B. Riley Financial Reports First Quarter 2022 Results

Rhea-AI Summary

B. Riley Financial (NASDAQ: RILY) reported a net loss of $12.1 million or ($0.43) diluted EPS for Q1 2022, a significant decline from a net income of $252.9 million a year prior. Total revenues dropped 66% to $205.6 million, with operating revenues decreasing by 18% to $274 million. The company declared a quarterly dividend of $1.00 per common share, payable on May 20. Despite challenges in the underwriting business, the firm anticipates growth from M&A activities and diversification into Telecom acquisitions, enhancing its revenue mix and cash flow.

Positive

• Declared quarterly dividend of $1.00 per common share.
• Diversifying revenue through acquisitions of Lingo Management and Bullseye Telecom.
• Continued to gain underwriting market share despite declines.

Negative

• Net loss of $12.1 million compared to a profit of $252.9 million in Q1 2021.
• Total revenues decreased by 66% from $600.2 million the previous year.
• Investment loss of $68.4 million impacting overall performance.

Continued Diversification of Revenue Mix
Declares regular quarterly dividend of $1.00 per common share

LOS ANGELES, April 28, 2022 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ: RILY), a diversified financial services company, today announced results for the three-month period ended March 31, 2022.

First Quarter 2022 Financial Highlights

• Net loss of $12.1 million, ($0.43) diluted EPS
• Total revenues of $205.6 million
• Operating revenues ⁽²⁾ of $274.0 million
• Total adjusted EBITDA ⁽¹⁾ of $40.7 million
• Operating adjusted EBITDA ⁽³⁾ of $84.2 million

Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial said, "Our first quarter operating results reflect resilient performance from our diversified platform, offset by a challenging environment for our underwriting business and investment portfolio.  Integration of recent acquisitions remain on track, as does the build out of our fixed income team.  While our platform has demonstrated its ability to deliver outstanding results in more accommodating operating environments, current conditions remind us why we remain committed to a highly variable cost structure and a portfolio approach to a complementary but diversified operating model.  We ended the quarter with $213.6 million in cash and equivalents, leaving us well-armed to capitalize on opportunities presented by recent market dislocations within our proprietary ecosystem."

"Within the Capital Markets segment, investment banking underwriting saw declines from the prior quarter due to market conditions.  However, we continued to gain underwriting market share, and saw activity from ATM offerings, sales and trading, and securities lending businesses remain stable from the prior quarter.  In subsequent quarters, we expect to see a more material benefit from M&A assignments as FocalPoint's robust pipeline is amplified by organic momentum.  Our capital management business continues to show strength on the heels of the addition of 272 Capital last year. And finally, our direct lending activity continues to deliver strong performance while addressing an underserved need in the market."

Tom Kelleher, Co-Chief Executive Officer of B. Riley Financial, added: "We continue to diversify our revenue mix by expanding our Communications business within Principal Investments via our pending acquisitions of Lingo Management and Bullseye Telecom which we anticipate will be completed this summer.  These acquisitions should further enhance our uncorrelated, free cash flows – a core tenet of our platform.  In addition, we are actively managing our equity exposure, and ensuring our recurring businesses continue to provide sufficient cash flow to cover our interest and dividend payments. We have an established track record of delivering market-leading returns and fully expect the competitive advantages of our diversified platform will deliver long-term sustainable growth and continued strong returns to our shareholders." 

Declaration of Common Dividend
B. Riley has declared a regular quarterly cash dividend of $1.00 per common share which is payable on or about May 20 to common stockholders of record as of May 11.

Financial Summary

			Three Months Ended
			March 31,
	(Dollars in thousands, except for share data)			2022				2021
	Net (loss) income available to common shareholders		$	(12,064)			$	252,907
	Basic (loss) income per common share		$	(0.43)			$	9.38
	Diluted (loss) income per common share		$	(0.43)			$	8.81

For the first quarter, net loss available to common shareholders was $12.1 million, or ($0.43) diluted earnings per share (EPS).

