B. Riley Financial, Inc. [RILYL] Filings

10-Q 1 rily-20230630.htm 10-Q rily-20230630

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 June 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 August 2, 2023, there were 30,571,779 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 June 30, 2023

Table of Contents


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30 , 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30 , 2023 and 2022	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30 , 2023 and 2022	3
	Condensed Consolidated Statements of Equity for the three and six months ended June 30 , 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30 , 2023 and 2022	6
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	54
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	76
Item 4.	Controls and Procedures	77

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	78
Item 1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	79
Item 6.	Exhibits	79

SIGNATURES		81

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 six months ended June 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 financial

Table of Contents

statements for further information on the impact of the restatement adjustments on the condensed consolidated financial statements as of and for the three and six months ended June 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)


	June 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
Assets:
Cash and cash equivalents	$	107,581	$	268,618
Restricted cash	2,321		2,308
Due from clearing brokers	22,289		48,737
Securities and other investments owned, at fair value	1,072,444		1,129,268
Securities borrowed	2,938,521		2,343,327
Accounts receivable, net	118,927		149,110
Due from related parties	669		1,081
Loans receivable, at fair value (includes $130,024 and $98,729 from related parties as of June 30, 2023 and December 31, 2022, respectively)	683,827		701,652
Prepaid expenses and other assets	309,083		460,696
Operating lease right-of-use assets	85,207		88,593
Property and equipment, net	28,443		27,141
Goodwill	526,827		512,595
Other intangible assets, net	354,328		374,098
Deferred income taxes	2,845		3,978
Total assets	$	6,253,312	$	6,111,202
LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	60,264	$	81,384
Accrued expenses and other liabilities	251,260		322,974
Deferred revenue	77,089		85,441
Deferred income taxes	46,624		29,548
Due to related parties and partners	289		2,210
Due to clearing brokers	—		19,307
Securities sold not yet purchased	2,686		5,897
Securities loaned	2,929,265		2,334,031
Operating lease liabilities	96,473		99,124
Notes payable	21,298		25,263

Revolving credit facility	110,875		127,678
Term loans, net	529,242		572,079
Senior notes payable, net	1,666,009		1,721,751
Total liabilities	5,791,374		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 June 30, 2023 and December 31, 2022, respectively; and liquidation preference of $114,082 and $113,615 as of June 30, 2023 and December 31, 2022, respectively	—		—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 28,480,870 and 28,523,764 issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	3		3
Additional paid-in capital	452,254		494,201
Accumulated deficit	(49,140)		(45,220)
Accumulated other comprehensive loss	(597)		(2,470)
Total B. Riley Financial, Inc. stockholders’ equity	402,520		446,514
Noncontrolling interests	59,418		59,379
Total equity	461,938		505,893
Total liabilities and equity	$	6,253,312	$	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 June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues:			As Restated				As Restated
Services and fees	$	230,327	$	191,662	$	465,886	$	394,476
Trading income (loss) and fair value adjustments on loans	42,365		(117,763)		93,933		(137,041)
Interest income - Loans and securities lending	75,199		63,835		152,385		125,261
Sale of goods	58,387		1,887		126,164		3,765
Total revenues	406,278		139,621		838,368		386,461
Operating expenses:
Direct cost of services	55,941		17,785		110,338		29,436
Cost of goods sold	40,317		1,994		87,943		4,245
Selling, general and administrative expenses	188,885		167,136		401,512		342,335
Restructuring charge	628		—		721		—
Impairment of tradenames	1,733		—		1,733		—
Interest expense - Securities lending and loan participations sold	35,780		14,544		68,204		26,310
Total operating expenses	323,284		201,459		670,451		402,326
Operating income (loss)	82,994		(61,838)		167,917		(15,865)
Other income (expense):
Interest income	701		500		3,275		567
Dividend income	9,555		9,243		22,759		17,104
Realized and unrealized gains (losses) on investments	18,843		(106,164)		(9,599)		(155,276)
Change in fair value of financial instruments and other	381		4,321		172		10,302
Income (loss) from equity investments	143		(3,399)		133		3,376
Interest expense	(47,332)		(31,764)		(94,893)		(62,200)
Income (loss) before income taxes	65,285		(189,101)		89,764		(201,992)
(Provision for) benefit from income taxes	(21,504)		52,513		(29,423)		56,208
Net income (loss)	43,781		(136,588)		60,341		(145,784)
Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests	(2,600)		3,571		(3,195)		4,437
Net income (loss) attributable to B. Riley Financial, Inc.	46,381		(140,159)		63,536		(150,221)
Preferred stock dividends	2,015		2,002		4,027		4,004
Net income (loss) available to common shareholders	$	44,366	$	(142,161)	$	59,509	$	(154,225)

Basic income (loss) per common share	$	1.57	$	(5.07)	$	2.09	$	(5.52)
Diluted income (loss) per common share	$	1.55	$	(5.07)	$	2.05	$	(5.52)

Weighted average basic common shares outstanding	28,239,116		28,051,570		28,411,270		27,953,845
Weighted average diluted common shares outstanding	28,654,246		28,051,570		29,082,885		27,953,845

