Q1 2024 B. Riley Financial Inc Earnings Call
For the first quarter of 2024, which can be found on its investor relations website at IR Dot B Riley Finn Dot com.
Speaker Change: Today's call includes prepared remarks from the company followed by a question and answer session joined.
Speaker Change: Joining us today from B, Riley or Brian Reilly, Chairman co founder and co CEO, Tom Kelleher co founder and co CEO and Philip <unk> CFO and COO.
Speaker Change: After management's remarks, we will open the line for questions. Please note that all participants will be on a listen only mode until the Q&A portion of the call.
Speaker Change: As a reminder, this call is being recorded and audio replay will be available on the company's Investor Relations Web site later today.
Today's call will also include non-GAAP measures. The reconciliation for these as well as an explanation for the use of these metrics and a definition of these terms as available in the earnings press release and financial supplement both of which are available on the company's Investor Relations website and before we conclude today's call I will provide the nest.
Speaker Change: <unk> cautions regarding forward looking statements now I will turn the call over to Mr. Brian Reilly Mr. Riley. Please proceed.
Speaker Change: Thank you for joining our call. This afternoon before we get into these results for the quarter I want to thank our employees investors and partners for your continued patience throughout what has been a highly unusual period for our firm.
Speaker Change: Against that backdrop I'd like to start by putting our operating performance for the quarter and the perspective, and then providing some context on our investments we had a solid quarter from an operating perspective.
Speaker Change: We generated $66 million of operating adjusted EBITDA compared to $88 million in the same period last year.
Speaker Change: Our advisory services business had a record Q1 brs saw increased fee income year over year. Despite a decrease in overall capital markets segment revenues and wealth management operating margins have continued to improve at the same time, we monetize investments consistent with our business model and uses capital to both repay outstanding.
Speaker Change: While investing in attractive new opportunities such as noggin.
Speaker Change: For context, our first quarter results reflected $59 million of investment related losses, which are primarily unrealized in addition to incremental cost into the late filing of our 10-K internal review and subsequent independent investigation undertaken by our Board's Audit Committee, which we're happy to have behind us.
Speaker Change: <unk> contract last year, our first quarter results benefited from approximately $23 million of investment related gains and an increase in interest income from a pool of port.
Speaker Change: Performing consumer receivables that we acquired from Babcock in the prior year, which has generated returns north of 20%.
Speaker Change: That portfolio is maturing as reflected in the year over year change in our net.
Total loans receivables balance.
Speaker Change: On a more normalized basis and excluding the incremental costs in our non cash gains and losses operating income was flat at approximately 33 million when compared to the same period last year.
Speaker Change: From a revenue perspective.
Speaker Change: Excuse me from a revenue perspective, the increase in fee income in our capital markets segment was offset by lower interest income in line with the reduction of consumer receivables and our overall overall loan portfolio from the same period in 2023.
Speaker Change: As I mentioned advisory services had a record first quarter. This was both in terms of revenue and operating income. This is a business that was generating approximately $76 million in revenue a little over three years ago and is now generating revenues an annual rate of over $100 million.
Unrealized in addition to incremental costs due to the late filing of our 10-K internal review and subsequent independent investigation undertaken by our Board's Audit Committee, which we're happy to have behind us.
Speaker Change: Operating margins in our wealth management business have continued to improve over the last two years and will target is continuing to work through the macro headwind headwinds that impacted the global PC market. We believe the business is well positioned for when this market normalizes.
Speaker Change: And contract last year, our first quarter results benefited from approximately $23 million of investment related gains and an increase in interest income from a pool of port.
Speaker Change: Performing consumer receivables that we acquired from Babcock in the prior year, which has generated returns north of 20%.
Speaker Change: I appreciate some of this call me some on this call may be new onto our story, it's important for investors to understand that we have a long history of making investments and acquisitions and we utilize the services and expertise of our platform to not only maximize the potential value of our investments, but also to manage any potential downside. This is core to our business.
Speaker Change: That portfolio is maturing as reflected in the year over year change in our net.
Speaker Change: Total loans receivables balance.
Speaker Change: On a more normalized basis and excluding the incremental costs in our non cash gains and losses operating income was flat at approximately $33 million when compared to the same period last year.
Speaker Change: What we do.
Speaker Change: Our portfolio is going to fluctuate and marks from quarter to quarter due to the nature of our investments we acknowledged the volatility this creates on our periodic results. However, it is important to view our investments over a longer time horizon.
Speaker Change: From a revenue perspective.
Speaker Change: Excuse me from a revenue perspective, the increase in fee income in our capital markets segment was offset by lower interest income in line with the reduction of consumer receivables and our overall overall loan portfolio from the same period in 2023.
Speaker Change: As I mentioned net loss for the quarter included an investment loss of $59 million, which was driven by changes in fair market valuations for our investments, including freedom DCM, which consists of the underlying business of FRG and also investment in GW.
Speaker Change: As I mentioned advisory services had a record first quarter. This was both in terms of revenue and operating income. This is a business that was generating approximately $76 million in revenue a little over three years ago and is now generating revenues an annual rate of over $100 million.
Speaker Change: As we discussed on our last call since the closing of Frg's take private in August of last year FRG management has executed two transactions that are in line with our stated an investment thesis does.
Speaker Change: Operating margins in our wealth management business have continued to improve over the last two years and more targets is continuing to work through the macro headwind headwinds that impacted the global PC market. We believe the business is well positioned for when this market normalizes.
Speaker Change: Those two transactions or the cell backup furniture in December 'twenty, Duane and silver learning in February 20th, Florida, which sold for a higher multiple than what FRG management expected and that was originally underwritten for this business.
Speaker Change: The adjustment in the fair market value for freedom reflected the overall softness in the consumer market during the first quarter.
Speaker Change: I appreciate some of this call me some on this call may be new onto our story it is.
Speaker Change: And for our investors to understand that we have a long history of making investments and acquisitions and we utilize the services and expertise of our platform to not only maximize the potential value of our investments, but also to manage any potential downside. This is core to our business of what we do.
Speaker Change: Despite the change we remain confident in the operators and the management team of each of these businesses and their ability to execute on strategy.
Speaker Change: For those familiar with B Riley you know, we often describe our music.
Speaker Change: Collection of operating businesses on the one hand, and our investment book and the other what perhaps is less appreciated is the challenges that the uniqueness of our firm present from an evaluation perspective for investors and looking at our P&L and balance sheet relative to the inherent value we've created with our wholly owned subsidiaries in the businesses we have.
Speaker Change: Our portfolio is going to fluctuate and marks from quarter to quarter due to the nature of our investments.
Speaker Change: Knowledge the volatility this creates on our periodic results. However, it is important to view our investments over a longer time horizon.
Speaker Change: As I mentioned net loss for the quarter included an investment loss of $59 million, which was driven by changes in fair market valuations for our investments.
Speaker Change: No.
Speaker Change: For perspective over the last year, we've taken a noncash impairment charges related to Targus, which has underperformed since we've purchased and a half ago.
Speaker Change: Including Freedom Bcm, which consists of the underlying business of FRG and also an investment in GW.
Speaker Change: On the other hand, our great American businesses, which consist of appraisal and asset disposition are on our books for approximately $35 million and our glass Ratner advisory business, which we acquired in 2019 and has approximately $35 million invested including tuck ins <unk>.
Speaker Change: As we discussed on our last call since the closing of Frg's take private in August of last year FRG management has executed two transactions that are in line with our stated investment thesis those two transactions or the sale of backup furniture in December 'twenty, Duane and silver learning in February 24, which sold for a higher multiple than what.
Speaker Change: Combined in 2022 and to generate approximately $52 million of operating income, which includes roughly $1 million of income from our real estate advisory.
