Q1 2021 B. Riley Financial Inc Earnings Call
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Good afternoon, and welcome to B Riley Financial's first quarter 2021 earnings call.
Earlier today the company reported its first quarter results in a press release, which is available on the company's investor website at IR Dot B Riley Finn dotcom.
Today's conference call will include a discussion of non-GAAP financial metrics for more information about these metrics on a reconciliation to the nearest GAAP measures. Please refer to the company's earnings release and financial supplement which can be found in the investors section of the company's website. As a reminder, today's call is being recorded on the audio.
Replay will also be available on the company's website later today.
Joining us today from B Riley are Bryant, Riley, chairman and cofounder and co CEO Tom Kelleher.
Co founder and co CEO and Philip on C. F O N C. L O. After management's remarks, we will open the lines for questions.
Before we conclude today's call I will provide then provide the necessary cautions regarding forward looking statements I will now turn the call over to Mr. Bryant Riley Mr. Riley you May proceed.
Thanks, Good afternoon, and welcome everyone I'll begin with providing a summary of the quarter on a high level overview of the current state of our overall business. So on our CFO and COO, who will cover key financial metrics and then my partner and co CEO, Tom Kelleher will share more detail about our individual business units.
We're pleased to reported another strong quarter from B Riley financial revenues totaled 642 million with total adjusted EBITDA of $385 5 million. Our strong operating results were enhanced by equally strong performance from our investment book, which resulted in an exceptional first quarter.
Strength in the market to help drive outsized investment games on approximately $260 7 million from our investment book.
Excluding these gains operating revenues for the quarter were $333 2 million with $122 7 million of operating adjusted EBITDA. Our operating results reflected the upside from a strong quarter from investment banking, coupled with the steady and recurring contributions from the balance of our business units principal investments consulting and our.
<unk> wealth management and brands.
Investment banking has been the beneficiary of significant deal flow, we're participating on larger transactions, while continuing to stick to our core routes advising small to mid cap companies as they look to grow their business.
We view our clients as long term partners and are proud of the many clients for which we have done multiple transactions over a long period of years.
We believe on continued focus on the small to mid cap arena, which we have been focusing on for almost 25 years is recognized and appreciated by our clients on all sides of our businesses.
Well, our first quarter results benefited from the upside on banking activity. This is just one component of our overall business our pipeline on the balance of our activity remains highly diverse.
Gramercy restructuring activity continues to drive on consulting business, which set another record for revenue during the month of March.
In January we were named Middle market turnaround consulting firm of the year by Global M&A network validating our leadership in restructuring and increased recognition of our brand in the market.
In February we completed the acquisition of National Holdings, together with our legacy wealth management business. We've added some really terrific talent with nearly 700, new registered reps and with 31 billion in combined assets as of March 31st. This edition provides meaningful scale and distribution to our overall platform.
During the quarter on appraisal business brands portfolio and principal investment companies continue to perform steadily serving as an important contribution of cash flow for our platform.
And while it has been a slower environment for retail liquidations were continuing to work with retailers to navigate issues that existed pre COVID-19.
Coming off two strong quarters, our results demonstrate the earnings power of our platform, we recognize where on a highly cyclical business and with the diversity of our platform. We believe B Riley is exceptionally well positioned to support our clients and partners through both up and down cycles.
In summary, we have operating results, which include the businesses that perform services for our clients and generate cash flow and our strategic investments, which are often enhanced through utilization of our business services and have the potential to produce outsized returns.
And taking a balanced approach to capital allocation. We also strongly believe it is important for our shareholders to share on our success.
And we have declared a total dividend of $3 per share, which approximates the free cash flow generated by our businesses during the quarter.
We have returned approximately 345 million to our shareholders through dividends and share repurchases since 2017.
With a strong balance sheet of over $650 million in cash and investments net of debt at the end of the quarter, we feel a meaningful return on capital to our shareholders is warranted and it can be done while continue to aggressively investing our business.
Taken together this has been one of the strongest periods and B Riley's history and by many measures last month B Riley financial was added to the S&P 600 has been truly exciting and gratifying to see the growth of our company over the past five years and on continued momentum only validates our strategy.
