RILY - Earnings call transcript Q2 2022 | B. Riley Financial, Inc.

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Operator

Good afternoon, and welcome to B. Riley Financial's Second Quarter 2022 Earnings Call. B. Riley today issued a press release and presentation detailing its financial results for the second quarter of 2022. Copies are available in the Investors section of the company's website at ir.brileyfin.com.

call recorded. this reminder, a is being As An Investor Relations will be the company's available on website audio replay later today.

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

Bryant Riley

everyone our Welcome and thank joining you call. for

[Technical Our contraction. unrealized correlate to Difficulty] market mostly are and

be increasing the are Over companies the create B. our we peers. partners a we become larger differentiates by investments and a our to Oftentimes the last believe the and XX more financial truly in same shareholders sources made put episodic companies balance over efforts services the less we services. Riley pleased income value consulting concerted EBITDA. episodic last recurring increasing deliver meaningfully in shareholders, time, for to to relative months for the years the and To which XXXX. invest we believe the $XXX delivering to of compared less with our have our We of strategy dividend, to businesses we our credit objective last more invest of $X on integral provide are across episodic operating to and that Riley generating our business have the $XX of has over increasing million XXXX. less that year, our and advisory with estate in it business, the our of quarters five With To grown expand XX At operating and The continue from quarters, are that first contributions the we currently to support over that real basting exceeding to EBITDA two capital for slow. recurring have are approximately entire or banking, shareholders steady million $XXX part we have from needed we EBITDA platform augmented share this our of cyclical investment including perspective, cyclical our platform earned contribution cyclical businesses. to from per we quarter. less our trailing the our businesses flexibility end, dividend

normalized markets normalize. encouraged the to become and are more they we return to ahead, by and opportunity will capital Looking that increase dividend

believe the us. capital of many come market we we year some recovered and We utilizing ourselves end, gratifying where are Being we enhance we ahead. years key generate our cycles reported markets course on cash variable volatile have did in to flexibility Recognizing we businesses. top opportunities this Disruptive many capitalize no time and we bit. seen current like see of share debt away, B. out cash markets times a attract as while have for exception. has we short, on maintain lines that our we will talent historically able million expense diligent each clients, converting operating believe differentiate extremely over the cash business, to have extremely with we to investment the And and losses on sustainable equivalents of In results another $XXX by come significant that is environment a and quarter during receivables focus since book side to continue we strongly flows encouraged are today. business we without some that have attractive our back we able opportunities to control most With to than XX balance across the and invest to and before. quarter other over are a the gains maturities presented the generate of in have sheet, and the be the is highly into history Riley's

Now to Ahn, Phil. to who our I'll for our COO, opening operating will CFO turn and the discuss questions. over call Over individual line before units you, Phillip the

Phillip Ahn

decline total Thanks, million Bryant. and $XX.X second portfolio, in of On a [Technical performance XXX, were investment revenues investment our XXX generated Difficulty] strong operating book, the quarter quarter. business the but consolidated for in loss our year-to-date has basis, second

to our the acquisition second related the $X.X with the loss Auction quarter. segment settlement activity. in in in revenues Excluding client on National segment this regulatory – Liquidation million Holdings markets the investments, and overall legacy and for in addition were its XXXX, of decline revenues $X.X million of primarily matters for impact operating were predated that income to

revenues impact matters, consulting As primarily Financial have $XX.X retail segment segment to dispositions of forensic to in and second addition Principal of million, calls, Other episodic primarily $X.X we in due with our stated engagements. addition $X.X from the on the the prior of was due engagements Communications and investments, driven liquidation income previous the Communications restructurings, for estate quarter. the bankruptcy consulting income segment million million Lingo segment litigation second real quarter, businesses from the results appraisal and are million Wireless were $XX.X large by quarter. up variable to $XX.X to for year this Marconi during revenues completed increased the million and period,

the Our our in the second $X.X segment, year period. million our $X the in segment up for companies million in prior from $X.X segment from income brands prior relate the million, flows increased up $X.X Brand magicJack, in Online, Marconi million United to increased six and provide this Segment licensing to quarter, Revenues Lingo to for Results communications Wireless trademarks our period. to in continue year of portfolio. cash our platform. steady to

quarter. of recognized segment, Capital are income Brands, and Justice which Markets the our investments as contributed well As for million in Hurley $X.X