Speaker Change: <unk> management expected and that was originally underwritten for this business.
Speaker Change: This $52 million as represented in our auction and liquidation and financial segment income.
Speaker Change: The adjustment in the fair market value for freedom reflected the overall softness in the consumer market during the first quarter. Despite.
Speaker Change: Taken together, our core offerings and a core operations continue to generate strong free cash flow and combined with the actions. We are undertaking we expect to exit 2024 with ample liquidity to aggressively capitalize on the opportunities ahead of us.
Speaker Change: Despite the change we remain confident in the operators and the management team of each of these businesses and then the ability to execute on strategy.
Speaker Change: For those familiar with B Riley you know, we often describe our firm is a collection of operating businesses on the one hand, and our investment book and the other.
Speaker Change: We remain focused on running our business in the best interest of our stakeholders by addressing the needs of our clients partners and employees.
Speaker Change: What perhaps is less appreciated is the challenges that the uniqueness of our firm present from an evaluation perspective for investors and looking at our P&L and balance sheet relative to the inherent value. We've created with our wholly owned subsidiaries in the businesses we have built.
Speaker Change: The market opportunity in the small and mid cap space remains as attractive as ever and we believe <unk> is uniquely positioned to meet the needs of companies in this space.
Speaker Change: To that end, we're pleased to deliver our investors a dividend <unk> 50 per share related to our operating performance for the first quarter.
Speaker Change: For perspective over the last year, we've taken a noncash impairment charges related to targets, which has underperformed since we've purchased and a half ago on.
Speaker Change: Were thankful to our many supporters for the outreach and continued confidence in B Riley.
Phil: With that I will turn the call over to Phil <unk>, our CFO and COO to discuss key metrics for the quarter Phil.
Speaker Change: On the other hand, our great American businesses, which consist of appraisal and asset disposition are on our books for approximately $35 million and our glass Ratner advisory business, which we acquired in 2019 and has approximately $35 million invested including tuck ins <unk>.
Phil: Thanks, Brian.
Phil: For the first quarter ended March 31, 2024, we reported total revenues of $343 million and net loss attributable to common shareholders of $51 million.
Speaker Change: Combined in 2022 way to generate approximately $52 million of operating income, which includes the roughly million dollars of income from our real estate advisory.
Phil <unk>: Driven by approximately $59 million of investment related losses, and incremental expenses related to the filing of our 10-K and the internal review and subsequent independent investigation undertaken by our audit Committee.
Speaker Change: This $52 million as represented in our auction and liquidation and financial segment income.
Phil <unk>: As Brian noted investment gains and losses have and will continue to create volatility in our periodic earnings.
Speaker Change: Taken together, our core operating rate core operations continue to generate strong free cash flow and combined with the actions. We are taking we expect to exit 2024 with ample liquidity to aggressively capitalize on the opportunities ahead of us.
Phil <unk>: For this reason, we generally discuss our performance in the context of our operating revenues and operating adjusted EBITDA, which are considered non-GAAP financial measures.
Speaker Change: We remain focused on running our business in the best interest of our stakeholders by addressing the needs of our clients partners and employees.
Phil <unk>: Excluding investment gains and losses operating revenues were $379 million for the first quarter of 2024 compared to $389 million in the prior year quarter.
Speaker Change: The market opportunity to small and mid cap space remains as attractive as ever and we believe <unk> is uniquely positioned to meet the needs of companies in this space.
Phil <unk>: Revenues from services and fees increased 9% to $257 million in the first quarter up from $236 million in the same prior year period.
Speaker Change: To that and we are pleased to deliver our investors a dividend <unk> 50 per share related to our operating performance for the first quarter.
Speaker Change: Interest income from loans and securities lending was $60 million for the first quarter of 2024 compared to $77 million in the prior year quarter.
Were thankful to our many supporters for the outreach and continued confidence in B Riley.
Speaker Change: That I will turn the call over to Phil <unk>, our CFO and COO to discuss key metrics for the quarter fell.
Speaker Change: This decrease was driven primarily by the reduction of our loans receivable at fair value balance from 772 million as of March 31, 2000, $23 million to $452 million as of March 31 2024.
Phil: Thanks, Brian.
Phil: For the first quarter ended March 31, 2024, we reported total revenues of $343 million and net loss attributable to common shareholders of $51 million driven.
Speaker Change: And as Brian noted, we generated operating adjusted EBITDA of $66 million in the first quarter of 2024, which compared to $88 million in the first quarter of 2023.
Driven by approximately $59 million of investment related losses, and incremental expenses related to the filing of our 10-K and the internal review and subsequent independent investigation undertaken by our audit Committee.
Speaker Change: Turning to highlights from our balance sheet.
Speaker Change: As of March 31, we had $191 million in unrestricted cash and cash equivalents.
As Brian noted investment gains and losses have and will continue to create volatility in our periodic earnings.
Speaker Change: $943 million in net securities and other investments owned.
Phil: For this reason, we generally discuss our performance in the context of our operating revenues and operating adjusted EBITDA, which are considered non-GAAP financial measures.
Speaker Change: And $452 million in loans receivable at fair value.
Speaker Change: At quarter end, we had total cash and investments balance of approximately $1 6 billion, which includes approximately $21 million of other investments reported in our prepaid and other assets.
Excluding investment gains and losses operating revenues were $379 million for the first quarter of 2024 compared to $389 million in the prior year quarter.
Speaker Change: Total debt as of March 31 was approximately $2 2 billion.
Phil: Revenues from services and fees increased 9% to $257 million in the first quarter up from $236 million in the same prior year period.
Speaker Change: And total debt net of cash and investments was approximately 581 million at quarter end.
Speaker Change: During the quarter, we redeemed approximately $115 million of our Riley Oh senior notes on February 29, 2024.
Phil: Interest income from loans and securities lending was $60 million for the first quarter of 2024 compared to $77 million in the prior year quarter.
Speaker Change: And earlier this month, we announced the remaining $25 million of our senior notes will be redeemed on May 31.
Phil: This decrease was driven primarily by the reduction of our loans receivable at fair value balance from $772 million as of March 31, 2000, $23 million to $452 million as of March 31 2024.
Speaker Change: 2024.
Speaker Change: Finally, as Brian noted, we have declared a dividend of <unk> 50 per common share.
Speaker Change: Our quarterly dividend will be paid on or about June 11th to common shareholders of record as of May 27.
Phil: And as Brian noted, we generated operating adjusted EBITDA of $66 million in the first quarter of 2024, which compared to $88 million in the first quarter of 2023.
That completes my summary, I will now turn the call over to Tom to discuss our business segments Tom.
Tom Kelleher: Thanks, Phil.
Phil: Turning to highlights from our balance sheet.
Tom Kelleher: Brian previously mentioned, while there was a decrease in overall capital market segment revenue due to unrealized investment losses B Riley securities benefited from the steady deal, making environment and generated more in fee income this quarter compared to the same period last year.
Phil: As of March 31, we had $191 million in unrestricted cash and cash equivalents.
$943 million in net securities and other investments owned.
Phil: And $452 million in loans receivable at fair value.
Vrs: Vrs generated over $100 million in operating revenues and over $18 million of operating EBITDA during the quarter.
Phil: At quarter end, we had total cash and investments balance of approximately $1 6 billion, which includes approximately $21 million of other investments reported in our prepaid and other assets.
Speaker Change: In wealth management, we are beginning to see consistent normalized production as a result of our strategic realignment of this business. Following our 2021 purchase of National Holdings.
Phil: Total debt as of March 31 was approximately $2 2 billion.
Phil: And total debt net of cash and investments was approximately 581 million at quarter end.
