Good afternoon and welcome to the B. Riley Financial's Fourth Quarter and Full Year 2023 Earnings Call. My name is Jordan and I will be your call coordinator. Earlier today, B. Riley issued a press release and financial supplement detailing its results for the fourth quarter and full year 2023 which can be found on its Investor Relations website at ir.brileyfin.com. Today's call includes prepared remarks from the company, followed by a question-and-answer session. 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. [Operator Instructions] As a reminder, this call is being recorded. An audio replay will be available on the company's Investor Relations website later today. And before we conclude today's call, I will provide the necessary cautions regarding forward-looking statements. Now, I will turn the call over to Mr. Bryant Riley. Mr. Riley, please proceed.

Thank you for joining our call this afternoon. Before we get into our results, I want to thank everyone who attended our Investor Day in December and I want to encourage anyone looking to understand the complexities of our business to refer to our comprehensive presentation which is posted to our Investor Relations website. At that event, we also addressed the attention on B. Riley related to our role in taking Franchise Group private while Brian Kahn was CEO. Given the current scrutiny surrounding this matter and the time and resources it has required to complete our review, our annual report on Form 10-K for the year will be delayed. This remains a focus for our team and we're working to complete it soon. Now in terms of our results, 2023 was a strong year for the majority of our subsidiaries. However, the strength across our core business was masked by non-cash write-downs related to Targus and unrealized investment losses. Despite a choppy operating environment for certain of our core businesses, we delivered increased revenues of over 50% at $1.6 billion for the year and $368 million of operating EBITDA. As we look ahead, our focus remains on charting the best path forward for our business, employees and shareholders. With these considerations in mind, this afternoon, we announced that we have retained Moelis & Company to conduct a review of the strategic alternatives for our appraisal and retail liquidation businesses, formerly known as Great American Group. Those who have followed us know that Great American has played a significant role in B. Riley's history and overall success. We became a public company in 2014 through our combination with Great American. Since then, we have consistently stated our intention to use our balance sheet opportunistically to invest in and acquire businesses…

Thanks, Bryant. As I start my comments, I would like to remind everyone that the financial results discussed in our press release and on today's call are preliminary and unaudited. As mentioned in our press release, we will be filing a Form 12b-25 with the SEC to provide notice of the delayed filing of our annual report on Form 10-K for 2023 which we are working to complete. Now turning to our results. For the fourth quarter ended December 31, 2023, B. Riley reported total revenues of $347 million and a net loss of $70 million or $2.32 diluted loss per share. Net loss for the quarter was primarily due to a non-cash impairment charge related to Targus and unrealized investment losses related to securities owned. Investment gains and losses include realized and unrealized gains and losses on our investments. These investment gains and losses have and will continue to create volatility in our periodic earnings. For this reason, we generally discuss our performance in the context of our operating revenues and operating adjusted EBITDA which may be considered non-GAAP financial measures. During the fourth quarter, we recast our operating metrics to include revenues from fixed income spread activity which represents spread income for our institutional business and a steady contributor to our earnings. This adjustment is reflected in our reconciliation for operating revenues and operating adjusted EBITDA. Investors can refer to our earnings release for a reconciliation of non-GAAP metrics as well as an explanation for our use of these metrics and the definition of these terms. Excluding investment loss of $49 million, operating revenues were $395 million for the quarter compared to $449 million in Q4 of 2022. Operating adjusted EBITDA of $79 million compare to $110 million in the prior year period. Turning to our results for…

Thanks, Phil. As Bryant mentioned, non-cash losses masked what was otherwise a strong year with notable progress across the vast majority of our subsidiaries. In our Capital Markets segment which includes our investments in loan portfolio and results from B. Riley Securities, revenues increased 75% to $575 million in 2023, up from $328 million in 2022. Segment income increased to $198 million in 2023, up from $82 million in 2022. Excluding investment gains and losses, segment operating revenues increased to $562 million, up from $557 million in 2022, primarily driven by investment banking and institutional brokerage activities at B. Riley Securities. B. Riley Securities saw a strong Q4 and contributed to operating revenues of over $100 million and over $20 million of operating adjusted EBITDA. Fourth quarter investment banking revenues increased year-over-year but were slightly lower versus the previous quarter due to lower underwritten offerings. While equity capital markets remained subdued in the quarter, we saw an uptick in M&A activity and have recently gained significant market share in debt capital markets. With respect to our restructuring group, this team continues to field an increased number of opportunities and has seen a higher level of active engagements. Sales and Trading demonstrated sequential improvement, supported again by increasing contribution from fixed income trading. Looking ahead, we are gearing up for our 24th Annual Institutional Investor Conference this coming May. Our Wealth Management business returned to profitability in 2023 with revenues of $198 million and segment income of $3 million. Reoccurring revenues contributed 60% of our Wealth revenues for the year. For the fourth quarter, revenues in fee-based assets increased year-over-year compared to our fourth quarter of 2022. This is yet another milestone following the operational realignment of this business throughout 2021 and 2022, as discussed during our December Investor Day presentation.…