in terms to also reconciliation financial operating are release for in reminder, the results non-GAAP these website. Relations reconciliations find earnings nearest metrics investment additional a GAAP Please for adjusted related definition our Investor measures. relating our Investors details financial to the measures. can and refer As and of supplement to metrics our a on for EBITDA these

highlights total turning balance Now reported receivable. cash approximately quarter and some Riley securities other and June $X.X unrestricted other $XX.X Net million from sheet. have totalled in owned cash cash which equivalents, end, Riley million assets. includes approximately billion cash investments At $XXX.X $X.X to loans of in At million of $XXX.X debt, our approximately B. and million June XXth, had in net our investments at Financial's and prepaid balance approximately B. and Financial in and investments we billion, other XXth. investments $XX of

second quarter share. per a declared common we dividend $X of Finally,

Our completes be August will summary. my of financial or XXth. as quarterly paid about on August dividend record That to of XXrd stockholders common

over call our the Kelleher, to turn Tom? provide our I'll of Now to Tom an overview units. Co-CEO, operating

Tom Kelleher

to Thanks, Phil. We're the immune market deceleration. not

to with performance of operating continue pleased overall our businesses. We the be

core markets. both As recent austerity, acquisitions. we remain confident disruptive as restructuring, teams meaningful our in clients business firm's have but are in existing amid in current as portions With our made expanding support confident and mentioned, consolidating asset of withstand despite disposition we our environment, And for Bryant the progress ability to the of growth. distressed our well financing, market opportunities only and ability define capabilities not periods

we looking National us, has of integration addition recent Holdings, substantive the expand our fixed for Lingo, have With income, to synergies Capital opportunities these well investment With ahead and Financial. XXXX a are behind transformative activities XXX growth. realize to as and in other Riley year FocalPoint, businesses to accelerate as become to B. started

Now capital investment year, in capabilities fixed walk markets mid-market with of Earlier years, gained synergies. Securities banking. various bank, backed or completing our this small while to breadth income. execution our we over acquisition Los highlights advisory acquired and share execution FocalPoint opportunities of provides broaden bring enables in services through FocalPoint sponsor With resources licenses, cost capabilities I some B. capabilities groups expertise the and the unified M&A January, of full platform last will jointly the position we Operating Riley meaningful our to sought command the mid-market bear FINRA combined broker combined have additional to in the to in scale, our to of we our investment having which based us relationships to Since divisions. leadership few Partners. support M&A sector our us market of consolidated allows as to and dealer and leverage together expanding a realizing clients. Angeles

based selective. During we debt closed Group. this on restructuring the the respect mandates Certified retained business Sciences, expect including capital level Collision on quarters. we we Group and also financings Apex completed We current Innovative to advisory were a the during several new placements and seven-figure raises, opportunities Econolite private activity markets, multiple and accelerate market the we of number seeing; of Notably, mandates, multiple including coming are transactions. remain follow-on to With over quarter, quarter,

on served April Blockchain’s IPO. In addition, we lead as bookrunner Applied

working engage actively address team committed rate Banking our Capital risk facility help interest including of and of behalf Group market issues, our flow and on clients. expanded, execute are Markets enhancement, to equity Tim continue number and also Division, alongside Fixed and Sullivan and newly yield clients We optimization, a cash In ATM volatility. Income to

is is upon removing the Co-CEOs, time, compliance create our Hastings worked continue Operating and as to a this additional our the integration Mullen, platform Wealth the that have invest advisors from of in platform solutions clients challenging believe we set both are we legacy National an months ago. Wealth our Wealth week, are a at This growth. for XX and short culmination tirelessly milestone business. to Wealth Division’s, Mike integration well foundation out significant formally In ability of us newly a enhancing with have to we to single teams under Management, build Riley Wealth risk a completed past posture B. our to our leadership a the positioned growth best-in-class for and the division's period a in pleased this Management represents Under Business B. time We combined while and provide market. the difficult from customers. Holdings and activities position to amid of our relatively future into building a encouraged our of began Chuck of with Riley brand which stronger same a

to management, exceptionally to Riley Turning to profits well, restructuring revenues support practices our stable platform. and and Advisory B. our providing turnaround litigation forensic and accounting continue perform Services,

jobs. served for addition and resulted continues a complex In finance. process, exceptional strong management turnaround in matters, awards services LionTree recent to having leadership, specialty earn we execution and concerning XX to in B. Chief won Among team's several of profile matters our which in industry of as the complex Chapter recently preservation performance, base Riley recognition sales Officer to high thousands Restructuring related for