Revenues increased to $52 million in the first quarter of 2024, surpassing prior revenues on both a year over year and sequential basis wealth.
Phil: During the quarter, we redeemed approximately $115 million of our Riley senior notes on February 2009 2024.
Speaker Change: Wealth management brokerage revenues advisory revenues and syndicate revenues all showed improvement from the fourth quarter of 2023.
Phil: And earlier this month, we announced the remaining $25 million of our Riley of senior notes will be redeemed on May 31.
Speaker Change: Operating income also benefited from higher seasonal tax revenues from our accounting and tax Prep Division.
Phil: 2024.
Brian: Finally, as Brian noted, we have declared a dividend of <unk> 50 per common share.
Speaker Change: Assets under management totaled $25 8 billion at March 31, 2024.
Brian: Our quarterly dividend will be paid on or about June 11th to common shareholders of record as of May 27.
Speaker Change: Auction and liquidation contributed revenues of $5 8 million and operating income of $2 million during the first quarter.
Tom: That completes my summary, I will now turn the call over to Tom to discuss our business segments Tom.
Speaker Change: Our team was engaged in several ongoing projects during the quarter, both domestic and international returning clients drove most of our revenue opportunities coupled with new business activity, which we expect to realize later this year.
Tom: Thanks, Phil.
Tom: Brian previously mentioned, while there was a decrease in overall capital market segment revenue due to unrealized investment losses B Riley securities benefited from the steady dealmaking environment and generated more in fee income this quarter compared to the same period last year.
Speaker Change: Our prospects in Europe continue to be steady with several opportunities in early stages.
Our financial consulting segment includes our legacy Great American appraisal group, our glass Ratner consulting division and our B Riley real estate brokerage division, which we established in 2020.
Tom: Brs generated over $100 million in operating revenues and over $18 million of operating EBITDA during the quarter.
Tom: In wealth management, we are beginning to see consistent normalized production as a result of our strategic realignment of this business. Following our 2021 purchase of National Holdings.
Speaker Change: Each of our appraisal and consulting divisions known as B Riley Advisory services experienced a record first quarter, which contributed to a 40% increase in segment revenues to $35 million and a 62% increase in segment operating income to $6 1 million compared to the same period last year.
Speaker Change: Revenues increased to $52 million in the first quarter of 2024, surpassing prior revenues on both a year over year and sequential basis.
Speaker Change: Wealth management brokerage revenues advisory revenues and syndicate revenues all showed improvement from the fourth quarter of 2023.
Speaker Change: Our acquisitions of Farber in Crawford when he our ski in 2023 also contributed to the increase in advisory bankruptcy and forensic litigation consulting assignments.
Speaker Change: Operating income also benefited from higher seasonal tax revenues more accounting and tax Prep division.
Speaker Change: In addition to the more robust demand for our legacy appraisal and consulting services during the quarter. We have continued to develop other lines of service, including our field exam group and.
Speaker Change: Assets under management totaled $25 8 billion at March 31, 2024.
Speaker Change: An expanded others like executive search.
Speaker Change: Auction and liquidation contributed revenues of $5 8 million and operating income of $2 million during the first quarter.
Speaker Change: Our portfolio of communications businesses has continued to contribute steady cash flow to our platform generating revenues of $82 million in operating income of $8 million during the quarter.
Speaker Change: Our team was engaged in several ongoing projects during the quarter, both domestic and international returning clients drove most of our revenue opportunities coupled with new business activity, which we expect to realize later this year.
Speaker Change: And in our consumer product segment, the continued softness in global PC and laptop sales resulted in a segment loss of $3 million during the quarter as Brian noted targets is continuing to work through some headwinds. However, we believe the business is well positioned to turn as the market for PC accessory sales recovers.
Speaker Change: Our prospects in Europe continued to be steady with several opportunities in early stages.
Speaker Change: Our financial consulting segment includes our legacy Great American appraisal group, our glass Ratner consulting division and our B Riley real estate brokerage division, which we established in 2020.
Speaker Change: Finally, our continued success is due in no small part to the dedication of our employees across B Riley and we could not be more grateful our world class team of professionals continues to demonstrate complete focus and commitment in serving our clients and customers.
Speaker Change: Each of our appraisal and consulting divisions known as B Riley Advisory services experienced a record first quarter, which contributed to a 40% increase in segment revenues to $35 million and a 62% increase in segment operating income to $6 1 million compared to the same period last year.
Speaker Change: With that we will now open the call up for questions before turning the call back to Brian for closing remarks.
Speaker Change: Thank you.
Speaker Change: Our acquisitions of farmer in Crawford <unk> in 2023 also contributed to the increase in advisory bankruptcy and forensic litigation consulting assignments.
Speaker Change: At this time, we will conduct a question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad to enter the queue.
For those that have joined US today via web. Please press the raised icon on the right side of your deal Hertz screen.
Speaker Change: In addition to the more robust demand for our legacy appraisal and consulting services during the quarter. We have continued to develop other lines of service, including our field exam group and.
Speaker Change: Once again that is star one on your telephone keypad attached to the Q or the raise Tampa icon on the right side of your deal Roadshow screen.
Speaker Change: An expanded others like executive search.
Speaker Change: Our portfolio of communications businesses is continuing to contribute steady cash flow to our platform generated revenues of $82 million in operating income of $8 million during the quarter.
Speaker Change: We'll pause here briefly you do a lot of questions to generate.
Speaker Change: Our first question comes from Sean.
Riley: Riley <unk>.
Riley: John Your line is now open.
Speaker Change: And in our consumer products segment, the continued softness in global PC and laptop sales resulted in a segment loss of $3 million during the quarter as Brian noted targets is continuing to work through some headwinds. However, we believe the business is well positioned to turn as the market for PC accessory sales recovers.
Speaker Change: Hey, guys I'm actually from Charlestown capital.
B Riley: B Riley.
Speaker Change: Hi, how are you doing thanks for taking my question, but.
Speaker Change: First question here is on the consumer products.
Speaker Change: In your release, you said you had 56 million.
Speaker Change: Finally, our continued success is due in no small part to the dedication of our employees across B Riley and we could not be more grateful our world class team of professionals continues to demonstrate complete focus and commitment in serving our clients and customers.
The revenue for goods sold and there's about $52 million.
Speaker Change: Consumer products revenue.
Speaker Change: What accounts for that Delta.
Speaker Change: Where would that show up.
Speaker Change: With that we will now open the call up for questions before turning the call back to Brian for closing remarks.
John: Hey, John felt you're talking about a $4 million Delta.
John: Yeah.
Speaker Change: I'm imagining that some something from retail but.
Speaker Change: Thank you.
Speaker Change: At this time, we will conduct the question and answer session. If you would.
Speaker Change: I'm not sure Phil do you know the Delta.
Speaker Change: Like to ask a question. Please press star one on your telephone keypad to enter the queue.
Speaker Change: No. We're gonna have to get back to you I mean, we've got a mixture of different things.
Speaker Change: For those that have joined US today via web. Please press the raise hand icon on the right side of your dual retro screen.
Speaker Change: Do do retail liquidation of some of the retail sales gets mixed in there.
Speaker Change: Okay, I figured with some liquidation just.
Speaker Change: Once again that is star one on your telephone keypad to enter the queue for the raise tab icon on the right side of your deal Roadshows Greg.
Speaker Change: Just wanted to confirm that.
Speaker Change: And then on communication how.
Speaker Change: How should we think about that margin.
Speaker Change: We will pause briefly to a lot of questions to generate.
Speaker Change: It looks like the incremental margin came down.
Speaker Change: Donald.
Speaker Change: <unk>.
