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B. Riley Financial Reports First Quarter 2020 Results and Declares Quarterly Cash Dividend of $0.25 per Common Share
Record Results Mitigated by Unrealized Losses

LOS ANGELES, May 11, 2020 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ:RILY) ("B. Riley" or the "Company") today announced results for the first quarter ended March 31, 2020.

Bryant Riley, Chairman and Co-Chief Executive Officer, B. Riley Financial, said: "Our first quarter results consisted of very strong performance from our operating businesses alongside a significant mark-to-market loss from our investment portfolio. Core operations demonstrated collective strength with a record quarter in terms of both growth and overall profitability. While our investment book saw large unrealized losses during the quarter, primarily from the global impact of COVID-19, these losses do not have a material impact on our operations. Since the end of the quarter, our portfolio has had a meaningful rebound and we feel fortunate to have the asset of permanent capital which will allow us to capitalize on market dislocations being presented."

"As we evaluate our operating businesses, we have never been more excited about our earnings power and position in the market. We believe B. Riley is well-positioned to grow market share through the second half of 2020 as capital markets recover and the headwinds in the retail sector accelerate. We are actively pursuing and have been engaged in several new opportunities which leverage our diverse capabilities across restructuring, bankruptcy and litigation advisory, valuation, lending and retail liquidation. We maintain a balance sheet in excess of $775 million of cash and investments, which we intend to use opportunistically to support our clients and partners and create value for our shareholders."

"As we continue to prioritize the health and well-being of our colleagues, we could not be prouder of this team of world-class professionals. Our strength lies in our ability to support our clients and partners as they navigate the challenges created by the COVID-19 pandemic."

First Quarter 2020 Financial Summary

  • GAAP consolidated revenues of ($0.2 million) and net loss of ($98.7 million)
  • Record quarterly operating revenues (1) of $182.2 million and operating adjusted EBITDA (3) of $70.9 million
  • Investment loss (4) driven by significant markdowns, primarily unrealized losses on marketable securities and on fair value of loans
  • Cash and cash equivalents total $124.2 million at March 31, 2020
  • Repurchased over one million shares of common stock during the quarter
  • Declared quarterly dividend of $0.25 per common share

 


Three Months Ended March 31

(Dollars in thousands)

2020


2019

Revenues:




    Operating Revenues (1)

$182,236


$116,261

    Investment (Loss) Gains(4)

(182,442)


25,867

        Total Revenues

$     (206)


$142,128





Adjusted EBITDA:




   Operating Adjusted EBITDA (3)

$  70,908


$  18,858

   Investment Adjusted EBITDA

(166,972)


15,572

       Total Adjusted EBITDA (2)

$ (96,064)


$  34,430

B. Riley Financial reported revenues of ($0.2 million) and net loss of ($98.7 million), primarily driven by investment losses which eclipsed record quarterly operating results for the three months ended March 31, 2020.

Operating revenue (1) increased to $182.2 million from $116.3 million in the prior year period. Operating adjusted EBITDA (3) increased to $70.9 million from $18.9 million for the prior year period. Strong operating performance was driven by investment banking, record quarterly results from GlassRatner consulting; and solid performance from appraisal and wealth management, in addition to contributions from retail liquidation, principal investments and brands.

Investment loss (4) of ($182.4 million) includes the recognition of significant markdowns related to the Company's proprietary investments, which comprise certain private and public securities and loans. Lower income related to these equity investments, and fair value adjustments on loans, are unrealized mark-to-market losses due to implementation of new accounting standard effective January 1, 2020.

The Company employs a strategy of actively investing in companies which can benefit from B. Riley's operational, financial and industry expertise to create revenue opportunities for its affiliated businesses. While a majority of the investment losses came from four large positions, the Company views these marks as moment in time valuations due to impacts of COVID-19 versus permanent impairment. Leveraging the Company's proprietary network, operating businesses, and balance sheet into long-term investment gains remains a core component of its business strategy to create value for its clients, partners and shareholders.

