Nov 5,2018

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

Declares Special Dividend of $0.08 Per Share in addition to 
Regular Quarterly Dividend of $0.08 Per Share

LOS ANGELES, Nov. 05, 2018 (GLOBE NEWSWIRE) -- B. Riley Financial, Inc. (NASDAQ:RILY or the “Company”), a diversified financial services company which operates through several wholly-owned subsidiaries, reported results for its third quarter ended September 30, 2018.

Third Quarter 2018 Financial Highlights

  • Total revenues of $99.7 million
  • Net income of $2.8 million or $0.10 per diluted share
  • Adjusted EBITDA of $21.0 million
  • Adjusted net income of $6.4 million or $0.24 per diluted share

“Our third quarter results demonstrate strong operating results in our capital markets segment and steady performance of our appraisal and principal investments businesses. We are seeing true leverage from our diversified platform and more instances where clients can engage us for multiple services which has resulted in increased revenue opportunities,” said Bryant Riley, Chairman and Co-Chief Executive Officer, B. Riley Financial. “Highlights for the quarter include our merger with GlassRatner, successful completion of our bond offering, continued penetration of GACP Fund II, our ongoing work related to the Bon-Ton Stores liquidation, and our partnership with bebe stores. Our enhanced platform has also enabled us to attract a number of new key hires as we look to further expand our presence in the marketplace.”

Riley added: “We have returned a total of $0.58 cents per share in dividends to our shareholders through the first nine months of 2018, and our recent share repurchase announcement follows our previous buyback of approximately 950,000 shares earlier this year. We continue to work towards obtaining regulatory approval to complete the magicJack acquisition and remain enthusiastic about the multitude of opportunities ahead of us.”

Third Quarter 2018 Financial Results
For the three months ended September 30, 2018, total revenues increased to $99.7 million compared to $92.4 million in revenues generated for the same year-ago period. Results for the third quarter of 2018 were primarily driven by an increase in revenues from the Capital Markets Segment in addition to contributions from Principal Investments and the Company’s Valuation and Appraisal business.

  • Capital Markets Segment: Revenues were $76.3 million for the third quarter of 2018 compared to $63.7 million for the same year-ago period. Segment income increased to $11.0 million for the third quarter of 2018 compared to a segment loss of $0.2 million for the same year-ago period. Revenue growth in this segment was primarily driven by an increase in investment banking fees and the addition of consulting fees related to the acquisition of GlassRatner.
  • Auction and Liquidation Segment: Revenues for the third quarter of 2018 were $2.5 million compared to $7.4 million for the same year-ago period. Segment income totaled $0.3 million for the third quarter of 2018 compared to $2.0 million for the same year-ago period. Quarterly results for this segment are expected to be variable in nature due to the episodic nature of retail liquidation engagements. For the nine months ended September 30, 2018, revenues in this segment increased to $44.9 million from $43.2 million for the same year-ago period.
  • Valuation and Appraisal Segment: Revenues for the third quarter of 2018 increased to $9.4 million from $9.0 million for the same year-ago period driven by an increase in appraisal engagements. Segment income totaled $2.9 million for the third quarter of 2018 compared to $3.0 million for the same year-ago period.
  • Principal Investments – United Online Segment: Revenues were $11.4 million for the third quarter of 2018, with segment income of $4.1 million. This compares to revenues of $12.3 million and segment income of $4.9 million for the same year-ago period. Revenues from United Online are primarily driven by services and fees for internet access and related subscription services. Since completing the acquisition in July of 2016, United Online has generated cash flow in excess of the Company’s initial net investment and is outperforming its acquisition plan. B. Riley Financial expects United Online to continue to generate meaningful cash flow over the next several years.

Net income attributable to B. Riley Financial for the third quarter of 2018 totaled $2.8 million or $0.10 per diluted share compared to $0.4 million or $0.01 per diluted share for the same year-ago period.