			Three Months Ended
			March 31,
	(Dollars in thousands)			2022				2021
	Operating Revenues (2)		$	273,979			$	333,217
	Investment (Loss) Gains (4)			(68,390)				266,942
	Total Revenues		$	205,589			$	600,159
	Operating Adjusted EBITDA (3)		$	84,187			$	122,717
	Investment Adjusted EBITDA (5)			(43,525)				262,764
	Total Adjusted EBITDA (1)		$	40,662			$	385,481

For the three months ended March 31, 2022:

• Total revenues decreased 66.0% to $205.6 million from $600.2 million for the prior year period.
• Total adjusted EBITDA ⁽¹⁾ of $40.7 million compared to $385.5 million for the prior year period.
• Operating revenues ⁽²⁾ decreased 18% to $274.0 million from $333.2 million for the prior year period.
• Operating adjusted EBITDA ⁽³⁾ of $84.2 million compared to $122.7 million for the prior year period.
• Quarterly investment loss ⁽⁴⁾ was $68.4 million which reflect certain strategic investments held by the Company.

As of March 31, 2022, cash and investments ⁽⁶⁾ totaled approximately $2.5 billion including cash and cash equivalents of $213.6 million. Total cash and investments, ⁽⁶⁾ net of debt, was approximately $406 million.

Segment Financial Summary and Highlights

		Operating Revenues (2)						Investment Gains (Loss) (4)						Total Segment Revenue
		Three Months Ended March 31,						Three Months Ended March 31,						Three Months Ended March 31,
	(Dollars in thousands)	2022			2021			2022			2021			2022			2021
	Capital Markets		$      130,510			$       207,899			$      (68,912)			$       264,503			$        61,598			$       472,402
	Wealth Management		76,957			65,542			522			2,356			77,479			67,898
	Auction and Liquidation		3,355			13,450			-			-			3,355			13,450
	Financial Consulting		25,936			21,409			-			-			25,936			21,409
	Principal Investments		32,664			20,529			-			-			32,664			20,529
	Brands		4,557			4,388			-			83			4,557			4,471
		Segment Operating Income (Loss) (7)						Investment Income (Loss) (5)						Total Segment Income (Loss)
		Three Months Ended March 31,						Three Months Ended March 31,						Three Months Ended March 31,
	(Dollars in thousands)	2022			2021			2022			2021			2022			2021
	Capital Markets		$        57,869			$       105,983			$      (44,047)			$       260,325			$        13,822			$       366,308
	Wealth Management		(10,618)			1,671			522			2,356			(10,096)			4,027
	Auction and Liquidation		(800)			907			-			-			(800)			907
	Financial Consulting		4,912			3,322			-			-			4,912			3,322
	Principal Investments		8,844			7,531			-			-			8,844			7,531
	Brands		3,218			2,998			-			83			3,218			3,081

For the three months ended March 31, 2022:
Capital Markets segment revenues decreased 87% year-over-year to $61.6 million for the first quarter. Excluding investment loss⁽⁴⁾ of $68.9 million, segment operating revenues ⁽²⁾ decreased 37% to $130.5 million, and segment operating income ⁽⁷⁾ decreased 45% to $57.9 million for the quarter. Performance for the first quarter was impacted by a slowdown in investment banking activity driven by challenging market conditions.

Wealth Management segment revenues increased to $77.5 million from $67.9 million in prior year period, while segment loss was $10.1 million reflecting reduced market activity combined with the impact of a settlement charge related to litigation prior to B. Riley's acquisition of National Holdings in 2021. Combined wealth management assets under management were over $30 billion as of March 31, 2022.

Auction and Liquidation segment revenues totaled $3.4 million. Results for this segment vary from quarter-to-quarter and year-to-year due to the episodic impact of large retail liquidation engagements.

Financial Consulting segment revenues increased to $25.9 million from $21.4 million in prior year period. Segment income increased to $4.9 million from $3.3 million in the prior year period.

Principal Investments segment companies, magicJack, United Online, and Marconi Wireless, generated segment revenues of $32.7 million up from $20.5 million in the prior year quarter. Segment income increased to $8.8 million up from $7.5 million. Results in this segment were primarily due to the addition of Marconi Wireless results in the quarter.

Brands generated quarterly segment revenues of $4.6 million related to the licensing of brand trademarks. These results do not include $5.8 million of dividend income that we earned in Q1 from our investment in Hurley and Justice which are recognized in our Capital Markets operating results.

