B. Riley Financial (RILY) 12 May 202020 Q1 Earnings call transcript

Good afternoon, and welcome to B. Riley Financial's First Quarter 2020 Earnings Call. Earlier today, B. Riley issued a press release and a presentation detailing its financial results. Copies can be found in the Investor Relations section of the company's website at ir.brileyfin.com. call be today's company's on of website. replay will available also the A

are and Riley, Co-CEO; us Bryant Joining today Chairman Ahn, and and CFO Co-CEO; COO. Phillip Kelleher, Tom

questions. I will the we the will After statements. regarding provide we management's call, line necessary remarks, for today's conclude And forward-looking open cautions before

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

welcome, you, everyone. and Thank

of these our we period. hope across through by everyone unique through times. foremost, safe start dedication We and who First acknowledging Riley staying all employees B. complete have to want is shown challenging this

Over XX-year market managed dislocation. course we extreme through have the successfully of our of prior periods history,

on downturns, While feel to is our the this business stronger positioned other obviously is side. from previous we well out unique come

our from and withstand diversity have to intentionally through built businesses. of market our We have severe platform shocks the experience learned

each several follows reported outlook spend quarter Riley, to the for our with growth will on plan for and COVID-related This on sheet cover balance then will a highlights I the metrics, investments. providing of so whole Phil some from business as our our quarters on as proprietary cover units. well Tom focus impact business financial as time B. a and of some continued context results our

and portfolio. results all investment inside strong first businesses mark-to-market performance growth in of of consisted our both profitability, Our in a quarter from our terms operating loss significant

was which operating the investment exceeding $XXX.X $XXX.X which X prior of by The quarter EBITDA revenues during a record operating generated and generated totaled far losses quarter, operating of revenues our million. XXXX, $XXX.X businesses million. million our which of of business performance is Our offset operating of quarterly record $XX.X million, in

in and sheet. our terms, this losses on no impact put it unrealized understand the employ operating have is all with is balance While we are strategy the to in business. a unrealized To perspective, important these our number, losses of large absolute

often performs We company will our as platform hear a platform. the view You our X business, the operating of to in with a are from business ourselves for the which which and we call have parts: cash for us refer company; because opportunities side investment -- our generates and platform. we investments, ideas and proprietary where sourced clients services then our flow our

important is trading an It realize this to is active not strategy.

book equity positions both public is includes various small-cap private to Our and markets and concentrated. strategic clients. our several It loans and in

our our create investments more As larger have of to part we've integral strategy platform, grown our and become value.

clients. we to additional our create of invest revenue our Our goal in can account services the that partnership opportunities. to business these of parts opportunities proprietary by with to prop with enhance expertise is investment and our investments our We using create aim

create we will Additionally, we have long-term opportunistically value companies teams partnerships and management with for believe our shareholders. that created

mid-XXXX. of partnerships price investment example dividend-adjusted Capital this quarter-to-quarter effect Capital share side our relationship initial the Liberty is Vintage be -- $X these and is in that of per at Vintage approximately Group. the We volatility can Franchise with of a However, large. Tax in An with

advisory we the Freight. by Vitamin Shoppe of market years, the purchases transactions, number supported X Vintage next American transforming into Franchise including Group the of and Over providing in and company a on services capital

volatility large historical but of QX, rebounded QX, in have in large large Our resulted in of of as first the a unrealized in and capital XXXX, resulted a investment unrealized demonstrates FRG subsequently, suffered investment the quarter, Shares markets these positions. loss. at end in gain a challenge the this through strongly

in and our decisions spite prior pressure the us from margin there in loss, no market volatility significant these the prudent In of investments, is these are opportunity balance positions. offset affords any contributed investment This these to our well. values as which face importantly, not to partially for generated sell in and make platform. investments current all quarters in unrealized of opportunities have business Revenues revenue

trade fact, $XX year put resulted realized end only In towards the million of of a quarter hedge on a market that during meaningful the gain. in the was last unwinding that we've the

we As generate we a balance look of continue ahead, have for flow that B. cash assets strong Riley. to

