B. Riley Financial, Inc.

Good afternoon and welcome to B. Reilly Financial's fourth quarter and full year 2020 earnings call. B. Reilly Financial has issued a press release and presentation detailing its financial results for the fourth quarter and fiscal year 2020. Copies are available in the investor section of the company's website at ir.breillyfin.com. Today's conference call will include a discussion of non-GAAP financial measures. Information reconciling these non-GAAP measures to the company's GAAP financial results can be found 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. Reilly are Bryant Reilly, Chairman, Co-Founder and Co-CEO, Tom Kelleher, Co-Founder and Co-CEO, and Philip Ohn, CFO and COO. After management's remarks, we will open the line for questions. 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. URiley Financial reported record revenues and profitability for both the fourth quarter and full year of 2020. For the fourth quarter, we reported revenues in excess of $410 million and total revenues of over $902 million for the full year. Based on our performance in 2020, despite an otherwise challenging year, we are increasingly confident in the earnings power of the platform we've developed. Our results demonstrated increased profitability from across our businesses and particularly our brokerage business. Investment banking delivered impressive results in Q4, contributing to record consolidated quarterly operating revenues of 270 million and record quarterly operating EBITDA of 126.8 million. Importantly, we have been beneficiaries of not only increased deal flow, but also from a number of larger and more significant deals across our equity capital markets and advisory businesses. We saw strong momentum from IPOs, SPACs, and a quarterly best for our ATM desk. In addition to our higher operating results, we were a beneficiary of the improved equity markets, which resulted in investment gains of over $140 million for the quarter, resulting in total gains for the year of approximately $104 million, a sharp recovery in our investment book from the markdown in Q1. With retail liquidation activity, continued growth in our consulting and advisory businesses, and steady contributions from appraisal, principal investments, and brands, we believe we have built a platform to not only withstand volatile markets, but also to benefit amid disruption. As our businesses have grown, we are in the fortunate position of generating material-free cash flow from our core operations in addition to our investment portfolio. While we continue to see extremely attractive uses for our capital, we also believe it is important to return a portion of our profits directly to our shareholders with the cash flow that we generate. As a result, we feel strongly that a balanced capital allocation policy includes substantial returns of capital to our partners. To that end, we have declared a total dividend of $3.50 per share, which includes an increase to our regular annual dividend to $2.50 per quarter and a special $3 dividend. Given the prospects and momentum we see across our businesses, we would expect our dividends to grow over time. In addition to our dividend policy, we repurchased over 2.1 million shares during the year. While B-Riley's momentum has never been stronger, we recognize there's always work to be done. We continue to look at other opportunities to lower our cost of capital and reflect our current state of operations. In addition, while we were always on the lookout for accretive acquisitions, we're seeing more and more opportunities to enhance our business by bringing on great people and new offerings onto our platform. Tom will talk about some of these later on in the call. As you will see from our press release earlier today, we're in the final closing process of our acquisition of national holdings, which, again, Tom will talk more about later on. The acquisition of National is an important milestone in B-Riley's 25-year history, and we could not be more excited to onboard this talented team to our platform. We should note we have a longstanding history with the National team as a prior board member and investor, and also through our respective teams working together as co-underwriters on a number of deals. We build a great mutual respect between our firms and our respective management teams. Together with our B. Reilly Wealth Management Division, National and B. Reilly have a combined platform of close to 900 registered reps and client assets north of $30 billion. With our combined institutional and retail distribution, we believe this merger enhances our position as a leader in small and mid-capital markets, which is reflected in our continued market share gains. A key benefit of our growth is our increasing operating leverage and the opportunities we are seeing, which are significant both in terms of number and in size. With over $300 million of cash and investments, net of debt at year-end, we will continue to work to capitalize on the opportunities we see ahead, while, as previously mentioned, continuing to take a balanced approach of returning capital to our shareholders. Lastly, we've said it before, but we can't say it enough. Our success relies on our people, and we feel incredibly fortunate for the world-class team we have here at B. Reilly and the new ones joining us from National. With that, I'll turn it over to Phil Onn, our CFO and COO, to discuss our financial metrics. Phil?

