LOS ANGELES, Aug. 07, 2017 (GLOBE NEWSWIRE) -- B. Riley Financial, Inc. (NASDAQ:RILY), a diversified provider of financial and business advisory services, reported results for the second quarter ended June 30, 2017.

Second Quarter 2017 Financial Highlights

  • Total revenues of $66.7 million; net income of $3.3 million or $0.15 per diluted share
  • Adjusted EBITDA of $17.6 million; adjusted net income of $8.8 million or $0.40 per diluted share
  • Completed acquisition of FBR & Co. on June 1, 2017
  • Declares special dividend of $0.05 per share in addition to regular dividend of $0.08 per share

Second Quarter 2017 Financial Results
Total revenues for the second quarter of 2017 were $66.7 million compared to $20.3 million in the same year-ago period. The significant increase was primarily due to higher revenues from the company’s Auction and Liquidation and Capital Markets segments as well as the addition of the Principal Investments - United Online segment, which acquired United Online Inc. on July 1, 2016.

  • Auction and Liquidation Segment: Revenue was $21.8 million compared to $5.4 million in the same year-ago period. The significant increase in revenue was primarily due to a $16.4 million increase in services and fees primarily related to retail liquidations. Segment income increased to $7.3 million from $1.7 million in the same year-ago period.      
     
  • Capital Markets Segment: Revenues were $23.9 million, a significant improvement from $7.2 million in the same year-ago period. The $16.7 million increase in revenue was primarily due to the addition of FBR & Co. in June 2017 as well as higher investment banking fees, trading income, and commissions earned. Segment loss totaled $4.8 million compared to a loss of $0.5 million in the same year-ago period primarily due to restructuring charges taken related to the FBR acquisition.          
     
  • Valuation and Appraisal Segment: Revenue was $8.0 million compared to $7.7 million in the same year-ago period. The revenue increase was primarily due to an increase in revenues related to appraisal engagements. Segment income totaled $2.3 million compared to $2.1 million in the same year-ago period.      
     
  • Principal Investments – United Online Segment: Revenues from services and fees, as well as the sale of products totaled $13.0 million primarily from services and fees for internet access and related subscription services. Segment income totaled $5.1 million.

Net income for the second quarter of 2017 totaled $3.3 million or $0.15 per diluted share, compared to a loss of $0.1 million or $(0.01) per diluted share in the same year-ago period.

Adjusted EBITDA (earnings before interest expense, interest income, provision for income taxes, depreciation and amortization, share-based payments, fair value adjustments, insurance settlement recovery, transactions-related costs, and restructuring costs) for the second quarter of 2017 totaled $17.6 million, compared to $1.8 million in 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, fair value adjustments, amortization of acquired intangible assets, restructuring costs, insurance settlement recovery and transaction-related costs, net of related tax impact thereof) for the second quarter of 2017 totaled $8.8 million or $0.40 per diluted share, compared to $0.8 million or $0.05 per diluted share in the same year-ago period (see note regarding "Use of Non-GAAP Financial Measures," below for further discussion of this non-GAAP term). 

On June 30, 2017, the company had $104.7 million of unrestricted cash and $74.7 million of net securities and other investments. Total B. Riley Financial, Inc. stockholders’ equity at June 30, 2017 was $239.0 million.

Declaration of Dividend
On August 7, 2017, the company's board of directors approved a regular quarterly dividend of $0.08 per share and a one-time special dividend of $0.05 per share, which will be paid on or about August 29, 2017 to stockholders of record as of August 21, 2017.

Management Commentary
“The second quarter was a continuation of the same strong growth, diversification and operational momentum we have achieved over the last several quarters,” said B. Riley Financial Chairman and CEO, Bryant Riley. “Our solid financial performance in the quarter was driven collectively by our diverse lines of business, demonstrating the attractiveness of our unique business model. We experienced another strong period especially in our liquidations segment, completing several large liquidation projects, including Gordmans and HHGregg. Additionally, we had another active quarter in our capital markets segment, driven mainly by several banking transactions and improving trading commissions. These successes were augmented by the continued meaningful cash flow contribution from United Online as well as our valuation business.

