Good afternoon and welcome to B. Riley Financial's Third Quarter 2020 Earnings Call. Earlier today, B. Riley issued a press release and presentation detailing its financial results for the third quarter. Copies are available in the Investor Relations section of the company's website at ir.brileyfin.com. This conference will include a discussion of non-GAAP financial measures. The most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the company's financial results prepared in accordance with GAAP are included in the earnings release. As a reminder, today's call is being recorded. An audio replay will also be available on the company's website later today. Joining us today from B. Riley are Bryant Riley, Chairman and Co-CEO; Tom Kelleher, Co-CEO; and Phillip Ahn, CFO and COO. After management's remarks, we will open the line for questions. And before we conclude today's call, I will provide the necessary cautions regarding forward-looking statements. I will now turn the call over to Mr. Bryant Riley. Mr. Riley, please proceed.

Thanks. Welcome, everyone. Our performance this quarter demonstrates the benefits and resiliency of our diverse platform and business model as well as the strength of the entire B. Riley team. Despite the limiting impact of COVID-19, we executed our strategy at a high level and delivered solid financial and operational performance. To that end, we generated operating revenues of $194.5 million in the third quarter. This represents year-over-year growth of almost 40%. In addition to our robust top-line growth, operating adjusted EBITDA was $67.2 million compared to $35.2 million in the third quarter of last year, an increase of more than 90%. Year-to-date, we have delivered almost $185 million of operating adjusted EBITDA, which is up 90% compared to the first nine months of last year. We believe that a diverse and a differentiated platform helps us to achieve this strong year-over-year growth. Including investment gains, Q3 total revenues increased 26% to $226.3 million while total adjusted EBITDA in Q3 grew 34% to $94.1 million. As you recall, during the first quarter, we experienced significant underlying markdowns on our investment portfolio. The initial shock of the COVID pandemic flipped through the financial markets. While certain effects of COVID will continue, business activity across our markets continue to normalize and investment book further recovered in Q3. We urge shareholders to focus on quarterly operating performance while putting us accountable for the long-term performance of our investment book. Looking ahead, we see an accelerating number of growth drivers across our platform and have strong confidence in our strategy influence. That confidence supports our decision to once again increase our regular quarterly dividend to $0.375 a share, up from $0.30 per share. This marks the second consecutive quarter we raised our regular quarterly dividend. For the past six years, our dividend philosophy has…

Thanks, Bryant, and welcome, everyone. For the quarter, B. Riley reported total revenues of $226.3 million and total adjusted EBITDA of $94.1 million. This was an increase from Q3 of last year, which recorded $180.1 million in total revenues and adjusted EBITDA of $70.3 million. Net income available to common shareholders was $47.3 million or $1.75 per diluted share compared to $34.3 million or $1.21 per diluted share for the prior year period. This increase was primarily due to increased activity across most of our businesses as well as further recovery of our investment book. Turning to our reportable segments. Our Capital Markets segment, which includes our investments as well as our operating results from our investment banking brokerage, our bankruptcy and litigation financial consulting business and our wealth management and fund management businesses. Excluding investment gains, our Capital Markets segment generated operating revenues of $115.1 million and segment operating income of $37.9 million during the third quarter. These results were primarily driven by increased fees in advisory services, the addition of our real estate business and an increase in income related to minority investments. Turning to our Auction and Liquidation segment. Our retail liquidation business contributed revenues of $44.2 million and segment income of $12 million. We concluded many successful engagements in the third quarter as market activity in the U.S. and Europe picked up following the initial impact of COVID back in March. As we have noted on prior earnings calls, our liquidation segment results can vary from quarter-to-quarter and year-to-year due to the impact of large-scale retail liquidation. Looking ahead, as Bryant noted, we expect additional global retail liquidations in the coming quarters. Our Valuation and Appraisal segment generated $9.7 million in revenue and $3 million in segment income in the third quarter. Appraisal activity continues to…

Thanks, Phil. As you’ve heard, our third quarter results were strong and showed the diversity and resiliency of our business model. We’re delivering robust year-over-year growth in the face of COVID, while also taking steps to further diversify and strengthen our platform. I’ll now walk through some key highlights from our businesses. Within our newly branded institutional broker-dealer, B. Riley Securities, our investment banking business posted strong results. We are on pace for a record year for our at the market, or ATM, product offerings. The restructuring and advisory group had another strong quarter built upon the momentum we experienced in Q2. Our teams continued their work on several engagements in the retail and consumer products sector as a result of the continued pressure placed on companies due to the pandemic. Our stack team also remained very active during the quarter as B. Riley Principal Merger Corp. II entered into a definitive merger agreement for a business combination with Eos Energy Storage that will result in Eos becoming a publicly listed company. The deal is expected to close in Q4 and gives us the unique opportunity to invest in the disruptive, sustainable energy solution that addresses a clear need in the rapidly growing energy storage market. Now turning to our retail liquidation division. Business levels continue to be attractive due to the continued impact of COVID. In particular, we are seeing opportunities in overseas market, including Europe, where activity has been strong. We’ve completed a number of transactions in Europe and see attractive forward opportunities both here and in Australia. In the U.S., we are participating in some large liquidation projects. However, given the risk of COVID and potential for future shutdowns, these deals have been typically fee-related opportunities rather than a guaranteed structure. Our recently added real estate advisory…

