RILY 8-K
BRC Group Holdings, Inc. (RILY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
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Securities registered pursuant to Section 12(b) of the Act:
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| Global Market | ||||
|
% Series A Cumulative Perpetual Preferred Share, par value $0.0001 per share) |
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|
% share of Series B Cumulative Perpetual Preferred Stock |
Global Market | |||
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Item 2.02. Results of Operations and Financial Condition.
On May 4, 2023, B. Riley Financial, Inc. (the “Company”) issued a press release reporting its financial results for the fiscal quarter ended March 31, 2023. A copy of the press release is attached hereto as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
Additionally, on May 4, 2023, in conjunction with the press release described above, the Company posted to its website at https://ir.brileyfin.com/events-and-presentations, supplemental financial information for the fiscal quarter ended March 31, 2023 and certain prior periods. A copy of the information is attached hereto as Exhibit 99.2.
The information set forth in this Current Report, including Exhibits 99.1 and 99.2 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report, including Exhibits 99.1 and 99.2 attached hereto, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing to this Current Report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 99.1 | Earnings Release dated May 4, 2023 | |
| 99.2 | First Quarter 2023 Supplemental Financial Data dated May 4, 2023 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| May 4, 2023 | B. RILEY FINANCIAL, INC. | ||
| By: | /s/ Phillip J. Ahn | ||
| Name: | Phillip J. Ahn | ||
| Title: | Chief Financial Officer and Chief Operating Officer | ||
2
Exhibit 99.1
B. Riley Financial Reports First Quarter 2023 Results; Declares $1.00 Dividend
LOS ANGELES, May 4, 2023 – B. Riley Financial, Inc. (NASDAQ: RILY) (“B. Riley” or the “Company”), a diversified financial services platform, today released results for the three-month period ending March 31, 2023.
Q1 2023 Financial Highlights
| ● | Total revenues increased 75% to $432.1 million | |
| ● | Net income of $15.1 million, or $0.51 diluted earnings per share (EPS) | |
| ● | Operating revenues increased 43% to $380.5 million | |
| ● | Operating Adjusted EBITDA of $80.1 million | |
| ● | Total Adjusted EBITDA of $94.8 million |
Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented: “Our first quarter results demonstrate the versatility and resiliency of our platform. Over the past five years, we have undertaken several initiatives to further enhance and diversify our model. To generate $80 million of operating EBITDA amid a period of historically weak investment banking and liquidation activity only validates our strategy. As we look ahead, we see many opportunities to capitalize on the dislocations being presented by the current market environment and remain steadfast in our strategy.”
Tom Kelleher, Co-Chief Executive Officer of B. Riley Financial, added: “Against the backdrop of challenging markets, we believe B. Riley is exceptionally positioned to support our clients. We have made a series of strategic hires to meet growing client demand and remain focused on enhancing our platform for the benefit of our colleagues, clients, and partners who continue to place their trust in us.”
Declaration of Common Dividend
The Company has declared a regular quarterly cash dividend of $1.00 per common share which will be payable on or about May 23 to common stockholders of record as of May 16.
First Quarter 2023 Financial Summary
Net income applicable to common shareholders was $15.1 million, or $0.51 diluted EPS. Income before income taxes was $24.5 million.
| Three Months Ended March 31, | ||||||||
| (Dollars in thousands, except for share data) | 2023 | 2022 | ||||||
| Net income (loss) available to common shareholders | $ | 15,143 | $ | (12,064 | ) | |||
| Basic income (loss) per common share | $ | 0.53 | $ | (0.43 | ) | |||
| Diluted income (loss) per common share | $ | 0.51 | $ | (0.43 | ) | |||
Total revenues increased 75% to $432.1 million for the first quarter of 2023, up from $246.8 million in the prior year quarter. The increase in revenues was primarily related to recent acquisitions including Targus, Lingo, and BullsEye Telecom, in addition to a significant increase in interest income from securities lending.
Total Adjusted EBITDA(1) increased 133% to $94.8 million for the first quarter of 2023, up from $40.7 million in the prior year quarter.
| www.brileyfin.com | NASDAQ: RILY | 1 |
Operating revenues(2) increased 43% to $380.5 million for the quarter, up from $266.1 million in the prior year quarter.