“In tandem with our continued organic growth and operational momentum, we are pleased to have completed the acquisitions of FBR and Wunderlich. FBR further strengthens our capital markets business through their market-leading equity offering practice and sector coverage and also expands our geographic distribution with operations throughout the East and West coasts. Wunderlich
bolsters our wealth management business by adding over 200 financial advisors and approximately $10 billion in assets under administration. Altogether, our combined organization of more than 800 professionals and strong balance sheet not only gives us a national footprint in equities and fixed income, but it also provides the necessary scale and resources to strategically expand our leading position in business services, financial advisory and investment banking. We have already made significant strides integrating the businesses and look forward to benefiting from the substantial financial and operational synergies in the quarters and years ahead.”

Conference Call
B. Riley Financial will host a conference call today (August 7, 2017) at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). The company’s Chairman and CEO, Bryant Riley, President Tom Kelleher, and CFO and COO, Phillip Ahn, will host the conference call, followed by a question and answer period.

Please call the conference telephone number 10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 949-574-3860.

Toll-Free Number: 877-425-9470
International Number: 201-389-0878

About B. Riley Financial
B. Riley Financial, Inc. is a publicly traded, diversified financial services company which takes a collaborative approach to 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 & Co., LLC, FBR Capital Markets & Co., Wunderlich Securities, Inc., Great American Group, LLC, B. Riley Capital Management, LLC (which includes B. Riley Asset Management, B. Riley Wealth Management, and Great American Capital Partners, LLC) and B. Riley Principal Investments, a group that makes proprietary investments in other businesses, such as the acquisition of United Online, Inc.

Forward-Looking Statements
This press release may contain forward-looking statements by B. Riley Financial, Inc. that are not based on historical fact, including, without limitation, statements containing the words "expects," "anticipates," "intends," "plans," “projects,” "believes," "seeks," "estimates," and similar expressions and statements. Such forward looking statements include, but are not limited to, express or implied statements regarding future financial performance and future dividends, the effects of our business model, the effects of our balance sheet on our ability to pursue business opportunities, the effects and anticipated benefits of our acquisitions of United Online, Inc., FBR & Co., and Wunderlich Securities, Inc. and related actions, expectations regarding future transactions and the financial impact, size and consistency of returns and timing thereof, 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. Such factors include risks associated with large engagements in our Auction and Liquidation segment; our ability to achieve expected cost savings or other benefits with respect to the acquisition of United Online, Inc., rights to manage certain hedge funds managed by Dialectic Capital Management, FBR & Co., and Wunderlich Securities, Inc., in each case within expected time frames or at all; our ability to consummate anticipated transactions and the expected financial impact thereof, in each case within the expected timeframes or at all; our ability to successfully integrate acquisitions; loss of key personnel; our ability to manage growth; the potential loss of financial institution clients; the timing of completion of significant engagements; 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, 2016 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017. 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 EBITDA and adjusted net income, may be considered non-GAAP financial measures. B. Riley Financial, Inc. 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 interest expense, interest income, provision for income taxes, depreciation and amortization, stock-based payments, fair value adjustments, insurance settlement recovery, transaction-related expenses, and restructuring costs 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 EBITDA Reconciliation" and “Adjusted Net Income Reconciliation.”

