B. Riley Financial, Inc. (NASDAQ: RILYZ) 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 and a net loss attributable to common shareholders of $51,180,000. This quarterly net loss was driven by approximately $59 million of investment-related losses and incremental expenses related to the filing of the company's 10-K and the internal review and subsequent investigation undertaken by the Audit Committee.
Excluding investment gains and losses, the company's operating revenues were $379 million for the first quarter of 2024, compared to $389 million in the prior year quarter. Revenues from services and fees increased 9% to $257 million in the first quarter, up from $236 million in the same prior year period. However, interest income from loans and securities lending decreased to $60 million for the first quarter of 2024, compared to $77 million in the prior year quarter, primarily due to a reduction in the company's loans receivable at fair value balance.
The company generated operating adjusted EBITDA of $66 million in the first quarter of 2024, compared to $88 million in the first quarter of 2023. The decrease in operating adjusted EBITDA was primarily attributable to the investment-related losses and incremental expenses mentioned earlier.
Liquidity
From a balance sheet perspective, as of March 31, 2024, B. Riley Financial had $191 million in unrestricted cash and cash equivalents, $943 million in net securities and other investments owned, and $452 million in loans receivable at fair value. Total debt as of March 31, 2024 was approximately $2.2 billion, with total debt, net of cash and investments, of approximately $581 million at quarter-end.
During the first quarter, the company redeemed approximately $115 million of its senior notes and announced the redemption of the remaining $25 million of those notes in May 2024. The company also declared a dividend of $0.50 per common share, which will be paid on or about June 11, 2024 to common shareholders of record as of May 27, 2024.
Business Overview
The company's diversified platform includes six reportable operating segments: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Communications, and Consumer Products.
Segment Performance
The Capital Markets segment generated revenues of $89.8 million in the first quarter of 2024, compared to $185.4 million in the prior year quarter. The decrease was primarily due to a $81.4 million decline in trading income and fair value adjustments on loans, partially offset by a $2.4 million increase in services and fees revenue. The Wealth Management segment reported revenues of $51.8 million, up from $49.8 million in the prior year quarter, driven by a $2.6 million increase in services and fees.
The Auction and Liquidation segment contributed revenues of $5.8 million and operating income of $2.0 million during the first quarter. 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 40% increase in segment revenues to $35.1 million and a 62% increase in segment operating income to $6.1 million compared to the same period last year.
The Communications segment, which includes the company's consumer internet access and cloud communication services businesses, generated revenues of $82.4 million and operating income of $8.0 million during the quarter. The Consumer Products segment, which is primarily comprised of the Targus laptop and computer accessories business, reported a segment loss of $3.4 million due to continued softness in global PC and laptop sales.
Geographic Distribution
Geographically, the majority of the company's revenues are generated in North America, which accounted for $315.7 million, or 92.0%, of total revenues in the first quarter of 2024. Revenues from Europe, the Middle East, and Africa were $16.6 million, or 4.8% of the total, while Asia and Latin America contributed $6.4 million and $1.8 million, respectively.
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 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.
Risks and Challenges
The company's diversified financial platform is 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.
Conclusion
Despite the challenges, B. Riley Financial remains confident in its ability to navigate the current environment. The company's core operations continue to generate strong free cash flow, and combined with the actions it is taking, it expects to exit 2024 with ample liquidity to aggressively capitalize on the opportunities ahead.
Overall, B. Riley Financial's diversified financial services platform, strong client relationships, and experienced management team position the company well to weather the current market conditions and deliver long-term value for its shareholders.