May 7,2018

B. Riley Financial Reports Financial Results for the First Quarter of 2018

Provides Q2 2018 Guidance for Net Income and Adjusted EBITDA

LOS ANGELES, May 07, 2018 (GLOBE NEWSWIRE) -- B. Riley Financial, Inc. (NASDAQ:RILY), a diversified provider of financial and business advisory services, reported results for its first quarter ended March 31, 2018.

First Quarter 2018 Financial Highlights

  • Total revenues increased to $95.8 million from $52.9 million in Q1 2017
  • Net income of $4.5 million or $0.17 per diluted share
  • Adjusted EBITDA increased to $16.1 million from $15.0 million in Q1 2017
  • Adjusted net income of $8.8 million or $0.32 per diluted share
  • Declares special dividend of $0.04 per share in addition to regular quarterly dividend of $0.08 per share
  • Provides Q2 2018 net income in the range of $5.4 million to $10.0 million and adjusted EBITDA guidance in the range of $22 million to $30 million

“Our first quarter performance was driven by strong results in the auction and liquidation business, offset by modest results in our capital markets business. Looking ahead, we believe the robust activity we’re seeing in these episodic business units will be the primary drivers of our second quarter results, in addition to the continued steady performance from our other business segments. While we do not typically provide guidance, we feel it is important to highlight the current strength in our business to our shareholders,” said Bryant Riley, Chairman and CEO, B. Riley Financial. “As we continue to find opportunities across our liquidation, appraisal, brokerage and principal investing platforms, the utilization and continued enhancement of our balance sheet will continue to play a critical role in providing value to our company and shareholders.”

First Quarter 2018 Financial Results
Total revenues for the three months ended March 31, 2018 increased to $95.8 million from $52.9 million for the same year-ago period, primarily driven by an increase in revenues related to services and fees associated with the company’s acquisitions of FBR & Co. and Wunderlich Securities, Inc. in 2017.

  • Capital Markets Segment: Revenues totaled $60.3 million for the first quarter of 2018 compared to $17.7 million in the same year-ago period. The year-over-year increase is primarily due to revenues generated from services and fees associated with the company’s acquisitions of FBR & Co. and Wunderlich Securities, Inc. in 2017. Revenues for the first quarter of 2018 include $52.8 million generated from services and fees, and $7.6 million generated from interest income by the securities lending business. Segment loss was $0.3 million for the first quarter of 2018 compared to segment income of $6.6 million in the same year-ago period.
  • Auction and Liquidation Segment: Revenues for the first quarter of 2018 increased to $15.5 million from $14.0 million in the same year-ago period. The year-over-year increase was driven by services and fees generated from the completion of a large retail liquidation engagement during the first quarter of 2018. Segment income generated $8.1 million in the first quarter of 2018, which represents a significant increase when compared to $1.8 million in the same year-ago period.
  • Valuation and Appraisal Segment: Revenues increased to $8.5 million for the first quarter of 2018 from $7.8 million in the same year-ago period. Segment income generated totaled $1.9 million for the first quarter of 2018 compared to $2.0 million in the same year-ago period.
  • Principal Investments – United Online Segment: Revenues, primarily driven by services and fees, and partially by the sale of goods, totaled $11.4 million in the first quarter of 2018. This compares to $13.4 million in the same year-ago period. Segment income totaled $4.9 million for the first quarter of 2018 compared to $4.2 million in the same year-ago period.

The company recorded $4.5 million in net income for the first quarter of 2018 or $0.17 per diluted share. This compares to $14.0 million in net income or $0.71 per diluted share in the same year-ago period.

