B. Riley Financial
Aug 5, 2016
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B. Riley Financial Reports Second Quarter 2016 Financial Results

LOS ANGELES, Aug. 5, 2016 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ: RILY), a diversified provider of financial and business advisory services, reported results for the second quarter ended June 30, 2016.

B. Riley Financial logo
  • Q2 2016 net loss of $0.1 million or $(0.01) per diluted share
  • Q2 2016 adjusted EBITDA of $1.8 million
  • Providing Q3 2016 adjusted EBITDA guidance of $15 million to $20 million
  • Completed $23 million follow-on equity offering of B. Riley Financial common stock
  • Completed acquisition of United Online on July 1st for $11.00 per share
  • Dividend of $0.03 per share declared for stockholders of record as of August 22, 2016

Second Quarter 2016 Financial Results

Total revenues for the second quarter of 2016 were $20.3 million compared to $45.5 million in the same year-ago period. The decrease in revenue was primarily due to lower revenue from the company's capital markets and auction and liquidation businesses.

  • Capital Markets Segment: Revenue was $7.2 million compared to $13.7 million in the same year-ago period. The decrease was primarily due to lower investment banking fees, trading income, commissions, fees, and other income earned from the company's research, sales and trading, and wealth management services. Segment loss totaled $520,000 compared to segment income of $4.1 million in the same year-ago period.
  • Auction and Liquidation Segment: Revenue was $5.4 million compared to $24.0 million in the same year-ago period. The decrease was primarily due to a $11.8 million decrease in revenues from services and fees from retail liquidation engagements and $0.8 million decrease from services and fees from the company's wholesale and industrial auction division. Segment income totaled $1.7 million compared to $11.9 million in the same year-ago period.      
  • Valuation and Appraisal Segment: Revenue was $7.7 million compared to $7.8 million in the same year-ago period. The decrease was primarily due to a net decrease in revenues related to appraisal engagements. Segment income totaled $2.1 million compared to $2.3 million in the same year-ago period.

Net loss for the second quarter of 2016 totaled $101,000 or $(0.01) per diluted share, compared to a net income of $8.7 million or $0.53 per diluted share in the same year-ago period.

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, transaction expenses, and share based compensation) for the second quarter of 2016 totaled $1.8 million, compared to $15.5 million in the same year-ago period (see note regarding "Use of Non-GAAP Financial Measures," below for further discussion of this non-GAAP term).  

At June 30, 2016, the company had $48.1 million of unrestricted cash and $18.7 million of net investments in securities. Total shareholder equity at quarter-end was $134.4 million.

Declaration of Dividend

On August 4, 2016, the company's board of directors approved a dividend of $0.03 per share, which will be paid on or about September 8, 2016 to stockholders of record on August 22, 2016

Management Commentary

"Despite a slowdown in our Capital Markets segment and modest activity in our Auction and Liquidation segment, we were able to generate $1.8 million in adjusted EBITDA during the second quarter," commented Bryant Riley, chairman and CEO of B. Riley Financial. "Maintaining positive adjusted EBITDA during these slower quarters is a key component to our business model. As we have demonstrated over the last two years since the combination of Great American and B. Riley & Co., our platform has the ability to produce outsized returns on an episodic basis. We will continue to maintain a disciplined operating structure which is a critical aspect to taking advantage of these opportunities whenever they arise.

"To that end, we are providing adjusted EBITDA guidance for Q3 2016 in the range of $15 million to $20 million, due primarily to the strength in our Auction and Liquidation segment, as well as the addition of United Online, which we acquired on July 1

"Additionally, we had previously provided guidance for adjusted EBITDA for the July 2016 YTD period of between $9 million to $13 million for B. Riley Financial's operations, excluding any contribution from the United Online business. We are providing an update to this guidance and estimate that adjusted EBITDA for that period to be in the range of $12 million to $14 million, excluding any contribution from the United Online business.

"As we look forward, we see strong opportunities in our Auction and Liquidation segment, steady cash flow from our United Online business as well as Valuation and Appraisal segment, and a moderate improvement in our Capital Markets segment. We will continue to strategically invest within these groups as meaningful opportunities present themselves."

Conference Call

B. Riley Financial will host an investor conference call today (August 5, 2016) at 8:30 a.m. Eastern 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 telephone number 10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.

Date: Friday, August 5, 2016
Time: 8:30 a.m. Eastern time (5:30 a.m. Pacific time)
Toll-Free Number: 1-877-407-0789
International Number: 1-201-689-8562

The conference call will be broadcast simultaneously and available for replay via the investor section of the company's website here

A replay of the call will be available after 11:30 a.m. Eastern time through August 12, 2016.

