B. Riley Financial, Inc. [RILYN] Filings

10-Q 1 rily-20240331.htm 10-Q rily-20240331

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 March 31, 2024

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 o No x

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 o No x

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 May 3, 2024, there were 30,295,303 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 March 31, 2024

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		Page

PART I. FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	1
	Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023	2
	Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2024 and 2023	3
	Unaudited Condensed Consolidated Statements of Equity for the three months ended March 31, 2024 and 2023	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023	5
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65
Item 4.	Controls and Procedures	66

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	69

SIGNATURES		71

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Dollars in thousands, except par value)


	March 31, 2024		December 31, 2023
	(Unaudited)
ASSETS
Assets:
Cash and cash equivalents	$	190,690	$	231,964
Restricted cash	1,889		1,875
Due from clearing brokers	40,875		51,334
Securities and other investments owned, at fair value	949,868		1,092,106
Securities borrowed	2,050,079		2,870,939
Accounts receivable, net of allowance for credit losses of $7,122 and $7,339 as of March 31, 2024 and December 31, 2023, respectively	123,797		115,496
Due from related parties	92		172
Loans receivable, at fair value (includes $355,287 and $387,657 from related parties as of March 31, 2024 and December 31, 2023, respectively)	452,496		532,419
Prepaid expenses and other assets	246,402		237,327
Operating lease right-of-use assets	84,217		87,605
Property and equipment, net	24,146		25,206
Goodwill	471,636		472,326
Other intangible assets, net	311,850		322,014
Deferred income taxes	49,607		33,595
Total assets	$	4,997,644	$	6,074,378
LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	44,791	$	44,550
Accrued expenses and other liabilities	253,153		273,193
Deferred revenue	68,643		71,504

Due to related parties and partners	1,763		2,731

Securities sold not yet purchased	6,423		8,601
Securities loaned	2,041,169		2,859,306
Operating lease liabilities	95,645		98,563
Notes payable	14,325		19,391

Revolving credit facility	22,197		43,801
Term loans, net	596,262		625,151
Senior notes payable, net	1,553,616		1,668,021
Total liabilities	4,697,987		5,714,812

Commitments and contingencies (Note 16)

B. Riley Financial, Inc. equity:
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,563 shares issued and outstanding as of March 31, 2024 and December 31, 2023; and liquidation preference of $114,082 as of March 31, 2024 and December 31, 2023	—		—
Common stock, $0.0001 par value; 100,000,000 shares authorized; 30,095,303 and 29,937,067 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	3		3
Additional paid-in capital	579,647		572,170
Accumulated deficit	(347,558)		(281,285)
Accumulated other comprehensive (loss) income	(3,643)		229
Total B. Riley Financial, Inc. stockholders’ equity	228,449		291,117
Noncontrolling interests	71,208		68,449
Total equity	299,657		359,566
Total liabilities and equity	$	4,997,644	$	6,074,378

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 March 31,
	2024		2023
Revenues:
Services and fees	$	257,303	$	235,559
Trading (loss) income and fair value adjustments on loans	(29,868)		51,568
Interest income - Loans and securities lending	59,944		77,186
Sale of goods	55,653		67,777
Total revenues	343,032		432,090
Operating expenses:
Direct cost of services	61,126		54,397
Cost of goods sold	39,615		47,626
Selling, general and administrative expenses	209,548		212,627
Restructuring charge	789		93

Interest expense - Securities lending and loan participations sold	35,383		32,424
Total operating expenses	346,461		347,167
Operating (loss) income	(3,429)		84,923
Other income (expense):
Interest income	669		2,574
Dividend income	11,815		13,204
Realized and unrealized losses on investments	(29,545)		(28,442)
Change in fair value of financial instruments and other	314		(209)
Loss from equity investments	(4)		(10)
Interest expense	(44,864)		(47,561)
(Loss) income before income taxes	(65,044)		24,479
Benefit from (provision for) income taxes	17,090		(7,919)
Net (loss) income	(47,954)		16,560
Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests	1,211		(595)
Net (loss) income attributable to B. Riley Financial, Inc.	(49,165)		17,155
Preferred stock dividends	2,015		2,012
Net (loss) income available to common shareholders	$	(51,180)	$	15,143

Basic (loss) income per common share	$	(1.71)	$	0.53
Diluted (loss) income per common share	$	(1.71)	$	0.51

