Good afternoon and welcome to B. Riley Financials Fourth Quarter and Full Year 2021 Earnings Call. Earlier today, B. Riley issued a press release and presentation detailing its financial results for the fourth quarter and fiscal year 2021. Copies are available in the Investor section of the Company's website at ir.brileyfin.com. As a reminder, today's call is being recorded. An audio replay will also be available on the Company's Investor Relation website later today. Joining us today from B. Riley are Bryant Riley, Chairman, Co-Founder and Co-CEO; Tom Kelleher, Co-Founder and 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. We are pleased to report an extraordinarily successful quarter for B. Riley Financial. 2021 was an important year for us strategically, operationally and financially. The fourth quarter caps off another record year for B. Riley where we generated total revenues and total adjusted EBITDA in 2021 of $1.7 billion and $762 million respectively representing a 93% revenue increase year-over-year and an 87% increase in our adjusted EBTIDA. During the same period, operating revenues totaled $1.35 billion resulting in operating adjusted EBTIDA of $422 million. This translates to a 70% increase in year-over-year operating revenues and a 35% increase in operating adjusted EBITDA. In 2021, our investment banking division delivered extremely strong results thanks to robust pipeline of activity as we leverage our growing reputation as a preferred banking partner to small and midcap companies. In total B. Riley Securities raised nearly $7 billion across IPO underwritings, follow-on underwriting, SPAC [ph] new issuances and debt raises in 2021. Over the last 3 years, B. Riley Securities has gained meaningful market share, extending our product offerings and our brokerage businesses earnings. However, I want to take a moment discuss what we believe is a significant competitive advantage and an important differentiator for our shareholders and team members in view of softer capital markets. As you're likely aware, IPOs, Secondaries and SPAC offerings have effectively come to a halt over the last two months. While it is impossible to predict how long these markets will be closed, I want to briefly discuss why we believe this slowdown will highlight our diversified business bottle and commitment to managing operating expenses. When we took the business public in 2014, B. Riley Financial effectively consisted of two cyclical subsidiaries, B. Riley Securities or Investment Banking Business, which we expanded through acquisitions including FBR…

Thanks, Bryant. As Bryant noted, we reported a very successful fourth quarter and record results for the full year ended December 31, 2021. For the fourth quarter on a consolidated basis, B Riley reported fourth quarter total revenues of $422 million, up 3% from the prior year period. Operating revenues were $353 million for the quarter, a year-over-year increase of 31% primarily related to the acquisition of National Holdings. Total adjusted EBITDA for the fourth quarter was $138 million and operating adjusted EBITDA was $106 million. Net income available to common shareholders was $62 million or $2.08 per diluted share in the fourth quarter. For the full year of 2021, total revenues were $1.74 billion, up 93% from the prior year period. Total adjusted EBITDA was $762 million, an increase of 87% compared to the prior year period. For the full year, net income available to common shareholders was approximately $438 million or $15.09 per diluted share up from $200 million and $7.56 per diluted share in 2020. Operating revenues for the year were $1.35 billion, a year-over-year increase of 70%, while operating adjusted EBITDA was $422 million up 35% compared to last year. Increases in operating EBITDA were primarily related to a strong performance from our investment banking business, and our acquisition of National in 2021. Turning to our reportable segments in the fourth quarter, starting with our capital markets, which includes our investments and operating results from investment banking, institutional brokerage and fund management. Excluding investment gains our capital market segment operating revenues in the fourth quarter, totaled $177 million, which represented a decrease of 2% year-over-year. Segment operating income was $87 million, which was down 14% year-over-year, mostly due to the comparison to a particularly strong fourth quarter in the prior year as a result of several…

