B. Riley Financial, Inc. [RILY] Filings

10-Q 1 rily-20230930.htm 10-Q rily-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37503

B. RILEY FINANCIAL, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						27-0223495
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

11100 Santa Monica Blvd., Suite 800 Los Angeles, CA						90025
(Address of Principal Executive Offices)						(Zip Code)

(310) 966-1444

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

RILY

Nasdaq Global Market

Depositary Shares, each representing a 1/1000th
fractional interest in a 6.875% share of Series A
Cumulative Perpetual Preferred Stock

RILYP

Nasdaq Global Market

Depositary Shares, each representing a 1/1000th
fractional interest in a 7.375% share of Series B
Cumulative Perpetual Preferred Stock

RILYL

Nasdaq Global Market

6.75% Senior Notes due 2024

RILYO

Nasdaq Global Market

6.375% Senior Notes due 2025

RILYM

Nasdaq Global Market

5.00% Senior Notes due 2026

RILYG

Nasdaq Global Market

5.50% Senior Notes due 2026

RILYK

Nasdaq Global Market

6.50% Senior Notes due 2026

RILYN

Nasdaq Global Market

5.25% Senior Notes due 2028

RILYZ

Nasdaq Global Market

6.00% Senior Notes due 2028

RILYT

Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 2, 2023, there were 30,582,871 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

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B. Riley Financial, Inc.

Quarterly Report on Form 10-Q

For the Quarterly Period Ended September 30, 2023

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		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	56
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	79

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	80
Item 1A.	Risk Factors	80
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	81
Item 6.	Exhibits	82

SIGNATURES		83

Explanatory Note

As previously disclosed in the Explanatory Note of the 2022 Annual Report on Form 10-K, we restated our audited consolidated financial statements as of and for the years ended December 31, 2020 and 2021 and each of our unaudited condensed consolidated financial statements for the quarterly and year-to-date periods during 2021 and for the first three quarters of the year ending 2022. The restatement of these periods was effective with the filing of our Annual Report on Form 10-K for the year ended December 31, 2022. See Note 2 to the consolidated financial statements in our 2022 Annual Report on Form 10-K for additional information related to the restatement.

Additionally, as previously disclosed in our 2022 Annual Report on Form 10-K, we restated the relevant unaudited financial information for the three months ended March 31, 2022, three and six months ended June 30, 2022, and three and nine months ended September 30, 2022. Accordingly, the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022 included in this Quarterly Report on Form 10-Q have been restated to reflect the restatement adjustments as described in the 2022 Form 10-K. See also Note 2 to our condensed consolidated

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financial statements for further information on the impact of the restatement adjustments on the condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value)


	September 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Assets:
Cash and cash equivalents	$	252,288	$	268,618
Restricted cash	2,060		2,308
Due from clearing brokers	25,579		48,737
Securities and other investments owned, at fair value	1,197,587		1,129,268
Securities borrowed	2,782,000		2,343,327
Accounts receivable, net	127,418		149,110
Due from related parties	395		1,081
Loans receivable, at fair value (includes $192,828 and $98,729 from related parties as of September 30, 2023 and December 31, 2022, respectively)	549,142		701,652
Prepaid expenses and other assets	265,531		460,696
Operating lease right-of-use assets	82,245		88,593
Property and equipment, net	24,774		27,141
Goodwill	497,388		512,595
Other intangible assets, net	333,641		374,098
Deferred income taxes	2,808		3,978
Total assets	$	6,142,856	$	6,111,202
LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	54,030	$	81,384
Accrued expenses and other liabilities	303,428		322,974
Deferred revenue	73,829		85,441
Deferred income taxes	6,677		29,548
Due to related parties and partners	289		2,210
Due to clearing brokers	—		19,307
Securities sold not yet purchased	7,120		5,897
Securities loaned	2,772,790		2,334,031
Operating lease liabilities	93,027		99,124
Notes payable	21,300		25,263

Revolving credit facility	57,246		127,678
Term loans, net	618,301		572,079
Senior notes payable, net	1,667,088		1,721,751
Total liabilities	5,675,125		5,426,687

Commitments and contingencies (Note 17)
Redeemable noncontrolling interests in equity of subsidiaries	—		178,622
B. Riley Financial, Inc. equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,563 and 4,545 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively; and liquidation preference of $114,082 and $113,615 as of September 30, 2023 and December 31, 2022, respectively	—		—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 30,582,729 and 28,523,764 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	3		3
Additional paid-in capital	576,947		494,201
Accumulated deficit	(157,693)		(45,220)
Accumulated other comprehensive loss	(5,476)		(2,470)
Total B. Riley Financial, Inc. stockholders’ equity	413,781		446,514
Noncontrolling interests	53,950		59,379
Total equity	467,731		505,893
Total liabilities and equity	$	6,142,856	$	6,111,202

The accompanying notes are an integral part of these condensed consolidated financial statements.