number businesses Great Bankruptcy a B. fact, and Restructuring In and our Advisory countercyclical Division. stand of FBR a our American includes during Retail benefit Liquidation This GlassRatner Litigation Corporate Riley Group, our our markets. Group Team,

for capital. for begun significant our we for to projects, and and new won have equity capital need pipeline robust. of and expect assignments weeks, raise our opportunities this have restructuring a We debt see a beneficiary to also is and/or Markets to In through be companies recent believe retail of and need Capital a Group number liquidation

the On the we of side, recently Markets of led GAN of since pandemic. Limited, IPO is one IPO the the which Capital the start first

balance United magicJack and and perform to businesses. investment appraisal Our companies, consulting our principal episodic to more Online and steadily our continue business wealth

always success value. A deliver our will ability be our shareholder key measure to of

During of $XXX,XXX downturn. large repurchased to totaling the including the from quarter, paying our block shares million a addition existing quarterly an in we shares, COVID-XX X dividend, to prior over shareholder

continued back to bonds, also confidence also in bought of management some and our our continued make open We purchases, which the market and Board demonstrates company.

until and liquidity mid-XXXX, support benefit uncertain time, that through principal this not and sheet, clients. be tight and business Over to that cash million however, and market to found be history, leverage to pursuing ahead, cash opportunities. our we with continue creates maintain in believe balance have the million to With intend investments, will continue our and support our strong us, to we our aggressive $XXX over our aggressive. will we will we operational payments sheet opportunities, also in and have more ample significant we in cash continue of which these to to we look we will but partners we over balance disruption As flow create $XXX discipline due continue only opportunities, no

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

Thanks, everyone. and welcome, Bryant,

As reported Bryant was context so this quarter, provide just and within additional results. we a unique outlined, will our

record the was $XXX.X quarter our EBITDA for million revenues quarterly this a As Bryant operating $XX.X and adjusted businesses, operating of operating of million. noted,

For context, revenues million last to and year adjusted of the of $XXX.X our of $XXX.X prior which This million prior operating operating $XX.X exceeds record also operating period. this from was in million EBITDA QX revenues, compares year. quarterly for

losses in by vast value with majority significant and markets. However, on the positions were our to our equity of Investment the our of losses businesses to financial adjustments strong unrealized during results the losses these due investment portfolio operating on the $XXX.X from impact the COVID-XX million, fair losses eclipsed totaled loans. quarter our related being

of a revenue our in common investment Combination loss for $XXX,XXX operating quarter $XX.X and loss the of total shareholders million. revenue to applicable the net negative and resulted of

In as terms businesses, well of fund wealth our Financial banking, of quarter. reportable investment first our losses, investments business. investment our revenue segment and of Including and management Litigation as loss from Capital million negative reported this for the the B. Consulting segments, $XXX.X management million and GlassRatner Riley's our segment includes results Markets our a and Bankruptcy $XX.X

by investment $XX.X revenue $XXX.X million, million. investment for the was driven strong revenues performance, the segment was and Markets banking wealth were segment primarily excluding income increased and Capital operating operating revenues. results, Markets management results Capital However, our consulting

to $X.X generated quarter. segment same income segment income million compares million million period. $XX.X million for for the year and Liquidation in segment Next, our $XX.X prior first the This and of and $XX.X of Auction revenue

results liquidation segment to liquidation engagements. the year-to-year and Our large-scale of vary quarter-to-quarter retail from due episodic impact

from revenue in million and $X.X Our and in appraisal quarter. million the $X.X income prior for million $X.X period. slightly segment income year valuation up generated is segment and revenue in segment for $X.X the in million This

for steady quarter-to-quarter businesses and our year-to-year. consistently appraisal flow Our one us remains cash business of performing generating

