervalued account were comfortable in value rebound. of by the was line in and the Investments recovered market. investment broader performance our trading declines offset we To have our

Our unique. unique XXX this doing XXX in variety broad and opportunities research, of provide this conduct over an in companies job we platform, very for are perspective, cover platform appraisals not from To we companies, many If for we then for specialized put find cannot is additional shareholders. and unique a more. our services

entire returns an meaningful period Mark-to-market to the use our that we revenue it’s balance across across the Capital to drive our to to distinct outsized year, a continue segment. team’s engine and will This our over of of sheet segments long as an We our time. note important support collective including clients aside, growth efforts was each a of our result direct saw for Markets platform. losses

are businesses relatively entire results testament a strong of our accomplished have time. we Riley incredibly the to B. talent across team, what a in period of the and we short Our and I’m proud have distinct

we Wealth of year, as Management, each continued GlassRatner synergies the from benefited as B. of Markets B. our in the the of of addition rebranded addition the FBR, divisions, August. of organic cost our to integration starting addition worked have in half in We growth Riley Riley we latter revenue Capital business continuously well subsidiaries. extensively which the operating and as our XXXX, at in In various integrate

inventory assets Last year we the retail American of a a We XXXX, full was the ahead will segment GlassRatner division. Stores. Group other Great year benefit year as for our integration completed continued Looking also GlassRatner of from look we Markets to successfully across the banner as Bon-Ton as of liquidation operations well expect of ahead. liquidation Capital our of segments

retail well largest success participation store and announces in For results also February the in scale January, in participated associated over into be contributed in XXX Canada. liquidations business Gymboree to of of in see carrying XXX we this disposition estate with completed liquidation conducted stores $X GlassRatner, and and was asset other of including value billion. liquidation investment at The as with announced inventory industry of In Payless in Toys believe in event, retail and history liquidation expect liquidation this units, began as sales under established by the we the much the and value. continues approximately Bon-Ton We associated our attributed XXXX, one history which "R" as at $X.X can stores XXXX stores leadership In the as of being closing of asset liquidations with the in the a Momentum a firm with is the to the our in real collaboration recently Shoes. Gymboree our to store segment. strong Payless count Us sense and XX, in liquidation X U.S. XXXX of retail participation business trends of is Group’s across Crazy management, and be inventory the We which and on Great assets U.S. by to forward over inventory the Bon-Ton largest approximately X,XXX space, continue. expertise way value in business at the more banking American billion.

growth steady for the most we flow, have of positions future we Appraisal achieved going we’re which of contribute reiterating investments magicJack Based continues future source than XXXX business the expand Online our source Investments, of serve the earnings to balance make is our quarters. a another in we excited been This results importantly, segment’s result segment as cash sheet, strength confidence on the Our to forward, company we performance, a recent also expect Investments that stronger business is record of of the our the ever, made revenue significant in year believe that the our opportunities Principal XXXX. and United and for and also a to income to improve our profitability. direct believe of previous adjusted Great business in our To addition will income EBITDA to range American in and we are for In steady and team’s to end, in for XXXX in us $XXX be Principal million and and efforts a business the source $XXX forecast million, million $XX ahead. of $XX with net the range guidance we has million.

I to than at been the and work of greater a suite think complementary and journey offerings. and strategic our impressive XXXX the the over great opportunity businesses we incredible We growth. individual ways in diversify clients that continue with and have look because of has constant accomplished that work was As of XXXX of our synergistic about substantially we grow to to firmly an hard body and I making the beyond. end, shareholders vision many both on step step take a that despite collection best back parts. unique we its into To forward as we’ve service the and and four a that is years, way last our believe realize

termination related Before moments oral and the XX The termination fee circumstances, and the invalid, under was on the would like I a address XX Delaware I We break-up March by payable whether take CFO post and purported valid Rent-a-Center the arguments would is to Merger reverse and not. to current Ahn, held litigation. deal COO, few was brief believe not briefly the February turn Agreement Phil that call for those in and of be with to or set our trial the over Court Rent-a-Center trial XX. Chancery

that speculate take. predict we It litigation We the is that, impossible of expect with long any the deliver after might how judge to outcome ruling certainty. this but can’t to

we are of on committed to June to terms and XXXX. merger execute the in agreed We ready the

are opine what this on I We able to just shared. matter not beyond

would any company’s our of at we performance. end appreciate focused So our keeping questions on call the

our to summary turn metrics. to Phil? will provide over I the Now, Phil a call of financial

and welcome, Thanks, everyone. Bryant,

$XXX to million million compared of For XXXX. the for $XXX.X the fourth revenues period same quarter XXXX, in totaled

briefly are investment by in of As results. decline Capital segment Markets in impacted Bryant million losses mentioned was which our our $XX revenue in the quarter for account, included the earlier, approximately

million of GlassRatner addition August revenues year For the increased $XXX compared $XXX.X Riley respectively. to to full year-ago million November which and B. revenues to same the from period. in a we and XXXX, for total Management, full for year B. year in contributions magicJack, acquired and included XXXX Wealth FBR for Results Riley partial

