News

LOS ANGELES, Nov. 14, 2016 /PRNewswire/ -- B. Riley Financial, Inc.(NASDAQ: RILY), a diversified provider of financial and business advisory services as well as Internet access services, reported results for the third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

• Adjusted EBITDA totaled $20.8 million
• Net income totaled $8.9 million or $0.47 per diluted share
• Adjusted net income totaled $11.5 million or $0.60 per diluted share
• Board of directors authorized a $0.08 per share regular cash dividend to be paid quarterly and a one-time special dividend of $0.17 per share

Third Quarter 2016 Financial Results

Total revenues for the third quarter of 2016 were up 168% to $57.0 million compared to $21.3 million in the same year-ago period. The significant increase was primarily due to higher revenues from services and fees from the company's Auction and Liquidation segment, as well as the addition of United Online that was acquired on July 1, 2016. The results of United Online are presented in the Communications segment.

• Auction and Liquidation Segment: Revenues were $23.6 million compared to $5.8 million in the same year-ago period. The increase in revenue was primarily due to a $15.6 million increase in services and fees from retail liquidation engagements, offset by a $4.2 million decrease in revenue from services and fees in the company's wholesale and industrial auction division. Segment income increased to $13.0 million from $2.8 million in the same year-ago period.      
• Capital Markets Segment: Revenues were $10.1 million compared to $7.5 million in the same year-ago period. The increase in revenue was primarily due to higher investment banking fees and trading income and commissions earned. Segment income increased to $1.0 million from $34,000 in the same year-ago period.          
• Valuation and Appraisal Segment: Revenues were $7.7 million compared to $7.9 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 $2.0 million compared to $2.4 million in the same year-ago period.      
• Communications Segment: Revenues from services and fees, as well as the sale of products totaled $15.6 million, including $11.2 million in revenues from internet access and related subscription services, and $4.3 million from advertising services. Segment income totaled $3.4 million.

Net income for the third quarter of 2016 totaled $8.9 million or $0.47 per diluted share, compared to a net income of $1.5 million or $0.09 per diluted share in the same year-ago period.

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, transaction and restructuring expenses, insurance settlement recoveries, and share based compensation) for the third quarter of 2016 totaled $20.8 million, compared to $3.1 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). 

Adjusted net income (excluding the impact of share based payments, amortization of acquired intangible assets, restructuring costs, insurance settlement recovery and transaction costs related to the United Online, Inc. acquisition, net of related tax impact thereof) totaled $11.5 million or $0.60 per share for the third quarter of 2016, compared to $2.1 million or $0.13 per share in the same year-ago period (see note regarding "Use of Non-GAAP Financial Measures," below for further discussion of these non-GAAP terms).  

At September 30, 2016, the company had $26.5 million of unrestricted cash and $8.7 million of net investments in securities. Total shareholder equity at quarter-end was $143.6 million.

Declaration of Dividend

On November 13, 2016, the company's board of directors approved a regular quarterly dividend of $0.08 per share and a one-time special dividend of $0.17 per share, which will be paid on or about December 14, 2016 to stockholders of record on November 29, 2016.

Management Commentary

"As we previewed in our preliminary release, we had a very profitable third quarter, driven primarily by strong results in our retail asset disposition business, as well as a recovery in our capital markets brokerage business," said company Chairman and CEO, Bryant Riley. "Additionally, United Online, which we acquired in July, has performed in line with our expectations and continues to provide meaningful and consistent cash flow generation.

"As we have communicated, our goal is to return a portion of our adjusted EBITDA back to shareholders in the form of a dividend. While much of our business continues to be episodic in nature, we have certain segments of our business that we expect will provide us with the stability to issue a regular quarterly dividend of $0.08 per share. In addition to this regular quarterly dividend, the additional special dividend of $0.17 per share reflects our commitment to paying a variable dividend based on the performance of the parts of our business that tend to display fluctuating results but outsized returns, like our liquidation segment. Altogether, our dividend policy and capital allocation strategy demonstrates our board's confidence in our balance sheet, future cash flows, and commitment to returning a portion of our profits to our shareholders." 

"Looking ahead, we are seeing many opportunities within our retail asset disposition business, including our announced transactions for Masters Home Improvement in Australia and MS Mode in the Netherlands," continued Riley. "The proceeds from our $28.75 million bond offering last month further bolsters our balance sheet so that we can proactively pursue the many attractive opportunities we are seeing."

