UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 2, 2018
B. RILEY FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 001-37503 | 27-0223495 | ||
|
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
|
21255 Burbank Boulevard, Suite 400 Woodland Hills, California |
91367 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (818) 884-3737
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Results of Operations and Financial Condition.
On August 2, 2018, B. Riley Financial, Inc. issued a press release reporting its financial results for the fiscal quarter ended June 30, 2018. A copy of the press release is attached hereto as Exhibit 99.1.
The information set forth in this Current Report, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report, including Exhibit 99.1 attached hereto, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing to this Current Report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
|
Exhibit No. |
Description | |
| 99.1 | Earnings Release dated August 2, 2018 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| August 2, 2018 | B. RILEY FINANCIAL, INC. | |||
| By: | /s/ Phillip J. Ahn | |||
| Name: | Phillip J. Ahn | |||
| Title: |
Chief Financial Officer and Chief Operating Officer |
|||
Exhibit 99.1
B. Riley Financial Reports Financial Results for the Second Quarter of 2018
Record Results Exceed Q2 Guidance for Net Income and Adjusted EBITDA
Declares Special Dividend of $0.22 Per Share in addition to Regular Quarterly Dividend of $0.08 Per Share
LOS ANGELES, August 02, 2018 — B. Riley Financial, Inc. (NASDAQ:RILY), a diversified provider of financial and business advisory services, reported results for its second quarter ended June 30, 2018.
Second Quarter 2018 Financial Highlights
| · | Total revenues of $125.5 million; net income of $17.0 million or $0.64 per diluted share |
| · | Adjusted EBITDA of $41.4 million; adjusted net income of $22.8 million or $0.86 per diluted share |
“We’re pleased to report record results for the second quarter which exceeded our guidance for net income and adjusted EBITDA. We saw strength in each of our businesses driven by meaningful fee engagements in both of our more episodic businesses, bolstered by steady recurring revenue from our appraisal, wealth management and asset management businesses, and cash flow generated by principal investments,” said Bryant Riley, Chairman and Co-Chief Executive Officer, B. Riley Financial. “This growth reflects the expanded opportunities our platform offers to create unique opportunities which involve multiple parts of our business. Recent highlights which demonstrate our ability to be effective in this strategy include the purchase of assets of Bon-Ton Stores, our support of the proposed acquisition of Rent-A-Center Inc., and our participation in the Toys ‘R’ Us liquidation. As we continue to focus on growth, we’re excited about the addition of GlassRatner and the expertise this team offers, as well as future contributions from our pending acquisition of magicJack to our principal investments segment.”
Second Quarter 2018 Financial Results
For the three months ended June 30, 2018, total revenues increased to $125.5 million from $66.7 million for the same year-ago period and $95.8 million for the first quarter of 2018. The increase in revenues for the second quarter of 2018 was primarily driven by higher revenues associated with significant fee-based engagements for the company’s Capital Markets and Auction and Liquidation segments.
| · | Capital Markets Segment: Revenues increased to $77.8 million for the second quarter of 2018 compared to $23.9 million for the same year-ago period and $60.3 million for the first quarter of 2018. Segment income increased to $12.0 million for the second quarter of 2018 compared to a loss of $4.8 million for the same year-ago period and a loss of $0.3 million for the first quarter of 2018. The sequential increase for this segment was primarily driven by an uptick in fee-based engagements for B. Riley FBR. The year-over-year increase was primarily driven by the acquisitions of FBR & Co. and Wunderlich Securities which were completed in June and July of 2017, respectively. |
| · | Auction and Liquidation Segment: Revenues for the second quarter of 2018 increased to $26.8 million from $21.8 million for the same year-ago period and $15.5 million for the first quarter of 2018. Segment income increased to $16.3 million for the second quarter of 2018 from $7.3 million for the same year-ago period and $8.1 million for the first quarter of 2018. Results for this segment were primarily driven by an increase in revenues related to large retail liquidation engagements conducted during the second quarter of 2018. |
| · | Valuation and Appraisal Segment: Revenues increased to $9.5 million for the second quarter of 2018 from $8.0 million for the same year-ago period and $8.5 million for the first quarter of 2018. Segment income increased to $2.9 million for the second quarter of 2018 from $2.3 million for the same year-ago period and $1.9 million for the first quarter of 2018. |
| · | Principal Investments – United Online Segment: Revenues totaled $11.4 million for the second quarter of 2018. Segment income totaled $4.7 million for the second quarter of 2018. Revenues from United Online are primarily driven by services and fees for internet access and related subscription services, and partially by the sale of goods. |
Net income for the second quarter of 2018 increased to $17.0 million or $0.64 per diluted share from $3.3 million or $0.15 per diluted share for the same year-ago period and $4.5 million or $0.17 per diluted share for the first quarter of 2018.
Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, restructuring costs, transaction costs, share-based compensation, fair value adjustments and insurance settlement recovery) increased to $41.4 million from $17.6 million for the same year-ago period. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)
Adjusted net income (excluding the impact of share-based payments, amortization of intangible assets, restructuring costs, transaction costs, fair value adjustments, insurance settlement recovery, tax impact of aforementioned adjustments, and certain tax items) increased to $22.8 million or $0.86 per diluted share for the second quarter of 2018. This compares to $8.8 million or $0.40 per diluted share for the same year-ago period. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)
As of June 30, 2018, the company had $191.3 million in cash and cash equivalents, $0.5 million in restricted cash, $35.2 million due from clearing brokers, $143.0 million in net securities and other investments owned (at fair value), $200.0 million in advances against customer contracts, and $491.1 million in total debt. Total B. Riley Financial stockholders’ equity was $263.4 million. Shares outstanding as of June 30, 2018 were approximately 26.1 million.
Declaration of Dividend
B. Riley Financial’s board of directors approved a regular quarterly dividend of $0.08 per share and a special dividend of $0.22 per share which will be paid on or about August 31, 2018 to stockholders of record as of August 16, 2018.
Update on magicJack Acquisition
The company’s previously announced acquisition of magicJack VocalTec Ltd. remains pending final regulatory approval. The company will communicate additional updates once closing conditions have been satisfied.
Conference Call
The company will host a conference call today, Thursday, August 2, 2018 at 4:30 p.m. ET (1:30 p.m. PT). Bryant Riley, Chairman and co-CEO; Tom Kelleher, co-CEO; and Phillip Ahn, CFO and COO, will host the conference call followed by a question and answer period.
B. Riley Financial, Inc. Second Quarter 2018 Earnings Call
| Toll-Free: | 1-855-327-6838 |
| International: | 1-604-235-2082 |
A replay of the call will be available after 7:30 p.m. ET on the same day through August 9, 2018.
Replay Dial-In Numbers
| Toll-Free: | 1-844-512-2921 |
| International: | 1-412-317-6671 |
| Replay pin: | 10005262 |
The conference call will be broadcast simultaneously and available for replay via the investor section of the company's website. For more information, visit ir.brileyfin.com.
About B. Riley Financial, Inc. (NASDAQ:RILY)
B. Riley Financial provides collaborative financial services and solutions tailored to fit the capital raising and financial advisory needs of public and private companies and high net worth individuals. The company operates through several wholly-owned subsidiaries, including B. Riley FBR, a full-service investment bank and institutional brokerage; Great American Group, a leading provider of asset disposition, appraisal, corporate advisory and valuation services; GlassRatner, a specialty financial advisory services and consulting firm; B. Riley Wealth Management, B. Riley Asset Management and B. Riley Alternatives, which offer investment management to institutional and high net worth investors; Great American Capital Partners, which originates and underwrites senior secured loans for asset-rich companies; and B. Riley Principal Investments, which invests in or acquires companies and assets with attractive return profiles.