First Quarter 2020 Segment Financial Summary


Capital Markets


Auction & Liquidation


Valuation & Appraisal 


Principal Investments


Brands

(Dollars in thousands)

Q1 2020


Q1 2019


Q1 2020


Q1 2019


Q1 2020


Q1 2019


Q1 2020


Q1 2019


Q1 2020


Q1 2019





















Revenues:




















    Operating Revenues

$ 126,264


$59,434


$      20,661


$      20,709


$        8,788


$        8,583


$      22,722


$      27,535


$        3,801


$            -

    Investment (Loss) Gains (4)

(182,442)


25,867


-


-


-


-


-


-


-


-

        Total Segment Revenue

$  (56,178)


$85,301


$      20,661


$      20,709


$        8,788


$        8,583


$      22,722


$      27,535


$        3,801


-





















Segment Income:




















    Operating Income

$   46,505


$ (1,711)


$        4,289


$      11,504


$        1,880


$        1,363


$        8,504


$        7,929


$       (1,817)


-

    Investment (Loss) Income

(166,972)


15,572


-


-


-


-


-


-


-


-

        Segment Income

$(120,467)


$13,861


$        4,289


$      11,504


$        1,880


$        1,363


$        8,504


$        7,929


$       (1,817)


-

 

  • Capital Markets segment loss reflects markdowns related to investments mentioned above, which eclipsed strong performance from investment banking, record quarterly revenues from GlassRatner, and increased contributions from wealth management.
  • Auction and Liquidation segment results were primarily driven by large retail liquidation projects conducted by Great American Group during the quarter.
  • Valuation and Appraisal segment performance increased slightly during the quarter driven by an increase in appraisal units and lower operating expenses. Historical results for this segment have remained relatively steady from quarter-to-quarter and year-to-year.
  • Principal Investments segment companies, United Online and magicJack, performed at or above expectations, contributing steady cash flow for the Company.

As of March 31, 2020, the Company had total cash and cash equivalents of $124.2 million, with no significant principal payments due on outstanding indebtedness until 2023. Cash and investments totaled $777.7 million, which includes approximately $48.8 million of other equity investments and deposits included in prepaid and other assets.

Supplemental Financial Data
Additional information included in B. Riley Financial's First Quarter 2020 Results related to investments and operating metrics have been presented to provide investors with useful information regarding its performance and overall results of operations, which the Company intends to provide moving forward. Further details related to these metrics can be found in a Financial Supplement on the Company's investor relations website. Shareholders may access this information by visiting ir.brileyfin.com.

Share Repurchases
During the first quarter, the Company repurchased over one million shares of its common stock under its existing share repurchase program, including the repurchase of 880,000 shares as part of a privately negotiated transaction completed prior to March 2020.

Dividend
The Company's Board of Directors has declared a quarterly dividend of $0.25 per share, which will be paid on or about June 10, 2020 to stockholders of record as of June 1, 2020.

Conference Call
Management will host a conference call today, Monday, May 11, 2020 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company's quarterly results. The live broadcast and archived recording will be available on the Company's investor relations website.

Date: 

Monday, May 11, 2020

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 Monday, May 18, 2020) 

Toll-Free: 

1-844-512-2921

International: 

1-412-317-6671

Replay Pin: 

13703074

For more information, visit ir.brileyfin.com.

About B. Riley Financial, Inc. (NASDAQ:RILY)
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. The Company 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. For more information about B. Riley and its affiliated companies, visit www.brileyfin.com.

Footnotes

(1)

Operating revenue is defined as the sum of revenues from service and fees, interest income - loans and securities lending and sales of goods.

(2)

Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share-based payments, impairment of tradenames, and transaction related and other costs. For a definition of adjusted EBITDA and a reconciliation to GAAP financial measures, please see the Appendix. See "Note Regarding Use of Non-GAAP Financial Measures" for further discussion of this non-GAAP term.

(3)

Operating adjusted EBITDA is defined as adjusted EBITDA excluding trading income (losses) and fair value adjustments on loans and other investment related expenses. See "Note Regarding Use of Non-GAAP Financial Measures" for further discussion of this non-GAAP term.