Weighted average basic common shares outstanding	29,989,584		28,585,337
Weighted average diluted common shares outstanding	29,989,584		29,513,435

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 (Loss) Income

(Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2024		2023
Net (loss) income	$	(47,954)	$	16,560
Other comprehensive (loss) income:
Change in cumulative translation adjustment	(3,872)		866
Other comprehensive (loss) income, net of tax	(3,872)		866
Total comprehensive (loss) income	(51,826)		17,426
Comprehensive income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests	1,211		(449)
Comprehensive (loss) income attributable to B. Riley Financial, Inc.	$	(53,037)	$	17,875

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 March 31, 2024 and 2023


	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, 2024	4,563	$	—	29,937,067	$	3	$	572,170	$	(281,285)	$	229	$	68,449	$	359,566


Vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		158,236	—		(1,170)		—		—		—		(1,170)



Share based payments	—	—		—	—		8,611		—		—		—		8,611
Share based payments in equity of subsidiary	—	—		—	—		36		—		—		—		36

Dividends on common stock ($0.50 per share)	—	—		—	—		—		(15,093)		—		—		(15,093)
Dividends on preferred stock	—	—		—	—		—		(2,015)		—		—		(2,015)
Net loss	—	—		—	—		—		(49,165)		—		1,211		(47,954)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(954)		(954)
Contributions from noncontrolling interests	—	—		—	—		—		—		—		2,502		2,502


Other comprehensive loss	—	—		—	—		—		—		(3,872)		—		(3,872)
Balance, March 31, 2024	4,563	$	—	30,095,303	$	3	$	579,647	$	(347,558)	$	(3,643)	$	71,208	$	299,657

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
Vesting of restricted stock and other, net of shares withheld for employer taxes	—	—		1,012,751	—		(4,819)		—		—		—		(4,819)
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	—	—		—	—		13,678		—		—		—		13,678
Dividends on common stock ($1.00 per share)	—	—		—	—		—		(31,291)		—		—		(31,291)
Dividends on preferred stock	—	—		—	—		—		(2,012)		—		—		(2,012)
Net income	—	—		—	—		—		17,155		—		(449)		16,706
Distributions to noncontrolling interests	—	—		—	—		—		—		—		(720)		(720)
Contributions from noncontrolling interests	—	—		—	—		—		—		—		431		431
Remeasurement of B. Riley Principal 250 Merger Corporations subsidiary temporary equity	—	—		—	—		—		(1,198)		—		—		(1,198)
Acquisition of noncontrolling interests	—	—		—	—		—		—		—		538		538
Other comprehensive loss	—	—		—	—		—		—		866		—		866
Balance, March 31, 2023	4,563	$	—	28,135,636	$	3	$	445,352	$	(62,566)	$	(1,604)	$	59,179	$	440,364

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 Cash Flows

(Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net (loss) income	$	(47,954)	$	16,560
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	11,137		13,077
Provision for credit losses	436		3,173
Share-based compensation	8,682		13,746

Fair value and remeasurement adjustments, non-cash	13,651		(46,050)
Non-cash interest and other	(2,661)		(1,141)
Depreciation of rental merchandise	4,202		—
Effect of foreign currency on operations	271		271
Loss from equity investments	4		10
Dividends from equity investments	37		129
Deferred income taxes	(16,012)		5,807

(Gain) loss on sale of business and disposal of fixed assets	(203)		5




Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests	293		308
Change in operating assets and liabilities:
Amounts due to/from clearing brokers	10,460		16,318
Securities and other investments owned	192,639		95,037
Securities borrowed	820,860		(599,516)
Accounts receivable	(8,739)		25,083
Prepaid expenses and other assets	(6,761)		(25,705)
Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities	(21,114)		(67,536)
Amounts due to/from related parties and partners	(888)		(1,070)
Securities sold, not yet purchased	(2,178)		1,909
Deferred revenue	(2,668)		(1,749)
Securities loaned	(818,137)		603,951
Net cash provided by operating activities	135,357		52,617
Cash flows from investing activities:
Purchases of loans receivable	(42,903)		(311,970)
Repayments of loans receivable	39,493		260,587
Sale of loans receivable	22,785		7,500


Acquisition of businesses and minority interest, net of $234 cash acquired for 2023	—		(12,287)
Sale of business, net of cash sold and other	(184)		1,364
Purchases of property, equipment and intangible assets	(913)		(1,696)


Purchase of equity and other investments	—		(662)

