B. Riley Financial Releases Preliminary Second Quarter 2024 Financial Results
B. Riley Financial (NASDAQ: RILY) released preliminary Q2 2024 financial results, reporting an expected net loss of $435-$475 million ($14-$15 per diluted share). The loss is primarily due to a non-cash markdown of $330-$370 million related to its investment in Freedom VCM (FRG's parent) and Vintage Capital loan receivable. Additional charges include a $28 million impairment for Targus goodwill and a $25 million valuation allowance for deferred income taxes.
The company expects operating adjusted EBITDA of $50-$55 million. As of June 30, 2024, B. Riley had $237 million in cash and cash equivalents, $1.1 billion in total cash and investments, and $2.16 billion in total outstanding debt. The company will suspend its common dividend to prioritize deleveraging and is reviewing strategic alternatives for Great American Group.
B. Riley Financial (NASDAQ: RILY) ha pubblicato i risultati finanziari preliminari del secondo trimestre del 2024, riportando una perdita netta prevista di 435-475 milioni di dollari (14-15 dollari per azione diluita). La perdita è principalmente causata da un deprezzamento non monetario di 330-370 milioni di dollari legato al suo investimento in Freedom VCM (la società madre di FRG) e ai crediti di prestito di Vintage Capital. Ulteriori oneri includono un impairment di 28 milioni di dollari per il goodwill di Targus e un contributo alla valutazione di 25 milioni di dollari per le imposte sul reddito differite.
L'azienda prevede un EBITDA operativo rettificato di 50-55 milioni di dollari. A partire dal 30 giugno 2024, B. Riley ha 237 milioni di dollari in contante e equivalenti, 1,1 miliardi di dollari in contante totale e investimenti e 2,16 miliardi di dollari in debito totale non rimborsato. L'azienda sospenderà il suo dividendo comune per dare priorità alla riduzione del debito e sta esaminando alternative strategiche per il Great American Group.
B. Riley Financial (NASDAQ: RILY) publicó los resultados financieros preliminares del segundo trimestre de 2024, informando una pérdida neta esperada de 435-475 millones de dólares (14-15 dólares por acción diluida). La pérdida se debe principalmente a un ajuste no monetario de 330-370 millones de dólares relacionado con su inversión en Freedom VCM (la empresa matriz de FRG) y los créditos de préstamos de Vintage Capital. Cargos adicionales incluyen un impairment de 28 millones de dólares para el goodwill de Targus y una provisión de valoración de 25 millones de dólares para impuestos sobre la renta diferidos.
La empresa espera un EBITDA operativo ajustado de 50-55 millones de dólares. A partir del 30 de junio de 2024, B. Riley tenía 237 millones de dólares en efectivo y equivalentes, 1.1 mil millones de dólares en efectivo total e inversiones y 2.16 mil millones de dólares en deuda total pendiente. La compañía suspenderá su dividendo común para priorizar la reducción de deuda y está revisando alternativas estratégicas para el Great American Group.
B. Riley Financial (NASDAQ: RILY)는 2024년 2분기 예비 재무 결과를 발표하며 4억 3500만~4억 7500만 달러 (주당 희석 주가 14~15달러)의 순손실을 예상한다고 보고했습니다. 이 손실은 주로 3억 3000만~3억 7000만 달러의 비현금 감손과 관련이 있으며, Freedom VCM( FRG의 모회사)과 Vintage Capital 대출채권과 관련이 있습니다. 추가로 2800만 달러의 Targus 영업권 손상과 2500만 달러의 이연소득세 평가충당금이 포함됩니다.
회사는 조정된 운영 EBITDA가 5000만~5500만 달러2억 3700만 달러의 현금 및 현금성 자산, 11억 달러의 총 현금 및 투자, 21억 6000만 달러의 총 미지급 부채를 보유하고 있었습니다. 회사는 부채 감소를 우선시하기 위해 일반 배당금을 일시 중지하고 Great American Group에 대한 전략적 대안을 검토하고 있습니다.
B. Riley Financial (NASDAQ: RILY) a publié des résultats financiers préliminaires pour le deuxième trimestre 2024, rapportant une perte nette attendue de 435-475 millions de dollars (14-15 dollars par action diluée). La perte est principalement due à une dépréciation non monétaire de 330-370 millions de dollars liée à son investissement dans Freedom VCM (la société mère de FRG) et aux créances de prêt de Vintage Capital. Les charges supplémentaires comprennent une dépréciation de goodwill de 28 millions de dollars pour Targus et un provisionnement de 25 millions de dollars pour les impôts sur le revenu différés.
