RILY 8-K
BRC Group Holdings, Inc. (RILY)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 3, 2020
B. RILEY FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-37503 | 27-0223495 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
21255 Burbank Boulevard, Suite 400
Woodland Hills, California 91367
818-884-3737
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock, par value $0.0001 per share | RILY | Nasdaq Global Market | ||
| Depositary Shares (each representing a 1/1000th interest in a 6.875% Series A Cumulative Perpetual Preferred Share, par value $0.0001 per share) | RILYP | Nasdaq Global Market | ||
| 7.25% Senior Notes due 2027 | RILYG | Nasdaq Global Market | ||
| 7.50% Senior Notes due 2027 | RILYZ | Nasdaq Global Market | ||
| 7.375% Senior Notes due 2023 | RILYH | Nasdaq Global Market | ||
| 6.875% Senior Notes due 2023 | RILYI | Nasdaq Global Market | ||
| 6.75% Senior Notes due 2024 | RILYO | Nasdaq Global Market | ||
| 6.50% Senior Notes due 2026 | RILYN | Nasdaq Global Market | ||
| 6.375% Senior Notes due 2025 | RILYM | Nasdaq Global Market |
Not Applicable
(Former name or former address, if changed since last report)
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:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On March 3, 2020, B. Riley Financial, Inc. issued a press release reporting its financial results for the fiscal quarter and year ended December 31, 2019. A copy of the press release is attached hereto as Exhibit 99.1.
The information set forth in this Current Report, including Exhibit 99.1 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 Exhibit 99.1 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 March 3, 2020 |
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.
| March 3, 2020 | B. RILEY FINANCIAL, INC. | |||
| By: | /s/ Phillip J. Ahn | |||
| Name: | Phillip J. Ahn | |||
| Title: | Chief Financial Officer and Chief Operating Officer | |||
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Exhibit 99.1
 |
www.brileyfin.com
|
B.
Riley Financial Reports Results for Fourth Quarter and Full Year 2019
and Increases Quarterly Dividend
Reports
revenues of $165.2 million for Q4 2019 and $652.1 million for FY 2019
with net income of $16.9 million for Q4 2019 and $81.3 million for FY 2019
Declares
total quarterly cash dividend of $0.35 per common share
includes increased regular dividend of $0.25 per share and special dividend of $0.10 per share
Total
of $1.76 per share in dividends declared related to FY 2019 earnings
LOS ANGELES, March 3, 2020 – B. Riley Financial, Inc. (NASDAQ:RILY) (“B. Riley” or the “Company”), a diversified provider of business advisory and financial services, today announced results for the fourth quarter and full year ended December 31, 2019.
Q4 2019 Highlights
| ● | Revenues of $165.2 million vs. $102.0 million for Q4 2018 |
| ● | Net income of $16.9 million or $0.59 per diluted share |
| ● | Adjusted EBITDA of $50.3 million vs. $11.2 million for Q4 2018 |
| ● | Adjusted net income of $23.6 million or $0.83 per diluted share |
FY 2019 Highlights
| ● | Revenues of $652.1 million vs. $423.0 million for FY 2018 |
| ● | Net income of $81.3 million or $2.95 per diluted share |
| ● | Adjusted EBITDA of $207.9 million vs. $89.6 million for FY 2018 |
| ● | Adjusted net income of $108.3 million or $3.93 per diluted share |
“Our strong quarterly performance was driven by record investment banking revenues as well as significant gains from our investment portfolio which helped more than offset a large loss in our liquidation segment. Meanwhile, our consulting, appraisal, wealth management and principal investment businesses continue to perform steadily as we pursue new opportunities to create additional value from our platform. Our recently acquired brand portfolio also contributed to our fourth quarter results and we expect this to be a more meaningful component of earnings as we look ahead,” said Bryant Riley, Chairman and Co-Chief Executive Officer, B. Riley Financial.