Net cash provided by (used in) investing activities	18,278		(57,164)
Cash flows from financing activities:
Proceeds from revolving line of credit	17,738		29,021

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Repayment of revolving line of credit	(39,343)		(17,237)
Repayment of notes payable and other	(5,361)		(11,510)
Repayment of term loan	(30,036)		(72,924)
Proceeds from term loan	—		128,187

Redemption of senior notes	(115,492)		—
Payment of debt issuance and offering costs	(191)		(1,957)
Payment of contingent consideration	(70)		(1,302)
Payment of employment taxes on vesting of restricted stock	(1,170)		(4,819)
Common dividends paid	(16,014)		(46,856)
Preferred dividends paid	(2,015)		(2,012)
Repurchase of common stock	—		(53,803)
Distribution to noncontrolling interests	(1,481)		(1,023)
Contributions from noncontrolling interests	2,502		431



Proceeds from issuance of preferred stock	—		467
Net cash used in financing activities	(190,933)		(55,337)
Decrease in cash, cash equivalents and restricted cash	(37,298)		(59,884)
Effect of foreign currency on cash, cash equivalents and restricted cash	(3,962)		1,280
Net decrease in cash, cash equivalents and restricted cash	(41,260)		(58,604)
Cash, cash equivalents and restricted cash, beginning of period	233,839		270,926
Cash, cash equivalents and restricted cash, end of period	$	192,579	$	212,322

Supplemental disclosures:
Interest paid	$	81,737	$	81,423
Taxes paid	$	1,432	$	2,932

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

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B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share data)

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS OPERATIONS

B. Riley Financial, Inc. and its subsidiaries (collectively, the “Company”) 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. The Company also has a portfolio of communication related businesses that provide consumer Internet access and cloud communication services and owns Tiger US Holdings Inc. (“Targus”), which designs and sells laptop and computer accessories.

During the fourth quarter of 2023, management reassessed the Company's previously reported Consumer segment due to organizational changes and financial information provided to the Chief Operating Decision Maker (“CODM”). These changes resulted in Targus's operations being reported on a stand-alone basis in the Consumer Products segment and the operations related to brand licensing that were previously reported in the Consumer segment being reported in the All Other Category that is reported with Corporate and Other. As a result of the changes, the Company has recast the financial data for the Consumer Products segment and reporting of the All Other Category for all periods presented.

The Company operates in six reportable operating segments: (i) Capital Markets, through which the Company provides investment banking, corporate finance, securities lending, restructuring, research, sales and trading services to corporate and institutional clients; (ii) Wealth Management, through which the Company provides wealth management and tax services to corporate and high-net-worth clients; (iii) Auction and Liquidation, through which the Company 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; (iv) Financial Consulting, through which the Company provides bankruptcy, financial advisory, forensic accounting, real estate consulting and valuation and appraisal services; (v) Communications, through which the Company provides consumer Internet access and related subscription services, cloud communication services, and mobile phone voice, text, and data services and devices; and (vi) Consumer Products, which generates revenue through sales of laptop and computer accessories.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of B. Riley Financial, Inc. and its wholly owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated upon consolidation.

The Company consolidates all entities that it controls through a majority voting interest. In addition, the Company performs an analysis to determine whether its variable interest or interests give it a controlling financial interest in a variable interest entity (“VIE”) including ongoing reassessments of whether it is the primary beneficiary of a VIE. See Note 2(n) for further discussion.

The condensed consolidated financial statements have been prepared by the Company, without audit, pursuant to interim financial reporting guidelines and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company’s management, all adjustments, consisting of only normal and recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the periods presented have been included. These condensed consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 24, 2024. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.

(b) Use of Estimates

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expense during the reporting period. Estimates are used when accounting for certain items such as valuation of securities, allowance for credit losses, the fair value of loans receivables, intangible assets and goodwill, share based arrangements, contingent consideration, accounting for income tax valuation allowances, and sales returns and allowances. Estimates are based on historical experience, where applicable, and assumptions that management believes are reasonable under the circumstances. Due to the inherent uncertainty involved with estimates, actual results may differ.

Interest expense from securities lending activities is included in operating expenses related to operations in the Capital Markets segment. Interest expense from securities lending activities is incurred from equity and fixed income securities that are loaned to the Company and totaled $35,383 and $32,424 during the three months ended March 31, 2024 and 2023, respectively.