We could not accomplish this success without the hard work and dedication of our world class team of professionals. We believe in the strength of our people on our platform to continue to deliver for all of our stakeholders in the years ahead. It is truly amazing what has been accomplished in the last year.
With that I'll turn the call over to Phil to share a brief summary of our financial metrics for the quarter Bill.
Thanks, Brian.
For the three months ended March 31, B Riley financial reported total revenues of $600 2 million and total adjusted EBITDA of $385 5 billion.
Net income available to common shareholders was $252 9 billion or $8 81 per diluted share.
Our first quarter results included investment gains of $266 9 million, which primarily relate to mark to market valuations on our strategic investments.
Excluding investments operating revenues of $333 2 million represented an 83 per cent increase compared to operating revenues of $182 2 million for the prior year quarter.
Operating adjusted EBITDA increased by 73 per cent to $122 7 million up from 70.9 billion for the prior year period.
As a reminder, adjusted EBITDA and metrics were operating investment results are non-GAAP financial measures for a definition of these terms as well as a reconciliation to the nearest GAAP measures. Please refer to our earnings release additional details related to our operating metrics can also be found in the financial supplement located at our Investor Relations website.
And as noted on previous calls we continue to review our reported bolt financial metrics to provide our investors with greater visibility into our overall performance and results of operations.
Okay.
During the quarter, we have added wealth management as a sixth reporting segment in conjunction with our acquisition of National Holdings in February.
If management was previously reported under our capital market segment.
And we have recast our segment presentation in the relevant materials to reflect these changes.
Now turning to our segment results capital markets is our largest segment and includes our investments in operating results from investment banking institutional brokerage and our fund management businesses.
Excluding investment gains capital markets operating revenues increased 118 per cent to $207 9 million up from $95 5 billion for the prior year period.
Segment operating income totaled $106 million.
As noted earlier wealth management includes results from our recent acquisition of National in addition to our existing business.
Wealth management generated revenues of $67 9 million for the quarter and segment income was $4 million.
Combined client assets under management totaled approximately 31 billion as of March 31 2021.
Aten liquidations generated revenues of $13 5 billion for the quarter and segment income was 907000.
As we have noted on prior earnings calls our liquidation segment results tend to vary from quarter to quarter and year to year due to the impact of large retail liquidation projects.
Financial consulting revenues increased to $21 4 million compared to revenues of $20 7 million for the prior year period.
Segment income was $3 3 million.
Principal investments, which includes results from Magicjack and United online contributed revenues of $20 5 million and segment income of $7 5 million for the first quarter.
Lastly, our brand segment, which includes the licensing revenues related to our brand investments portfolio generated revenues of $4 5 million and segment income of $3 1 million.
Now turning to some highlights from our balance sheet.
As of March 31, B Riley financial had $237 6 million in unrestricted cash on cash equivalents.
Over $870 million in net securities and other investments owned.
And $282 9 million of loans receivable net of loans participations sold.
We had a total cash and investments balance of approximately $1 9 billion, which includes 49 million of other equity investments included in prepaid and other assets.
Net of debt B Riley financial as cash and investments totaled over $650 million at quarter end.
Finally, we declared a total dividend of $3 related to our first quarter earnings. This includes our 50 regular quarterly dividend and a special dividend of $2 50.
The quarterly dividend will be paid on or about may 28 to common stockholders of record as of the close of business on may 17th.
That completes my financial summary, I will turn the call over to our co CEO, Tom Kelleher to discuss our individual business units Tom.
Thanks, Phil as Brian noted at the top of the call investment banking had an exceptional quarter continuing the momentum we saw late last year.
Our current position on relative rise in the ranks has helped further validate b Riley securities recognition as a leading mid market investment bank record results for the quarter were driven by several large transactions on strong institutional brokerage.
Highlights include raising $333 million of debt and equity for Babcock and Wilcox.
Completing the fourth and final sale of bed Bath and B on its process to divest certain non core assets.
Our role as a buy side adviser and Rocky brands $230 million acquisition of Honeywell's brand portfolio.
And African gold $360 million backed IPO, which was the largest backed IPO. Our team has completed to date.
First quarter results related to Atms or at the market issuances nearly doubled resulting in another all time high for this business investing in our prior record in Q4 of last year.