Adjusted net income (excluding the impact of share-based payments, amortization of intangible assets, restructuring costs, transaction costs, tax impact of aforementioned adjustments, and certain tax items) totaled $8.8 million or $0.32 per diluted share for the first quarter of 2018. This compares to $7.7 million in adjusted net income or $0.39 in the same year-ago period. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, restructuring costs, transaction costs, and share-based compensation) for the first quarter of 2018 totaled $16.1 million. This compares to $15.0 million in adjusted EBITDA in the same year-ago period. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)

As of March 31, 2018, the company had $74.3 million in unrestricted cash and cash equivalents, $23.4 million in restricted cash, $47.9 million due from clearing brokers, $131.1 million in net securities and other investments owned (at fair value), and $212.8 million in total debt. Total stockholders’ equity was $271.5 million as of March 31, 2018.

Guidance for Second Quarter 2018
B. Riley Financial is providing guidance estimates for net income in the range of $5.4 million to $10.0 million and adjusted EBITDA to be in the range of $22 million to $30 million for the second quarter of 2018. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)  These ranges reflect the expected impact of increased activity in the Capital Markets and Auction and Liquidation segments which have the potential to drive larger fee opportunities.

Declaration of Dividend
On May 7, 2018, B. Riley Financial’s board of directors approved a regular quarterly dividend of $0.08 per share and a special dividend of $0.04 per share which will be paid on or about June 5, 2018 to stockholders of record as of May 21, 2018.

Conference Call
B. Riley Financial will host a conference call today Monday, May 7, 2018 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). The company’s Chairman and CEO, Bryant Riley, President, Tom Kelleher, and CFO and COO, Phillip Ahn, will host the conference call followed by a question and answer period.

Please call the conference call number 10 minutes prior to the start time and an operator will register your name and organization.

B. Riley Financial, Inc. Q1 2018 Earnings Call
Date:  Monday, May 7, 2018
Time:  4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Toll-Free:  1-877-451-6152
International:  1-201-389-0879

The conference call will be broadcast simultaneously and available for replay via the investor section of the company's website. A replay of the call will be available after 7:30 p.m. Eastern time on the same day through May 14, 2018.

Replay Dial-In Numbers:
Toll-Free:  1-844-512-2921
International:  1-412-317-6671
Replay Pin:  13679001

About B. Riley Financial, Inc.
B. Riley Financial, Inc. (NASDAQ:RILY), through its subsidiaries, provides collaborative financial services and solutions to the capital raising and financial advisory needs of public and private companies and high net worth individuals. The company operates through several wholly-owned subsidiaries, including B. Riley FBR, Inc., Wunderlich Securities, Inc., Great American Group, LLC, B. Riley Capital Management, LLC (which includes B. Riley Asset Management, B. Riley Wealth Management, and Great American Capital Partners, LLC) and B. Riley Principal Investments, a group that makes proprietary investments in other businesses, such as the acquisition of United Online, Inc.

Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Such statements include, without limitation, statements regarding our expectations, hopes or intentions regarding the future.  These forward looking statements can often be identified by their use of words such as "will", "predict", "continue", "forecast", "expect", "believe", "anticipate", "outlook", "could", "target", "project", "intend", "plan", "seek", "estimate", "should", "may" and "assume", as well as variations of such words and similar expressions referring to the future, and may include (without limitation) express or implied statements regarding anticipated second quarter guidance, future financial performance, the effects of our business model, the effects and anticipated benefits of our completed acquisitions of United Online, Inc., FBR & Co., and Wunderlich Securities, Inc., our pending acquisitions and related actions, expectations regarding future transactions and the financial impact, size and consistency of returns and timing thereof, as well as statements regarding the effect of investments in our business segments. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in each such statement. Factors that could cause actual results to differ include (without limitation) risks associated with large engagements in our auction and liquidation segment; our ability to achieve expected cost savings or other benefits with respect to our pending and completed acquisitions, in each case within expected time frames or at all; our ability to consummate anticipated transactions and the expected financial impact thereof, in each case within the expected timeframes or at all; our ability to successfully integrate recent acquisitions; loss of key personnel; our ability to manage growth; the potential loss of financial institution clients; changing economic and market conditions; the timing of completion of significant engagements and those risks described from time to time in B. Riley Financial, Inc.'s 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, 2017 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. 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, transaction 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. The non-GAAP measures are described above and are reconciled to the corresponding GAAP measure in the unaudited condensed consolidated financial statements portion of this release under the headings “Adjusted Net Income Reconciliation,” "Adjusted EBITDA Reconciliation" and “Forecasted Adjusted EBITDA Reconciliation.”