Operating Adjusted EBITDA(3) declined slightly to $80.1 million compared to $84.2 million in the prior year quarter.
| Three Months Ended March 31, | ||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||
| Operating Revenues (2) | $ | 380,522 | $ | 266,118 | ||||
| Investment Gains (Loss) (4) | 51,568 | (19,278 | ) | |||||
| Total Revenues | $ | 432,090 | $ | 246,840 | ||||
| Operating Adjusted EBITDA (3) | $ | 80,126 | $ | 84,187 | ||||
| Investment Adjusted EBITDA (5) | 14,705 | (43,525 | ) | |||||
| Total Adjusted EBITDA (1) | $ | 94,831 | $ | 40,662 | ||||
Certain of the information set forth herein, including Operating Revenues, Adjusted EBITDA, and Operating Adjusted EBITDA, may be 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.”
Balance Sheet Highlights
As of March 31, 2023, the Company had $210.0 million of cash and cash equivalents; $1.04 billion in net securities and other investments owned; and $772.1 million of loans receivable, at fair value. Cash and investments(6) totaled $2.08 billion at quarter-end. Total debt was $2.51 billion at March 31, 2023. Total debt, net of cash and investments,(6) was $426.7 million.
Segment Financial Summary
| ● | Capital Markets segment revenue increased 80% to $185.4 million, up from $102.8 million in the prior year period. Segment income increased 56% to $86.0 million compared to $55.1 million in the prior year period. |
Excluding investment gains and losses,(4) Capital Markets segment operating revenue increased 10% to $135.1 million, up from $122.6 million in the prior year period. The increase was primarily driven by a significant increase in interest income from securities lending which helped to offset lower levels of investment banking and equity capital markets activity.
| Segment Revenue | Segment Income | |||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Capital Markets | ||||||||||||||||
| Operating | $ | 135,115 | $ | 122,649 | $ | 44,145 | (7) | $ | 50,008 | (7) | ||||||
| Investment | 50,296 | (19,800 | ) | 41,875 | 5,065 | |||||||||||
| Total | $ | 185,411 | $ | 102,849 | $ | 86,020 | $ | 55,073 | ||||||||
| ● | Wealth Management segment revenues decreased to $49.8 million in the first quarter of 2023 from $77.5 million in the prior year quarter, reflecting the strategic realignment of this business throughout 2022. B. Riley Wealth had over $24 billion of client assets under management as of March 31, 2023. |
| ● | Auction and Liquidation segment revenues increased to $5.7 million, up from $3.4 million in the prior year period. Results for this segment vary from quarter-to-quarter and year-to-year due to the episodic impact of large retail liquidation engagements. |
| www.brileyfin.com | NASDAQ: RILY | 2 |
| ● | Financial Consulting segment revenues remained relatively flat at $25.0 million compared to the prior year quarter, reflecting activities related to appraisal engagements, bankruptcy restructuring, and forensic litigation consulting matters, in addition to real estate dispositions. |
| ● | Communications segment revenues increased to $86.9 million, up from $32.0 million in the prior year quarter, primarily driven by the acquisitions of Lingo and BullsEye Telecom in May and August of 2022, respectively. On a combined basis, communications businesses – magicJack, United Online, Marconi Wireless, Lingo and BullsEye Telecom— generated segment income of $10.8 million for the quarter. | |
| ● | Consumer segment revenues increased to $70.0 million, up from $4.6 million in the prior year quarter. The significant increase was primarily driven by the acquisition of Targus in the fourth quarter of 2022, and revenues related the licensing of trademarks. |
| Segment Revenue | Segment Income (Loss) | |||||||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Capital Markets | $ | 185,411 | $ | 102,849 | $ | 86,020 | $ | 55,073 | ||||||||
| Wealth Management | 49,814 | 77,479 | 1,373 | (10,096 | ) | |||||||||||
| Auction and Liquidation | 5,660 | 3,355 | 200 | (800 | ) | |||||||||||
| Financial Consulting | 25,010 | 25,936 | 3,783 | 4,912 | ||||||||||||
| Communications | 86,919 | 31,965 | 10,783 | 8,969 | ||||||||||||
| Consumer | 70,003 | 4,557 | 1,646 | 3,218 | ||||||||||||
Share Repurchases
The Company repurchased an aggregate total of $53.7 million of its common shares during the quarter. As of March 31, 2023, approximately $30 million was remaining under the Company’s current share repurchase program authorized in March 2023.