Online to principal generated million of United platform. investment of prior cash million for and $X.X year quarter. segment to million $XX.X steady attractive And revenue This segment segment they and revenues for $X.X for acquired the are continue which and period. for of generate companies flow Our in These income return characteristics. we $XX.X segment compares investment companies, million the income magicJack, the

interest our brands. Brand quarter of segment, several XXXX, assets which is comprised is related during is intellectual and the of fourth fashion in Last of our established and property

contributed to for the of of related $X.X quarter the to $X.X portfolio impairment primarily million from fee and segment pandemic. a the loss million of due Brands incurred Our revenue impacts trade licensing gains resulting

some turning balance Now highlights to sheet. from our

net As securities owned; due $XXX.X B. and and against in of in XXXX, equity Riley approximately includes investments cash investments and $XXX and in $XXX XX, B. brokers; Riley customer Riley net receivable, Financial March approximately equity other XX, Financial $XXX.X Financial and unrestricted had other participations million million cash a deposits in $X.X of in million was contracts; million $XXX.X $XX Total loans clearing advances other million sold. $XX.X balance from million equivalents; B. March in loans investment included total stockholders' which assets. million, of prepaid of At and cash million. had net

mentioned, Bryant we existing the outstanding of end the under $XX the million program million. repurchase share totaled over shares quarter at repurchased As our X quarter. Shares during approximately

maintaining our dividend. quarterly Lastly, regular we are

$X.XX share or XX, June of X, record June of quarterly about Our cash on as payable per dividend XXXX. common of is stockholders to

financial our summary. completes That

to the I'll Now individual co-CEO, over highlights quarter. to call share from turn few Tom? a Tom Kelleher, during operating the our groups specific our

Phil. Thanks,

tirelessly loved and be our team teams partners Bryant health team our the a provide on of entire made COVID their In services know I'm First businesses want our a to guidance and behalf have March, critical prioritize we support a I allowed I efficiently this of to their our to colleagues world-class work proud the people into We our amid pandemic. on dedication. which of and quickly worked workforce, our have remote families and and our period, management truly safety and time. foremost, speaking their a comment to early and to not transition to when could more necessary continued to operations Throughout professionals, build with at I say of clients employees with respect ones. the

results call, strong large and top the B. continued businesses. part As was Riley. QX performance discussed for to at due an incredibly professionals provided in of across quarter operating by services our the the our These are

our investment for with QX. Starting quarters banking near B. we brokerage, bank Riley in institutional record achieved FBR, and

Alta in the significant combination the fees involvement business contributed quarter. for recent Our

relative The SPAC impact We regular-way volatility be are demand the of market on and pent-up IPOs. due for for SPAC continues the pipeline spot a new bright seeing to firm. strong to issuers

a to activity or related at-the-market Our record offering highest amount of the date. quarter, had fees the to product generating ATM

be overall to slowdown continue markets. capital We active in despite the

week, non-SPAC position with small-cap in As just companies Limited. IPOs X brought to had the We us providing of previously, with leading to listing last continues the market of market opportunities. we GAN mentioned successful first our Bryant post-COVID believe unique differentiate,

we consumer hold, several being the in seeing on the And put and significant with put the companies several a on meaningful activity are recently immense increase signed products in although We retail including transactions and pandemic. engagements, pressure the several banking in sector. have been restructuring new amid COVID

While served for trade our due has we distancing clients take execution amid annual strengthen to this they place work-from-home our to institutional an era. sales with division investor conference as scheduled to increasingly with requirements, several rely opportunity later social this trading relationships period long-term us month this canceled and on

Turning In adviser the assets private our year from per a our revenue increased under Wealth Management Wealth to ago. and same client Management. period management group business, in

Washington, from D.C. revenue offices. thanks channel and QX independent Our year, up of up to our last quarter XX% XX% over additions new and Miami the in was

modest by a participation. the in saw also revenue We syndicate driven increase quarter deal during

remained period market. the we we and with revenues do our assets have retained While accounts, all strong of decline to the overall during have expect

us in Earlier onboarded Greater the key focus ongoing. we And for region. in few advisers Dallas. Chicago our group, and those of established and we in a month have advisers a the in joining new the remains newly a quarter, efforts Recruiting branch team Philadelphia are this

