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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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 April 24, 2024, B. Riley Financial, Inc. (the “Company”) issued a press release announcing the filing of its 2023 Annual Report on Form 10-K and providing certain financial information related to the year and quarter ended December 31, 2023. In addition, the press released disclosed that, as referenced in the Company’s 2023 Annual Report, the Audit Committee of the Company’s Board of Directors engaged Winston & Strawn LLP as independent counsel to assist the Audit Committee in conducting an investigation of the historical relationship between the Company (and its affiliates) and Brian Kahn (and his affiliates) as well as certain related allegations asserted against the Company by certain short sellers. The results of the independent investigation confirmed that the Company and its executives had no involvement with, or knowledge of, any of the alleged misconduct concerning Mr. Kahn or any of his affiliates. This independent investigation was conducted subsequent to the Company’s February 22, 2024 disclosure of the internal review performed with the assistance of Sullivan & Cromwell LLP as outside counsel.
A copy of the press release is attached hereto as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
Additionally, on April 24, 2024, in conjunction with the press release described above, the Company posted to its website at https://ir.brileyfin.com, certain supplemental financial information for the fourth quarter ended December 31, 2023. A copy of the information is attached hereto as Exhibit 99.2.
The Company also intends to amend its August 21, 2023 Current Report on Form 8-K filed with the SEC in connection with the closing of its investment in Franchise Group, Inc. (“FRG”), which amended Form 8-K will include the filing of FRG’s statements of operations for the year and six months ended December 31, 2022 and June 30, 2023, respectively, and balance sheet as of June 30, 2023, as well as related Company pro forma financials. Those FRG financial statements were filed by FRG with the SEC in its 2022 Annual Report on Form 10-K and its June 30, 2023 Quarterly Report on Form 10-Q, respectively, and are available at the SEC’s website at www.sec.gov. Due to the successful sales by FRG of its Badcock and Sylvan Learning businesses in December 2023 and February 2024, respectively, however, FRG is in the process of preparing those financials in accordance with GAAP to recast the Badcock and Sylvan Learning businesses as discontinued operations. Accordingly, the Company anticipates filing the amended Form 8-K to include such financial statements in the near term.
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 | Press Release dated April 24, 2024 | |
| 99.2 | Fourth Quarter 2023 Supplemental Financial Data dated April 24, 2024 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
1
SIGNATURES
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.
| B. Riley Financial, Inc. | ||
| By: |
/s/ Phillip J. Ahn | |
| Name: | Phillip J. Ahn | |
| Title: | Chief Financial Officer and Chief Operating Officer | |
Date: April 24, 2024
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Exhibit 99.1
B. Riley Financial Files 2023 Annual Report on Form 10-K
| ● | Audit Committee Independent Legal Counsel, Winston & Strawn LLP, Completes Investigation of Relationship Between the Company and Brian Kahn |
| ● | Independent Investigation Reaches Same Conclusion of Prior Internal Review Conducted by Sullivan & Cromwell LLP |
LOS ANGELES, April 24, 2024 – B. Riley Financial, Inc. (NASDAQ: RILY) (“B. Riley” or the “Company”), a diversified financial services platform, today announced the filing of its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”).
B. Riley Financial’s 2023 Annual Report is available in the Investor Relations section of the Company’s website at ir.brileyfin.com under “SEC Filings,” as well as on the SEC’s website at www.sec.gov. Additional information regarding the Company’s operating and investment metrics is available in the Fourth Quarter 2023 Financial Supplement on the Company’s investor relations website.
Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented:
“We want to thank our many stakeholders for their continued confidence, support, and patience as we finalized our Annual Report. With this process behind us, we are excited to be able to focus 100% of our time and efforts on what has always been our highest priority— our core business, delivering for our clients, and creating value for our shareholders.”
“We are pleased to note that our overall business has continued to perform well since year-end. Relative valuations for small and mid-caps are as attractive as we have seen in years, and we are investing to grow our leadership in providing financial services and capital solutions to this underserved market.”
“Since year-end, we have welcomed senior talent, invested in attractive new opportunities, monetized several others, retired $115 million of our outstanding bonds and reduced additional indebtedness by approximately $55 million. Our strategic review process for Great American Group is proceeding on schedule, and we are pleased with the interest we have seen to date. The potential monetization of this unique asset would accelerate our ability to opportunistically retire more debt and invest in our core B. Riley Securities, Advisory and Wealth Management businesses as we double down on our commitment to serving our clients and businesses across the middle market – both as an advisor and principal.”
“We acknowledge the complexities of our business are a result of an aggressive acquisition and investment strategy that has meaningfully diversified our platform. We are continuing to strengthen our processes and procedures to ensure we are best positioned to capitalize on the substantial market opportunities in front of us. Above all, we are proud of our team’s persistence and resolve throughout what has been a challenging dynamic for our firm. We look forward to providing more updates on our first quarter earnings call.”