Toll-Free Replay Number: 1-877-870-5176
International Replay Number: 1-858-384-5517
Replay ID: 13642491

About B. Riley Financial, Inc.

B. Riley Financial, Inc. (NASDAQ: RILY) provides collaborative financial services and solutions through several subsidiaries, including: B. Riley & Co. LLC, a leading investment bank which provides corporate finance, research, and sales & trading to corporate, institutional and high net worth individual clients; Great American Group, LLC, a leading provider of advisory and valuation services, and asset disposition and auction solutions; B. Riley Capital Management, LLC, an SEC registered Investment Advisor, which includes B. Riley Asset Management, a provider of investment products to institutional and high net worth investors, and B. Riley Wealth Management (formerly MK Capital Advisors), a multi-family office practice and wealth management firm focused on the needs of ultra-high net worth individuals and families; and Great American Capital Partners, a provider of senior secured loans and second lien secured loan facilities to middle market public and private U.S. companies.

B. Riley Financial is headquartered in Los Angeles with offices in major financial markets throughout the world. For more information on B. Riley Financial, visit www.brileyfin.com.

Forward-Looking Statements

This press release may contain forward-looking statements by B. Riley Financial, Inc. that are not based on historical fact, including, without limitation, statements containing the words "expects," "anticipates," "intends," "plans," "projects," "believes," "seeks," "estimates" and similar expressions and statements. Such forward looking statements include, but are not limited to, express or implied statements regarding future financial performance, the effects of our business model, the effects of the United Online acquisition and related actions, expectations regarding future transactions and the financial impact, size and consistency of returns and timing thereof, expectations regarding adjusted EBITDA for the third quarter of 2016, as well as statements regarding 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. Such factors include risks associated with large engagements in our Auction and Liquidation segment; our ability to achieve expected cost savings or other benefits with respect to the acquisition of United Online, 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; 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, 2015 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 June 30, 2016. 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 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 income taxes, depreciation, amortization, transaction expenses 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 EBITDA Reconciliation."

Estimates of Adjusted EBITDA for the year-to-date period through July 31, 2016 are based upon preliminary estimates of B. Riley Financial's operations excluding net interest expense, provisions for income taxes, depreciation, amortization, transaction expenses and stock-based compensation and do not include any results from the United Online, Inc. business. A reconciliation of this adjusted EBITDA estimate to estimated net income is not currently available for this period because the Company is still in the process of closing its books as of the acquisition date and completing the valuation of United Online's assets and intangible assets acquired, and the absence of such data would, in the Company's judgment, cause any estimated net income for such period to be not meaningful or reliable.

Investor Contact:
Scott Liolios or Matt Glover
Liolios Group, Inc.
949-574-3860
RILY@liolios.com

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value)

         

June 30,

 

December 31,

         

2016

 

2015

         

(Unaudited)

   

Assets

       

Current assets:

       
 

Cash and cash equivalents

$

48,123

$

30,012

 

Restricted cash

 

12,108

 

51

 

Securities owned, at fair value

 

24,644

 

25,543

 

Accounts receivable, net

 

7,997

 

9,472

 

Due from related parties

 

2,255

 

409

 

Advances against customer contracts

 

5,609

 

5,013

 

Goods held for sale or auction

 

36

 

37

 

Prepaid expenses and other current assets

 

8,507

 

2,415

     

Total current assets

 

109,279

 

72,952

Property and equipment, net

 

475

 

592

Goodwill

 

34,528

 

34,528

Other intangible assets, net

 

4,545

 

4,768

Deferred income taxes

 

18,722

 

18,992

Other assets

 

1,989

 

588

     

Total assets

$

169,538

$

132,420

Liabilities and Equity

       

Current liabilities:

       
 

Accounts payable

$

1,084

$

1,123

 

Accrued payroll and related expenses

 

3,084

 

7,178

 

Accrued value added tax

 

34

 

1,785

 

Accrued expenses and other liabilities

 

5,335

 

5,806

 

Auction and liquidation proceeds payable

 

15,959

 

672

 

Due to related parties

 

 

166

 

Securities sold not yet purchased

 

5,932

 

713

 

Mandatorily redeemable noncontrolling interests

 

2,512

 

2,994

 

Revolving credit facilities

 

 

272

 

Contingent consideration- current portion

 

1,196

 

1,241

     

Total current liabilities

 

35,136

 

21,950

Contingent consideration, net of current portion

 

 

1,150

     

Total liabilities

 

35,136

 

23,100

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; 19,043,072 and 16,448,119 issued and outstanding as of June 30, 2016 and December 31, 2015, respectively

 

2

 

2

 

Additional paid-in capital

 

140,555

 

116,799

 

Retained earnings (deficit)

