BRC Group Holdings, Inc. Q4 FY2022 earnings call

• Strategic acquisitions in 2022: Targus, BullsEye Telecom, Lingo, and FocalPoint were acquired to bolster the platform with uncorrelated revenue sources and enhance capabilities. • Receivables portfolio: Performed well with double-digit returns, recovering approximately $395 million of cash from a $400 million unlevered purchase and having $154 million of current receivables. • Financials and balance sheet: As of Dec 31, 2022, had $269 million in unrestricted cash, $1.1 billion in net securities, $702 million in loans receivables, total cash and investment balance ~$2.1 billion, total debt ~$2.4 billion, in compliance with debt covenants. • Segment realignment: New Consumer segment includes Brands and Targus; Communications and All Other segments created. • Dividend: Regular quarterly dividend of $1 per share to be paid on March 23.

The segment performance included: Capital Markets generated operating revenues of $542 million with segment operating income of $232 million for the year. Wealth Management had revenues of $234 million for the year, down from $382 million in 2021. Financial Consulting had revenues $99 million for the year with segment income $16 million. Auction and Liquidation had revenues $74 million. The Communications segment revenues increased over 150% to $236 million for the year. The Consumer segment revenues were $171 million with segment income $96 million.

• Recurring EBITDA in 2022 was ~$324 million, which funded dividend, taxes, and overhead. • Targus contributed ~$11 million in 2022 (acquired mid-October), with expected run rate in 2023. • BullsEye Telecom and Lingo enhanced Communications segment cash flows, expected to contribute more in 2023. • Receivables portfolio continues to perform with double-digit returns, with recovery of ~$395 million and $154 million current receivables.

• Market volatility impacting investment portfolio and overall results. • Debt covenants compliance risks, though currently in compliance. • Quality of receivables, particularly concerns raised about certain receivables like Badcock Furniture. • Volatility in brokerage and investment banking businesses, affecting operating EBITDA.

Q: Sean at Charles Lane Capital asks about Farber acquisition and its geographical vision.

A: Bryant Riley responds that Farber was an opportunistic acquisition with a great fit, providing capabilities and geographical opportunities.

Q: Paul at Punch & Associates asks about loan book underwriting and Wealth Management profitability.

A: Bryant Riley and Tom Kelleher respond on underwriting process, integration challenges in Wealth Management.

Q: Unidentified Analyst at [indiscernible] Economics asks about net debt and loans receivable breakdown.

A: Bryant Riley and Phil Ahn respond on balance sheet, receivables quality, and portfolio returns.

Q: Keith at Cruiser Capital Advisors asks about recurring EBITDA and Badcock receivables.

A: Bryant Riley responds on Targus contribution and receivables performance.

Q: Unidentified Analyst at [indiscernible] Strategic Advisors asks about dividend funding and core capital market fees.

A: Bryant Riley and Phil Ahn respond on recurring EBITDA funding the dividend and incentive fees.