Earnings Call Details
Management will host an investor call to discuss its first quarter results today, Thursday May 4, 2023 at 4:30 PM ET (1:30 PM PT). Investors may access the live audio webcast and archived recording at https://ir.brileyfin.com/events-and-presentations. A recording will be made available for replay until May 18, 2023.
Supplemental Financial Data
Additional details related to operating results and investment performance can be found in the First Quarter 2023 Financial Supplement on B. Riley Financial’s investor relations website.
About B. Riley Financial
B. Riley Financial is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. B. Riley leverages cross-platform expertise to provide clients with full service, collaborative solutions at every stage of the business life cycle. Through its affiliated subsidiaries, B. Riley provides end-to-end financial services across investment banking, institutional brokerage, private wealth and investment management, financial consulting, corporate restructuring, operations management, risk and compliance, due diligence, forensic accounting, litigation support, appraisal and valuation, auction, and liquidation services. B. Riley opportunistically invests to benefit its shareholders, and certain affiliates originate and underwrite senior secured loans for asset-rich companies. B. Riley refers to B. Riley Financial, Inc. and/or one or more of its subsidiaries or affiliates. For more information, please visit www.brileyfin.com.
| www.brileyfin.com | NASDAQ: RILY | 3 |
Note: Certain amounts for the quarter ended March 31, 2022 reflect restated amounts that were reported in our 2022 Annual Report on Form 10-K for the year ended December 31, 2022.
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 Investment Adjusted EBITDA to the comparable GAAP financial measures, please see the Appendix hereto.)
| (1) | Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring charge, share-based payments, gain on extinguishment of loans, impairment of tradenames, and transaction related and other costs. |
| (2) | Operating Revenue is defined as the sum of revenues from (i) Service and Fees, (ii) Interest Income - Loans and Securities Lending and (iii) Sales of Goods. |
| (3) | 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. |
| (4) | Investment Gains (Loss) is defined as Trading Income (Loss) and Fair Value Adjustments on Loans. |
| (5) | Investment Adjusted EBITDA is defined as the sum of (i) Trading Income (Loss) and Fair Value Adjustments on Loans and (ii) Realized and Unrealized Gains (Losses) on Investments, less other investment related expenses. |
| (6) | Total cash and investments is defined as the sum of 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 (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. |
| (7) | Defined as segment income (loss) excluding trading income (losses) 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 operating revenues, adjusted EBITDA, operating adjusted EBITDA, and investment adjusted EBITDA, 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, impairment of trade names, 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, and other investment related expenses, (iv) including in the case of investment adjusted EBITDA, trading income (losses) and fair value adjustments on loans, net of 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
Statements in this press release that are not descriptions of historical facts are forward-looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition, and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date of this press release. Such forward-looking statements include, but are not limited to, statements regarding our excitement and the expected growth of our business segments. Factors that could cause such actual results to differ materially from those contemplated or implied by such forward-looking statements include, without limitation, the risks described from time to time in B. Riley Financial, Inc.'s periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial, Inc.’s 2022 Annual Report on Form 10-K under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” (as applicable). Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023. These factors should be considered carefully, and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and B. Riley Financial undertakes no duty to update this information.
