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News

B. Riley Financial Reports Financial Results for Second Quarter 2017

LOS ANGELES, Aug. 07, 2017 (GLOBE NEWSWIRE) -- B. Riley Financial, Inc.(NASDAQ:RILY), a diversified provider of financial and business advisory services, reported results for the second quarter ended June 30, 2017.

Second Quarter 2017 Financial Highlights

  • Total revenues of $66.7 million; net income of $3.3 million or $0.15 per diluted share
  • Adjusted EBITDA of $17.6 million; adjusted net income of $8.8 million or $0.40 per diluted share
  • Completed acquisition of FBR & Co. on June 1, 2017
  • Declares special dividend of $0.05 per share in addition to regular dividend of $0.08 per share

Second Quarter 2017 Financial Results
Total revenues for the second quarter of 2017 were $66.7 million compared to $20.3 million in the same year-ago period. The significant increase was primarily due to higher revenues from the company's Auction and Liquidation and Capital Markets segments as well as the addition of the Principal Investments - United Online segment, which acquired United Online Inc. on July 1, 2016.

  • Auction and Liquidation Segment: Revenue was $21.8 million compared to $5.4 million in the same year-ago period. The significant increase in revenue was primarily due to a $16.4 million increase in services and fees primarily related to retail liquidations. Segment income increased to $7.3 million from $1.7 million in the same year-ago period.      
     
  • Capital Markets Segment: Revenues were $23.9 million, a significant improvement from $7.2 million in the same year-ago period. The $16.7 million increase in revenue was primarily due to the addition of FBR & Co. in June 2017 as well as higher investment banking fees, trading income, and commissions earned. Segment loss totaled $4.8 million compared to a loss of $0.5 million in the same year-ago period primarily due to restructuring charges taken related to the FBR acquisition.          
     
  • Valuation and Appraisal Segment: Revenue was $8.0 million compared to $7.7 million in the same year-ago period. The revenue increase was primarily due to an increase in revenues related to appraisal engagements. Segment income totaled $2.3 million compared to $2.1 million in the same year-ago period.      
     
  • Principal Investments - United Online Segment: Revenues from services and fees, as well as the sale of products totaled $13.0 million primarily from services and fees for internet access and related subscription services. Segment income totaled $5.1 million.

Net income for the second quarter of 2017 totaled $3.3 million or $0.15 per diluted share, compared to a loss of $0.1 million or $(0.01) per diluted share in the same year-ago period.

Adjusted EBITDA (earnings before interest expense, interest income, provision for income taxes, depreciation and amortization, share-based payments, fair value adjustments, insurance settlement recovery, transactions-related costs, and restructuring costs) for the second quarter of 2017 totaled $17.6 million, compared to $1.8 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, fair value adjustments, amortization of acquired intangible assets, restructuring costs, insurance settlement recovery and transaction-related costs, net of related tax impact thereof) for the second quarter of 2017 totaled $8.8 million or $0.40 per diluted share, compared to $0.8 million or $0.05 per diluted share in the same year-ago period (see note regarding "Use of Non-GAAP Financial Measures," below for further discussion of this non-GAAP term). 

On June 30, 2017, the company had $104.7 million of unrestricted cash and $74.7 million of net securities and other investments. Total B. Riley Financial, Inc. stockholders' equity at June 30, 2017 was $239.0 million.

Declaration of Dividend
On August 7, 2017, the company's board of directors approved a regular quarterly dividend of $0.08 per share and a one-time special dividend of $0.05 per share, which will be paid on or about August 29, 2017 to stockholders of record as of August 21, 2017.

Management Commentary
"The second quarter was a continuation of the same strong growth, diversification and operational momentum we have achieved over the last several quarters," said B. Riley Financial Chairman and CEO, Bryant Riley. "Our solid financial performance in the quarter was driven collectively by our diverse lines of business, demonstrating the attractiveness of our unique business model. We experienced another strong period especially in our liquidations segment, completing several large liquidation projects, including Gordmans and HHGregg. Additionally, we had another active quarter in our capital markets segment, driven mainly by several banking transactions and improving trading commissions. These successes were augmented by the continued meaningful cash flow contribution from United Online as well as our valuation business.

"In tandem with our continued organic growth and operational momentum, we are pleased to have completed the acquisitions of FBR and Wunderlich. FBR further strengthens our capital markets business through their market-leading equity offering practice and sector coverage and also expands our geographic distribution with operations throughout the East and West coasts. Wunderlich
bolsters our wealth management business by adding over 200 financial advisors and approximately $10 billion in assets under administration. Altogether, our combined organization of more than 800 professionals and strong balance sheet not only gives us a national footprint in equities and fixed income, but it also provides the necessary scale and resources to strategically expand our leading position in business services, financial advisory and investment banking. We have already made significant strides integrating the businesses and look forward to benefiting from the substantial financial and operational synergies in the quarters and years ahead."