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

Table of Contents

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(Dollars in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net income (loss)	$	43,781	$	(136,588)	$	60,341	$	(145,784)
Other comprehensive income (loss):
Change in cumulative translation adjustment	1,007		(2,316)		1,873		(2,804)
Other comprehensive income (loss), net of tax	1,007		(2,316)		1,873		(2,804)
Total comprehensive income (loss)	44,788		(138,904)		62,214		(148,588)
Comprehensive (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests	(2,600)		3,698		(3,049)		4,564
Comprehensive income (loss) attributable to B. Riley Financial, Inc.	$	47,388	$	(142,602)	$	65,263	$	(153,152)

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

Table of Contents

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Equity

(Unaudited)

(Dollars in thousands, except share data)

For the Three Months Ended June 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, April 1, 2023	4,563	$	—	28,135,636	$	3	$	445,352	$	(62,566)	$	(1,604)	$	59,179	$	440,364

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		345,234	—		(3,523)		—		—		—		(3,523)



Share based payments	—	—		—	—		10,425		—		—		—		10,425
Dividends on common stock ($1.00 per share)	—	—		—	—		—		(30,144)		—		—		(30,144)
Dividends on preferred stock	—	—		—	—		—		(2,015)		—		—		(2,015)
Net income	—	—		—	—		—		46,381		—		(2,600)		43,781
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(740)		(740)
Contributions from noncontrolling interests	—	—		—	—		—		—		—		3,579		3,579
Remeasurement of B. Riley Principal 250 Merger Corporation subsidiary temporary equity	—	—		—	—		—		(796)		—		—		(796)

Other comprehensive income	—	—		—	—		—		—		1,007		—		1,007
Balance, June 30, 2023	4,563	$	—	28,480,870	$	3	$	452,254	$	(49,140)	$	(597)	$	59,418	$	461,938

Balance, April 1, 2022	4,535	$	—	27,928,234	$	3	$	450,164	$	205,765	$	(1,568)	$	45,813	$	700,177

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		362,224	—		(5,146)		—		—		—		(5,146)

Share based payments	—	—		—	—		14,202		—		—		—		14,202
Dividends on common stock ($1.00 per share)	—	—		—	—		—		(31,034)		—		—		(31,034)
Dividends on preferred stock	—	—		—	—		—		(2,002)		—		—		(2,002)
Net loss	—	—		—	—		—		(140,159)		—		3,698		(136,461)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(801)		(801)
Contributions from noncontrolling interests	—	—		—	—		—		—		—		6,757		6,757

Other comprehensive loss	—	—		—	—		—		—		(2,316)		—		(2,316)
Balance, June 30, 2022	4,535	$	—	28,290,458	$	3	$	459,220	$	32,570	$	(3,884)	$	55,467	$	543,376

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

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For the Six Months Ended June 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, January 1, 2023	4,545	$	—	28,523,764	$	3	$	494,201	$	(45,220)	$	(2,470)	$	59,379	$	505,893

Preferred stock issued	18	—		—	—		467		—		—		—		467
ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		1,357,985	—		(8,342)		—		—		—		(8,342)
Common stock repurchased and retired	—	—		(1,452,831)	—		(53,803)		—		—		—		(53,803)
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	—	—		—	—		24,103		—		—		—		24,103
Dividends on common stock ($2.00 per share)	—	—		—	—		—		(61,435)		—		—		(61,435)
Dividends on preferred stock	—	—		—	—		—		(4,027)		—		—		(4,027)
Net income	—	—		—	—		—		63,536		—		(3,049)		60,487
Remeasurement of B. Riley Principal 250 Merger Corporation subsidiary temporary equity	—	—		—	—		—		(1,994)		—		—		(1,994)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(1,460)		(1,460)
Contributions from noncontrolling interests	—	—		—	—		—		—		—		4,010		4,010
Acquisition of noncontrolling interests	—	—		—	—		—		—		—		538		538

Other comprehensive income	—	—		—	—		—		—		1,873		—		1,873
Balance, June 30, 2023	4,563	$	—	28,480,870	$	3	$	452,254	$	(49,140)	$	(597)	$	59,418	$	461,938

Balance, January 1, 2022	4,512	$	—	27,591,028	$	3	$	413,486	$	248,862	$	(1,080)	$	43,930	$	705,201
Preferred stock issued	23	—		—	—		639		—		—		—		639

ESPP shares issued and vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		394,552	—		(6,440)		—		—		—		(6,440)
Shares issued for the acquisition of FocalPoint	—	—		304,878	—		20,320		—		—		—		20,320
Share based payments	—	—		—	—		31,215		—		—		—		31,215
Dividends on common stock ($2.00 per share)	—	—		—	—		—		(62,067)		—		—		(62,067)
Dividends on preferred stock	—	—		—	—		—		(4,004)		—		—		(4,004)
Net loss	—	—		—	—		—

B. Riley Financial, Inc. [RILYL] Filings
B. Riley Financial, Inc. [RILY] Filings
B. Riley Financial, Inc. [RILYG] Filings
B. Riley Financial, Inc. [RILYK] 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
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. [RILYL] Filings

B. Riley Financial, Inc. [RILY] Filings

B. Riley Financial, Inc. [RILYG] Filings

B. Riley Financial, Inc. [RILYK] 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