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. In some cases, you can identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “will,” “would” or the negative of these terms or other comparable terminology. 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, the anticipated benefits of the acquisition of GlassRatner, the effects of our business model, the effects and anticipated benefits of our completed and pending acquisitions and related actions, expectations regarding future transactions and the financial impact, size and consistency of returns and timing thereof, expectations regarding market dynamics, as well as statements regarding the effect of investments in our business segments. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements. Risk factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to risks related to: volatility in our revenues and results of operations; changing conditions in the financial markets; our ability to generate sufficient revenues to achieve and maintain profitability; the short term nature of our engagements; the accuracy of our estimates and valuations of inventory or assets in “guarantee” based engagements; competition in the asset management business; potential losses related to our auction or liquidation engagements; our dependence on communications, information and other systems and third parties; potential losses related to purchase transactions in our auctions and liquidations business; the potential loss of financial institution clients; potential losses from or illiquidity of our proprietary investments; changing economic and market conditions; potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation; potential mark-downs in inventory in connection with purchase transactions; failure to successfully compete in any of our segments; loss of key personnel; our ability to borrow under our credit facilities as necessary; failure to comply with the terms of our credit agreements; our ability to meet future capital requirements; our ability to realize the benefits of our completed and proposed acquisitions, including our ability to achieve anticipated opportunities and operating cost savings, and accretion to reported earnings estimated to result from completed and proposed acquisitions in the time frame expected by management or at all; our ability to promptly and effectively integrate our business with that of GlassRatner; the effect of the GlassRatner acquisition on our and GlassRatner’s customers, employees and counterparties; the possibility that our proposed acquisition of magicJack VocalTec Ltd. (“magicJack” or “MJ”) does not close when expected or at all; our ability to promptly and effectively integrate our business with that of magicJack if such transaction closes; the reaction to the magicJack acquisition or our and magicJack’s customers, employees and counterparties; the diversion of management time on acquisition-related issues; and those risks described from time to time in B. Riley Financial, Inc.'s 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, 2017 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Additional information is also set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018. 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 adjusted net income 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 cash flow, excluding net interest expense, provisions for or benefit from income taxes, depreciation, amortization, transaction expenses, restructuring costs, stock-based compensation, fair value adjustments and insurance settlement recovery 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. The non-GAAP measures are described above and are reconciled to the corresponding GAAP measure in the unaudited condensed consolidated financial statements portion of this release under the headings “Adjusted Net Income Reconciliation” and "Adjusted EBITDA Reconciliation.”
