B. Riley Financial (RILY) 4 Aug 192019 Q2 Earnings call transcript

Good afternoon and welcome to B. Riley Financial's Second Quarter 2019 Earnings Call. My name is Steve, and I'll be your call operator. Earlier today, B. Riley issued a press release with its financial results. found ir.brileyfin.com. Investors be company's of can at website copy in section the the A

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

will us regarding And Co-CEO; Phillip remarks, before today's Kelleher, we we Joining Co-CEO; open forward-looking the After I and and are conclude Chairman Ahn, Bryant and provide today line cautions Tom COO. will CFO statements. the management's necessary Riley, for call, questions.

Mr. to over Riley. call the turn now will please Riley, Bryant proceed. I Mr.

Thanks, and everyone. welcome,

For EBITDA the net second million income million, quarter, we reported adjusted revenues of of of XXX.X income and net million. adjusted of XX.X XX.X million, XX.X

of is including result legacy well our GlassRatner strong our businesses integration as a and all performance magicJack. of working together businesses Our the of as

and team. proud work what we this are recognize have any entire accomplished, hard without have the We our we couldn't of we achieved of dedication of and very

is be were addition EBITDA. $X.XX payout to The increase confident for XX% and organically special combined about this in acquisitions. growth of dividend our the with $X.XXX And quarter has from a our dividend or $X.XX in of to platform. announce We of dividend grown our both steady a quarterly increasing in dividend is cash to continue dividend of are consistent which The business, through our increased pleased to regular our we to $X.XXX. end, that we

continues to repurchase in plan our Additionally, shareholder be effect.

but are liquidations of and projects ShoeSource. of Now did number history. busiest the its Group Gymboree meaningful quarter, periods We a drove results coming for of the of two off the one highlights, couple Payless American highlight Great a completed to during in

count Payless retail was have in the we store largest As history. US by previously liquidation noted,

landscape to fundamentally We business retail as to remain evolve. continues expect the this active

our call. government quarterly assignments, by several banking saw to negatively which Tom that will which and noteworthy results more deals advisory from QX. deeply the significant the improvement completed quarter, in in contributed go shutdown into the impacted prior was Investment and We later

note GlassRatner, over which joined year We momentum August of advisory business XXXX. growth tremendous has today complemented and last want one and one experienced on our year to X, anniversary many has also the the This our exactly in ago ways. business our year platform existing acquisition of

QX leadership. marked our to with contributed in speaks our expertise segment, the results. expectations, also believe we magicJack operational second magicJack our lift in full Online United Principal our to quarter and are the this team's which outperforming which of both Investments

segments. strong all our Revenues were of across

to to we ourselves accountable continue However, operating our hold expenses.

are assure power we ball. that we business. And cognizant day, are We while in you, we every up can eye our off earnings take a won't volatile the goes our

want made. to share opportunistic of also an on I investments we've some update the

in the acquired completed exit strategic our to split. plan we Last closure example our we by restructuring was finance XX made which This clients. support home During Wilcox, rights are process great conducting of facility bring recently retailer, Z for Gallery, in a X which a investment month, of a a assisted the decor just the quarter, offering & Babcock XX the reverse and We acquisition to Direct of B. to in Buy. stores. of an another lines service multiple is Riley the provided ability in

a acquire global legacy We Tacchini, also assets Sergio jointly brand. recently co-invested to of sportswear the

investments our our of been to Our role has by part strategy. Proprietary as value firm's investors our always DNA. sourcing remains core

returns support allows and more our a larger growth also balance years last generating before, and our making while strategic opportunities over important However, ever partners' and has we've for clients' our to our expansion attractive than critical cross-platform initiatives the strategy to us B. ability of part believe leverage Riley. this created sheet the approach. more seen most We two

the has B. for former month. spent I'd behalf of a impressive perspective metrics Mimi Mimi from in quarter, congresswoman We Riley, background Mimi her unique the a is with contribution forward a of and Governance time Walters, board and California Before worked our to to public in her brings financial our Committee. we having across last state welcome Board the our look to an extend various like service. of who member financial to to industry California. prior as companies career who joined and warm cover services

Phil COO, to summary Phil? and to With a turn Ahn, our provide financial metrics. the that, I'll call of over our CFO

everyone. Welcome, Bryant. Thanks,

for a For the Riley is second quarter quarterly Financial. XXX.X record B. which million, new XXXX, of were total revenues

segment In XX.X segment, up to million, Segment from the million XX million quarter, same QX million from in XX.X to revenue for year. period. XX.X increased increased up income Markets, in Capital our last of largest the second year-ago