Financial Results for the Year Ended December 31, 2023
The audited financial statements in the Company’s Annual Report reflected certain non-cash adjustments to the preliminary results announced on February 29, 2024. The cumulative impact of these adjustments on the Company’s key reported financial metrics is summarized in the below table. For a complete summary of financial results for the fourth quarter and full year ended 2023, including a comparison to 2022 financial results, please see the appendix at the end of this press release.
| Twelve Months Ended | ||||||||||||
| December 31, 2023 | ||||||||||||
| (Dollars in thousands) | Preliminary | Adjustments | Final | |||||||||
| Total revenues | $ | 1,647,185 | $ | (3,585 | ) | $ | 1,643,600 | |||||
| Operating income (loss) | 150,630 | (5,977 | ) | 144,653 | ||||||||
| Net loss available to common shareholders | (86,371 | ) | (21,596 | ) | (107,967 | ) | ||||||
| Adjusted EBITDA | 239,877 | (29,633 | ) | 210,244 | ||||||||
| Operating Adjusted EBITDA | 367,604 | (4,595 | ) | 363,009 | ||||||||
Certain of the information set forth herein, including Adjusted EBITDA and Operating Adjusted EBITDA, are 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.”
Summary of Adjustments from Preliminary Results
| ● | Total revenues were $1.644 billion, revised from $1.647 billion to reflect $3.6 million of adjustments primarily related to accrued fee income and trading income. |
| ● | Net loss available to common shareholders was $108 million, revised from $86.4 million, a change of $21.6 million. The change primarily relates to the decrease in revenues and adjustments from changes in unrealized gains and losses on investments, net of benefit from income taxes. The unrealized gains and losses on investments primarily related to the Company’s Hurley and Justice brand investments. The change in the valuation of the Company’s investments equates to less than half a percent of the Company’s total assets. |
| ● | Total assets as of December 31, 2023 were $6.07 billion, revised from the preliminary reported amount of $6.10 billion. The decrease primarily relates to the adjustments in the fair value of securities and other investments as noted above. |
| ● | Total Adjusted EBITDA(2) was $210.2 million reflecting adjustments of $29.6 million primarily due to the decrease in revenues and adjustments from changes in unrealized gains and losses on investments. |
| ● | Total Operating Adjusted EBITDA(3) was $363.0 million, reflecting adjustments of $4.6 million primarily due to a $2.3 million adjustment to fee income and a $2.2 million reserve on inventory. |
2
Independent Audit Committee Investigation
As referenced in the Company’s 2023 Annual Report, the Audit Committee of the Company’s Board of Directors engaged Winston & Strawn LLP as independent counsel to assist the Audit Committee in conducting an investigation of the historical relationship between the Company (and its affiliates) and Brian Kahn (and his affiliates) as well as certain related allegations asserted against the Company by certain short sellers.
The results of the independent investigation confirmed that the Company and its executives had no involvement with, or knowledge of, any of the alleged misconduct concerning Mr. Kahn or any of his affiliates. This independent investigation was conducted subsequent to the Company’s February 22, 2024 disclosure of the internal review performed with the assistance of Sullivan & Cromwell LLP as outside counsel.
Additional Information
The Annual Report provides additional clarification regarding the Company’s investment in Freedom VCM, which addresses unsubstantiated claims made about the Company’s role and participation in the FRG take-private transaction and its investment in FRG.
As noted, the Company’s ownership of Freedom VCM amounted to $281 million, or 31%, in connection with the take-private transaction, which included an investment of $216.5 million and $64.6 million of FRG shares that were rolled over into additional equity interests in Freedom VCM in connection with closing. As of December 31, 2023, the fair value of the investment in Freedom VCM totaled $287 million and is included in securities and other investments owned, at fair value in the consolidated balance sheets.
The Company intends to amend its August 21, 2023 Current Report on Form 8-K in connection with the closing of its investment in the FRG take-private transaction to include updated historical FRG financial statements and related pro forma financials. As result of the successful sales by FRG of its Badcock and Sylvan Learning businesses in December 2023 and February 2024, respectively, FRG is in the process of preparing its 2022 annual financial statements and interim June 2023 financial statements in accordance with GAAP to recast these businesses as discontinued operations. The Company anticipates filing the amended Form 8-K to include such financial statements in the near term.
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.
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Footnotes (See “Note Regarding Use of Non-GAAP Financial Measures” for further discussion of these non-GAAP terms. For a reconciliation of Adjusted EBITDA and Operating Adjusted EBITDA 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) | 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. |
| (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. 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. |
| (4) | 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. |
| (5) | 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. |
| (6) | Investment Gains (Loss) is defined as Trading Income (Loss) and Fair Value Adjustments on Loans less fixed income trading revenue. |
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including operating revenues, adjusted EBITDA, and operating 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, 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
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 2023 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). 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.