# # #
|
Investor Contact Investor Relations ir@brileyfin.com (310) 966-1444 |
Media Contact Jo Anne McCusker jmccusker@brileyfin.com (646) 885-5425 |
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par value)
| June 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Assets | ||||||||
| Cash and cash equivalents | $ | 191,274 | $ | 132,823 | ||||
| Restricted cash | 467 | 19,711 | ||||||
| Due from clearing brokers | 35,242 | 31,479 | ||||||
| Securities and other investments owned, at fair value | 160,540 | 145,360 | ||||||
| Securities borrowed | 1,013,988 | 807,089 | ||||||
| Accounts receivable, net | 33,111 | 20,015 | ||||||
| Due from related parties | 8,042 | 5,689 | ||||||
| Advances against customer contracts | 200,036 | 5,208 | ||||||
| Prepaid expenses and other assets | 42,203 | 22,605 | ||||||
| Property and equipment, net | 11,195 | 11,977 | ||||||
| Goodwill | 99,246 | 98,771 | ||||||
| Other intangible assets, net | 52,603 | 56,948 | ||||||
| Deferred income taxes | 29,222 | 29,229 | ||||||
| Total assets | $ | 1,877,169 | $ | 1,386,904 | ||||
| Liabilities and Equity | ||||||||
| Liabilities | ||||||||
| Accounts payable | $ | 3,790 | $ | 2,650 | ||||
| Accrued expenses and other liabilities | 72,986 | 71,685 | ||||||
| Deferred revenue | 3,600 | 3,141 | ||||||
| Due to partners | 7,398 | 1,578 | ||||||
| Securities sold not yet purchased | 17,583 | 28,291 | ||||||
| Securities loaned | 1,012,240 | 803,371 | ||||||
| Mandatorily redeemable noncontrolling interests | 4,238 | 4,478 | ||||||
| Asset based credit facility | 105,004 | — | ||||||
| Notes payable | 52,286 | 2,243 | ||||||
| Senior notes payable | 333,768 | 203,621 | ||||||
| Total liabilities | 1,612,893 | 1,121,058 | ||||||
| Commitments and contingencies | ||||||||
| B. Riley Financial, Inc. stockholders' equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued | — | — | ||||||
| Common stock, $0.0001 par value; 40,000,000 shares authorized; 26,070,165 and 26,569,462 issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 2 | 2 | ||||||
| Additional paid-in capital | 244,631 | 259,980 | ||||||
| Retained earnings | 20,408 | 6,582 | ||||||
| Accumulated other comprehensive loss | (1,619 | ) | (534 | ) | ||||
| Total B. Riley Financial, Inc. stockholders' equity | 263,422 | 266,030 | ||||||
| Noncontrolling interests | 854 | (184 | ) | |||||
| Total equity | 264,276 | 265,846 | ||||||
| Total liabilities and equity | $ | 1,877,169 | $ | 1,386,904 | ||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues: | ||||||||||||||||
| Services and fees | $ | 118,882 | $ | 64,395 | $ | 207,331 | $ | 117,213 | ||||||||
| Interest income - Securities lending | 6,591 | 2,218 | 13,882 | 2,218 | ||||||||||||
| Sale of goods | 28 | 63 | 66 | 142 | ||||||||||||
| Total revenues | 125,501 | 66,676 | 221,279 | 119,573 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Direct cost of services | 13,925 | 18,485 | 25,577 | 36,086 | ||||||||||||
| Cost of goods sold | 49 | 130 | 90 | 189 | ||||||||||||
| Selling, general and administrative expenses | 76,723 | 37,722 | 144,821 | 61,874 | ||||||||||||
| Restructuring charge | 1,602 | 6,214 | 1,819 | 6,588 | ||||||||||||
| Interest expense - Securities lending | 4,724 | 1,565 | 9,892 | 1,565 | ||||||||||||
| Total operating expenses | 97,023 | 64,116 | 182,199 | 106,302 | ||||||||||||