[Operator Instructions] Our first question today is coming from Kevin Rendino of 180 Degree Capital. Please go ahead.

Thanks, Bryant, great review and a great quarter for you and your team. So it's obvious, you have your hands in a lot of different areas. As you scan the universe, what types of opportunities do you see B. Riley being most able to take advantage of? Is there any one area that has a greater focus in the short term than others? Thanks.

Thanks, Kevin, and thanks for the comments. I think that's probably the biggest challenge we have, and I've talked a little bit about it. But if you look at the B. Riley Financial platform, you have – we're doing appraisals on over 1,000 companies and we're doing advisory on 200 companies, we cover 500 companies, and then we have all the other touch points of wealth management, et cetera. Trying to harness that and do the best job we can in terms of delivering products to our clients, looking through acquisitions, and then really getting synergies between all the organizations is really the biggest challenge we've done. And we've done a lot of work there, and Tom Kelleher, our Co-CEO, has really done an amazing job of putting together an internal network to take advantage of all those opportunities. So I think as I look through it, we will continue to build on the business that we have. We haven't made a really large acquisition since – I think since GlassRatner or maybe magicJack, it was around the same time. We're seeing a lot of opportunities in the principal investment side. We made the brand investment. But our philosophy of really taking some of our episodic profits and growing those as we have and then funneling those into a more recurring revenue stream through opportunistic purchases I think is the number one opportunity we have, and we’ll continue to build on that. But it’s a full time job, and Tom mentioned we brought on two new people, one person from JPMorgan, one person from Goldman, which I think speaks to the opportunity that they saw just to internally find opportunities to make sure we’re not missing anything. So, I think it’s a big answer to your question, but I do think that what you’ll see in the short term is some opportunities on the principal investments side where we are really starting to see unique investment opportunities and purchase opportunities.

Thanks, Bryant.

Thank you.

[Operator Instructions] Our next question is coming from Wes Cummins of 272 Capital. Please go ahead.

Great. Thanks. Bryant, I was just going through kind of the numbers over the past four quarters and when I look back kind of at the trailing 12 months, if I normalized for operating EBITDA, if we normalized kind of Barneys out of Q4 and the securities in Q1, I’m getting right around $250 million of operating EBITDA. I know you just started reporting that this year. Does that sound right to you?

Yes. So Wes, so I think the thing I’m going to be most excited about when we report Q4 is we will anniversary Barneys, and we won’t have to talk about that one again, but thanks for bringing that up. Yes. So, we have been very clear, and I think we talked to everybody about the loss we took in Barneys. I think that is a – I think that is an example of probably more of an equity investment. We took a big bet of something that didn’t work. It wasn’t super occurring. So, I think what you’re saying is if you added back that loss and then took the operating EBITDA for the last four quarters, if your numbers are – if not, it’s within a couple of percent, that’s right.

Okay. Okay. And then I mean is that a reasonable number to think about kind of going forward? I know you never like to make projections, but just curious if that’s kind of the level we’ve reached now.

So, I think that we feel really comfortable about projecting half of our business. And so when you look at all of the recurring sides of our businesses, we’re sneaking up to $115 million, $125 million kind of annualized run rate, and then you have the retail and the brokerage. And brokerage is up almost 50% year-over-year in EBITDA. And so does that continue? I feel like we have a lot of momentum. I feel like the leadership in that group is doing an amazing job of increasing our presence. We’ve been doing a kind of small-cap world for 22 years and now doing more mid-cap, and I think that’s being appreciated. So the opportunity set is bigger and bigger. But having said that, markets are cyclical, and this has been a unique world where you had COVID create companies needing to raise capital and investors giving some of those companies a bit of a pass given that dynamic. And so really good companies winning the markets and raise money, we were able to help them. But on the advisory side, the restructuring side, the capital market side now doing larger debt deals in addition to our equity deals, I feel really good about where we stand. I think the base is a real base. So, we’ll see, but excited about next year.

Okay. Great. Thanks. Appreciated.

Thanks, Wes.