Adjusted EBITDA for the third quarter of 2018 totaled $21.0 million compared to adjusted EBITDA of $15.8 million for the same year ago period. Adjusted EBITDA includes earnings before interest expense, interest income, provision for (benefit from) income taxes, depreciation and amortization, share-based payments, fair value adjustments, insurance settlement recovery, transactions-related costs, and restructuring costs. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)

Adjusted net income totaled $6.4 million or $0.24 per diluted share for the third quarter of 2018. This compares to $10.4 million or $0.38 per diluted share for the same year-ago period. Adjusted net income excludes the impact of share-based payments, fair value adjustments, amortization of intangible assets, restructuring costs, insurance settlement recovery and transaction-related costs, tax impact of aforementioned adjustments, and certain tax items. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)

As of September 30, 2018, the Company had $233.9 million in cash and cash equivalents, $0.5 million in restricted cash, $54.9 million due from clearing brokers, $162.8 million in net securities and other investments owned (at fair value), $21.4 million in advances against customer contracts, and $457.5 million in total debt. Total B. Riley Financial stockholders’ equity was $268.4 million. Shares outstanding totaled approximately 26.5 million as of September 30, 2018.

Declaration of Dividend
B. Riley Financial’s board of directors approved a regular quarterly dividend of $0.08 per share and a special dividend of $0.08 per share which will be paid on or about November 30, 2018 to stockholders of record as of November 16, 2018.

Acquisition of magicJack vocalTec, Ltd.
The previously announced acquisition of magicJack VocalTec Ltd. (NASDAQ:CALL) remains pending final regulatory approval. B. Riley Financial will communicate additional updates once closing conditions have been satisfied.

Conference Call
B. Riley Financial will host a conference call today, Monday, November 5, 2018 at 4:30 p.m. ET (1:30 p.m. PT). Bryant Riley, Chairman and co-CEO; Tom Kelleher, co-CEO; and Phillip Ahn, CFO and COO, will host the conference call followed by a question and answer period.

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 B. Riley Financial’s website. A replay of the call will be available after 7:30 p.m. ET through November 12, 2018.

For more information, visit ir.brileyfin.com.

About B. Riley Financial, Inc. (NASDAQ:RILY)
B. Riley Financial provides collaborative financial services and solutions tailored to fit 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, a full-service investment bank and institutional brokerage; Great American Group, a leading provider of asset disposition, appraisal, corporate advisory and valuation services; GlassRatner, a specialty financial advisory services and consulting firm; B. Riley Wealth Management, B. Riley Asset Management and B. Riley Alternatives, which offer investment management to institutional and high net worth investors; Great American Capital Partners, which originates and underwrites senior secured loans for asset-rich companies; and B. Riley Principal Investments, which invests in or acquires companies and assets with attractive return profiles.

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. In some cases, you can identify forward-looking statements by terminology including “anticipates,” “believes,” “continue,” “could,” “expects,” “may,” “will” and “would” or the negative of these terms or other comparable terminology. 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, the effects of our business model, the effects and anticipated benefits of our completed and pending acquisitions and related actions, expectations regarding future transactions and the financial impact, size and consistency of returns and timing thereof, expectations regarding market dynamics, as well as statements regarding our enthusiasm and the effect of investments in our business segments. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements. Factors that could cause actual results to differ include (without limitation) the risk that our final results could differ materially from the preliminary results included in this release; and 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, 2017 under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional information is also set forth in our Quarterly Reports on Form 10-Q for the quarter ended September 30, 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.

Contacts:

Investor Contact
Investor Relations
ir@brileyfin.com 
(310) 966-1444

Media Contact
Jo Anne McCusker
jmccusker@brileyfin.com 
(646) 885-5425

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par value)
 