Riley added, “Our results demonstrate the strength of B. Riley Financial’s diversified platform and successful execution of our core strategy to create increased value while also delivering dividends to our shareholders. Over the last few years, we have meaningfully transformed our business by building and purchasing assets with steadier and more recurring revenue streams. In 2019, these recurring businesses contributed more than 50 percent of pre-tax income before corporate overhead and approximately 40 percent of adjusted EBITDA. As we look ahead to 2020, and with a full year of brand investments, we expect these percentages to grow. Additionally, we continue to view our balance sheet as a differentiator for gaining market share across all of our operating subsidiaries and as an engine for driving incremental cash flows from our more episodic capital markets and retail liquidation businesses. The platform we have created allows us to opportunistically pursue unique investment situations which helps us to deliver shareholder value in excess of our day-to-day operations.”
Q4 2019 Financial Summary
Fourth quarter 2019 revenue increased to $165.2 million from $102.0 million for the fourth quarter of 2018, despite a loss in the Auction and Liquidation segment during the quarter. Net income increased to $16.9 million, or $0.59 per diluted share, compared to a loss of $8.8 million, or $0.34 per diluted share, for the fourth quarter of 2018.
| ● | Capital Markets: Revenues increased to $172.2 million from $60.6 million for the fourth quarter of 2018. Segment income increased to $88.6 million from a loss of $12.5 million for the fourth quarter of 2018. The significant increase was primarily driven by investment banking as well as investment gains related to the Company’s proprietary equity positions. |
| ● | Auction and Liquidation: For the fourth quarter of 2019, this segment recognized negative revenue of $44.4 million and a segment loss of $60.8 million. The negative revenue is attributed to a significant loss accrual related to a large liquidation project which is expected to be completed during 2020. The total estimated loss for this project through completion is included in fourth quarter 2019 results. |
| ● | Valuation and Appraisal: Revenues were $9.7 million compared to $11.3 million for the fourth quarter of 2018. Segment income was $2.7 million compared to $3.4 million for the same year-ago period. While the fourth quarter of 2018 represented an exceptional quarter for revenue growth in this segment, results have remained relatively steady from quarter-to-quarter and year-to-year. |
| ● | Principal Investments: Revenues increased to $23.7 million from $20.0 million for the fourth quarter of 2018. Segment income increased to $8.8 million compared to $5.7 million for the fourth quarter of 2018. Results for this segment are primarily driven by United Online and magicJack. |
In October 2019, the Company acquired a majority interest in a brand investment portfolio which is focused on generating steady recurring revenue through the licensing of brand trademarks. The Company’s brand holdings contributed an additional $4.1 million in revenue and $2.7 million in operating income for the fourth quarter of 2019.
Adjusted EBITDA (1) increased to $50.3 million compared to $11.2 million for the fourth quarter of 2018.
Adjusted net income (2) increased to $23.6 million, or $0.83 per diluted share, compared to $0.7 million, or $0.03 per diluted share, for the fourth quarter of 2018.
FY 2019 Financial Summary
Full year 2019 revenue increased to $652.1 million from $423.0 million for the full year 2018. Net income increased to $81.3 million or $2.95 per diluted share from $15.5 million or $0.58 per diluted share for the full year 2018. The addition of the Company’s brand holdings in October 2019 contributed $4.1 million in revenue and $2.7 million in operating income for the year.