Turning to segment. operating revenue our income business by mix and

B. Our Great Riley and from Markets FBR, Capital segment Riley results Wealth GlassRatner. Partners Management, Capital American B. includes

loss a of million which losses. $X.X Wealth rebrand of XXXX, B. Capital well of the compared same the quarter investment restructuring previously segment for related period. year-ago million million fourth severance in $XX.X to segment $XX.X the as included revenues charges, This the recorded as Management, in For totaled mentioned for the primarily portfolio $XX.X approximately million Riley quarter, to Markets

generated by as Management year Segment to the as for of same compared For an year Capital Riley the XXXX. income $XX.X with since B. Results $XX.X services from to million year increase Capital and Wealth totaled management August full primarily additions the wealth our for GlassRatner B. to our full from $XXX.X well segment Markets addition and for XXXX. in the driven Riley revenues in to of Markets fees revenues banking $XXX.X for FBR were investment million segment results, compared the the year-ago million increased year million period.

and Great retail Now, Liquidation segment, driven turning primarily is division. our our liquidation American by to Group Auction which

$X.X million fourth to the compared income the to to same million For the year-ago same for million quarter year-ago revenues million the quarter, Segment $X.X $XX.X compared period. $X.X for to increased period. increased for

segment in same in increased for XXXX. year. million $XX this period. and the several $XX our year, the by involvement to in driven large projects $XX.X segment Segment up Auction were the million $XX.X the income For the for in increased year from compared Liquidation liquidation primarily to firm’s million million, Results retail during revenues year-ago to

to Liquidation to on the scale retail year-to-year periodic note we’ve results Auction As from large our impact segment previous of calls, vary made liquidation. and quarter-to-quarter tend and due the

our and and is segment, Great which Next American Appraisal Group Advisory from results Valuation Services. includes Valuation

million. from quarter, of For up for from the $XX.X fourth Segment $X.X million million, million, in in $X.X $X.X to quarter segment to up the increased quarter the revenues XXXX. this income increased

to a for for the in by appraisal revenues million and million full engagements year, in $X.X from subsidiary. an in and same year Valuation income totaled growth $XX.X up appraisals the year-ago which $XX.X Appraisal increase team million segment leadership represented our record and compared in in XXXX. this increased this segment Segment business, million, for the year-over-year revenue the Results $XX.X For from the our period. year fourth strong was quarter driven management to for

to Investments by Principal of million $X.X the $XX for is segment, which million, segment million increased same income QX $XX we in year-ago Investments compared same the for driven acquired final United Segment segment the for which period. Online is from to Principal and in year. from XXXX Our revenues increased magicJack, primarily period. to results the year-ago $X.X November up our quarter last million

Principal $XX.X million million compared increased Segment million $XX.X the revenues year-ago XXXX. For from same the Investments to income to up $XX.X $XX.X the in totaled year, for for period. segment million, year

million for million the loss Now, related million XXXX. per quarter the Fourth $XX.X per fourth which of $XX.X are to in or $X.XX million quarter severance Wealth Riley to the same period. income loss share compared of diluted approximately fourth Management. B. compares net a in totaled and share the to $XX.X per increased quarter for XXXX $X.XX the $X.XX EBITDA turning year includes Riley of rebrand to adjusted loss to or in B. whole. XXXX net diluted diluted $X.X full profitability of a year-ago to of charges quarter. metrics, our Fourth Financial attributable $X.X spite million the restructuring for $X.X Net as This million or share

same adjusted period. year, increased from $XX.X to the for million For year-ago the $XX.X EBITDA million, up

for for year $X.XX the or was year-ago or net income compares XXXX. totaled million share for per million quarter diluted This adjusted This diluted XXXX full same fourth share $X.XX the diluted share. per of or quarter the the $XX.X to of million income XXXX, $XX.X diluted $X.XX For or $X.XX share. compares period. per fourth million net to Adjusted $X.X $XX.X of per

today’s information reconciliation financial nearest about the measures, non-GAAP earnings refer EBITDA a GAAP you in regarding and the income and use net to more adjusted For to section can measures. the adjusted of release

some balance turning Now, to of highlights our sheet.