Thanks, Brian. Thanks, Brian. Welcome, everyone. As Brian mentioned, our fourth quarter and fiscal 2020 results represented an all-time high for B. Reilly Financial in terms of revenues and overall profitability. For the three months ended December 31, 2020, we reported record total quarterly revenues of $410.2 million, up from $165.2 million for the fourth quarter of 2019. Net income available to common shareholders totaled $170.1 million or $6.55 per diluted share up from 16.9 million or 59 cents per diluted share for the prior year quarter. Total adjusted EBITDA increased to 260.5 million up from 50.3 million in the fourth quarter of 2019. Operating revenues increased to 270 million up from 130.5 million for the prior year quarter. Operating adjusted EBITDA increased to 126.8 million up from $16.4 million for the prior year period. For the 12 months ended December 31, 2020, we reported record annual total revenues of $902.7 million, up from $652.1 million for 2019. Net income available to common shareholders was $200.4 million, or $7.56 per diluted share, up from $81.3 million, or $2.95 per diluted share for 2019. Total adjusted EBITDA increased to 406.8 million, up from 207.9 million for the prior year. Operating revenues increased to 798.7 million, up from 545.6 million for 2019. And operating adjusted EBITDA totaled 311.7 million for the year, up from 113.6 million for 2019. Strength in the equity markets also contributed to strong performance from our investment book. We saw investment gains of approximately 140 million for the fourth quarter, resulting in investment gains of approximately 104 million for the year. These investment gains primarily relate to mark-to-market valuations on strategic investments held by the company. Investment gains for the year represented a sharp recovery from the mark-to-market losses for the first quarter of 2020. With the growth and momentum of our platform, we continue to review our reportable financial metrics to provide our investors with greater visibility into our various business units. To that end, during the fourth quarter, we realigned our segment reporting to reflect some of our recent organizational changes, including the rebrand of our legacy Glass-Ratner consulting business and our appraisal business under the name of B. Reilly Advisory Services. As noted in our earnings release, we reclassified results from our consulting and appraisal businesses and our real estate business underneath the financial consulting segment. Consulting and real estate were previously reported in the capital market segment, and appraisal was previously reported as a standalone segment. We have recast our segment presentation in the relevant materials to reflect these changes. So now turning to our segment results, capital markets is our largest segment and includes investments and operating results for our investment banking, brokerage, wealth management, and fund management businesses. Excluding investment gains, capital markets generated operating revenue of 201.1 million and segment operating income of 102.5 million for the quarter. This compares to $127 million in operating revenues and segment operating income of $52.7 million for the fourth quarter of 2019. The significant increase was primarily driven by strong investment banking performance that Brian referred to earlier. Auction and liquidation fourth quarter results included segment revenues of $15.7 million and segment income of $7.5 million from retail liquidations and store closing projects completed by B. Reilly Retail Solutions, our former Great American Group. As we 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 retail liquidation projects. For the fourth quarter, financial consulting segment revenues were $26.5 million, up from $20.1 million for the prior year period. Segment income totaled $6.9 million, compared to $4.7 million for the prior year period. Results were primarily driven by bankruptcy, forensic accounting, and appraisal assignments performed by B. Reilly Advisory Services. Our principal investment segment, which includes results from MagicJack and United Online, contributed revenues of $21.4 million and segment income of $7.3 million for the fourth quarter. And our brand segment, which includes licensing revenues related to brand investments portfolios, generated revenues of $5.5 million and segment income of $4.1 million. Now, for the full year, capital markets generated operating revenues of $514.7 million and segment operating income of $208.6 million. up from 2019 annual operating revenues of $341.9 million and segment operating income of $77.4 million. Optional liquidation generated annual revenues of $88.8 million and segment income of $25.8 million. Financial consulting annual revenues increased to $91.6 million, up from $76.3 million in 2019. Segment income increased to $22.5 million, up from $17.8 million for the prior year. Principal investment segment companies continue to outperform initial investment estimates and provide steady cash flows to the B-Riley platform in 2020. For the full year, MagicJack and United Online contributed revenues of $87.1 million and segment income of $33.4 million. And finally, our brand segment, which was established in 2019, contributed licensing revenues of $16.5 million for 2020. Now some highlights from our balance sheet. As of December 31st, B. Reilly Financial had $103.6 million in unrestricted cash and cash equivalents, $767.2 million in net securities and other investments owned, and $373.4 million of loans receivables, net of loan participation sold. At year end, we had total cash and investments balance of approximately $1.3 billion, which includes $59.6 million of other equity investments included in our prepaid and other assets. Net of debt, BRI Financial's cash and investments totaled over $300 million at year-end. We repurchased 450,000 shares of common stock during the fourth quarter and over 2.1 million shares in 2020. Lastly, as Brian noted, we continued to review our dividend policy to align with our performance and outlook. We've increased our regular quarterly dividend to 50 cents per share from our previous quarterly dividend of 37.5 cents, In addition, our board has declared a special one-time dividend of $3 a share related to our fourth quarter performance. The fourth quarter dividend is payable on or about March 24th to stockholders of record as of March 10th. Upon payment of this dividend, we will have returned approximately $4.47 per share in common dividends related to our fiscal 2020 earnings. That completes my financial summary. I'll turn the call over to our co-CEO, Tom Kelleher, to discuss our individual operating units. Tom?