L'entreprise prévoit un EBITDA opérationnel ajusté de 50-55 millions de dollars. Au 30 juin 2024, B. Riley avait 237 millions de dollars en liquidités et équivalents, 1,1 milliard de dollars en liquidités totales et investissements et 2,16 milliards de dollars en dettes totales en souffrance. L'entreprise suspendra son dividende ordinaire afin de donner la priorité à la réduction de la dette et examine des alternatives stratégiques pour le Great American Group.
B. Riley Financial (NASDAQ: RILY) veröffentlichte vorläufige Finanzzahlen für das zweite Quartal 2024 und berichtete über einen erwarteten Nettoverlust von 435-475 Millionen Dollar (14-15 Dollar pro verwässerter Aktie). Der Verlust ist hauptsächlich auf eine nicht-barzahlungsmäßige Wertberichtigung von 330-370 Millionen Dollar zurückzuführen, die mit seiner Investition in Freedom VCM (der Muttergesellschaft von FRG) und dem Forderungsbetrag von Vintage Capital in Zusammenhang steht. Zu den zusätzlichen Belastungen gehören eine Wertminderung von 28 Millionen Dollar für den Goodwill von Targus sowie eine Bewertungsrückstellung von 25 Millionen Dollar für latente Einkommensteuern.
Das Unternehmen erwartet ein bereinigtes EBITDA von 50-55 Millionen Dollar. Zum 30. Juni 2024 verfügte B. Riley über 237 Millionen Dollar in Bargeld und Barmitteln, 1,1 Milliarden Dollar an Gesamtbarmitteln und Investitionen sowie 2,16 Milliarden Dollar an insgesamt ausstehenden Schulden. Das Unternehmen wird die Auszahlung seiner regulären Dividende aussetzen, um die Deleveraging zu priorisieren und prüft strategische Alternativen für die Great American Group.
- Operating adjusted EBITDA expected to be $50-$55 million for Q2 2024
- Cash and cash equivalents of $237 million as of June 30, 2024
- Total cash and investments of $1.1 billion as of June 30, 2024
- Expected net loss of $435-$475 million for Q2 2024
- Non-cash markdown of $330-$370 million related to FRG investment and Vintage Capital loan receivable
- $28 million impairment charge primarily related to Targus goodwill
- $25 million charge for valuation allowance on deferred income taxes
- Suspension of common dividend
- Total outstanding debt of $2.16 billion as of June 30, 2024
- Delay in filing Q2 2024 10-Q report due to valuation finalization issues
Insights
This is a significant negative development for B. Riley Financial. The company is reporting a substantial expected net loss of $435-475 million for Q2 2024, primarily due to a non-cash markdown of $330-370 million related to its investment in Franchise Group (FRG). This markdown, coupled with other charges, has led to a severe financial setback.
Key points to consider:
- Suspension of common dividend to prioritize deleveraging
- Operating adjusted EBITDA expected to be
$50-55 million - Cash and cash equivalents of approximately
$237 million - Total outstanding debt of about
$2.16 billion
The company's focus on deleveraging and potential divestiture of Great American Group suggests a strategic shift towards strengthening its balance sheet. However, the significant write-downs and challenges in its principal investments raise concerns about B. Riley's risk management and investment strategy.
The impact of a weaker consumer spending environment on Franchise Group's businesses is a important factor to watch. This trend could have broader implications for the retail and consumer sectors. The $28 million impairment charge for Targus further underscores the challenges in consumer-facing businesses.
The allegations against FRG's former CEO, though unrelated to B. Riley, have created additional hurdles for the investment. This situation highlights the importance of governance and reputation in corporate valuations. Investors should be aware that such non-financial factors can significantly impact investment performance, especially in complex, multi-layered investment structures like B. Riley's involvement with FRG.
The company's pivot towards its core financial services and focus on small-cap and middle-market sectors could provide some stability, but the recovery path remains uncertain given the scale of the write-downs.