Supplemental Financial Data
Additional metrics related to operating results and investments can be found in the First Quarter 2022 Financial Supplement on B. Riley's investor relations website.

Conference Call Details
Management will host an investor call to discuss its first quarter results today, Thursday, April 28, 2022 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). Investors may access the live broadcast and archived recording via the Company's investor relations website at ir.brileyfin.com.

Date and Time:	Thursday, April 28, 2022 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Dial In:	1-855-327-6837 (toll-free) or 1-412-317-6026 (international)
Audio Webcast:	https://ir.brileyfin.com/events-and-presentations

 

Replay (expires Thursday, May 5, 2022)
Dial In:	1-844-512-2921; 10018742 (pin)
Replay Link:	https://ir.brileyfin.com/events-and-presentations

 

About B. Riley Financial
B. Riley Financial provides collaborative solutions tailored to fit the capital raising and business advisory needs of its clients and partners. B. Riley operates through several subsidiaries that offer a diverse range of complementary end-to-end capabilities spanning investment banking and 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. 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.)
(1)	Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share-based payments, gain on extinguishment of loans, 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 hereto.
(2)	Operating revenue is defined as the sum of revenues from services and fees, interest income - loans and securities lending, and sale of goods.
(3)	Operating adjusted EBITDA is defined as adjusted EBITDA excluding trading income (losses) and fair value adjustments on loans and other investment related expenses.
(4)	Investment gains (loss) is defined as trading income and fair value adjustments on loans.
(5)	Investment adjusted EBITDA and investment income (loss) are defined as trading income (losses) and fair value adjustments on loans, less other investment related expenses.
(6)	Total cash and investments is defined as the sum of cash and cash equivalents, 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.
(7)	Segment operating income (loss) is defined as segment income (loss) excluding trading income (losses) and fair value adjustments on loans and other investment related expenses.

Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including operating revenues, adjusted EBITDA, operating adjusted EBITDA, and investment 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 operating revenues, trading income (losses) and fair value adjustments on loans, (ii) excluding in the case of adjusted EBITDA, net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, restructuring costs, gain on extinguishment of loans, impairment of trade names, stock-based compensation and transaction and other expenses, (iii) 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, and other investment related expenses, (iv) including in the case of investment adjusted EBITDA, trading income (losses) and fair value adjustments on loans, net of other investment related expenses, and (v) including in the case of total cash and investments, net of debt, total cash, net securities and investments, and other minus total debt, 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, 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, 2021 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (as applicable). Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022. 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.

Contacts
Investors	Media
Mike Frank	Jo Anne McCusker / Scott Cianciulli
ir@brileyfin.com	press@brileyfin.com
(212) 409-2424	(212) 739-6753

 

B. RILEY FINANCIAL, INC.
Consolidated Balance Sheets
(Dollars in thousands, except par value)
							March 31,			December 31,
							2022			2021
								(Unaudited)
Assets
Assets:
	Cash and cash equivalents						$	213,584		$	278,933
	Restricted cash							928			927
	Due from clearing brokers							40,350			29,657
	Securities and other investments owned, at fair value							1,317,101			1,532,095
	Securities borrowed							1,629,773			2,090,966
	Accounts receivable, net							44,722			49,673
	Due from related parties							1,480			2,074
	Loans receivable, at fair value (includes $154,862 and $167,744 from related parties as of March 31, 2022 and December 31, 2021, respectively)							882,391			873,186
	Prepaid expenses and other assets							470,525			463,502
	Operating lease right-of-use assets							60,677			56,969
	Property and equipment, net							12,980			12,870
	Goodwill							362,466			250,568
	Other intangible assets, net							211,915			207,651
	Deferred tax assets, net							2,867			2,848
	Total assets						$	5,251,759		$	5,851,919
Liabilities and Equity
Liabilities:
	Accounts payable						$	8,634		$	6,326
	Accrued expenses and other liabilities							298,905			343,750
	Deferred revenue							75,509			69,507
	Deferred tax liabilities, net							51,174			93,055
	Due to clearing brokers							—			69,398
	Securities sold not yet purchased							7,498			28,623
	Securities loaned							1,619,132			2,088,685
	Operating lease liabilities							72,339			69,072
	Notes payable							22,891			357
	Revolving credit facility							80,000			80,000
	Term loans, net							342,851			346,385
	Senior notes payable, net							1,627,649			1,606,560
	Total liabilities							4,206,582			4,801,718
Commitments and contingencies
Redeemable noncontrolling interests in equity of subsidiaries								345,000			345,000
B. Riley Financial, Inc. equity:
	Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,535 and 4,512 issued and							—			—
	outstanding as of March 31, 2022 and December 31, 2021, respectively; liquidation preference
	of $113,380 and $112,790 as of March 31, 2022 and December 31, 2021, respectively
	Common stock, $0.0001 par value; 100,000,000 shares authorized; 27,928,234 and 27,591,028 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.							3			3
	issued and outstanding as of March 31, 2022 and December 31, 2020, respectively
	Additional paid-in capital							450,164			413,486
	Retained earnings							205,765			248,862
	Accumulated other comprehensive loss							(1,568)			(1,080)
	Total B. Riley Financial, Inc. stockholders' equity							654,364			661,271
Noncontrolling interests								45,813			43,930
	Total equity							700,177			705,201
	Total liabilities and equity						$	5,251,759		$	5,851,919