| Operating income | 28,478 | 2,560 | 39,080 | 13,271 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 166 | 150 | 294 | 282 | ||||||||||||
| Income from equity investment | 4,893 | — | 4,221 | — | ||||||||||||
| Interest expense | (10,359 | ) | (1,894 | ) | (14,586 | ) | (2,685 | ) | ||||||||
| Income before income taxes | 23,178 | 816 | 29,009 | 10,868 | ||||||||||||
| (Provision for) benefit from income taxes | (5,377 | ) | 2,547 | (6,366 | ) | 6,396 | ||||||||||
| Net income | 17,801 | 3,363 | 22,643 | 17,264 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 804 | 83 | 1,143 | (37 | ) | |||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 16,997 | $ | 3,280 | $ | 21,500 | $ | 17,301 | ||||||||
| Basic income per share | $ | 0.67 | $ | 0.15 | $ | 0.83 | $ | 0.85 | ||||||||
| Diluted income per share | $ | 0.64 | $ | 0.15 | $ | 0.80 | $ | 0.82 | ||||||||
| Cash dividends per share | $ | 0.12 | $ | 0.16 | $ | 0.28 | $ | 0.42 | ||||||||
| Weighted average basic shares outstanding | 25,424,178 | 21,216,829 | 25,799,077 | 20,311,231 | ||||||||||||
| Weighted average diluted shares outstanding | 26,397,513 | 22,119,055 | 26,785,169 | 20,984,757 | ||||||||||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2018 | 2017 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 22,643 | $ | 17,264 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 6,670 | 4,290 | ||||||
| Provision for doubtful accounts | 648 | 704 | ||||||
| Share-based compensation | 5,559 | 3,940 | ||||||
| Recovery of key man life insurance | — | (6,000 | ) | |||||
| Non-cash interest and other | 1,870 | 166 | ||||||
| Effect of foreign currency on operations | (582 | ) | (855 | ) | ||||
| Income from equity investment | (4,221 | ) | — | |||||
| Deferred income taxes | 7 | (23,636 | ) | |||||
| Impairment of leaseholds, lease loss accrual and loss on disposal of fixed assets | 1,403 | 1,371 | ||||||
| Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests | 543 | 7,268 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Due from clearing brokers | (3,763 | ) | 13,408 | |||||
| Securities and other investments owned | (15,180 | ) | (40,975 | ) | ||||
| Securities borrowed | (206,899 | ) | (48,134 | ) | ||||
| Accounts receivable and advances against customer contracts | (208,658 | ) | (37,153 | ) | ||||
| Prepaid expenses and other assets | (16,108 | ) | 14,988 | |||||
| Accounts payable, accrued payroll and related expenses, accrued value added tax payable and other accrued expenses | 5,320 | (22,748 | ) | |||||
| Amounts due to/from related parties and partners | 3,362 | (13,333 | ) | |||||
| Securities sold, not yet purchased | (10,708 | ) | 2,675 | |||||
| Deferred revenue | 459 | (425 | ) | |||||
| Securities loaned | 208,869 | 44,365 | ||||||
| Net cash used in operating activities | (208,766 | ) | (82,820 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash acquired from acquisition of FBR & Co. | — | 15,738 | ||||||
| Acquisition of other businesses | — | (2,052 | ) | |||||
| Acquisition consideration payable | — | (10,381 | ) | |||||
| Purchases of property and equipment and intangible assets | (1,836 | ) | (306 | ) | ||||
| Proceeds from key man life insurance | — | 6,000 | ||||||
| Proceeds from sale of property and equipment and intangible assets | 37 | 619 | ||||||
| Equity investments | (3,575 | ) | — | |||||
| Dividends from equity investment | 1,695 | — | ||||||
| Net cash (used in) provided by investing activities | (3,679 | ) | 9,618 | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from asset based credit facility | 300,000 | 65,987 | ||||||
| Repayment of asset based credit facility | (194,460 | ) | (45,750 | ) | ||||
| Payment of contingent consideration | — | (1,250 | ) | |||||
