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B. Riley Financial Reports Results for Fourth Quarter and Full Year 2019 and Increases Quarterly Dividend

Reports revenues of $165.2 million for Q4 2019 and $652.1 million for FY 2019 with net income of $16.9 million for Q4 2019 and $81.3 million for FY 2019

Declares total quarterly cash dividend of $0.35 per common share includes increased regular dividend of $0.25 per share and special dividend of $0.10 per share

Total of $1.76 per share in dividends declared related to FY 2019 earnings

LOS ANGELES , March 3, 2020 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ:RILY) ("B. Riley" or the "Company"), a diversified provider of business advisory and financial services, today announced results for the fourth quarter and full year ended December 31, 2019 .

B. Riley Financial logo (PRNewsFoto/B. Riley Financial, Inc.)

Q4 2019 Highlights

  • Revenues of $165.2 million vs. $102.0 million for Q4 2018
  • Net income of $16.9 million or $0.59 per diluted share
  • Adjusted EBITDA of $50.3 million vs. $11.2 million for Q4 2018
  • Adjusted net income of $23.6 million or $0.83 per diluted share

FY 2019 Highlights

  • Revenues of $652.1 million vs. $423.0 million for FY 2018
  • Net income of $81.3 million or $2.95 per diluted share
  • Adjusted EBITDA of $207.9 million vs. $89.6 million for FY 2018
  • Adjusted net income of $108.3 million or $3.93 per diluted share

"Our strong quarterly performance was driven by record investment banking revenues as well as significant gains from our investment portfolio which helped more than offset a large loss in our liquidation segment. Meanwhile, our consulting, appraisal, wealth management and principal investment businesses continue to perform steadily as we pursue new opportunities to create additional value from our platform. Our recently acquired brand portfolio also contributed to our fourth quarter results and we expect this to be a more meaningful component of earnings as we look ahead," said Bryant Riley , Chairman and Co-Chief Executive Officer, B. Riley Financial.

Riley added, "Our results demonstrate the strength of B. Riley Financial's diversified platform and successful execution of our core strategy to create increased value while also delivering dividends to our shareholders. Over the last few years, we have meaningfully transformed our business by building and purchasing assets with steadier and more recurring revenue streams. In 2019, these recurring businesses contributed more than 50 percent of pre-tax income before corporate overhead and approximately 40 percent of adjusted EBITDA. As we look ahead to 2020, and with a full year of brand investments, we expect these percentages to grow. Additionally, we continue to view our balance sheet as a differentiator for gaining market share across all of our operating subsidiaries and as an engine for driving incremental cash flows from our more episodic capital markets and retail liquidation businesses. The platform we have created allows us to opportunistically pursue unique investment situations which helps us to deliver shareholder value in excess of our day-to-day operations."

Q4 2019 Financial Summary
Fourth quarter 2019 revenue increased to $165.2 million from $102.0 million for the fourth quarter of 2018, despite a loss in the Auction and Liquidation segment during the quarter. Net income increased to $16.9 million , or $0.59 per diluted share, compared to a loss of $8.8 million , or $0.34 per diluted share, for the fourth quarter of 2018.

  • Capital Markets: Revenues increased to $172.2 million from $60.6 million for the fourth quarter of 2018. Segment income increased to $88.6 million from a loss of $12.5 million for the fourth quarter of 2018. The significant increase was primarily driven by investment banking as well as investment gains related to the Company's proprietary equity positions.
  • Auction and Liquidation: For the fourth quarter of 2019, this segment recognized negative revenue of $44.4 million and a segment loss of $60.8 million . The negative revenue is attributed to a significant loss accrual related to a large liquidation project which is expected to be completed during 2020. The total estimated loss for this project through completion is included in fourth quarter 2019 results.
  • Valuation and Appraisal: Revenues were $9.7 million compared to $11.3 million for the fourth quarter of 2018. Segment income was $2.7 million compared to $3.4 million for the same year-ago period. While the fourth quarter of 2018 represented an exceptional quarter for revenue growth in this segment, results have remained relatively steady from quarter-to-quarter and year-to-year.
  • Principal Investments: Revenues increased to $23.7 million from $20.0 million for the fourth quarter of 2018. Segment income increased to $8.8 million compared to $5.7 million for the fourth quarter of 2018. Results for this segment are primarily driven by United Online and magicJack.