Thanks, Phil. The fourth quarter ended another record year for B. Riley as we continue to expand our diversified business. This past year, our firm saw many accomplishments as we added critical complementary practices, brought on industry leading talent and continue to execute our strategy amid an unpredictable and challenging environment. Among the initiatives currently underway include the integration of National Holdings, and it's 1000 personnel, which is due to be combined with B. Riley well in Q2 of 2022. The addition of a compliance risk and resilience consulting practice in our advisory group, the addition of Wes Cummins to not only continue the management of the 272 fund, but to also head up the expansion of our Asset Management Group. The addition of Tim Sullivan to lead the expansion of our fixed income practice by materially adding to both our personnel and products suite, and most recently, the addition of FocalPoint Securities, which significantly increases our M&A and private capital markets capabilities. Our philosophy and diverse business platform remain in our view a key differentiator for B. Riley compared to the competition. This has enabled us to add experience in industry leading professionals across our business despite a tight labor market. There's also a contributing factor to why we were named number two on Fortunes fastest growing companies of 2021. Now I'd like to make a few comments about last year's fourth quarter. As Bryant noted, activity investment banking was strong across all 2021. In the fourth quarter, we completed a number of capital markets deals including the Spartacus Acquisition Corp. and its merger with NextNav, the IPO stronghold digital mining, and $150 million notes offering for Fossil Group. These transactions along with our recent acquisition of M&A specialist FocalPoint, demonstrate the full suite of investment banking offerings that…

[Operator Instructions] Our first question comes from Sam Sheldon with Punch & Associates. Please go ahead.

Hi, thanks for taking my questions. Maybe you could start by talking more about the FocalPoint deal and specifically how you can leverage their expertise across multiple areas within the B. Riley platform?

Sure. Thanks, Sam. So FocalPoint has is an exciting transaction for us for a number of reasons FocalPoint, offices, actually, literally across the street from ours. We saw their team build their business from scratch, when they started about 20 years ago. We had talked to them a number of times and really watch them grow and build a relationship. And so we had an opportunity to combine forces, I think we are both incredibly excited about what that brings. So FocalPoint strength is M&A. I think if you look at B. Riley financial strength, that is it just capital markets in both debt and equity. FocalPoint has, has mostly worked on private equity type of companies or private companies where our strength is on public companies. And so we have these incredible relationships with public companies where we've often been their prime banking source their prime capital markets source advisor, but we have not been a go to on the M&A side. So we brought in, a bunch of professionals that with tons of experience, first-hand experience, experience building their own firm, understanding what all that takes, and, and the hustle that goes with that, to be able to leverage off of those relationships. And then conversely, a lot of those companies that had FocalPoint on relationships with haven't had the same type of public markets, relationships. So whether that means, helping them think about going public or selling to a public company or thinking about ideas, it really is a perfect fit. So and then culturally, we think, we spent a lot of time with them, their team, it's a very similar culture where you have two, two companies that were really started by a very small group built up over a long period of time, and became kind of respectable leaders in their segments. So I think it's -- I do think it's a classic example of one plus one equals three.

Yes, yes, it does sound really interesting. And with this acquisition, how does that change the breakeven levels for the capital market segment. I guess, how much has been added to the Capital Markets team now over the last two years and how do you think about protecting the downside with activity slowing recently?

So like us, they started FocalPoint started with all the money they could probably put together to start a business so they don't lose money. That's a, that's a, I guess their grandiose statement, but I just tell you, they run a business in a similar way that we do, which basically means you, you manage your costs for downside and you kind of overpay and upside, and you have a little bit more of a variable model. So the fixed expense, I'll tell you honestly say I haven’t thought a lot about it, because this is going to be a profitable business from the get go and would be very, very difficult. And even in the COVID period they didn't really lose money. So I think it’s just going to be additive. Having said that, they're -- the thought is like a GlassRatner, which we've talked about before, where we were brought in a group that started their own business, and we're able to leverage off of our infrastructure. I think we've increased our business by 30%, just from referrals. So I think it's going to be far more than just revenue add, it's going to be a lot of incremental opportunities.

Okay, great. That's helpful. And, Bryant you mentioned, market share gains in your prepared remarks. I'm interested in hearing how much of that capital markets growth that we've seen over the last few years here, you attribute to market share gains versus just the surge in capital markets activity.

So I don't have my link tables on me, but I will send them to you. I -- broadly speaking and in small cap market follow ons and IPOs. And I think it's defined as a billion and a half. We've gone from, and this is going to be that I'm going to be off a little bit, Sam, but in general from 19 I think we were 15, 20 we were 7, and then 21. I think we were second. So we'll send those to you. But there's clearly been market share gains is a testament to doing the same, pretty much doing the same thing. Our whole career have been around small cap markets for 25 years. We built some great relationships, and we stuck to our netting. So -- but we'll get you the specifics of that.

Okay, great. Great to hear. That's really significant. My last question is just about the Auction Liquidation business, which we haven't heard as much about recently. Maybe you can just update us on what you're seeing on the Auction Liquidation side with the pipeline there? Thanks.