Conference Call
B. Riley Financial will host a conference call today (August 7, 2017) 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 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: 877-425-9470
International Number: 201-389-0878

About B. Riley Financial
B. Riley Financial, Inc. 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 operates through several wholly-owned subsidiaries, including B. Riley & Co., LLCFBR Capital Markets & Co.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 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 and future dividends, the effects of our business model, the effects of our balance sheet on our ability to pursue business opportunities, the effects and anticipated benefits of our acquisitions of United Online, Inc., FBR & Co., and Wunderlich Securities, Inc. 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, Inc., rights to manage certain hedge funds managed by Dialectic Capital Management, FBR & Co., and Wunderlich Securities, Inc., 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 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, 2016 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, 2017. 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 and adjusted net income, may be considered non-GAAP financial measures. B. Riley Financial, Inc. 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 interest expense, interest income, provision for income taxes, depreciation and amortization, stock-based payments, fair value adjustments, insurance settlement recovery, transaction-related expenses, and restructuring costs 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."

 
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
           
                 June 30,   December 31,
                 2017    2016
                  (Unaudited)      
Assets            
Assets                    
  Cash and cash equivalents   $ 104,670     $ 112,105  
  Restricted cash     5,632       3,294  
  Due from clearing brokers     6,297        
  Securities and other investments owned, at fair value     78,204       16,579  
  Securities borrowed     909,331        
  Accounts receivable, net     19,319       18,989  
  Due from related parties     6,765       3,009  
  Advances against customer contracts     40,991       427  
  Prepaid expenses and other assets     10,986       5,742  
  Property and equipment, net     13,450       5,785  
  Goodwill         67,335       48,903  
  Other intangible assets, net     45,033       41,166  
  Deferred income taxes     33,407       8,619  
  Total assets   $ 1,341,420     $ 264,618  
Liabilities and Equity            
Liabilities                  
  Accounts payable   $ 3,184     $ 2,703  
  Accrued expenses and other liabilities     62,573       53,168  
  Deferred revenue     3,731       4,130  
  Due to related parties and partners     393       10,037  
  Securities sold not yet purchased     3,526       846  
  Securities loaned     911,991        
  Mandatorily redeemable noncontrolling interests     9,641       4,019  
  Acquisition consideration payable           10,381  
  Asset based credit facility     20,237        
  Senior notes payable     86,065       27,700  
  Contingent consideration           1,242  
  Total liabilities     1,101,341       114,226  
                         
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; 24,377,806            
    and 19,140,342 issued and outstanding as of June 30, 2017 and December 31,          
    2016, respectively     2       2  
  Additional paid-in capital     220,628       141,170  
  Retained earnings     19,054       9,887  
  Accumulated other comprehensive loss     (666 )     (1,712 )
    Total B. Riley Financial, Inc. stockholders' equity     239,018       149,347  
Noncontrolling interests     1,061       1,045  
    Total equity     240,079       150,392  
      Total liabilities and equity   $ 1,341,420     $ 264,618  
                         

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share data)
                                     
                Three Months Ended
June 30,
  Six Months Ended
June 30 ,
                2017     2016     2017     2016  
                                     
Revenues:                          
  Services and fees   $ 64,395     $ 20,261     $ 117,213     $ 40,205  
  Interest income - Securities lending     2,218             2,218        
  Sale of goods     63             142       2  
    Total revenues     66,676       20,261       119,573       40,207  
Operating expenses:                        
  Direct cost of services     18,485       5,560       36,086       12,243  
  Cost of goods sold     130             189       2  
  Selling, general and administrative expenses     37,722       14,521       61,874       26,117  
  Restructuring charge     6,214             6,588        
  Interest expense - Securities lending     1,565             1,565        
    Total operating expenses     64,116       20,081       106,302       38,362  
      Operating income     2,560       180       13,271       1,845  
Other income (expense):                        
  Interest income     150       3       282       6  
  Interest expense     (1,894 )     (275 )     (2,685 )     (407 )
    Income (loss) before income taxes     816       (92 )     10,868       1,444  
Benefit (provision) for income taxes     2,547       65       6,396       (101 )
    Net income (loss)     3,363       (27 )     17,264       1,343  
Net income (loss) attributable to noncontrolling interests     83       74       (37 )     1,196  
    Net income (loss) attributable to B. Riley Financial, Inc.     $ 3,280     $ (101 )   $ 17,301     $ 147  
                                     
Basic income (loss) per share     $ 0.15     $ (0.01 )   $ 0.85     $ 0.01  
Diluted income (loss) per share     $ 0.15     $ (0.01 )   $ 0.82     $ 0.01  
                                     
