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B. Riley Financial Reports Record Results for the Third Quarter of 2019
Q3 revenues of $180.1M, adj. EBITDA of $70.3M, net income of $34.3M; earnings per diluted share of $1.21
Quarterly dividend of $0.65 per share brings total YTD dividends to $1.49 per common share
Board of directors authorize $50 million share buyback program

LOS ANGELES, Oct. 30, 2019 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ:RILY) (the "Company" or "B. Riley"), a diversified provider of business advisory and financial services which operates through several wholly-owned subsidiaries, today announced financial results for the third quarter ended September 30, 2019.

B. Riley Financial logo (PRNewsFoto/B. Riley Financial, Inc.)

Third Quarter 2019 Highlights

  • Total revenues of $180.1 million
  • Net income of $34.3 million or $1.21 per diluted share
  • Adjusted EBITDA of $70.3 million
  • Adjusted net income of $40.0 million or $1.42 per diluted share

"We are extremely pleased to report record results in our third quarter earnings. These results speak to the strength of our individual businesses, combined with the synergies and opportunities being created throughout B. Riley Financial. The value created by our combined businesses continues to exceed our expectations, and we believe our quarterly and year-to-date results demonstrate the earnings power of our company. Over the last five years, we have transitioned from a traditional investment banking and brokerage business into a diversified platform of companies which provide both recurring and episodic revenues. We have utilized the broad capabilities of our enhanced platform to create investment opportunities for ourselves and our clients, while at the same time expanding our service revenues organically and through acquisitions," said Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial. "As a strategic matter, we use our balance sheet in situations where we can source off market, proprietary investment opportunities in partnership with our operating businesses. This strategy has created a tremendous number of investment opportunities, often combined with meaningful fee revenue, which have added to our short-term profits as well as our recurring revenues. We are mindful that a balance between steady revenues and episodic opportunities is critical, and today's announcement about the formation of our brand investment platform is a continuation of our efforts to grow recurring revenues."

Third Quarter 2019 Financial Summary
For the three-month period ending September 30, 2019, total revenues increased to $180.1 million compared to $99.7 million in revenues for the third quarter of 2018. Strong performance from the Company's Capital Markets and Auction and Liquidation segments contributed to record results for the quarter. Revenues have increased across each of the Company's segments over the respective same year-ago period for the third consecutive quarter. Through the first three quarters of 2019, the Company generated total revenues of $486.9 million.

  • Capital Markets Segment: Revenues increased to $134.1 million from $76.3 million for the same year-ago period. Segment income increased to $52.4 million from $11.0 million for the same year-ago period.
  • Auction and Liquidation Segment: Revenues increased to $11.3 million from $2.5 million for the same year-ago period. Segment income increased to $6.0 million from $0.3 million for the same year-ago period.
  • Valuation and Appraisal Segment: Revenues increased to $10.8 million from $9.4 million for the same year-ago period. Segment income totaled $3.5 million compared to $2.9 million for the same year-ago period.
  • Principal Investments Segment: Revenues increased to $23.9 million compared to $11.4 million for the same year-ago period. Segment income increased to $8.7 million compared to $4.1 million for the same year-ago period.

Net income attributable to B. Riley Financial increased to $34.3 million or $1.21 per diluted share for the third quarter of 2019 compared to $2.8 million or $0.10 per diluted share for the same year-ago period. Net income increased to $64.5 million or $2.37 per diluted share for the nine months ending September 30, 2019.

Adjusted EBITDA increased to $70.3 million for the third quarter of 2019 compared to $21.0 million for the same year-ago period; and increased to $157.6 million through the first nine months of 2019. Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share-based payments, and transaction related and other costs. (See "Note Regarding Use of Non-GAAP Financial Measures" below for further discussion of this non-GAAP term.)

