B. Riley Financial, Inc. (NASDAQ: RILYT) is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. The company 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. The company generated annual operating cash flow of $24,502,000 and annual free cash flow of $16,791,000.

For the first quarter of 2024, the company 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 operates in six reportable business segments: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Communications, and Consumer Products.

Capital Markets

The Capital Markets segment provides investment banking, corporate finance, securities lending, restructuring, research, sales and trading services to corporate and institutional clients. In the first quarter of 2024, this segment generated revenues of $89,823,000, a decrease from $185,411,000 in the prior year period, primarily due to lower trading income and fair value adjustments on loans.

Wealth Management

The Wealth Management segment provides wealth management and tax services to corporate and high-net-worth clients. Revenues in this segment increased to $51,782,000 in the first quarter of 2024 from $49,814,000 in the prior year period, driven by higher wealth and asset management fees.

Auction and Liquidation

The Auction and Liquidation segment provides auction and liquidation services to help clients dispose of assets that include multi-location retail inventory, wholesale inventory, trade fixtures, machinery and equipment, intellectual property and real property. Revenues in this segment increased to $5,780,000 in the first quarter of 2024 from $5,660,000 in the prior year period, primarily due to an increase in commission fees.

Financial Consulting

The Financial Consulting segment provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services. Revenues in this segment increased 40% to $35,085,000 in the first quarter of 2024, driven by growth in the company's Advisory Services division.

Communications

The Communications segment provides consumer Internet access and related subscription services, cloud communication services, and mobile phone voice, text, and data services and devices. Revenues in this segment decreased to $82,366,000 in the first quarter of 2024 from $86,919,000 in the prior year period, primarily due to declines in subscription and advertising revenue.

Consumer Products

The Consumer Products segment generates revenue through sales of laptop and computer accessories. Revenues in this segment decreased to $51,522,000 in the first quarter of 2024 from $65,694,000 in the prior year period, due to a decrease in computer and laptop sales worldwide.

Liquidity

As of March 31, 2024, B. Riley Financial had $190,690,000 in cash and cash equivalents, $949,868,000 in securities and other investments owned at fair value, and $452,496,000 in loans receivable at fair value. Total debt as of March 31, 2024 was approximately $2,186,400,000.

The company believes that its current cash and cash equivalents, securities and other investments owned, funds available under its asset based credit facility, funds available under the Targus and Nomura revolving credit facilities, and cash expected to be generated from operating activities will be sufficient to meet its working capital and capital expenditure requirements for at least the next 12 months.

Risks and Challenges

B. Riley Financial's operations are affected by a variety of factors including continuing higher inflation, the actions by the Federal Reserve to address inflation, the possibility of recession or an economic downturn, Russia's invasion of Ukraine, the conflicts in the Middle East, and rising energy prices. These factors create uncertainty about the future economic environment which will continue to evolve and may impact the company's business in future periods.

Outlook

The company has not provided specific financial guidance for fiscal year 2024. However, management has stated that it remains focused on running the business in the best interest of stakeholders by addressing the needs of clients, partners and employees. The company believes the market opportunity in the small- and mid-cap space remains attractive, and it is uniquely positioned to meet the needs of companies in this space.

Conclusion

B. Riley Financial is a diversified financial services platform that has weathered a challenging macroeconomic environment in recent quarters. While the company has faced volatility in its investment portfolio, its core operating businesses continue to generate steady cash flow. With a strong liquidity position and a focus on serving the needs of its clients, B. Riley appears well-positioned to capitalize on opportunities in the small- and mid-cap space as market conditions improve.