Conference Call

B. Riley Financial will host an investor conference call today (November 14, 2016) at 12 noon Eastern time (9:00 a.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 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.

Toll-Free Number: 877-407-0789
International Number: 201-689-8562

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

A replay of the call will be available after 3:00 p.m. Eastern time on the same day through November 21, 2016.

Toll-Free Replay Number: 844-512-2921
International Replay Number: 412-317-6671
Replay ID: 13649526

About B. Riley Financial, Inc.

B. Riley Financial, Inc. (NASDAQ: RILY) is a publicly traded, diversified financial services company which takes a collaborative approach to the capital raising and financial advisory needs of public and private companies and high net worth individuals. The company also makes proprietary investments in other businesses where B. Riley Financial, Inc. is uniquely positioned to leverage its expertise and assets in order to maximize value. The Company operates through several wholly-owned subsidiaries, including B. Riley & Co., LLC (www.brileyco.com), Great American Group, LLC (www.greatamerican.com), Great American Capital Partners (www.gacapitalpartners.com) and B. Riley Capital Management, LLC (which includes B. Riley Asset Management and B. Riley Wealth Management, (www.brileywealth.com). Since the acquisition of United Online, Inc. (www.untd.com) in July 2016, B. Riley Financial, Inc. also provides internet access services under the NetZero and Juno brands. 

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, plans for future regular or special dividends, stability and level of future cash flows, the effects of our recent bond offering, 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, 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; our ability to achieve stable cash flows 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 September 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, adjusted net income and adjusted diluted net income per share 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 and restructuring expenses, insurance settlement recoveries, 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" and "Adjusted Net Income Reconciliation."

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)
								September 30,		December 31,
								2016		2015
								(Unaudited)
Assets
Current assets:
	Cash and cash equivalents						$	26,474	$	30,012
	Restricted cash							78,287		51
	Securities owned, at fair value							9,028		25,543
	Accounts receivable, net							15,112		9,472
	Due from related parties							731		409
	Advances against customer contracts							5,020		5,013
	Goods held for sale or auction							9,145		37
	Prepaid expenses and other current assets							4,543		2,415
			Total current assets					148,340		72,952
Property and equipment, net								5,765		592
Goodwill								52,634		34,528
Other intangible assets, net								40,913		4,768
Deferred income taxes								11,509		18,992
Other assets								2,193		588
			Total assets				$	261,354	$	132,420
Liabilities and Equity
Current liabilities:
	Accounts payable						$	4,188	$	1,123
	Accrued payroll and related expenses							9,404		7,178
	Accrued value added tax							900		1,785
	Accrued expenses and other liabilities							18,279		5,806
	Auction and liquidation proceeds payable							—		672
	Deferred revenue							3,863		—
	Due to related parties							—		166
	Securities sold not yet purchased							370		713
	Acquisition consideration payable							10,381		—
	Participating note payable							60,822		—
	Mandatorily redeemable noncontrolling interests							2,764		2,994
	Revolving credit facilities							—		272
	Contingent consideration- current portion							1,219		1,241
			Total current liabilities					112,190		21,950
Other liabilities								5,570		—
Contingent consideration, net of current portion								—		1,150
			Total liabilities					117,760		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 September 30, 2016 and December 31, 2015, respectively
								2		2
	Additional paid-in capital							141,389		116,799
	Retained earnings (deficit)							2,210		(6,305)
	Accumulated other comprehensive loss							(1,098)		(1,058)
			Total B. Riley Financial, Inc. stockholders' equity					142,503		109,438
Noncontrolling interests								1,091		(118)
			Total equity					143,594		109,320
			Total liabilities and equity				$	261,354	$	132,420