and securities clearing loans $XXX.X B. in due debt. December from receivable in $XXX.X of Financial million brokers, As investments cash net $XX.X million cash equivalents, XXXX, XX, million in Riley in other had total million million $XXX and $XX.X unrestricted and owned,

at stockholders’ XX. equity of B. Shares Riley million totaled December the million. as approximately of end total outstanding quarter was $XXX.X XX.X Financial Our the

are XXXX. As for our Bryant guidance reiterating earlier, we mentioned

For in million. XXXX, $XXX in $XXX we’re the to $XX range forecasting the adjusted million EBITDA and to million net of million to of range income be $XX

Board $X.XX of XXXX. Bryant? of of summary. be March my our dividend per Directors XX, I’ll That Lastly, regular share, completes to back paid on about stockholders of March financial will XXXX over as XX, approved which turn to the call a quarterly And now, or Bryant. record

Thanks, Phil.

developments and Now, of of includes business, our was updates Riley management QX, our the segment. brokerage some and Capital top the despite I’ll FBR GlassRatner. addition our call. each Riley Markets GA Management RIA B. share business segment, at Partners in I’ll which the business, which B. we stable recent begin from the and more includes mentioned detail Wealth on of business, Riley fund and banking our trading by business B. Capital FBR’s our asset losses with

During revenues the have our we and quarter pipeline ahead. notable we deals we our deals, banking robust of completed as which backlog in a QX contributed several look to

this of continue with to increased see be expect in we a XXXX. revenue work key to and in driver early Our activity SPAC space

lending XXXX, continue we QX, expect in throughout future fixed-income securities despite volatility and performed the and these well to to in divisions well perform quarters. Our division

and This this relates January, We announced focus on research, mid-cap brokerage our ideas in There efforts view as my is Personally, primary also it to investment in but mid-cap eliminated names small caps it the valuation. and appreciate for of are small decision, Conference is approximately has two Annual research increase As in our mainstay new find one success event resources the investor cap, recently market Small opportunities. as a focused that have are our reallocated for firm’s larger event our Investor in platform, for in cap harder been basis XX We’ve the hosting coverage our Hills. realignment May, and be we institutional names small a marquee small XXth the have the larger community over roots our much the and we our a decades for Institutional existing well proprietary Beverly networking. to on that core in as will is become to on market is few XX for cap ability place been and of firm. to the This the and and initiations. years. a cap to value. catalysts differentiate

We are can and this believe in is ever an we we’re differentiated where space, seeing as provide we opportunities about as area, service. the enthusiastic it

where continuing each markets have This we Wealth Now to Management, are of and which is country we retail continues on steady to focus a be the business Riley business turning our business. for RIA contributor earnings us B. in brokerage across the In to growing XXXX, quarter. presence.

build new provides helped our recognition the independent platform an practices and our align the broader believe traditional can recruits. alternative financial their business rebrand what and attractive businesses for has among external Our wirehouse combined versus the marketplace advisors better offer. in to with platform recent We to grow RIA

Moving specialty focused on transactions to and we bankruptcy, advisory a GlassRatner, which work. firm crisis acquired litigation, is

and be there’s GlassRatner for retained number on continue to markets, healthcare we firm our incredibly support new the and added in opportunity our we of of space, to heels the new where services, our been services. agricultural The numerous year, have bankruptcy and has restructuring in merger growth expand professionals matters. key believe a active, last to business of at in where continues August On particularly and

quickly to whole other leaders GlassRatner referrals platform, and They serve into source for say addition, can’t become entities the the a see continues we and firm future. on our as in expect to great enough the the this in headfirst group. collaboration leadership important Riley and of had more of about B. directives I In firm. cross-sell jumped

the focused direct pace and have of been fast of Partners On has capital our traditional Great or as side out deploying American a on lending been our segment, Capital sectors, and where such Capital hurt management favor fund fund, lenders at retail Markets GACP, asset energy.

their GACP ABL one strategies. half the and been have The strategy the fully is is invested expected GACP growing for Our in second of lenders larger last fully to cash invested lending as II see non-bank over the fund as year. be years market to additional credit managers flow few an it

see of to attractive of are result, a and infrastructure been we the a opportunities number business. to have for adding this As continuing GACP

growth to GACP’s expect continue in XXXX. We

our At in Liquidation our call, over American carried to about I segment. saw Group we of already the moving Great in has and XXXX. Auction division the momentum top Now, our retail into talked momentum XXXX. That

for current We results expect first from and significant addition the contributions involvement to half, Payless in Gymboree liquidation to results the Bon-Ton realize our liquidations. the from in