We Depp also expert the Mr. Depp. on as in financial Johnny participated testimony versus Amber witness for providing of profile trial high damages Heard,

for to for support financing related institutions, XXXX. appraisal remained pipeline second division projects loans. continues valuation lenders, to seek and services build the In relatively borrowers half our Our steady financial as performance transaction, and of

Our XXX the business. other parts reoccurring continues well Capital of legacy quarter-to-quarter our management, division in by our out build as as to stated for resulted Riley as B. acquisition a a of year-to-year, Wes which the of source previously stable to serve and We Cummins. hub intent appraisal led to asset income along referrals

platform. to extending had pleased expanded while asset exploring base. team growing continued Wes Riley is division We great newly our new this has the the the are products our with continuing B. team and as addition returns marketing momentum; The our of for globally. and currently is clients successfully deliver efforts part of really

with real for our portfolio the located new division contributed States. quarter Estate XX a strong retail projects which store Badcock throughout Furniture, distribution clients sizeable three also Southeast of disposition broader for Real platform. we Riley existing sale recently real and Home included B. of several Notably, a locations estate Our large and centers led United estate

lease months aggregate approximately sale back $XXX which Our of team properties in six two resulted separate through sold in million. transactions, proceeds the

of we of area is expertise real core Tim benefit the recently current In given Real retail welcomed with B. that Executive our from has over across Tim America stands advisor, North asset and Estate to President retail career. most market our worked Vice span of liquidation headwinds, retailers his the Our Solutions. as led Shilling restructuring thousands of and retail has firm of who another and is division division the Retail veteran disposition disposition. estate a prominent XX-year is assignments the in some Riley

expect are into in interest and While remain back headwinds both in half next. current on retailers current chain historical this putting pressure of and by and disruptions supply standards, more year we opportunities and activities to the low domestically Europe rising in rates result

recently up, added Online We formed portfolio and With that mentioned questions our I since of we'll over despite adjacent through we telecommunication serves the acquisition all. as hard dedication with the now the portfolio expanding in our of continue for earlier, of United to an sector, to couldn't and principle Marconi As companies. as And Brian we all communications of our Lingo and final current Today and pleased built companies near more back income opportunities of remarks. reoccurring XXXX, couldn't industry it grow. the our investments a and have of in our Thanks. to without then stable, they look any for has leading our book, area operating this communications To provide. do Lingo. We underlying one opportunities for created open now term line business source always, colleagues. we Online, volatility Wireless magicJack, conditions market turn United including be unit an investment work that, our sum in platform, and for we thank to the

Operator

Thank you.

[Operator now session. queue. on There begin no questions will question-and-answer Instructions] are the We

Tom Kelleher

Great.

Bryant Riley

that you. usually Sorry. not about Thanks I mention in money of a did new Tom all People some don't wanted sign. our quick. that again pandemic. made Thank the $XX the a QX paid are pretty time time, I momentum. as getting operator if care since And are And real after that beginning employees us. and money. histories is in get thank lost call questions of the XXXX good listening was we to think, of guide dividends we we and Last just lot

So in. come I think a question did

you So open that want to fine. up it operator, if that's

Operator

Thank you.

from Sean Capital. question Charles go ahead. first Please comes with Our Lane Haydon

Sean Haydon

Hey guys.

usual. question congrats can the But some you dividend quarter. numbers Sorry. seeing provide just Got late. Had But in great just the in allocation as here It's capital a about here. this. around maybe

you it dividend? be forward, Going kind for press buybacks preference sort valuations any given to addition have in a M&A the more or do the of of

Tom Kelleher

Hey, we that live all investments about of that's, time. Sean, world in we and this think the look, obviously

And are at $XXX I think the quarter we that to all was that that million I our last that quarter, haven't look kind we year, to not closed backlog. little we closed quarter, the it very add we last closed bit the happen think underwriting about building things mean, – we'll as dealer, of million million we business going, see and versus FocalPoint, did with the got B. $X have this in million think Lingo run Bullseye, efficiently. Riley profitable year. broker just in $XX still a so EBITDA. was think and of We gets National we up profitable we synergies together, that of $XX but which which is their once more to we'll middle

there we that EBITDA operating the things of of that. had is proud meaningfully for that lot can we're enhance while a So, this quarter,

know going pick to thing. to cash to we're one don't flow really that our feel We good I so about dividends. pair have And

this We that a have no for EBITDA. business kind of net debt operating generates

balance You to And acquisitions. obviously leverage feel could buy good about we your sheet stock. making