Our Capital August. for Riley's added Great businesses, we in segment GlassRatner primarily lending last including results management investments. our the of from quarter driven firm Markets addition includes Markets Capital Partners brokerage, the our the banking, management was investment GlassRatner, and businesses, B. is which segment direct and income from banking, by advisory wealth strong fund performance consulting Capital The and and American

million performance Auction We period. Segment Liquidation to increased for increased the XX.X from XX.X and strong from segment segment that up for to XX.X up also in million, Revenues from income same million. our the saw quarter. million, XX.X year-ago

liquidation primarily were the for of including driven projects, completion Gymboree. quarter several retail Our and the overall Payless results by

quarter the our variable previous Liquidation more As we've make noted impact year Auction on these segment from liquidations to nature year. scale results quarter of and and in larger to calls,

Segment $X.X million compared million the increase the in slightly Moving on with same from for steady quarter, for year. our in last Capital Liquidation Results be segment, the of episodic year-ago QX segment Appraisal our cyclical Appraisal X.X which to segment, income to more more Valuation X.X contrast to to conditions. segment and X.X remain Markets depending relatively to a period. decreased our for million on our quarter, up saw in market tend quarter we million modest to can broader revenue and

United increased from XXXX. results includes of we X.X XX.X also to year-ago acquired to this million segment magicJack and the which for X.X period. the XX.X million from November magicJack, income for Segment up in Investments period. Online year-ago addition million, million Revenues a segment. segment The increased this in of Principal results to compared for Our drove for same increase significant same

Next, metrics EBITDA same million our profitability the second B. which whole, to XX.X for million adjusted to increased the from are as Financial period. for a year-ago attributable $XX.X quarter, up Riley

same to increased for million the or share, quarter from diluted per the or income last year. $XX $X.XX Net second up for per $X.XX period share diluted million XX.X

XX.X diluted share in share $X.XX million last per to Our million or increased year. adjusted per income net to XX.X diluted QX or $X.XX compared

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

Now some balance highlights from our sheet.

a cash XXX.X from debt. and approximately in securities other As equity of company owned cash that investments assets; million XX.X million million million XX loans debt. receivable, total in had balance cash other and brokers, the equivalents, approximately of June of XX.X customer as in due and million unrestricted and in million net of XXX.X XX, million X.X held advances against clearing of the Including XXX XXXX, classified company total deposits positions contracts, net net are XXX.X and investments million

outstanding As XXX.X second There shares XX. XXX.X the million to stockholders' at were million compared of March to June end XX, increased XX.X B. Riley of equity quarter. million at approximately Financial's the

the Now to just I in few a notable other want mention events quarter.

and This raised notes, During the Also Securities. gross the repurchase million the reduce in $XXX helps of year approximately approximately XXX,XXX issued over which our in acquisition outstanding of during stock. represents with of repurchase completed Wunderlich quarter, proceeds. a connection offering completed of X% we quarter, the of we were dilution warrants, bond our shares potential which five total warrants in

and dividend on of Bryant to XXXX. as our per XX, of be dividend mentioned $X.XX XXXX we which a as $X.XXX about earlier, stockholders total per record for paid onetime August dividend special Finally, or Directors Board of of to August a our $X.XXX also share, will declared quarterly increase share of to regular per cash XX, share, approved

turn summary. Bryant. back financial our over call completes the That I'll Bryant? to

We competitive Group, have With is for believe of areas synergies service proprietary Riley are Phil. we management businesses that other each B. of end-to-end and profitability. our we in Remaining calls distinct can differentiator improve or this because mix can these new why unique American wealth in key assembled the for us. these a platform, revenue, the businesses we drive support highlight banking, differentiation means Thanks, on services. investments often our financial GlassRatner, clients businesses lines where Great we in is with which a constantly marketplace, reassessing

long-term my of has integration Financial. have success with partner results. is Kelleher, we companies growth Tom collective to due earnings co-CEO, demonstrated across our much team credit historical believe spearheaded in with the Riley of B. We our this success our and the of who And continued

to like over now recent call I'd that, other turn discuss to across businesses. highlights our With Tom? from some to the Tom

Thanks, Bryant.