| Proceeds from notes payable | 51,020 | — | ||||||
| Repayment of notes payable | (357 | ) | — | |||||
| Proceeds from issuance of senior notes | 132,123 | 60,375 | ||||||
| Payment of debt issuance costs | (4,936 | ) | (2,528 | ) | ||||
| Payment of employment taxes on vesting of restricted stock | (3,570 | ) | (1,057 | ) | ||||
| Dividends paid | (9,549 | ) | (8,380 | ) | ||||
| Repurchase of common stock | (17,338 | ) | — | |||||
| Distribution to noncontrolling interests | (782 | ) | (1,646 | ) | ||||
| Net cash provided by financing activities | 252,151 | 65,751 | ||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 39,706 | (7,451 | ) | |||||
| Effect of foreign currency on cash, cash equivalents and restricted cash | (499 | ) | 2,354 | |||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 39,207 | (5,097 | ) | |||||
| Cash, cash equivalents and restricted cash, beginning of year | 152,534 | 115,399 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 191,741 | $ | 110,302 | ||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | 21,868 | $ | 2,890 | ||||
| Taxes paid | $ | 2,306 | $ | 9,689 | ||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Segment Financial Information
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Capital Markets reportable segment: | ||||||||||||||||
| Revenues - Services and fees | $ | 71,194 | $ | 21,676 | $ | 124,232 | $ | 39,399 | ||||||||
| Interest income - Securities lending | 6,591 | 2,218 | 13,882 | 2,218 | ||||||||||||
| Total revenues | 77,785 | 23,894 | 138,114 | 41,617 | ||||||||||||
| Selling, general, and administrative expenses | (57,713 | ) | (22,829 | ) | (111,352 | ) | (33,798 | ) | ||||||||
| Restructuring charge | (1,774 | ) | (3,923 | ) | (2,029 | ) | (3,923 | ) | ||||||||
| Interest expense - Securities lending | (4,724 | ) | (1,565 | ) | (9,892 | ) | (1,565 | ) | ||||||||
| Depreciation and amortization | (1,555 | ) | (404 | ) | (3,119 | ) | (531 | ) | ||||||||
| Segment income (loss) | 12,019 | (4,827 | ) | 11,722 | 1,800 | |||||||||||
| Auction and Liquidation reportable segment: | ||||||||||||||||
| Revenues - Services and fees | 26,836 | 21,807 | 42,353 | 35,803 | ||||||||||||
| Direct cost of services | (6,849 | ) | (11,763 | ) | (11,425 | ) | (22,097 | ) | ||||||||
| Cost of goods sold | (16 | ) | — | (17 | ) | — | ||||||||||
| Selling, general, and administrative expenses | (3,617 | ) | (2,749 | ) | (6,498 | ) | (4,599 | ) | ||||||||
| Depreciation and amortization | (8 | ) | (5 | ) | (16 | ) | (10 | ) | ||||||||
| Segment income | 16,346 | 7,290 | 24,397 | 9,097 | ||||||||||||
| Valuation and Appraisal reportable segment: | ||||||||||||||||
| Revenues - Services and fees | 9,459 | 7,960 | 17,979 | 15,756 | ||||||||||||
| Direct cost of services | (4,123 | ) | (3,581 | ) | (8,321 | ) | (7,253 | ) | ||||||||
| Selling, general, and administrative expenses | (2,414 | ) | (2,062 | ) | (4,759 | ) | (4,142 | ) | ||||||||
| Depreciation and amortization | (54 | ) | (43 | ) | (103 | ) | (87 | ) | ||||||||
| Segment income | 2,868 | 2,274 | 4,796 | 4,274 | ||||||||||||
| Principal Investments - United Online segment: | ||||||||||||||||
| Revenues - Services and fees | 11,393 | 12,952 | 22,767 | 26,255 | ||||||||||||
| Revenues - Sale of goods | 28 | 63 | 66 | 142 | ||||||||||||
| Total revenues | 11,421 | 13,015 | 22,833 | 26,397 | ||||||||||||
| Direct cost of services | (2,953 | ) | (3,141 | ) | (5,831 | ) | (6,736 | ) | ||||||||
| Cost of goods sold | (33 | ) | (130 | ) | (73 | ) | (189 | ) | ||||||||
| Selling, general, and administrative expenses | (2,015 | ) | (2,791 | ) | (3,973 | ) | (6,103 | ) | ||||||||
