B RILEY FINANCIA(RILYL) - 2025 Q2 - Quarterly Results

Executive Summary & Business Update First Half 2025 Highlights B. Riley Financial executed strategic initiatives in the first half of 2025, including the carve-out of B. Riley Securities to focus on client capital and AI investments, achieving significant debt reduction and securing a senior facility - B. Riley Securities (BRS) executed a carve-out in March 2025, aligning capital and management to serve clients, and partnered with BRS to provide timely, flexible capital for emerging client priorities in AI investments[3] - Total Company debt reduction from September 30, 2024, to June 30, 2025, is estimated to be $600 million[3] - Realized cash proceeds from business sales of approximately $187 million from the sales of GlassRatner and Atlantic Coast Recycling[3] - Bond exchanges achieved approximately $126 million of debt reduction through five bond exchanges through July 2025[3] Management Commentary Management highlighted aggressive actions to align the balance sheet, a strategic focus on financial services businesses, and progress on the complex 2024 audit, with subsequent quarterly filings expected soon - Chairman and Co-CEO Bryant Riley stated the company has taken aggressive, decisive actions to align its balance sheet while continuing to invest in financial services businesses, which are seeing increasing momentum[4] - CFO Scott Yessner confirmed the company is in the final stages of documenting the 2024 audit and expects to file the 10-K shortly, followed by both 10-Qs within 30 to 45 days[6] - Co-CEO Tom Kelleher noted that many operating businesses continue to generate meaningful results and the company will assess opportunities to invest in and support its operating companies[6] About B. Riley Financial B. Riley Financial is a diversified financial services company that provides tailored solutions across various stages of the business life cycle, leveraging cross-platform expertise in investment banking, institutional brokerage, wealth management, consulting, restructuring, appraisal, auction, and liquidation services, while also making opportunistic investments - B. Riley Financial is a diversified financial services company that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners[15] - Through its subsidiaries, BRF provides end-to-end financial services across investment banking, institutional brokerage, private wealth and investment management, financial consulting, corporate restructuring, appraisal and valuation, auction, and liquidation services[15] - BRF opportunistically invests to benefit its shareholders and certain affiliates originate and underwrite senior secured loans for asset-rich companies[15] Preliminary Financial Estimates - First Half 2025 (Unaudited) Summary of Key Financial Estimates The company expects net income for the first half of 2025 to be between $125.0 million and $145.0 million, driven by gains from asset sales and senior note exchanges. Revenue is projected to be between $405.0 million and $425.0 million, with estimated operating adjusted EBITDA ranging from $20.0 million to $26.0 million. Debt is estimated at $1.46 billion, with net debt between $809.0 million and $839.0 million Estimated Financial Performance for Six-Months Ended June 30, 2025 | Metric | Low Estimate ($ millions) | High Estimate ($ millions) | | :-------------------------------- | :------------------------ | :------------------------- | | Net income available to common shareholders | 125.0 | 145.0 | | Diluted Net Income per Common Share | 4.08 | 4.74 | | Revenue | 405.0 | 425.0 | | Operating Adjusted EBITDA from continuing operations | 20.0 | 26.0 | | Debt | 1,460.0 | 1,460.0 | | Net Debt | 809.0 | 839.0 | | Cash, cash equivalents, and restricted cash | 268.0 | 268.0 | | Securities and other investments owned, at fair value | 231.0 | 251.0 | | Total investments | 310.0 | 340.0 | - Net income is expected to include estimated gains on sale of $53 million from Atlantic Coast Recycling, $66 million from GlassRatner, and $55 million on senior note exchanges[9] - The company earned approximately $29 million in profits from its equity participation in the JOANN's liquidation[8] Estimated Adjusted EBITDA and Operating Adjusted EBITDA Reconciliation The estimated reconciliation for the first half of 2025 projects Adjusted EBITDA between $5.4 million and $40.4 million, and Operating Adjusted EBITDA between $20.0 million and $26.0 million, after various adjustments including gains on divestitures and loan/note exchanges Estimated Adjusted EBITDA and Operating Adjusted EBITDA for Six-Months Ended June 30, 2025 | Metric | Low Estimate ($ thousands) | High Estimate ($ thousands) | | :------------------------ | :------------------------- | :-------------------------- | | Adjusted EBITDA | 5,400 | 40,400 | | Operating Adjusted EBITDA | 20,000 | 26,000 | Estimated Total Investments and Net Debt As of June 30, 2025, total investments are estimated to range from $310.0 million to $340.0 million, with total debt at $1.463 billion and net debt ranging from $809.0 million to $839.0 million Estimated Total Investments and Net Debt as of June 30, 2025 | Metric | Low Estimate ($ thousands) | High Estimate ($ thousands) | | :---------------------------------------- | :------------------------- | :-------------------------- | | Cash, cash equivalents, and restricted cash | 268,000 | 268,000 | | Securities and other investments owned, at fair value | 231,000 | 251,000 | | Loans receivable, at fair value | 51,000 | 60,000 | | Total investments | 310,000 | 340,000 | | Total debt | 1,463,000 | 1,463,000 | | Net debt | 839,000 | 809,000 | Preliminary Financial Results - Full Year 2024 (Unaudited) Summary of Key Financial Results For the full year 2024, B. Riley Financial reported a significant net loss of $772.3 million, primarily due to substantial write-downs of equity investments and loan receivables, and impairment of goodwill. Operating Adjusted EBITDA decreased by 54.0%, while total debt decreased and net debt increased Preliminary Full Year 2024 Key Financials vs. 2023 | Metric | FY 2024 ($ thousands) | FY 2023 ($ thousands) | Change (YoY) | | :-------------------------------- | :-------------------- | :-------------------- | :----------- | | Net loss available to common shareholders | (772,334) | (107,967) | Increased loss | | Diluted loss per common share | (25.46) | (3.69) | Increased loss | | Operating Revenues | 1,242,402 | 1,453,114 | -14.5% | | Total Revenues | 838,597 | 1,465,777 | -42.8% | | Operating Adjusted EBITDA | 126,399 | 274,576 | -54.0% | | Total Adjusted EBITDA | (542,797) | 123,870 | Shift to loss | - The net loss of $772.3 million was primarily due to write-downs of $510.0 million related to equity investment in Freedom VCM Holdings LLC and loan receivable from Vintage Capital Management, and impairment of goodwill and other intangible assets of $105.4 million[11] - Total debt decreased to $1.77 billion at year-end 2024 from $2.36 billion at year-end 2023, while net debt increased to $1.06 billion from $0.76 billion[12] - Cash, cash equivalents, and restricted cash increased 13.7% to $255.4 million, but total investments decreased 67.3% to $432.6 million at year-end 2024[12] Preliminary Condensed Consolidated Balance Sheets As of December 31, 2024, total assets significantly decreased by 70.7% to $1.78 billion, and total liabilities decreased by 60.8% to $2.24 billion, resulting in a shift from equity to a total equity deficit of $(456.0) million. Key changes include a 65.1% decrease in securities and other investments owned and an 83.1% decrease in loans receivable Preliminary Condensed Consolidated Balance Sheets (Selected Items) as of December 31 | Asset/Liability | 2024 ($ thousands) | 2023 ($ thousands) | Change (YoY) | | :---------------------------------------- | :----------------- | :----------------- | :----------- | | Total assets | 1,783,263 | 6,080,604 | -70.7% | | Total liabilities | 2,239,279 | 5,721,038 | -60.8% | | Total equity (deficit) | (456,016) | 359,566 | Shift to deficit | | Cash and cash equivalents | 154,877 | 222,690 | -30.4% | | Restricted cash | 100,475 | 1,875 | +5258.7% | | Securities and other investments owned, at fair value | 282,325 | 809,049 | -65.1% | | Loans receivable, at fair value | 90,103 | 532,419 | -83.1% | | Goodwill | 423,136 | 466,638 | -9.4% | | Other intangible assets, net | 146,885 | 198,245 | -25.9% | | Senior notes payable, net | 1,530,561 | 1,668,021 | -8.3% | Preliminary Consolidated Statement of Operations For the twelve months ended December 31, 2024, total revenues decreased by 42.8% to $838.6 million, leading to an operating loss of $(475.7) million compared to an operating income in 2023. The company reported a net loss of $(774.9) million, significantly higher than the previous year, with diluted loss per common share at $(25.46) Preliminary Consolidated Statement of Operations (Selected Items) for Twelve Months Ended December 31 | Metric | 2024 ($ thousands) | 2023 ($ thousands) | Change (YoY) | | :---------------------------------------- | :----------------- | :----------------- | :----------- | | Total revenues | 838,597 | 1,465,777 | -42.8% | | Operating expenses | 1,314,335 | 1,369,726 | -4.0% | | Operating (loss) income | (475,738) | 96,051 | Shift to loss | | Loss from continuing operations | (900,854) | (160,161) | Increased loss | | Income from discontinued operations, net of income taxes | 125,915 | 54,530 | +131.0% | | Net loss | (774,939) | (105,631) | Increased loss | | Net income (loss) available to common shareholders | (772,334) | (107,967) | Increased loss | | Basic and diluted income (loss) per common share | (25.46) | (3.69) | Increased loss | Preliminary Adjusted EBITDA and Operating Adjusted EBITDA Reconciliations For the full year 2024, Adjusted EBITDA shifted to a loss of $(542.8) million from a positive $123.9 million in 2023. Operating Adjusted EBITDA decreased by 54.0% to $126.4 million Preliminary Adjusted EBITDA and Operating Adjusted EBITDA for Twelve Months Ended December 31 | Metric | 2024 ($ thousands) | 2023 ($ thousands) | Change (YoY) | | :------------------------ | :----------------- | :----------------- | :----------- | | Adjusted EBITDA | (542,797) | 123,870 | Shift to loss | | Operating Adjusted EBITDA | 126,399 | 274,576 | -54.0% | Preliminary Operating Revenues Reconciliation Operating revenues for the full year 2024 were $1.24 billion, a 14.5% decrease from $1.45 billion in 2023, reflecting adjustments for trading loss and fair value changes on loans Preliminary Operating Revenues for Twelve Months Ended December 31 | Metric | 2024 ($ thousands) | 2023 ($ thousands) | Change (YoY) | | :--------------- | :----------------- | :----------------- | :----------- | | Total revenues | 838,597 | 1,465,777 | -42.8% | | Operating revenues | 1,242,402 | 1,453,114 | -14.5% | Preliminary Total Investments and Net Debt As of December 31, 2024, total investments decreased by 