Key energy, during are GlassRatner, is spanned includes CRR services automotive, We're seasoned retained in restructuring and retail assignments on periods diligence, expertise advisory Group, real which assistance. range and bankruptcy, due which work, our new our in Advisory joining a from Next financial of core of services, the financial financial several general been results work, during business-interruption receiver agriculture, Consulting professionals record matters, August is litigation involved business and have and health estate. Financial care, and distress. which whose critical quarter platform group quarter of since achieved This XXXX.

in of participated Now closings American division. Liquidation liquidation turning of about inventory. have Great to our new we Group's projects involving retail $X billion store ongoing includes returning and XXX Year-to-date, with a This clients. over number

to retailers have of in But financial paused March, to as anticipate focus. we with the created navigate by more environment. work retailers the inventory Real to consolidation the several current While be purging there on we estate horizon. excess nonessential retail, remained distress a projects continue and the new related several COVID-XX accelerate key being the across opportunities challenges market effects will

As we expect activity robust new we business resume return to of some pipeline opportunities liquidation a normalcy, to through with year-end.

enhanced in lease quarter, who, we and real by estate of a specialize veteran the our During team offering professionals, things, restructuring. among other disposition onboarding estate real

While has new team been they have for Current extremely serve we and signed a comprehensive results. Riley property estate for an owners. conditions FBR, our retailer. With short B. a this a future is us created bright only a GlassRatner, area will large environment engagements, project number this spot that already market offering with real and businesses months, new estate believe have Great for real involving we as of American few a through including another challenging

Great continues will need our results opportunity this during division Appraisal work quarter. transaction to American group appraisal future capital anticipate generate steady for a support and be we to Similarly, greater Meanwhile, lenders will activities. as the banks there

United magicJack strong generate above investment perform Online, flow cash for estimates principal companies, the platform. our at and to to and Lastly, our continued

manage Our Principal continues several investments. potential our Investment other to team new investments minority while evaluating also of

business. Taken is together, always recognize with our be pleased there from more But results we operating are to done. we

now remarks. and the for back open turn we'll over then that, line With the Bryant questions for to closing Operator? call

[Operator Instructions].

line the with THC. Sean from Haydon comes question first Our of

in few not if I'm sure minutes safe. date? recovery to this, investment you but all a late. I have you covered the jumped portfolio you're your on quarter quantified Hope

we we to X% securities holder. amount over often, Sean, didn't. of that Typically a There is a significant these XX% are and are filed.

own So up number, in it we meaningful FRG, is know exact a but million shares of I move. which mean, Quantum think and it's X hate to don't meaningful. do I the at the day-to-day, quarter. I I is points X.X

a been on sizable focused honestly, So we're the more it's move. so much Sean, operating earnings. just But

been for teams so And time, the some a with positions ups principal to downs. taking and partnering going that's long we've have and and

our core think money meantime, So we're But in make going those the lot operating to names. our about on results. has and we a really of focus, those business we're excited been

Yes.

that liquidations guys to And how been? I becoming reasonable. landscape go, far for meaningfully think that that's competitive do as then And retail due COVID? as the you has see accelerating

Yes.

be you've I they lot -- restructuring got to retail think about of seen assume going companies, and you've announcements a to think there's either platform. of how or changing, the

very be to going it's So busy.

an think equity the dynamic of you'll seeing we're some signs estate I there I be environment more imagine, see And as I that think to hesitant of is I environment. fee-based is, the would what part, that think by I opposed risk an a a purchase estate. all probably little to going biggest and liquidators, the to of for of equity an mean most take are the and

and sort some more is see that. you'll to of maybe what percentage upside think I some So of recovery

busy. So going to be it's incredibly

and all competition, we really to really get going good, faced we're confident share. tight competitors but fair we're Our our are

guys your what And think say, to do quarter. I'd capital to just it like to chose I allocations competency speaks this with you

Thanks, Sean. support. your Appreciate Appreciate it.

