BRC Group Holdings, Inc.

Good afternoon and welcome to B. Reilly Financial's first quarter 2024 earnings call. My name is Ariel and I will be your call coordinator. Earlier today, B. Reilly issued a press release and financial supplement detailing its results for the first quarter of 2024, which can be found on its investor relations website at ir.breillyfin.com. Today's call includes prepared remarks from the company followed by a question and answer session. Joining us today from B. Reilly are Brian Reilly, Chairman, Co-Founder, and Co-CEO, Tom Kelleher, Co-Founder and Co-CEO, and Philip Ahn, CFO and COO. After management's remarks, we will open the line for questions. Please note that all participants will be on a listen-only mode until the Q&A portion of the call. As a reminder, this call is being recorded. An audio replay will be available on the company's Investor Relations website later today. Today's call will also include non-GAAP measures, the reconciliation for these, as well as an explanation for the use of these metrics and a definition of these terms is available in the earnings press release and financial supplement, both of which are available on the company's investor relations website. 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. Brian Riley. Mr. Riley, please proceed.

Thank you for joining our call this afternoon. Before we get into these results for the quarter, I want to thank our employees, investors, and partners for your continued patience throughout what has been a highly unusual period for our firm. Against that backdrop, I'd like to start by putting our operating performance for the quarter into perspective and then providing some context on our investments. We had a solid quarter from an operating perspective. We generated $66 million of operating adjusted EBITDA compared to $88 million in the same period last year. Our advisory services business had a record Q1. BRS saw increased fee income year over year despite a decrease in overall capital market segment revenues. And wealth management operating margins have continued to improve. At the same time, we monetize investments consistent with our business model and use this capital to both repay outstanding debt while investing in attractive new opportunities such as Noggin. For context, our first quarter results reflected $59 million of investment-related losses, which are primarily unrealized, in addition to incremental costs due to the late filing of our 10-K, internal review, and subsequent independent investigation undertaken by our board's audit committee, which we are happy to have behind us. In contract, last year, our first quarter results benefited from approximately $23 million of investment-related gains and an increase in interest income from a pool of performing consumer receivables that we acquired from Babcock in the prior year, which has generated returns north of 20%. That portfolio is maturing as reflected in the year-over-year change in our total loans receivables balance. On a more normalized basis and excluding the incremental costs and our non-cash gains and losses, operating income was flat at approximately $33 million when compared to the same period last year. From a revenue perspective, the increase in fee income in our capital market segment was offset by lower interest income in line with the reduction of consumer receivables in our overall loan portfolio from the same period in 2023. As I mentioned, advisory services had a record first quarter. This was both in terms of revenue and operating income. This is a business that was generating approximately $76 million in revenue a little over three years ago and is now generating revenues at an annual rate of over $100 million. Operating margins in our wealth management business have continued to improve over the last two years, and while Targus is continuing to work through the macro headwinds that impacted the global PC market, we believe the business is well positioned for when this market normalizes. I appreciate some on this call may be newer to our story. It's important for our investors to understand that we have a long history of making investments and acquisitions, And we utilize the services and expertise of our platform to not only maximize the potential value of our investments, but also to manage any potential downside. This is core to our business of what we do. Our portfolio is going to fluctuate in marks from quarter to quarter due to the nature of our investments. We acknowledge the volatility this creates in our periodic results. However, it is important to view our investments over a longer time horizon. As I mentioned, net loss for the court included an investment loss of $59 million, which was driven by changes in fair market valuations for our investments, including Freedom BCM, which consists of the underlying business of FRG, and also our investment in BW. As we discussed on our last call, since the closing of FRG's take private in August of last year, FRG management has executed two transactions that are aligned with our state and investment thesis. Those two transactions are the sale of Badcock Furniture in December 23 and Sylvan Learning in February 24, which sold for a higher multiple than what FRG management expected, and that was originally underwritten for this business. The adjustment in the fair market value for Freedom reflected the overall softness of the consumer market during the first quarter. Despite the change, we remain confident in the operators and the management team of each of these businesses and in their ability to execute on strategy. For those familiar with B. Reilly, you know we often describe our firm as a collection of operating businesses on the one hand and our investment book on the other. What perhaps is less appreciated is the challenges that the uniqueness of our firm present from an evaluation perspective for investors in looking at our P&L and balance sheet relative to the inherent value we've created with our wholly owned subsidiaries and the businesses we have built. For perspective, over the last year, we have taken non-cash impairment charges related to Targus, which has underperformed since we purchased it a year and a half ago. On the other hand, our Great American businesses, which consist of appraisal and asset disposition, are on our books for approximately $35 million, and our Glass-Ratner advisory business, which we acquired in 2018 and has approximately $35 million invested, including tuck-ins, combined in 2023 to generate approximately $52 million of operating income, which includes a roughly million of income from our real estate advisory. This $52 million is represented in our auction and liquidation and financial segment income. Taken together, our core operations continue to generate strong free cash flow, and combined with the actions we are taking, we expect to exit 2024 with ample liquidity to aggressively capitalize on the opportunities ahead of us. We remain focused on running our business in the best interest of our stakeholders by addressing the needs of our clients, partners, and employees. The market opportunity in this small and mid-cap space remains as attractive as ever, and we believe B. Reilly is uniquely positioned to meet the needs of companies in this space. To that end, we are pleased to deliver our investors a dividend of $0.50 per share related to our operating performance for the first quarter. We are thankful to our many supporters for their outreach and continued confidence in B. Reilly. With that, I will turn the call over to Phil Ahn, our CFO and COO, to discuss key metrics for the quarter. Phil?

Thanks, Bryant. For the first quarter ended March 31, 2024, we reported total revenues of $343 million and net loss attributable to common shareholders of $51 million. driven by approximately $59 million of investment-related losses and incremental expenses related to the filing of our 10-K and the internal review and subsequent investigation undertaken by our audit committee. As Bryant noted, 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 are considered non-GAAP financial measures. Excluding investment gains and losses, operating revenues were $379 million for the first quarter of 2024, compared to $389 million in the prior year quarter. Revenues from services and fees increased 9% to $257 million in the first quarter, up from $236 million in the same prior year period. Interest income from loans and securities lending was $60 million for the first quarter of 2024 compared to $77 million in the prior year quarter. This decrease was driven primarily by the reduction of our loans receivable at fair value balance from $772 million as of March 31, 2023 to $452 million as of March 31, 2024. And as Bryant noted, we generated operating adjusted EBITDA of 66 million in the first quarter of 2024, which compared to 88 million in the first quarter of 2023. Turning to highlights from our balance sheet, as of March 31st, we had 191 million in unrestricted cash and cash equivalents, 943 million in net securities and other investments owned, and 452 million in loans receivable at fair value. At quarter end, we had total cash and investments balance of approximately $1.6 billion, which includes approximately $21 million of other investments reported in our prepaid and other assets. Total debt as of March 31st was approximately $2.2 billion. And total debt net of cash and investments was approximately $581 million at quarter end. During the quarter, we redeemed approximately $115 million of our Riley O. Senior Notes on February 29th, 2024, And earlier this month, we announced the remaining $25 million of our Riley O. Sr. notes will be redeemed on May 31, 2024. Finally, as Bryant noted, we have declared a dividend of $0.50 per common share. Our quarterly dividend will be paid on or about June 11 to common shareholders of record as of May 27. That completes my summary. I'll now turn the call over to Tom to discuss our business segments. Tom?