LOS ANGELES, May 15, 2024 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ: RILY) ("B. Riley" or the "Company"), a diversified financial services platform, today released financial results for the three-month period ended March 31, 2024.
First Quarter 2024 Summary
- Net loss available to common shareholders of $51 million primarily driven by non-cash, unrealized investment losses
- Total revenues of $343 million vs $432 million for the first quarter of 2023
- Operating revenues(3) of $379 million vs $389 million
- Operating adjusted EBITDA(4)(5) of $66 million vs $88 million
- Total cash and cash equivalents of $191 million as of March 31, 2024
- Total cash and investments(1) of $1.61 billion as of quarter end
- Retired $115 million of 6.75% 2024 Senior Notes; and repaid $57 million of bank debt facilities and notes payable
- Declared quarterly dividend of $0.50 per common share
Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented: "Overall, we had a solid quarter from an operating perspective despite the unusual events our firm has experienced over the last several months. As we review this quarter, it is worth pointing out a few meaningful changes since last year. Results from 2023 benefited from $52 million of unrealized gains on investments in addition to increased interest income from the pool of performing consumer receivables that we acquired in the prior year which is maturing. In contrast, the first quarter of 2024 reflected $30 million of unrealized non-cash investment losses, and incremental costs related to the filing of our 10-K, internal review and subsequent independent investigation undertaken by our Board's Audit Committee. Excluding these items, operating income was flat compared to last year based on the performance of our core businesses - B. Riley Securities, Wealth Management, and Financial Consulting, including Advisory Services which reported a record first quarter."
Tom Kelleher, Co-Chief Executive Officer of B. Riley Financial, added: "As it relates to our operating performance, B. Riley Advisory Services delivered its strongest Q1 results in our firm's history, driven by increased demand for appraisals and bankruptcy restructuring, litigation consulting and real estate services. B. Riley Securities benefitted from a steady dealmaking environment and generated more in fee income this quarter compared to the same period last year, despite a decrease in overall Capital Markets segment revenues. Wealth Management operating margins have continued to improve over the last two years, and our Communications portfolio continued to deliver steady cash flow to our platform during the quarter. While Targus is continuing to work through macro headwinds, we believe the business is poised to turn as the overall PC market normalizes. Our core operating performance remains strong - and that is due in no small part to the continued dedication of our employees across B. Riley."
Riley continued: "Consistent with our business model, we have monetized investments since year-end and used the capital to retire bonds, repay $57 million of bank debt and notes payable, and redeploy in attractive new opportunities - including Nogin which is a great strategic fit with our brands business. The strategic review process for our Great American Group retail liquidation and appraisal businesses is progressing, and we are pleased with the interest we have seen to date. Throughout all of the distractions we experienced this past quarter, we have kept our heads down and focused on running our business in the best interest of our stockholders by addressing the needs of our clients, partners, and employees. To that end, we are pleased to deliver our investors a quarterly dividend of $0.50 per share based on our operating performance for the first quarter."
Declaration of Common Dividend
The Company has declared a quarterly dividend of $0.50 per common share which will be paid on or about June 11, 2024 to common shareholders of record as of May 27, 2024.
Balance Sheet Summary
At March 31, 2024, the Company had $191 million of cash and cash equivalents. Cash and investments(1) totaled $1.61 billion as of quarter end, which includes $943 million of net securities and other investments owned, and $452 million of loans receivable, at fair value.
Total debt was $2.19 billion as March 31, 2024. Total net debt, net of cash and investments,(1) was $581 million at quarter-end.
Redemption of 6.75% 2024 Senior Notes
On February 29, 2024, the Company redeemed approximately $115 million aggregate principal amount of its 6.75% 2024 Senior Notes. The Company announced it will redeem the remaining $25 million of its 6.75% 2024 Senior Notes on May 31, 2024.