 
B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
      
         June 30,
 December 31,
         2017
  2016
         (Unaudited)   
Assets      
Assets          
 Cash and cash equivalents $104,670  $112,105 
 Restricted cash  5,632   3,294 
 Due from clearing brokers  6,297   — 
 Securities and other investments owned, at fair value  78,204   16,579 
 Securities borrowed  909,331   — 
 Accounts receivable, net  19,319   18,989 
 Due from related parties  6,765   3,009 
 Advances against customer contracts  40,991   427 
 Prepaid expenses and other assets  10,986   5,742 
 Property and equipment, net  13,450   5,785 
 Goodwill    67,335   48,903 
 Other intangible assets, net  45,033   41,166 
 Deferred income taxes  33,407   8,619 
 Total assets $1,341,420  $264,618 
Liabilities and Equity      
Liabilities         
 Accounts payable $3,184  $2,703 
 Accrued expenses and other liabilities  62,573   53,168 
 Deferred revenue  3,731   4,130 
 Due to related parties and partners  393   10,037 
 Securities sold not yet purchased  3,526   846 
 Securities loaned  911,991   — 
 Mandatorily redeemable noncontrolling interests  9,641   4,019 
 Acquisition consideration payable  —   10,381 
 Asset based credit facility  20,237   — 
 Senior notes payable  86,065   27,700 
 Contingent consideration  —   1,242 
 Total liabilities  1,101,341   114,226 
             
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; 24,377,806      
  and 19,140,342 issued and outstanding as of June 30, 2017 and December 31,     
  2016, respectively  2   2 
 Additional paid-in capital  220,628   141,170 
 Retained earnings  19,054   9,887 
 Accumulated other comprehensive loss  (666)  (1,712)
  Total B. Riley Financial, Inc. stockholders' equity  239,018   149,347 
Noncontrolling interests  1,061   1,045 
  Total equity  240,079   150,392 
   Total liabilities and equity $1,341,420  $264,618 
             


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except share data)
                   
        Three Months Ended
June 30,		 Six Months Ended
June 30,
        2017  2016  2017  2016 
                   
Revenues:             
 Services and fees $64,395  $20,261  $117,213  $40,205 
 Interest income - Securities lending  2,218   —   2,218   — 
 Sale of goods  63   —   142   2 
  Total revenues  66,676   20,261   119,573   40,207 
Operating expenses:            
 Direct cost of services  18,485   5,560   36,086   12,243 
 Cost of goods sold  130   —   189   2 
 Selling, general and administrative expenses  37,722   14,521   61,874   26,117 
 Restructuring charge  6,214   —   6,588   — 
 Interest expense - Securities lending  1,565   —   1,565   — 
  Total operating expenses  64,116   20,081   106,302   38,362 
   Operating income  2,560   180   13,271   1,845 
Other income (expense):            
 Interest income  150   3   282   6 
 Interest expense  (1,894)  (275)  (2,685)  (407)
  Income (loss) before income taxes  816   (92)  10,868   1,444 
Benefit (provision) for income taxes  2,547   65   6,396   (101)
  Net income (loss)  3,363   (27)  17,264   1,343 
Net income (loss) attributable to noncontrolling interests  83   74   (37)  1,196 
  Net income (loss) attributable to B. Riley Financial, Inc.  $3,280  $(101) $17,301  $147 
                   
Basic income (loss) per share  $0.15  $(0.01) $0.85  $0.01 
Diluted income (loss) per share  $0.15  $(0.01) $0.82  $0.01 
                   
Cash dividends per share $0.16  $—  $0.42  $— 
                   
Weighted average basic shares outstanding   21,216,829   17,935,254   20,311,231   17,212,716 
Weighted average diluted shares outstanding   22,119,055   17,935,254   20,984,757   17,547,073 
                   