(4)

Investment (loss) gains is defined as trading income (losses) and fair value adjustments on loans.

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 2020, as well as statements regarding our excitement and the expected growth of our business segments. Factors that could cause such actual results to differ materially from those contemplated or implied by such forward-looking statements include (without limitation) the risks associated with the unpredictable and ongoing impact of the COVID-19 pandemic and other risks described from time to time in B. Riley Financial, Inc.'s periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2019 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 March 31, 2020. 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 operating revenue 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 revenues and cash flow, excluding in the case of operating revenues, which is the sum of revenues from service and fees, interest income - loans and securities lending and sales of goods, and additionally excluding in the case of adjusted EBITDA 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.

Consolidated Balance Sheets

(Dollars in thousands, except par value)





March 31,


December 31,




2020


2019




(Unaudited)




Assets






Assets:







Cash and cash equivalents

$

124,231


$

104,268


Restricted cash


471



471


Due from clearing brokers


10,879



23,818


Securities and other investments owned, at fair value


287,786



408,213


Securities borrowed


674,163



814,331


Accounts receivable, net


46,450



46,624


Due from related parties


4,391



5,832


Advances against customer contracts


11,121



27,347


Loans receivable, at fair value (includes $216,302from related parties at March 31, 2020)


326,299



43,338


Loans receivable, at cost (includes $157,080 from related parties at December 31, 2019)




225,848


Prepaid expenses and other assets


114,686



81,808


Operating lease right-of-use assets


46,213



47,809


Property and equipment, net


12,223



12,727


Goodwill


223,697



223,697


Other intangible assets, net


212,500



220,525


Deferred income taxes


35,786



31,522



Total assets

$

2,130,896


$

2,318,178

Liabilities and Equity






Liabilities:







Accounts payable

$

6,858


$

4,477


Accrued expenses and other liabilities


103,452



130,714


Deferred revenue


73,709



67,121


Due to related parties and partners


1,061



1,750


Due to clearing brokers


5,126




Securities sold not yet purchased


14,298



41,820


Securities loaned


670,859



810,495


Mandatorily redeemable noncontrolling interests


4,508



4,616


Operating lease liabilities


59,430



61,511


Notes payable


714



38,167


Loan participations sold


12,405



12,478


Term loan


61,932



66,666


Senior notes payable


853,523



688,112



Total liabilities


1,867,875



1,927,927

















B. Riley Financial, Inc. stockholders' equity:







Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 2,531 and 2,349 issued and 





outstanding as of March 31, 2020 and December 31, 2019, respectively; liquidation 







preference of $63,273 and $58,723 as of March 31, 2020 and December 31, 2019, respectively







Common stock, $0.0001 par value; 100,000,000 shares authorized; 25,988,565 and 26,972,332


3



3


issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.







Additional paid-in capital


308,472



323,109


(Accumulated deficit) retained earnings


(70,232)



39,536


Accumulated other comprehensive loss


(3,208)



(1,988)



Total B. Riley Financial, Inc. stockholders' equity


235,035



360,660

Noncontrolling interests


27,986



29,591



Total equity


263,021



390,251



Total liabilities and equity

$

2,130,896


$

2,318,178

 

B. RILEY FINANCIAL, INC.

Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except share data)












Three Months Ended




March 31,




2020


2019

Revenues:







Services and fees

$

159,381


$

103,896


Trading (losses) income and fair value adjustments on loans


(182,442)



25,867


Interest income - Loans and securities lending


21,851



11,420


Sale of goods


1,004



945



Total revenues


(206)



142,128

Operating expenses:







Direct cost of services


19,952



14,116


Cost of goods sold


769



1,119


Selling, general and administrative expenses


87,744



94,964


Restructuring charge




147


Impairment of tradenames


4,000




Interest expense - Securities lending and loan participations sold


8,473



6,804



Total operating expenses


120,938



117,150



Operating (loss) income


(121,144)



24,978

Other income (expense):







Interest income


246



637


Loss from equity investments


(236)



(3,762)


