Good afternoon, and welcome to the B. Riley Financial Second Quarter 2020 Earnings Conference. Earlier today, B. Riley issued a press release and presentation detailing its financial results for the second quarter. Copies are available in the Investor Relations 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 website later today. Joining us from B. Riley are Bryant Riley, Chairman, 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 begin.

Thanks. Welcome, everyone. Our second quarter results demonstrated solid performance from our operating businesses, along with a sharp rebound in our investments. Last quarter, we described the unrealized markdowns on our investment results as a moment in time valuations. Those losses were significantly reduced with investment gains of $114.5 million in the second quarter as a result of the market rebound. In the second quarter, our businesses generated $151.9 million in operating revenues and operating EBITDA of $46.8 million. Taken together, these results contributed to consolidated revenues of $266.5 million and total adjusted EBITDA of $148.3 million. And while forward visibility is generally difficult to predict in the markets that we serve, especially the more episodic businesses, we are encouraged by several developments at the end of Q2, which point to a sustained level of activity and a robust set of opportunities on the near horizon. Investment banking and brokerage has been a beneficiary of the market rebound. Our banking team closed several noteworthy capital markets transactions in Q2 and are engaged in several other deals that are due to close in the coming quarters. At the same time, our countercyclical businesses also saw a meaningful uptick in new engagements at the end of the quarter following the pause in activity in late March. Our bankruptcy advisory and banking restructuring groups signed a record number of new mandates in June. Our retail liquidation group has seen a significant increase in activity as COVID continues to impact retailers and has been engaged to operate over 1,000 stores a day. And our real estate disposition team has also signed multiple assignments since joining our firm this past February. We expect activity levels will remain high through year-end and into 2021 as a result of the immense pressure on companies during this period…

Thanks, Bryant, and welcome, everyone. For the quarter, B. Riley reported total revenues of $266.5 million and total adjusted EBITDA of $148.3 million. This was an increase from Q2 of last year, which recorded $164.7 million in total revenues and adjusted EBITDA of $52.9 million. Net income available to common shareholders was $82.8 million or $3.07 per diluted share compared to $22.2 million or $0.82 per diluted share for the prior year period. This increase was primarily due to a sharp rebound in our investment book following the COVID-19 market downturn at the end of the first quarter. In addition to investment gains of $114.5 million, our overall business reported operating revenues of $151.9 million for the second quarter. Turning to our reportable segments. Our Capital Markets segment 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 $111.4 million and operating income of $31.1 million for the quarter. These results were primarily driven by strong investment banking performance, contributions from GlassRatner’s financial consulting operations and wealth management. In terms of our Auction and Liquidation segment, our retail liquidation business contributed revenues of $8.3 million and segment income of $2 million. This included a few retail liquidation projects that closed during the quarter following the pause in March due to stay-at-home orders and COVID restrictions on retailers. As we have mentioned on our prior calls, our liquidation segment results vary from quarter-to-quarter and year-to-year due to the episodic nature of large scale retail liquidations. That being said, since quarter end, we have commenced several new fee engagements in July, which we expect to realize in future quarters. Our Valuation and…

Thanks, Phil. I’d like to start by recognizing the tremendous efforts of our people during this challenging period. We realized that many of our coworkers are anxious to reestablish some normalcy as it relates to the work environment, and while we have implemented a voluntary and phased approach to reopening our offices, our people’s health and safety remain our utmost priority. For the offices that we have reopened, we are closely monitoring local health advisories while adhering to social distancing and capacity restrictions as well as sanitation guidelines. However, most of our employees continue to work productively and efficiently from home. As both Bryant and Phil discussed, we have largely maintained performance across our operating groups despite the ongoing impact of COVID-19. This is much to do with the continued dedication of our professionals across B. Riley. After some highlights from our individual businesses, starting with our investment bank, deal activity accelerated in line with the overall market recovery after a period where many deals were put on hold. This contributed to another strong quarter for banking in several noteworthy closed transactions, including GAN Limited’s $62.4 million IPO and uplisting, which is one of the first public offerings post-COVID in May; Franchise Group’s upsized $97.7 million follow-on offering in June; and our advisory role to Northwest Bancshares and its acquisition of MutualFirst Financial and to the buyers of S.P. Richards U.S. operations. Our ATM and SPAC groups also remained active during the quarter. Notably, we served a sole book runner on our $175 million B. Riley principal merger SPAC IPO offering. And two of our SPAC IPO clients have identified targets during the quarter. And as Bryant referenced, Q2 banking restructuring advisory has increased in recent weeks. We signed several engagements during the quarter, many of which are ongoing, including…

[Operator Instructions] Our first question today is coming from Sean Haydon of THC.

Congrats on a fantastic quarter. I wanted to ask you guys about the B. Riley Principal Merger acquisition of Eos Energy? And just how will that manifest itself in the P&L? And do you guys have plans going forward for more SPACs, B. Riley SPACs, I should say?