| www.brileyfin.com | NASDAQ: RILY | 4 |
B. RILEY FINANCIAL, INC.
Consolidated Balance Sheets
(Dollars in thousands, except par value)
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 209,971 | $ | 268,618 | ||||
| Restricted cash | 2,351 | 2,308 | ||||||
| Due from clearing brokers | 19,145 | 48,737 | ||||||
| Securities and other investments owned, at fair value | 1,049,230 | 1,129,268 | ||||||
| Securities borrowed | 2,942,843 | 2,343,327 | ||||||
| Accounts receivable, net | 120,853 | 149,110 | ||||||
| Due from related parties | 372 | 1,081 | ||||||
| Loans receivable, at fair value (includes $97,062 and $98,729 from related parties as of March 31, 2023 and December 31, 2022, respectively) | 772,085 | 701,652 | ||||||
| Prepaid expenses and other assets | 491,872 | 460,696 | ||||||
| Operating lease right-of-use asset, net | 88,989 | 88,593 | ||||||
| Property and equipment, net | 27,577 | 27,141 | ||||||
| Goodwill | 523,997 | 512,595 | ||||||
| Other intangible assets, net | 366,060 | 374,098 | ||||||
| Deferred income taxes | 2,845 | 3,978 | ||||||
| Total assets | $ | 6,618,190 | $ | 6,111,202 | ||||
| Liabilities and Equity | ||||||||
| Liabilities | ||||||||
| Accounts payable | $ | 59,969 | $ | 81,384 | ||||
| Accrued expenses and other liabilities | 263,335 | 322,974 | ||||||
| Deferred revenue | 84,019 | 85,441 | ||||||
| Due to related parties and partners | 431 | 2,210 | ||||||
| Due to clearing brokers | 6,033 | 19,307 | ||||||
| Securities sold not yet purchased | 7,806 | 5,897 | ||||||
| Securities loaned | 2,937,982 | 2,334,031 | ||||||
| Operating lease liabilities | 100,075 | 99,124 | ||||||
| Deferred income taxes | 34,274 | 29,548 | ||||||
| Notes payable | 19,882 | 25,263 | ||||||
| Revolving credit facility | 139,463 | 127,678 | ||||||
| Term loan | 626,613 | 572,079 | ||||||
| Senior notes payable, net | 1,722,977 | 1,721,751 | ||||||
| Total liabilities | 6,002,859 | 5,426,687 | ||||||
| Redeemable noncontrolling interests in equity of subsidiaries | 174,967 | 178,622 | ||||||
| Total B. Riley Financial, Inc. stockholders' equity | 381,185 | 446,514 | ||||||
| Noncontrolling interests | 59,179 | 59,379 | ||||||
| Total equity | 440,364 | 505,893 | ||||||
| Total liabilities and equity | $ | 6,618,190 | $ | 6,111,202 | ||||
| www.brileyfin.com | NASDAQ: RILY | 5 |
B. RILEY FINANCIAL, INC.
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| As Restated | ||||||||
| Revenues: | ||||||||
| Services and fees | $ | 235,559 | $ | 202,814 | ||||
| Trading income (loss) and fair value adjustments on loans | 51,568 | (19,278 | ) | |||||
| Interest income - Loans and securities lending | 77,186 | 61,426 | ||||||
| Sale of goods | 67,777 | 1,878 | ||||||
| Total revenues | 432,090 | 246,840 | ||||||
| Operating expenses: | ||||||||
| Direct cost of services | 54,397 | 11,651 | ||||||
| Cost of goods sold | 47,626 | 2,251 | ||||||
| Selling, general and administrative expenses | 212,627 | 175,199 | ||||||
| Restructuring charge | 93 | — | ||||||
| Interest expense - Securities lending and loan participations sold | 32,424 | 11,766 | ||||||
| Total operating expenses | 347,167 | 200,867 | ||||||
| Operating income | 84,923 | 45,973 | ||||||
| Other income (expense): | ||||||||
| Interest income | 2,574 | 67 | ||||||
| Dividend income | 13,204 | 7,861 | ||||||
| Realized and unrealized losses on investments | (28,442 | ) | (49,112 | ) | ||||
| Change in fair value of financial instruments and other | (209 | ) | 5,981 | |||||
| (Loss) income from equity method investments | (10 | ) | 6,775 | |||||
| Interest expense | (47,561 | ) | (30,436 | ) | ||||
| Income (loss) before income taxes | 24,479 | (12,891 | ) | |||||
| (Provision for) benefit from income taxes | (7,919 | ) | 3,695 | |||||
| Net income (loss) | 16,560 | (9,196 | ) | |||||
| Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests | (595 | ) | 866 | |||||
| Net income (loss) attributable to B. Riley Financial, Inc. | 17,155 | (10,062 | ) | |||||
| Preferred stock dividends | 2,012 | 2,002 | ||||||
| Net income (loss) available to common shareholders | $ | 15,143 | $ | (12,064 | ) | |||
| Basic income (loss) per common share | $ | 0.53 | $ | (0.43 | ) | |||
| Diluted income (loss) per common share | $ | 0.51 | $ | (0.43 | ) | |||
| Weighted average basic common shares outstanding | 28,585,337 | 27,855,033 | ||||||
| Weighted average diluted common shares outstanding | 29,513,435 | 27,855,033 | ||||||