First Quarter 2024 Financial Summary
Three Months Ended | ||||||
March 31, | ||||||
(Dollars in thousands, except for share data) | 2024 | 2023 | ||||
Net (loss) income available to common shareholders | $ | (51,180) | $ | 15,143 | ||
Basic (loss) income per common share | $ | (1.71) | $ | 0.53 | ||
Diluted (loss) income per common share | $ | (1.71) | $ | 0.51 | ||
Net loss available to common shareholders was $51 million during the three months ended March 31, 2024 which was driven by approximately $59 million of investment-related losses consisting primarily of non-cash trading loss on investments and fair value adjustments on loans, and realized and unrealized losses on investments. This compared to net income available to common shareholders of $15 million for the three months ended March 31, 2023, which included investment-related gains of approximately $23 million.
During the first quarter of 2024, the Company also incurred incremental professional services expenses of approximately $7 million, compared to the first quarter of 2023, related to the filing of its Annual Report on Form 10-K, and the internal review and subsequent independent investigation undertaken by the Audit Committee of the Company's Board of Directors.
Operating loss was $3 million in the first quarter of 2024, compared to operating income of $85 million in the prior year quarter. On a normalized basis, operating income, adjusted for trading income and fair value adjustments on loans and incremental professional services fees, was flat at approximately $33 million in the first quarter of 2024 compared to the prior year quarter.
Total revenues were $343 million for the first quarter of 2024, compared to $432 million for the first quarter of 2023. The decrease was due to trading loss and fair value adjustments on loans of $30 million which was primarily related to unrealized, non-cash investment losses, compared to trading income and fair value adjustment on loans of $52 million in the same prior year period.
Operating revenues(3) 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, up from $236 million in the same prior year period. Revenues from the sale of goods were $56 million for the first quarter of 2024, compared to $68 million in the 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, in line with the reduction of the Company's loans receivable at fair value balance to $452 million as of March 31, 2024 from $772 million as of March 31, 2023.
Operating adjusted EBITDA (4)(5) was $66 million compared to $88 million for the first quarter of 2023.
Certain of the information set forth herein, including Operating Revenues(3) and Operating Adjusted EBITDA(4)(5), are considered non-GAAP financial measures. Information about B. Riley Financial's use of non-GAAP financial measures is provided below under "Use of Non-GAAP Financial Measures."
Supplemental Financial Data
Investment gains and losses include realized and unrealized gains and losses on investments, whether realized from dispositions or unrealized due to changes in mark-to-market prices, and often cause volatility in our periodic earnings. For this reason, the Company generally discusses its financial performance in the context of operating revenues (3) and operating adjusted EBITDA (4)(5) which are considered non-GAAP financial measures.
Additional details related to operating results and investment performance can be found in the First Quarter 2024 Financial Supplement on the Company's investor relations website. The Company recast its non-GAAP operating metrics during the fourth quarter of 2023 to include revenues from fixed income trading. This adjustment is reflected in the reconciliation for operating revenues and operating adjusted EBITDA for all periods presented.
Segment Financial Summary for the First Quarter 2024
Segment Revenues | |||||
Three Months Ended March 31, | |||||
(Dollars in thousands) | 2024 | 2023 | |||
Capital Markets | $ 89,823 | $ 185,411 | |||
Wealth Management | 51,782 | 49,814 | |||
Auction and Liquidation | 5,780 | 5,660 | |||
Financial Consulting | 35,085 | 25,010 | |||
Communications | 82,366 | 86,919 | |||
Consumer Products | 51,522 | 65,694 | |||
Segment Revenues | |||||
(Dollars in thousands) | Three Months Ended March 31, | ||||
Capital Markets | 2024 | 2023 | |||
Operating Revenues (3) | $ 125,544 | $ 142,246 | |||
Investment (Loss) Gains (2) | (35,721) | 43,165 | |||
Total Segment Revenues | $ 89,823 | $ 185,411 | |||
Segment Highlights
- Capital Markets segment revenues were $90 million in the first quarter of 2024, compared to $185 million in the first quarter of 2023, primarily due to unrealized investment loss. Segment revenues for the first quarter of 2024 increased 7% from $84 million in the fourth quarter of 2023 due in part to the overall improved dealmaking environment for investment banking. Excluding investment loss(2) of $36 million, segment operating revenues(3) of $126 million included $60 million of revenues from services and fees, and $60 million of interest income from loans and securities lending. Segment income was $0.4 million for the first quarter of 2024, which included $30 million of trading loss and fair value adjustment on loans. Excluding trading loss and fair value adjustments on loans, segment operating income(6) was $36 million for the first quarter of 2024.