4
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands)
| December 31, 2023 | December 31, 2022 | |||||||
| Assets | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 231,964 | $ | 268,618 | ||||
| Restricted cash | 1,875 | 2,308 | ||||||
| Due from clearing brokers | 51,334 | 48,737 | ||||||
| Securities and other investments owned, at fair value | 1,092,106 | 1,129,268 | ||||||
| Securities borrowed | 2,870,939 | 2,343,327 | ||||||
| Accounts receivable, net of allowance for credit losses of $7,339 and $3,664 as of December 31, 2023 and 2022, respectively | 115,496 | 149,110 | ||||||
| Due from related parties | 172 | 1,081 | ||||||
| Loans receivable, at fair value (includes $387,657 and $98,729 from related parties as of December 31, 2023 and December 31, 2022, respectively) | 532,419 | 701,652 | ||||||
| Prepaid expenses and other assets | 237,327 | 460,696 | ||||||
| Operating lease right-of-use asset, net | 87,605 | 88,593 | ||||||
| Property and equipment, net | 25,206 | 27,141 | ||||||
| Goodwill | 472,326 | 512,595 | ||||||
| Other intangible assets, net | 322,014 | 374,098 | ||||||
| Deferred income taxes | 33,595 | 3,978 | ||||||
| Total assets | $ | 6,074,378 | $ | 6,111,202 | ||||
| Liabilities and Equity | ||||||||
| Liabilities | ||||||||
| Accounts payable | $ | 44,550 | $ | 81,384 | ||||
| Accrued expenses and other liabilities | 273,193 | 322,974 | ||||||
| Deferred revenue | 71,504 | 85,441 | ||||||
| Due to related parties and partners | 2,731 | 2,210 | ||||||
| Due to clearing brokers | — | 19,307 | ||||||
| Securities sold not yet purchased | 8,601 | 5,897 | ||||||
| Securities loaned | 2,859,306 | 2,334,031 | ||||||
| Operating lease liabilities | 98,563 | 99,124 | ||||||
| Deferred income taxes | — | 29,548 | ||||||
| Notes payable | 19,391 | 25,263 | ||||||
| Revolving credit facility | 43,801 | 127,678 | ||||||
| Term loan | 625,151 | 572,079 | ||||||
| Senior notes payable, net | 1,668,021 | 1,721,751 | ||||||
| Total liabilities | 5,714,812 | 5,426,687 | ||||||
| Redeemable noncontrolling interests in equity of subsidiaries | — | 178,622 | ||||||
| Total B. Riley Financial, Inc. stockholders’ equity | 291,117 | 446,514 | ||||||
| Noncontrolling interests | 68,449 | 59,379 | ||||||
| Total equity | 359,566 | 505,893 | ||||||
| Total liabilities and equity | $ | 6,074,378 | $ | 6,111,202 | ||||
5
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Dollars in thousands, except share data)
| Twelve Months Ended December 31 | ||||||||||||
| 2023 | 2022 | 2021 | ||||||||||
| Revenues: | ||||||||||||
| Services and fees | $ | 1,002,370 | $ | 895,623 | $ | 1,153,225 | ||||||
| Trading income (loss) and fair value adjustments on loans | 41,828 | (202,628 | ) | 220,545 | ||||||||
| Interest income - Loans and securities lending | 284,896 | 245,400 | 122,723 | |||||||||
| Sale of goods | 314,506 | 142,275 | 58,205 | |||||||||
| Total revenues | 1,643,600 | 1,080,670 | 1,554,698 | |||||||||
| Operating expenses: | ||||||||||||
| Direct cost of services | 238,794 | 142,455 | 54,390 | |||||||||
| Cost of goods sold | 213,351 | 78,647 | 26,953 | |||||||||
| Selling, general and administrative expenses | 828,903 | 714,614 | 906,196 | |||||||||
| Restructuring charge | 2,131 | 9,011 | — | |||||||||
| Impairment of goodwill and tradenames | 70,333 | — | — | |||||||||
| Interest expense - Securities lending and loan participations sold | 145,435 | 66,495 | 52,631 | |||||||||
| Total operating expenses | 1,498,947 | 1,011,222 | 1,040,170 | |||||||||
| Operating income | 144,653 | 69,448 | 514,528 | |||||||||
| Other income (expense): | ||||||||||||
| Interest income | 3,875 | 2,735 | 229 | |||||||||
| Dividend income | 47,776 | 35,874 | 19,732 | |||||||||
| Realized and unrealized (losses) gains on investments | (162,589 | ) | (201,079 | ) | 166,131 | |||||||
| Change in fair value of financial instruments and other | (4,748 | ) | 10,188 | 3,796 | ||||||||
| Gain on bargain purchase | 15,903 | — | — | |||||||||
| (Loss) income from equity investments | (181 | ) | 3,570 | 2,801 | ||||||||
| Interest expense | (187,013 | ) | (141,186 | ) | (92,455 | ) | ||||||
| (Loss) income before income taxes | (142,324 | ) | (220,450 | ) | 614,762 | |||||||
| Benefit from (provision for) income taxes | 36,693 | 63,856 | (163,960 | ) | ||||||||
| Net (loss) income | (105,631 | ) | (156,594 | ) | 450,802 | |||||||
| Net (loss) gain attributable to noncontrolling interests and redeemable noncontrolling interests | (5,721 | ) | 3,235 | 5,748 | ||||||||
| Net (loss) income attributable to B. Riley Financial, Inc. | (99,910 | ) | (159,829 | ) | 445,054 | |||||||
| Preferred stock dividends | 8,057 | 8,008 | 7,457 | |||||||||
| Net (loss) income available to common shareholders | $ | (107,967 | ) | $ | (167,837 | ) | $ | 437,597 | ||||