| ● | Capital Markets: Revenues increased to $485.9 million from $275.1 million in the prior year. Segment income increased to $179.3 million from $10.2 million for the full year of 2018. The significant increase in results for this segment can be attributed to strong investment banking performance as well as gains from the Company’s investment portfolio. The addition of GlassRatner, which the Company acquired in August 2018, also contributed to results for the full year. |
| ● | Auction and Liquidation: Revenues were $22.5 million with a segment loss of $25.5 million for the full year of 2019. Results for this segment are expected to vary from quarter-to-quarter and year-to-year due to the episodic nature of the Company’s retail liquidation engagements. |
| ● | Valuation and Appraisal: Revenues increased slightly to $38.8 million from $38.7 million for the full year 2018. Segment income totaled $10.2 million compared to $11.1 million in the prior year. |
| ● | Principal Investments: Revenues increased to $100.9 million from $54.2 million in the prior year. Segment income increased to $33.2 million from $19.4 million for the full year 2018. Results for this segment were primarily driven by United Online and by magicJack which the Company acquired in November 2018. |
Adjusted EBITDA (1) for the full year 2019 increased to $207.9 million compared to $89.6 million for the full year of 2018.
2
Adjusted net income (2) increased to $108.3 million, or $3.93 per diluted share, compared to $38.8 million, or $1.45 per diluted share, in the prior year.
As of December 31, 2019, the Company had a total cash and investment balance of $832.2 million which includes approximately $53 million in equity investments included under prepaid expenses and other assets. Net of $792.9 million in total debt, the Company had a net cash and investment balance of $39.2 million at the end of the fourth quarter.
The Company repurchased over 870,000 shares of its common stock and warrants under its share repurchase program during 2019.
B. Riley Financial stockholders' equity increased to $360.7 million as of December 31, 2019.
Declaration of Common Stock Dividend
The Company’s Board of Directors has approved an increase in the regular quarterly dividend to $0.25 per share, up from $0.175 per share, and has also declared a one-time special quarterly dividend of $0.10 per share. A total quarterly cash dividend of $0.35 per common share will be paid on or about March 31, 2020 to stockholders of record as of March 17, 2020.
Upon payment of the fourth quarter dividend, the Company will have paid a total of $1.76 per share in dividends on its common stock related to earnings for the full year of 2019.
Conference Call Details
Management will host a conference call today, Tuesday, March 3, 2020 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time), to discuss results for the fourth quarter and full year 2019. The live broadcast and archived recording will also be made available on the Company’s investor relations website.
| Date: | Tuesday, March 3, 2020 |
| Time: | 4:30 p.m. Eastern time (1:30 p.m. Pacific time) |
| Toll-Free: | 1-877-451-6152 |
| International: | 1-201-389-0879 |
Replay (expires on Tuesday, March 10, 2020)
| Toll-Free: | 1-844-512-2921 |
| International: | 1-412-317-6671 |
| Replay Pin: | 13698984 |
About B. Riley Financial, Inc. (NASDAQ:RILY)
B. Riley Financial provides collaborative financial services tailored to fit the capital raising and business advisory needs of public and private companies and high-net-worth individuals. The Company operates through several wholly owned subsidiaries which offer complementary end-to-end capabilities spanning investment banking and institutional brokerage, private wealth and investment management, corporate advisory, restructuring, due diligence, forensic accounting and litigation support, appraisal and valuation, and auction and liquidation services. Certain registered affiliates of B. Riley originate and underwrite senior secured loans for asset-rich companies. The Company also makes proprietary investments in companies and assets with attractive return profiles. For more information about B. Riley and its affiliated companies, visit www.brileyfin.com.
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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 the Company’s anticipated results of operations for 2020, as well as 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) those 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 Annual Report on Form 10-K for the year ended December 31, 2018 under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional information will be set forth in our Annual Report on Form 10-K for the year ended December 31, 2019. 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, Inc. undertakes no duty to update this information.
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including adjusted net income and 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 cash flow, excluding net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, transaction and other expenses, restructuring costs, and stock-based compensation 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.
Footnotes
(1) Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share-based payments, and transaction related and other costs. See “Note Regarding Use of Non-GAAP Financial Measures” for further discussion of this non-GAAP term.
(2) Adjusted net income excludes the impact of share-based payments, amortization of intangible assets, restructuring costs, transaction related and other costs, and tax impact of aforementioned adjustments. See “Note Regarding Use of Non-GAAP Financial Measures” for further discussion of this non-GAAP term.