Yes. So theAuction Group has done a very good job of finding opportunities, and then made $8 million EBITDA in 2021, despite no very little domestic business. They've been most of business has been in Europe. That group is you know, is positioned to take advantage, any dislocation and a bricks and -- excuse me in retail in general. And, and I think they're, we always see retailers overbilled every time and Scott Carpenter runs this division tells me this all the time. Over the course of the last 30 years, when he's been in this business, you just have retailers over bills, and I think they're going to be ready for that. The good news is that group is it's not a it's not a large group. There you talk about a professionals that also help in other other ways, whether it's an appraisal and capital markets if we need some advisors around retail. So it's, that business is ready to go if you start to see some deterioration in the economy, which ultimately tends to happen as companies over build, but, but very slow domestically right now.

Great, thanks for taking my questions.

Thank you.

Our next question comes from Keith Rosenbloom with Cruiser Capital. Please go ahead.

Thanks for taking the call guys. Hey Bryant, I was hoping you could put some of the business in context. You mentioned in the press release on FocalPoint that you hoped it would do four times your existing M&A operating profit. I think I said that correctly. Could you give us a sense for what that means in terms of when that might happen? What when your thinking is of that 4X and what the starting amount is and what the ending amount is?

Yes, I think we look at the M&A advisory business on a combined basis after the after the performance of the transaction and talking about a business that is on a run rate of in and around 120 million. And what are the combinations bring, what does the size bring, what the opportunities bring. As you know, and I know you've looked at this a great deal. We do have an advisory business, but we have some great M&A bankers, but we've looked we've been Capital Market shots that's been our strength and so there were three areas that we thought needed to really be addressed. And we could really leverage from, from what we built, M&A was a big one. Asset Management was a big one and fixed income and credit was a big one. And so we've got all those pieces in place. And the M&A side, I truly believe that there are a lot of public companies that have had relationships with us for many, many years that if they could have, or if they, if they had the opportunity, because we have the ability to service them in a particular segment would have hired us, and we just, we've been really straight way to capital markets. So that frames the size of that business for you.

Thanks. Just a couple more questions on that. In the capital markets revenue line, what percentage of your revenue has come let's say in 2021 came from underwriting fees specifically?

Phil, do have that breakdown?

Let's see here. We – I don't have that offhand. Keith, we can follow up with you. It's -- yes. I want to say it's, it's venturing north of 300 for the year.

Okay. And then, also in terms of perspective, could you let us know, what is the number of companies that are currently in the FBR B. Riley research universe?

Mid four hundreds.

Okay. And lastly, you mentioned that you were you were in the league table just now, in the Q&A. Your dividend yield is now 6.7% as of today, that's excluding specials. And when you look at other investment banks, like Jefferies, Cowen, and Piper that's, that's a real outlier. I mean, you're paying multiples more in terms of dividends. Who do you see, as your peers as your public company peers?

It's funny. We had this conversation on our board meeting yesterday. And one of the things that I said to my board is that, there's not a lot of companies that have the flexibility to take advantage of the opportunities that we do. And maybe that's partly because we founded the company, and we, we grew up for many years before we went public. And our board saw that. I think a lot of our competitors probably are hindered or not hindered, but are a little bit more focused on just one segment, let's just call that the investment banking broker dealer side. So I don't know if there's a lot of comps to us. I mean, I would say, there's firms out there, like a KKR, where they do have a broker dealer, and they do have some advisory, and they really utilize that. But their main focus is, is private equity, we're kind of the opposite. We really lead with our investment banker, broker dealer, and then we see these proprietary opportunities that we are willing to invest in, and I think that differentiates it. So I don't, don't think a lot about our comps, Keith. I just don't, I think it's -- let's just keep grinding and building our business like we did and, and not get stuck in any box of how to how to present the best on a piece of paper, but rather return another $10 keep on returning capital to our shareholders, while at the same time we're building out our business. That's our -- that's our sole focus. So I think we could go through a bunch of names, you know, Jefferies, and we know Cowen, and we know all the competitors. But I don't think there's anybody that takes advantage of the platform, like we do.

Then I'll sneak one more in. Just in terms of returning capital to shareholders, which obviously you guys have been terrific on. In your press release today, you talked about a $50 million share repurchase program. Can you give us some color on what the timeframe is on that 15 million?