In October 2019 , the Company acquired a majority interest in a brand investment portfolio which is focused on generating steady recurring revenue through the licensing of brand trademarks. The Company's brand holdings contributed an additional $4.1 million in revenue and $2.7 million in operating income for the fourth quarter of 2019.

Adjusted EBITDA (1) increased to $50.3 million compared to $11.2 million for the fourth quarter of 2018.

Adjusted net income (2) increased to $23.6 million , or $0.83 per diluted share, compared to $0.7 million , or $0.03 per diluted share, for the fourth quarter of 2018.

FY 2019 Financial Summary
Full year 2019 revenue increased to $652.1 million from $423.0 million for the full year 2018. Net income increased to $81.3 million or $2.95 per diluted share from $15.5 million or $0.58 per diluted share for the full year 2018. The addition of the Company's brand holdings in October 2019 contributed $4.1 million in revenue and $2.7 million in operating income for the year.

  • Capital Markets: Revenues increased to $485.9 million from $275.1 million in the prior year. Segment income increased to $179.3 million from $10.2 million for the full year of 2018. The significant increase in results for this segment can be attributed to strong investment banking performance as well as gains from the Company's investment portfolio. The addition of GlassRatner, which the Company acquired in August 2018 , also contributed to results for the full year.
  • Auction and Liquidation: Revenues were $22.5 million with a segment loss of $25.5 million for the full year of 2019. Results for this segment are expected to vary from quarter-to-quarter and year-to-year due to the episodic nature of the Company's retail liquidation engagements.
  • Valuation and Appraisal: Revenues increased slightly to $38.8 million from $38.7 million for the full year 2018. Segment income totaled $10.2 million compared to $11.1 million in the prior year.
  • Principal Investments: Revenues increased to $100.9 million from $54.2 million in the prior year. Segment income increased to $33.2 million from $19.4 million for the full year 2018. Results for this segment were primarily driven by United Online and by magicJack which the Company acquired in November 2018 .

Adjusted EBITDA (1) for the full year 2019 increased to $207.9 million compared to $89.6 million for the full year of 2018.

Adjusted net income (2) increased to $108.3 million , or $3.93 per diluted share, compared to $38.8 million , or $1.45 per diluted share, in the prior year.

As of December 31, 2019 , the Company had a total cash and investment balance of $832.2 million which includes approximately $53 million in equity investments included under prepaid expenses and other assets. Net of $792.9 million in total debt, the Company had a net cash and investment balance of $39.2 million at the end of the fourth quarter.

The Company repurchased over 870,000 shares of its common stock and warrants under its share repurchase program during 2019.

B. Riley Financial stockholders' equity increased to $360.7 million as of December 31, 2019 .

Declaration of Common Stock Dividend
The Company's Board of Directors has approved an increase in the regular quarterly dividend to $0.25 per share, up from $0.175 per share, and has also declared a one-time special quarterly dividend of $0.10 per share. A total quarterly cash dividend of $0.35 per common share will be paid on or about March 31, 2020 to stockholders of record as of March 17, 2020 .

Upon payment of the fourth quarter dividend, the Company will have paid a total of $1.76 per share in dividends on its common stock related to earnings for the full year of 2019.

Conference Call Details
Management will host a conference call today, Tuesday, March 3, 2020 at 4:30 p.m. Eastern time ( 1:30 p.m. Pacific time ), to discuss results for the fourth quarter and full year 2019. The live broadcast and archived recording will also be made available on the Company's investor relations website .