Speaker Change:
Speaker Change: Our first question comes from Sean <unk> of B Riley John Your line is now open.
Donald: How do we think about that how much of that is fixed.
Speaker Change: Expense versus variable.
Sean: Hey, guys I'm actually here from Charles land capital not not B Riley.
Speaker Change: Well I think that the that.
Speaker Change: That group until you can touch upon the margins a little bit more but that group. There's three assets that have performed amazingly well so I.
Speaker Change: How are you doing thanks for taking my question, but so.
Speaker Change: So first question here is on the consumer products.
Speaker Change: I think you know and we've talked a lot about.
Speaker Change: Online and returns we've gotten on that $45 million craftsmen.
Speaker Change: In your release, you said you had 56 million.
Speaker Change: Hmm.
Speaker Change: Revenue from goods sold and there is about $52 million in consumer products revenue was.
Speaker Change: Magicjack has been an unbelievable Marconi has been our best investment. So yes, there are two lingo and bullseye have been a little bit tougher and I think are causing you know have contracted margins a bit we think we have a solve that and it in itself.
Speaker Change: What accounts for that Delta and where would that show up.
Speaker Change: Hey, John felt when you're talking about a $4 million Delta.
Yeah.
Speaker Change: I'm imagining that as some something from retail but.
Speaker Change: It's evolving selling a piece of that business now for a big number, but a business that causes us some margin contraction.
Speaker Change: I'm not sure Phil do you know the Delta.
Speaker Change: But its mostly from that side of the business.
Speaker Change: Bill anything you want to add though.
Speaker Change: No we're going to have to get back to you I mean, we've got a mixture of different things in there when we do do retail liquidation of some of the retail sales gets mixed in there.
Speaker Change: No I think I think you captured it.
Speaker Change: Okay and then.
Speaker Change: Okay I figured.
Just a couple more from me.
Speaker Change: There was some degradation I just.
Speaker Change: So on the dividend.
Speaker Change: Just wanted to confirm that.
Speaker Change: Savings growing from one to one.
And then on communication how.
Speaker Change: $1 50, so about $30 million a year.
Speaker Change: How should we think about that margin.
Ken: It looks like the incremental margin Ken.
Speaker Change: Got to be funneled towards deleveraging or how.
Donald: Donald touch.
Speaker Change: How should we be thinking about the capital being allocated.
Donald: How do we think about that how much of that is fixed expense versus variable.
Speaker Change: Look I think.
Speaker Change: You know we're cognizant that.
Speaker Change: Well look I think that the that group until you can touch upon the margins a little bit more but that group. There's three assets that have performed amazingly well so.
Speaker Change: Anything we do any stock we sell any asset we sell we are giving away our cap table trades.
Speaker Change: You know and we've talked a lot about United online and returns we've gotten on that $45 million investment and.
Speaker Change: Selling you frame.
Speaker Change: Incremental higher price, whether you know the yield to maturity is 20, according to or whatever and so.
Speaker Change: Our Magicjack has been an unbelievable investment and Mark Tony has been our best investment and so the other two lingo in bullseye have been a little bit tougher and I think are causing you know have contracted margins a bit we think we have a solve their annette and it's.
Speaker Change: I think we have to take that into account.
Speaker Change:
Speaker Change: We are we've made some big investments in the last year and as those.
Speaker Change: Return walk about or thinking about that differently, obviously, we've talked about.
Process that we are considering with with <unk>.
Speaker Change: It's evolving selling a piece of that business not for a big number, but a business that causes us some margin contraction.
Speaker Change: You know based on any sort of comp you would see a fair amount of incremental capital. There. So we think we'll have a lot of options.
Speaker Change: But its mostly from that side of the business.
Bill: Bill anything you want to add though.
Speaker Change #100: But we want to make sure that our dividend is covered by our operating EBITDA.
No I think you've captured it.
Bill: Okay and then.
And our free cash flow and then incrementally we do think there's an opportunity.
Speaker Change: Just a couple more from me.
Speaker Change: On the dividend.
Speaker Change #101: One of the things that we can.
Speaker Change: Savings growing from one to $1 50, it's about $30 million a year should.
Speaker Change #101: Think about GAAP a lot of it a lot I mean, one of the things Thats interesting.
Speaker Change: Should we expect that to be funneled towards deleveraging or.
Speaker Change #102: And our difficult is that we did.
Speaker Change: How should we think about that.
Speaker Change #102: As you know a lot of bonds that are at a rate that I think.
Speaker Change: Capital being allocated.
Speaker Change: Look I think.
Speaker Change #103: You're probably in a similar situation has to pay double in terms of interest rates and so theres a lot of there's a lot of embedded value. There is obviously a discount just because of the noise around us, which we will also try and take advantage up there's a lot of embedded value in those in those bonds for us to take advantage of.
Speaker Change: We're cognizant that.
Speaker Change: Anything we do any stock we sell any asset we sell we are given where our cap table trades.
Speaker Change: We're selling a frame and incremental higher price, whether you know the yield on maturities 'twenty, according to or whatever and so.
Speaker Change #103: All of those things.
Speaker Change #103: Okay.
Speaker Change #103: Yes.
Speaker Change: I think we have to take that into account.
Speaker Change #104: And then.
Speaker Change #105: Just two more for me on.
Speaker Change: You know we are.
Speaker Change #106: Capital markets.
Speaker Change: We've made some big investments in the last year and as those.
Speaker Change #106: Any any color there on kind of how Q1.
Speaker Change: Return, we'll think about thinking about that differently, obviously, we've talked about for <unk>.
Speaker Change #106:
Speaker Change #107: And how Q2 is beginning to shape up and any commentary on focal point would be Oh, yeah, well, we had our first win our biggest fan and focal point.
Speaker Change: <unk> that we are considering with with Ta, which.
You know based on any sort of comp you would see a fair amount of incremental capital. There. So we think we'll have a lot of options.
Speaker Change #108: Since we acquired them and I think there are definitely picking up.
Speaker Change #109: The M&A market still been pretty slow.
Speaker Change: But we want to make sure that our dividend is covered by our operating EBITDA.
Speaker Change #110: I would say that capital the capital markets were relatively small in Q1.
Speaker Change: And our free cash flow and then incrementally we do think there's an opportunity.
Speaker Change #111: Started off slow in Q2, but picked up meaningfully in the last you know just as is.
One of the things that we can.
Speaker Change: Think about GAAP a lot of it a lot I mean, one of the things Thats interesting.
Speaker Change #112: As the Russell.
Speaker Change #112: As picked up so even the last couple of weeks are.
Speaker Change: And why were difficult is that we did.
Speaker Change #113: Fully more.
Speaker Change #113: Active than than the previous month.
Speaker Change: Sure a lot of bonds at a rate that I think.
Speaker Change #114: I think that quite frankly, when we did not have our K out.
Speaker Change: You're probably in a similar situation has to pay double in terms of interest rates and so theres a lot of there's a lot of embedded value that there is obviously a discount just because of the noise around us, which we will also try and take advantage of but there's a lot of embedded value in those in those bonds for us to take advantage of so we won't get it all.
Speaker Change #115: We lost a little bit of market share and I think that is turning I think that from my perspective, our clients and investors recognize that we were in a unique situation and we've been around for 27 years and I think they appreciate that I think that that's going to swing is my opinion I'm excited about our conference I'm excited about.
Speaker Change: All of those things.
Speaker Change: Mhm.
Speaker Change #115: Telling our story during that timeframe.
Speaker Change: Yes that makes sense.
Speaker Change: Just two more for me.
Speaker Change #116: Youre going to start to see.
Speaker Change: On.
Some real momentum in the cat market side, and that's a big part of our overall strategy. We think that you know what.