Cash dividends per share   $ 0.16     $     $ 0.42     $  
                                     
Weighted average basic shares outstanding       21,216,829       17,935,254       20,311,231       17,212,716  
Weighted average diluted shares outstanding       22,119,055       17,935,254       20,984,757       17,547,073  
                                     

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
                           
                  Six Months Ended
June 30,
                  2017     2016  
Cash flows from operating activities:                
  Net income       $ 17,264     $ 1,343  
  Adjustments to reconcile net income to net cash (used in) provided by operating activities:                
    Depreciation and amortization         4,290       399  
    Provision (recoveries) for doubtful accounts         704       (3 )
    Share-based compensation         3,940       997  
    Recovery of key man life insurance         (6,000 )      
    Non-cash interest and other         166       54  
    Effect of foreign currency on operations         (855 )      
    Deferred income taxes         (23,636 )     271  
    Impairment of leaseholds, lease loss accrual and loss on disposal of fixed assets         1,371        
    Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests         7,268       960  
    Change in operating assets and liabilities:                
      Due from clearing brokers         13,408        
      Securities and other investments owned         (40,975 )     899  
      Securities borrowed         (48,134 )      
      Accounts receivable and advances against customer contracts         (37,153 )     1,087  
      Prepaid expenses and other assets         14,988       (7,645 )
      Accounts payable, accrued payroll and related expenses, accrued value                
        added tax payable and other accrued expenses         (22,748 )     (5,998 )
      Amounts due from related parties and partners         (13,333 )     (1,935 )
      Securities sold, not yet purchased         2,675       5,219  
      Deferred revenue         (425 )      
      Securities loaned         44,365        
      Auction and liquidation proceeds payable               14,667  
        Net cash (used in) provided by operating activities         (82,820 )     10,315  
Cash flows from investing activities:                
  Cash acquired from acquisition of FBR & Co.         15,738        
  Acquisition of other businesses         (2,052 )      
  Acquisition consideration payable         (10,381 )      
  Purchases of property and equipment         (306 )     (58 )
  Proceeds from key man life insurance         6,000        
  Proceeds from sale of property and equipment         6        
  Proceeds from sale of intangible assets         613        
  Increase in restricted cash         (2,263 )     (12,026 )
        Net cash provided by (used in) investing activities         7,355       (12,084 )
Cash flows from financing activities:                
  Repayment of revolving line of credit               (272 )
  Proceeds from asset based credit facility         65,987        
  Repayment of asset based credit facility         (45,750 )      
  Payment of contingent consideration         (1,250 )     (1,250 )
  Proceeds from issuance of senior notes         57,847        
  Proceeds from issuance of common stock               22,999  
  Offering costs from issuance of common stock               (240 )
  Payment of employment taxes on vesting of restricted stock         (1,057 )      
  Dividends paid         (8,380 )      
  Distribution to noncontrolling interests         (1,646 )     (1,441 )
        Net cash provided by financing activities         65,751       19,796  
        (Decrease) increase in cash and cash equivalents         (9,714 )     18,027  
        Effect of foreign currency on cash         2,279       84  
        Net (decrease) increase in cash and cash equivalents         (7,435 )     18,111  
Cash and cash equivalents, beginning of  year         112,105       30,012  
Cash and cash equivalents, end of period       $ 104,670     $ 48,123  
                           
Supplemental disclosures:                
  Interest paid       $ 2,890     $ 252  
  Taxes paid       $ 9,689     $ 409  
                           

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Unaudited)
(Dollars in thousands)
                                 
            Three Months Ended   Six Months Ended
            June 30,    June 30,
            2017     2016     2017     2016  
Capital Markets reportable segment:                      
  Revenues - Services and fees $ 21,676     $ 7,172     $ 39,399     $ 12,736  
  Interest income - Securities lending   2,218             2,218        
  Total revenues     23,894       7,172       41,617       12,736  
  Selling, general, and administrative expenses   (23,067 )     (7,669 )     (34,036 )     (13,843 )
  Restructuring costs     (3,923 )           (3,923 )      
  Interest expense - Securities lending   (1,565 )           (1,565 )      
  Depreciation and amortization   (166 )     (23 )     (293 )     (44 )
  Segment (loss) income     (4,827 )     (520 )     1,800       (1,151 )
Auction and Liquidation reportable segment:                      
  Revenues - Services and fees   21,807       5,393       35,803       12,300  
  Revenues - Sale of goods                       2  
  Total revenues     21,807       5,393       35,803       12,302  
  Direct cost of services     (11,763 )     (2,087 )     (22,097 )     (5,505 )
  Cost of goods sold                       (2 )
  Selling, general, and administrative expenses   (2,749 )     (1,577 )     (4,599 )     (2,802 )
  Depreciation and amortization   (5 )     (37 )     (10 )     (78 )
  Segment income     7,290       1,692       9,097       3,915  
Valuation and Appraisal reportable segment:                      
  Revenues - Services and fees   7,960       7,696       15,756       15,169  
  Direct cost of services     (3,581 )     (3,473 )     (7,253 )     (6,738 )
  Selling, general, and administrative expenses   (2,062 )     (2,124 )     (4,142 )     (4,243 )
  Depreciation and amortization   (43 )     (24 )     (87 )     (53 )
  Segment income     2,274       2,075       4,274       4,135  
Principal Investments - United Online segment:                      
  Revenues - Services and fees   12,952             26,255        
  Revenues - Sale of goods     63             142        
  Total revenues     13,015             26,397        
  Direct cost of services     (3,141 )           (6,736 )      
  Cost of goods sold     (130 )           (189 )      
  Selling, general, and administrative expenses   (2,791 )           (6,103 )      
  Depreciation and amortization   (1,770 )           (3,610 )      
  Restructuring costs     (109 )           (483 )      
  Segment income     5,074             9,276        
                                 