 

(6,158)

 

(6,305)

 

Accumulated other comprehensive loss

 

(1,075)

 

(1,058)

     

Total B. Riley Financial, Inc. stockholders' equity

 

133,324

 

109,438

Noncontrolling interests

 

1,078

 

(118)

     

Total equity

 

134,402

 

109,320

     

Total liabilities and equity

$

169,538

$

132,420

 
 
 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share data)

                       
       

Three Months Ended

 

June 30,

 

 

   

Six Months Ended

 

June 30,

 

 

       

2016

 

2015

   

2016

 

2015

                       

Revenues:

                 
 

Services and fees

$

20,261

$

39,442

 

$

40,205

$

61,026

 

Sale of goods

 

 

6,019

   

2

 

10,466

   

Total revenues

 

20,261

 

45,461

   

40,207

 

71,492

Operating expenses:

                 
 

Direct cost of services

 

5,560

 

8,539

   

12,243

 

15,317

 

Cost of goods sold

 

 

2,181

   

2

 

3,071

 

Selling, general and administrative expenses (including transaction costs of $905 and $922 for the three and six months ended June 30, 2016, respectively)

 

14,521

 

20,072

   

26,117

 

32,973

   

Total operating expenses

 

20,081

 

30,792

   

38,362

 

51,361

   

Operating income

 

180

 

14,669

   

1,845

 

20,131

Other income (expense):

                 
 

Interest income

 

3

 

3

   

6

 

5

 

Interest expense

 

(275)

 

(418)

   

(407)

 

(671)

   

(Loss) income before income taxes

 

(92)

 

14,254

   

1,444

 

19,465

Benefit (provision) for income taxes

 

65

 

(5,685)

   

(101)

 

(7,460)

   

Net (loss) income

 

(27)

 

8,569

   

1,343

 

12,005

Net income (loss) attributable to noncontrolling interests

 

74

 

(95)

   

1,196

 

659

   

Net (loss) income attributable to B. Riley Financial, Inc.

$

(101)

$

8,664

 

$

147

$

11,346

                       

Basic (loss) income per share 

$

(0.01)

$

0.53

 

$

0.01

$

0.70

Diluted (loss) income per share 

$

(0.01)

$

0.53

 

$

0.01

$

0.70

                       

Weighted average basic shares outstanding

 

17,935,254

 

16,237,860

   

17,212,716

 

16,177,824

Weighted average diluted shares outstanding

 

17,935,254

 

16,310,829

   

17,547,073

 

16,236,748

 
 
 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 
             

Six Months Ended
June 30,

             

2016

 

2015

Cash flows from operating activities:

       
 

Net income

 

$

1,343

$

12,005

 

Adjustments to reconcile net income to net cash provided by operating

       
   

activities:

       
     

Depreciation and amortization

 

399

 

421

     

Provision for credit losses

 

(3)

 

255

     

Share based compensation

 

997

 

416

     

Effect of foreign currency on operations

 

-

 

5

     

Non-cash interest

 

54

 

73

     

Deferred income taxes

 

271

 

5,499

     

Income allocated to mandatorily redeemable noncontrolling interests and redeemable noncontrolling interests

 

960

 

1,116

     

Change in operating assets and liabilities:

       
       

Accounts receivable and advances against customer contracts

 

1,087

 

(439)

       

Securities owned

 

899

 

4,273

       

Goods held for sale or auction

 

1

 

52

       

Prepaid expenses and other assets

 

(7,646)

 

(1,414)

       

Accounts payable and accrued expenses

 

(5,998)

 

9,218

       

Due from related party

 

(1,935)

 

(1,310)

       

Securities sold, not yet purchased

 

5,219

 

7,311

       

Auction and liquidation proceeds payable

 

14,667

 

(665)

         

Net cash provided by operating activities

 

10,315

 

36,816

Cash flows from investing activities:

       
 

Acquisition of MK Capital, net of cash acquired $45

 

-

 

(2,451)

 

Purchases of property and equipment

 

(58)

 

(171)

 

Proceeds from sale of property and equipment

 

-

 

4

 

Increase in restricted cash

 

(12,026)

 

7,155

         

Net cash (used in) provided by investing activities

 

(12,084)

 

4,537

Cash flows from financing activities:

       
 

Repayment of asset based credit facility

 

-

 

(18,506)

 

Proceeds from (repayment of) revolving line of credit 

 

(272)

 

71

 

Proceeds from note payable - related party

 

-

 

4,500

 

Repayment of from note payable - related party

 

-

 

(4,500)

 

Payment of contingent consideration

 

(1,250)

 

-

 

Proceeds from issuance of common stock

 

22,999

 

-

 