No, not really. I mean, we'll be opportunistic; obviously we want to buy it at the right price for our shareholders. And we, if you do the math, or if you look at our, our news or last year insider buying I think there was buying a level higher than these levels. And so obviously, we think that our shares are interesting and opportunistic, but we don't have a set time level.

Great. Thanks, Bryant. Thanks, guys.

Thank you.

[Operator Instructions] Our next question will come from Sean Haydon with Charles Lane. Please go ahead.

Hey guys thanks for getting my question here.

Hi Sean.

So just to piggyback on that last question, what is this new authorization kind of in place of a special or what was the thinking there? Are you guys seeing more opportunities to add through M&A?

Well, are you talking about the new -- you're talking about the new authorization, the buyback authorization?

Yes, the 50, the incremental 50.

I mean, if you look at our investor presentation, and you'd go back to 2017, there's been a steady level of share buybacks and a steady level and increasing level of dividends. So one of the beauties of being in the capital markets is it enables you to your times buy back, some of your business that you know better than others, or maybe return some of that capital to shareholders and be really flexible about that. So I wouldn't read anything into it. Other than we are opportunistic, and we've always been opportunistic, of taking advantage of dislocations we see out there and, but we've always had to buy, but we've always had that opportunity to buy on buybacks. But it’s not like this is not the first time we've done a buyback.

Okay, yes, I got it. And then on the operating margin for capital markets, can you just add just for modeling purposes, can you just talk about the, puts and takes there. Looks like it went down, a hair, but just wanted to know what kind of modeling assumptions we should add in there?

There's, there's I’ll ask Phil to speak to this a bit, but there are so many different dynamics that go into a capital markets deal. So I'll give you one. For example, if margin on a M&A deal might be a little bit higher than a capital markets deal, a capital markets deal that we do in houses a lot less if we're on the left, right than the left. Somebody who is a executive is the producer and a transaction, that margin is really high, because we don't double dip. So for example, if I bring in a deal, that's a really high margin. So there's a variety of factors. Another one is, and this, this is just the way the accounting works, when we do a SPAC and we get founder shares and film, just make sure I'm saying this correctly, but those go to those go into the capital market side, and they don't really have enough a very high margin business, because we're just getting issued founder shares. So in generally it can move around quite a bit. But Phil, anything you want to add there?

Yes, no, I think I think you're right. It is -- there is a lot that goes out to capital markets. So it can be difficult. I think what Bryant brought up is kind of the stuff that moves things where we have some significant fees, whether it's a D spec fee, right, or certain, certain advisory fees that have very high margin. And so that's why you'll see some variability there.

But not in general, the way to think about our business in the capital market side is, we have a we have a kind of a fixed knot, and every incremental dollar over that should be somewhere around 55%, kind of incremental margin.

Got it? And is it safe to assume that FocalPoint will not right off the bat, of course, I understand there are integration costs, but at kind of steady state, will that be accretive to margin?

So, so there won't really be much in the way of integration costs. Literally they are across the street. And these guys know how to run their business, and they're going to be additive. So you wouldn't see that. I -- their margin profile is going to be higher, maybe in a little bit more traditional banking type of business, where they're, especially on the advisory side, where their upfront fixed costs will be higher, and then their incremental margin will be higher. So, where we might have capital market bankers that don't have as high of an upfront cost, M&A advisors usually do, and then incrementally the margins kind of all trend together and trim like our margins. Does that make sense?

Yes, that makes sense. And then, my last question, a couple years ago, I think I asked you if you -- what holes you thought you had in your portfolio, and you had mentioned credit as one of them. And given we're kind of entering a new rate regime here. Is that still something you'd be interested in or something you're thinking about?

Yes. So we have, we've announced a couple hires there. But we've added a lot more. We are investing aggressively in that business. And Tim Sullivan, who was the President of Imperial before joining us, and has a long career firms like Lehman and Jefferies was tasked with building that out, we could have built or built or bought, and we think we found the right person in the team that he's bringing on to build. So you will see, you will see that business growing in the next year aggressively. But don't, don't forget we do have a really meaningful baby bond business. We've got some other elements of private debt, FocalPoint has a really strong business of placing and helping companies with private debt, so that, that those capital capabilities will be added to ours. But that's, that's a big area of focus for us.

Got it. And then I sorry, I just want one last quick one. Again, for modeling, does National have it gained any benefit from rising rates from customer cash balance?

