8-K: B. Riley Financial Releases Preliminary Q4 2024 Results: Net Income Expected to Range from $48 Million to $68 Million

B. Riley Financial announces preliminary estimates for Q4 2024, projecting net income available to common shareholders between $48 million and $68 million, driven by income from discontinued operations.

Summary

• B. Riley Financial released preliminary, unaudited financial estimates for the fourth quarter of 2024.
• Net income available to common shareholders is expected to be in the range of $48 million to $68 million, or $1.57 to $2.22 per diluted share.
• This includes approximately $236 million to $247 million of income from discontinued operations, primarily from the divestiture of a majority interest in the Great American businesses.
• Net loss from continuing operations is expected to be in the range of ($178) million to ($187) million.
• This loss includes preliminary estimated impairment charges of goodwill and intangible assets of $73 million to $79 million, and $49 million of trading losses and realized and unrealized losses on investments.
• Operating adjusted EBITDA from continuing operations is expected to be in the range of $12 million to $14 million.
• As of December 31, 2024, cash, cash equivalents, and restricted cash totaled approximately $257 million.
• Total debt as of December 31, 2024, was $1.78 billion.
• Total debt, net of cash and investments, was $991 million as of December 31, 2024, a decline of $221 million from the third quarter.
• The company reduced debt by more than $700 million since January 2024 and retired its Nomura facility.
• The company will hold an investor call on March 3, 2025, to discuss the results.

Sentiment

Score: 6

Explanation: The sentiment is mixed. While the company highlights debt reduction and a focus on core businesses, the net loss from continuing operations and impairment charges temper the positive aspects. The management's optimism suggests a potential turnaround, but the preliminary nature of the results warrants caution.

Positives

• The company expects net income available to common shareholders to be between $48 million and $68 million for Q4 2024.
• The company reduced debt by more than $700 million since January 2024.
• Total debt, net of cash and investments, decreased by $221 million from the third quarter.
• B. Riley Securities finished the year with a strong December.

Negatives

• The company expects a net loss from continuing operations in the range of ($178) million to ($187) million.
• The net loss includes impairment charges of goodwill and intangible assets of $73 million to $79 million.
• The net loss includes $49 million of trading losses and realized and unrealized losses on investments.
• The results were negatively impacted by unusual expenses related to legal, transaction and restructuring fees.

Risks

• The preliminary financial estimates are unaudited and subject to change.
• The company's future performance is subject to risks and uncertainties described in its filings with the SEC.
• The company's stock price could be materially negatively affected if risks or uncertainties materialize or assumptions prove incorrect.

Future Outlook

The company believes the worst is behind them and remains confident in the future based on the underlying strength of its core businesses, including B. Riley Securities. They are well positioned to invest resources to grow the team over the coming quarters.

Management Comments

• Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented: 'This quarter reflects a demarcation line from managing the losses in our principal investments to moving forward with our core businesses as the primary focus.'
• Riley continued, 'The steps we've taken over the past year, which include reducing debt by more than $700 million since January 2024, have enabled us to retire our Nomura facility and look forward as a company.'
• Riley stated, 'While we recognize we have work to do, we do believe the worst is behind us and remain confident in the future based on the underlying strength of our core businesses, including B. Riley Securities.'

Industry Context

B. Riley's diversified financial services model allows it to navigate various market conditions. The focus on core businesses and debt reduction aligns with a broader industry trend of financial prudence and operational efficiency. Competitors in the investment banking and financial consulting space may be facing similar challenges related to investment losses and restructuring costs.

Comparison to Industry Standards

• It's difficult to provide a precise comparison without knowing the specific composition of B. Riley's discontinued operations and the nature of their principal investments.
• However, the reported impairment charges suggest potential underperformance in certain investment areas, which is not uncommon in the financial services industry.
• Companies like Houlihan Lokey and PJT Partners, which focus on restructuring and advisory services, may have experienced different results due to their specific market focus.
• Comparing B. Riley's debt levels and EBITDA to peers like Stifel Financial or Cowen (now part of TD Securities) would provide a more comprehensive assessment of its financial health.

Stakeholder Impact

• Shareholders will be impacted by the reported net income and loss figures.
• Employees may be affected by the company's restructuring efforts and focus on core businesses.
• Clients may experience changes in service offerings as the company streamlines its operations.
• Creditors will be impacted by the company's debt reduction efforts.

Next Steps

• The company will hold an investor call on March 3, 2025, to discuss the results.
• The company's Annual Report on Form 10-K is due on March 17, 2025.

Key Dates