Speaker Change: Capital markets.
Speaker Change: Any any color there on kind of how Q1.
Speaker Change #117: Next three to four years theres going to be amazing opportunities, there will really well position for that so we're excited about about that business in that market for the most part has been closed.
Speaker Change:
Speaker Change: And how Q2 is beginning to shape up and any any commentary on focal point would be helpful. Yes, So well we had our first with our biggest fan and focal point.
Speaker Change #117: Slow for three years, so you know.
Speaker Change #118: If we can start to see a little bit better environment, whether it's from companies are growing or whether it's companies left.
Speaker Change: Since we acquired them and I think there are definitely picking up.
Speaker Change: The M&A market is still going pretty slow.
Speaker Change #119: You'll reevaluate their debt or whatever we think we're positioned really well there. So I'm excited about the next as this year goes on and the momentum we're going to see in capital markets.
Speaker Change: I would say that capital the capital markets were relatively slow in Q1.
Speaker Change: Started off slow in Q2, but it picked up meaningfully in the last.
Speaker Change #119: Great.
Speaker Change #120: Last one actually that's a good segue to <unk> 7 million.
Speaker Change: Yes.
Speaker Change: As the Russell has picked up so even in the last couple of weeks are meaningfully more.
Speaker Change #121: Like extraordinary expenses from the.
Speaker Change #121: Internal.
Speaker Change: Active than the previous month.
Speaker Change #122: Investigation any any.
Also think that quite frankly, when we did not have our K out we lost a little bit of market share and I think that is turning I think that from my perspective, our clients and investors recognize that we were in a unique situation and we've been around for 27 years and I think they appreciate that I think that.
Speaker Change #123: Any more expenses that you foresee bleeding over into Q2 and then.
Speaker Change #124: How should we think about expenses related to.
Speaker Change #125: Your conference coming up.
Speaker Change #125: Yeah.
Phil <unk>: So Phil.
Speaker Change #126: So you can say.
Speaker Change #127: I think the leakage is not going to be huge but until you can talk about that I would say the conference.
Speaker Change: That's going to swing is my opinion I'm excited about our conference I'm excited about telling our story during that conference and I think youre going to start to see.
Phil <unk>: The conference since the first year, we started we wanted I think efficiently and we.
Speaker Change: Some real momentum in the cat market side, and that's a big part of our overall strategy. We think that you know in the.
Phil <unk>: We have a lot of sponsors and you know we try to make sure that we're physically responsible around that so I would not.
Speaker Change: The next three to four years theres going to be amazing opportunities, there will really well position for that so we're excited about about that business in that market for the most part has been closed are very slow for three years or so.
Speaker Change #128: It's not a big number relative to the.
Speaker Change #128: The incremental costs that we had to bear for.
Speaker Change #128: And just getting the audit through but Phil.
Speaker Change #128: Looking at the second quarter.
Speaker Change: If we can start to see a little bit better environment, whether it's.
Speaker Change #128: Yeah.
Joanne: Yes, I think I'll, let joanne.
Speaker Change #130: Theres, probably some spillover obviously from Q.
Speaker Change: Some companies are growing or whether it's companies left.
Speaker Change: We'll reevaluate their debt or whatever we think we're positioned really well there. So I'm excited about the next as this year goes on the momentum we're going to see in capital markets.
Speaker Change #130: <unk>.
Speaker Change #130: The <unk> and.
Speaker Change #130: <unk>.
April: April so theres going to be a little bit of spillover.
Speaker Change #132: I can't imagine it would be anything.
Speaker Change #133: Like we said in Q1.
Speaker Change: Great and my last one actually I think that's a good segue to <unk> 7 million kind.
Speaker Change #134: Got it okay, well, thank you guys and congrats.
Speaker Change: Kind of like extraordinary expenses from the.
Speaker Change #135: Alright, thank you.
Speaker Change: The internal.
Speaker Change: Investigation any any.
Speaker Change #135: Our next question comes from Paul Cheng.
Speaker Change: Any more expenses that you foresee bleeding over into Q2 and then.
Paul Cheng: Associates Paul Your line is now open.
Paul Cheng: Hi, good afternoon.
Speaker Change: How should we think about expenses related to.
Speaker Change #137: Thanks for the question Paul.
Speaker Change: Your conference coming up.
Speaker Change #137: Okay.
Speaker Change #138: Can you.
Speaker Change: Okay.
Speaker Change #138: Thank you.
Phil: So Phil you can say.
Speaker Change #139: Any more color you can provide on the great American transaction.
Phil: I think the leakage is not going to be huge but you can talk about that I would say the conference I've been running the conference since the first year. We started we run it I think efficiently and we.
Speaker Change #139:
Speaker Change #140: Timeline, there as well as other non core divestiture opportunities.
Speaker Change #141: So I guess, what I would say is.
Phil: We have a lot of sponsors and we try to make sure that we're physically responsible around that so I would not it's not a big number relative to the.
Speaker Change #142: You know that we are in the middle of it.
Speaker Change #142: Bobby.
Speaker Change #143: The amount of interest that we got.
Bobby: And you know, we'll make a determination.
Phil: The incremental costs that we had to bear for.
Speaker Change #145: I think it's an amazing asset I think it's an asset that somebody if they use as a platform. We can do a lot of the things we did.
Phil: And just getting the audit through but Phil.
Phil: Looking at our second quarter.
Speaker Change #146: Whether it's buying brands through auctions or whether it's Sars or building a direct lending business off of it and it's a great team.
Phil: Yes.
Phil: Theres, probably some spillover obviously from Q.
Phil: We released it.
Phil: The K in mid late April so there is going to be a little bit of spillover, but I can't imagine that would be anything.
Speaker Change #146: So I'm really excited about.
Speaker Change #146:
Speaker Change #147: I don't want to sell it at.
Speaker Change #148: But you know for the opportunities, we see are potentially selling it I should say.
Phil: Like we had in Q1.
Speaker Change: Got it okay, well, thank you guys and congrats.
Speaker Change #148: On the small cap side and kind of.
Speaker Change: Alright, thank you.
Speaker Change #148: Bread and butter of where we started.
Speaker Change #148: We think theres just going to be a great run and that's that's the view of our firm and they'll.
Speaker Change: Okay.
Speaker Change: Our next question comes from Paul <unk>.
Speaker Change #148: It will play itself out.
Speaker Change: <unk> Associates Paul Your line is now open.
We've talked a little bit about some of the other noncore assets like like brands, What's your bedroom amazing amazing investment for us and generate a lot of EBITDA.
Speaker Change: Good afternoon, and thanks for the question Paul.
Speaker Change: Okay.
Speaker Change: Can you.
Paul: <unk> any more color you can provide on the great American transaction.
Speaker Change #149: $550 million of dividend, that's not even EBITDA.
Paul:
Paul: Timeline, there as well as other non core divestiture opportunities.
Speaker Change #150: So is there an opportunity at some point in the next year.
Speaker Change #151: With that I am Super Super aware that there are opportunities for us.
Speaker Change: So I guess, what I would say is.
Speaker Change: You know that that it we are in the middle of it.
Speaker Change #151: Two.
Quite a lot of value.
Speaker Change: We've been happy with.
Speaker Change: Out of interest that we that we've gotten in and we'll make a determination.
Speaker Change #152: By buying our debt back at discounts so that does drive some of our thinking.
Speaker Change: I think it's an amazing asset I think it's an asset that somebody if they use our platform can do a lot of the things we did.
Speaker Change #152: But.
Speaker Change #153: But yes, I think you saw we had $190 million of cash we obviously sold some noncore assets during the quarter in last year and we continue.