(d) Concentration of Risk

Revenues in the Capital Markets, Financial Consulting, Wealth Management, and Communications segments are primarily generated in the United States. Revenues in the Auction and Liquidation segment and Consumer Products segment are primarily generated in the United States, Australia, Canada, and Europe.

The Company maintains cash in various federally insured banking institutions. The account balances at each institution periodically exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC insurance coverage. The Company has not experienced any losses in such accounts. The Company also has substantial cash balances from proceeds received from auctions and liquidation engagements that are distributed to parties in accordance with the collaborative arrangements.

The Company’s activities in the Auction and Liquidation segment are executed frequently with, and on behalf of, distressed customers and secured creditors. Concentrations of credit risk can be affected by changes in economic, industry, or geographical factors. The Company seeks to control its credit risk and potential risk concentration through risk management activities that limit the Company’s exposure to losses on any one specific liquidation services contract or concentration within any one specific industry. To mitigate the exposure to losses on any one specific liquidations services contract, the Company sometimes conducts operations with third parties through collaborative arrangements.

On December 18, 2023, the Company loaned $108,000 to Conn’s Inc. (“Conn’s”) as more fully described in Note 19. On February 14, 2024, the Company collected $15,000 of principal payments which reduced the loan balance to $93,000. This loan combined with two other existing loans receivable with an outstanding balance of $58,350 and $62,808 as of March 31, 2024 and December 31, 2023, respectively, is collateralized by consumer loan receivables of customers of the furniture and electronics retailer. These loans have an aggregate fair value of $147,630 and $167,568 or 32.6% and 31.5% of the loan portfolio as of March 31, 2024 and December 31, 2023, respectively, and are concentrated in the retail industry. In the event there is a recession or economic downturn that would put pressure on the retailer’s customers, this could impact the operations of the retailer and payment patterns of the customers and the overall performance and collectability of these loans.

The Company also has a loan receivable with a principal amount of $200,506 as of March 31, 2024 and December 31, 2023. The loan receivable allows for interest to be paid-in-kind, which is capitalized to the loan receivable balance annually on the loan's anniversary date. The interest receivable on the loan was $14,971 and $8,889 as of March 31, 2024 and December 31, 2023, respectively, and is included in prepaid expenses and other assets in the condensed consolidated balance sheets. The loan receivable is secured by a first priority security interest in Freedom VCM Holdings, LLC (“Freedom VCM”) equity interests owned by Brian Kahn as more fully described in Note 2(h) below. The fair value of the loan receivable was $183,268 and $200,506 or 40.5% and 37.7% of the total loan portfolio as of March 31, 2024 and December 31, 2023, respectively. Deterioration in the collateral, including in the performance of Freedom VCM or delays in the execution of its strategies, including the possible disposition of additional businesses and further de-leveraging of its balance sheet, for the loan receivable may impact the ultimate collection of principal and interest.

The maximum amount of loss that the Company is exposed to is equivalent to the fair value of these loans which totaled $330,898 and $368,074 as of March 31, 2024 and December 31, 2023, respectively.

(e) Advertising Expenses

The Company expenses advertising costs, which consist primarily of costs for printed materials, as incurred. Advertising costs totaled $2,410 and $2,937 during the three months ended March 31, 2024 and 2023, respectively. Advertising expense was included as a component of selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

(f) Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

(g) Restricted Cash

As of March 31, 2024 and December 31, 2023, restricted cash included $1,889 and $1,875, respectively, primarily consisting of cash collateral for leases.

Cash, cash equivalents and restricted cash consist of the following:


	March 31, 2024		December 31, 2023
Cash and cash equivalents	$	190,690	$	231,964
Restricted cash	1,889		1,875
Total cash, cash equivalents and restricted cash	$	192,579	$	233,839

(h) Loans Receivable

Under ASC 825 - Financial Instruments, the Company elected the fair value option for all outstanding loans receivable. Management evaluates the performance of the loan portfolio on a fair value basis. Under the fair value option, loans receivables are measured at each reporting period based upon their exit value in an orderly transaction and unrealized gains or losses from changes in fair value are recorded in the condensed consolidated statements of operations.