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share data)
								Three Months Ended September 30,					Nine Months Ended September 30,
								2016		2015			2016		2015
Revenues:
	Services and fees						$	50,300	$	21,150		$	90,505	$	82,176
	Sale of goods and products							6,666		122			6,668		10,588
		Total revenues						56,966		21,272			97,173		92,764
Operating expenses:
	Direct cost of services							12,841		5,213			25,084		20,530
	Cost of goods sold							2,391		—			2,393		3,071
	Selling, general and administrative expenses							22,727		12,782			48,844		45,755
	Restructuring costs							3,585		—			3,585		—
		Total operating expenses						41,544		17,995			79,906		69,356
		Operating income						15,422		3,277			17,267		23,408
Other income (expense):
	Interest income							26		5			32		10
	Interest expense							(991)		(64)			(1,398)		(735)
		Income before income taxes						14,457		3,218			15,901		22,683
Provision for income taxes								(6,083)		(600)			(6,184)		(8,060)
		Net income						8,374		2,618			9,717		14,623
Net (loss) income attributable to noncontrolling interests								(565)		1,155			631		1,814
		Net income attributable to B. Riley Financial, Inc.					$	8,939	$	1,463		$	9,086	$	12,809
Basic income per share							$	0.47	$	0.09		$	0.51	$	0.79
Diluted income per share							$	0.47	$	0.09		$	0.50	$	0.79
Weighted average basic shares outstanding								18,977,072		16,243,425			17,805,127		16,199,931
Weighted average diluted shares outstanding								19,191,035		16,344,649			18,009,158		16,272,953

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
											Nine Months Ended September 30,
											2016		2015
Cash flows from operating activities:
	Net income									$	9,717	$	14,623
	Adjustments to reconcile net income to net cash provided by operating activities:
			Depreciation and amortization								2,381		634
			Provision for (recoveries of) doubtful accounts								(178)		366
			Loss on disposal of fixed assets								-		7
			Share based compensation								1,831		1,192
			Effect of foreign currency on operations								640		(363)
			Non-cash interest								147		118
			Deferred income taxes								1,839		5,451
			Income allocated to mandatorily redeemable noncontrolling interests and redeemable noncontrolling interests
											1,450		1,796
			Change in operating assets and liabilities:
				Accounts receivable and advances against customer contracts							(1,871)		13,177
				Securities owned							16,515		407
				Goods held for sale or auction							(8,447)		52
				Prepaid expenses and other assets							1,410		9
				Accounts payable and accrued expenses							3,175		5,371
				Due from (due to) related parties							(488)		(3,916)
				Securities sold, not yet purchased							(343)		5,735
				Auction and liquidation proceeds payable							(672)		(665)
				Deferred revenues							963		-
				Other liabilities							(143)		-
					Net cash provided by operating activities						27,926		43,994
Cash flows from investing activities:
	Acquisition of MK Capital, net of cash acquired $45										-		(2,451)
	Acquisition of United Online, net of cash acquired $125,542										(33,430)		-
	Purchases of property and equipment										(297)		(196)
	Proceeds from sale of property and equipment										15		4
	(Increase) decrease in restricted cash										(78,161)		7,533
					Net cash (used in) provided by investing activities						(111,873)		4,890
Cash flows from financing activities:
	Repayment of asset based credit facility										(56,255)		(18,506)
	Proceeds from borrowings under asset based credit facility										56,255
	Proceeds from (repayment of) revolving line of credit										(272)		14
	Proceeds from note payable - related party										-		4,500
	Repayment of note payable - related party										-		(4,500)
	Borrowings from participating note payable										61,400		-
	Payment of contingent consideration										(1,250)		-
	Proceeds from issuance of common stock										22,999		-
	Offering costs from issuance of common stock										(240)		-
	Dividends paid										(571)		(4,241)
	Payment of employment taxes on vesting of restricted stock										-		(24)
	Distribution to noncontrolling interests										(1,680)		(1,797)
					Net cash provided by (used in) financing activities						80,386		(24,554)
					(Decrease) increase in cash and cash equivalents						(3,561)		24,330
					Effect of foreign currency on cash						23		(8)
					Net (decrease) increase in cash and cash equivalents						(3,538)		24,322
Cash and cash equivalents, beginning of period											30,012		21,600
Cash and cash equivalents, end of period										$	26,474	$	45,922
Supplemental disclosures:
	Interest paid									$	505	$	303
	Taxes paid									$	409	$	976