So be I opportunities. to feel I any will a don't able have way. we're like like hampered feel lot of in we

to markets just book and declining we what hide put that's book, equities to look money took but month. were while million some the collect. example, good $XX might a money It's $XX down $XXX some million, at accounts slower, receivable have a returning million of as for you the roughly gets of book and a lucky place the out or been bought good; this receivable chunk If – a

XX% kind our recent estimate a think most I is of IRR.

money that back comes to So us.

don't think – just and a So I about sitting that we buyback. think boy, dividend just let a let's we're here not going, pay

I of on think table. things the those all are

Sean Haydon

look does coming No. restructuring pick the on that focal the or That's substantially just that just... what could like months? in point it So hear. to because Is up great And half there? the it, business without quantifying business then

Tom Kelleher

Yes.

half. So let's quite than less it's half, not

forget business has then that a is been XX% group don't distress. from big and we XX%, And business few restructuring the that old pick-up own think Perry seeing maybe restructuring. of part have their Mandarino for but we're going there. GlassRatner our Let's business fixed bit a running a years We opportunities The activity income we're little see some of benefits to is there.

we than a I a think but and lot not XXXX from and we're us up to I think get really starting more restructuring, where left were see – we size So think – pick opportunities – positioned early really that's that we well underwriting to perspective means not we don't there. off mandates to from some in say momentum the where we're don't to

Sean Haydon

Got it.

as know litigation finally to just payment to just eventually? like on And this asked last something is exist I Or far time, of going kind the here? prior National, that's I going that Okay. is as but for roll through that

Tom Kelleher

like the Are litigation you we saying us National? feel is behind do from

Sean Haydon

any Yes. Yes. there? liability Like

Bryant Riley

look, Well, look here. here,

Let's we would dealer. just merged we the – broker

that to, this wealth XXX and in So we've resulted high think really me, high meaningfully TK and knows upgrade to we group we that and our our say better lot think opinion spots. managers – probably quality – but we made a on wealth managers confidence mean, of made changes. decisions that have speaks moving than I to in would we've other I of I a

I we've recently is one good help – rates about business. we where that more I benefit think that interest feel we we're we're, had are So think Sean

and get firm. cleaning at cash your the You money

it's a versus cash and been cash while year. the year been on incremental we're activity I of million getting last $X-ish estimate of not would there's kind there's in that side, So a challenging, in underwriting lot

a can can but of nice active dollars smaller I more bit if getting, – really with get little could core. market we on So a if those cash-on-cash better it and and profitable build see of being an we're we

Sean Haydon

Okay, and Thanks congrats. great. That's all guys got. I

Bryant Riley

Thanks. Thanks, Sean. We it. appreciate

Operator

[Operator go Instructions] is ahead. Nokomis The with Please Hendrickson Brett next Capital. from question

Brett Hendrickson

Hey Bryan.

Bryant Riley

Hey Brett.

Brett Hendrickson

a just have I I and right $X.X Sorry, hear Did from of questions. clarification couple million Hurley Justice?

Tom Kelleher

what Are you asking dividends the were? about

Brett Hendrickson

make in. What had geography understand to yes. I hadn't coming that and wanted back think changed, you the goes and then to Well, I you sure

Tom Kelleher

$X.X Hurley Yes. rate I Justice Hurley and kind mean, of talking Justice and you at the at about with XX, for brands if low-XX the look we're run quarter. million

Brett Hendrickson

million the... go that and did on $X.X $X.X where million Okay.

Tom Kelleher

go? did say a When get It's just you it where we dividend.

So...

Brett Hendrickson

Yes.

So in and in other; P&L segment. it right me doesn't It go in interest don't the front brand goes your of have I now.

Phillip Ahn

We recognize that our in market. capital

Brett Hendrickson

Okay. Is that And market? consistent? capital has that been always been in

Phillip Ahn

investment there, an it's Yes, out correct.