Interest expense


(15,654)



(10,770)



(Loss) income before income taxes


(136,788)



11,083

Beneft (provision) for income taxes


37,539



(3,104)



Net (loss) income


(99,249)



7,979

Net loss attributable to noncontrolling interests


(584)



(44)



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

$

(98,665)


$

8,023

Preferred stock dividends


1,055





Net (loss) income available to common shareholders

$

(99,720)


$

8,023









Basic (loss) income per common share 

$

(3.83)


$

0.31

Diluted (loss) income per common share 

$

(3.83)


$

0.30









Weighted average basic common shares outstanding


26,028,613



26,217,215

Weighted average diluted common shares outstanding


26,028,613



26,687,531

 

B. RILEY FINANCIAL, INC.

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)







Three Months Ended March 31,






2020


2019

Cash flows from operating activities:







Net (loss) income

$

(99,249)


$

7,979


Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization


4,956



4,913



Provision for doubtful accounts


724



233



Share-based compensation


5,322



2,614



Fair value adjustments, non-cash


17,926



49



Non-cash interest and other


(2,827)



736



Effect of foreign currency on operations


179



130



Loss from equity investments


236



3,762



Deferred income taxes


(4,254)



(390)



Impairment of intangibles and loss on disposal of fixed assets


4,046



88



Gain on extinguishment of debt


(1,556)





Income allocated for mandatorily redeemable noncontrolling interests


175



169



Change in operating assets and liabilities:









Due from clearing brokers


12,939



15,320




Securities and other investments owned


125,061



(15,274)




Securities borrowed


140,168



104,104




Accounts receivable and advances against customer contracts


15,674



(2,845)




Prepaid expenses and other assets


(37,151)



(3,706)




Accounts payable, accrued expenses and other liabilities


(22,097)



(1,251)




Amounts due to/from related parties and partners


752



(1,236)




Securities sold, not yet purchased


(27,522)



(1,675)




Deferred revenue


6,589



893




Securities loaned


(139,636)



(105,689)





Net cash provided by operating activities


455



8,924

Cash flows from investing activities:







Purchases of loans receivable


(115,328)



(20,154)


Repayments of loans receivable


42,128



5,500


Sale of loan receivable to related party


1,800




Repayment of loan participations sold


(244)




Purchases of property, equipment and other


(438)



(1,746)


Proceeds from sale of property, equipment and intangible assets


1



12


Purchase of equity investments




(10,558)


Dividends and distributions from equity investments


589



433





Net cash used in investing activities


(71,492)



(26,513)

Cash flows from financing activities:







Repayment of asset based credit facility


(37,096)




Repayment of notes payable 


(357)



(357)


Proceeds from term loan




10,000


Repayment of term loan


(4,810)




Proceeds from issuance of senior notes


171,078



4,987


Redemption of senior notes


(1,829)




Payment of debt issuance costs


(2,724)



(145)


Payment of employment taxes on vesting of restricted stock


(505)



(714)


Common dividends paid


(9,609)



(2,606)


Preferred dividends paid


(1,055)




Repurchase of common stock


(24,068)



(2,650)


Distribution to noncontrolling interests


(1,323)



(274)


Proceeds from issuance of preferred stock


4,630







Net cash provided by financing activities


92,332



8,241





Increase (decrease) in cash, cash equivalents and restricted cash


21,295



(9,348)





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


(1,332)



23





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


19,963



(9,325)

Cash, cash equivalents and restricted cash, beginning of period


104,739



180,278

Cash, cash equivalents and restricted cash, end of period

$

124,702


$

170,953











Supplemental disclosures:







Interest paid

$

21,785


$

17,435


Taxes paid 

$

574


$

192

 

B. RILEY FINANCIAL, INC.

Segment Financial Information

(Unaudited)

(Dollars in thousands)












Three Months Ended




March 31,




2020


2019

Capital Markets segment:







Revenues - Services and fees

$

104,413


$

48,014


Trading (losses) income and fair value adjustments on loans


(182,442)



25,867


Interest income - Loans and securities lending


21,851



11,420


    Total revenues


(56,178)