Speaker Change: You know, whether it's buying brands through auctions or whether it's consignment are building a direct lending business off of it and it's a great team.
Speaker Change #154: To do that and we're also want to be for our deals that make sure that we're able to do.
Speaker Change: So I'm really excited about.
Speaker Change #155: Backstop deals are do overnights, and all that kind of stuff. So it's all balanced, but I would say.
Speaker Change:
Speaker Change: I don't want to sell it at.
Speaker Change: But for the opportunities, we see are potentially selling it I should say.
Speaker Change #156: You know the timing these things always seem to take longer than you expect to make a decision.
Speaker Change: On the small cap side and kind of the bread and butter of where we started we think theres just going to be a great run and that's that's the view of our firm and and all that.
But if I were if I were to handicap it.
Speaker Change #157: Somebody told me I said and in Q2, if I did I was a little optimistic I think it would be would be probably more in the.
Speaker Change: It will play itself out.
Speaker Change #158: Earlier side of Q3.
Speaker Change: We've talked a little bit about some of the other non core assets like like brands, which have been an amazing amazing investment for us and generate a lot of EBITDA.
Speaker Change #159: One a decision would be made.
Speaker Change #160: That people recognize what a unique asset it is because it's really unique.
Speaker Change #160: Yes, okay.
Speaker Change: 45, $50 million of dividend checks not even EBITDA.
Speaker Change #160: And then.
Speaker Change #161: Franchise group.
Speaker Change #162: A couple of news headlines you've commented on human performance, but very little detail out there.
Speaker Change: So is there an opportunity at some point in the next year or to think through that I am Super Super aware that there are opportunities for us.
Speaker Change #163: Any update you can give on the remaining operating segments.
Speaker Change #163: Yes, I would say that.
Speaker Change: To create.
Speaker Change: Create a lot of value by buying our debt back at discounts and so that does drive some of our thinking but.
Speaker Change #164: First of all I am obviously, there's this.
Speaker Change #165: This investment started off in a different manner than what we expected.
Speaker Change #165: I will say the management team there has done a great job.
Speaker Change: I think you saw we had $190 million of cash we obviously sold some noncore assets during the quarter in last year and we continue to.
Speaker Change #166: Taking the reins.
Speaker Change #167: Obviously, the transaction that we help facilitate I think.
Speaker Change: To do that and we're also want to be there for our deals that make sure that we're we're able to.
Speaker Change #168: It was a really good first step cell then was really important because the cash cost.
Speaker Change: Backstop deals are do overnights, and all that kind of stuff. So it's all balanced, but I would say.
Speaker Change #169: Really really extends their ability to get through what is the what is a.
Speaker Change: The timing these things always seem to take longer than you expect to make a decision.
Speaker Change #170: And a a rough consumer environment. So there's no change to the model and I think all the constituents appreciate that we.
Speaker Change: But if I were if I were to handicap that.
Speaker Change: Somebody told me I sat in in Q2, if I did I was a little optimistic I think it would be would be probably more on the earlier side of Q3.
Speaker Change #171: No you're spot on that same note.
Speaker Change #172: But the potential to do a securitization on pet supplies plus.
Speaker Change: One a decision would be made but I think that people recognize what a unique asset it is because it's really unique.
Speaker Change #173: That's an exciting market that I think could create a lot of liquidity and pay down.
Speaker Change: Yeah, Yeah, okay.
Speaker Change #174: We have other assets that we're working on so hard to get into too much specifics I would just say that.
Speaker Change: And then.
Speaker Change: Franchise group there were.
Speaker Change #175: I think the constituents wrong I think the management team is doing a great job. We're fortunate that we were able to.
Speaker Change: Couple of news headlines you've commented on human performance, but very little detail out there.
Speaker Change: Any update you can give on the remaining operating segments.
Speaker Change #176: Sell silvana and bring in a lot of cash so that we can invest in businesses like American freight, which are historically have been really good businesses that are down right now and I you know I.
Speaker Change: Yeah, I would say that.
First of all I am obviously.
Speaker Change: Investment started off in a different manner than what we expected.
Speaker Change #176: These cycles turn and as long as we can out last that would be really well positioned but for sure. We did not underwrite the consumer.
Speaker Change: I will say the management team there has done a great job.
Speaker Change:
Taking the reins on.
Speaker Change: Obviously, the <unk> transaction that we help facilitate I think is a.
Speaker Change #177: And American freight taking as long term.
Speaker Change #177: As it has but again fortunate that we have runway.
Speaker Change: It was a really good first step cell then was really important because the cash just.
Speaker Change #177: Okay. Okay.
Speaker Change #177: And Tom you had talked about targets being pointed to turn.
Really really extends their ability to get through what is the what is a.
Speaker Change #178: Just wanted to see if there is anymore.
Speaker Change: And a a rough consumer environment. So there's no change to the model and I think all the constituents appreciate that we.
Speaker Change #179: There you can provide kind of what youre seeing in terms of that industry and thoughts there.
Speaker Change #180: Online to normalization.
Speaker Change: You saw on that same note.
Tom Kelleher: Yes, I think thats one of those.
Speaker Change: The potential to do a securitization on pet supplies plus.
Tom Kelleher: Businesses.
Industries that is really tied to a larger macro which is.
Speaker Change: That's an exciting market that I think could create a lot of liquidity and debt paydown.
Tom Kelleher: Hardware.
Tom Kelleher: And.
Speaker Change #181: It's kind of.
Speaker Change #182: Clear that with Covid and the proliferation of people working from home.
Speaker Change: We have other assets that we're working on so hard to get into too much specifics I would just say that.
Speaker Change #183: And there was a lot of people who bought a lot of laptops.
Speaker Change: I think the constituents are aligned I think the management team is doing a great job. We're fortunate that we were able to.
Speaker Change #183: But.
Speaker Change #184: Overtime that cycle will Brian.
Speaker Change #185: And with that it will drive sales with targets so.
Sell silvana and bring in a lot of cash so that we can invest in businesses like American freight which are historically have been really good businesses that are down right now.
Speaker Change #185: Yes.
Speaker Change #186: With the consumer it's taken a little bit longer than we anticipated.
Speaker Change #186: But we see that happening eventually so.
Speaker Change #187: And while I think investment.
Speaker Change: I believe cycles turn.
Speaker Change #188: Sorry to say I think one of the things.
Speaker Change: And as long as we can out last that will be really well positioned but yeah. I mean for sure we did not underwrite the consumer.
Speaker Change #188: And it's an important part of what we do and.
Obviously with franchise group it turned a little bit but you know.
Speaker Change: And American freight taking as long term.
Speaker Change #188: Michael Williams to run that runs that business has been successful in two public companies in a private company.
Speaker Change: As it has but again fortunate that we have runway.
Michael Williams: You know approached us about buying that business because he wanted to buy that business and Michael is.
Speaker Change: Yes, okay.
And Tom you had talked about targets pinpointed to turn.
Michael Williams: And in my mind, one of the best Ceos out there.
Speaker Change: Just wanted to see if there's any more color you can provide on kind of what youre seeing in terms of that industry and thoughts there in terms of timeline to normalization.
Speaker Change #190: And we have the ability to invest in our business when others may not be able to we are seeing some of the some of our competitors not able to get.
Speaker Change #191: Get through and so as we come out of it and you've seen it I'm sure. Many of your investments. If you are able to come out of this whether it's investing in American freight when others are closing stores or whether it's.
Speaker Change: Yes.
Tom: Yes, I think thats one of those.
Businesses.
Tom: Industries, that's really tied to a larger macro which is.
Tom: Hardware.
And.
Tom: It's kind of.
Speaker Change #192: Investing in targets, that's what we're going to do because we feel like that.