Thanks, Phil. As Brian noted earlier, the key recent development is our acquisition of National Holdings. This is a meaningful addition to our platform and a powerful combination for our respective firms. National adds 700 registered representatives and close to $20 billion of assets to our current roster of over 170 advisors and $12 billion in assets. With National also comes an established middle market-focused banking and capital markets franchise, complementary new service lines like tax advisory, and expanded offerings such as National's private shares platform, which provides qualified clients access to pre-IPO investment opportunities. At the same time, B. Riley Wealth Management, our existing legacy firm, has evolved into an integral piece of our platform. We have seen continued growth in this division, both in terms of profitability, but also in talent. Combining with National, forms critical mass in both our W-2 and and independent advisor channels, and significantly expands our respective equity syndicate offerings. The continued growth of our advisors remains our top priority as we work to integrate Nationals professionals into our platform. Importantly, we believe this combination will only serve to increase all of our professionals' businesses through a broader suite of investment solutions for clients, as well as enhanced sales and trading capabilities. We are incredibly excited to welcome our new colleagues at Nationals. in the coming weeks and look forward to sharing more in the coming quarters. Now, moving to our investment banking and institutional brokerage division, B. Reilly Securities. As noted, B. Reilly Securities delivered its best quarter yet. We saw momentum both in our capital markets and advisory businesses with meaningful gains driven by several noteworthy transactions. A few highlights include a $292 million IPO for software security company Telos, healthcare services $331 million SPAC IPO, the sale of Bed Bath & Beyond's Christmas Tree Shop subsidiary, the completed restructuring of RTW RecalWinds New York & Company, and $565 million jointly raised for AMC through our ATM desk. On this final point, Q4 was the best-ever quarter for our ATM business, which more than doubled its revenue contribution compared to Q3. eRally has served as the number one market leader for ATMs in the past decade, and we expect increasing activity the coming year as ATMs see broader adoption and are more widely accepted as a strategic capital markets tool for both healthy and distressed companies. Our role in healthcare services' $331 million IPO was just one of the SPAC IPOs we brought in the fourth quarter. In addition, we helped three of our SPAC sponsors successfully close business combinations. We are currently working with others that are actively seeking targets. Importantly, each of these engagements represent tremendous visibility into future opportunities. The structure and banking activity also remains strong with several mandates closing in Q4 and many more in the pipeline. This business, in contrast to our more cyclical capital market segment, has quickly established itself as resilient and opportunistic through both up and down cycles. We also continue to see a growth in the financial consulting division, which includes our legacy Glass-Ratner and appraisal groups under the new B-Riley Advisory Services brand. We saw a significant increase in bankruptcy and restructuring consulting engagements during the fourth quarter, and our appraisal division returned to growth following the slowdown in lending activity earlier in the year. As Brian mentioned, we are actively expanding the capabilities in our advisory group. During the quarter, we introduced a new operations management service line Earlier this week, we announced new compliance, risk, and resilience practice focused on ERM, business continuity, and cybersecurity consulting. Our newest team members bring deep expertise to areas that strengthen many of our core capabilities. We are excited to welcome these talented professionals to B-Riley and look forward to introducing them to our clients. We continue to assess opportunities to strategically scale new service offerings across the enterprise and to enhance existing core capabilities. A great example of this is our real estate group that we brought on a year ago in February of 2020 amid a very turbulent year for commercial property owners. Since joining the firm, this group has led over 1,700 real estate restructuring and bankruptcy-related projects spanning retail, department stores, restaurant chains, grocery, entertainment, and health services. Many of these engagements were completed by year-end, including Aldo, Muji, and Potbelly. with several more pending completion in 2021, including our ongoing JCPenney real estate project. Turning to our retail liquidation division, in 2020, we participated in over 2,000 store closings with associated retail inventory value of over $2.8 billion. Notable engagements completed during the quarter include Steinmar and JCPenney. 2020 was also a highly profitable year for our retail liquidation business overseas in Europe, and we expect activity to carry into 2021 as retailers continue to face financial stress due to lockdowns and dwindling brick-and-mortar sales. Our principal investment companies, Magic Jack and United Online, remain steady and important contributors of cash flow. At the end of November, we acquired 40% interest in Lingo, a cloud-based legacy communications service provider. We expect to acquire an additional 40% upon obtaining necessary regulatory approval. The addition of Lingo stands to meaningfully enhance our adjacent communications company investment. We continue to seek opportunities to acquire businesses that would be complementary to our current portfolio, while also assisting other investment companies with acquisitions. At the same time, the brand investment portfolio that we established in late 2019 continues to provide a steady source of reoccurring licensing revenue to the platform. Our brand's portfolio recovered from the initial impact of COVID-19 on retail sales earlier this year. In late November, we added the Justice brand to our portfolio. We remain optimistic about the long-term earnings potential from this platform. Taken together, we are extremely proud of our accomplishments amid an otherwise challenging year. As Brian said, this is much to the credit of our dedicated employees and their continued commitment to providing best-in-class service for our clients and our partners. We ended the year with more momentum than ever and look forward to continuing to deliver in the year ahead. With that, we'll open the line for questions and turn the call back over to Brian for closing remarks.

Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys To withdraw your question, please press star, then two. Once again, to join the question queue, please press star, then one, now. Our first question comes from Wes Cummins of 272 Capital. Please go ahead.

Hi, this is Seidel on for Wes. Great quarter. Quick question on capital allocation. Really great to see the minimum $5 dividend earned applied for this year. We'd love to get maybe greater color on how you balance the dividend versus the buyback as well as opportunistic investments such as Lingo. Thank you.

Sure. You know, this year was only five years in one. And, you know, at the beginning of the year, at points in time, we were buying our stock at $14, $15, you know, bonds, you know, at a 50% discount. And now we are, you know, paying out this dividend. And so we're always thinking about the different options. and what's best for our company and our employees and our shareholders. And so there's a balance there. We don't think we've compromised in any way on any of those things. We have plenty of capital to go find opportunities. We obviously purchased a large chunk of Justice, the Lingo transaction, National, added meaningful groups into the company, and we've got plenty of cash to do more. But at the same time, we think we're at an interesting inflection point where We had always said, you know, 25% of our EBITDA would be a target to distribute to our shareholders. And I think, you know, the more stable we get, the more, you know, the more our cash builds, I could see that number getting larger. But we've got to be really careful. This is a volatile business, and it can be humbling. And, you know, right now it is humming, and we're a beneficiary of that. And I think we're a beneficiary of some of the things we've done as a company. But we've just got to make sure that we're super balanced. As far as Lingo, we're always looking for other ways to create value off of the platform. We have a lot of inputs and a lot of proprietary opportunities, and now we've got 700 advisors that will also maybe have proprietary opportunities. So we think we're just going to see a lot of flow, and some of that comes directly to the company. Obviously, we have a SPAC out there, and we've done two SPACs, and that's an opportunity for us to take some of that proprietary flow. We feel really good about where we are. We have a lot of momentum, but we've been cognizant that 12 months ago was a lot different. We just have to make sure we balance all those things.