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
              
         Six Months Ended
June 30,
         2017  2016 
Cash flows from operating activities:        
 Net income   $17,264  $1,343 
 Adjustments to reconcile net income to net cash (used in) provided by operating activities:        
  Depreciation and amortization    4,290   399 
  Provision (recoveries) for doubtful accounts    704   (3)
  Share-based compensation    3,940   997 
  Recovery of key man life insurance    (6,000)  — 
  Non-cash interest and other    166   54 
  Effect of foreign currency on operations    (855)  — 
  Deferred income taxes    (23,636)  271 
  Impairment of leaseholds, lease loss accrual and loss on disposal of fixed assets    1,371   — 
  Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests    7,268   960 
  Change in operating assets and liabilities:        
   Due from clearing brokers    13,408   — 
   Securities and other investments owned    (40,975)  899 
   Securities borrowed    (48,134)  — 
   Accounts receivable and advances against customer contracts    (37,153)  1,087 
   Prepaid expenses and other assets    14,988   (7,645)
   Accounts payable, accrued payroll and related expenses, accrued value        
    added tax payable and other accrued expenses    (22,748)  (5,998)
   Amounts due from related parties and partners    (13,333)  (1,935)
   Securities sold, not yet purchased    2,675   5,219 
   Deferred revenue    (425)  — 
   Securities loaned    44,365   — 
   Auction and liquidation proceeds payable    —   14,667 
    Net cash (used in) provided by operating activities    (82,820)  10,315 
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    (306)  (58)
 Proceeds from key man life insurance    6,000   — 
 Proceeds from sale of property and equipment    6   — 
 Proceeds from sale of intangible assets    613   — 
 Increase in restricted cash    (2,263)  (12,026)
    Net cash provided by (used in) investing activities    7,355   (12,084)
Cash flows from financing activities:        
 Repayment of revolving line of credit    —   (272)
 Proceeds from asset based credit facility    65,987   — 
 Repayment of asset based credit facility    (45,750)  — 
 Payment of contingent consideration    (1,250)  (1,250)
 Proceeds from issuance of senior notes    57,847   — 
 Proceeds from issuance of common stock    —   22,999 
 Offering costs from issuance of common stock    —   (240)
 Payment of employment taxes on vesting of restricted stock    (1,057)  — 
 Dividends paid    (8,380)  — 
 Distribution to noncontrolling interests    (1,646)  (1,441)
    Net cash provided by financing activities    65,751   19,796 
    (Decrease) increase in cash and cash equivalents    (9,714)  18,027 
    Effect of foreign currency on cash    2,279   84 
    Net (decrease) increase in cash and cash equivalents    (7,435)  18,111 
Cash and cash equivalents, beginning of  year    112,105   30,012 
Cash and cash equivalents, end of period   $104,670  $48,123 
              
Supplemental disclosures:        
 Interest paid   $2,890  $252 
 Taxes paid   $9,689  $409 
              


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
SEGMENT FINANCIAL INFORMATION
(Unaudited)
(Dollars in thousands)
                 
      Three Months Ended Six Months Ended
      June 30,   June 30,
      2017  2016  2017  2016 
Capital Markets reportable segment:           
 Revenues - Services and fees$21,676  $7,172  $39,399  $12,736 
 Interest income - Securities lending 2,218   —   2,218   — 
 Total revenues  23,894   7,172   41,617   12,736 
 Selling, general, and administrative expenses (23,067)  (7,669)  (34,036)  (13,843)
 Restructuring costs  (3,923)  —   (3,923)  — 
 Interest expense - Securities lending (1,565)  —   (1,565)  — 
 Depreciation and amortization (166)  (23)  (293)  (44)
 Segment (loss) income  (4,827)  (520)  1,800   (1,151)
Auction and Liquidation reportable segment:           
 Revenues - Services and fees 21,807   5,393   35,803   12,300 
 Revenues - Sale of goods  —   —   —   2 
 Total revenues  21,807   5,393   35,803   12,302 
 Direct cost of services  (11,763)  (2,087)  (22,097)  (5,505)
 Cost of goods sold  —   —   —   (2)
 Selling, general, and administrative expenses (2,749)  (1,577)  (4,599)  (2,802)
 Depreciation and amortization (5)  (37)  (10)  (78)
 Segment income  7,290   1,692   9,097   3,915 
Valuation and Appraisal reportable segment:           
 Revenues - Services and fees 7,960   7,696   15,756   15,169 
 Direct cost of services  (3,581)  (3,473)  (7,253)  (6,738)
 Selling, general, and administrative expenses (2,062)  (2,124)  (4,142)  (4,243)
 Depreciation and amortization (43)  (24)  (87)  (53)
 Segment income  2,274   2,075   4,274   4,135 
Principal Investments - United Online segment:           
 Revenues - Services and fees 12,952   —   26,255   — 
 Revenues - Sale of goods  63   —   142   — 
 Total revenues  13,015   —   26,397   — 
 Direct cost of services  (3,141)  —   (6,736)  — 
 Cost of goods sold  (130)  —   (189)  — 
 Selling, general, and administrative expenses (2,791)  —   (6,103)  — 
 Depreciation and amortization (1,770)  —   (3,610)  — 
 Restructuring costs  (109)  —   (483)  — 
 Segment income  5,074   —   9,276   — 
                 