Consolidated operating income from reportable segments   9,811       3,247       24,447       6,899  
Corporate and other expenses (including restructuring   (7,251 )     (3,067 )     (11,176 )     (5,054 )
  costs of $2,182 for the three and six months ended                      
  June 30, 2017)                          
Interest income       150       3       282       6  
Interest expense       (1,894 )     (275 )     (2,685 )     (407 )
  Income (loss) before income taxes   816       (92 )     10,868       1,444  
Benefit (provision) for income taxes   2,547       65       6,396       (101 )
                                 
  Net income (loss)     3,363       (27 )     17,264       1,343  
Net income (loss) attributable to noncontrolling interests   83       74       (37 )     1,196  
                                 
  Net income (loss) attributable to B. Riley Financial, Inc. $ 3,280     $ (101 )   $ 17,301     $ 147  
                                 

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(Unaudited)
(Dollars in thousands)
                           
     Three Months Ended  Six Months Ended  
     June 30,    June 30,  
    2017     2016     2017     2016    
Adjusted EBITDA reconciliation:                          
Net income (loss), as reported   $ 3,280     $ (101 )   $ 17,301     $ 147    
                           
Adjustments:                          
Interest expense     1,894       275       2,685       407    
Interest income     (150 )     (3 )     (282 )     (6 )  
(Benefit) provision for income taxes     (2,547 )     (65 )     (6,396 )     101    
Depreciation and amortization     2,248       196       4,290       399    
Share-based payments     1,608       560       2,515       997    
Fair value adjustment     6,250             6,250          
Insurance settlement recovery     (6,000 )           (6,000 )        
Transaction-related costs     4,789       905       5,675       922    
Restructuring costs     6,214             6,588          
                           
Total EBITDA adjustments     14,306       1,868       15,325       2,820    
                           
Adjusted EBITDA   $ 17,586     $ 1,767     $ 32,626     $ 2,967    
                           
                           

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
ADJUSTED NET INCOME RECONCILIATION
(Unaudited)
(Dollars in thousands, except share data)
                                       
                Three Months Ended
June 30,
    Six Months Ended
June 30,
                  2017       2016         2017       2016  
                                       
Net income (loss) attributable to B. Riley Financial, Inc.   $ 3,280     $ (101 )     $ 17,301     $ 147  
                                       
Adjustments:                              
                                       
  Share-based payments     1,608       560         2,515       997  
  Fair value adjustment     6,250               6,250        
  Amortization of acquired intangible assets     1,554       111         3,076       223  
  Restructuring costs     6,214               6,588        
  Insurance settlement recovery     (6,000 )             (6,000 )      
  Transactions-related costs     4,789       905         5,675       922  
  Income tax effect of adjusting entries     (8,857 )     (641 )       (10,503 )     (868 )
  Tax benefit from tax election to treat acquisition of UOL                          
    as a taxable business combination                   (8,389 )      
Adjusted net income attributable to B. Riley Financial, Inc.   $ 8,838     $ 834       $ 16,513     $ 1,421  
                                       
Adjusted income per common share:                          
  Adjusted basic income per share   $ 0.42     $ 0.05       $ 0.81     $ 0.08  
  Adjusted diluted income per share   $ 0.40     $ 0.05       $ 0.79     $ 0.08  
                                       
Weighted average basic shares outstanding     21,216,829       17,935,254         20,311,231       17,212,716  
Weighted average diluted shares outstanding     22,119,055       17,935,254         20,984,757       17,547,073  
                                       

 

Investor Contact:

Scott Liolios or Matt GloverLiolios Group, Inc.

949-574-3860

RILY@liolios.com

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Source: B. Riley Financial

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