                September 30,   December 31,
                2018   2017
                (Unaudited)      
Assets            
Assets                    
  Cash and cash equivalents   $ 233,918     $ 132,823  
  Restricted cash     468       19,711  
  Due from clearing brokers     54,891       31,479  
  Securities and other investments owned, at fair value     222,521       145,360  
  Securities borrowed     1,042,295       807,089  
  Accounts receivable, net     38,958       20,015  
  Due from related parties     9,921       5,689  
  Advances against customer contracts     21,405       5,208  
  Loans receivable     37,147        
  Prepaid expenses and other assets     50,193       22,605  
  Property and equipment, net     11,143       11,977  
  Goodwill         120,129       98,771  
  Other intangible assets, net     51,011       56,948  
  Deferred income taxes     26,901       29,229  
    Total assets   $ 1,920,901     $ 1,386,904  
Liabilities and Equity            
Liabilities                  
  Accounts payable   $ 2,278     $ 2,650  
  Accrued expenses and other liabilities     87,901       71,685  
  Deferred revenue     3,205       3,141  
  Due to partners     1,428       1,578  
  Securities sold not yet purchased     59,672       28,291  
  Securities loaned     1,035,408       803,371  
  Mandatorily redeemable noncontrolling interests     4,409       4,478  
  Notes payable     1,671       2,243  
  Senior notes payable     455,783       203,621  
    Total liabilities     1,651,755       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; 100,000,000 shares authorized; 26,526,445     2       2  
  and 26,569,462 issued and outstanding as of September 30, 2018 and            
  December 31, 2017, respectively            
  Additional paid-in capital     255,236       259,980  
  Retained earnings     14,842       6,582  
  Accumulated other comprehensive loss     (1,696 )     (534 )
    Total B. Riley Financial, Inc. stockholders' equity     268,384       266,030  
Noncontrolling interests     762       (184 )
    Total equity     269,146       265,846  
      Total liabilities and equity   $ 1,920,901     $ 1,386,904  
                         

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except share data)
 
                Three Months Ended   Nine Months Ended
                September 30,   September 30,
                2018     2017     2018     2017  
Revenues:                          
  Services and fees   $ 90,655     $ 85,450     $ 297,986     $ 202,663  
  Interest income - Securities lending     8,954       6,897       22,836       9,115  
  Sale of goods     72       79       138       221  
    Total revenues     99,681       92,426       320,960       211,999  
Operating expenses:                        
  Direct cost of services     8,156       10,138       33,733       46,224  
  Cost of goods sold     52       124       142       313  
  Selling, general and administrative expenses     71,782       70,962       216,603       132,836  
  Restructuring charge     428       4,896       2,247       11,484  
  Interest expense - Securities lending     6,425       4,950       16,317       6,515  
    Total operating expenses     86,843       91,070       269,042       197,372  
      Operating income     12,838       1,356       51,918       14,627  
Other income (expense):                        
  Interest income     442       76       736       358  
  Income (loss) from equity investments     828       (157 )     5,049       (157 )
  Interest expense     (9,340 )     (2,510 )     (23,926 )     (5,195 )
    Income (loss) before income taxes     4,768       (1,235 )     33,777       9,633  
(Provision for) benefit from income taxes     (2,046 )     1,357       (8,412 )     7,753  
    Net income     2,722       122       25,365       17,386  
Net (loss) income attributable to noncontrolling interests     (92 )     (246 )     1,051       (283 )
    Net income attributable to B. Riley Financial, Inc.   $ 2,814     $ 368     $ 24,314     $ 17,669  
                                     
Basic income per share   $ 0.11     $ 0.01     $ 0.94     $ 0.80  
Diluted income per share   $ 0.10     $ 0.01     $ 0.91     $ 0.76  
                                     
Cash dividends per share   $ 0.30     $ 0.13     $ 0.58     $ 0.55  
                                     
Weighted average basic shares outstanding     25,968,997       26,059,490       25,856,339       22,180,808  
Weighted average diluted shares outstanding     26,854,261       27,639,862       26,776,133       23,385,014  
                                     