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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except par value)
| December 31, | December 31, | |||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 104,268 | $ | 179,440 | ||||
| Restricted cash | 471 | 838 | ||||||
| Due from clearing brokers | 23,818 | 37,738 | ||||||
| Securities and other investments owned, at fair value | 451,551 | 273,577 | ||||||
| Securities borrowed | 814,331 | 931,346 | ||||||
| Accounts receivable, net | 46,624 | 42,123 | ||||||
| Due from related parties | 5,832 | 1,729 | ||||||
| Advances against customer contracts | 27,347 | — | ||||||
| Loans receivable | 225,848 | 38,794 | ||||||
| Prepaid expenses and other assets | 81,808 | 79,477 | ||||||
| Operating lease right-of-use assets | 47,809 | — | ||||||
| Property and equipment, net | 12,727 | 15,523 | ||||||
| Goodwill | 223,697 | 223,368 | ||||||
| Other intangible assets, net | 220,525 | 91,358 | ||||||
| Deferred income taxes | 31,522 | 42,399 | ||||||
| Total assets | $ | 2,318,178 | $ | 1,957,710 | ||||
| Liabilities and Equity | ||||||||
| Liabilities: | ||||||||
| Accounts payable | $ | 4,477 | $ | 5,646 | ||||
| Accrued expenses and other liabilities | 130,714 | 108,662 | ||||||
| Deferred revenue | 67,121 | 69,066 | ||||||
| Due to related parties and partners | 1,750 | 2,428 | ||||||
| Securities sold not yet purchased | 41,820 | 37,623 | ||||||
| Securities loaned | 810,495 | 930,522 | ||||||
| Mandatorily redeemable noncontrolling interests | 4,616 | 4,633 | ||||||
| Operating lease liabilities | 61,511 | — | ||||||
| Notes payable | 38,167 | 1,550 | ||||||
| Loan participations sold | 12,478 | — | ||||||
| Term loan | 66,666 | 79,166 | ||||||
| Senior notes payable | 688,112 | 459,754 | ||||||
| Total liabilities | 1,927,927 | 1,699,050 | ||||||
| Commitments and contingencies | ||||||||
| B. Riley Financial, Inc. stockholders' equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 2,349 shares issued and outstanding as of December 31, 2019 and none issued and outstanding as of December 31, 2018; liquidation preference of $58,723 as of December 31, 2019. | — | — | ||||||
| Common stock, $0.0001 par value; 100,000,000 shares authorized; 26,972,332 and 26,603,355 issued and outstanding as of December 31, 2019 and December 31, 2018, respectively. | 3 | 2 | ||||||
| Additional paid-in capital | 323,109 | 258,638 | ||||||
| Retained earnings | 39,536 | 1,579 | ||||||
| Accumulated other comprehensive loss | (1,988 | ) | (2,161 | ) | ||||
| Total B. Riley Financial, Inc. stockholders' equity | 360,660 | 258,058 | ||||||
| Noncontrolling interests | 29,591 | 602 | ||||||
| Total equity | 390,251 | 258,660 | ||||||
| Total liabilities and equity | $ | 2,318,178 | $ | 1,957,710 | ||||
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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Dollars in thousands, except share data)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| Revenues: | ||||||||||||||||
| Services and fees | $ | 138,251 | $ | 88,660 | $ | 566,956 | $ | 384,076 | ||||||||
| Interest income - Loans and securities lending | 23,074 | 12,871 | 77,221 | 38,277 | ||||||||||||
| Sale of goods | 3,912 | 500 | 7,935 | 638 | ||||||||||||