Brett Hendrickson

And stat? from generated did question I me. last one was million? say with more $X you that only hear good. had Okay, hit investor, $XXX you What one went star the to two underwriting I when but Bryant, Did million from

Bryant Riley

$XXX $X the the for year for million to million quarter.

So a type business on Brett, that's pretty margin XX would average be $XX of all much plus of incremental. million, that

$XX.X $XX of mean, million XX, a maybe bit it's less I So little go higher. million,

was good pretty control it's I lost we've market about we're dealing not market of, just feel with The our that results share. when We're just out we have. I little So that pointing inputs stopped. very these like

of quarter. and that here this that I a there's lot feel think into to I of came us goes time a back benefit way as like that at preparation ahead

Brett Hendrickson

related interest wealth on with than an to in on the saying did move million so clarification, that is cash the higher clearing are Just management; funds year? on firms – the then say the the fed $X interest rate the you just this you last And have you run Great. – far? with year last

Phillip Ahn

then measurement. last and last a certain say We – as if fund, was TK, up I this I and but and would you the I want, fed increased you got pick that's you just of now, one. it's, right you last the the wrong, hurdles so, another the if one there comment hit get So think meaningful it's rate

better annualized XXX% that think about an margin were Tom, right? I million we than $X on sound year. last time we're So basis about this of does

Tom Kelleher

one the Wells and separate in two get Fargo do with to weeks, actually agreements, Not right. different we with Fidelity principle That's one clearing but and whatnot. are there covenants, arrangements, Yes.

other run more Fargo was to a kicks $X Wells the levels bit more So lower one one $X in rate. but million about will accumulate to I and once from much referring in one it that's kicked kick million an to run and rate for Rates quickly in, much numbers to gone again at have earlier the faster.

Brett Hendrickson

Okay.

Tom Kelleher

a thing just a a free lot it with kind of and I of a firms and, where mean, well income was that’s call a always management for of lost a after rates finally as been years that viewed seeing bit and piece wealth years that. we're interest years bit call little a little of a it free we of and from and benefit

Brett Hendrickson

I is And great. want That's XX fed bips $X the is to before yesterday clarify that the after? or million that just – did the that

Phillip Ahn

run a that's rate. No,

pick a the of it in gave if a around look sorry, million, specific, think I is up higher, last better maybe I kind of bit little as gave more So it little wasn't you you, might $X than every and now year. and I day like, right at number bit, but I we

Brett Hendrickson

Okay.

that So the before, fed yesterday. from has kicked in funds be think don't I yet would

the bips... that before XX So would be

Phillip Ahn

fed for raise, quarter math we we ago. basis an so three knew did I raise. all included to update the we think we asked I funds knew that did point No. – and going I five were mean, days – that

Brett Hendrickson

Perfect.

Okay. Thanks work. for the clarification. good up the Keep

Bryant Riley

Thanks, Brett.

Operator

to our question-and-answer for call the turn Mr. remarks. back to session. concludes closing like now over Riley It'd This his

Bryant Riley

of partners I market Well, again. that. we're really and I that, our to do really excited it partners all for this our that new did we thankful and I do come won't to are really, – we're out think really I well do and softness prematurely going think so

forward it. quarter So we to Thanks. and next thank you. We'll look talk

Operator

Thank you.

on-going statements COVID-XX impact Please of the B. that plans information, XXXX All of regarding today forward-looking by as any this of future quarter includes except the call. any are expectations, obligation and made for well prospects today's this Thank detail as and Riley historical Safe statements the & Harbor statement, Commission. otherwise. call, earnings provide forward-looking and about explained The important uncertainties XXXX. conference of detailed Financials filings other joining B. Securities subject undertakes publicly facts as Riley be I filings forward-looking will more risk which of pandemic, not and as factors risks future law. to uncertainties discussion here whether cautions other matters call and statements. with statements Private regarding any refer these new we Statements meaning made conclude forward-looking of during Riley a the you company's Before no during events, in Exchange second are factors Financials statements because forward-looking statements B. the and the statements, cause from to those and us should constitute within for today unpredictable or discussed may risks or today. made These Financials call. that Reform Securities the actual risk Litigation results to differ various Company include Act could and Investors aware for to update required the that of statements forward-looking materially revise are such

may You disconnect. now

B. Riley Financial (RILY) 29 Jul 222022 Q2 Earnings call transcript