- Wealth Management revenues increased to $52 million in the first quarter of 2024, up on a year-over-year and sequential basis from revenues of $50 million in the first quarter of 2023. Brokerage revenues, advisory revenues, and syndicate revenues all showed sequential improvement from the fourth quarter of 2023. Assets under management totaled $25.8 billion at March 31, 2024.
- Auction and Liquidation contributed segment revenues of $6 million and segment income of $2 million during the first quarter of 2024 primarily related to ongoing retail liquidation projects in Europe and returning clients in the U.S. and Canada. Results for this segment vary quarter-to-quarter and year-to-year due to the episodic impact of large retail liquidation engagements.
- Financial Consulting revenues increased 40% to $35 million, up from $25 million in the first quarter of 2023, primarily related to an increase in appraisal engagements, bankruptcy and litigation consulting assignments, and real estate restructuring projects. The increase in revenue was also driven by the additions of Farber and Crawford & Winiarski in 2023, which contributed to the increase in advisory and bankruptcy consulting and litigation consulting assignments. Segment income increased 62% to $6 million for the first quarter of 2024, up from $4 million in the same period during 2023.
- Communications segment revenues were $82 million with segment income of $8 million for the first quarter of 2024. The Company's portfolio of communications businesses continued to serve as a steady source of cash flow for the platform.
- Consumer Products segment revenues were $52 million for the first quarter of 2024 compared to $66 million for the same prior year period. Continued softness in worldwide PC and laptop sales resulted in a segment loss of $3 million for the quarter. Despite macro headwinds, Targus remains a leader in the PC and tablet accessories category and the Company believes Targus is well positioned when the market returns to growth.
Brand investments contributed to increased revenues from services and fees in All Other category during the first quarter of 2024. Dividend income related to securities owned and brand investments was $11.8 million for the three months ended March 31, 2024.
Earnings Call Details
https://ir.brileyfin.com/events-and-presentations. A web recording will be made available for replay until May 29.
About B. Riley Financial
www.brileyfin.com.
Footnotes See "Note Regarding Use of Non-GAAP Financial Measures" for further discussion of these non-GAAP terms. For a reconciliation of Adjusted EBITDA, Operating Revenue, Operating Adjusted EBITDA, and Segment Operating Income (Loss) to the comparable GAAP financial measures, please see the Appendix hereto.
(1) Total cash and investments is defined as the sum of cash and cash equivalents, net of noncontrolling interest, restricted cash, due from clearing brokers net of due to clearing brokers, securities and other investments owned, at fair value net of (i) securities sold not yet purchased and (ii) noncontrolling interest related to investments, advances against customer contracts, loans receivable, at fair value net of loan participations sold, and other investments reported in prepaid and other assets.
(2) Investment Gains (Losses) is defined as Trading Income (Loss) and Fair Value Adjustments on Loans less fixed income trading revenue.
(3) Operating Revenues is defined as the sum of revenues from (i) Service and Fees, (ii) Interest Income - Loans and Securities Lending and (iii) Sales of Goods. During the fourth quarter of 2023, the Company recast its operating financial metrics to include revenues from fixed income trading. Operating Revenues has been adjusted to include fixed income trading revenue for the periods presented.
(4) Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring charge, share-based payments, gain/loss on extinguishment of loans, gain on bargain purchase, impairment of goodwill and tradenames, and transaction related and other costs.
(5) Operating Adjusted EBITDA is defined as Adjusted EBITDA excluding (i) Trading Income (Loss) and Fair Value Adjustments on Loans, (ii) Realized and Unrealized Gains (Losses) on Investments, and (iii) other investment-related expenses. During the fourth quarter of 2023, the Company recast its operating metrics to include revenues from fixed income trading. Operating Adjusted EBITDA has been adjusted to include fixed income trading revenue for the periods presented.
(6) Segment Operating Income (Loss) is defined as segment income (loss) including fixed income trading revenues and excluding trading income (loss) and fair value adjustments on loans and other investment-related operating expenses.
