RILYL: A Diversified Financial Services Platform Delivering Tailored Solutions

Published on September 24, 2024 | Ticker: RILYL

B. Riley Financial, Inc. (NASDAQ: RILYL) is a diversified financial services platform that provides a wide range of tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. The company operates through several consolidated subsidiaries that offer investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services.

Financials

B. Riley Financial reported annual net income of -$78,314,000, annual revenue of $1,556,449,000, annual operating cash flow of $24,502,000, and annual free cash flow of $16,791,000 in its most recent fiscal year. In the first quarter of 2024, the company generated total revenues of $343,032,000 and a net loss attributable to common shareholders of $51,180,000.

Business Overview

The company's diversified platform has grown considerably over the past several years, both organically and through strategic acquisitions. B. Riley operates in six reportable business segments: Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer Products.

Capital Markets

In the Capital Markets segment, the company's securities business benefited from a steady deal-making environment, generating over $100 million in operating revenues and $18 million of operating EBITDA during the first quarter. However, this was offset by lower interest income due to a reduction in the company's loan portfolio.

Wealth Management

The Wealth Management segment saw consistent normalized production, with revenues increasing to $52 million in Q1 2024, surpassing prior-year and sequential levels. Brokerage, advisory, and syndicate revenues all showed improvement, and the segment's operating income also benefited from higher seasonal tax revenues.

Auction and Liquidation

B. Riley's Auction and Liquidation segment contributed $5.8 million in revenues and $2 million in operating income during the quarter, as the company was engaged in several ongoing domestic and international projects. The company expects to realize additional new business opportunities later this year, particularly in Europe.

Financial Consulting

The Financial Consulting segment, which includes the company's legacy Great American appraisal group, GlassRatner consulting division, and B. Riley Real Estate brokerage, experienced a record first quarter. Segment revenues increased 40% to $35 million, and operating income rose 62% compared to the same period last year, driven by robust demand for advisory, bankruptcy, and forensic litigation consulting services.

Communications and Consumer Products

B. Riley's portfolio of Communications businesses continued to generate steady cash flow, contributing $82 million in revenues and $8 million in operating income during the quarter. However, the company's Consumer Products segment, which includes the Targus laptop and computer accessories business, reported a $3 million loss due to continued softness in global PC and laptop sales.

Geographic Distribution

Geographically, the company generated 89.1% of its total revenues from North America, 4.8% from Europe, Middle East, and Africa, 1.8% from Asia, 1.8% from Latin America, and 2.5% from Australia during the first quarter of 2024.

Outlook

Looking ahead, B. Riley remains focused on running its business in the best interest of its stakeholders. The company recently announced a strategic review process for its Great American appraisal and asset disposition businesses, which could result in a potential sale or other transaction. Management believes this unique asset could be valuable to a buyer looking to leverage the platform and expertise.

Additionally, the company is pleased to deliver a $0.50 per share dividend to its investors, reflecting its confidence in the strength of its core operations and ability to generate steady free cash flow. B. Riley believes it is well-positioned to capitalize on the attractive opportunities in the small- and mid-cap space, leveraging its diversified platform and experienced management team.

Risks and Challenges

Despite the volatility in its investment portfolio, which has created periodic earnings fluctuations, B. Riley remains committed to its strategy of making opportunistic investments and acquisitions to drive long-term value creation. The company's unique business model, combining operating subsidiaries and a proprietary investment book, presents both challenges and opportunities from an evaluation perspective for investors.

Conclusion

As B. Riley navigates the current market environment, the company is focused on addressing the needs of its clients, partners, and employees, while also exploring ways to simplify its structure and enhance transparency for its shareholders. With a strong balance sheet, ample liquidity, and a diversified portfolio of businesses, the company believes it is well-positioned to weather any near-term headwinds and capitalize on the significant opportunities ahead.

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