| Basic (loss) income per common share | $ | (3.69 | ) | $ | (5.95 | ) | $ | 15.99 | ||||
| Diluted (loss) income per common share | $ | (3.69 | ) | $ | (5.95 | ) | $ | 15.09 | ||||
| Weighted average basic common shares outstanding | 29,265,099 | 28,188,530 | 27,366,292 | |||||||||
| Weighted average diluted common shares outstanding | 29,265,099 | 28,188,530 | 29,005,602 | |||||||||
6
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues: | ||||||||
| Services and fees | $ | 258,461 | $ | 243,837 | ||||
| Trading (loss) income and fair value adjustments on loans | (41,518 | ) | (58,670 | ) | ||||
| Interest income - Loans and securities lending | 62,781 | 62,545 | ||||||
| Sale of goods | 63,196 | 134,380 | ||||||
| Total revenues | 342,920 | 382,092 | ||||||
| Operating expenses: | ||||||||
| Direct cost of services | 60,606 | 68,496 | ||||||
| Cost of goods sold | 47,355 | 71,313 | ||||||
| Selling, general and administrative expenses | 205,703 | 208,552 | ||||||
| Restructuring charge | 1,182 | 995 | ||||||
| Impairment of goodwill and tradenames | 33,100 | — | ||||||
| Interest expense - Securities lending and loan participations sold | 38,863 | 22,738 | ||||||
| Total operating expenses | 386,809 | 372,094 | ||||||
| Operating (loss) income | (43,889 | ) | 9,998 | |||||
| Other income (expense): | ||||||||
| Interest income | 420 | 1,482 | ||||||
| Dividend income | 12,141 | 9,595 | ||||||
| Realized and unrealized losses on investments | (77,629 | ) | (64,874 | ) | ||||
| Change in fair value of financial instruments and other | (750 | ) | 460 | |||||
| Gain on bargain purchase | 15,903 | — | ||||||
| (Loss) income from equity investments | (6 | ) | 285 | |||||
| Interest expense | (46,891 | ) | (44,399 | ) | ||||
| Loss before income taxes | (140,701 | ) | (87,453 | ) | ||||
| Benefit from income taxes | 51,037 | 23,998 | ||||||
| Net loss | (89,664 | ) | (63,455 | ) | ||||
| Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests | (41 | ) | (6,010 | ) | ||||
| Net loss attributable to B. Riley Financial, Inc. | (89,623 | ) | (57,445 | ) | ||||
| Preferred stock dividends | 2,015 | 2,002 | ||||||
| Net loss available to common shareholders | $ | (91,638 | ) | $ | (59,447 | ) | ||
| Basic loss per common share | $ | (3.03 | ) | $ | (2.08 | ) | ||
| Diluted loss per common share | $ | (3.03 | ) | $ | (2.08 | ) | ||
| Weighted average basic common shares outstanding | 30,248,946 | 28,545,714 | ||||||
| Weighted average diluted common shares outstanding | 30,248,946 | 28,545,714 | ||||||
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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted EBITDA and Operating Adjusted EBITDA Reconciliations
(Unaudited)
(Dollars in thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss attributable to B. Riley Financial, Inc. | $ | (89,623 | ) | $ | (57,445 | ) | $ | (99,910 | ) | $ | (159,829 | ) | ||||
| Adjustments: | ||||||||||||||||
| Benefit from income taxes | (51,037 | ) | (23,998 | ) | (36,693 | ) | (63,856 | ) | ||||||||
| Interest expense | 46,891 | 44,399 | 187,013 | 141,186 | ||||||||||||
| Interest income | (420 | ) | (1,482 | ) | (3,875 | ) | (2,735 | ) | ||||||||
| Share based payments | 9,845 | 15,312 | 45,109 | 61,140 | ||||||||||||
| Depreciation and amortization | 11,502 | 13,443 | 49,604 | 39,969 | ||||||||||||
| Restructuring charge | 1,182 | 995 | 2,131 | 9,011 | ||||||||||||
| Gain on bargain purchase | (15,903 | ) | — | (15,903 | ) | — | ||||||||||
| Loss (gain) on extinguishment of loans | — | — | 5,409 | (1,102 | ) | |||||||||||
| Impairment of goodwill and tradenames | 33,100 | — | 70,333 | — | ||||||||||||
| Transactions related costs and other | 1,864 | (5,264 | ) | 7,026 | 8,498 | |||||||||||
| Total EBITDA adjustments | 37,024 | 43,405 | 310,154 | 192,111 | ||||||||||||
| Adjusted EBITDA | $ | (52,599 | ) | $ | (14,040 | ) | $ | 210,244 | $ | 32,282 | ||||||
| Operating EBITDA Adjustments: | ||||||||||||||||
| Trading loss (income) and fair value adjustments on loans | 41,518 | 58,670 | (41,828 | ) | 202,628 | |||||||||||
| Realized and unrealized losses on investments | 77,629 | 64,874 | 162,589 | 201,079 | ||||||||||||
| Fixed Income Spread | 8,250 | 8,069 | 29,165 | 27,127 | ||||||||||||
| Other investment related expenses | (538 | ) | (7,697 | ) | 2,839 | (69,531 | ) | |||||||||
| Total Operating EBITDA Adjustments | 126,859 | 123,916 | 152,765 | 361,303 | ||||||||||||
| Operating Adjusted EBITDA | $ | 74,260 | $ | 109,876 | $ | 363,009 | $ | 393,585 | ||||||||
8
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Operating Revenues Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Total Revenues | $ | 342,920 | $ | 382,092 | $ | 1,643,600 | $ | 1,080,670 | ||||||||
| Operating Revenues Adjustments: | ||||||||||||||||
| Trading loss (income) and fair value adjustments on loans | 41,518 | 58,670 | (41,828 | ) | 202,628 | |||||||||||