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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:			As Restated				As Restated
Services and fees	$	278,023	$	257,310	$	743,909	$	651,786
Trading (loss) income and fair value adjustments on loans	(10,587)		(6,917)		83,346		(143,958)
Interest income - Loans and securities lending	69,730		57,594		222,115		182,855
Sale of goods	125,146		4,130		251,310		7,895
Total revenues	462,312		312,117		1,300,680		698,578
Operating expenses:
Direct cost of services	67,850		44,523		178,188		73,959
Cost of goods sold	78,053		3,089		165,996		7,334
Selling, general and administrative expenses	221,688		163,727		623,200		506,062
Restructuring charge	228		8,016		949		8,016
Impairment of goodwill and tradenames	35,500		—		37,233		—
Interest expense - Securities lending and loan participations sold	38,368		17,447		106,572		43,757
Total operating expenses	441,687		236,802		1,112,138		639,128
Operating income	20,625		75,315		188,542		59,450
Other income (expense):
Interest income	180		686		3,455		1,253
Dividend income	12,876		9,175		35,635		26,279
Realized and unrealized (losses) gains on investments	(75,361)		19,071		(84,960)		(136,205)
Change in fair value of financial instruments and other	(4,170)		(574)		(3,998)		9,728
(Loss) income from equity investments	(308)		(91)		(175)		3,285
Interest expense	(45,229)		(34,587)		(140,122)		(96,787)
(Loss) income before income taxes	(91,387)		68,995		(1,623)		(132,997)
Benefit from (provision for) income taxes	15,079		(16,350)		(14,344)		39,858
Net (loss) income	(76,308)		52,645		(15,967)		(93,139)
Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests	(2,485)		4,808		(5,680)		9,245
Net (loss) income attributable to B. Riley Financial, Inc.	(73,823)		47,837		(10,287)		(102,384)
Preferred stock dividends	2,015		2,002		6,042		6,006
Net (loss) income available to common shareholders	$	(75,838)	$	45,835	$	(16,329)	$	(108,390)

Basic (loss) income per common share	$	(2.53)	$	1.62	$	(0.56)	$	(3.86)
Diluted (loss) income per common share	$	(2.53)	$	1.53	$	(0.56)	$	(3.86)

Weighted average basic common shares outstanding	29,961,068		28,293,064		28,933,546		28,068,160
Weighted average diluted common shares outstanding	29,961,068		29,968,417		28,933,546		28,068,160

The accompanying notes are an integral part of these condensed consolidated financial statements.

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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(Dollars in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net (loss) income	$	(76,308)	$	52,645	$	(15,967)	$	(93,139)
Other comprehensive (loss) income:
Change in cumulative translation adjustment	(4,879)		(2,842)		(3,006)		(5,646)
Other comprehensive loss, net of tax	(4,879)		(2,842)		(3,006)		(5,646)
Total comprehensive (loss) income	(81,187)		49,803		(18,973)		(98,785)
Comprehensive (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests	(2,485)		6,187		(5,534)		10,751
Comprehensive (loss) income attributable to B. Riley Financial, Inc.	$	(78,702)	$	43,616	$	(13,439)	$	(109,536)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(Unaudited)

(Dollars in thousands, except share data)

For the Three Months Ended September 30, 2023 and 2022


	Preferred Stock			Common Stock			Additional Paid-in Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
	Shares	Amount		Shares	Amount
Balance, July 1, 2023	4,563	$	—	28,480,870	$	3	$	452,254	$	(49,140)	$	(597)	$	59,418	$	461,938
Common stock issued, net of offering costs	—	—		2,090,909	—		114,507		—		—		—		114,507

Vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		10,950	—		(277)		—		—		—		(277)
Excise taxes	—	—		—	—		115		—		—		—		115


Share based payments	—	—		—	—		10,561		—		—		—		10,561
Share based payments in equity of subsidiary	—	—		—	—		32		—		—		—		32
Vesting of shares in equity of subsidiary	—	—		—	—		(245)		—		—		245		—
Dividends on common stock ($1.00 per share)	—	—		—	—		—		(32,715)		—		—		(32,715)
Dividends on preferred stock	—	—		—	—		—		(2,015)		—		—		(2,015)
Net loss	—	—		—	—		—		(73,823)		—		(2,485)		(76,308)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(4,527)		(4,527)
Contributions from noncontrolling interests	—	—		—	—		—		—		—		699		699
Acquisition of noncontrolling interests	—	—		—	—		—				—		600		600

Other comprehensive loss	—	—		—	—		—		—		(4,879)		—		(4,879)
Balance, September 30, 2023	4,563	$	—	30,582,729	$	3	$	576,947	$	(157,693)	$	(5,476)	$	53,950	$	467,731

Balance, July 1, 2022	4,535	$	—	28,290,458	$	3	$	459,220	$	32,570	$	(3,884)	$	55,467	$	543,376

Vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		10,116	—		(293)		—		—		—		(293)
Common stock repurchased and retired	—	—		(571)	—		(27)		—		—		—		(27)
Share based payments	—	—		—	—		14,498		—		—		—		14,498
Share based payments in equity of subsidiary	—	—		—	—		57		—		—		—		57
Vesting of shares in equity of subsidiary	—	—		—	—		(35)		—		—		35		—
Dividends on common stock ($1.00 per share)	—	—		—	—		—		(31,061)		—		—		(31,061)
Dividends on preferred stock	—	—		—	—		—		(2,002)		—		—		(2,002)
Net income	—	—		—	—		—		47,837		—		6,187		54,024
Remeasurement of B. Riley Principal 150 and 250 Merger Corporations subsidiary temporary equity	—	—		—	—		—		(428)		—		—		(428)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(431)		(431)
Contributions from noncontrolling interests	—	—		—	—		—		—		—		2,823		2,823

Other comprehensive loss	—	—		—	—		—		—		(2,842)		—		(2,842)
Balance, September 30, 2022	4,535	$	—	28,300,003	$	3	$	473,420	$	46,916	$	(6,726)	$	64,081	$	577,694

The accompanying notes are an integral part of these condensed consolidated financial statements.

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For the Nine Months Ended September 30, 2023 and 2022

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	Preferred Stock			Common Stock			Additional Paid-in Capital		(Accumulated Deficit) Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Equity
	Shares	Amount		Shares	Amount
Balance, January 1, 2023	4,545	$	—	28,523,764	$	3	$	494,201	$	(45,220)	$	(2,470)	$	59,379	$	505,893
Common stock issued, net of offering costs	—	—		2,090,909	—		114,507		—		—		—		114,507
Preferred stock issued	18	—		—	—		467		—		—		—		467
ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		1,368,935	—		(8,619)		—		—		—		(8,619)
Common stock repurchased and retired	—	—		(1,452,831)	—		(53,688)		—		—		—		(53,688)
Shares issued for the acquisition of a business	—	—		51,952	—		2,111		—		—		—		2,111
Remeasurement of Lingo redeemable minority interest	—	—		—	—		(6,483)		—		—		—		(6,483)
Share based payments	—	—		—	—		34,528		—		—		—		34,528
Share based payments in equity of subsidiary	—	—		—	—		168		—		—		—		168
Vesting of shares in equity of subsidiary	—	—		—	—		(245)		—		—		245		—
Dividends on common stock ($3.00 per share)	—	—		—	—		—		(94,150)		—		—		(94,150)
Dividends on preferred stock	—	—		—	—		—		(6,042)		—		—		(6,042)
Net loss	—	—		—	—		—		(10,287)		—		(5,534)		(15,821)

B. Riley Financial, Inc. [RILY] Filings
B. Riley Financial, Inc. [RILYM] Filings
B. Riley Financial, Inc. [RILYN] Filings
B. Riley Financial, Inc. [RILYO] Filings
B. Riley Financial, Inc. [RILYP] Filings
B. Riley Financial, Inc. [RILYT] Filings
B. Riley Financial, Inc. [RILYZ] Filings
B. Riley Financial, Inc. [RILYG] Filings
B. Riley Financial, Inc. [RILYK] Filings
B. Riley Financial, Inc. [RILYL] Filings
10-Q	[2023-11-09]
10-Q	[2023-08-09]
10-Q	[2023-05-08]
10-K	[2023-03-16]
10-Q	[2022-11-04]
10-Q	[2022-07-29]
10-Q	[2022-04-29]
10-K	[2022-02-28]
10-Q	[2021-11-09]
10-Q	[2021-08-02]
10-Q	[2021-05-10]
10-K	[2021-03-04]
10-Q	[2020-10-30]
10-Q	[2020-08-03]
10-Q	[2020-05-11]
10-K	[2020-03-10]
10-Q	[2019-11-01]
10-Q	[2019-08-09]
10-Q	[2019-05-01]
10-K	[2019-03-06]
10-Q	[2018-11-06]
10-Q	[2018-08-03]
10-Q	[2018-05-08]
10-K	[2018-03-14]
10-Q	[2017-11-09]
10-Q	[2017-08-08]
10-Q	[2017-05-10]
10-K	[2017-03-10]
10-Q	[2016-11-14]
10-Q	[2016-08-05]
10-Q	[2016-05-16]
10-K	[2016-03-28]
10-Q	[2015-11-09]
10-Q	[2015-08-11]
10-Q	[2015-05-07]
10-K	[2015-03-30]
10-Q	[2014-11-06]
S-1	[2014-09-18]
10-Q	[2014-08-14]
10-Q	[2014-05-14]
10-K	[2014-03-31]
10-Q	[2013-11-14]
10-Q	[2013-08-14]
10-Q	[2013-05-14]
10-K	[2013-03-29]
10-Q	[2012-11-14]
10-Q	[2012-08-14]
10-Q	[2012-05-15]
10-K	[2012-03-30]

B. Riley Financial, Inc. [RILY] Filings

B. Riley Financial, Inc. [RILYM] Filings

B. Riley Financial, Inc. [RILYN] Filings

B. Riley Financial, Inc. [RILYO] Filings

B. Riley Financial, Inc. [RILYP] Filings

B. Riley Financial, Inc. [RILYT] Filings

B. Riley Financial, Inc. [RILYZ] Filings

B. Riley Financial, Inc. [RILYG] Filings

B. Riley Financial, Inc. [RILYK] Filings

B. Riley Financial, Inc. [RILYL] Filings