 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 
          Nine Months Ended
          September 30,
          2018     2017  
Cash flows from operating activities:          
Net income $ 25,365     $ 17,386  
Adjustments to reconcile net income to net cash used in operating activities:          
  Depreciation and amortization   9,768       7,705  
  Provision for doubtful accounts   840       827  
  Share-based compensation   8,650       7,679  
  Recovery of key man life insurance         (6,000 )
  Non-cash interest and other   1,384       319  
  Effect of foreign currency on operations   (352 )     (1,022 )
  (Income) loss from equity investments   (5,049 )     157  
  Deferred income taxes   7       (24,560 )
  Impairment of leaseholds, lease loss accrual and loss on disposal of fixed assets   1,718       2,838  
  Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests   847       10,766  
  Change in operating assets and liabilities:          
    Due from clearing brokers   (23,412 )     13,258  
    Securities and other investments owned   (77,161 )     (41,350 )
    Securities borrowed   (235,206 )     129,998  
    Accounts receivable and advances against customer contracts   (35,982 )     1,635  
    Prepaid expenses and other assets   (19,418 )     15,522  
    Accounts payable, accrued payroll and related expenses, accrued value          
      added tax payable and other accrued expenses   10,111       (38,597 )
    Amounts due to/from related parties and partners   (4,487 )     (12,313 )
    Securities sold, not yet purchased   31,381       7,700  
    Deferred revenue   64       (1,302 )
    Securities loaned   232,037       (139,425 )
      Net cash used in operating activities   (78,895 )     (48,779 )
Cash flows from investing activities:           
Purchases of loans receivable   (35,111 )      
Acquisition of Wunderlich, net of cash acquired $4,259         (25,478 )
Cash acquired from acquisition of FBR & Co.         15,738  
Acquisition of other businesses   (4,000 )     (2,052 )
Acquisition consideration payable -United Online         (10,381 )
Purchases of property and equipment and intangible assets   (2,314 )     (550 )
Proceeds from key man life insurance         6,000  
Proceeds from sale of property and equipment and intangible assets   37       619  
Equity investments   (6,856 )     (1,015 )
Dividends from equity investment   1,695        
      Net cash used in investing activities   (46,549 )     (17,119 )
Cash flows from financing activities:          
Proceeds from asset based credit facility   300,000       65,987  
Repayment of asset based credit facility   (300,000 )     (65,987 )
Payment of contingent consideration         (1,250 )
Proceeds from notes payable   51,020        
Repayment of notes payable   (51,591 )     (8,214 )
Proceeds from issuance of senior notes   255,290       89,330  
Payment of debt issuance costs   (6,356 )     (2,093 )
Payment of employment taxes on vesting of restricted stock   (4,106 )     (2,683 )
Dividends paid   (17,912 )     (13,493 )
Repurchase of common stock   (17,338 )      
Distribution to noncontrolling interests   (915 )     (2,878 )
      Net cash provided by financing activities   208,092       58,719  
      Increase (decrease) in cash, cash equivalents and restricted cash   82,648       (7,179 )
      Effect of foreign currency on cash, cash equivalents and restricted cash   (796 )     3,458  
      Net increase (decrease) in cash, cash equivalents and restricted cash   81,852       (3,721 )
Cash, cash equivalents and restricted cash, beginning of year   152,534       115,399  
Cash, cash equivalents and restricted cash, end of period $ 234,386     $ 111,678  
                   
Supplemental disclosures:          
Interest paid $ 35,289     $ 11,513  
Taxes paid $ 2,455     $ 11,668  
                   

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Segment Financial Information
(Unaudited)
(Dollars in thousands)
 
            Three Months Ended   Nine Months Ended
            September 30,   September 30,
            2018     2017     2018     2017  
Capital Markets reportable segment:                      
  Revenues - Services and fees $ 67,389     $ 56,782     $ 191,621     $ 96,181  
  Interest income - Securities lending   8,954       6,897       22,836       9,115  
  Total revenues     76,343       63,679       214,457       105,296  
  Selling, general, and administrative expenses   (57,207 )     (53,955 )     (168,559 )     (87,753 )
  Restructuring charge     (428 )     (3,322 )     (2,457 )     (7,245 )
  Interest expense - Securities lending   (6,425 )     (4,950 )     (16,317 )     (6,515 )
  Depreciation and amortization   (1,309 )     (1,636 )     (4,428 )     (2,167 )
    Segment income (loss)     10,974       (184 )     22,696       1,616  
Auction and Liquidation reportable segment:                      
  Revenues - Services and fees   2,459       7,376       44,812       43,179  
  Revenues - Sale of goods     48       1       48       1  
    Total revenues     2,507       7,377       44,860       43,180  
  Direct cost of services     (838 )     (3,385 )     (12,263 )     (25,482 )
  Cost of goods sold     (24 )     (2 )     (41 )     (2 )
  Selling, general, and administrative expenses   (1,289 )     (1,963 )     (7,787 )     (6,562 )
  Depreciation and amortization   (7 )     (5 )     (23 )     (15 )
    Segment income     349       2,022       24,746       11,119  
Valuation and Appraisal reportable segment:                      
  Revenues - Services and fees   9,404       9,043       27,383       24,799  
  Direct cost of services     (4,067 )     (3,778 )     (12,388 )     (11,031 )
  Selling, general, and administrative expenses   (2,379 )     (2,253 )     (7,138 )     (6,395 )
  Depreciation and amortization   (56 )     (43 )     (159 )     (130 )
    Segment income     2,902       2,969       7,698       7,243  
Principal Investments - United Online segment:                      
  Revenues - Services and fees   11,403       12,249       34,170       38,504  
  Revenues - Sale of goods     24       78       90       220  
  Total revenues     11,427       12,327       34,260       38,724  
  Direct cost of services     (3,251 )     (2,975 )     (9,082 )     (9,711 )
  Cost of goods sold     (28 )     (122 )     (101 )     (311 )
  Selling, general, and administrative expenses   (2,348 )     (2,433 )     (6,321 )     (8,536 )
  Depreciation and amortization   (1,682 )     (1,703 )     (5,040 )     (5,313 )
  Restructuring charge           (150 )           (633 )
    Segment income     4,118       4,944       13,716       14,220  
Consolidated operating income from reportable segments   18,343       9,751       68,856       34,198  
                                 