| Fixed Income Spread | 8,250 | 8,069 | 29,165 | 27,127 | ||||||||||||
| Total Revenues Adjustments | 49,768 | 66,739 | (12,663 | ) | 229,755 | |||||||||||
| Operating Revenues | $ | 392,688 | $ | 448,831 | $ | 1,630,937 | $ | 1,310,425 | ||||||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Revenues Reconciliation
(Dollars in thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues: | ||||||||||||||||
| Capital Markets | $ | 83,973 | $ | 72,304 | $ | 571,002 | $ | 327,596 | ||||||||
| Wealth Management | 49,350 | 46,217 | 198,245 | 234,257 | ||||||||||||
| Auction and Liquidation | 9,439 | 59,778 | 103,265 | 74,096 | ||||||||||||
| Financial Consulting | 40,123 | 25,427 | 133,705 | 98,508 | ||||||||||||
| Communications | 82,021 | 87,944 | 337,689 | 235,655 | ||||||||||||
| Consumer Products | 54,046 | 77,821 | 233,202 | 77,821 | ||||||||||||
| All Other | 23,968 | 12,601 | 66,492 | 32,737 | ||||||||||||
| Total Revenues | $ | 342,920 | $ | 382,092 | $ | 1,643,600 | $ | 1,080,670 | ||||||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Operating (Loss) Income Reconciliation
(Dollars in thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Operating (Loss) Income: | ||||||||||||||||
| Capital Markets | $ | (6,253 | ) | $ | (8,007 | ) | $ | 194,843 | $ | 81,602 | ||||||
| Wealth Management | 683 | (7,414 | ) | 3,097 | (34,320 | ) | ||||||||||
| Auction and Liquidation | (1,147 | ) | 12,372 | 21,371 | 12,600 | |||||||||||
| Financial Consulting | 7,816 | 4,412 | 30,420 | 16,312 | ||||||||||||
| Communications | 6,468 | 11,205 | 34,725 | 30,320 | ||||||||||||
| Consumer Products | (37,538 | ) | 8,188 | (77,710 | ) | 8,188 | ||||||||||
| All Other | (13,918 | ) | (10,758 | ) | (62,093 | ) | (45,254 | ) | ||||||||
| Total Operating (Loss) Income | $ | (43,889 | ) | $ | 9,998 | $ | 144,653 | $ | 69,448 | |||||||
9
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Capital Markets Operating Revenues Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| Capital Markets | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Total Revenues | $ | 83,973 | $ | 72,304 | $ | 571,002 | $ | 327,596 | ||||||||
| Operating Revenues Adjustments: | ||||||||||||||||
| Trading loss (income) and fair value adjustments on loans | 44,041 | 59,115 | (37,070 | ) | 206,150 | |||||||||||
| Fixed Income Spread | 7,011 | 6,927 | 25,519 | 22,765 | ||||||||||||
| Total Revenues Adjustments | 51,052 | 66,042 | (11,551 | ) | 228,915 | |||||||||||
| Operating Revenues | $ | 135,025 | $ | 138,346 | $ | 559,451 | $ | 556,511 | ||||||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Capital Markets Segment Operating Income Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| Capital Markets | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Segment (Loss) Income | $ | (6,253 | ) | $ | (8,007 | ) | $ | 194,843 | $ | 81,602 | ||||||
| Operating Revenues Adjustments: | ||||||||||||||||
| Trading loss (income) and fair value adjustments on loans | 44,041 | 59,115 | (37,070 | ) | 206,150 | |||||||||||
| Fixed Income Spread | 7,011 | 6,927 | 25,519 | 22,765 | ||||||||||||
| Other investment related expenses | — | (2,515 | ) | 12,882 | (63,519 | ) | ||||||||||
| Total Operating Income Adjustments | 51,052 | 63,527 | 1,331 | 165,396 | ||||||||||||
| Segment Operating Income | $ | 44,799 | $ | 55,520 | $ | 196,174 | $ | 246,998 | ||||||||
# # #
Contacts
Investors
Mike Frank
[email protected]
(212) 409-2424
Media
Jo Anne McCusker
B. Riley Financial
[email protected]
(646) 885-5425
10
Exhibit 99.2
April 23, 2024 NASDAQ: RILY Fourth Quarter 2023 Supplemental Financial Data
Reconciliation of U.S. GAAP to Non - GAAP Measures Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 (Unaudited, dollars in thousands) Total Revenues to Operating Revenue Reconciliation $ 342,920 $ 462,312 $ 406,278 $ 432,090 $ 382,092 Total Revenues 41,518 10,587 (42,365) (51,568) 58,670 Revenue Adjustments: Trading loss (income) and fair value adjustments on loans 8,250 6,982 5,817 8,116 8,069 Fixed income spread 49,768 17,569 (36,548) (43,452) 66,739 Total Revenue Adjustments $ 2 392,688 $ 479,881 $ 369,730 $ 388,638 $ 448,831 Operating Revenue