| www.brileyfin.com | NASDAQ: RILY | 6 |
B. RILEY FINANCIAL, INC.
Adjusted EBITDA and Operating Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2023 | 2022 | |||||||
| Net income (loss) attributable to B. Riley Financial, Inc. | $ | 17,155 | $ | (10,062 | ) | |||
| Adjustments: | ||||||||
| Provision for (benefit from) income taxes | 7,919 | (3,695 | ) | |||||
| Interest expense | 47,561 | 30,436 | ||||||
| Interest income | (2,574 | ) | (67 | ) | ||||
| Share based payments | 13,746 | 17,013 | ||||||
| Depreciation and amortization | 13,077 | 7,848 | ||||||
| Restructuring charge | 93 | — | ||||||
| Gain on extinguishment of loans | — | (1,102 | ) | |||||
| Transactions related costs and other | (2,146 | ) | 291 | |||||
| Total EBITDA Adjustments | 77,676 | 50,724 | ||||||
| Adjusted EBITDA | $ | 94,831 | $ | 40,662 | ||||
| Operating EBITDA Adjustments: | ||||||||
| Trading (income) loss and fair value adjustments on loans | (51,568 | ) | 19,278 | |||||
| Realized and unrealized losses on investments | 28,442 | 49,112 | ||||||
| Other investment related expenses | 8,421 | (24,865 | ) | |||||
| Total Operating EBITDA Adjustments | (14,705 | ) | 43,525 | |||||
| Operating Adjusted EBITDA | $ | 80,126 | $ | 84,187 | ||||
# # #
| www.brileyfin.com | NASDAQ: RILY | 7 |
Contacts
| Investors | Media |
| Mike Frank | Jo Anne McCusker |
| [email protected] | [email protected] |
| (212) 409-2424 | (646) 885-5425 |
Source: B. Riley Financial, Inc.
| www.brileyfin.com | NASDAQ: RILY | 8 |
Exhibit 99.2
1 NASDAQ: RILY First Quarter 2023 Supplemental Financial Data May 4, 2023
Reconciliation of U.S. GAAP to Non - GAAP Measures 2 Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 (Unaudited, dollars in thousands) Adj. EBITDA and Operating Adj. EBITDA Reconciliation $ 17,155 $ (57,445) $ 47,837 $ (140,159) $ (10,062) Net (loss) income attributable to B. Riley Financial, Inc. EBITDA Adjustments: 7,919 (23,998) 16,350 (52,513) (3,695) (Benefit from) provision for income taxes 47,561 44,399 34,587 31,764 30,436 Interest expense (2,574) (1,482) (686) (500) (67) Interest income 13,746 15,312 14,613 14,202 17,013 Share based payments 13,077 13,443 10,717 7,961 7,848 Depreciation and amortization 93 995 8,016 — — Restructuring charge — — — — (1,102) Gain on extinguishment of loans (2,146) (5,264) 10,003 3,468 291 Transactions related costs and other 77,676 43,405 93,600 4,382 50,724 Total EBITDA Adjustments $ 94,831 $ (14,040) $ 141,437 $ (135,777) $ 40,662 Adjusted EBITDA Operating EBITDA Adjustments: (51,568) 58,670 6,917 117,763 19,278 Trading loss (income) and fair value adjustments on loans 28,442 64,874 (19,071) 106,164 49,112 Realized and unrealized losses (gains) on investments 8,421 (7,697) (23,039) (13,930) (24,865) Other investment related expenses (14,705) 115,847 (35,193) 209,997 43,525 Total Operating EBITDA Adjustments $ 80,126 $ 101,807 $ 106,244 $ 74,220 $ 84,187 Operating Adjusted EBITDA