That's great. That's great. And then on your recent debt offering, it was 150 bps below your current highest cost of debt. I mean, should we expect that you guys should be able to continue to lower your cost of debt as you go on? I'd love to hear any color on that. Thank you.

Yeah, look, our cash flow and I think all of the inputs to how debt is valued, they're all better. We are a unique company that makes it a little bit harder to evaluate for debtors and equity holders. We've got a number of different businesses, and we do a lot of different things, and I And we're able to do a lot of different things, and I think that comes with a little bit of a higher cost on our interest rate. But I think you're right, you know, doing the most recent baby bond at 6%. And, you know, you would think that if we put a senior facility in there that we could do better than that. So that is an important mandate of ours over the course of the next year, and we've already started on that.

Nice. Thanks. That would be great and hugely creative. Thank you once again.

Thank you.

Our next question comes from Sean Hayden of THC. Please go ahead.

Hey, guys. First off, congrats on a phenomenal quarter and a great year. As far as your portfolio, in light of the national acquisition and the kind of realignment of the segments, do you foresee continuing to be opportunistic with your acquisitions, or are there holes in your product portfolio that you think could be filled and need to be filled?

Thanks for the comments. There's always going to be holes. We could expand on a number of different areas, leverage finance, commodities. We don't sit every day thinking to ourselves, I wish we had a commodities group. We are really excited about the team we have. National Fit's perfectly in that if you think of where I think we've gained a lot of market shares, our ability to put a deal together and utilize our balance sheet. And now we've got $30 billion of assets and 900 advisors that can also be part of our transactions. And the good news is I think the lead transactions over the course of the last 12 months that we've done have been up over 50%. So people have made money. Obviously, the market's strong, too. So I acknowledge that. But We just have – that's a great ad for us, and we've already seen that. But we're going to continue to look around, and it's hard – if you wanted to buy an M&A business right now, there would be 10 bidders for that, and that's not the world in which we've found the best value. So we're going to be – not that we're looking for that, but that's just an example. It's a pretty good environment for people like us, and – And we're just going to be thoughtful about do we build it internally? Do we buy it? Do we merge with it? But we don't feel any rush or any pressure to add anything to our business.

Yeah. And then, you know, you guys were relatively early on the whole SPAC movement. Are you running into increased competition? Because I know that You know, EOS is a good example. You're not looking at, you know, quote-unquote buzzy private companies. But, you know, there's a lot of capital being deployed in that area. Is that of concern to you?

Not as an underwriter, but as a principal to be Riley Spax. Is that what you're referring to? Yeah.

Yeah.

Yeah, I think we have the most compelling argument out there to merge with us. We – We went public as a small company. We grew through acquisitions. We grew through equity offerings or a couple equity offerings. We grew through debt offerings. And we've got a group of people in this firm that all want to see whatever company we merge with succeed. So you have all the M&A group. You've got the capital markets group. We have really good relationships with the sell side, with the buy side. So we think, and then we're picking from or trying to pick from bunch of proprietary relationships just because of the business we're in. So I would say, of course, there's more competition. I mean, I don't know how you could say there's not. There's just so many more SPACs out there. But I think we have, you know, a lot of runway for, you know, based on where we sit. And that's why you'll see we just followed our second one, our fourth one publicly today. So we feel like there's a lot of opportunities. Remember, you went years without any smaller cap IPOs. Right now, obviously... We're seeing a lot of really growthy companies come public, but there's a lot of great companies that should be public, and the markets weren't open for them, and I think they're going to be more open for them, and that excites us. So we still think there's a fair amount of runway there.

Great. Again, you guys knocked it out of the park. Thanks. Appreciate it.

Once again, if you have a question, please press star, then 1. Our next question comes from Paul Dwyer of Punch and Associates. Please go ahead.

Hey, guys. Good afternoon. Hey, Paul. Wanted to start on the capital market side. Could you spend a little more time, touch on it a bit, but spend a little more time on kind of how Q1 has been in terms of additional capital market strength? It's obviously been strong. And then In terms of specs that you've underwritten in Q4 and through Q1, any more insights you can provide into how that provides visibility into the rest of the year for capital market activity?