Consolidated operating income from reportable segments 9,811   3,247   24,447   6,899 
Corporate and other expenses (including restructuring (7,251)  (3,067)  (11,176)  (5,054)
 costs of $2,182 for the three and six months ended           
 June 30, 2017)             
Interest income   150   3   282   6 
Interest expense   (1,894)  (275)  (2,685)  (407)
 Income (loss) before income taxes 816   (92)  10,868   1,444 
Benefit (provision) for income taxes 2,547   65   6,396   (101)
                 
 Net income (loss)  3,363   (27)  17,264   1,343 
Net income (loss) attributable to noncontrolling interests 83   74   (37)  1,196 
                 
 Net income (loss) attributable to B. Riley Financial, Inc.$3,280  $(101) $17,301  $147 
                 


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
ADJUSTED EBITDA RECONCILIATION
(Unaudited)
(Dollars in thousands)
              
   Three Months Ended  Six Months Ended  
   June 30,   June 30,  
  2017  2016  2017  2016  
Adjusted EBITDA reconciliation:             
Net income (loss), as reported $3,280  $(101) $17,301  $147  
              
Adjustments:             
Interest expense  1,894   275   2,685   407  
Interest income  (150)  (3)  (282)  (6) 
(Benefit) provision for income taxes  (2,547)  (65)  (6,396)  101  
Depreciation and amortization  2,248   196   4,290   399  
Share-based payments  1,608   560   2,515   997  
Fair value adjustment  6,250   —   6,250   —  
Insurance settlement recovery  (6,000)  —   (6,000)  —  
Transaction-related costs  4,789   905   5,675   922  
Restructuring costs  6,214   —   6,588   —  
              
Total EBITDA adjustments  14,306   1,868   15,325   2,820  
              
Adjusted EBITDA $17,586  $1,767  $32,626  $2,967  
              
              


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
ADJUSTED NET INCOME RECONCILIATION
(Unaudited)
(Dollars in thousands, except share data)
                    
        Three Months Ended
June 30,		  Six Months Ended
June 30,
         2017   2016    2017   2016 
                    
Net income (loss) attributable to B. Riley Financial, Inc. $3,280  $(101)  $17,301  $147 
                    
Adjustments:               
                    
 Share-based payments  1,608   560    2,515   997 
 Fair value adjustment  6,250   —    6,250   — 
 Amortization of acquired intangible assets  1,554   111    3,076   223 
 Restructuring costs  6,214   —    6,588   — 
 Insurance settlement recovery  (6,000)  —    (6,000)  — 
 Transactions-related costs  4,789   905    5,675   922 
 Income tax effect of adjusting entries  (8,857)  (641)   (10,503)  (868)
 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. $8,838  $834   $16,513  $1,421 
                    
Adjusted income per common share:             
 Adjusted basic income per share $0.42  $0.05   $0.81  $0.08 
 Adjusted diluted income per share $0.40  $0.05   $0.79  $0.08 
                    
Weighted average basic shares outstanding  21,216,829   17,935,254    20,311,231   17,212,716 
Weighted average diluted shares outstanding  22,119,055   17,935,254    20,984,757   17,547,073 
                    

 

Investor Contact: 
Scott Liolios or Matt Glover
Liolios Group, Inc.
949-574-3860
RILY@liolios.com

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