| Total revenues | 165,237 | 102,031 | 652,112 | 422,991 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Direct cost of services | 17,109 | 13,409 | 58,824 | 34,754 | ||||||||||||
| Cost of goods sold | 3,740 | 658 | 7,575 | 800 | ||||||||||||
| Selling, general and administrative expenses | 97,256 | 81,517 | 385,219 | 310,508 | ||||||||||||
| Restructuring charge | — | 6,259 | 1,699 | 8,506 | ||||||||||||
| Interest expense - Securities lending and loan participations sold | 9,565 | 6,722 | 32,144 | 23,039 | ||||||||||||
| Total operating expenses | 127,670 | 108,565 | 485,461 | 377,607 | ||||||||||||
| Operating income (loss) | 37,567 | (6,534 | ) | 166,651 | 45,384 | |||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 248 | 590 | 1,577 | 1,326 | ||||||||||||
| Income (loss) from equity investments | 2,618 | 2,937 | (1,431 | ) | 7,986 | |||||||||||
| Interest expense | (15,075 | ) | (9,467 | ) | (50,205 | ) | (33,393 | ) | ||||||||
| Income (loss) before income taxes | 25,358 | (12,474 | ) | 116,592 | 21,303 | |||||||||||
| (Provision for) benefit from income taxes | (7,842 | ) | 3,509 | (34,644 | ) | (4,903 | ) | |||||||||
| Net income (loss) | 17,516 | (8,965 | ) | 81,948 | 16,400 | |||||||||||
| Net income (loss) attributable to noncontrolling interests | 387 | (160 | ) | 337 | 891 | |||||||||||
| Net income (loss) attributable to B. Riley Financial, Inc. | 17,129 | (8,805 | ) | 81,611 | 15,509 | |||||||||||
| Preferred stock dividends | 264 | — | 264 | — | ||||||||||||
| Net income (loss) applicable to common shareholders | $ | 16,865 | $ | (8,805 | ) | $ | 81,347 | $ | 15,509 | |||||||
| Basic income (loss) per common share | $ | 0.64 | $ | (0.34 | ) | $ | 3.08 | $ | 0.60 | |||||||
| Diluted income (loss) per common share | $ | 0.59 | $ | (0.34 | ) | $ | 2.95 | $ | 0.58 | |||||||
| Weighted average basic common shares outstanding | 26,547,023 | 26,177,560 | 26,401,036 | 25,937,305 | ||||||||||||
| Weighted average diluted common shares outstanding | 28,412,871 | 26,177,560 | 27,529,157 | 26,764,856 | ||||||||||||
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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)
| Year Ended December 31, | ||||||||
| 2019 | 2018 | |||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 81,948 | $ | 16,400 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 19,048 | 13,809 | ||||||
| Provision for doubtful accounts | 2,126 | 1,308 | ||||||
| Share-based compensation | 15,916 | 13,042 | ||||||
| Non-cash interest and other | (12,267 | ) | 4,068 | |||||
| Effect of foreign currency on operations | (78 | ) | (916 | ) | ||||
| Loss (income) from equity investments | 1,431 | (7,986 | ) | |||||
| Deferred income taxes | 10,874 | 1,990 | ||||||
| Impairment of leaseholds and intangibles, lease loss accrual and gain on disposal of fixed assets | (286 | ) | 4,142 | |||||
| Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests | 1,220 | 1,222 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Due from clearing brokers | 13,920 | (6,259 | ) | |||||
| Securities and other investments owned | (165,765 | ) | (128,217 | ) | ||||
| Securities borrowed | 117,015 | (124,257 | ) | |||||
| Accounts receivable and advances against customer contracts | (33,927 | ) | (12,948 | ) | ||||
| Prepaid expenses and other assets | 9,588 | (24,395 | ) | |||||
| Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities | 32,553 | 3,559 | ||||||
| Amounts due to/from related parties and partners | (4,781 | ) | 4,705 | |||||
| Securities sold, not yet purchased | 4,197 | 9,332 | ||||||
| Deferred revenue | (3,098 | ) | (564 | ) | ||||
| Securities loaned | (120,026 | ) | 127,151 | |||||
| Net cash used in operating activities | (30,392 | ) | (104,814 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of loans receivable | (343,811 | ) | (38,794 | ) | ||||
| Repayments of loans receivable | 159,186 | — | ||||||
| Loan participations sold | 31,806 | — | ||||||
| Repayment of loan participations sold | (18,911 | ) | — | |||||
| Asset acquisition - BR Brand, net of cash acquired $2,160 | (114,912 | ) | — | |||||
| Acquisition of magicJack, net of cash acquired $53,875 | — | (89,240 | ) | |||||
| Acquisition of other businesses | — | (4,000 | ) | |||||
| Proceeds from sale of division of magicJack | 6,196 | — | ||||||
| Purchases of property, equipment and intangible assets | (3,461 | ) | (5,432 | ) | ||||
| Proceeds from sale of property, equipment and intangible assets | 513 | 37 | ||||||
| Equity investments | (33,391 | ) | (16,640 | ) | ||||
| Dividends and distributions from equity investments | 21,389 | 2,628 | ||||||
| Net cash used in investing activities | (295,396 | ) | (151,441 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from asset based credit facility | 140,439 | 300,000 | ||||||
| Repayment of asset based credit facility | (103,343 | ) | (300,000 | ) | ||||
| Proceeds from notes payable | — | 51,020 | ||||||
| Repayment of notes payable | (478 | ) | (51,713 | ) | ||||
| Payment of participating note payable and contingent consideration | (4,250 | ) | — | |||||
| Proceeds from term loan | 10,000 | 80,000 | ||||||
| Repayment of term loan | (22,734 | ) | — | |||||
| Proceeds from issuance of senior notes | 281,924 | 258,997 | ||||||
| Redemption of senior notes | (52,154 | ) | — | |||||
| Payment of debt issuance costs | (3,425 | ) | (7,260 | ) | ||||
| Payment of employment taxes on vesting of restricted stock | (2,022 | ) | (3,731 | ) | ||||
| Common dividends paid | (41,138 | ) | (22,684 | ) | ||||
| Preferred dividends paid | (264 | ) | — | |||||
| Repurchase of common stock | (4,273 | ) | (18,703 | ) | ||||
| Repurchase of warrants | (2,777 | ) | — | |||||
| Distribution to noncontrolling interests | (1,958 | ) | (1,067 | ) | ||||
| Proceeds from offering common stock | 63 | — | ||||||
| Proceeds from offering preferred stock | 56,566 | — | ||||||
| Net cash provided by financing activities | 250,176 | 284,859 | ||||||
| (Decrease) increase in cash, cash equivalents and restricted cash | (75,612 | ) | 28,604 | |||||
| Effect of foreign currency on cash, cash equivalents and restricted cash | 73 | (860 | ) | |||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (75,539 | ) | 27,744 | |||||
| Cash, cash equivalents and restricted cash, beginning of year | 180,278 | 152,534 | ||||||
| Cash, cash equivalents and restricted cash, end of year | $ | 104,739 | $ | 180,278 | ||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | 74,625 | $ | 50,103 | ||||
| Taxes paid | $ | 8,649 | $ | 6,497 | ||||