Our next question XXX line Wes from the Cummins Capital. of comes with

Okay. secured Great. some quarter. you engagements during restructuring heard the mentioned you Bryant, that I

how business? you enough -- many to have And need curiosity, where of for months quarters? you or out handle? think do you'll your coming add engagements or the what mean your capacity capacity restructuring in you I Just in is can capacity

dealing with because question So an currently. interesting that's we've that -- it's been

a moving me, assets But some and -- fair that -- excuse of with around we're assist we of seeing. business element bankruptcy a the restructuring been is amount advisory. senior So got have to has we've restructuring GlassRatner professionals. meaningful

the not on level So level. more on senior but support the

So we'll see.

go Riley I mean, you've talent long going things go high-priced not of B. to those We're think Wes, chase it's go platform. markets I busy look there's where, because do one capital and of our enough. be been around higher, not more restructuring super -- folks we'd to some be part and that want probably it's now. What is might robust for of

years the GlassRatner. moving then year recently maybe in two we like restructuring Mandarino and feel ago brought more years and when ago, above a two we Perry we ago So won

think something But busy there, and to Ian we're so be got have that going bear says to mindful just that's we're I fruit. to -- of I from just that's that. And really have text going so Ratner. He And capacity. a we

[Operator Instructions].

Management. James Asset comes the next Our Dressler of question line from Princeton with

questions in about your quarter, XXX. a some I S&P the couple of there. down cases had drop of senior just first They significant greater notes a some the had than out

what to about speak and So you can wondering of kind decline think that. if their you

might these call call lastly, you open market, to also of that regarding I notes the mentioned that. $X.X to $XX date month? the those intent And speak if in up can any a of you have more end at some the you think million the purchased to little when comes the

a Got there. questions of bunch

Yes. sweat. No

obviously The obviously came think as spreads credit about widened. we that often. in So bonds

from Obviously, fair some You some saw in as bonds. may margin put in baby bonds, pressure amount a did meaningful corporates. the think there's retail We and purchase that uptick have some yields might calls. a of of I gotten have

back focus invest interest, our the company that on that pay have dividend, due. to we debt cash flows in making Our is and our pay is the the ultimately, sure pay

So our We investors. bonds. feel about very those we feel those comfortable really with relationship about good

We back. have buy -- intention some of no we did

a of -- bit to a a XX%, But of wish were those more any our we time of discounts. is time issues, chaotic when decision. back. we we relates that game-type was kind calling at bought It XX% a it Obviously, as trading were

banking this work at rates, high liquidation. good or maybe to put will retail potential to in opportunities there you pretty are often which include money fees If -- environment,

balance analyzing always But -- flow. feel so can't just sheet. we would We give really really that about our opportunistic. free good our are I that. balance our any sheet, conclusive you be we'll say cash answer just to we and about So I feel good

you provide quantification of any in the of Okay. open you And the regarding purchased amount market, can bonds that?

Few we more. enough. million, not wish I have bought would

the comes Associates. next Dwyer with Our Punch of question from Paul line &

you've possible, that investments the know generated a of platform the there -- way don't but it's the to Could fees you amount if that to quantify tied across to be -- I would made? is direct

did some of So we you the in $XX But everything the to we -- that of advisory, recent capital backstops, investments. if more take more actually kind of the some recently million-ish. from markets

Over the quarter, last the so? or last -- and months that's over XX

No. No. No.

Over the last and XX around. months. In

Yes. but could and the about And environment talking see time small, where little it's brand then it's there? how in spend segment and you performing you current obviously a this opportunity

Yes.

we see, the -- partnership then highly we bounce have So excellent. the do -- revenues -- Those a purchases already couple And bit confident last back that Bluestar in formed of that but partnership that BB their business Hurley. guys our where a pretty a be in a will that $XX Brookstone. Group. on licensed little transaction to those and the We I I with big. Japanese There's are there's with and license. are X good type we numbers XX% sell And And around met months paid the for obviously BB Hurley should have the see if of am those between the and to partnerships for through and licensees. did have side also everything come mentioned. stopped BlueStar seeing license by Obviously, they we you'll did over We the been million minimums they bought of we that brands business, are of time. I that of long -- EBITDA back. a number. That there underwrote

if So and of quarters traditionally year represent the is of X X way will X that a I X number X where think would you as year, quarters probably typically describe it quarter. think quarter in this

pretty in So slowness you're have then you and and bit QX. hard in back my to of little probably -- bounce going guess might a QX is X