Investor Contact
Investor Relations
B. Riley Financial, Inc.
ir@brileyfin.com
(310) 966-1444

 

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES  
Condensed Consolidated Balance Sheets  
(Dollars in thousands, except par value)  
                March 31,   December 31,  
                2018   2017  
                  (Unaudited)        
Assets              
Assets                      
  Cash and cash equivalents   $ 74,339     $ 132,823    
  Restricted cash     23,371       19,711    
  Due from clearing brokers     47,896       31,479    
  Securities and other investments owned, at fair value     150,817       145,360    
  Securities borrowed     861,092       807,089    
  Accounts receivable, net     25,382       20,015    
  Due from related parties     6,016       5,689    
  Advances against customer contracts     7,695       5,208    
  Prepaid expenses and other assets     39,468       22,605    
  Property and equipment, net     11,467       11,977    
  Goodwill         98,771       98,771    
  Other intangible assets, net     54,788       56,948    
  Deferred income taxes     29,227       29,229    
    Total assets   $ 1,430,329     $ 1,386,904    
Liabilities and Equity              
Liabilities                    
  Accounts payable   $ 3,180     $ 2,650    
  Accrued expenses and other liabilities     57,746       71,685    
  Deferred revenue     3,519       3,141    
  Due to related parties and partners     2,378       1,578    
  Securities sold not yet purchased     19,736       28,291    
  Securities loaned     854,723       803,371    
  Mandatorily redeemable noncontrolling interests     4,536       4,478    
  Notes payable     1,886       2,243    
  Senior notes payable     210,960       203,621    
    Total liabilities     1,158,664       1,121,058    
                           
Commitments and contingencies              
B. Riley Financial, Inc. stockholders' equity:              
  Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued              
  Common stock, $0.0001 par value; 40,000,000 shares authorized; 26,677,422     2       2    
    and 26,569,462 issued and outstanding as of March 31, 2018 and              
    December 31, 2017, respectively              
  Additional paid-in capital     261,413       259,980    
  Retained earnings     10,882       6,582    
  Accumulated other comprehensive loss     (754 )     (534 )  
    Total B. Riley Financial, Inc. stockholders' equity     271,543       266,030    
Noncontrolling interests     122       (184 )  
    Total equity     271,665       265,846    
    Total liabilities and equity   $ 1,430,329     $ 1,386,904    
                           

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Income  
(Unaudited)  
(Dollars in thousands, except share data)  
                           
                Three Months Ended
March 31,
 
                2018   2017  
Revenues:                
  Services and fees   $ 88,187     $ 52,818    
  Interest income - Securities lending     7,553          
  Sale of goods     38       79    
    Total revenues     95,778       52,897    
Operating expenses:              
  Direct cost of services     11,652       17,601    
  Cost of goods sold     41       59    
  Selling, general and administrative expenses     68,098       24,152    
  Restructuring charge     217       374    
  Interest expense - Securities lending     5,168          
    Total operating expenses     85,176       42,186    
      Operating income     10,602       10,711    
Other income (expense):              
  Interest income     128       132    
  Loss from equity investments     (672 )        
  Interest expense     (4,227 )     (791 )  
    Income before income taxes     5,831       10,052    
(Provision for) benefit from income taxes     (989 )     3,849    
    Net income     4,842       13,901    
Net income (loss) attributable to noncontrolling interests     339       (120 )  
    Net income attributable to B. Riley Financial, Inc.   $ 4,503     $ 14,021    
                           