expanded our Riley platform our less B. find to with Perhaps ideas but as how greater companies opportunity a partners, various compelling serve not benefit benefit each whole. provides also clients only our us that other. unique discussed, to investment obvious also As and a is

last XX drive our to among we to revenue collaboration the operating and opportunities. education various Over months, XX groups on new focused

seeing we we Our fuller allow clients offer than services us in-house offered to are have already on and were a measured efforts. results And those based if network we expanded unaffiliated. of partnerships suite could otherwise

and served noteworthy A approximately which in principal company and B. $XXX market. FBR is on April Merger runner as from few on investment team proceeds. B. bring book the including SPAC highlights the Corp. our a deal, seeking deals, own actively it Riley to went in public Banking Principal million Riley sole participated several to SPAC, NYSE raised in gross quarter, the our

support quarter wins recent of and thestreet.com acquisition for in the its in rights TheMaven operate include Illustrated. acquisition the notable in Sports its of transactions capital of Other to

served on million to In we $XXX its as Enterprises. acquisition advisers Insight sell-side PCM by M&A addition,

ongoing provided also Wilcox its & $XXX financing support in approximately We in of for efforts. million turnaround Babcock

revenue prior trading, and down persist regulated sales headwinds slightly commission In quarters. from with

maximizing continue remain We to focused related and control on expenses profitability.

positive trading yielding only expected sheet is results early lower balance Our with exposure. initiative use new and risk modest stock

our attendance past Fifth XXX Hills. will In and companies, Conference year of over attendees host hosted XXth over Investor meetings. our X,XXX Beverly Annual May, Media presenting we we This with York. October, in Conference New Consumer had Annual We record nearly in and one-on-one X,XXX another

was small the this conference repositioning has continue message to May that mid-cap small and space. value cap in heels issuers, proposition we and believe with year. the the resonated our on We recent of coverage earlier market a Our aggressively

done of with has arbitrage. since liquidity in has excellent created reigns here We and As do the lack the dynamic active passive to between towards to the as our opportunities shift continues participate that its passive, want us to highlight unit active managers took brokerage CEO. Andy the job he for Moore

to that increase on Moving a B. management, Riley in which quarter. prior revenues wealth in the several syndicate significant public group over drove offerings, participated

work to We in improve there's a continue regions advisers. high-profile profitability finance and high-net-worth to marketing growth to individuals and where larger pool of and

robust. And is our recruiting pipeline

location and adviser Pennsylvania presence the provides on-boarded new This quarter, team. branch more market. in we branch services a manager Greater who During with region opportunities a representation Philadelphia in hired adviser establishes a in Riley opened in has a expand the to first Dallas, already immediate in the the other one location B. our Devon, new and in one Houston with new formal We pipeline.

two gross continued issued million and look during completed successful had fund Partners our Their a has asset growth XX exits size group. business, with that over the loans to to Great we forward and Moving fund second and new Capital transaction six from performance, quarter. management of great American

opportunities which due complementary we more upward seeing remain GlassRatner's for this high. Demand advisory, our spans continues, bankruptcy, litigation momentum and diligence in support And to business, as restructuring, are collaborate. expand services and

year, retailer Dimple entertainment Group this home large Great the remains our Records, several American the of wave closure California-based closing store Z Gallerie business started Liquidation the active. Following a of July, bankruptcies We including projects in chain. and earlier project

impacting shift remain industry. mentioned, we business expect and retail the by the driven Bryant in to consumer this As ongoing active

our relatively the Through half below quarter-to-quarter. up is Meanwhile, continues modestly appraisal XXXX, of budget. our Great division to American slightly steady remain last valuation over business year, our first Appraisal but

to division Our and Corporate be This units increased a total is including business appraisal above continues our for relatively Valuations across year-to-date. sources an and cross-selling steady of and the up non-lender us, And the revenue in year-to-date, has and number verticals. expanding Advisory budget appraisals. is industry increase on focus

talent our the energy collective As networks capitalize expand on to to we and strategy, broad our These and across programs to formalized development diversification continue brought we strengthen new base. sales and team. expertise our have have learning initiatives

can company. that in recognize anywhere we the come from Importantly, opportunity

As we platform. foundation unique success to a opportunities by strong ahead, future we have create we look our with believe offered

call With that, the are open we Operator? questions. ready for to

begin now Instructions] Haydon comes will The We [Operator with the THC. Sean from Please question question-and-answer first proceed. session.