Date:

Tuesday, March 3, 2020

Time: 

4:30 p.m. Eastern time (1:30 p.m. Pacific time)

Toll-Free: 

1-877-451-6152

International: 

1-201-389-0879


Replay (expires on Tuesday, March 10, 2020)  

Toll-Free: 

1-844-512-2921

International: 

1-412-317-6671

Replay Pin: 

13698984

About B. Riley Financial, Inc. (NASDAQ:RILY)
B. Riley Financial provides collaborative financial services tailored to fit the capital raising and business advisory needs of public and private companies and high-net-worth individuals. The Company operates through several wholly owned subsidiaries which offer complementary end-to-end capabilities spanning investment banking and institutional brokerage, private wealth and investment management, corporate advisory, restructuring, due diligence, forensic accounting and litigation support, appraisal and valuation, and auction and liquidation services. Certain registered affiliates of B. Riley originate and underwrite senior secured loans for asset-rich companies. The Company also makes proprietary investments in companies and assets with attractive return profiles. For more information about B. Riley and its affiliated companies, visit www.brileyfin.com .

Forward-Looking Statements
Statements in this press release that are not descriptions of historical facts are forward-looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date of this press release. Such forward looking statements include, but are not limited to, statements regarding the Company's anticipated results of operations for 2020, as well as statements regarding our excitement and the expected growth of our business segments. Factors that could cause such actual results to differ materially from those contemplated or implied by such forward-looking statements include (without limitation) those risks described from time to time in B. Riley Financial, Inc.'s periodic 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, 2018 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Additional information will be set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 . 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 net income and adjusted EBITDA, may be considered non-GAAP financial measures. B. Riley Financial 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 net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, transaction and other expenses, restructuring costs, and stock-based compensation 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.

Footnotes
(1)  Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share-based payments, and transaction related and other costs. See "Note Regarding Use of Non-GAAP Financial Measures" for further discussion of this non-GAAP term.

(2)  Adjusted net income excludes the impact of share-based payments, amortization of intangible assets, restructuring costs, transaction related and other costs, and tax impact of aforementioned adjustments. See "Note Regarding Use of Non-GAAP Financial Measures" for further discussion of this non-GAAP term.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands, except par value)














December 31,


December 31,





2019


2018





(Unaudited)




Assets



Assets:







Cash and cash equivalents

$

104,268


$

179,440


Restricted cash


471



838


Due from clearing brokers


23,818



37,738


Securities and other investments owned, at fair value


451,551



273,577


Securities borrowed


814,331



931,346


Accounts receivable, net


46,624



42,123


Due from related parties


5,832



1,729


Advances against customer contracts


27,347




Loans receivable


225,848



38,794


Prepaid expenses and other assets


81,808



79,477


Operating lease right-of-use assets


47,809




Property and equipment, net


12,727



15,523


Goodwill


223,697



223,368


Other intangible assets, net


220,525



91,358


Deferred income taxes


31,522



42,399



Total assets

$

2,318,178


$

1,957,710

Liabilities and Equity



Liabilities:







Accounts payable

$

4,477


$

5,646


Accrued expenses and other liabilities


130,714



108,662


Deferred revenue


67,121



69,066


Due to related parties and partners


1,750



2,428


Securities sold not yet purchased


41,820



37,623


Securities loaned


810,495



930,522


Mandatorily redeemable noncontrolling interests


4,616



4,633


Operating lease liabilities


61,511




Notes payable


38,167



1,550


Loan participations sold


12,478




Term loan


66,666



79,166


Senior notes payable


688,112



459,754



Total liabilities


1,927,927



1,699,050










Commitments and contingencies






B. Riley Financial, Inc. stockholders' equity:







Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 2,349 shares issued and outstanding as of December 31, 2019 and none issued and outstanding as of December 31, 2018; liquidation preference of $58,723 as of December 31, 2019.





Common stock, $0.0001 par value; 100,000,000 shares authorized; 26,972,332 and 26,603,355 issued and outstanding as of December 31, 2019 and December 31, 2018, respectively.


3



2


Additional paid-in capital


323,109



258,638


Retained earnings


39,536



1,579


Accumulated other comprehensive loss


(1,988)



(2,161)



Total B. Riley Financial, Inc. stockholders' equity


360,660



258,058

Noncontrolling interests


29,591



602



Total equity


390,251



258,660




Total liabilities and equity

$

2,318,178


$

1,957,710

 

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Dollars in thousands, except share data)






















Three Months Ended


Year Ended






December 31,


December 31,






2019


2018


2019


2018






(Unaudited)


(Unaudited)


(Unaudited)




Revenues:














Services and fees


$

138,251


$

88,660


$

566,956


$

384,076


Interest income - Loans and securities lending



23,074



12,871



77,221



38,277


Sale of goods




3,912



500



7,935



638



Total revenues



165,237



102,031



652,112



422,991

Operating expenses:















Direct cost of services



17,109



13,409



58,824



34,754


Cost of goods sold



3,740



658



7,575



800


Selling, general and administrative expenses



97,256



81,517



385,219



310,508


Restructuring charge





6,259



1,699



8,506


Interest expense - Securities lending and loan participations sold



9,565



6,722



32,144



23,039



Total operating expenses



127,670



108,565



485,461



377,607




Operating income (loss)



37,567



(6,534)



166,651



45,384

Other income (expense):














Interest income



248



590



1,577



1,326


Income (loss) from equity investments



2,618



2,937



(1,431)



7,986


Interest expense



(15,075)



(9,467)



(50,205)



(33,393)



Income (loss) before income taxes



25,358



(12,474)



116,592



21,303

(Provision for) benefit from income taxes



(7,842)



3,509



(34,644)



(4,903)



Net income (loss)



17,516



(8,965)



81,948



16,400

Net income (loss) attributable to noncontrolling interests



387



(160)



337



891



Net income (loss) attributable to B. Riley Financial, Inc.



17,129



(8,805)



81,611



15,509

Preferred stock dividends



264





264





Net income (loss) applicable to common shareholders


$

16,865


$

(8,805)


$

81,347


$

15,509

















Basic income (loss) per common share 


$

0.64


$

(0.34)


$

3.08


$

0.60

Diluted income (loss) per common share 


$

0.59


$

(0.34)


$

2.95


$

0.58

















Weighted average basic common shares outstanding



26,547,023



26,177,560



26,401,036



25,937,305

Weighted average diluted common shares outstanding



28,412,871



26,177,560



27,529,157



26,764,856

 

...

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)

















Year Ended December 31,







2019


2018







(Unaudited)




Cash flows from operating activities:







Net income


81,948


$

16,400


Adjustments to reconcile net income to net cash used in operating activities:








Depreciation and amortization


19,048



13,809



Provision for doubtful accounts


2,126



1,308



Share-based compensation


15,916



13,042



Non-cash interest and other


(12,267)



4,068



Effect of foreign currency on operations


(78)



(916)



Loss (income) from equity investments


1,431



(7,986)



Deferred income taxes


10,874



1,990



Impairment of leaseholds and intangibles, lease loss accrual and gain on disposal of fixed assets


(286)



4,142



Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests


1,220



1,222



Change in operating assets and liabilities:









Due from clearing brokers


13,920



(6,259)




Securities and other investments owned


(165,765)



(128,217)




Securities borrowed


117,015



(124,257)




Accounts receivable and advances against customer contracts


(33,927)



(12,948)




Prepaid expenses and other assets


9,588



(24,395)




Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities


32,553



3,559




Amounts due to/from related parties and partners


(4,781)



4,705




Securities sold, not yet purchased


4,197



9,332




Deferred revenue


(3,098)



(564)




Securities loaned


(120,026)



127,151





Net cash used in operating activities


(30,392)



(104,814)

Cash flows from investing activities:







Purchases of loans receivable


(343,811)



(38,794)


Repayments of loans receivable


159,186




Loan participations sold


31,806




Repayment of loan participations sold


(18,911)




Asset acquisition - BR Brand, net of cash acquired $2,160


(114,912)




Acquisition of magicJack, net of cash acquired $53,875




(89,240)


Acquisition of other businesses




(4,000)


Proceeds from sale of division of magicJack


6,196




Purchases of property, equipment and intangible assets


(3,461)



(5,432)


Proceeds from sale of property, equipment and intangible assets


513



37


Equity investments


(33,391)



(16,640)


Dividends and distributions from equity investments


21,389



2,628





Net cash used in investing activities


(295,396)



(151,441)

Cash flows from financing activities:







Proceeds from asset based credit facility


140,439



300,000


Repayment of asset based credit facility


(103,343)



(300,000)


Proceeds from notes payable




51,020


Repayment of notes payable 


(478)



(51,713)


Payment of participating note payable and contingent consideration


(4,250)