Yeah, so look, I would say that on the capital markets side, this has been years and years of investment in small and mid-cap companies. We didn't start last year doing this. We started in 97, and for the first seven years, we didn't even have a banking. We were just a small cap research firm. And so the relationships and the investment we've made are now paying off in a meaningful way with the relationships with the companies we've covered, some for, you know, 20 years. And I think the people that have worked here for a long time are just, you know, they've been primed to take advantage of that. Over the course of the last year, we have not added any additional operating expenses to our brokerage businesses, the same people that were here three years ago and just taking advantage of, you know, all of the experience we've had and sticking to our netting. And now we're, you know, we're really reaping the benefits from that. Clearly, there's an uplift, a rising tide for sure effect here. But, you know, I wouldn't opine on where we are on that. I just know that we have a team that's going to, I think, outwork our competition and continue to gain market share. As it relates to the SPAC business, and I've been asked a bunch of times where we think we are in that, I would say, as I mentioned earlier, there's a lot of companies that have had the window shut for them for a long time. So I think you're going to see, you know, maybe a broader breadth of companies going public, not just the Uber growth companies. And I think institutionally you're seeing private placements getting done with, you know, really quality brand institutions who are going to help those companies have a surety to go public. How founders' percentages work out may change. I don't know, but I think that there's a lot of opportunities. And so I think our total number of SPACs out there, including one we're doing today, which is our biggest yet, we've got the back-end fee opportunity is 10 times where it was 10%. nine months ago, and we have not had a SPAC that has expired without doing a deal. Obviously, there's a lot of newer ones, so take that with a little bit of grain of salt. But we try to take the approach of investing with the sponsors, not just being a churning kind of business for us. So we feel really confident that the SPACs we have out there that have been – that are public will complete a deal, and there's – There's $50 million-plus back-end fee opportunities, and obviously help them with their private placements. But most importantly, we help them with taking a good company public that, you know, needs access to capital and hopefully building a long-term relationship with those companies. So this is not just the SPAC. It is about, you know, building longer-term relationships that benefit the firm. Did I answer that?

Yeah, okay. You did. That's perfect. Thank you.

Okay, thank you.

I guess next question. Next part I wanted to touch on was the national, just kind of your overall wealth management platform. So with the 30 plus billion of assets, can you just flush out what that business looks like on a standalone basis? And I assume it's one of your more predictable businesses.

Well, you've certainly seen a move towards advisory over, you know, kind of regular way brokerage. So that advisory business is usually on assets. You know, we think that – so national is – we really like the national team, and we think that it's going to be a great fit. The thing about national is that the infrastructure that they put in place for the wealth managers, particularly on the independent side, makes it hard to – you know, it's a hard business being independent. And, again, the management team has done a great job, and we're super excited. But now you're going to be able to leverage, you know, our infrastructure, our products – We've already seen that, and it's been great. We have seen the national network really embrace our research and embrace our deals. And so, you know, together you'll have a business that will be doing in excess of $325 million in revenues. And, you know, we would expect that we would hope to get to at least a 10% EBITDA margin and then get a bunch of benefits on the other side of that. But, you know, National hasn't been greatly profitable for five years and also recognize that interest rates have, you know, really been a negative factor. You know, usually in the old days they'd make a lot of money from the money on their money, getting, you know, a piece of the interest rate on the cash from their clients, and that all went away. So that's out there too. But I think you can use that kind of number, and it might take a little bit of time, but I think the most important part is, I mean, think about the compelling offering we have to a company, a public company that wants to do a deal, you know, not only being willing and anxious to utilize our balance sheet to get a deal done. And now we've got the retail network and then we have, you know, clients like yourself that have been participants in our deal. And I think feel highly of the way we put deals together. And so all those things together, I think makes us a really, really powerful force. So there's the, you know, there's a financial side of it, which I kind of outlined, but there's also the other benefits. And there's also the benefits of, of a national, um, rep referring a company that, you know, one of the clients owns that wants to be sold or wants to buy things. And so we need to put all that together. It's a lot of hard work and, um, but we've done it with a glass Ratner acquisition and we've done it with other acquisitions. So we think that this will just enhance that.