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including total cash and investments, investment gains (losses), operating revenues, adjusted EBITDA, operating adjusted EBITDA, and segment operating income (loss), may be considered non-GAAP financial measures. B. Riley Financial believes this information is useful to investors because it provides a basis for measuring the Company's available capital resources, the operating performance of its business and its revenues and cash flow, (i) excluding in the case of operating revenues, trading income (losses) and fair value adjustments on loans, (ii) excluding in the case of adjusted EBITDA, net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, restructuring charge, gain on extinguishment of loans, gain on bargain purchase, impairment of goodwill and tradenames, stock-based compensation and transaction and other expenses, (iii) excluding in the case of operating adjusted EBITDA, the aforementioned adjustments for adjusted EBITDA as well as trading income (losses) and fair value adjustments on loans net of fixed income trading revenue, realized and unrealized gains (losses) on investments, and other investment related expenses, (iv) including in the case of trading income (losses) and fair value adjustments on loans, realized and unrealized gains (losses) on investments, net of fixed income trading revenue and other investment-related expenses, and (v) including in the case of total cash and investments, cash and cash equivalents, restricted cash, due from clearing brokers net of due to clearing brokers, securities and other investments owned, at fair value net of (a) securities sold not yet purchased and (b) noncontrolling interest related to investments, advances against customer contracts, loans receivable, at fair value net of loan participations sold, and other investments reported in prepaid and other assets, that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP"). In addition, the Company's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company's operating performance, management compensation, capital resources, and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies.
Forward-Looking Statements B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands, except par value) March 31, December 31, 2024 2023 (Unaudited) Assets Assets Cash and cash equivalents $ 190,690 $ 231,964 Restricted cash 1,889 1,875 Due from clearing brokers 40,875 51,334 Securities and other investments owned, at fair value 949,868 1,092,106 Securities borrowed 2,050,079 2,870,939 Accounts receivable, net of allowance for credit losses of $7,122 and $7,339 as of March 31, 2024 and December 31, 2023, respectively 123,797 115,496 Due from related parties 92 172 Loans receivable, at fair value (includes $355,287 and $387,657 from related parties as of March 31, 2024 and December 31, 2023, respectively) 452,496 532,419 Prepaid expenses and other assets 246,402 237,327 Operating lease right-of-use assets 84,217 87,605 Property and equipment, net 24,146 25,206 Goodwill 471,636 472,326 Other intangible assets, net 311,850 322,014 Deferred income taxes 49,607 33,595 Total assets $ 4,997,644 $ 6,074,378 Liabilities and Equity Liabilities Accounts payable $ 44,791 $ 44,550 Accrued expenses and other liabilities 253,153 273,193 Deferred revenue 68,643 71,504 Due to related parties and partners 1,763 2,731 Securities sold not yet purchased 6,423 8,601 Securities loaned 2,041,169 2,859,306 Operating lease liabilities 95,645 98,563 Notes payable 14,325 19,391 Revolving credit facility 22,197 43,801 Term loans, net 596,262 625,151 Senior notes payable, net 1,553,616 1,668,021 Total liabilities 4,697,987 5,714,812 Total B. Riley Financial, Inc. stockholders' equity 228,449 291,117 Noncontrolling interests 71,208 68,449 Total equity 299,657 359,566 Total liabilities and equity $ 4,997,644 $ 6,074,378 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except share data) Three Months Ended March 31, 2024 2023 Revenues: Services and fees $ 257,303 $ 235,559 Trading (loss) income and fair value adjustments on loans (29,868) 51,568 Interest income - Loans and securities lending 59,944 77,186 Sale of goods 55,653 67,777 Total revenues 343,032 432,090 Operating expenses: Direct cost of services 61,126 54,397 Cost of goods sold 39,615 47,626 Selling, general and administrative expenses 209,548 212,627 