It's -- I've not always used to be the dream, because obviously, they have a lot of cash on the cleaning firms balance sheet. But it's just you got to get to like, 3% treasuries before it makes a gigantic difference, which 15 years ago, didn't seem like a big deal. But for guys now, so there's an incremental benefit, but nothing that would move the needle meaningfully, versus the kind of EBITDA we bring in.

Got it. Alright. That's all I got. Thanks, guys. Great quarter.

Hi, thank you for the questions.

Our next question comes from Thomas Hain without Azra [ph]. Please go ahead.

Good afternoon. Thanks for taking a moment for me. I had two questions. The first one is on the trading income and fair value adjustments on loans and line item. So I think I'm not overstating and when I say it's, it's been phenomenal 600 million or 700 million of revenues in the last seven quarters, can you give us a little bit more, sort of tell us a little bit more about the nature of what goes into that line item is it, how much of it might be sort of principle transactions and commissions, from a stable set of regular, regular clients, versus less client driven opportunities to transaction revenues.

So, I feel like maybe there's two questions in there. So let me just talk about the principal investment, the philosophy around that, and how that works. We, we believe that our platform, and we talked about this in previous calls. We have, we have 2000 employees, we have, 130 people in our advisory side over the last round, or we do appraisals on 1000 companies. We have all the broker dealer relationships, we are going to see proprietary transaction opportunities, usually, usually, that require speed. And so we have taken advantage of those opportunities, and put our money or our own capital to work. We've also benefited from having relationships with, with companies like franchise group where we helped build that business bought out Liberty Tax, when an insider was selling three years ago, he helped them make, I don't know how many acquisitions backstops some of those acquisitions. At the same time, we owned 3 million shares from eight to 40 something. So we think that we can help enhance the companies that were around and utilizing all of these different skill sets we have, and then take advantage of opportunities as they come in. And so we do not view our mandate, as let's go buy some IBM, like, that's not what we do. We are everything we do, has a proprietary component to it, and usually has fee opportunities around it too. So in the case of a franchise group or other companies that we've worked with, we want to be able to help. We want to take we want to take advantage of the fact that we think we're helpful by owning some of their stock, and then we want to be a provider of services for them as we partner with them. So that's, that's the nature of the principle investing that we do.

Okay. And then thank you for that. My second question is just, if you could sort of talk about it seems like you folks are always on the hunt for interesting investment. Could you talk about sort of pipelines of things you might be looking at within the principal investments or the brand segment that you just pipelines look relative to history is there a lot going on out there?

Yes, so I think because we've been so active, we've been willing to buy assets that aren't down the pipe, kind of private equity transactions. And when I say that, let's go for as far back as buying United Online, a dial up internet company or, or a magicJack. So we often see proprietary flow, because we're willing to think differently and move a little bit quicker. And we brought in our principal investment group we've brought in Dan Shribman, three years ago from Anchorage, who has just built a great team to go out and take advantage of those opportunities. So the flow that we see is significant. And we've got to make sure that we're, we're integrating them right. And some of them might be an initial investment that ultimately ends up into a bigger investment. But I would say there is no lack of opportunities for us to look at for our principal fund.

Great. That was it for me. Thank you.

Alright. Thank you for your interest.

Ladies and gentlemen, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Riley for his closing remarks.

Well great. Thank you everybody. I guess, I would close by saying with the recent market dislocation, this is where we gain market share. And this is where we find opportunities. And this is often where we will find great people that might be looking for a more diversified platform or change. And this has always been the best time for us. So while you might take a little bit of short term pain and your principal investments or our underwriting might be a little slower. If you go back in time, this is really where we've been able to make a big difference in our business. So that's, that's the plan. And we appreciate your support. And obviously, we appreciate all of all of our partners at B. Riley that's helped make us grow and it was a terrific year. And on to the next one, so we look forward to talk to everybody in the quarter. Thank you very much.

Thank you. Before we conclude today's call, I will provide B. Riley Financials Safe Harbor statement, which includes important cautions regarding forward-looking statements made during this call. There have been statements made during this call about B. Riley Financials future expectations, plans and prospects and any other statements regarding matters that are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors include the unpredictable and on-going impact of the COVID-19 pandemic, as well as the other risk factors explained in detail and the company's filings with the Securities & Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today and except as required by law. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise. Thank you for joining us today for B. Riley Financials fourth quarter and full year 2021 earnings conference call. You may now disconnect.