 

B. RILEY FINANCIAL, INC.
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share data)
							Three Months Ended
							March 31,
							2022			2021
Revenues:
	Services and fees						$	210,675		$	289,469
	Trading (losses) income and fair value adjustments on loans							(68,390)			266,942
	Interest income - Loans and securities lending							61,426			36,920
	Sale of goods							1,878			6,828
		Total revenues						205,589			600,159
Operating expenses:
	Direct cost of services							11,651			11,322
	Cost of goods sold							2,251			5,326
	Selling, general and administrative expenses							175,199			191,344
	Interest expense - Securities lending and loan participations sold							11,766			19,189
		Total operating expenses						200,867			227,181
			Operating income					4,722			372,978
Other income (expense):
	Interest income							67			49
	Change in fair value of financial instruments and other							5,981			—
	Income from equity investments							6,775			875
	Interest expense							(30,436)			(19,786)
		(Loss) Income before income taxes						(12,891)			354,116
Benefit from (provision for) income taxes								3,695			(97,518)
		Net (loss) income						(9,196)			256,598
Net income attributable to noncontrolling interests								866			1,942
		Net (loss) income attributable to B. Riley Financial, Inc.						(10,062)			254,656
Preferred stock dividends								2,002			1,749
		Net (loss) income available to common shareholders					$	(12,064)		$	252,907
Basic (loss) income per common share							$	(0.43)		$	9.38
Diluted (loss) income per common share							$	(0.43)		$	8.81
Weighted average basic common shares outstanding								27,855,033			26,972,275
Weighted average diluted common shares outstanding								27,855,033			28,710,368

 