[Operator Instructions] First question comes from Steve with Emerson Investment Group.

We're -- along with stock and the bonds, I'd appreciate a little more color regarding the delay in filing and specifically, if your auditor has agreed to sign off on the audit.

Hey Steve, been a while. We're not going to comment on the audit other than what we said in the press release.

Our next question comes from Sean with Charles Lane Capital.

Just real quick, could you just walk us through the thinking behind the former Great American sale, why that unit? And if you have any sense of timing on that, that would be helpful.

Sure. So I think, Sean, you've been around this business for a long time and you've seen us make acquisitions of wealth management at a time where it was out of favor. We acquired GlassRatner when they were great business but doing $4 million, $5 million of EBITDA and helped to enhance that with this great management team. My view is that what we're best served at is finding opportunities, again, whether it's United Online, where we bought for $48 million and returned over $120 million or its Brands, finding opportunities that are either out of favor or just represent a unique opportunity for us; so that's one. Two is, Great American, in my view, is poised to take off with a different entity. And the reason I say that is, if you look at our competitors, we did some of this. We had a direct lending fund that was very successful. We leveraged that asset into buying brands. We utilized some help when we did the receivables business. We've done some consignment. But I think they're right in the middle of the sweet spot as direct lending becomes even more increased. And I think a larger institution with a bigger balance sheet is going to kill it with that asset. And from my perspective, we've got some opportunities around businesses we already own and know and our own business. And so we thought the timing was good. As far as how long, I think we like to have a pretty good sense of where we are by the end of the second quarter.

Okay. And then, with the savings, so to speak, from the dividend cut, do you have a priority for shares versus bonds?

Yes. I would say that that's a Board decision. Obviously, one has limited upside and one has more upside. But I would say we're just going to be opportunistic around our cap stack and anything that we find is not core, not a business but an asset that's not core, if we can utilize that to buy back some of our debt at 30% strip yield, then we should be thinking that that asset is worth 30% more than it is. So we have an opportunity to, I think, create real value based on the perception of our company right now by some.

[Operator Instructions]

Okay, operator, are we good?

Correct, just prompting. [Operator Instructions]

I think we prompted 3 times. So let me just -- let me speak to our employees and partners and clients directly. Many of you and I think we highlighted this Investor Day, we've been fighting through and growing this business for 20, 25 years together, 15 years together. This is a battle that I am excited to be in with everyone that's part of this team. We were in a great spot. I'd much rather have a business go from $12 million EBITDA to $20 million EBITDA in a year than a mark or a markdown. And what we saw this year was improvement in almost all of our operating businesses. So, let's just stay focused. I know we can -- we will stay focused and we will take advantage of what I view as a huge disconnect. So, thanks everyone for listening on the call. TK or Phil, anything you want to add?

Yes. No, just would echo your sentiments. I mean, the core of this firm is our people and the resilience that they've shown over the last couple of months cannot be overstated. It's truly gratifying to see and it's what's going to carry us through this. So, not a company on the planet that doesn't go through its trials and we're going through ours and we're going to get through it. So, looking forward to it.

Alright. 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. 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. 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. 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. Such forward-looking statements include but are not limited to, statements regarding our excitement and the expected growth of our business segments and segments regarding a transaction related to the company's Greater American business and potential use of proceeds. Factors 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 in B. Riley Financial, Inc.'s periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial, Inc.'s annual report on Form 10-K for the year ended December 31, 2022, under the captions Risk Factors in Management's Discussion and Analysis of Financial Conditions and Results of Operations, as applicable. Additional information will be set forth in B. Riley Financial's annual report on Form 10-K for the year ended December 31, 2023. These factors should be considered carefully and participants are cautioned not to place undue reliance on such forward-looking statements. 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 Fourth Quarter and Full Year 2023 Earnings Conference Call. You may now disconnect.