Reconciliation of U.S. GAAP to Non - GAAP Measures Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 (Unaudited, dollars in thousands) Adj. EBITDA and Operating Adj. EBITDA Reconciliation (89,623) $ (73,823) $ 46,381 $ 17,155 $ (57,445) Net (loss) income attributable to B. Riley Financial, Inc. (51,037) (15,079) 21,504 7,919 (23,998) EBITDA Adjustments: (Benefit from) provision for income taxes 46,891 45,229 47,332 47,561 44,399 Interest expense (420) (180) (701) (2,574) (1,482) Interest income 9,845 11,026 10,492 13,746 15,312 Share based payments 11,502 12,491 12,534 13,077 13,443 Depreciation and amortization 1,182 228 628 93 995 Restructuring charge (15,903) — — — — Gain on bargain purchase — 5,409 — — — Loss on extinguishment of loans 33,100 35,500 1,733 — — Impairment of goodwill and tradenames 1,864 7,318 (10) (2,146) (5,264) Transactions related costs and other 37,024 101,942 93,512 77,676 43,405 Total EBITDA Adjustments $(52,599) $ 28,119 $ 139,893 $ 94,831 $ (14,040) Adjusted EBITDA Operating EBITDA Adjustments: 41,518 10,587 (42,365) (51,568) 58,670 Trading loss (income) and fair value adjustments on loans 77,629 75,361 (18,843) 28,442 64,874 Realized and unrealized losses (gains) on investments 8,250 6,982 5,817 8,116 8,069 Fixed Income Spread (538) (6,575) 1,531 8,421 (7,697) Other investment related expenses 126,859 86,355 (53,860) (6,589) 123,916 Total Operating EBITDA Adjustments $74,260 $114,474 $86,033 $88,242 $109,876 Operating Adjusted EBITDA 3
Quarterly Operating Revenue and Operating Adjusted EBITDA Operating Revenue and Operating Adjusted EBITDA (1)(3)(5)(6) Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 (Dollars in thousands) Operating Revenue (1) Investment (Loss) Gains (2) $ $ 392,688 (49,768) $ 479,881 (17,569) $ 369,730 36,548 $ 388,638 43,452 448,831 (66,739) $ 342,920 $ 462,312 $ 382,092 $ 432,090 $ 406,278 Total Revenue Q4 2023 Q3 2023 Q2 2023 Q1 2023 Q4 2022 $ 74,260 (126,859) $ 86,033 $ 114,474 53,860 (86,355) $ 109,876 $ 88,242 (123,916) 6,589 Operating Adjusted EBITDA (3) Investment Adjusted EBITDA (4) Quarterly Revenue and Adjusted EBITDA 1. 2. 3. 4. 5. 6. Adjusted EBITDA (5)(6) $ (14,040) $ 94,831 $ 139,893 $ 28,119 $ (52,599) 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. During the fourth quarter of 2023, the Company recast its operating metrics to include revenues from fixed income trading. Operating Revenues has been adjusted to include fixed income trading revenue for the periods presented. Investment Gains (Loss) is defined as Trading Income (Loss) and Fair Value Adjustments on Loans less fixed income trading revenue. 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. 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 fixed income trading revenue and other investment related expenses. 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. For a reconciliation to GAAP financial measures, please see slide 2. $448.8M $388.6M $369.7M $392.7M $109.9M $88.2M $86.0M $114.5M $74.3M Operating Adj. EBITDA $479.9M Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Operating Revenue 4
Cash and Investments Summary 1. 2. Other investments and investment related deposits reported in prepaid and other assets. Noncontrolling interest related to investments reported in Securities and Other Investments Owned. Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 (Dollars in thousands) $ 231,964 $ 252,288 $ 107,581 $ 209,971 $ 268,618 Cash and Cash Equivalents 1,875 2,060 2,321 2,351 2,308 Restricted Cash 51,334 25,579 22,289 13,112 29,430 Due from/(to) Clearing Brokers, net — 200 200 200 200 Advances Against Customer Contracts 994,634 1,088,567 963,817 929,582 1,046,710 Securities and Other Investments Owned Equity Securities 59,287 66,341 62,977 65,470 8,539 Corporate Bonds 2,989 3,872 5,093 5,248 3,956 Other Fixed Income Securities 35,196 38,807 40,557 48,930 70,063 Partnership Interests and Other (8,601) (7,120) (2,686) (7,806) (5,897) Securities Sold Not Yet Purchased 532,419 549,142 683,827 772,085 701,652 Loans Receivable, net of Loan Participations Sold 14,582 57,738 66,268 72,905 53,844 Other investments and deposits (1) (41,456) (24,766) (31,199) (29,785) (31,349) Noncontrolling interest (2) $ 1,874,223 $ 2,052,708 $ 1,921,045 $ 2,082,263 $ 2,148,074 Total Cash, Net Securities, and Other Debt Summary Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 (Dollars in thousands) $ 625,151 $ 618,301 $ 529,242 $ 626,613 $ 572,079 Term Loans, net 43,801 57,246 110,875 139,463 127,678 Revolving Credit Facility 19,391 21,300 21,298 19,882 25,263 Notes Payable 1,668,021 1,667,088 1,666,009 1,722,977 1,721,751 Senior Notes Payable, net 2,356,364 2,363,935 2,327,424 2,508,935 2,446,771 Total Debt $ (482,141) $ (311,227) $ (406,379) $ (426,672) $ (298,697) Total Cash and Investments, Net of Debt 5
Private Equity 38.0% Loans Receivable 27.7% Public Equity 13 . 7 % Cash and Restricted Cash 12.2% Partnership Interests and Other 2.6% Due from/(to) Clearing Brokers, net 2.7% Corporate Bonds and Fixed Income Securities 3.2% Composition of Cash and Investments Percentage by Asset Type – December 31, 2023 6 % of Total Gross Value ( Dollars in thousands) 12.2% 2.7% 13.7% 38.0% 27.7% 3.2% 2.6% 100.0% $ 233,839 51,334 263,773 730,861 532,419 62,276 Cash and Restricted Cash Due from/(to) Clearing Brokers, net Public Equity Private Equity Loans Receivable Corporate Bonds and Fixed Income Securities Partnership Interests and Other (1) Total 49,778 $ 1,924,280 1. Includes investments reported in prepaid and other assets.