Adjusted net income increased to $40.0 million or $1.42 per diluted share compared to $6.4 million or $0.24 per diluted share for the same year-ago period. Through the first three quarters of 2019, adjusted net income increased to $84.6 million or $3.11 per diluted share. Adjusted net income excludes the impact of share-based payments, amortization of intangible assets, restructuring costs, transaction related and other costs, and tax impact of aforementioned adjustments. (See "Note Regarding Use of Non-GAAP Financial Measures" below for further discussion of this non-GAAP term.)

As of September 30, 2019, the Company had a total cash and investment balance of $844.6 million, including approximately $81 million in equity investments and deposits included in prepaid expenses and other assets. Net of $773.9 million of total debt, the Company had a net cash and investment balance of $70.7 million at the end of the third quarter.

Total B. Riley Financial stockholders' equity increased to $298.9 million as of September 30, 2019.

Declaration of Dividend
The Company's Board of Directors has approved a special dividend of $0.475 per share in addition to the regular quarterly dividend of $0.175 per share. The total quarterly cash dividend of $0.65 per share will be paid on or about November 26, 2019 to stockholders of record as of November 14, 2019. Upon payment, the Company will have distributed a combined total of $1.49 per share in dividends on its common stock to its shareholders, year-to-date.

Share Repurchase Program
The Board has also approved the repurchase of up to $50 million of the Company's outstanding shares of common stock during the year ending October 31, 2020. The share repurchases may be effected on the open market at prevailing market prices from time to time as market conditions warrant, or in privately negotiated transactions. All purchases will be implemented in accordance with the company's securities trading policy and applicable requirements of Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, or other legally permissible ways in accordance with applicable rules and regulations.

Conference Call
Bryant Riley, Chairman and Co-CEO; Tom Kelleher, Co-CEO; and Phillip Ahn, CFO and COO, will host a conference call today at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company's financial and operational results, followed by a question and answer period.

Please call the conference line 10 minutes prior to the start time and an operator will register your name and organization. The live broadcast and archive will be available on the Company's investor relations website.

Q3 2019 Earnings Call Details

Date: 

Wednesday, October 30, 2019

Time: 

4:30 p.m. Eastern time (1:30 p.m. Pacific time)

Toll-Free: 

1-877-451-6152

International: 

1-201-389-0879


Replay Dial-In (expires on Wednesday November 6, 2019)

Toll-Free:

1-844-512-2921

International:

1-412-317-6671

Replay Pin:

13695614

For more information, visit ir.brileyfin.com.

About B. Riley Financial
B. Riley Financial provides collaborative financial services tailored to fit the capital raising and business advisory needs of public and private companies and high-net-worth individuals. B. Riley operates through several wholly-owned subsidiaries which offer complementary end-to-end capabilities spanning investment banking and institutional brokerage, private wealth and investment management, corporate advisory, restructuring, due diligence, forensic accounting and litigation support, appraisal and valuation, and auction and liquidation services. Certain registered affiliates of B. Riley originate and underwrite senior secured loans for asset-rich companies. The Company also makes proprietary investments in 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. 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, statements regarding the Company's anticipated results of operations for 2019, expectations regarding the size and consistency of returns, expectations regarding market dynamics, as well as our expectations regarding our business strategies and the expected growth of our business segments. Other factors that could adversely affect our operating results and cash flows include (without limitation) those risks described from time to time in B. Riley Financial's periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial's Annual Report on Form 10-K for the year ended December 31, 2018 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. 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 the Company 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, fair value adjustment, transaction and other 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.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands, except par value)





















September 30,


December 31,








2019


2018









(Unaudited)




Assets






Assets:












Cash and cash equivalents

$

170,587


$

179,440


Restricted cash


471



838


Due from clearing brokers


27,791



37,738


Securities and other investments owned, at fair value


326,616



273,577


Securities borrowed


720,207



931,346


Accounts receivable, net


47,419



42,123


Due from related parties


6,689



1,729


Loans receivable


295,898



38,794


Prepaid expenses and other assets


112,309



79,477


Operating lease right-of-use assets


49,642




Property and equipment, net


13,171



15,523


Goodwill


220,562



223,368


Other intangible assets, net


79,488



91,358


Deferred income taxes


36,041



42,399



Total assets

$

2,106,891


$

1,957,710

Liabilities and Equity






Liabilities:










Accounts payable

$

6,239


$

5,646


Accrued expenses and other liabilities


115,062



108,662


Deferred revenue


68,385



69,066


Due to related parties and partners


2,814



2,428


Securities sold not yet purchased


29,092



37,623


Securities loaned


714,947



930,522


Mandatorily redeemable noncontrolling interests


4,395



4,633


Operating lease liabilities


63,817




Notes payable



1,193



1,550


Loan participations sold


28,872




Term loan




71,393



79,166


Senior notes payable


701,278



459,754



Total liabilities


1,807,487



1,699,050













Commitments and contingencies






B. Riley Financial, Inc. stockholders' equity:







Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued





and outstanding as of September 30, 2019 and December 31, 2018, respectively.







Common stock, $0.0001 par value; 100,000,000 shares authorized; 26,921,500 and 26,603,355


3



2


issued and outstanding as of September 30, 2019 and December 31, 2018, respectively.







Additional paid-in capital


259,237



258,638


Retained earnings


41,957



1,579


Accumulated other comprehensive loss


(2,345)



(2,161)



Total B. Riley Financial, Inc. stockholders' equity


298,852



258,058

Noncontrolling interests


552



602



Total equity


299,404



258,660




Total liabilities and equity

$

2,106,891


$

1,957,710

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Dollars in thousands, except share data)









Three Months Ended



Nine Months Ended








September 30,



September 30,








2019


2018


2019


2018

Revenues:














Services and fees

$

153,379



89,824


$

428,705



295,416


Interest income - Loans and securities lending


25,766



9,785



54,147



25,406


Sale of goods


918



72



4,023



138



Total revenues


180,063



99,681



486,875



320,960

Operating expenses:













Direct cost of services


12,441



8,156



55,210



33,733


Cost of goods sold


911



52



3,835



142


Selling, general and administrative expenses


96,587



71,782



274,468



216,603


Restructuring charge




428



1,699



2,247


Interest expense - Securities lending and loan participations sold


10,273



6,425



22,579



16,317



Total operating expenses


120,212



86,843



357,791



269,042



Operating income


59,851



12,838



129,084



51,918

Other income (expense):













Interest income


361



442



1,329



736


Income (loss) from equity investments


1,113



828



(4,049)



5,049


Interest expense


(12,772)



(9,340)



(35,130)



(23,926)



Income before income taxes


48,553



4,768



91,234



33,777

Provision for income taxes


(14,409)



(2,046)



(26,802)



(8,412)



Net income


34,144



2,722



64,432



25,365

Net (loss) income attributable to noncontrolling interests


(158)



(92)



(50)



1,051



Net income attributable to B. Riley Financial, Inc.

$

34,302


$

2,814


$

64,482


$

24,314



















Basic income per share 

$

1.29


$

0.11


$

2.45


$

0.94

Diluted income per share 

$

1.21


$

0.10


$

2.37


$

0.91



















Weighted average basic shares outstanding


26,556,223



25,968,997



26,351,839



25,856,339

Weighted average diluted shares outstanding


28,233,423



26,854,261



27,251,837



26,776,133

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)










Nine Months Ended September 30,








2019


2018

Cash flows from operating activities:








Net income


$

64,432


$

25,365


Adjustments to reconcile net income to net cash provided by (used in) operating activities:









Depreciation and amortization



14,217



9,768



Provision for doubtful accounts



1,646



840



Share-based compensation



10,276



8,650



Non-cash interest and other



(14,941)



1,384



Effect of foreign currency on operations



8



(352)



Loss (income) from equity investments



4,049



(5,049)



Deferred income taxes



6,358



7



Impairment of leaseholds and intangibles, lease loss accrual and gain on disposal of fixed assets



(327)



1,718



Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests



857



847



Change in operating assets and liabilities:










Due from clearing brokers



9,947



(23,412)




Securities and other investments owned



(45,465)



(77,161)




Securities borrowed



211,139



(235,206)




Accounts receivable and advances against customer contracts



(8,645)



(35,982)




Prepaid expenses and other assets



(9,619)



(19,418)




Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities



31,473



10,111




Amounts due to/from related parties and partners



(4,574)



(4,487)




Securities sold, not yet purchased



(8,531)



31,381




Deferred revenue



(502)



64




Securities loaned



(215,575)



232,037





Net cash provided by (used in) operating activities



46,223



(78,895)

Cash flows from investing activities:








Purchases of loans receivable



(350,695)



(35,111)


Acquisition of other businesses





(4,000)


Repayments of loans receivable



98,742




Loan participations sold



31,806




Repayment of loan participations sold



(3,175)




Purchases of property, equipment and intangible assets



(2,885)



(2,314)


Proceeds from sale of property, equipment and intangible assets



504



37


Equity investments



(33,391)



(6,856)


Proceeds from sale of division of magicJack



6,196




Dividends from equity investments



1,454



1,695





Net cash used in investing activities



(251,444)



(46,549)

Cash flows from financing activities:








Proceeds from asset based credit facility





300,000


Repayment of asset based credit facility





(300,000)


Proceeds from notes payable





51,020


Repayment of notes payable



(357)



(51,591)


Proceeds from term loan



10,000




Repayment of term loan



(17,924)




Proceeds from issuance of senior notes



244,497



255,290


Payment of debt issuance costs



(4,212)



(6,356)


Payment of employment taxes on vesting of restricted stock



(2,626)



(4,106)


Dividends paid



(25,049)



(17,912)


Repurchase of common stock



(4,273)



(17,338)


Repurchase of warrants



(2,777)




Distribution to noncontrolling interests



(1,095)



(915)





Net cash provided by financing activities



196,184



208,092





(Decrease) increase in cash, cash equivalents and restricted cash



(9,037)



82,648





Effect of foreign currency on cash, cash equivalents and restricted cash



(183)



(796)





Net (decrease) increase in cash, cash equivalents and restricted cash



(9,220)



81,852

Cash, cash equivalents and restricted cash, beginning of  year



180,278



152,534

Cash, cash equivalents and restricted cash, end of period


$

171,058


$

234,386













Supplemental disclosures:








Interest paid


$

52,931


$

35,289


Taxes paid



$

5,029


$

2,455


 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Segment Financial Information

(Unaudited)

(Dollars in thousands)








Three Months Ended


Nine Months Ended







September 30,


September 30,







2019


2018


2019


2018

Capital Markets segment:














Revenues - Services and fees

$

108,330


$

66,558


$

259,498


$

189,051


Interest income - Loans and securities lending


25,766



9,785



54,147



25,406


    Total revenues



134,096



76,343



313,645



214,457


Selling, general and administrative expenses


(70,140)



(57,207)



(196,570)



(168,559)


Restructuring (charge) recovery 




(428)



4



(2,457)


Interest expense - Securities lending and loan participations sold


(10,273)



(6,425)



(22,579)



(16,317)


Depreciation and amortization


(1,281)



(1,309)



(3,844)



(4,428)



Segment income



52,402



10,974



90,656



22,696

Auction and Liquidation segment:













Revenues - Services and fees


11,232



2,459



65,681



44,812


Revenues - Sale of goods



54



48



1,230



48


    Total revenues



11,286



2,507



66,911



44,860


Direct cost of services



(2,371)



(838)



(21,584)



(12,263)


Cost of goods sold



(126)



(24)



(992)



(41)


Selling, general and administrative expenses


(2,835)



(1,289)



(9,045)



(7,787)


Depreciation and amortization


(1)



(7)



(5)



(23)



Segment income



5,953



349



35,285



24,746

Valuation and Appraisal segment:













Revenues - Services and fees


10,818



9,404



29,143



27,383


Direct cost of services



(4,505)



(4,067)



(13,495)



(12,388)


Selling, general and administrative expenses


(2,826)



(2,379)



(7,997)



(7,138)


Depreciation and amortization


(36)



(56)



(100)



(159)



Segment income



3,451



2,902



7,551



7,698

Principal Investments - United Online and magicJack segment:













Revenues - Services and fees


22,999



11,403



74,383



34,170


Revenues - Sale of goods



864



24



2,793



90


    Total revenues



23,863



11,427



77,176



34,260


Direct cost of services



(5,565)



(3,251)



(20,131)



(9,082)


Cost of goods sold



(785)



(28)



(2,843)



(101)


Selling, general and administrative expenses


(5,895)



(2,348)



(18,410)



(6,321)


Depreciation and amortization


(2,956)



(1,682)



(9,719)



(5,040)


Restructuring charge







(1,703)





Segment income



8,662



4,118



24,370



13,716

Consolidated operating income from reportable segments


70,468



18,343



157,862



68,856


















Corporate and other expenses (including restructuring recovery of 












  $210 during the nine months ended September 30, 2018)


(10,617)



(5,505)



(28,778)



(16,938)

Interest income




361



442



1,329



736

Income (loss) on equity investments


1,113



828



(4,049)



5,049

Interest expense




(12,772)



(9,340)



(35,130)



(23,926)


Income before income taxes


48,553



4,768



91,234



33,777

Provision for income taxes



(14,409)



(2,046)



(26,802)



(8,412)


Net income




34,144



2,722



64,432



25,365

Net income attributable to noncontrolling interests


(158)



(92)



(50)



1,051


Net income attributable to B. Riley Financial, Inc.

$

34,302


$

2,814


$

64,482


$

24,314

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Adjusted EBITDA Reconciliation

(Unaudited)

(Dollars in thousands)









Three Months Ended


Nine Months Ended








September 30,


September 30,








2019


2018


2019


2018

Net income attributable to B. Riley Financial, Inc.

$

34,302


$

2,814


$

64,482


$

24,314

Adjustments:















Provision for income taxes


14,409



2,046



26,802



8,412


Interest expense


12,772



9,340



35,130



23,926


Interest income


(361)



(442)



(1,329)



(736)


Share based payments


4,728



3,074



10,276



8,310


Depreciation and amortization


4,473



3,098



14,217



9,768


Restructuring costs  




428



1,699



2,247


Transactions related costs and other


7



648



6,339



2,193





















Total EBITDA adjustments


36,028



18,192



93,134



54,120






















Adjusted EBITDA

$

70,330


$

21,006


$

157,616


$

78,434

 

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,








2019


2018


2019


2018

Net income attributable to B. Riley Financial, Inc.

$

34,302


$

2,814


$

64,482


$

24,314

Adjustments:















Share based payments


4,728



3,074



10,276



8,310


Amortization of intangible assets


3,310



2,093



10,031



6,399


Restructuring costs  




428



1,699



2,247


Transactions related costs and other


7



648



6,339



2,193


Income tax effect of adjusting entries


(2,380)



(2,628)



(8,185)



(5,411)

Adjusted net income attributable to B. Riley Financial, Inc.

$

39,967


$

6,429


$

84,642


$

38,052



















Adjusted income per common share:













Adjusted basic income per share 

$

1.51


$

0.25


$

3.21


$

1.47


Adjusted diluted income per share 

$

1.42


$

0.24


$

3.11


$

1.42



















Shares used to calculate adjusted basic net income per share


26,556,223



25,968,997



26,351,839



25,856,339

Shares used to calculate adjusted diluted net income per share


28,233,423



26,854,261



27,251,837



26,776,133

 

Contacts


Investors

Media


B. Riley Financial

Jo Anne McCusker


ir@brileyfin.com

jmccusker@brileyfin.com


(310) 966-1444

(646) 885-5425

 

SOURCE B. Riley Financial

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