Provides Additional Detail on FRG Investment and Other Developments
Investor Call Scheduled for Monday, August 12 at 8:30 am ET
Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented: "Our second quarter results were negatively impacted by non-cash losses, the overwhelming majority of which relate to performance of our investment in Franchise Group, Inc. ("FRG") and our Vintage Capital loan receivable, which is primarily collateralized by equity interests in FRG. The substantial write-down during the quarter was driven by a confluence of recent events, including the impact of a meaningfully weaker consumer spending environment on FRG's businesses and its investments. The reports concerning Brian Kahn, FRG's former CEO, and his alleged misconduct at Prophecy have continued to create additional challenges for this investment, despite the fact that these allegations are unrelated to FRG or B. Riley. Ultimately, we believe these developments have materially impacted the execution of FRG's business strategy, including its ability to divest or otherwise monetize certain assets."
"We have taken and are continuing to take actions to ensure we maintain a strong, flexible balance sheet and will be suspending our common dividend as we prioritize deleveraging. Our review of strategic alternatives for Great American Group is advancing and we look forward to providing additional updates when appropriate. We will continue to work towards maximizing value from our existing principal positions and positioning the firm to capitalize on opportunities presented to our core operating businesses."
Riley concluded, "The operating strength of this platform has recently been masked by the performance of our principal investments. As we look ahead, we will be refocusing on our core financial services businesses and supporting our valued clients across the small-cap and middle-market sectors as we have for the past 27 years. We also recognize the benefits that our other diversified assets deliver in the form of uncorrelated free cash flow. I have the highest confidence in the resilience of our platform, and in the talented professionals across our firm who have relentlessly built this business in the interest of our clients, teammates and our shareholders."
Summary of preliminary estimates for the three-months ending June 30, 2024:
- Net loss for the quarter ended June 30, 2024 is expected to be in the range of
$435 $475 million $14 $15 - The Company expects to report a non-cash markdown of approximately
$330 $370 million - The Company expects to record an impairment charge of
$28 million - The Company expects to record a charge of approximately
$25 million - Operating adjusted EBITDA (1)(2) for the quarter ended June 30, 2024 is expected to be in the range of
$50 $55 million - Cash and cash equivalents as of June 30, 2024 is approximately
$237 million - Total cash and investments(3) as of June 30, 2024 is approximately
$1.1 billion - Total outstanding debt as of June 30, 2024 is approximately
$2.16 billion
This update is not a comprehensive statement of the Company's quarterly financial results and is subject to change. The Company has provided ranges for the preliminary estimates of the unaudited financial data primarily because the Company's financial closing procedures for the quarter ended June 30, 2024 are not yet complete.
The Company anticipates filing a Form 12b-25 with the SEC to provide notice of the late filing of its Quarterly Report on Form 10-Q for the three months ended June 30, 2024 due to delays experienced in finalizing the valuations of certain of the Company's loans and investments for the quarter ended June 30, 2024. The Company is working diligently to file the Quarterly Report as promptly as practical.
Conference Call Details
B. Riley Financial will host a conference call today Monday, August 12, 2024 at 8:30 AM ET (5:30 AM PT) to discuss these preliminary estimates for the second quarter of 2024 and to provide an update to investors. Investors may access the live audio webcast and archived recording at https://ir.brileyfin.com/events-and-presentations. A web recording will be made available for replay until August 26, 2024.
About B. Riley Financial
B. Riley Financial is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. B. Riley leverages cross-platform expertise to provide clients with full service, collaborative solutions at every stage of the business life cycle. Through its affiliated subsidiaries, B. Riley provides end-to-end financial services across investment banking, institutional brokerage, private wealth and investment management, financial consulting, corporate restructuring, operations management, risk and compliance, due diligence, forensic accounting, litigation support, appraisal and valuation, auction, and liquidation services. B. Riley opportunistically invests to benefit its shareholders, and certain affiliates originate and underwrite senior secured loans for asset-rich companies. B. Riley refers to B. Riley Financial, Inc. and/or one or more of its subsidiaries or affiliates. For more information, please visit www.brileyfin.com.
Footnotes See "Note Regarding Use of Non-GAAP Financial Measures" for further discussion of these non-GAAP terms. For a reconciliation of Adjusted EBITDA, and Operating Adjusted EBITDA to the comparable GAAP financial measures, please see the Appendix hereto.
(1) Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring charge, share-based payments, gain/loss on extinguishment of loans, gain on bargain purchase, impairment of goodwill and tradenames, and transaction related and other costs.