B. RILEY FINANCIAL, INC.
Segment Financial Information
(Unaudited)
(Dollars in thousands)
						Three Months Ended
						March 31,
						2022			2021
Capital Markets segment:
Revenues - Services and fees						$	69,084		$	170,979
Trading (losses) income and fair value adjustments on loans							(68,912)			264,503
Interest income - Loans and securities lending							61,426			36,920
Total revenues							61,598			472,402
Selling, general and administrative expenses							(34,117)			(86,140)
Interest expense - Securities lending and loan participations sold							(11,766)			(19,189)
Depreciation and amortization							(1,893)			(765)
Segment income							13,822			366,308
Wealth Management segment:
	Revenues - Services and fees						76,957			65,542
	Trading income and fair value adjustments on loans						522			2,356
	Total revenues						77,479			67,898
	Selling, general and administrative expenses						(85,742)			(61,472)
	Depreciation and amortization						(1,833)			(2,399)
		Segment (loss) income					(10,096)			4,027
Auction and Liquidation segment:
	Revenues - Services and fees						3,355			7,358
	Revenues - Sale of goods						—			6,092
	Total revenues						3,355			13,450
	Direct cost of services						(2,335)			(6,580)
	Cost of goods sold						—			(4,474)
	Selling, general and administrative expenses						(1,820)			(1,489)
		Segment (loss) income					(800)			907
Financial Consulting segment:
	Revenues - Services and fees						25,936			21,409
	Selling, general and administrative expenses						(20,943)			(17,989)
	Depreciation and amortization						(81)			(98)
		Segment income					4,912			3,322
Principal Investments - Communications segment:
	Revenues - Services and fees						30,786			19,793
	Revenues - Sale of goods						1,878			736
	Total revenues						32,664			20,529
	Direct cost of services						(9,316)			(4,742)
	Cost of goods sold						(2,251)			(852)
	Selling, general and administrative expenses						(9,028)			(4,870)
	Depreciation and amortization						(3,225)			(2,534)
		Segment income					8,844			7,531
Brands segment:
	Revenues - Services and fees						4,557			4,388
	Trading income and fair value adjustments on loans						—			83
	Total revenues						4,557			4,471
	Selling, general and administrative expenses						(756)			(676)
	Depreciation and amortization						(583)			(714)
		Segment income					3,218			3,081
Consolidated operating income from reportable segments							19,900			385,176
Corporate and other expenses							(15,178)			(12,198)
Interest income							67			49
Change in fair value of financial instruments and other							5,981			—
Income on equity investments							6,775			875
Interest expense							(30,436)			(19,786)
	(Loss) income before income taxes						(12,891)			354,116
Benefit from (provision for) income taxes							3,695			(97,518)
	Net (loss) income						(9,196)			256,598
Net income attributable to noncontrolling interests							866			1,942
	Net (loss) income attributable to B. Riley Financial, Inc.						(10,062)			254,656
Preferred stock dividends							2,002			1,749
	Net (loss) income available to common shareholders					$	(12,064)		$	252,907

 

B. RILEY FINANCIAL, INC.
Adjusted EBITDA and Operating Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
							Three Months Ended
							March 31,
							2022			2021
Net (loss) income attributable to B. Riley Financial, Inc.							$	(10,062)		$	254,656
Adjustments:
	(Benefit from) provision for income taxes							(3,695)			97,518
	Interest expense							30,436			19,786
	Interest income							(67)			(49)
	Share based payments							17,013			5,526
	Depreciation and amortization							7,848			6,759
	Gain on extinguishment of loans							(1,102)			—
	Transactions related costs and other							291			1,285
		Total EBITDA adjustments						50,724			130,825
			Adjusted EBITDA				$	40,662		$	385,481
Operating EBITDA Adjustments:
	Trading losses (income) and fair value adjustments on loans							68,390			(266,942)
	Other investment related expenses							(24,865)			4,178
		Total Operating EBITDA Adjustments						43,525			(262,764)
Operating Adjusted EBITDA							$	84,187		$	122,717

 

B. RILEY FINANCIAL, INC.
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)
							Three Months Ended
							March 31,
							2022			2021
Net (loss) income attributable to B. Riley Financial, Inc.							$	(10,062)		$	254,656
Adjustments:
	Share based payments							17,013			5,526
	Amortization of intangible assets							6,816			5,886
	Gain on extinguishment of loans							(1,102)			—
	Transactions related costs and other							291			1,285
	Income tax effect of adjusting entries							(6,182)			(3,516)
Adjusted net income attributable to B. Riley Financial, Inc.							$	6,774		$	263,837
Adjusted income per common share:
	Adjusted basic income per share						$	0.24		$	9.78
	Adjusted diluted income per share						$	0.24		$	9.19
Shares used to calculate adjusted basic net income per share								27,855,033			26,972,275
Shares used to calculate adjusted diluted net income per share								27,855,033			28,710,368

 

 

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SOURCE B. Riley Financial

FAQ

What were B. Riley Financial's Q1 2022 earnings results?

B. Riley Financial reported a net loss of $12.1 million or ($0.43) diluted EPS for Q1 2022, with total revenues down 66% to $205.6 million.

When is the dividend payout for RILY?

The quarterly dividend of $1.00 per common share is payable on or about May 20, 2022.

What factors contributed to the revenue decline for B. Riley Financial?

The decline was mainly due to a challenging environment for underwriting and significant investment losses of $68.4 million.

What is the outlook for B. Riley Financial after Q1 2022?

The company expects benefits from M&A assignments and continues to diversify its revenue mix, particularly in Telecom.