So Sean, I would say that the SPAC economics are pretty well known. There’s a – obviously, there’s a promote component. And so those promotes often are somewhat variable based on the transaction. So I would say if, just broadly, SPAC promotes are anywhere up to 20% and sometimes, depending on other investors and things like that, that can be lower. So this will be very much like any other SPAC. We have always felt like we could be a conduit to smaller companies going public. We sell ourselves as someone that’s done it, that went through the early stages of being public. When we first went public, I think our estimates were something like $15 million of EBITDA and how to think about running the business tight and where to spend the money and we can help on acquisitions and M&A. So, we think we add a really unique perspective to companies that may want to go public, and then we have the ability to utilize our balance sheet because we don’t want to take anything public that we don’t want to be an investor in, and that’s always been our philosophy. So this allows us to invest a fair amount of our own capital in addition to whatever we earn on the SPAC and stay there for a long time. And this is something we hope to do more and more. Obviously, a lot of news getting crowded. But we think we have a proprietary platform that will create a lot of different opportunities for us that others won’t. We’ve never been in a bake off, even as ourselves as principles. And I think on a SPAC, I don’t see us in a situation we’re competing against other SPACs. I’d say, it’s really going to be, hopefully, a proprietary opportunity off of our platform. But the short answer is, yes, we hope to be a really important player in bringing smaller companies public.

Great. And do you have an average price on the 900,000 shares that you purchased – or sorry, the 200,000 that you purchased, I believe, this quarter outside of the 900,000?

So you know the 900,000. I don’t know the average price. I would say, if you – I think there was an earlier part of the quarter where we were obviously in the middle of a fire storm and in [indiscernible], if we knew what now, when we – or excuse me, if we knew then what we know now, we would have been more aggressive. But Phil – we can get back to – I got to think it’s in the low to mid-teens, probably 15, 16, [ph] something like that.

Yes, we can get back to you, Sean, on that.

[Operator Instructions] Our next question is coming from Wes Cummins of Nokomis Capital.

Bryant and Tom, just more of a high level question. I was looking through the financials on the operating EBITDA, which is new this year. When I look at that, and it’s up, I think, in the first six months, 90% year-over-year. And I know there’s some – a little bit of variability in the business, so I shouldn’t annualize, but it’s a big number annualized. And just trying to think through, is that kind of a new level, you think, for the business? Is it more sustainable versus last year or even two years ago, kind of given the diversification you’ve done? And then your move more towards a fixed dividend versus a small fixed and more of a special dividend? Just kind of your thought process around kind of where the business is versus where it was last year or the year before?

Sure. I’ll take a shot at that. So I think that when we look at our recurring dividend, we say, okay, what is our – where do we – how do we feel about our recurring EBITDA? And obviously, we added to the recurring side of the business with the brand business. We’ve had growth in a number of our other businesses. And at some point, unless you are – you’ve seen this for a long time, at what point do you say brokerage or retail is not completely episodic, and there is a recurring nature. We’re always trying to measure those things and be careful about it. But I think from our perspective, that – the recurring part, which is getting nicely over $100 million of EBITDA, provides a really good floor and pays for a lot of our interest and a lot of our dividends, and then there’s other pieces, we’re just always trying to manage. And as you go back just the last five quarters, you’ve got operating EBITDA of $43 million, $35 million. And then I don’t know what you want to do with Barneys, we’ve talked a lot about that. But even Q4 2019 where you had $16 million, you had a $50-plus million loss in Barney. So the real business that isn’t such a onetime hit that over $70 million in that quarter and then $70 million in Q1 and $46 million in Q2. So you’re going back six quarters, and you could go a little bit further, where you’re getting a sense that some of those episodic businesses are a little bit more recurring, it gives you more confidence. And what is the right number to annualize? Look, we ask ourselves that question every day. I mean we start-up over every quarter, but we feel really good from where we’re starting. And I would say – I don’t know that I’d sign up for a $250 million annualized run rate. But I will say the run rate gets higher and higher as we build out the business, and it’s definitely starting from a high level. As it relates to the dividend, we’re still going to do the onetime dividend. That’s a – that was our kind of commitment to our original shareholders and it’s a commitment to our current shareholders is that [indiscernible] the money. We ask a lot of our shareholders. We take a lot of discretion. And as part of that, our discipline is going to be to pay back a meaningful portion of our EBITDA back to the shareholders, and that’s been about 20%, 25%, and we don’t plan on changing that.

Great. Yes, I was just looking back myself getting close to – it seems like $200 million is a reasonable bogey on the operating EBITDA. And about 3x, I think is where you guys trade right now, it seems like it’s just really – the business is much more stable on an operating perspective than it was, say, two years ago. So I appreciate it.

[Operator Instructions] Mr. Riley, I’m showing no additional questions in queue at this time. I’d like to turn the floor back over to you for closing comments.

Great. Thank you. And thank you, everyone. What a difference 90 days makes. We feel like we’ve obviously have a lot of momentum. We recognize we’re in volatile markets, and we recognize that none of this success would not have happened without our valuable partners that work with us and the partners that trade with us and bank with us and trust us. And so we greatly appreciate of that, and look forward to talking next quarter. Thank you, everyone.

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 about 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 Litigations 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. This conference call also included 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. Thank you for joining us today for B. Riley Financial’s Second Quarter 2020 Earnings Conference Call. You may now disconnect.