B. Riley Financial, Inc. (NASDAQ: RILYK) 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 Financial operates through several consolidated subsidiaries that provide investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services to a broad client base spanning public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals.

Financials

In the fiscal year ended December 31, 2023, B. Riley Financial reported annual revenue of $1,556,449,000 and a net loss of $78,314,000. B. Riley Financial generated annual operating cash flow of $24,502,000 and annual free cash flow of $16,791,000.

For the first quarter of 2024, B. Riley Financial reported total revenues of $343,032,000, a net loss of $47,954,000, and operating cash flow of $135,357,000. The decrease in revenues during the first quarter of 2024 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $81,436,000, interest income from loans and securities lending of $17,242,000, and sale of goods of $12,124,000, partially offset by an increase in revenues from services and fees of $21,744,000.

Business Overview

B. Riley Financial's diversified platform includes six reportable business segments: Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer Products. During the fourth quarter of 2023, B. Riley Financial reassessed its previously reported Consumer segment due to organizational changes and financial information provided to the Chief Operating Decision Maker. These changes resulted in the Targus operations being reported on a stand-alone basis in the Consumer Products segment and the operations related to brand licensing that were previously reported in the Consumer segment being reported in the All Other Category that is reported with Corporate and Other.

Capital Markets Segment

In the Capital Markets segment, revenues from services and fees increased $2,418,000 or 4.2% to $60,347,000 during the first quarter of 2024 compared to the same period in 2023. The increase was primarily due to increases of $11,000,000 in corporate finance, consulting, and investment banking fees, $500,000 in asset management fees, and $500,000 in other income, partially offset by decreases of $6,500,000 in dividends and $3,000,000 in commission fees.

Wealth Management Segment

The Wealth Management segment reported a $2,640,000 or 5.4% increase in revenues from services and fees to $51,182,000 during the first quarter of 2024 compared to the same period in 2023. The increase was primarily due to a $2,700,000 increase in wealth and asset management fees.

Auction and Liquidation Segment

Revenues from services and fees in the Auction and Liquidation segment decreased $1,884,000 or 34.6% to $3,560,000 during the first quarter of 2024 compared to the same period in 2023. The decrease was primarily due to a $2,900,000 decline in commission fees, partially offset by a $1,000,000 increase in service contract revenues.

Financial Consulting Segment

The Financial Consulting segment reported a $10,075,000 or 40.3% increase in revenues from services and fees to $35,085,000 during the first quarter of 2024 compared to the same period in 2023. The increase was primarily due to an $8,500,000 increase within the Advisory Services division, consisting of $2,900,000 from a full quarter of revenues from acquisitions in the prior year and $5,600,000 in advisory services. The remaining increase was due to a $1,600,000 increase in the Appraisal division.

Communications Segment

Revenues from services and fees in the Communications segment decreased $3,982,000 or 4.7% to $81,070,000 during the first quarter of 2024 compared to the same period in 2023. The decrease was primarily due to declines of $3,300,000 in subscription revenue and $700,000 in advertising, licensing, and other revenue.

All Other Category

Revenues from services and fees in the All Other category increased $12,477,000 or 91.9% to $26,059,000 during the first quarter of 2024 compared to the same period in 2023. These revenues include the licensing of brand trademarks, merchandise rental fees and sales from bebe stores, inc. ("bebe") in which B. Riley Financial acquired a controlling interest and consolidated during the fourth quarter of 2023, and the operations of a regional environmental services business and a landscaping business that were acquired in 2022 and sold in the third quarter of 2023.

Trading Income and Fair Value Adjustments

Trading income (loss) and fair value adjustments on loans decreased approximately $81,436,000 to a loss of $29,868,000 during the first quarter of 2024 compared to income of $51,568,000 during the same period in 2023. The loss of $29,868,000 was primarily due to realized and unrealized losses on B. Riley Financial's loans receivable, at fair value of $12,201,000, partially offset by realized and unrealized losses on investments made in B. Riley Financial's proprietary trading accounts of $17,667,000.

Interest Income

Interest income - loans and securities lending decreased $17,242,000 to $59,944,000 during the first quarter of 2024 from $77,186,000 during the same period in 2023. The decrease was due to a reduction in loan receivable balances from $772,100,000 as of March 31, 2023 to $452,496,000 as of March 31, 2024.

Sale of Goods

Revenues from the sale of goods decreased $12,124,000 to $55,653,000 during the first quarter of 2024 from $67,777,000 during the same period in 2023. The decrease was attributable to a $14,172,000 decline in the Consumer Products segment due to decreased computer and laptop sales worldwide, partially offset by increases of $2,004,000 in the Auction and Liquidation segment and $615,000 in the All Other category.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $3,079,000 to $209,548,000 during the first quarter of 2024 from $212,627,000 during the same period in 2023. The decrease was primarily due to declines of $12,972,000 in the Capital Markets segment, $5,300,000 in the Communications segment, $4,380,000 in the Consumer Products segment, and $772,000 in the Auction and Liquidation segment, partially offset by increases of $10,932,000 in Corporate and All Other, $7,718,000 in the Financial Consulting segment, and $1,695,000 in the Wealth Management segment.

Liquidity

B. Riley Financial's balance sheet remains strong, with $190,690,000 in unrestricted cash and cash equivalents, $949,868,000 in securities and other investments, and $452,496,000 in loans receivable, at fair value, as of March 31, 2024. Total debt as of March 31, 2024 was approximately $2,186,400,000.

Outlook

Looking ahead, B. Riley Financial remains focused on running its business in the best interest of its stakeholders by addressing the needs of its clients, partners, and employees. The market opportunity in the small- and mid-cap space remains attractive, and B. Riley Financial believes it is uniquely positioned to meet the needs of companies in this space. To that end, B. Riley Financial has declared a dividend of $0.50 per common share, payable on or about June 11, 2024 to shareholders of record as of May 27, 2024.

Conclusion

Overall, B. Riley Financial's diversified platform and focus on delivering tailored solutions position B. Riley Financial well to navigate the current market environment and capitalize on future opportunities. B. Riley Financial's strong balance sheet and cash flow generation provide the flexibility to invest in growth initiatives and return capital to shareholders.