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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Segment Financial Information
(Dollars in thousands)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| Capital Markets segment: | ||||||||||||||||
| Revenues - Services and fees | $ | 149,139 | $ | 47,738 | $ | 408,637 | $ | 236,789 | ||||||||
| Interest income - Loans and securities lending | 23,074 | 12,871 | 77,221 | 38,277 | ||||||||||||
| Total revenues | 172,213 | 60,609 | 485,858 | 275,066 | ||||||||||||
| Selling, general and administrative expenses | (72,924 | ) | (59,215 | ) | (269,494 | ) | (227,774 | ) | ||||||||
| Restructuring recovery (charge) | — | (5,921 | ) | 4 | (8,378 | ) | ||||||||||
| Interest expense - Securities lending and loan participations sold | (9,565 | ) | (6,722 | ) | (32,144 | ) | (23,039 | ) | ||||||||
| Depreciation and amortization | (1,130 | ) | (1,295 | ) | (4,974 | ) | (5,723 | ) | ||||||||
| Segment income (loss) | 88,594 | (12,544 | ) | 1,79,250 | 10,152 | |||||||||||
| Auction and Liquidation segment: | ||||||||||||||||
| Revenues - Services and fees | (47,385 | ) | 10,111 | 18,296 | 54,923 | |||||||||||
| Revenues - Sale of goods | 2,990 | 15 | 4,220 | 63 | ||||||||||||
| Total revenues | (44,395 | ) | 10,126 | 22,516 | 54,986 | |||||||||||
| Direct cost of services | (11,712 | ) | (7,364 | ) | (33,296 | ) | (19,627 | ) | ||||||||
| Cost of goods sold | (3,024 | ) | — | (4,016 | ) | (41 | ) | |||||||||
| Selling, general and administrative expenses | (1,685 | ) | (487 | ) | (10,730 | ) | (8,274 | ) | ||||||||
| Depreciation and amortization | (2 | ) | (8 | ) | (7 | ) | (31 | ) | ||||||||
| Segment (loss) income | (60,818 | ) | 2,267 | (25,533 | ) | 27,013 | ||||||||||
| Valuation and Appraisal segment: | ||||||||||||||||
| Revenues - Services and fees | 9,678 | 11,322 | 38,821 | 38,705 | ||||||||||||
| Selling, general and administrative expenses | (6,956 | ) | (7,877 | ) | (28,448 | ) | (27,403 | ) | ||||||||
| Depreciation and amortization | (36 | ) | (46 | ) | (136 | ) | (205 | ) | ||||||||
| Segment income | 2,686 | 3,399 | 10,237 | 11,097 | ||||||||||||
| Principal Investments - United Online and magicJack segment: | ||||||||||||||||
| Revenues - Services and fees | 22,764 | 19,489 | 97,147 | 53,659 | ||||||||||||
| Revenues - Sale of goods | 922 | 485 | 3,715 | 575 | ||||||||||||
| Total revenues | 23,686 | 19,974 | 100,862 | 54,234 | ||||||||||||
| Direct cost of services | (5,398 | ) | (6,045 | ) | (25,529 | ) | (15,127 | ) | ||||||||
| Cost of goods sold | (716 | ) | (658 | ) | (3,559 | ) | (759 | ) | ||||||||
| Selling, general and administrative expenses | (5,846 | ) | (4,641 | ) | (24,256 | ) | (10,962 | ) | ||||||||
| Depreciation and amortization | (2,939 | ) | (2,560 | ) | (12,658 | ) | (7,600 | ) | ||||||||
| Restructuring charge | — | (338 | ) | (1,703 | ) | (338 | ) | |||||||||
| Segment income | 8,787 | 5,732 | 33,157 | 19,448 | ||||||||||||
| Brands segment: | ||||||||||||||||
| Revenues - Services and fees | 4,055 | — | 4,055 | — | ||||||||||||
| Selling, general and administrative expenses | (881 | ) | — | (881 | ) | — | ||||||||||
| Depreciation and amortization | (507 | ) | — | (507 | ) | — | ||||||||||
| Segment income | 2,667 | — | 2,667 | — | ||||||||||||
| Consolidated operating income (loss) from reportable segments | 41,916 | (1,146 | ) | 199,778 | 67,710 | |||||||||||