Tom: Clear that with Covid and the proliferation of people working from home.
Speaker Change #193: The partnerships, we have with the management teams, we have a really really bad and that's we've seen this many times I mean, Paul if you remember wealth management for a long time that was a topic of discussion and I think you can see that.
Tom: And there was a lot of people who bought a lot of laptops.
Tom: But.
Tom: Over time that cycle will turn and with that it will drive sales with targets. So.
Speaker Change #194: Chuck and Mike really turned that business in partnership with us and investing in the wealth managers.
Tom: As in with the consumer it's taking a bit longer than we anticipated.
Tom: But we see that happening eventually so.
Speaker Change #195: And that group have been unbelievably supportive through all of that through all of the Crazy dynamics.
Tom: Okay.
Tom: Well I think the investment.
Speaker Change: Sorry to kind of I think one of the things.
Speaker Change #196: But with us they've been unbelievable supportive and I just think that this is business and sometimes you know you acquire something in it at reps then it goes goes right up like glass rack, which.
Speaker Change: And it's an important part of what we do.
Speaker Change: And you know obviously with franchise group it turned a little bit but.
Speaker Change: Michael Williams, who run that runs that business as it has been successful in two public companies in a private company in <unk>.
Speaker Change #199: You know, which was great and like the brand is dead and sometimes you've got to work and you've got to work through them like we did with select interior or like we did with core which was marked down 75% at one point in one of our assets. We just got to grind through them and work with management to turn them in that.
Approached us about buying that business because he wanted to buy that business and Michael is.
In my in my mind, one of the best Ceos out there and we have the ability to invest in our business when others may not be able to we are seeing some of the some of our competitors not able to.
That's what we've done in our whole career and I'm confident you'll see that happen again in those segments.
Speaker Change: Get through and so as we come out of it and you've seen it I'm sure. Many of your investments. If you are able to come out of this whether it's.
Speaker Change #197: Yes, no we get.
Speaker Change #197: Got it.
Speaker Change #197: And then Brian maybe just to wrap up here.
Speaker Change: Investing in American freight one others are closing stores or whether it's.
Brian Reilly: You're talking about Crazy dynamics and unusual last few months.
Speaker Change: Investing in Targus.
Brian Reilly: Any learnings or insights from the period that you think will impact.
That's what we're going to do because we feel like that the partnerships, we have and the management teams. We have a really really good and that's we've seen this many times I mean, Paul if you remember wealth management for a long time that was a topic of discussion and I think you can see that.
Brian Reilly: Operations or our capital allocation going forward.
Brian Reilly: Okay.
Brian Reilly: <unk>.
Brian Reilly: Yeah.
Speaker Change #200: Pretty self reflect the question for me and then as a firm I would say that.
Speaker Change: Chuck and Mike Vaughn, and really turned that business in partnership with us and investing in the wealth managers.
Speaker Change #201: Clearly we are a.
Speaker Change #202: Difficult public company, if you think about it there's an element of us is that as an operating private equity business and then there's an element of us.
Speaker Change: And that group have been unbelievably supportive through all of that through all of the crazy dynamics that have gone on with us.
Speaker Change #203: Pure investments.
Speaker Change #204: And you kind of combine those than you guys.
Speaker Change: Unbelievable supportive and I just think that this is business and sometimes you acquire something Tonight at reps then it goes.
If you make it operate in that kind of thing.
Speaker Change #204: But if you make an operating business that.
Speaker Change: It goes right up like glass Ratner did which you know which was great and like the brands that and sometimes you got to work and you've got to work through them like we did with select interior or like we did with core which was marked down 75% on one point and one of our assets. We just got to grind through them and work with management to turn them in that.
Speaker Change #204: Declines you Mark that down if you buy operating businesses that goes up you don't market.
Speaker Change #205: And so we're kind of a weird spot around.
Speaker Change #207: That dynamic I think that as we this is not something that is a reaction to anything its where we see the opportunity. We think that we are going to go on a really good.
Speaker Change: That's that's what we've done our whole career and I'm confident you'll see that happen again in those segments.
Speaker Change #206: One in <unk>.
Speaker Change: Yes, no we get it we get it.
Speaker Change #208: In financial services, and you see what's happened with our advisory.
Brian: And then Brian maybe just to wrap up here.
Speaker Change #209: Im may I am so impressed.
Speaker Change: Are you talking about crazy dynamics and unusual last few months.
Speaker Change #209: What I mean.
Speaker Change #210: And team have done in the brokerage side I mean, it's been a tough capital markets. We have not been we did not.
Speaker Change: Any.
Brian: Any learnings or insights from the period that you think will impact either operations or our capital allocation going forward.
Speaker Change #211: <unk> out for a while and that team is grind and grind it and I think we're going to come out of it stronger and we haven't had that so.
Brian:
Brian: It's yes, I mean, its pretty self reflective question for me and then as a firm I would say that.
Speaker Change #212: I'm excited about what's happening on the financial services side. So I think my answer would be more of a optimism over to that side of the business, where we would.
Brian: Nearly.
Brian: A.
Brian: Difficult public company, if you think about it there's an element of us is that as an operating private equity business and then there is an element of stars pure investments.
Speaker Change #213: Maybe be opportunistic buying and dial up Internet company that I've said, all the time, but I just can't help because I think we paid 45 and returned $135 million that was super opportunistic I'd, probably have a hard time, passing up something like that again, but I would think about it a little bit more just because the complexity of our business does create.
Brian: And you kind of combine those and you get.
Brian: If you make it operate at that kind of unique but if you make an operating business that.
Brian: Declines you Mark that down if you buy an operating business that goes up you don't market out there.
Speaker Change #213: You know I think it creates dynamics everywhere from how people understand us too.
Brian: And so we're kind of in a weird spot around.
Speaker Change #214: Two of our audit and so maybe a little simpler is better but there's a lot of different ways I think find opportunities.
Brian: That dynamic I think that as we this is not something that is a reaction to anything.
Speaker Change #215: This platform that will take advantage of and we're not saying that without world things out.
Brian: Where we see the opportunity we think that we are going to go on a really good.
Brian: Ron.
Speaker Change #215: Great Okay.
Brian: In financial services, and you see what's happened with our advisory.
Speaker Change #215: Perfect.
Speaker Change #216: That's all I've got thank you for the time alright.
Andy: I'm a may I am so impressed with what Andy and Jamie and team have done in the brokerage side I mean, that's been a tough capital markets and we have not been.
Speaker Change #217: Thank you.
Speaker Change #217: Got it.
Speaker Change #217: Our next question comes from Robert Hopkins.
We did not have the K out for.
Robert Hopkins: <unk> capital management.
Robert Hopkins: Robert Your line is now open.
Robert Hopkins: Hey, guys.
Robert Hopkins: Yeah.
Speaker Change #219: On the Investor day.
Speaker Change #220: You gave.
Robert: A nice EBITDA like kind of a peak in last 12 months.
Speaker Change #222: The various businesses.
Speaker Change #223: Just hoping we could maybe get.
Speaker Change #224: Our guide for the various businesses just you spoke about the ability to cover the dividend really more in line with just.
Speaker Change #224: Interest coverage and how you see that going forward.
That would be great.
Speaker Change #224:
Speaker Change #225: So look I would say.
Speaker Change #226: Our our trailing mountain operating EBITDA is roughly $340 million.
Speaker Change #226: Our.
Speaker Change #227: The number that we need to to cover an operating EBITDA to cover our dividend and interest and everything.
Speaker Change #228: Is around $60 million.
Speaker Change #229: And that's.
Speaker Change #230: That's really relying on.
Speaker Change #230: <unk>.