We market and real on through expect inventory. high see distressed focus retail excess to activity of QX continue consolidation to retailers purging as estate to – levels continue

targeted which Appraisal an direct performance Turning Appraisal and another and Valuation in among its to Group to increase of asset-based in business our existing division put segment, expand lending specialty record Advisory up and Services. core Valuation our in result QX finance Strong in revenue and year revenue across divisions direct of and all Great is revenues. sources a selling increasing saw consists efforts this our American efforts. industry of clients,

business We source have a as of our historically Appraisal pointed steady earnings. to

and of opportunity drive revenue, meaningful we this an improve growth contribute believe sources made and quarters. in to to operations the segment future we with to has our investments profitability new However, concerted efforts

to on Investments. moving Now, Principal

we and partnership ongoing with multiple integrating Investments minority BV. investments, managing magicJack under are Online unit, United our actively to In addition including Principal our

ideas platform large principle the generate has unique outsized outlined can on always returns Our I investment find been guiding that to earlier.

in will as group sets. team management gets it good we implementing Our can that these utilize efficiencies continue and to and this skill as is opportunities seek operational

the FINRA our the November, XX% agreement this legacy earlier XX% this We Management ownership distribution stake as work we power can institutional complete. the announced first completed we continued in Holdings. of today, XXXX National year as which summarize XXXX. an of cannot We accomplished December, to extremely my of of investors. Fortress tranche the we the in without opportunities closing approval. – pleased with partners have business growth in Wealth With questions. and believe XX% we past retail Biotech’s and are work at we in we network, evidenced remarks for provide Riley our both to with We by open after homes together Additionally, look the and National’s recognize a that, we’re ready to IPO saw purchased existing what franchise To forward our your B. call momentum distribution and employees, combined to we the support purchase obtaining have second the

Thank this question-and-answer we’ll your you. [Operator of question. the line with from question time, Wes a Nokomis comes Instructions] Cummins At Our proceed Please Capital. session. be with first conducting

mean that that market. Hey, liquidation reversal push on spend like maintained Bryant, Payless the the you and it you given but that guidance liquidations Did seems your I to kind at ago, few of you’ve thanks. given in the that this, a announced Hey, expect and in you’ve – guidance level? that don’t months other guys a since you gave the

I would Wes, hey, that. that we expect say So, didn’t

perfect we really of with is our I principal of but markets. to some is are liquidations seeing units. we’ve balance in business feel to good the the science, business but is optimistic trying off a is not what business all strong volatility think some and some of think got about some Obviously, we’re what opportunities, a start the and and positions, I it and concentrated that a fee, we’re

implied you’ve plus dividends you to Okay. XX% continue for I historically, And in of of or year? then the my other paid think XX% to and kind question $X dividend. do do is, you’ve out that? EBITDA expect

running stock the we’re some make we’ve if this buying say it’s we’ve would were shareholders and for we also So, to long-term defined. run running believe given opportunity that it as it return also but to we back sure and that, our strongly announced, been we’re that business, receive I a

at think we regular appropriate dividend. about raise think XX% felt a to just I would lot you we with time, And the sense. the as EBITDA us, using that that makes So if and balance we’d appropriate the special dividend the of – number it time, then that XX% off was

So, yes, I think that philosophy will maintained. be

Thanks. Okay.

Wes. Thanks, right. All

This concludes closing Mr. session. the Instructions] back I’d now for to [Operator question-and-answer remarks. call to Bryant over turn Riley our like

call. be hard and we the Thanks, there’s for joining to that and everybody’s you. greatly until on the Great. and work. extent Thank call all the next thanks at others the quarterly employees everybody We’ll and Hector, appreciate appreciate work interest the line,

call. within provide otherwise. conclude the are to call, publicly regarding made Harbor risks from I Securities are during revise a XXXX. forward-looking filings or as and these and differ GAAP These plans facts, future new whether the call earnings earnings to statements in of discussed in company’s results directly Safe forward-looking information, includes joining company Please more in important constitute prospects, Private statements for information for forward-looking B. GAAP result are like are we statements regarding the B. during about this detailed materially Further, as statements results company’s Before be by Investors today’s of any various statements filings most Financial’s made statements release. actual such and matters us statement and as financial today forward-looking of events except to other update Riley obligation that law. of with forward-looking Thank factors financial cautions uncertainties measures detail to conference measures, subject made of today. not today risks XXXX statements explained those with here the Commission. and Financial’s could Riley that to Riley refer of Statements the quarter would undertakes Securities aware historical expectations, well cause may All B. a Financial’s of Exchange the Act required or as you any that this included and as measures accordance the to Reform call. risk call should for in uncertainties Litigation any that a no non-GAAP the future are The this fourth financial discussion statements. forward-looking conference discussion and reconciling prepared these included comparable financial non-GAAP meaning

may now You disconnect.