Loans receivable, at fair value totaled $452,496 and $532,419 as of March 31, 2024 and December 31, 2023, respectively. The loans have various maturities through August 2033. As of March 31, 2024 and December 31, 2023, the historical cost of loans receivable accounted for under the fair value option was $494,730 and $555,882, respectively, which included principal balances of $499,956 and $563,637 respectively, and unamortized costs, origination fees, premiums and discounts, totaling $5,226 and $7,755, respectively. The principal balance of loans receivable exceeded the fair value of loans by $42,234 and $23,463 as of March 31, 2024 and December 31, 2023, respectively. At the time of origination, the Company's loans are collateralized by the assets of borrowers and other pledged collateral and may have guarantees to provide for protection of the payments due on loans receivable. During the three months ended March 31, 2024 and 2023, the Company recorded net unrealized losses of $18,771 and net unrealized gains of $43,459, respectively, on loans receivable, at fair value, which is included in trading income (loss) and fair value adjustments on loans on the condensed consolidated statements of operations. Loans receivable, at fair value on non-accrual and 90 days or greater past due was approximately zero as of March 31, 2024. Loans receivable, at fair value on non-accrual and 90 days or greater past due was $41,236, which represents approximately 7.7% of total loans receivable, at fair value as of December 31, 2023. The principal balance of loans receivable on non-accrual and 90 days or greater past due was $43,326 as of December 31, 2023. Interest income for loans on non-accrual and/or 90 days or greater past due is recognized separately from changes in fair value in interest income - loans and securities lending on the condensed consolidated statements of operations. The amount of gains or (losses) included in earnings attributable to changes in instrument – specific credit risk was $(11,339) and $37,488 during the three months ended March 31, 2024 and 2023, respectively. The gains or losses attributable to changes in instrument – specific risk was determined by management based on an estimate of the fair value change during the period specific to each loan receivable.

The Company may periodically provide limited guarantees to third parties for loans that are made to investment banking and lending clients. As of March 31, 2024, the Company has outstanding limited guarantee arrangements with respect to Babcock & Wilcox Enterprises, Inc. (“B&W”) as further described in Note 16(b). In accordance with the credit loss standard, the Company evaluates the need to record an allowance for credit losses for these loan guarantees since they have off-balance sheet credit exposures. As of March 31, 2024, the Company has not recorded any provision for credit losses on the B&W guarantees since the Company believes that there is sufficient collateral to protect the Company from any credit loss exposure.

Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the condensed consolidated statements of operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts and premiums are amortized to interest income using a level yield methodology.

On August 21, 2023, one of the Company’s subsidiaries and Vintage Capital Management, LLC (“VCM”), an affiliate of Brian Kahn, amended and restated a promissory note (the “Amended and Restated Note”), pursuant to which VCM owes the Company's subsidiary the aggregate principal amount of $200,506 and bears interest at the rate of 12% per annum payable-in-kind with a maturity date of December 31, 2027. The Amended and Restated Note requires repayments prior to the maturity date from certain proceeds received by VCM, Mr. Kahn or his affiliates from, among other proceeds, distributions or dividends paid by Freedom VCM in amount equal to the greater of (i) 80% of the net after-tax proceeds, and (ii) 50% of gross proceeds. The obligations under the Amended and Restated Note are primarily secured by a first priority perfected security interest in Freedom VCM equity interests owned by Mr. Kahn, the CEO and a board member of Freedom VCM as of December 31, 2023, and his spouse with a value (based on the transaction price in the FRG take-private transaction) of $227,296 as of August 21, 2023. On January 22, 2024, Mr. Kahn resigned as CEO and a member of the board of directors of Freedom VCM. The fair value of the Freedom VCM equity interest owned by Mr. Kahn and his spouse was $197,782 and $232,065 as of March 31, 2024 and December 31, 2023, respectively. Amounts owing under the Amended and Restated Note may be repaid at any time without penalty. On a quarterly basis, the Company will continue to obtain third party appraisals to evaluate the value of the collateral of the loan since the repayment of the loan and accrued interest will be paid primarily from the cash distributions from Freedom VCM or foreclosure on the underlying collateral. In light of Mr. Kahn’s alleged involvement with the alleged misconduct concerning Prophecy Asset Management LP, the Company can provide no assurances that it will not be subject to claims asserting an interest in the Freedom VCM equity interests owned by Mr. Kahn, including those that collateralize the Amended and Restated Note. If a claim were successful, it would diminish the value of the collateral which could impact the carrying value of the loan. If such claims are made, however, the Company believes it has valid defenses from any such claim and any such claim would be without merit. Other factors leading to a deterioration in the collateral, including in the performance of Freedom VCM or delays in the execution of its strategies, including the possible disposition of additional businesses and further de-leveraging of its balance sheet, for the loan receivable may impact the ultimate collection of principal and interest. In the event the loan balance and accrued interest exceed the underlying collateral value of the loan, this will impact the fair value of the loan and result in an unrealized loss being recorded in the condensed consolidated statements of operations.