Speaker Change #230: We've got a lot we've got a lot of recurring business because they'll pay for a lot of that and then the question is going to be what is the broker deal we're going to do and what is retail going to do if that's still part of our business. So I.
Speaker Change #230: I deal with.
Speaker Change #230: Over the course of the next year or two.
Speaker Change #230: Our interest expense if we are mostly.
Speaker Change #231: Baby bonds, you know that the average yield.
Speaker Change #232: I think this is right is like five 8% that's a huge advantage for us.
Speaker Change #232: You know as we as we pay down debt so.
Speaker Change #232: From an operating EBITDA.
Speaker Change #232: The number is trailing 12 months is roughly 340.
Speaker Change #233: To pay one dollar.
Speaker Change #234: The dividend $2 dividend.
Speaker Change #235: As you know in and around two.
Speaker Change #236: And in around like two 660 ish million.
Speaker Change #237: A quarter I mean, when I look at our business. This quarter, we had no contribution from from targets.
Speaker Change #238: We had.
Speaker Change #239: A less contribution from our receivables book retail was a little quiet right. We made money on it but it was a little quiet and then you have the other businesses that have been performing really steadily and in the case of advisory increasing so.
Okay.
Okay.
Hello.
Yes.
We feel good about that that's the way the business was set up to have.
On a big segment of our.
Speaker Change #240: Expenses and interest paid in and dividend paid for by our recurring operating EBITDA and then have the swings from the broker dealer I mean, these swings are not new to us.
Speaker Change: Yeah.
Speaker Change #241: So in 2020, one we earned $15 a share.
Speaker Change #242: We weren't as excited as one would be thank you.
Speaker Change #242: $15 a share as we recognize that a lot of those gains were unrealized and a lot of them were based off of.
Speaker Change #242: Really.
Speaker Change #243: I guess in retrospect frothy environment.
Speaker Change #244: But by the contrary we think this is it's not the direct opposite but it's pretty close it's been a tough small cap market. So if we're able to continue to generate this kind of operating EBITDA in this environment with no contribution from.
Speaker Change #245: From our guests in other businesses like wealth management and appraisal and these other things.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change #246: Improving we feel really good about that.
Speaker Change #247: Does that answer.
Speaker Change #247: Yeah.
Speaker Change #247: It's helpful.
Speaker Change #248: It's just something to think about going forward, maybe in the prepared comments.
Speaker Change: Okay and then the other.
Speaker Change: Yeah.
Speaker Change #249: As you said it can be tough to understand the business, but you know.
Speaker Change #250: Just thinking of it as some of our parks.
Speaker Change #251: Dividual contribution of each part might be helpful.
Speaker Change #252: Just to follow up is you got to.
Speaker Change #253: 25 baby bonds that are.
Speaker Change #254: Their current so.
Speaker Change #254: Yeah.
Speaker Change #255: Do you think about that as a constraint against the dividend or just how do you plan on addressing maybe that's why the.
Speaker Change: Okay.
Speaker Change #256: American group is on the block.
Speaker Change #257: Which would be a shame because obviously there is that flywheel.
Speaker Change #258: Finding excellent investment opportunities through there, but you know.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change #258: You got to pay it off so is that why it's on the block in.
Speaker Change #258: Yes.
Speaker Change #259: Is that the plan to I mean look weak.
Speaker Change #260: I think part of what we're supposed to do in general as you know.
Speaker Change #260: You could argue the other side of it and I wouldn't you know it would be a good argument, but part of what we're supposed to do is find assets.
Speaker Change #260:
Speaker Change #260: You know that are either out of favor are undervalued for whatever reason and work to create value and I think we spoke about our cost basis in GAA and the flywheel is is reasonable, but I think it's a flywheel for.
Speaker Change #261: An institution RF.
Speaker Change #262: A company that can.
Dedicate billions of dollars to direct lending fund, maybe or can you.
Speaker Change #263: B bore.
Speaker Change #264: Artist consignment or two again like we did the brand's thing right. We bought a lot of brands, we bought them cheap and they made US a lot of money, we get a lot of it and as we look at it now sometimes recycling asset even if you don't want to do but just financially makes sense you got to make those decision.
Speaker Change #265: And that's what this is and if we get but we're not done I mean, we don't look we don't need to sell J to payer bonds with 190 million in cash and a lot of assets, but if we're not.
Speaker Change #266: And so if we don't get the price that we think makes sense great. Let's go.
Speaker Change #267: But but again, we will never setup, we started out we started this firm.
Speaker Change #268: Is it $30 million market cap, we were not funded.
Speaker Change #269: And set up and again take just bye bye bye bye and never sell or maybe we could have done that but we decided to continue to buy some other things.
Speaker Change #270: And I would just say, it's part of an overall.
Speaker Change #271: We've got a portfolio of companies.
Speaker Change #272: Company that we think is gonna be a real value for somebody else and has created real value for us and those two things crossover.
Speaker Change #273: This concludes the Q&A scanning.
Speaker Change #273: Handing it back to Steve.
Speaker Change #273: Lee for any final remarks.
Yeah.
Steve. Lee: Great well I want to remind everybody that tomorrow is the commission for charity day to 100% of Tomorrow's trading commissions goes to the.
Speaker Change #275: Sugar Ray Leonard Foundation.
Speaker Change #276: 'cause it funds research programs for childhood type one and two diabetes next week is our 24th annual institutional Investor Conference.
Very excited about that.
Speaker Change #277: We feel like that's going to be a great forum for us.
Speaker Change #278: You know really kind of continue to build the momentum we're seeing here. This month and you know over the last few years, so it'll be 200 public and private companies a thousand attendees.
Speaker Change #279: Great way to highlight affirm and then.
I just think it's really amazing.
Speaker Change #280: A testimony to the people who manage this business not the people and the Xactly executive side, but the people that man has the operating businesses that we have been through a lot and we have maintained the culture, we maintain the people I think.
Speaker Change #280: Yeah.
Speaker Change #281: The overall employee base I think is really excited and fired up and and I'm excited about what the next year bring so we're looking forward to talking to you next quarter.
Speaker Change #282: I appreciate it thank you operator.
Thank you.
Before we conclude today's call I will provide b Riley Financial's Safe Harbor statement, which includes important cautions regarding forward looking statements made during this call.
Speaker Change #283: Statements made during this call that are not descriptions of historical facts are forward looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties.
Speaker Change #283: If such risks or uncertainties materialize or such assumptions prove incorrect our business operating results financial condition and stock price could be materially negatively affected.
Speaker Change #284: You should not place undue reliance on such forward looking statements, which are based on the information currently available to us and speak only as of today's date.
Speaker Change #285: Such forward looking statements include but are not limited to statements regarding our excitement and the expected growth of our business segments and statements regarding the Companys strategic review process for the Great American business and any potential resulting ramifications.
Speaker Change #286: Actors that could cause such actual results to differ materially from those contemplated or implied by such forward. Looking statements include without limitation. The risks described from time to time and B Riley Financial Inc. Periodic filings with the SEC, including without limitation. The risks described in B Riley Financial Inc. Annual report.
Speaker Change #286: On Form 10-K for the year ended December 31, 2023 under the captions risk factors and management's discussions and analysis of financial condition and results of operations as applicable.
Speaker Change #287: Additional information will be set forth in B Riley Financial's quarterly report on Form 10-Q for the three month period ended March 31 2024.
Speaker Change #288: These factors should be considered carefully and participants are cautioned not to place undue reliance on such forward looking statements.
Speaker Change #289: All information is current as of today's call and B Riley financial undertakes no duty to update this information. Thank you for joining us today for B Riley Financial's first quarter 2024 earnings Conference call you may now disconnect.