(2) Operating Adjusted EBITDA is defined as Adjusted EBITDA excluding (i) Trading Income (Loss) and Fair Value Adjustments on Loans, (ii) Realized and Unrealized Gains (Losses) on Investments, and (iii) other investment-related expenses. During the fourth quarter of 2023, the Company recast its operating metrics to include revenues from fixed income trading. Operating Adjusted EBITDA has been adjusted to include fixed income trading revenue for the periods presented.
(3) Total cash and investments is defined as the sum of cash and cash equivalents, net of noncontrolling interest, restricted cash, due from clearing brokers net of due to clearing brokers, securities and other investments owned, at fair value net of (i) securities sold not yet purchased and (ii) noncontrolling interest related to investments, advances against customer contracts, loans receivable, at fair value net of loan participations sold, and other investments reported in prepaid and other assets.
Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including adjusted EBITDA, and operating 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, (i) excluding in the case of adjusted EBITDA, net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, restructuring charge, gain on extinguishment of loans, gain on bargain purchase, impairment of goodwill and tradenames, stock-based compensation and transaction and other expenses, (ii) excluding in the case of operating adjusted EBITDA, the aforementioned adjustments for adjusted EBITDA as well as trading income (losses) and fair value adjustments on loans net of fixed income trading revenue, realized and unrealized gains (losses) on investments, and other investment related expenses, (iii) including in the case of trading income (losses) and fair value adjustments on loans, realized and unrealized gains (losses) on investments, net of fixed income trading revenue and other investment-related expenses, and (iv) including in the case of total cash and investments, cash and cash equivalents, net of noncontrolling interest, restricted cash, due from clearing brokers net of due to clearing brokers, securities and other investments owned, at fair value net of (a) securities sold not yet purchased and (b) noncontrolling interest related to investments, advances against customer contracts, loans receivable, at fair value net of loan participations sold, and other investments reported in prepaid and other assets, 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, management compensation, 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.
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, maintaining a strong, flexible balance sheet, the strategic alternative review process for Great American Group and any expected related announcements, and working to maximize value from existing principal positions and positioning the firm to capitalize on opportunities presented to our core operating businesses. 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 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 2023 Annual Report on Form 10-K and in B. Riley Financial's Quarterly Reports on Form 10-Q for the period ended March 31, 2024 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (as applicable). 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 undertakes no duty to update this information.
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES | |||||||||||
Reconciliation of Net Income (Loss) Guidance to Adjusted EBITDA | |||||||||||
and Operating Adjusted EBITDA Guidance | |||||||||||
(Unaudited) | |||||||||||
(Dollars in thousands) | |||||||||||
Three Months Ended | |||||||||||
Low | High | ||||||||||
Net loss attributable to B. Riley Financial, Inc. | $ | (435,000) | $ | (475,000) | |||||||
Adjustments: | |||||||||||
Provision for income taxes | 25,000 | 25,000 | |||||||||
Interest expense | 43,000 | 43,000 | |||||||||
Interest income | (800) | (800) | |||||||||
Share based payments | 6,200 | 6,200 | |||||||||
Depreciation and amortization | 11,800 | 11,800 | |||||||||
Gain on extinguishment of loans | (100) | (100) | |||||||||
Impairment of goodwill and tradenames | 27,700 | 27,700 | |||||||||
Transactions related costs and other | 7,000 | 7,000 | |||||||||
Total EBITDA adjustments | 119,800 | 119,800 | |||||||||
Adjusted EBITDA | $ | (315,200) | $ | (355,200) | |||||||
Operating EBITDA Adjustments: | |||||||||||
Trading loss and fair value adjustments on loans | 205,000 | 228,000 | |||||||||
Realized and unrealized losses on investments | 155,000 | 177,000 | |||||||||
Fixed Income Spread | 6,000 | 6,000 | |||||||||
Other investment related expenses | (800) | (800) | |||||||||
Total Operating EBITDA Adjustments | 365,200 | 410,200 | |||||||||
Operating Adjusted EBITDA | $ | 50,000 | $ | 55,000 | |||||||
Contacts | |
Investors | Media |
Mike Frank | Jo Anne McCusker |
(212) 409-2424 | (646) 885-5425 |
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SOURCE B. Riley Financial
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