Quarterly Operating Revenue and Operating Adjusted EBITDA Operating Revenue and Operating Adjusted EBITDA (1)(3)(5)(6) Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 (Dollars in thousands) $ 380,522 $ 440,762 $ 319,034 $ 257,384 $ 266,118 Operating Revenue (1) 51,568 (58,670) (6,917) (117,763) (19,278) Investment Gains (Loss) (2) $ 432,090 $ 382,092 $ 312,117 $ 139,621 $ 246,840 Total Revenue Q1 2023 Q4 2022 Q3 2022 Q2 2022 Q1 2022 $ 80,126 $ 101,807 $ 106,244 $ 74,220 $ 84,187 Operating Adjusted EBITDA (3) 14,705 (115,847) 35,193 (209,997) (43,525) Investment Adjusted EBITDA (4) $ 94,831 $ (14,040) $ 141,437 $ (135,777) $ 40,662 Adjusted EBITDA (5)(6) Quarterly Revenue and Adjusted EBITDA 1. 2. 3. 4. 5. 6. Operating Revenue is defined as the sum of revenues from (i) Service and Fees, (ii) Interest Income - Loans and Securities Lending and (iii) Sales of Goods. Investment Gains (Loss) is defined as Trading Income (Loss) and Fair Value Adjustments on Loans. 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. Investment Adjusted EBITDA is defined as the sum of (i) Trading Income (Loss) and Fair Value Adjustments on Loans and (ii) Realized and Unrealized Gains (Losses) on Investments, less other investment related expenses. Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring charge, share - based payments, gain on extinguishment of loans, impairment of tradenames, and transaction related and other costs. For a reconciliation to GAAP financial measures, please see slide 2. $266.1M $257.4M $319.0M $440.8M $380.5M $84.2M $74.2M $106.2M $101.8M $80.1M Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Operating Revenue Operating Adj. EBITDA 3
Cash and Investments Summary 2. Noncontrolling interest related to investments reported in Securities and Other Investments Owned. 4 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 (Dollars in thousands) $ 209,971 $ 268,618 $ 231,805 $ 216,098 $ 213,584 Cash and Cash Equivalents 2,351 2,308 1,578 928 928 Restricted Cash 13,112 29,430 49,530 25,902 40,350 Due from/(to) Clearing Brokers, net 200 200 200 200 200 Advances Against Customer Contracts Securities and Other Investments Owned 929,582 1,046,710 1,140,728 1,055,379 1,228,690 Equity Securities 65,470 8,539 6,761 8,231 10,508 Corporate Bonds 5,248 3,956 8,649 2,321 3,681 Other Fixed Income Securities 48,930 70,063 82,475 78,965 74,222 Partnership Interests and Other (7,806) (5,897) (17,751) (5,403) (7,498) Securities Sold Not Yet Purchased 772,085 701,652 814,715 770,840 882,391 Loans Receivable, net of Loan Participations Sold 72,905 53,844 45,947 49,156 49,391 Other investments and deposits (1) (29,785) (31,349) (32,038) (25,317) (17,135) Noncontrolling interest (2) $ 2,082,263 $ 2,148,074 $ 2,332,599 $ 2,177,300 $ 2,479,312 Total Cash, Net Securities, and Other Debt Summary Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 (Dollars in thousands) $ 626,613 $ 572,079 $ 558,035 $ 367,815 $ 342,851 Term Loans, net 139,463 127,678 74,700 80,000 80,000 Revolving Credit Facility 19,882 25,263 25,075 23,186 22,891 Notes Payable 1,722,977 1,721,751 1,661,191 1,644,778 1,627,649 Senior Notes Payable, net 2,508,935 2,446,771 2,319,001 2,115,779 2,073,391 Total Debt $ (426,672) $ (298,697) $ 13,598 $ 61,521 $ 405,921 Total Cash and Investments, Net of Debt 1. Other investments and investment related deposits reported in prepaid and other assets.