Restructuring charge 789 93 Interest expense - Securities lending and loan participations sold 35,383 32,424 Total operating expenses 346,461 347,167 Operating (loss) income (3,429) 84,923 Other income (expense): Interest income 669 2,574 Dividend income 11,815 13,204 Realized and unrealized losses on investments (29,545) (28,442) Change in fair value of financial instruments and other 314 (209) Loss from equity investments (4) (10) Interest expense (44,864) (47,561) (Loss) income before income taxes (65,044) 24,479 Benefit from (provision for) income taxes 17,090 (7,919) Net (loss) income (47,954) 16,560 Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests 1,211 (595) Net (loss) income attributable to B. Riley Financial, Inc. (49,165) 17,155 Preferred stock dividends 2,015 2,012 Net (loss) income available to common shareholders $ (51,180) $ 15,143 Basic (loss) income per common share $ (1.71) $ 0.53 Diluted (loss) income per common share $ (1.71) $ 0.51 Weighted average basic common shares outstanding 29,989,584 28,585,337 Weighted average diluted common shares outstanding 29,989,584 29,513,435 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Adjusted EBITDA (4) and Operating Adjusted EBITDA (5) Reconciliations (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Net (loss) income attributable to B. Riley Financial, Inc. $ (49,165) $ 17,155 Adjustments: (Benefit from) provision for income taxes (17,090) 7,919 Interest expense 44,864 47,561 Interest income (669) (2,574) Share based payments 8,682 13,746 Depreciation and amortization 11,137 13,077 Restructuring charge 789 93 Transactions related costs and other 1,519 (2,146) Total EBITDA adjustments 49,232 77,676 Adjusted EBITDA(4) $ 67 $ 94,831 Operating EBITDA Adjustments: Trading loss (income) and fair value adjustments on loans 29,868 (51,568) Realized and unrealized losses on investments 29,545 28,442 Fixed Income Spread 6,052 8,116 Other investment related expenses 253 8,421 Total Operating EBITDA Adjustments 65,718 (6,589) Operating Adjusted EBITDA(5) $ 65,785 $ 88,242 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Operating Revenues (3) Reconciliation (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Total Revenues $ 343,032 $ 432,090 Operating Revenues Adjustments: Trading loss (income) and fair value adjustments on loans 29,868 (51,568) Fixed Income Spread 6,052 8,116 Total Revenues Adjustments 35,920 (43,452) Operating Revenues(3) $ 378,952 $ 388,638 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Revenues Reconciliation (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Revenues: Capital Markets $ 89,823 $ 185,411 Wealth Management 51,782 49,814 Auction and Liquidation 5,780 5,660 Financial Consulting 35,085 25,010 Communications 82,366 86,919 Consumer Products 51,522 65,694 All Other 26,674 13,582 Total Revenues $ 343,032 $ 432,090 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Operating (Loss) Income Reconciliation (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Operating (Loss) Income: Capital Markets $ 445 $ 86,020 Wealth Management 1,679 1,373 Auction and Liquidation 2,028 200 Financial Consulting 6,140 3,783 Communications 8,050 10,783 Consumer Products (3,406) (1,614) All Other (18,365) (15,622) Total Operating (Loss) Income $ (3,429) $ 84,923 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Capital Markets Operating Revenues (3) Reconciliation (Unaudited) (Dollars in thousands) Three Months Ended March 31, Capital Markets 2024 2023 Total Revenues $ 89,823 $ 185,411 Operating Revenues Adjustments: Trading loss (income) and fair value adjustments on loans 30,468 (50,296) Fixed Income Spread 5,253 7,131 Total Revenues Adjustments 35,721 (43,165) Operating Revenues(3) $ 125,544 $ 142,246 B. RILEY FINANCIAL, INC. AND SUBSIDIARIES Capital Markets Segment Operating Income (6) Reconciliation (Unaudited) (Dollars in thousands) Three Months Ended March 31, Capital Markets 2024 2023 Segment Income $ 445 $ 86,020 Operating Revenues Adjustments: Trading loss (income) and fair value adjustments on loans 30,468 (50,296) Fixed Income Spread 5,253 7,131 Other investment related expenses - 8,421 Total Operating Income Adjustments 35,721 (34,744) Segment Operating Income(6) $ 36,166 $ 51,276 Contacts Investors Media Mike Frank Jo Anne McCusker [email protected] [email protected] (212) 409-2424 (646) 885-5425
SOURCE B. Riley Financial
