Binah Capital Group, Inc.(BCG) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the first half of 2025 Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Binah Capital Group, Inc. as of June 30, 2025, and for the three and six-month periods then ended Condensed Consolidated Statements of Financial Condition As of June 30, 2025, total assets increased slightly to $67.8 million from $66.7 million at year-end 2024, driven by higher receivables Condensed Consolidated Statements of Financial Condition (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $67,791 | $66,677 | | Cash, cash equivalents and restricted cash | $8,170 | $8,486 | | Goodwill | $39,839 | $39,839 | | Total Liabilities | $51,404 | $50,499 | | Notes payable, net | $18,620 | $19,561 | | Total Stockholders' Equity and Mezzanine Equity | $16,387 | $16,178 | Condensed Consolidated Statements of Operations For the six months ended June 30, 2025, the company reported net income of $0.38 million, a significant improvement from a net loss of $2.32 million in the same period of 2024 Financial Performance Summary (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $41,497 | $40,648 | $90,431 | $82,095 | | Commissions | $33,998 | $33,663 | $75,137 | $68,057 | | Advisory fees | $6,627 | $6,320 | $13,542 | $12,004 | | Total Expenses | $42,058 | $41,171 | $89,537 | $84,062 | | Net Income (Loss) | $(654) | $(736) | $378 | $(2,319) | | Net Income (Loss) per share | $(0.04) | $(0.04) | $0.02 | $(0.18) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $1.1 million, a reversal from $2.1 million used in the prior year period, mainly due to improved net income Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Provided By (Used In) Operating Activities | $1,117 | $(2,113) | | Net Cash Used In Investing Activities | $(8) | $(18) | | Net Cash (Used In) Provided By Financing Activities | $(1,425) | $1,535 | | Net Change in Cash, Cash Equivalents and Restricted Cash | $(316) | $(596) | | Cash, Cash Equivalents and Restricted Cash - End of Period | $8,170 | $7,025 | Notes to Unaudited Condensed Consolidated Financial Statements The notes provide critical context to the financial statements, detailing accounting policies, revenue streams, debt, and legal contingencies - On March 15, 2024, the company consummated a reverse recapitalization transaction with Kingswood Acquisition Corp (KWAC), resulting in the current public company structure[30][31] - For accounting purposes, this was treated as BMS acquiring KWAC[30][31] Revenue from Contracts with Customers by Product (Six Months Ended June 30, in thousands) | Product | 2025 | 2024 | | :--- | :--- | :--- | | Variable annuities and other insurance commissions | $50,653 | $50,070 | | Mutual fund commissions | $11,535 | $9,908 | | Securities commissions | $6,017 | $5,588 | | Alternative investments | $6,932 | $2,491 | | Advisory fees | $13,542 | $12,004 | | Total | $88,679 | $80,061 | - The company entered into a $20.3 million term loan facility with Byline Bank on December 23, 2024[88] - As of June 30, 2025, the outstanding balance was $18.6 million, net of unamortized costs[88] - As of June 30, 2025, the company has accrued $0.7 million for litigation contingencies, net of $1.0 million of expected insurance proceeds[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the second quarter and first half of 2025, highlighting revenue growth, expense trends, and liquidity Financial Highlights and Asset Trends For the six months ended June 30, 2025, the company achieved net income of $0.4 million on $90.4 million in revenue, with total assets growing to $27.8 billion Key Financial Highlights (in millions) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Total Revenue | $90.4 | $82.1 | | Net Income (Loss) | $0.4 | $(2.3) | Asset Trends (in billions) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Total Advisory and Brokerage Assets | $27.8 | $25.1 | | Advisory Assets | $2.7 | $2.3 | | Brokerage Assets | $25.1 | $22.8 | | Total Net New Assets (Six Months) | $(1.1) | $(2.1) | Key Performance Metrics and Non-GAAP Financial Measures The company uses non-GAAP measures like Gross Profit and EBITDA to evaluate performance, showing significant growth for the six months ended June 30, 2025 Non-GAAP Financial Metrics (in millions) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $8.8 | $7.3 | $17.4 | $15.1 | | EBITDA | $1.0 | $0.6 | $3.2 | $0.5 | Results of Operations For the first six months of 2025, total revenues increased 10.2% to $90.4 million, driven by commissions and advisory fees, while expenses grew slower - For the six months ended June 30, 2025, sales-based commission revenue increased by 11.6% to $35.3 million, largely due to higher sales of alternative investment products[165][166] - Trailing-based commission revenue for the six-month period grew 9.4% to $39.9 million, benefiting from positive market volatility and increased trail-based assets[165][166] - Employee compensation and benefits increased by $2.2 million (31.6%) for the six-month period, mainly due to additional personnel costs and non-cash compensation awards associated with being a public company[179] - Professional fees decreased by $3.7 million (74.7%) for the six-month period, as the prior year included significant non-recurring transaction costs related to the Business Combination[181] Liquidity and Capital Resources The company's primary liquidity sources are dividends and fees from subsidiaries, supplemented by a credit facility, with positive cash flow from operations - The company has a term loan with Byline Bank with an outstanding balance of $18.6 million (net) as of June 30, 2025, maturing in December 2029[189] - In H1 2025, the company entered into a $10 million notional interest rate swap to hedge a portion of its variable-rate debt, fixing the rate at 3.98% plus a 4.00% margin[192] Contractual Obligations as of June 30, 2025 (in thousands) | Obligation | Total | Less than 1 Year | 1-3 Years | 3-5 Years | | :--- | :--- | :--- | :--- | :--- | | Long-term debt obligations | $19,285 | $1,015 | $8,120 | $10,150 | | Promissory notes - affiliates | $5,313 | $0 | $5,313 | $0 | | Operating lease obligations | $4,405 | $777 | $2,228 | $1,400 | | Total | $29,003 | $1,792 | $15,661 | $11,550 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risk through asset-based fees and interest rate risk on floating-rate debt, partially offset by interest-sharing revenue - The company's fees are sensitive to market fluctuations as they are based on the market value of advisory and brokerage assets[225] - As of June 30, 2025, $8.6 million of the company's outstanding debt was subject to floating interest rates[226] - Management believes the impact of short-term rate changes is not material due to offsetting interest-sharing revenue[226] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - Based on an evaluation as of June 30, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[230] - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[231] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, other information, and exhibits Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings but is subject to various claims arising in the ordinary course of business - The company is not party to any pending material legal proceedings but is subject to various claims and actions arising in the ordinary course of business[233][234] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[235] Item 5. Other Information On August 7, 2025, the company amended employment agreements for CEO and CFO, changing equity compensation to restricted stock units - On August 7, 2025, the employment agreements for CEO Craig Gould and CFO David Shane were amended to issue restricted stock units instead of stock options for equity compensation[240][241] - The amendments also allow the 2025 annual bonus for the CEO and CFO to be paid in either cash or vested company shares, as determined by the Board or Compensation Committee[240][241] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including equity agreements and executive certifications