Loans Receivables Summary Loans Receivable Balance Roll Forward – December 31, 2023 1. Excludes Consumer Receivable Related. Loans Receivable Balance by Sector December 31, 2023 September 30, 2023 $ 84,394 464,748 $ 549,142 December 31, 2023 $ 62,808 469,611 $ 532,419 Capitalized Interest and Other Fair Value Adjustments Sales, Repayments, and Conversions Gross Loan Funding (Unaudited, dollars in thousands) $ 344 (581) $ (237) $ (3,174) (28,225) $ (31,399) $ (18,756) (104,182) $ (122,938) $ — 137,851 $ 137,851 Consumer Receivable Related, at Fair Value Other Loans Receivable, at Fair Value Total Loans Receivable, at Fair Value December 31, 2023 ( Dollars in thousands) 469,611 $ Total Fair Value 480,299 $ Total Principal 12 Number of Companies 16 Number of Loans 40,025 $ Average Principal per Name 39,134 $ Average Fair Value per Name 7% - 18% Interest Rate Range 3.0 years Average Duration Vintage Loan 37.7% Technology 21.4% Retail/Consumer 19.7% Consumer Receivable Related 11.8% Utilities 4.8% Other 4.7% Summary Statistics of Other Loans Receivable (1) 7
Condensed Consolidated Balance Sheets December 31, 2022 December 31, 2023 (Dollars in thousands) $ 268,618 $ 231,964 Cash and cash equivalents 2,308 1,875 Restricted cash 48,737 51,334 Due from clearing brokers 1,129,268 1,092,106 Securities and other investments owned, at fair value 2,343,327 2,870,939 Securities borrowed 149,110 115,496 Accounts receivable, net 1,081 172 Due from related parties 701,652 532,419 Loans receivable, at fair value 460,696 237,327 Prepaid expenses and other assets 88,593 87,605 Operating lease right - of - use assets 27,141 25,206 Property and equipment, net 512,595 472,326 Goodwill 374,098 322,014 Other intangible assets, net 3,978 33,595 Deferred income taxes $ 6,111,202 $ 6,074,378 Total assets $ 81,384 $ 44,550 Accounts payable 322,974 273,193 Accrued expenses and other liabilities 85,441 71,504 Deferred revenue 2,210 2,731 Due to related parties and partners 19,307 — Due to clearing brokers 5,897 8,601 Securities sold not yet purchased 2,334,031 2,859,306 Securities loaned 99,124 98,563 Operating lease liabilities 29,548 — Deferred income taxes 25,263 19,391 Notes payable 127,678 43,801 Revolving credit facility 572,079 625,151 Term loans, net 1,721,751 1,668,021 Senior notes payable, net $ 5,426,687 $ 5,714,812 Total liabilities 178,622 — Redeemable noncontrolling interests in equity of subsidiaries 446,514 291,117 Total B. Riley Financial, Inc. stockholders' equity 59,379 68,449 Noncontrolling interests 505,893 359,566 Total equity $ 6,111,202 $ 6,074,378 Total liabilities and equity 8
Condensed Consolidated Statements of Operations 9 Three Months Ended December 31, 2022 2023 Twelve Months Ended December 31, 2022 2023 (Dollars in thousands, except share data) (Unaudited) (Unaudited) Revenues: $ 895,623 $ 1,002,370 $ 243,837 $ 258,461 Services and fees (202,628) 41,828 (58,670) (41,518) Trading (loss) income and fair value adjustments on loans 245,400 284,896 62,545 62,781 Interest income - Loans and securities lending 142,275 314,506 134,380 63,196 Sale of goods 1,080,670 1,643,600 382,092 342,920 Total revenues Operating expenses: 142,455 238,794 68,496 60,606 Direct cost of services 78,647 213,351 71,313 47,355 Cost of goods sold 714,614 828,903 208,552 205,703 Selling, general and administrative expenses 9,011 2,131 995 1,182 Restructuring charge — 70,333 — 33,100 Impairment of goodwill and tradenames 66,495 145,435 22,738 38,863 Interest expense - Securities lending and loan participations sold 1,011,222 1,498,947 372,094 386,809 Total operating expenses 69,448 144,653 9,998 (43,889) Operating (loss) income Other income (expense): 2,735 3,875 1,482 420 Interest income 35,874 47,776 9,595 12,141 Dividend income (201,079) (162,589) (64,874) (77,629) Realized and unrealized losses on investments 10,188 (4,748) 460 (750) Change in fair value of financial instruments and other — 15,903 — 15,903 Gain on bargain purchase 3,570 (181) 285 (6) (Loss) income from equity method investments (141,186) (187,013) (44,399) (46,891) Interest expense (220,450) (142,324) (87,453) (140,701) Loss before income taxes 63,856 36,693 23,998 51,037 Benefit from income taxes (156,594) (105,631) (63,455) (89,664) Net loss Net (loss) income attributable to noncontrolling interests 3,235 (5,721) (6,010) (41) and redeemable noncontrolling interests $ (159,829) $ (99,910) $ (57,445) $ (89,623) Net loss attributable to B. Riley Financial, Inc. 8,008 8,057 2,002 2,015 Preferred stock dividends $ (167,837) $ (107,967) $ (59,447) $ (91,638) Net loss available to common shareholders $ (5.95) $ (3.69) $ (2.08) $ (3.03) Basic loss per common share $ (5.95) $ (3.69) $ (2.08) $ (3.03) Diluted loss per common share 28,188,530 29,265,099 28,545,714 30,248,946 Weighted average basic common shares outstanding 28,188,530 29,265,099 28,545,714 30,248,946 Weighted average diluted common shares outstanding