Congratulations on hitting in you almost the have given you're guys revisited quarter guys. way? the quick, and the guidance that Hey, you earlier, any your dividend. have provided Real that targets,

question. a when And that. we thought we of about to how it's fair Sean, struggled So kind address

difficult guidance we're$XX So, you capital yes, if in you are million just clearly, reason that and our for was remember, historicals, low we a QX is quarter XXX. reflected And I guidance. our far mean, the kind the that of that end markets. quarters ahead through we two And of look of gave if the at really guidance

make and to to what be. really hard is to gauge. sure understood This power we wanted our And EBITDA everybody we business earnings thought a so

guidance so really episodic hard. is a giving business in And

do a that good slow didn't feel answer business there's can or would that episodic argument Clearly, math. you I we're $X,XXX So – you make our in by And point or an a we maybe a a about sell-off that it's the when would guidance. businesses. shutdown quite volatile clearly, saying, meaningfully that government bit can We really more. reiterate retail much. too But down

we And thought. we give so – some we it wanted we're how our just tough to shareholders color to because update. them It's to did for

finally, so you a have holes would any financial you're totally see that's service offerings. thorough to great then guys fill far. executing out there? say No, And kind that I of And pretty Do you menu of a job natural looking fair.

BV more opportunities. retail interesting. Yeah. that I around don't in so we put management our some There's see investments Brookstone. in are know if then it's some there's brand holes. I foot things and Obviously,

market can there way create – its point brands. a platform here. I around some at think do don't opportunities could we Clearly, a think And of so distressed income. that ton retail We fixed come

And so out a and area grow great that's in a We flag But in. can I think of we helping. we put hired put our really we – ground. the Chicago that's an invest group

I an asset management is think opportunity.

of our sheet the we balance that almost you direct the at look X.X you If fund, kind funds lending manage and they're look at at with billion.

a very to ability that. are work. We we think And comfortable to so money we do putting proprietary have

But that's our of goes a And money, of who on can I so think, some of that we balance huge manage absolutely the part sheet, are. we and outside B. platform. Riley

that four mind to are those came So right away.

have of – unique there's creates things that respond think just and investment lot vehicles. I think And opportunities, I unique We them. we see interesting others. we a and to

taking quarter Yeah, question. for my okay. guys, Great thanks

it. appreciate I Thank you.

Cummins next with Wes Capital. proceed. Nokomis The comes Please from question

of strong I Hi, you this actually extremely and performance policy, call look year. XX $X.XX guys dividend if were great, the at raising so Bryant, special and But mentioned the about kind about you you Hey, this. like of on the minimum out thanks. or to pay, have have even I've the asked and given of before. this onetime on the the paid dividend kind dividend, track

that you balance do about And I that. sheet? how follow-up your then Just have one to think with

of be So we the something the the I versus at regular the sheet sticky a we the Board I greatest – always I said a so able stock need and to that the our is, of balance versus or to think, that, have, have. think talked dividend business our can put opportunities and $XXX we level, returning think buy for managing we that we We to and one warrants buying shareholders way were that capital And that – or have think work million challenges to a buying higher the lot. dividend. is the we more liquidation about it's way about prepared having

lower of plus if business. than on So interest – paying math do out, that it, times sticky is dividend, what dividend kind call regular XX, the at we're $X.XX our you the we're

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more generated assets we Our liabilities. interest The interest our there almost income match where we a generated expense. month – than June was

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that. in question, previous appreciate about I And No, to the kind your financial then following services. of you up asked holes

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thanks. great, Okay,

lot. a Thanks

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

B. Thank a the you call. lot know of are much. there people Financial on I very Riley

take this as I'll thank So to that's an everybody opportunity listening.

team. We company. enormous. continue are, us upon in have to a think, out And go of excited the And building this opportunities we're and I front great

forward So quarter. next you. and to look we Thank talking thanks to everyone you

you. Thank

statements important we Before will Riley call, conclude which Financial's includes statement, call. forward-looking provide safe today's I during B. regarding this cautions harbor made

made undertakes as update Exchange explained filings Please or Litigation during any publicly plans except other future B. facts, matters company's about Commission. meaning statements historical and revise and of regarding Reform today. whether Act of Securities XXXX. and statements today here to with are are differ actual the by Investors obligation made factors forward-looking various for are aware should no detail and forward-looking expectations, the to are The These to risks in uncertainties new in and of statements detailed statements the as All a constitute Riley and required cause any discussion Statements of law. subject from events that Private within the of information, forward-looking future that prospects may those forward-looking uncertainties forward-looking could risk statements. refer Securities Financial otherwise. more filings call be any the disclosed to company that statements risks not results statements because these or of such materially the

measures discussion non-GAAP reconciling earnings directly company's also of call these results and with non-GAAP The release. measures conference This prepared included and financial measures. accordance financial GAAP comparable to GAAP information the financial a the financial in in includes most

us joining for Earnings B. XXXX for Call. Riley Conference Second today Quarter Financial's you Thank

now disconnect. may You