| Corporate and other expenses (including restructuring recovery of $210 during the year ended December 31, 2018) | (4,349 | ) | (5,388 | ) | (33,127 | ) | (22,326 | ) | ||||||||
| Interest income | 248 | 590 | 1,577 | 1,326 | ||||||||||||
| Income (loss) on equity investments | 2,618 | 2,937 | (1,431 | ) | 7,986 | |||||||||||
| Interest expense | (15,075 | ) | (9,467 | ) | (50,205 | ) | (33,393 | ) | ||||||||
| Income (loss) before income taxes | 25,358 | (12,474 | ) | 116,592 | 21,303 | |||||||||||
| (Provision for) benefit from income taxes | (7,842 | ) | 3,509 | (34,644 | ) | (4,903 | ) | |||||||||
| Net income (loss) | 17,516 | (8,965 | ) | 81,948 | 16,400 | |||||||||||
| Net income (loss) attributable to noncontrolling interests | 387 | (160 | ) | 337 | 891 | |||||||||||
| Net income (loss) attributable to B. Riley Financial, Inc. | 17,129 | (8,805 | ) | 81,611 | 15,509 | |||||||||||
| Preferred stock dividends | 264 | — | 264 | — | ||||||||||||
| Net income (loss) applicable to common shareholders | $ | 16,865 | $ | (8,805 | ) | $ | 81,347 | $ | 15,509 | |||||||
8
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net income (loss) attributable to B. Riley Financial, Inc. | $ | 17,129 | $ | (8,805 | ) | $ | 81,611 | $ | 15,509 | |||||||
| Adjustments: | ||||||||||||||||
| Provision for (benefit from) income taxes | 7,842 | (3,509 | ) | 34,644 | 4,903 | |||||||||||
| Interest expense | 15,075 | 9,467 | 50,205 | 33,393 | ||||||||||||
| Interest income | (248 | ) | (590 | ) | (1,577 | ) | (1,326 | ) | ||||||||
| Share based payments | 5,640 | 3,286 | 15,916 | 11,596 | ||||||||||||
| Depreciation and amortization | 4,831 | 4,041 | 19,048 | 13,809 | ||||||||||||
| Restructuring costs | — | 6,259 | 1,699 | 8,506 | ||||||||||||
| Transactions related costs and other | — | 1,048 | 6,339 | 3,241 | ||||||||||||
| Total EBITDA adjustments | 33,140 | 20,002 | 1,26,274 | 74,122 | ||||||||||||
| Adjusted EBITDA | $ | 50,269 | $ | 11,197 | $ | 2,07,885 | $ | 89,631 | ||||||||
9
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Net income (loss) attributable to B. Riley Financial, Inc. | $ | 17,129 | $ | (8,805 | ) | $ | 81,611 | $ | 15,509 | |||||||
| Adjustments: | ||||||||||||||||
| Share based payments | 5,640 | 3,286 | 15,916 | 11,596 | ||||||||||||
| Amortization of intangible assets | 3,815 | 2,734 | 13,846 | 9,133 | ||||||||||||
| Restructuring costs | — | 6,259 | 1,699 | 8,506 | ||||||||||||
| Transactions related costs and other | — | 1,048 | 6,339 | 3,241 | ||||||||||||
| Income tax effect of adjusting entries | (2,969 | ) | (3,798 | ) | (11,154 | ) | (9,209 | ) | ||||||||
| Adjusted net income attributable to B. Riley Financial, Inc. | $ | 23,615 | $ | 724 | $ | 1,08,257 | $ | 38,776 | ||||||||
| Adjusted income per common share: | ||||||||||||||||
| Adjusted basic income per share | $ | 0.89 | $ | 0.03 | $ | 4.10 | $ | 1.49 | ||||||||
| Adjusted diluted income per share | $ | 0.83 | $ | 0.03 | $ | 3.93 | $ | 1.45 | ||||||||
| Shares used to calculate adjusted basic net income per share | 26,547,023 | 26,177,560 | 26,401,036 | 25,937,305 | ||||||||||||
| Shares used to calculate adjusted diluted net income per share | 28,412,871 | 26,177,560 | 27,529,157 | 26,764,856 | ||||||||||||
10