[Operator Instructions] Our next question is coming from Stanford White of Alcon Partners[ph]. Please go ahead.

Hey, guys. Great results. Great to see all the progress you guys are making. Just – Bryant, just to piggyback on Wes' question there, I mean you guys are growing 90% EBITDA, an increase in the dividend and buying back stock. And just looking at the market cap, I mean you guys are trading kind of sub three times EBITDA for tremendous growth and a lot of tailwinds in your business. And I guess I was just curious to get your take on kind of the valuation of your company. I know you're buying back stock in centers of buying. So maybe prefer kind of a lower share price, but you're raising capital occasionally and it seems like the share price is pretty undervalued for the growth and the opportunities. So just would love your take on how you see the valuation of your company.

Thanks. So we're a difficult company to put in a box. If you want to play or invest in a capital market cycle, there are a lot of companies that have a very focused business in the capital market. So if you want to make distress purchasing, maybe there are some private equity firms or BDCs that might enable you to invest in those types of things. So I think it's hard to put us in a box. I think it's hard to get analyst coverage on a company like ours. One, because some of the companies that would provide coverage on our competitors. And two, it's a difficult – again, it's just kind of a difficult company to evaluate. What I would say with this quarterly dividend, we effectively in 2014, went public at $5 a share through a merger with Great American. And we are – I don't know, if we're above it, but we're like a $4.90 something in terms of dividends returned to our shareholders. And when I look at that measure and how we've returned between buybacks and dividends in the last six quarters, we returned $14 million – roughly $13 million to $14 million every quarter to our shareholders. And I think that, to me, I'd much rather have a business that is generating a lot of cash, and we feel as undervalued than a business that we were – that was overvalued and we didn't understand it. So we're obviously putting our money where our mouth is. As you've seen multiple directors buy, you've seen multiple insiders buy, you've seen us buy almost 7% of our company this year and balance that with dividends. So all we can do is blind and continue to look through the opportunities and continue to do what we think we're good at, which is what we've done the last six years, has been opportunistic around the principal side and sticking to our knitting on the broker deal, enhancing it with acquisitions like GlassRatner. I mean what we haven't even talked about is the real estate group. We started a real estate group to work in mostly liquidation types of situations in the beginning of the year from – not from nothing because we hired a guy that is very well-respected in the industry or partnered with them. I mean we're doing 17 mandates already. I mean that – including JCPenney, which was announced. So we have a lot to build on. We have a lot to kind of evergreen, but we also have a lot of opportunities I think to buy. So one winded answer to your question, it's always hard to – when you ask management how they feel about valuation. But I think we're really speaking with our pockets and our dollars more than anything else.

Yes. Definitely. I appreciate the feedback and great to see the strong growth and the results. And I'm sure the market will start to pay more attention. You guys continue to execute. So thank you very much.

Well, we appreciate your interest. Thanks.

[Operator Instructions] Thank you. Our next question is coming from Sean Haydon of Tipp Hill. Please go ahead.

Hey guys, congrats on a great quarter. I had a quick question, and you might have mentioned this, I hopped on a few minutes late. But can you just talk about the Venture Capital effort? Have you guys recently launched?

Sean, thanks for the question. So I did talk about our platform and all the different opportunities that we see. And Venture Capital, especially later-stage Venture Capital, if you think about the offering we can bring to a company that may be thinking about going public, we – it's always dealt with the smaller companies, maybe sub-1 billion, sub-500 million that have gone public. We're public. We have a lot of views. And I think a lot of – we don't know how to sing or dance, but I think when we talk about being a public company and how you think about that and how you discuss and communicate with investors, that we've been doing it for a long time. And so if we can utilize that experience and that skill set to find interesting investments and then hopefully, those – when those companies do go public, we'll be able to help them on a multiple of capacities, whether it's in underwriting or investment banking. And so we had someone in Todd Sims, who was on our Board and has a long background in venture – or investing. And we saw that as an opportunity to really enter that business. So that's the philosophy. We've got a couple already in the hopper. We've done a few in the past, but we're really going to take a look at seeing if we can expand those efforts.

Great. Thanks.

Thanks, Sean.

Thank you. At this time, I'd like to turn the floor back over to Mr. Riley for his closing comments.

Well, thank you. And thank you all the shareholders and clients, and most of all really appreciate all of our partners and employees. It's been a crazy six, nine months, but I can't think of a better team to be in the [indiscernible] how do you say that term again? Well, you get the gist. We are really thankful about all the partnerships we have. So we look forward to reporting next quarter. Thank you.

Thank you. Ladies and gentlemen, 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. Statements made during this call by 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 meanings 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 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 for today's B. Riley Financial's third quarter 2020 earnings conference call. You may now disconnect.