85,301


Selling, general and administrative expenses


(54,711)



(63,389)


Restructuring recovery




29


Interest expense - Securities lending and loan participations sold


(8,473)



(6,804)


Depreciation and amortization


(1,105)



(1,276)



Segment (loss) income


(120,467)



13,861

Auction and Liquidation segment:







Revenues - Services and fees


20,661



20,709


Direct cost of services


(14,816)



(6,274)


Cost of goods sold


(29)



(14)


Selling, general and administrative expenses


(1,526)



(2,915)


Depreciation and amortization


(1)



(2)



Segment income


4,289



11,504

Valuation and Appraisal segment:







Revenues - Services and fees


8,788



8,583


Selling, general and administrative expenses


(6,867)



(7,187)


Depreciation and amortization


(41)



(33)



Segment income


1,880



1,363

Principal Investments - United Online and magicJack segment:







Revenues - Services and fees


21,718



26,590


Revenues - Sale of goods


1,004



945


    Total revenues


22,722



27,535


Direct cost of services


(5,136)



(7,842)


Cost of goods sold


(740)



(1,105)


Selling, general and administrative expenses


(5,463)



(7,020)


Depreciation and amortization


(2,879)



(3,463)


Restructuring charge




(176)



Segment income


8,504



7,929

Brands segment:







Revenues - Services and fees


3,801




Selling, general and administrative expenses


(904)




Depreciation and amortization


(714)




Impairment of tradenames


(4,000)





Segment loss


(1,817)



Consolidated operating (loss) income from reportable segments


(107,611)



34,657









Corporate and other expenses 


(13,533)



(9,679)

Interest income


246



637

Loss on equity investments


(236)



(3,762)

Interest expense


(15,654)



(10,770)


(Loss) income before income taxes


(136,788)



11,083

Benefit (provision) for income taxes


37,539



(3,104)


Net (loss) income


(99,249)



7,979

Net loss attributable to noncontrolling interests


(584)



(44)


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


(98,665)



8,023

Preferred stock dividends


1,055




Net (loss) income available to common shareholders

$

(99,720)


$

8,023

 

B. RILEY FINANCIAL, INC.

Adjusted EBITDA and Operating Adjusted EBITDA Reconciliation

(Unaudited)

(Dollars in thousands)












Three Months Ended
March 31,




2020


2019

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

$

(98,665)


$

8,023

EBITDA Adjustments:







(Benefit) Provision for income taxes


(37,539)



3,104


Interest expense


15,654



10,770


Interest income


(246)



(637)


Share based payments


5,322



2,614


Depreciation and amortization


4,956



4,913


Restructuring costs  




147


Impairment of tradenames


4,000




Transactions related costs and other


10,454



5,496











Total EBITDA adjustments


2,601



26,407









Adjusted EBITDA

$

(96,064)


$

34,430









Operating EBITDA Adjustments:







Trading losses (income) and fair value adjustments on loans


182,442



(25,867)


Other investment related expenses


(15,470)



10,295











Total Operating EBITDA Adjustments


166,972



(15,572)









Operating Adjusted EBITDA

$

70,908


$

18,858

 

B. RILEY FINANCIAL, INC.

Adjusted Net Income Reconciliation

(Unaudited)

(Dollars in thousands, except share data)




Three Months Ended



March 31,



2020


2019

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

$

(98,665)


$

8,023

Adjustments:







Share based payments


5,322



2,614


Amortization of intangible assets


4,024



3,377


Restructuring costs  




147


Impairment of tradenames


4,000




Transactions related costs and other


10,454



5,496


Income tax effect of adjusting entries


(6,559)



(3,245)

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

$

(81,424)


$

16,412








Adjusted income per common share:







Adjusted basic income per share 

$

(3.13)


$

0.63


Adjusted diluted income per share 

$

(3.13)


$

0.61








Shares used to calculate adjusted basic net income per share


26,028,613



26,217,215

Shares used to calculate adjusted diluted net income per share


26,028,613



26,687,531

 

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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