Basic income per share     $ 0.17     $ 0.73    
Diluted income per share   $ 0.17     $ 0.71    
                           
Cash dividends per share   $ 0.16     $ 0.26    
                           
Weighted average basic shares outstanding     26,219,277       19,181,749    
Weighted average diluted shares outstanding       27,271,819       19,626,574    
                     

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
(Dollars in thousands)  
            Three Months Ended
March 31,
 
            2018   2017  
Cash flows from operating activities:            
  Net income $ 4,842     $ 13,901    
  Adjustments to reconcile net income to net cash used in operating activities:            
    Depreciation and amortization   3,337       2,042    
    Provision for doubtful accounts   305       325    
    Share-based compensation   2,558       907    
    Non-cash interest and other   186       15    
    Effect of foreign currency on operations   (48 )     (1,167 )  
    Loss from equity investments   672          
    Deferred income taxes         (9,124 )  
    Impairment of leaseholds, lease loss accrual and loss on disposal of fixed assets   286          
    Income allocated for mandatorily redeemable noncontrolling interests   175       402    
    Change in operating assets and liabilities:            
      Due from clearing brokers   (16,417 )        
      Securities and other investments owned   (5,457 )     (24,514 )  
      Securities borrowed   (54,003 )        
      Accounts receivable and advances against customer contracts   (8,078 )     (347 )  
      Goods held for sale or auction   22          
      Prepaid expenses and other assets   (16,034 )     242    
      Accounts payable, accrued payroll and related expenses, accrued value   (10,049 )     (11,127 )  
        added tax payable and other accrued expenses            
      Amounts due to/from related parties and partners   473       (10,908 )  
      Securities sold, not yet purchased   (8,555 )     813    
      Deferred revenue   378       (315 )  
      Securities loaned   51,352          
        Net cash used in operating activities   (54,055 )     (38,855 )  
Cash flows from investing activities:            
  Purchases of property and equipment   (693 )     (191 )  
  Proceeds from sale of intangible assets         459    
  Equity investments   (3,575 )        
        Net cash (used in) provided by investing activities   (4,268 )     268    
Cash flows from financing activities:            
  Repayment of notes payable   (357 )        
  Payment of contingent consideration         (1,250 )  
  Proceeds from issuance of senior notes   7,267          
  Payment of debt issuance costs   (76 )        
  Payment of employment taxes on vesting of restricted stock   (1,125 )        
  Dividends paid   (1,779 )     (5,020 )  
  Distribution to noncontrolling interests   (117 )     (571 )  
        Net cash provided by (used in) financing activities   3,813       (6,841 )  
        Decrease in cash, cash equivalents and restricted cash   (54,510 )     (45,428 )  
        Effect of foreign currency on cash, cash equivalents and restricted cash   (314 )     2,088    
        Net decrease in cash, cash equivalents and restricted cash   (54,824 )     (43,340 )  
Cash, cash equivalents and restricted cash, beginning of year   152,534       115,399    
Cash, cash equivalents and restricted cash, end of period $ 97,710     $ 72,059    
                       
Supplemental disclosures:            
  Interest paid $ 9,008     $ 1,386    
  Taxes paid   $ 136     $ 71    
                     

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Segment Financial Information
(Unaudited)
(Dollars in thousands)
                     
