Good afternoon and welcome to B. Riley Financial's Second Quarter 2019 Earnings Call. My name is Steve, and I'll be your call operator. Earlier today, B. Riley issued a press release with its financial results. A copy can be found in the Investors section of the company's website at ir.brileyfin.com. As a reminder, this call is being recorded. A replay of today's call will also be made available on the company's website. Joining us today 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, and welcome, everyone. For the second quarter, we reported revenues of 164.7 million, adjusted EBITDA of 52.9 million, net income of 22.2 million and adjusted net income of 28.3 million. Our strong performance is a result of our businesses working together including all of our legacy businesses as well as the integration of GlassRatner and magicJack. We are very proud of what we have accomplished, and we recognize we couldn't have achieved any of this without the hard work and dedication of our entire team. We continue to be confident in our platform. And to that end, we were pleased to announce we are increasing our regular quarterly dividend from $0.08 to $0.175. The increased dividend is in addition to a special dividend of $0.325 for a combined cash dividend payout of $0.50 this quarter or about 26% of EBITDA. The increase in our dividend is consistent with the steady growth of our business, which has grown both organically and through our acquisitions. Additionally, our shareholder repurchase plan continues to be in effect. Now for a couple of highlights, Great American Group drove meaningful results coming off one of the busiest periods in its history. We did a number of projects during the quarter, but two to highlight are the completed liquidations of Gymboree and Payless ShoeSource. As we have previously noted, Payless was the largest retail liquidation by store count in US history. We expect this business to remain active as the retail landscape fundamentally continues to evolve. Investment banking saw significant improvement from the prior quarter, which was negatively impacted by the government shutdown in Q1. We completed several noteworthy deals and advisory assignments, which contributed to our quarterly results and that Tom will go into more deeply later in the call. We also want to note…

Thanks, Bryant. Welcome, everyone. For the second quarter of 2019, total revenues were 164.7 million, which is a new quarterly record for B. Riley Financial. In our largest segment, Capital Markets, segment revenue increased to 94.2 million for the second quarter, up from 77.8 million in the same year-ago period. Segment income increased to 24.4 million, up from 12 million in Q2 of last year. Our Capital Markets segment includes results from B. Riley's banking, brokerage, wealth management businesses, our fund management and direct lending businesses, including Great American Capital Partners and GlassRatner, which is the advisory and consulting firm we added last August. The strong performance in our Capital Markets segment for the quarter was driven primarily by investment banking, the addition of GlassRatner and income from investments. We also saw strong performance from our Auction and Liquidation segment for the quarter. Revenues in that segment increased to 34.9 million, up from 26.8 million for the same year-ago period. Segment income increased to 17.8 million, up from 16.3 million. Our overall results for the quarter were primarily driven by the completion of several retail liquidation projects, including Payless and Gymboree. As we've noted on previous calls, the impact of these larger scale liquidations make our Auction and Liquidation segment results more variable in nature from quarter to quarter and year to year. Moving on to our Valuation and Appraisal segment, we saw a modest increase in revenue with $9.7 million for the quarter, up from 9.5 million for the same year-ago period. Segment income decreased slightly to 2.7 million compared to 2.9 million in Q2 of last year. Results for our Appraisal segment tend to remain relatively steady quarter to quarter, in contrast to our more episodic Liquidation segment and our Capital Markets segment, which can be more cyclical…

Thanks, Phil. We often highlight our proprietary investments in these calls because we believe this is a key differentiator for us. With Great American Group, GlassRatner, banking, wealth management and other service lines on the B. Riley platform, we have assembled a unique mix of businesses that can support clients with end-to-end financial services. Remaining competitive in each of these distinct businesses means differentiation in the marketplace, which is why we are constantly reassessing our businesses for areas where we can drive new revenue, synergies or improve profitability. We believe we have demonstrated success with continued growth in our historical earnings results. And much of this success is due to the credit of my long-term partner and co-CEO, Tom Kelleher, who has spearheaded the integration of our companies with our collective team across B. Riley Financial. With that, I'd now like to turn the call over to Tom to discuss some other recent highlights from across our businesses. Tom?

Thanks, Bryant. As discussed, our expanded platform provides us with a greater opportunity to find unique compelling investment ideas that benefit not only our clients and partners, but also B. Riley as a whole. Perhaps less obvious is how our various companies also serve to benefit each other. Over the last 12 to 18 months, we focused on education and collaboration among our various operating groups to drive new revenue opportunities. Our in-house partnerships and expanded network allow us to offer clients a fuller suite of services than we otherwise could have offered if we were unaffiliated. And we are already seeing measured results based on those efforts. A few noteworthy highlights from the quarter, Banking participated in several SPAC deals, including our own B. Riley Principal Merger Corp. SPAC, which went public on the NYSE in April and raised approximately $143 million in gross proceeds. B. Riley FBR served as sole book runner on the deal, and our principal investment team is actively seeking a company to bring it to market. Other notable wins in the quarter include capital transactions for TheMaven in support of its recent acquisition of thestreet.com and in its acquisition of the rights to operate Sports Illustrated. In addition, we served as sell-side M&A advisers to PCM on its $581 million acquisition by Insight Enterprises. We also provided approximately $150 million in financing for Babcock & Wilcox in support of its ongoing turnaround efforts. In sales and trading, regulated commission headwinds persist with revenue slightly down from prior quarters. We continue to control related expenses and remain focused on maximizing profitability. Our new stock trading initiative is yielding positive early results with only modest balance sheet use and lower expected risk exposure. This past May, we hosted our 20th Annual Investor Conference in Beverly Hills.…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Sean Haydon with THC. Please proceed.