Interest income on loans receivable is recognized based on the stated interest rate of the loan on the unpaid principal balance plus the amortization of any costs, origination fees, premiums and discounts and is included in interest income - loans and securities lending on the consolidated statements of operations. Loan origination fees and certain direct origination costs are deferred and recognized as adjustments to interest income over the lives of the related loans. Unearned income, discounts, and premiums are amortized to interest income using a level yield methodology.

As of March 31, 2024, loans receivable had an aggregate remaining contractual principal balance of $499,956, an aggregate fair value of $452,496, and the contractual principal balance exceeded the fair value by $47,460. As of December 31, 2023, loans receivable had an aggregate remaining contractual principal balance of $563,637, an aggregate fair value of $532,419, and the contractual principal balance exceeded the fair value by $31,218.

Badcock Loan Receivable

On December 20, 2021, the Company entered into a Master Receivables Purchase Agreement (“Badcock Receivables I”) with W.S. Badcock Corporation, a Florida corporation (“WSBC”), which at the time was an indirect wholly owned subsidiary of Franchise Group, Inc., a Delaware corporation (“FRG”), which became a subsidiary of Freedom VCM as a result of the transaction on August 21, 2023. The Company paid $400,000 in cash to WSBC for the purchase of certain consumer credit receivables of WSBC. On September 23, 2022, the Company's then majority-owned subsidiary, B Riley

Receivables II, LLC (“BRRII”), a Delaware limited liability company, entered into a Master Receivables Purchase Agreement (“Badcock Receivables II”) with WSBC. This purchase of $168,363 consumer credit receivables of WSBC was partially financed by a $148,200 term loan discussed in Note 10. During the three months ended March 31, 2023, BRRII entered into Amendment No. 2 and No. 3 to Badcock Receivables II with WSBC for a total of $145,278 in additional consumer credit receivables. The accounting for these transactions resulted in the Company recording a loan receivable from WSBC with the recognition of interest income at an imputed rate based on the cash flows expected to be received from the collection of the consumer receivables that serve as collateral for the loan. These loan receivables are measured at fair value.

On August 21, 2023, all of the equity interests of BRRII were sold to Freedom VCM Receivables, Inc. (“Freedom VCM Receivables”), a subsidiary of Freedom VCM, which resulted in a loss of $78. In connection with the sale, Freedom VCM Receivables assumed the obligations with respect to the Pathlight Credit Agreement as more fully discussed in Note 10 and Freedom VCM Receivables entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $58,872, with a stated interest rate of 19.74% and a maturity date of August 21, 2033 with payments of principal and interest on the note limited solely to the performance of certain consumer receivables held by BRRII. This loan receivable is measured at fair value.

In connection with these loans, the Company entered into a Servicing Agreement with WSBC pursuant to which WSBC provides to the Company certain customary servicing and account management services in respect of the receivables purchased by the Company under the Receivables Purchase Agreement. In addition, subject to certain terms and conditions, FRG has agreed to guarantee the performance by WSBC of its obligations under the Master Receivables Purchase Agreements and the Servicing Agreement.

As of March 31, 2024 and December 31, 2023, the Badcock Receivables I loan receivable to WSBC in the Company's condensed consolidated balance sheets included loans measured at fair value in the amount of $15,868 and $20,624, respectively. As of March 31, 2024 and December 31, 2023, the Freedom VCM Receivables’ loan receivable in connection with the sale of all of the equity interests of BRRII was included in the Company's condensed consolidated balance sheets in loans receivable, at fair value in the amount of $42,482 and $42,183, respectively.

Nogin Loan and Loan Commitment

On November 16, 2023, the Company entered into a Chapter 11 Restructuring Support Agreement (as amended, the “RSA”) with Nogin Inc. and certain of its subsidiaries (collectively, “Nogin”), and certain holders of Nogin’s convertible notes (the “Consenting Noteholders”). Pursuant to the RSA, the Company funded $17,530 of debtor-in-possession (“DIP”) financing as of December 31, 2023. The Company funded an additional $15,470 during the three months ended March 31, 2024, which increased the DIP financing to $33,000 at March 31, 2024. This loan receivable had a fair value of $32,673 and $17,980 as of March 31, 2024 and December 31, 2023, respectively. An additional $3,000 of DIP financing was funded in the second quarter of 2024, for a total DIP financing (inclusive of $1,700 in fees payable in kind) of $37,700. On May 3, 2024, the Company funded an additional $21,300 in cash to complete the acquisition of Nogin of which $15,500 was a payment to the Consenting Noteholders.