| Depreciation and amortization | (1,679 | ) | (1,770 | ) | (3,358 | ) | (3,610 | ) | ||||||||
| Restructuring charge | — | (109 | ) | — | (483 | ) | ||||||||||
| Segment income | 4,741 | 5,074 | 9,598 | 9,276 | ||||||||||||
| Consolidated operating income from reportable segments | 35,974 | 9,811 | 50,513 | 24,447 | ||||||||||||
| Corporate and other expenses (including restructuring recovery of $172 and $210 during the three and six months ended June 30, 2018, respectively, and restructuring charge of $2,182 during the three and six months ended June 30, 2017 | (7,496 | ) | (7,251 | ) | (11,433 | ) | (11,176 | ) | ||||||||
| Interest income | 166 | 150 | 294 | 282 | ||||||||||||
| Income on equity investments | 4,893 | — | 4,221 | — | ||||||||||||
| Interest expense | (10,359 | ) | (1,894 | ) | (14,586 | ) | (2,685 | ) | ||||||||
| Income before income taxes | 23,178 | 816 | 29,009 | 10,868 | ||||||||||||
| (Provision for) benefit from income taxes | (5,377 | ) | 2,547 | (6,366 | ) | 6,396 | ||||||||||
| Net income | 17,801 | 3,363 | 22,643 | 17,264 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 804 | 83 | 1,143 | (37 | ) | |||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 16,997 | $ | 3,280 | $ | 21,500 | $ | 17,301 | ||||||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 16,997 | $ | 3,280 | $ | 21,500 | $ | 17,301 | ||||||||
| Adjustments: | ||||||||||||||||
| Provision for (benefit from) income taxes | 5,377 | (2,547 | ) | 6,366 | (6,396 | ) | ||||||||||
| Interest expense | 10,359 | 1,894 | 14,586 | 2,685 | ||||||||||||
| Interest income | (166 | ) | (150 | ) | (294 | ) | (282 | ) | ||||||||
| Share based payments | 2,678 | 1,608 | 5,236 | 2,515 | ||||||||||||
| Depreciation and amortization | 3,333 | 2,248 | 6,670 | 4,290 | ||||||||||||
| Restructuring costs | 1,602 | 6,214 | 1,819 | 6,588 | ||||||||||||
| Transactions related costs | 1,191 | 4,789 | 1,545 | 5,675 | ||||||||||||
| Fair value adjustment | — | 6,250 | — | 6,250 | ||||||||||||
| Insurance settlement recovery | — | (6,000 | ) | — | (6,000 | ) | ||||||||||
| Total EBITDA adjustments | 24,374 | 14,306 | 35,928 | 15,325 | ||||||||||||
| Adjusted EBITDA | $ | 41,371 | $ | 17,586 | $ | 57,428 | $ | 32,626 | ||||||||
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 16,997 | $ | 3,280 | $ | 21,500 | $ | 17,301 | ||||||||
| Adjustments: | ||||||||||||||||
| Share based payments | 2,678 | 1,608 | 5,236 | 2,515 | ||||||||||||
| Amortization of intangible assets | 2,146 | 1,554 | 4,306 | 3,076 | ||||||||||||
| Restructuring costs | 1,602 | 6,214 | 1,819 | 6,588 | ||||||||||||
| Transactions related costs | 1,191 | 4,789 | 1,545 | 5,675 | ||||||||||||
| Fair value adjustment | — | 6,250 | — | 6,250 | ||||||||||||
| Insurance settlement recovery | — | (6,000 | ) | — | (6,000 | ) | ||||||||||
| Income tax effect of adjusting entries | (1,831 | ) | (8,857 | ) | (2,783 | ) | (10,503 | ) | ||||||||
| Tax benefit from tax election to treat acquisition of UOL as a taxable business combination | — | — | — | (8,389 | ) | |||||||||||
| Adjusted net income attributable to B. Riley Financial, Inc. | $ | 22,783 | $ | 8,838 | $ | 31,623 | $ | 16,513 | ||||||||
| Adjusted income per common share: | ||||||||||||||||
| Adjusted basic income per share | $ | 0.90 | $ | 0.42 | $ | 1.23 | $ | 0.81 | ||||||||
| Adjusted diluted income per share | $ | 0.86 | $ | 0.40 | $ | 1.18 | $ | 0.79 | ||||||||
| Shares used to calculate adjusted basic net income per share | 25,424,178 | 21,216,829 | 25,799,077 | 20,311,231 | ||||||||||||
| Shares used to calculate adjusted diluted net income per share | 26,397,513 | 22,119,055 | 26,785,169 | 20,984,757 | ||||||||||||