Hey, guys. Congratulations on the quarter and the dividend. Real quick, given that you're almost hitting your targets, the guidance you guys have provided earlier, have you revisited that in any way?

So Sean, it's a fair question. And we kind of struggled when we thought about how to address that. So, yes, I mean, we're$85 million through the two quarters and the low end of our guidance is 115. And if you just look at our historicals, clearly, we are far ahead of that guidance. And if you remember, the reason we really gave that guidance was for Q4 that reflected kind of a difficult quarter in capital markets. And so we wanted to make sure everybody understood what we thought our earnings and EBITDA power to be. This is a really hard business to gauge. And so giving guidance in a really episodic business is hard. So I would answer you by saying, do the math. We feel really good about our businesses. And clearly, we would reiterate that guidance. Clearly, you can make an argument that it's quite a bit more. But we're in a volatile episodic business that can slow down meaningfully when there's a government shutdown or maybe a $2,000 – point sell-off or retail that didn't too much. And so we're just – we did it for our shareholders because we wanted to give them some color to how we thought. It's tough to update.

No, that's totally fair. And I would say a great job executing so far. And then finally, you guys have a pretty thorough menu of financial service offerings. Do you see any kind of natural holes that you're looking to fill out there?

Yeah. I don't know if it's holes. I see some opportunities. There's more things around retail that are interesting. Obviously, we put our foot in brand management so there's some investments in BV and then Brookstone. And so there – we think that retail platform can create opportunities around brands. We don't do a ton of fixed income. Clearly, I think a distressed market could come its way at some point here. And so we put our – we put a flag in the ground. We hired a great group out of Chicago that's really helping. But that's an area I think we can invest and grow in. I think asset management is an opportunity. If you look at our balance sheet and you look at kind of the funds that we manage with the direct lending fund, they're almost at 1.4 billion. And so we are comfortable putting money to work. We think we have a very proprietary ability to do that. And so some of that goes on our balance sheet, and that's a huge part of who we are. But we can absolutely manage money, I think, outside of the B. Riley platform. So those are four that came to mind right away. I think there's others. We just have – we see a lot of interesting opportunities, and we respond to them. And I think that creates unique things and unique investment vehicles.

Yeah, okay. Great quarter guys, thanks for taking my question.

I appreciate it. Thank you.

The next question comes from Wes Cummins with Nokomis Capital. Please proceed.

Hi, great, thanks. Hey, Bryant, I've mentioned this. I actually have asked you about this on the call before. But the dividend policy, kind of given the extremely strong performance and the special onetime dividend and raising the dividend, you guys have paid out $0.76 and kind of look like on track to pay, even if you were at the minimum of about 10 or so this year. Just how do you think about that with your balance sheet? And then I have one follow-up to that.

So I think managing our balance sheet and the opportunities versus returning capital to shareholders versus buying the warrants that we were able to buy and – or buying stock is, I think, one of the greatest challenges we have. We need to be always prepared to put $100 million of work for a liquidation or – so it's something we think a lot. And having said that, the way that I think about our dividend and the way that we talked about at the Board level, is the more sticky business that we have, the higher we can have a regular dividend. So if you do the math on what we're – the dividend we're paying out, call it, $0.17 regular dividend, at times 26, that plus interest is lower than our kind of sticky business. And then we have two businesses that have done over $50 million in the first two quarters that provide, but they're – we say it all the time, I hate the word because I say it so much, episodic. But it generates a lot of free cash flow. And to the extent that those businesses are strong, we are going to reward our shareholders with a meaningful portion of that. And we think we're underlevered. Our assets almost match our liabilities. The June – there was a month where we generated more interest income than we generated interest expense. So we should generate a lot of capital in an environment like this, and we're going to make sure we distribute the fair portion. So I think your math is right. And then by the same token, if there's opportunities to buy back our stock and like we did in Q2 at levels that make sense to us, we're going to do that too. Kind of a long-winded answer, but that's how we think about it.

No, I appreciate that. And then following up to the previous question, you asked about holes in kind of your financial services. Just anything you're seeing out there that would fit more into kind of the proprietary investments group? You closed one of those transactions in the second half of last year, any opportunities that you're seeing in that area?

So we are seeing more opportunities. And you and I have been in small cap for a long time. And the difference between passive and active, it's just so extreme. And we're in the middle of that in many different ways. And we see that and allot it from a lot of different resources, whether it's the valuable appraisals or the cash around the 500 companies we cover. So we are seeing a ton of opportunities. We came very close on an interesting kind of more of a magicJack and United Online type of thing. The type of investment that we passed at the last minute, we just couldn't get there on price. But lots of opportunities, and we're going to be super active, but they're just tough. Obviously, we try and stay pretty disciplined on what we pay, but I think you'll see us active.

Okay, great, thanks.

Thanks a lot.

[Operator Instructions] This concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Bryant Riley for his closing remarks.

Thank you very much. I know there are a lot of B. Riley Financial people on the call. So I'll take this as an opportunity to thank everybody that's listening. We have a great team. And the opportunities in front of us are, I think, enormous. And we're excited to go out and continue building upon this company. So thanks everyone and we look forward to talking to you next quarter. Thank you.

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. Statements made during the call about B. Riley Financial future expectations, plans and prospects and any other statements regarding matters that are not historical facts, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those disclosed here today. These risk factors are explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today 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. This conference call also includes 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 and included in the earnings release. Thank you for joining us today for B. Riley Financial's Second Quarter 2019 Earnings Conference Call. You may now disconnect.