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Segment Financial Information
(Unaudited)
(Dollars in thousands)
						Three Months Ended				Nine Months Ended
						September 30,				September 30,
						2016		2015		2016		2015
Capital markets reportable segment:
	Revenues - Services and fees					10,063		$ 7,478		$ 22,799		$ 30,343
	Selling, general, and administrative expenses					(8,692)		(7,310)		(22,535)		(23,234)
	Depreciation and amortization					(362)		(134)		(406)		(384)
	Segment income (loss)					1,009		34		(142)		6,725
Auction and Liquidation reportable segment:
	Revenues - Services and fees					17,058		5,727		29,358		28,861
	Revenues - Sale of goods					6,503		122		6,505		10,588
	Total revenues					23,561		5,849		35,863		39,449
	Direct cost of services					(4,365)		(1,722)		(9,870)		(10,642)
	Cost of goods sold					(2,223)		-		(2,225)		(3,071)
	Selling, general, and administrative expenses					(3,957)		(1,260)		(6,759)		(7,725)
	Depreciation and amortization					(25)		(45)		(103)		(147)
	Segment income					12,991		2,822		16,906		17,864
Valuation and Appraisal reportable segment:
	Revenues - Services and fees					7,696		7,945		22,865		22,972
	Direct cost of services					(3,549)		(3,491)		(10,287)		(9,888)
	Selling, general, and administrative expenses					(2,136)		(2,000)		(6,379)		(6,434)
	Depreciation and amortization					(19)		(35)		(72)		(104)
	Segment income					1,992		2,419		6,127		6,546
Communications reportable segment:
	Revenues - Services and fees					15,483		-		15,483		-
	Revenues - Sale of products					163		-		163		-
	Total revenues					15,646		-		15,646		-
	Direct cost of services					(4,927)		-		(4,927)		-
	Cost of goods sold					(168)		-		(168)		-
	Selling, general, and administrative expenses					(2,128)		-		(2,128)		-
	Depreciation and amortization					(1,813)		-		(1,813)		-
	Restructuring costs					(3,187)		-		(3,187)		-
	Segment income					3,423		-		3,423		-
Consolidated operating income from reportable segments
						19,415		5,275		26,314		31,135
Corporate and other expenses (including restructuring costs of $398 during the three and nine months ended September 30, 2016)						(3,993)		(1,998)		(9,047)		(7,727)
Interest income						26		5		32		10
Interest expense						(991)		(64)		(1,398)		(735)
	Income before income taxes					14,457		3,218		15,901		22,683
Provision for income taxes						(6,083)		(600)		(6,184)		(8,060)
	Net income					8,374		2,618		9,717		14,623
Net (loss) income attributable to noncontrolling interests						(565)		1,155		631		1,814
	Net income attributable to B. Riley Financial, Inc.					$ 8,939		$ 1,463		$   9,086		$ 12,809

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(Unaudited)
(Dollars in thousands)
									Three Months Ended					Nine Months Ended
									September 30,					September 30,
									2016		2015			2016		2015
Adjusted EBITDA reconciliation:
Net income (loss) as reported								$	8,939	$	1,463		$	9,086	$	12,809
Adjustments:
	Provision (benefit) for income taxes								6,083		600			6,184		8,060
	Interest expense								991		64			1,398		735
	Interest income								(26)		(5)			(32)		(10)
	Depreciation and amortization								1,982		214			2,381		635
	Share based payments								834		727			1,831		1,193
	Transaction costs related to United Online, Inc. acquisition								35		—			957		—
	Restructuring Costs								3,585		—			3,585		—
	Insurance Settlement Recovery								(1,618)		—			(1,618)		—
	Total EBITDA adjustments								11,866		1,600			14,686		10,613
Adjusted EBITDA								$	20,805	$	3,063		$	23,772	$	23,422

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
ADJUSTED NET INCOME RECONCILIATION
(Unaudited)
(Dollars in thousands, except share data)
								Three Months Ended September 30,					Nine Months Ended September 30,
								2016		2015			2016		2015
Net income attributable to B. Riley Financial, Inc.							$	8,939	$	1,463		$	9,086	$	12,809
Adjustments
	Share based payments							834		727			1,831		1,193
	Amortization of acquired intangible assets							1,465		111			1,688		319
	Restructuring costs							3,585		—			3,585		—
	Insurance settlement recovery							(1,618)		—			(1,618)		—
	Transaction costs related to United Online, Inc. acquisition							35		—			957		—
								13,240		2,301			15,529		14,321
	Income tax effect of adjusting entries							(1,742)		(244)			(2,609)		(584)
Adjusted net income attributable to B. Riley Financial, Inc.								11,498		2,057			12,920		13,737
Adjusted income per common share:
	Adjusted basic income per share						$	0.61	$	0.13		$	0.73	$	0.85
	Adjusted diluted income per share						$	0.60	$	0.13		$	0.72	$	0.84
Shares used to calculate adjusted basic net income per share								18,977,072		16,243,425			17,805,127		16,199,931
Shares used to calculate adjusted diluted net income per share								19,191,035		16,344,649			18,009,158		16,272,953

 

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SOURCE B. Riley Financial, Inc.