Segment Financial Information Twelve Months Ended December 31, 2022 2023 Three Months Ended December 31, 2022 2023 (Unaudited) (Unaudited) Capital Markets segment: $ 292,933 $ 249,036 $ 69,485 $ 65,233 Revenues - Services and fees (206,150) 37,070 (59,115) (44,041) Trading (loss) income and fair value adjustments on loans 240,813 284,896 61,934 62,781 Interest income - Loans and securities lending 327,596 571,002 72,304 83,973 Total revenues (171,006) (224,993) (55,351) (50,514) Selling, general and administrative expenses (66,495) (145,435) (22,738) (38,863) Interest expense - Securities lending and loan participations sold (8,493) (3,998) (2,222) (849) Depreciation and amortization — (1,733) — Impairment of tradenames — 81,602 194,843 (8,007) Segment (loss) income (6,253) Wealth Management segment: 230,735 193,487 45,772 46,827 Revenues - Services and fees 3,522 4,758 445 2,523 Trading income and fair value adjustments on loans 234,257 198,245 46,217 49,350 Total revenues (258,134) (190,779) (51,696) (47,602) Selling, general and administrative expenses (4,955) (61) (849) — Restructuring charge (5,488) (4,308) (1,086) (1,065) Depreciation and amortization (34,320) 3,097 (7,414) 683 Segment income (loss) Auction and Liquidation segment: 12,581 29,062 4,789 2,245 Revenues - Services and fees 56,928 74,203 54,378 7,194 Revenues - Sale of goods 4,587 — 611 — Interest Income – Loan 74,096 103,265 59,778 9,439 Total revenues (23,920) (24,729) (17,290) (2,914) Direct cost of services (17,893) (40,515) (16,658) (4,009) Cost of goods sold (19,683) (16,650) (13,458) (3,663) Selling, general and administrative expenses $ 12,600 $ 21,371 $ 12,372 $ (1,147) Segment (loss) income 10 (Dollars in thousands)
Segment Financial Information (continued) Twelve Months Ended December 31, Three Months Ended December 31, (Dollars in thousands) 2022 2023 2022 2023 (Unaudited) (Unaudited) Financial Consulting segment: $ 98,508 $ 133,705 $ 25,427 $ 40,123 Revenues - Services and fees (81,891) (102,930) (20,944) (32,221) Selling, general and administrative expenses (305) (355) (71) (86) Depreciation and amortization 16,312 30,420 4,412 7,816 Segment income Communications segment: 228,129 330,952 85,763 80,429 Revenues - Services and fees 7,526 6,737 2,181 1,592 Revenues - Sale of goods 235,655 337,689 87,944 82,021 Total revenues (108,686) (183,993) (44,366) (47,163) Direct cost of services (8,592) (7,848) (2,493) (1,884) Cost of goods sold (64,836) (83,642) (23,368) (19,202) Selling, general and administrative expenses (19,165) (25,941) (6,366) (6,166) Depreciation and amortization (4,056) (1,540) (146) (1,138) Restructuring charge 30,320 34,725 11,205 6,468 Segment income Consumer Products segment: 77,821 233,202 77,821 Revenues - Sale of goods 54,046 (52,162) (164,635) (52,162) Cost of goods sold (41,109) (15,303) (67,229) (15,303) Selling, general and administrative expenses (15,197) (2,168) (9,918) (2,168) Depreciation and amortization (2,134) — (68,600) — Impairment of goodwill and tradenames (33,100) — (530) — Restructuring charge (44) 8,188 (77,710) 8,188 Segment (loss) income (37,538) $ 114,702 $ 206,746 $ 20,756 Consolidated operating (loss) income from reportable segments $ (29,971) 11
Definition of US GAAP to Non - GAAP Financial Measures 12 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, 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, aforementioned adjustments for adjusted EBITDA, as well as trading income (loss) and fair value adjustments on loans net of fixed income trading revenue, realized and unrealized gains (losses) on investments, and other investment related expenses, and (iv) including in the case of investment adjusted EBITDA, trading income (loss) and fair value adjustments on loans, realized and unrealized gains (losses) on investments, net of fixed income trading revenue and 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 .
13 For more information, please visit www.brileyfin.com