Yeah. Okay. That, um, that makes sense. Uh, last for me is on the, uh, the brand side, uh, turning into a nice little business for you guys. I guess, one, how seasonal is the business? And then, two, is that 70% plus operating margins sustainable and typical?

Yeah, so just to describe that business, we have a relationship on most of those brands with Blue Star Group, and they provide all of the operating expenses. So just think of us as, for the most part, you know, partners, minority partners in most of those brands. So Hurley, we own 40%. Justice, we own 40%. The six-brand portfolio that we bought, you know, a year and a half ago, we own closer to 80%. But they still manage that. So the numbers that you see us report should be, you know, mostly margin. So that's sustainable. In terms of Cyclicality, there's not a ton. I mean, you know, Hurley does a little bit better in the summer, and some of the other brands do better in the winter. But most of these, just so you understand the way the business works, is there's a minimum license that you get from a licensee, and that's paid, you know, quarterly or monthly, and then you get overages. And so the minimum is pretty consistent. The overages could be a little seasonal. But I wouldn't say to you that it's anything that's going to be overly noticeable. So we love that. We think that that business for us is a good counter to our, you know, we always say this episodic and recurring, and we love the relationship with the Blue Star guys and think that we'll find some more things to do with them.

Okay, great. That's it for me. Really nice to hear, and thanks for all the work.

Oh, we appreciate your support. Thank you.

Once again, if you have a question, please press star, then one. Our next question comes from Keith Rosenbloom of Cruiser Capital. Please go ahead.

First, I just wanted to reiterate all the congratulations. What a great year and a great quarter, Brian. Great job for your team. Thank you. You're welcome. I wanted to just get a little color on something that the prior questioner was was asking about, you guys have now put a lot of pipes into the marketplace, and this seems like you're effectively seeding an investment banking business for the foreseeable future. Do you have any sense as to the earnings capacity you have? You mentioned the back-end fees every time you close a SPAC. You're obviously, every time you do a SPAC, you've got a pipe potential pipe, you've got a potential M&A fee, and then obviously the deal that you get, the fees you get when the SPAC itself closes. Do you think of that as backlog? And do you have any concept of what that revenue could be, assuming you guys do the work and earn the business and are able to close?

Well, I mean, I can speak specifically to the SPACs that we've already underwritten. There's, you know, approximately $50 million of kind of deferred fees as those SPACs get de-SPACed, and then there's the pipes involved with them. But what I would say is what excites me more than that is the size of some of the other deals we're doing, the advisory deals. I mean, managing or running an IPO, a $300 million IPO where – there's not a lot of firms that have done that, you know, other than the bolts bracket. And to the extent we can continue to see our brand increase, our platform increase, you know, when you all of a sudden start picking up, you know, $10-plus million fees on a deal, that's when it gets really exciting. And I think we have a lot of room there. I mean, I think, you know, we're going to be able to put bigger, bigger deals together and start to see some outsized companies some fee opportunities. And you're right, and I said this in the previous call, every time we do a SPAC, every time we cover a company, that's a relationship that we need to utilize in every way we can. I mean, we'll sell them a magic jack if it helps our relationship. So we've got the advisor, we've got the formal grass ratner group that can help with any new businesses and evaluations. We've got our appraisal group that can help them think about their assets. And so All of those put together should create opportunities for us to have really, it has, put together great relationships, and now we've just got to make sure we take advantage of that, and it feels like there's a lot of opportunities for us. I can't pick a number, but it feels like we should really take advantage of those relationships and have a monetary benefit, and obviously the SPAC backlog is real, and I do think about that as backlog.

Congrats again.

All right. Thank you.

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, thank you very much. We really appreciate all the support, and we're really excited to have the national team join us and all of their brokers, including Bob Lodati. And we couldn't do this with all the people without all the all the employees and partners we have and investors we have. So thank you very much. We look forward to reporting next quarter.

Thank you. Before we conclude today's call, I will provide B. Reilly Financial's Safe Harbor Statement, which includes important cautions regarding forward-looking statements made during this call. Statements made during this call about B. Reilly 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 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 ongoing impact of the COVID-19 pandemic, as well as the 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 today for B. Reilly Financial's 4th Quarter and Full Year 2020 Earnings Conference Call. You may now disconnect.