(i) Securities and Other Investments Owned and Securities Sold Not Yet Purchased

Securities owned consist of equity securities including, common and preferred stocks, warrants, and options; corporate bonds; other fixed income securities including, government and agency bonds; loans receivable valued at fair value; and investments in partnerships. Securities sold, but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price and thereby create a liability to purchase the security in the market at prevailing prices. Changes in the value of these securities are reflected currently in the results of operations.

As of March 31, 2024 and December 31, 2023, the Company’s securities and other investments owned and securities sold not yet purchased at fair value consisted of the following securities:


	March 31, 2024		December 31, 2023
Securities and other investments owned:
Equity securities	$	869,137	$	994,634
Corporate bonds	56,616		59,287
Other fixed income securities	5,151		2,989
Partnership interests and other	18,964		35,196
	$	949,868	$	1,092,106

Securities sold not yet purchased:
Equity securities	$	2,609	$	1,037
Corporate bonds	2,592		5,971
Other fixed income securities	1,222		1,593
	$	6,423	$	8,601

The Company owns certain equity securities that are accounted for under the fair value option where the Company would otherwise use the equity method of accounting. Investments become subject to the equity method of accounting when the Company possesses the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the Company possesses more than 20% of the voting interests of the investee. However, the Company may have the ability to exercise significant influence over the investee when the Company owns less than 20% of the voting interests of the investee depending on the facts and circumstances that demonstrate that the ability to exercise influence is present, such as when the Company has representation on the board of directors of such investee.

The Brand Investments

The following tables contain summarized financial information with respect to five of the Company's investments in limited liability companies that primarily license brand names and trademarks through licensing agreements. The Company has an ownership interest in each investee between 10% and 50%. For the 10% ownership interest, the Company is presumed to have the ability to exercise significant influence since the investment is more than minor and the limited liability company is required to maintain specific ownership accounts for each member. The Company has significant influence in the other four investments due to the ownership interest being greater than 20%. The financial information of these five investments has been aggregated and included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 and 2022 correspond to amounts during the three months ended March 31, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:


	December 31,		September 30,
	2023		2023
Current assets	$	47,356	$	51,588
Noncurrent assets	$	266,995	$	269,809
Current liabilities	$	9,524	$	8,594
Noncurrent liabilities	$	621	$	760
Equity attributable to investee	$	301,380	$	309,167
Noncontrolling interest	$	2,826	$	2,876


	For the three months ended December 31,
	2023(1)		2022
Revenues	$	33,966	$	27,971
Cost of revenues	$	19,069	$	16,387
Net income attributable to investees	$	15,152	$	11,808

(1) - Financial information for 2023 includes two additional investments as a result of the acquisition of a majority ownership interest in bebe stores, inc (“bebe”) in 2023 and an other investment made in 2023.

As of March 31, 2024 and December 31, 2023, the fair value of these five investments totaled $288,436 and $283,057, respectively, and are included in securities and other investments owned, at fair value in the condensed consolidated balance sheets.

Freedom VCM Holdings, LLC Equity Interest and Take-Private Transaction

On August 21, 2023, the Company acquired an equity interest in Freedom VCM for $216,500 in cash in connection with the closing of the acquisition of FRG, by a buyer group that included members of senior management of FRG, led by Mr. Kahn, FRG’s then Chief Executive Officer (the “FRG take-private transaction”). In connection with the closing of the FRG take-private transaction, the Company terminated an investment advisory agreement (the “Advisory Agreement”) with Mr. Kahn. Pursuant to the Advisory Agreement, Mr. Kahn, as financial advisor, had the sole power to vote or dispose of $64,644 of shares of FRG common stock (based on the value of FRG shares in the FRG take-private transaction as of the closing date of such transaction) held of record by B. Riley Securities, Inc. (“BRS”). Upon the termination of the Advisory Agreement, (i) Mr. Kahn’s right to vote or dispose of such FRG shares terminated, (ii) such FRG shares owned by BRS were rolled over into additional equity interests in Freedom VCM in connection with the FRG take-private transaction, and (iii) Mr. Kahn owed a total of $20,911 to the Company under the Advisory Agreement which amount was added to, and included in, the Amended and Restated Note.