Yes.

expecting other with to either this. a side adding where years? And the you on that segments to of opportunities, call next, the come to touched you see platform another Perfect. you overall -- Wesley's do potentially could then than an the the are stronger about Okay. X out or you within perspective over make fully it, little bit from where questions. talked And acquisition it sense segment X But

this increased, of better. we So the I with just of -- different variety have an and from you every longer to our our GlassRatner They business grown pieces touch people us business, of and about opportunities business a it's been with whether day or transaction. as the we the think our and think side in that They come has independently opportunities. liquidation talked and as have of that they areas, touch a Every learn lot for a time. that refer I together, banking a understand day, are more investment I've on calls, about more points

just that you -- side, We helping the give real that a who the an the was added mandates to platform. add-on been advisory out amount Michael real experienced. real months mandates money our obviously, of brought and a nicely of dozen with have think to added and It's types love. somebody estate And and restructuring. came big retailers, the the areas, focus us portfolio. Those a are restructuring exciting that ton buy But business. Jerbich, it added just side. hope often estate of in add-ons makes ago in we professionals we a some we competitor we by more as and a that of the adding are has meaningful professional different estate example on a just added great these so as fits -- he our recently, in we X from the real fact half group we thinking more of did embedded good it into very more than working a kind our about like a didn't done. Michael a on leases, retail as many we we the I go headed of We something with get restructuring so portfolio -- super estate of And But size. I'll

there's because we recently us about seen pretty approach think think positioned I opportunities the lot of I a more So feel people side We've well that. on there. restructuring

I adjusted QX. EBITDA So and big a you X were $XX markets EBITDA look you think the good Paul, just in and money at amount operating look But $XX in last QX. you are pretty those -- in I -- add back million we clear, -- million lost we a if in on Barneys, quarters Those pretty QX, we Barneys numbers, fair where over of capital at in environment. EBITDA really reflect our

way, predicting numbers. those do seeing But a I'm function we're momentum. of going of And we've staying types ways I lot form. certainly different help forevermore or think and know are So got not we that's a staying of in to -- and just you're any kind the track really that making sure of -- that people to that shape assist us on

it. that's long-winded of I think answer, kind a about So how but

And [Operator to Mr. Instructions]. call closing Riley like back turn for any This remarks. I concludes our would over question-and-answer session. the to

on we during look, everybody, make craziness. what to It's all worked group how together work came to partners partners key see to Well, consider would again, remotely. kind together our could our employees done they've just, and and who that I of and sure like I thank amazing this our everybody

some we'll we'll and forward great to comments, everybody appreciation, look So quarter. and previous echo stays next operator. reporting hope you, Thank with safe,

you. Thank

the expectations, during statement, Securities made Riley's cautions are this statements call. Reform plans facts uncertainties call, ongoing risks could various Before to COVID-XX today. that forward-looking factors I forward-looking materially that statements results are impact any and the from Commission. the actual future in statements subject financial and other the well should call forward-looking B. as may important like Securities includes cause would and and statements of statements in These of B. about include those differ meaning to pandemic we uncertainties XXXX. refer other Riley's as factors conclude of safe of constitute regarding detailed Exchange today's during risk within to Investors to discussed Act which a for provide risks more matters explained Litigation risk the and made that of regarding be aware prospects Statements and such detail Private forward-looking any Please with the these discussion not historical harbor and filings filings financial the statements. unpredictable company's

also discussion the earnings comparable directly included the of non-GAAP the GAAP these most information results and of new statements measures financial forward-looking measures, and future except whether a publicly call reconciling of prepared This as company's or non-GAAP are no because in with forward-looking financial financial made any update undertakes company revise law, or statements, as measures included by the financial in All accordance to obligation GAAP today, required release. information, events of are otherwise. conference

Riley's for Thank call. Quarter you today conference Financial's XXXX for joining us Earnings B. First

now you day. may this a wonderful and You Thank disconnect at have for time. lines your your participation,