Offerring costs from issuance of common stock 

 

(240)

   
 

Dividends paid

 

-

 

(978)

 

Distribution to noncontrolling interests

 

(1,441)

 

(1,421)

         

Net cash provided by (used in) financing activities

 

19,796

 

(20,834)

         

Increase in cash and cash equivalents

 

18,027

 

20,519

         

Effect of foreign currency on cash

 

84

 

9

         

Net increase in cash and cash equivalents

 

18,111

 

20,528

Cash and cash equivalents, beginning of period

 

30,012

 

21,600

Cash and cash equivalents, end of period

$

48,123

$

42,128

Supplemental disclosures:

       
 

Interest paid

$

252

$

413

 

Taxes paid

$

409

$

695

 
 
 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

ADJUSTED EBITDA RECONCILIATION

(Unaudited)

(Dollars in thousands)

 
       

Three Months Ended

   

Six Months Ended

       

June 30,

   

June 30,

       

2016

 

2015

   

2016

 

2015

Adjusted EBITDA reconciliation:

                   
                       

Net income (loss) as reported

 

$

(101)

$

8,664

 

$

147

$

11,346

                       

Adjustments:

                   
 

Provision (benefit) for income taxes

   

(65)

 

5,685

   

101

 

7,460

 

Interest expense

   

275

 

418

   

407

 

671

 

Interest income

   

(3)

 

(3)

   

(6)

 

(5)

 

Depreciation and amortization

   

196

 

226

   

399

 

421

 

Share based payments

   

560

 

466

   

997

 

466

 

Transaction costs related to United Online, Inc. acquisition

   

905

 

   

922

 

                       
 

Total EBITDA adjustments

   

1,868

 

6,792

   

2,820

 

9,013

                       

Adjusted EBITDA

 

$

1,767

$

15,456

 

$

2,967

$

20,359

 
 
 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

SEGMENT FINANCIAL INFORMATION

(Unaudited)

(Dollars in thousands)

 
   

Three Months Ended

 

Six Months Ended

   

June 30,

 

June 30,

   

2016

 

2015

 

2016

 

2015

Capital markets reportable segment:

             
 

Revenues - Services and fees

$ 7,172

 

$ 13,657

 

$ 12,736

 

$ 22,865

 

Selling, general, and administrative expenses

(7,669)

 

(9,429)

 

(13,843)

 

(15,924)

 

Depreciation and amortization

(23)

 

(143)

 

(44)

 

(250)

 

Segment (loss) income

(520)

 

4,085

 

(1,151)

 

6,691

Auction and Liquidation reportable segment:

             
 

Revenues - Services and fees

5,393

 

18,012

 

12,300

 

23,134

 

Revenues - Sale of goods

0

 

6,019

 

2

 

10,466

 

    Total revenues

5,393

 

24,031

 

12,302

 

33,600

 

Direct cost of services

(2,087)

 

(5,337)

 

(5,505)

 

(8,920)

 

Cost of goods sold

0

 

(2,181)

 

(2)

 

(3,071)

 

Selling, general, and administrative expenses

(1,577)

 

(4,501)

 

(2,802)

 

(6,465)

 

Depreciation and amortization

(37)

 

(93)

 

(78)

 

(102)

 

Segment income

1,692

 

11,919

 

3,915

 

15,042

Valuation and Appraisal reportable segment:

             
 

Revenues - Services and fees

7,696

 

7,773

 

15,169

 

15,027

 

Direct cost of services

(3,473)

 

(3,202)

 

(6,738)

 

(6,397)

 

Selling, general, and administrative expenses

(2,124)

 

(2,246)

 

(4,243)

 

(4,434)

 

Depreciation and amortization

(24)

 

(35)

 

(53)

 

(69)

 

Segment income

2,075

 

2,290

 

4,135

 

4,127

Consolidated operating income from reportable segments

3,247

 

18,294

 

6,899

 

25,860

Corporate and other expenses

(3,067)

 

(3,625)

 

(5,054)

 

(5,729)

Interest income

3

 

3

 

6

 

5

Interest expense

(275)

 

(418)

 

(407)

 

(671)

                 
 

(Loss) income before income taxes

(92)

 

14,254

 

1,444

 

19,465

Benefit (provision) for income taxes

65

 

(5,685)

 

(101)

 

(7,460)

                 
 

Net (loss) income

(27)

 

8,569

 

1,343

 

12,005

Net income (loss) attributable to noncontrolling interests

74

 

(95)

 

1,196

 

659

                 
 

Net (loss) income attributable to B. Riley Financial, Inc.

$  (101)

 

$   8,664

 

$      147

 

$ 11,346

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SOURCE B. Riley Financial, Inc.

 

 

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