Following these transactions, the Company owns an equity interest of $281,144 or 31% of the outstanding equity interests in Freedom VCM. Also in connection with the FRG take-private transaction, on August 21, 2023 all of the equity interests of BRRII, a majority-owned subsidiary of the Company, were sold to a Freedom VCM affiliate, which resulted in a loss of $78. In connection with the sale, the Freedom VCM affiliate assumed the obligations with respect to the Pathlight Credit Agreement, as further discussed in Note 10, and the Company entered into a non-recourse promissory note with another Freedom VCM affiliate in the amount of $58,872, with a stated interest rate of 19.74% and a maturity date of August 21, 2033 (the “Freedom Receivables Note”) with payments of principal and interest on the note limited solely to performance of certain receivables held by BRRII.

The Company has elected to account for this 31% equity investment under the fair value option. The following tables contain summarized financial information with respect to Freedom VCM, included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 correspond to amounts during the three months ended March 31, 2024 of the Company), which is the period in which the most recent financial information is available:


	December 31, 2023		September 30, 2023
Current assets	$	961,787	$	1,219,682
Noncurrent assets	$	3,131,506	$	3,142,660
Current liabilities	$	720,510	$	749,894
Noncurrent liabilities	$	2,640,805	$	2,695,445
Equity attributable to investee	$	731,978	$	917,003


	For the three months ended December 31,
	2023
Revenues	$	806,229
Cost of revenues	$	499,679
Loss from continuing operations	$	(1,175)
Net loss attributable to investees	$	(169,583)

As of March 31, 2024 and December 31, 2023, the fair value of the investment in Freedom VCM totaled $244,638 and $287,043, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets. The change in fair value recorded in the income statement was an unrealized loss of $42,405 for the three months ended March 31, 2024. The change in fair value recorded in the income statement was an unrealized gain of $5,899 for the period from August 21, 2023 (date of the investment) through December 31, 2023.

Babcock and Wilcox Enterprises, Inc, Equity Investment

The Company owns a 31% voting interest in B&W whereby the Company has elected to account for this investment under the fair value option. The following tables contain summarized financial information with respect to B&W included below for purposes of the disclosure a quarter in arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 and 2022 correspond to amounts during the three months ended March 31, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:


	December 31, 2023		September 30, 2023
Current assets	$	497,593	$	542,300
Noncurrent assets	$	278,105	$	294,979
Current liabilities	$	350,197	$	393,539
Noncurrent liabilities	$	625,851	$	585,430
Equity attributable to investee	$	(200,961)	$	(142,316)
Noncontrolling interest	$	611	$	626


	For the three months ended December 31,
	2023		2022
Revenues	$	227,167	$	236,424
Cost of revenues	$	171,552	$	182,760
Loss from continuing operations	$	(54,266)	$	(2,289)
Net (loss) income	$	(62,724)	$	5,660
Net (loss) income attributable to investees	$	(66,454)	$	2,021

As of March 31, 2024 and December 31, 2023, the fair value of the investment in B&W totaled $31,015 and $40,072, respectively, and is included in securities and other investments owned, at fair value in the condensed consolidated balance sheets.

Other Public Company Equity Investments

As of March 31, 2024, the Company had a voting interest of 14% in Synchronoss Technologies, Inc. The Company has significant influence due to the equity ownership interest and board representation for this company. The Company has elected to account for this equity investment under the fair value option. The following tables contain summarized financial information with respect to Synchronoss Technologies, Inc., included below for purposes of the disclosure a quarter in

arrears (balance sheet amounts as of December 31, 2023 and September 30, 2023 correspond to amounts as of March 31, 2024 and December 31, 2023, respectively, of the Company; income statement amounts during the three months ended December 31, 2023 and 2022 correspond to amounts during the three months ended March 31, 2024 and 2023, respectively, of the Company), which is the period in which the most recent financial information is available:


	Synchronoss Technologies, Inc.
	December 31, 2023		September 30, 2023
Current assets	$	82,002	$	85,903
Noncurrent assets	$	228,335	$	275,304
Current liabilities	$	47,697	$	74,528
Noncurrent liabilities	$

B. Riley Financial, Inc. [RILYN] Filings
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10-Q	[2024-05-15]
10-K	[2024-04-24]
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]

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