Notable ATM projects for the quarter include a M C N novavax.
Turning to our wealth management group during the quarter B Riley wealth management continued its steady growth as we welcomed our new colleagues from nationals.
Our legacy firms fee based advisory assets have grown significantly over the past 18 months as our target efforts to attract high quality advisers with more reoccurring revenue streams has come to fruition.
The coming months, we expect to continue to focus on the integration of our respective B Riley in national wealth management groups.
And our B Riley Advisory services business, our consulting division saw a high volume of new bankruptcy restructuring forensic litigation cases during the first quarter.
In January we added new compliance risk and resilience practice.
The group specializes in helping clients strategically prepare for and response from cyber risks public health risks and operational risks. This highly experienced and talented team has already contributed on a topline basis, helping us achieve another record for consulting revenue during the month of March.
What is particularly noteworthy as this new service can potentially be used by any of the thousands of companies with which we interact.
Despite a soft lending market, our appraisal division steadily performed during the quarter, while continuing to serve as a strong source for business referrals across our platform.
Turning to liquidation retailers have found temporary relief as companies hold out to assess performance post pandemic. Despite this b Riley retail solutions completed several small store closing projects during the quarter, including stock on field.
The balance of our engagements with returning clients. These client relationships helped drive our results for the quarter in lieu of major retail bankruptcies, which have historically lifted our retail liquidation results.
Similar to retail liquidation or real estate disposition practice experienced some softness in the quarter and spud on this we completed a number of projects that started late last year, including Rubios coastal grill in shape fitness and JC Penney.
The commercial real estate sector has come into focus as an area of opportunity for several of our restructuring related businesses to collaborate including banking and consulting.
In addition, we are exploring ways to put capital to work through acquisitions of distressed real estate.
Finally, our principal investment companies and our brand portfolio continues to provide cash flow for our platform.
Magicjack and United online continue to steadily outperform our own estimates and we're working to obtain the necessary regulatory approval to complete the majority of investment in window, which would be a material addition to our principal investment platform.
But at the same time, we are seeking additional businesses to complement our current portfolio and are continuing to assist our other minority investment companies with acquisitions.
In addition to the normal course of our business, we have undertaken efforts to continue to elevate our brand while educating the market on our platform and affiliated B Riley businesses.
Efforts began in earnest with the rebrand of our acquired legacy from late last year.
Our brand is a diversified leading financial services company is resonating thanks to the superior work of our teams and our sales force.
We are seeing much more connectivity and touch points across all of our businesses, which has enhanced the value we deliver to our clients with a strong brand and a world class team. We continue to be as excited today as we were when we started the business 24 years ago.
As always we will keep our focus there's always more to be done. However, our foundation is strong and we believe we are exceptionally well positioned to continue to deliver it in the years ahead.
With that we'll open the line for questions and then turn the call back over to Brian for closing remarks.
Thank you.
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Our first question comes from Wes Cummins of Q seven two capital. Please go ahead.
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Oh, okay well.
Thank you everyone and again I started to say at the end of the previous taxed. It's it's just amazing what this team has accomplished since March last year on when I say this team all the people at the firm that sometimes don't get the recognition that they deserve and spend hours, you know above and beyond having.
Taking care of this transition as we dealt with the pandemic and we're so thankful for that thankful for all our shareholders and the confidence they've given us and appreciate.
The opportunity to talk about it once a quarter so with that we will look forward to talking next quarter. Thank you.
Yeah.
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Thank you before we conclude today's call I will provide b Riley financial Safe Harbor statement, which includes important cautions regarding forward looking statements made during this call.
Statements made during this call about B Riley financial's future expectations plans and prospects and any other statements regarding matters that are not historical facts may constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Investors should be aware that any forward looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here. Today. These risk factors include the unpredictable and ongoing impact of the COVID-19 pandemic as well as other risk factors are explained in detail in the company's filings.
With the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward looking statements and the risks and uncertainties of such statements. All forward looking statements are made as of today and except as required by law. The company undertakes no obligation to publicly update or revise any forward looking statements.
Whether because of new information future events or otherwise. Thank you for joining us today for B Riley Financial's first quarter 2021 earnings Conference call you may now disconnect.
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