            Three Months Ended
            March 31, 
            2018   2017
Capital Markets reportable segment:          
  Revenues - Services and fees $ 52,776     $ 17,723  
  Interest income - Securities lending   7,553        
  Total revenues     60,329       17,723  
  Selling, general, and administrative expenses   (53,639 )     (10,969 )
  Restructuring costs     (255 )      
  Interest expense - Securities lending   (5,168 )      
  Depreciation and amortization   (1,564 )     (127 )
    Segment (loss) income     (297 )     6,627  
Auction and Liquidation reportable segment:          
  Revenues - Services and fees   15,517       13,996  
  Direct cost of services     (4,576 )     (10,334 )
  Cost of goods sold     (1 )      
  Selling, general, and administrative expenses   (2,881 )     (1,850 )
  Depreciation and amortization   (8 )     (5 )
    Segment income     8,051       1,807  
Valuation and Appraisal reportable segment:          
  Revenues - Services and fees   8,520       7,796  
  Direct cost of services     (4,198 )     (3,672 )
  Selling, general, and administrative expenses   (2,345 )     (2,080 )
  Depreciation and amortization   (49 )     (44 )
    Segment income     1,928       2,000  
Principal Investments - United Online segment:          
  Revenues - Services and fees   11,374       13,303  
  Revenues - Sale of goods     38       79  
  Total revenues     11,412       13,382  
  Direct cost of services     (2,878 )     (3,595 )
  Cost of goods sold     (40 )     (59 )
  Selling, general, and administrative expenses   (1,958 )     (3,312 )
  Depreciation and amortization   (1,679 )     (1,840 )
  Restructuring costs           (374 )
    Segment income     4,857       4,202  
Consolidated operating income from reportable segments   14,539       14,636  
                     
Corporate and other expenses (including restructuring recovery of $38   (3,937 )     (3,925 )
  during the three months ended March 31, 2018)          
Interest income       128       132  
Loss on equity investments     (672 )      
Interest expense       (4,227 )     (791 )
  Income before income taxes     5,831       10,052  
(Provision for) benefit from income taxes   (989 )     3,849  
  Net income       4,842       13,901  
Net income (loss) attributable to noncontrolling interests   339       (120 )
  Net income attributable to B. Riley Financial, Inc. $ 4,503     $ 14,021  
                 

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
                       
              Three Months Ended
              March 31,
              2018   2017
Net income attributable to B. Riley Financial, Inc. $ 4,503     $ 14,021  
                       
Adjustments:              
  Provision for (benefit from) income taxes   989       (3,849 )
  Interest expense   4,227       791  
  Interest income   (128 )     (132 )
  Share based payments   2,558       907  
  Depreciation and amortization   3,337       2,042  
  Restructuring costs   217       374  
  Transactions related costs   354       886  
                       
    Total EBITDA adjustments   11,554       1,019  
                       
      Adjusted EBITDA $ 16,057     $ 15,040  

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)
                         
                Three Months Ended
                March 31,
                2018   2017
Net income attributable to B. Riley Financial, Inc.   $ 4,503     $ 14,021  
Adjustments:                
  Share based payments     2,558       907  
  Amortization of intangible assets     2,160       1,522  
  Restructuring costs     217       374  
  Transactions related costs     354       886  
  Income tax effect of adjusting entries     (952 )     (1,646 )
  Tax benefit from tax election to treat acquisition of UOL           (8,389 )
    as a taxable business combination            
Adjusted net income attributable to B. Riley Financial, Inc.   $ 8,840     $ 7,675  
                         
Adjusted income per common share:            
  Adjusted basic income per share   $ 0.34     $ 0.40  
  Adjusted diluted income per share   $ 0.32     $ 0.39  
                         
Shares used to calculate adjusted basic net income per share     26,219,277       19,181,749  
Shares used to calculate adjusted diluted net income per share     27,271,819       19,626,574  

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Forecasted Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
                       
              Three Months Ended
              June 30, 2018
              Low   High
Net income attributable to B. Riley Financial, Inc. (estimate) $ 5,400       $ 10,000    
                       
Adjustments (estimate):          
  Provision for income taxes   2,000         3,700    
  Interest expense   9,000         9,700    
  Interest income   (100)       (100)  
  Share based payments   2,500         3,000    
  Depreciation and amortization   3,200         3,200    
  Transactions related costs   —        500    
                       
    Total EBITDA adjustments   16,600         20,000    
                       
      Adjusted EBITDA (estimate) $ 22,000       $ 30,000    
                       

 

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Source: B. Riley Financial, Inc.