Loans Receivable 36.4% Public Equity 28.1% 5 Private Equity 17.7% Cash and Restricted Cash 10.0% Partnership Interests and Other 3.8% Due from/(to) Clearing Brokers, net 0.6% Corporate Bonds and Fixed Income Securities 3.3% Composition of Cash and Investments Percentage by Asset Type – March 31, 2023 % of Total Gross Value ( Dollars in thousands) 10.0% $ 212,322 Cash and Restricted Cash 0.6% 13,112 Due from/(to) Clearing Brokers, net 28.1% 595,232 Public Equity (1)(2) 17.7% 375,635 Private Equity (1) 36.4% 772,085 Loans Receivable 3.3% 70,718 Corporate Bonds and Fixed Income Securities 3.8% 80,750 Partnership Interests and Other (1) 100.0% $ 2,119,854 Total 1. 2. Includes investments reported in prepaid and other assets. Includes $59 million equity positions held by B. Riley in managed account with gains and losses for client benefit
Consumer / Retail 19.6% Badcock 42.0% 6 Technology 19.2% Communication 12.6% Utilities 3.4% Other 3.2% Loans Receivables Summary Loans Receivable Balance Roll Forward – March 31, 2023 March 31, 2023 Capitalized Interest and Other Fair Value Adjustments Sales, Repayments, and Conversions Gross Loan Funding December 31, 2022 (Unaudited, dollars in thousands) $ 324,328 $ — $ (182) $ (138,877) $ 145,278 $ 318,109 Badcock Receivables, at Fair Value 447,757 1,181 43,458 (92,308) 111,883 383,543 Other Loans Receivable, at Fair Value $ 772,085 $ 1,181 $ 43,276 $ (231,185) $ 257,161 $ 701,652 Total Loans Receivable, at Fair Value Loans Receivable Balance by Sector – March 31, 2023 Summary Statistics of Other Loans Receivable 1 March 31, 2023 ( Dollars in thousands) $ 447,757 Total Fair Value $ 475,289 Total Principal 14 Number of Companies 24 Number of Loans $ 33,949 Average Principal per Name $ 31,983 Average Fair Value per Name 7% - 18% Interest Rate Range 0.9 years Average Duration 1. Excludes Badcock receivables.
Condensed Consolidated Balance Sheets 7 December 31, 2022 March 31, 2023 (Unaudited) (Dollars in thousands) $ 268,618 $ 209,971 Cash and cash equivalents 2,308 2,351 Restricted cash 48,737 19,145 Due from clearing brokers 1,129,268 1,049,230 Securities and other investments owned, at fair value 2,343,327 2,942,843 Securities borrowed 149,110 120,853 Accounts receivable, net 1,081 372 Due from related parties 701,652 772,085 Loans receivable, at fair value 460,696 491,872 Prepaid expenses and other assets 88,593 88,989 Operating lease right - of - use assets 27,141 27,577 Property and equipment, net 512,595 523,997 Goodwill 374,098 366,060 Other intangible assets, net 3,978 2,845 Deferred income taxes $ 6,111,202 $ 6,618,190 Total assets $ 81,384 $ 59,969 Accounts payable 322,974 263,335 Accrued expenses and other liabilities 85,441 84,019 Deferred revenue 29,548 34,274 Deferred income taxes 2,210 431 Due to related parties and partners 19,307 6,033 Due to clearing brokers 5,897 7,806 Securities sold not yet purchased 2,334,031 2,937,982 Securities loaned 99,124 100,075 Operating lease liabilities 25,263 19,882 Notes payable 127,678 139,463 Revolving credit facility 572,079 626,613 Term loans, net 1,721,751 1,722,977 Senior notes payable, net $ 5,426,687 $ 6,002,859 Total liabilities 178,622 174,967 Redeemable noncontrolling interests in equity of subsidiaries 446,514 381,185 Total B. Riley Financial, Inc. stockholders' equity 59,379 59,179 Noncontrolling interests 505,893 440,364 Total equity $ 6,111,202 $ 6,618,190 Total liabilities and equity
Consolidated Statements of Operations 8 Three Months Ended (Dollars in thousands, except share data) March 31, (Unaudited) 2022 2023 (As Restated) Revenues: $ 202,814 $ 235,559 Services and fees (19,278) 51,568 Trading income (loss) and fair value adjustments on loans 61,426 77,186 Interest income - Loans and securities lending 1,878 67,777 Sale of goods 246,840 432,090 Total revenues Operating expenses: 11,651 54,397 Direct cost of services 2,251 47,626 Cost of goods sold 175,199 212,627 Selling, general and administrative expenses — 93 Restructuring charge 11,766 32,424 Interest expense - Securities lending and loan participations sold 200,867 347,167 Total operating expenses 45,973 84,923 Operating income Other income (expense): 67 2,574 Interest income 