Corporate and other expenses (including restructuring   (5,505 )     (8,395 )     (16,938 )     (19,571 )
recovery of $210 during the nine months ended September 30, 2018; and                      
restructuring charge of $1,424 and $3,606 during the three and nine                      
months ended September 30, 2017, respectively.                      
Interest income       442       76       736       358  
Income (loss) on equity investments   828       (157 )     5,049       (157 )
Interest expense       (9,340 )     (2,510 )     (23,926 )     (5,195 )
  Income (loss) before income taxes   4,768       (1,235 )     33,777       9,633  
(Provision for) benefit from income taxes   (2,046 )     1,357       (8,412 )     7,753  
  Net income       2,722       122       25,365       17,386  
Net (loss) income attributable to noncontrolling interests   (92 )     (246 )     1,051       (283 )
  Net income attributable to B. Riley Financial, Inc. $ 2,814     $ 368     $ 24,314     $ 17,669  
                                 


 

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
 
              Three Months Ended   Nine Months Ended
              September 30,   September 30,
              2018     2017     2018     2017  
Net income attributable to B. Riley Financial, Inc. $ 2,814     $ 368     $ 24,314     $ 17,669  
                                   
Adjustments:                          
  Provision for (benefit from) income taxes   2,046       (1,357 )     8,412       (7,753 )
  Interest expense   9,340       2,510       23,926       5,195  
  Interest income   (442 )     (76 )     (736 )     (358 )
  Share based payments   3,074       2,773       8,310       5,288  
  Depreciation and amortization   3,098       3,416       9,768       7,706  
  Restructuring costs   428       4,896       2,247       11,484  
  Transactions related costs   648       480       2,193       6,155  
  Fair value adjustment         2,750             9,000  
  Insurance settlement recovery                     (6,000 )
    Total EBITDA adjustments   18,192       15,392       54,120       30,717  
                                   
      Adjusted EBITDA $ 21,006     $ 15,760     $ 78,434     $ 48,386  
                                   

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)
 
                Three Months Ended   Nine Months Ended
                September 30,   September 30,
                2018     2017     2018     2017  
Net income attributable to B. Riley Financial, Inc. $   2,814     $ 368     $ 24,314     $ 17,669  
Adjustments:                            
  Share based payments     3,074       2,773       8,310       5,288  
  Amortization of intangible assets     2,093       2,172       6,399       5,248  
  Restructuring costs     428       4,896       2,247       11,484  
  Transactions related costs     648       480       2,193       6,155  
  Fair value adjustment           2,750             9,000  
  Insurance settlement recovery                       (6,000 )
  Income tax effect of adjusting entries     (2,628 )     (3,066 )     (5,411 )     (13,569 )
  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. $   6,429     $ 10,373     $ 38,052     $ 26,886  
                                     
Adjusted income per common share:                        
  Adjusted basic income per share $   0.25     $ 0.40     $ 1.47     $ 1.21  
  Adjusted diluted income per share $   0.24     $ 0.38     $ 1.42     $ 1.15  
                                     
Shares used to calculate adjusted basic net income per share     25,968,997       26,059,490       25,856,339       22,180,808  
Shares used to calculate adjusted diluted net income per share     26,854,261       27,639,862       26,776,133       23,385,014  
                                     

 

B Riley Financial Logo.jpg

 

Source: B. Riley Financial, Inc.