67.3% to $432.6 million, while total debt decreased by 24.7% to $1.77 billion. Net debt, however, increased by 39.5% to $1.06 billion Preliminary Total Investments and Net Debt as of December 31 | Metric | 2024 ($ thousands) | 2023 ($ thousands) | Change (YoY) | | :---------------------------------------- | :----------------- | :----------------- | :----------- | | Total investments | 432,616 | 1,323,969 | -67.3% | | Total debt | 1,774,340 | 2,356,364 | -24.7% | | Net debt | 1,055,659 | 756,496 | +39.5% | Preliminary Financial Results - Fourth Quarter 2024 (Unaudited) Summary of Key Financial Results For the fourth quarter of 2024, B. Riley Financial reported a net income available to common shareholders of $0.9 million, a significant improvement from a net loss of $91.6 million in Q4 2023. However, operating adjusted EBITDA from continuing operations decreased by 63.6% to $21.5 million Preliminary Fourth Quarter 2024 Key Financials vs. 2023 | Metric | Q4 2024 ($ thousands) | Q4 2023 ($ thousands) | Change (YoY) | | :-------------------------------- | :-------------------- | :-------------------- | :----------- | | Net income (loss) available to common shareholders | 877 | (91,638) | Shift to income | | Basic income (loss) per common share | 0.03 | (3.03) | Shift to income | | Diluted income (loss) per common share | 0.03 | (3.03) | Shift to income | | Operating Adjusted EBITDA from continuing operations | 21,489 | 59,091 | -63.6% | Additional Updates & Financing Oaktree Capital Management Financing B. Riley Financial amended its senior secured credit agreement with Oaktree Capital Management in February 2025, enhancing flexibility. This includes a new $100 million investment basket for transactions, an increased $30 million investment basket for parent company investments, and the ability to deploy up to $25 million in cash for unsecured note repurchases - The Company amended its senior secured credit agreement with funds managed by Oaktree Capital Management in February 2025 to provide incremental flexibility[13][16] - The amendment includes a new investment basket that enables an incremental $100 million to facilitate transactions using the Company's balance sheet[16] - A $30 million investment basket for parent company investments was upsized from $20 million, and the company gained the ability to deploy up to $25 million of cash to reduce other indebtedness through potential repurchases of its unsecured notes[16] Disclaimers & Non-GAAP Measures Note Regarding Use of Non-GAAP Financial Measures B. Riley Financial utilizes non-GAAP financial measures such as Adjusted EBITDA, Operating Adjusted EBITDA, and Net Debt to provide investors and management with additional insights into the company's capital resources, operating performance, revenues, and cash flow. These measures are presented as supplementary information and should not be considered a substitute for GAAP financial measures - B. Riley Financial uses non-GAAP financial measures (e.g., Adjusted EBITDA, Operating Adjusted EBITDA, Investment Adjusted EBITDA, Operating Revenues, Investment Gains (Losses), Total Investments, and Net Debt) to provide a basis for measuring the Company's available capital resources, operating performance, revenues, and cash flow[24] - Management uses these non-GAAP measures in evaluating operating performance, compensation, capital resources, and cash flow, but they should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP[24] Forward-Looking Statements This press release contains forward-looking statements based on management's current expectations and assumptions, which are subject to various known and unknown risks and uncertainties. These factors could materially and negatively affect the company's business, operating results, financial condition, and stock price, and readers are cautioned against undue reliance on them - Statements in this press release that are not historical facts are forward-looking statements, based on management's current expectations and assumptions, and are subject to risks and uncertainties[25] - If such risks or uncertainties materialize or assumptions prove incorrect, the company's business, operating results, financial condition, and stock price could be materially negatively affected[25] - Readers should not place undue reliance on forward-looking statements, which speak only as of their date, and the Company assumes no duty to update them except as required by law[25] Footnotes The footnotes provide detailed definitions for key financial terms used throughout the report, particularly for non-GAAP measures such as Operating Revenues, Investment Gains (Losses), Adjusted EBITDA, Operating Adjusted EBITDA, Investment Adjusted EBITDA, Total Investments, and Net Debt, clarifying their components and calculation methodologies - Operating Revenues is defined as the sum of service and fees, interest income (loans and securities lending), fixed income spread, and sales of goods[17] - Adjusted EBITDA includes earnings from continuing operations before interest, taxes, depreciation, amortization, restructuring charge, share-based payments, gain or loss on extinguishment of loans, gain on bargain purchase, impairment of goodwill and tradenames, and transaction related and other costs[19] - Net Debt is defined as the sum of term loans, senior notes payable, revolving credit facility, and notes payable, net of cash and cash equivalents, restricted cash, due from clearing brokers, and Total Investments[22]