7,861 13,204 Dividend income (49,112) (28,442) Realized and unrealized losses on investments 5,981 (209) Change in fair value of financial instruments and other 6,775 (10) (Loss) income from equity method investments (30,436) (47,561) Interest expense (12,891) 24,479 Income (loss) before income taxes 3,695 (7,919) (Provision for) benefit from income taxes (9,196) 16,560 Net income (loss) Net (loss) income attributable to noncontrolling interests 866 (595) and redeemable noncontrolling interests $ (10,062) $ 17,155 Net income (loss) attributable to B. Riley Financial, Inc. 2,002 2,012 Preferred stock dividends $ (12,064) $ 15,143 Net income (loss) available to common shareholders $ (0.43) $ 0.53 Basic income (loss) per common share $ (0.43) $ 0.51 Diluted income (loss) per common share 27,855,033 28,585,337 Weighted average basic common shares outstanding 27,855,033 29,513,435 Weighted average diluted common shares outstanding
Segment Financial Information 9 Three Months Ended March 31, (Dollars in thousands) 2022 2023 (Unaudited) (As Restated) Capital Markets segment: $ 61,223 $ 57,929 Revenues - Services and fees (19,800) 50,296 Trading income (loss) and fair value adjustments on loans 61,426 77,186 Interest income - Loans and securities lending 102,849 185,411 Total revenues (34,117) (65,711) Selling, general and administrative expenses (11,766) (32,424) Interest expense - Securities lending and loan participations sold (1,893) (1,256) Depreciation and amortization 55,073 86,020 Segment income Wealth Management segment: 76,957 48,542 Revenues - Services and fees 522 1,272 Trading income and fair value adjustments on loans 77,479 49,814 Total revenues (85,742) (47,322) Selling, general and administrative expenses — (33) Restructuring charge (1,833) (1,086) Depreciation and amortization (10,096) 1,373 Segment income (loss) Auction and Liquidation segment: 3,355 5,444 Revenues - Services and fees — 216 Revenues - Sale of goods 3,355 5,660 Total revenues (2,335) (3,128) Direct cost of services — (52) Cost of goods sold (1,820) (2,280) Selling, general and administrative expenses $ (800) $ 200 Segment income (loss) Three Months Ended March 31, 2022 2023 (As Restated) Financial Consulting segment: $ 25,936 $ 25,010 Revenues - Services and fees (20,943) (21,149) Selling, general and administrative expenses (81) (78) Depreciation and amortization 4,912 3,783 Segment income Communications segment: 30,087 85,052 Revenues - Services and fees 1,878 1,867 Revenues - Sale of goods 31,965 86,919 Total revenues (9,316) (44,733) Direct cost of services (2,251) (2,168) Cost of goods sold (8,245) (22,544) Selling, general and administrative expenses — (60) Restructuring charge (3,184) (6,631) Depreciation and amortization 8,969 10,783 Segment income Consumer segment: 4,557 4,309 Revenues - Services and fees 1 — 65,694 Revenues - Sale of goods 4,557 70,003 Total revenues — (45,406) Cost of goods sold (756) (20,112) Selling, general and administrative expenses (583) (2,839) Depreciation and amortization 3,218 1,646 Segment income $ 61,276 $ 103,805 Consolidated operating income from reportable segments 1. Excludes dividends from Hurley and Justice Brands.
Definition of US GAAP to Non - GAAP Financial Measures 10 Certain of the information set forth herein, including operating revenue, adjusted EBITDA, operating adjusted EBITDA, and investment adjusted EBITDA 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 (loss) 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, impairment of trade names, stock - based compensation and transaction and other expenses, (iii) excluding in the case of operating adjusted EBITDA, aforementioned adjustments for adjusted EBITDA, as well as trading income (loss) and fair value adjustments on loans, realized and unrealized gains (losses) on investments , and other investment related expenses, and (iv) in the case of investment adjusted EBITDA this includes trading income (loss) and fair value adjustments on loans and realized and unrealized gains (losses) on investments, net of other investment related expenses, 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, 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 .