10-Q: Siebert Financial Q3 Earnings Drop Amid Rising Costs

Siebert Financial Corp. reported a significant drop in Q3 2025 net income and EPS despite revenue growth, driven by increased operating expenses and lower interest income.

Summary

• Net income available to common stockholders for Q3 2025 was $1.622 million, a decrease from $3.826 million in Q3 2024.
• Basic and diluted earnings per share (EPS) for Q3 2025 was $0.04, down from $0.10 in Q3 2024.
• Total revenue for Q3 2025 increased to $26.847 million from $22.560 million in Q3 2024.
• Total expenses for Q3 2025 increased significantly to $24.659 million from $17.721 million in Q3 2024.
• Operating income for Q3 2025 was $2.188 million, a decrease from $4.839 million in Q3 2024.
• For the nine months ended September 30, 2025, net income available to common stockholders was $5.567 million, down from $11.554 million in the prior year period.
• Nine-month EPS was $0.14, down from $0.29 in the prior year period.
• Nine-month total revenue increased to $70.640 million from $63.879 million.
• Nine-month total expenses increased to $63.788 million from $48.359 million.
• The company acquired certain assets from Big Machine Label Group RLS LLC (BMLG) for $441,000 to expand its music business line.
• Began earning $362,000 in NIL negotiation services revenue in Q3 2025.
• Sold the majority of its Investment in Equity Security by August 2025, recognizing a total realized gain of $2.4 million for the nine months ended September 30, 2025.
• Extended its clearing agreement with National Financial Services, LLC (NFS) for an additional five years, receiving a one-time business development credit of $4.8 million.
• Acquired the remaining 32% of RISE Financial Services, LLC for $3.7 million on October 28, 2025, making it a wholly-owned subsidiary.

Sentiment

Score: 4

Explanation: While revenue saw growth, net income and EPS experienced a substantial decline due to a significant increase in operating expenses, particularly employee compensation and benefits, and technology investments. Strategic acquisitions and new revenue streams like NIL services show diversification efforts, but their positive impact on profitability is not yet realized. The company maintains strong regulatory capital positions and has access to credit, but the immediate financial performance is weaker.

Positives

• Total revenue increased by $4.287 million (19%) in Q3 2025 compared to Q3 2024.
• Stock borrow/stock loan revenue increased by 73.7% to $10.048 million in Q3 2025.
• Principal transactions and proprietary trading revenue increased by 9.7% to $4.606 million in Q3 2025.
• Other income increased by 92.1% to $1.408 million in Q3 2025, driven by new music and sports operations revenue.
• Advisory fees increased by $202,000 in Q3 2025, primarily due to growth in platform assets.
• Recognized a total realized gain of $2.4 million from the sale of Investment in Equity Security for the nine months ended September 30, 2025.
• Extended its clearing agreement with NFS for five years, securing a $4.8 million business development credit.
• Successfully launched technology development projects for the Retail Platform, with more anticipated in early 2026.
• Retail customer net worth increased to $19.2 billion as of September 30, 2025, from $18.0 billion at December 31, 2024.
• Retail customer accounts increased to 164,619 as of September 30, 2025, from 160,054 at December 31, 2024.
• Muriel Siebert & Co., LLC's (MSCO) net capital of $65.5 million was $63.7 million in excess of its required net capital.
• MSCO's special reserve account had $16.7 million in excess of the deposit requirement.
• RISE Financial Services, LLC's regulatory net capital of $1.2 million was $0.9 million in excess of its minimum requirement.

Negatives

• Net income available to common stockholders decreased by 57.6% to $1.622 million in Q3 2025 from $3.826 million in Q3 2024.
• Basic and diluted EPS decreased by 60% to $0.04 in Q3 2025 from $0.10 in Q3 2024.
• Operating income decreased by 54.8% to $2.188 million in Q3 2025 from $4.839 million in Q3 2024.
• Total expenses increased significantly by $6.938 million (39.2%) in Q3 2025 compared to Q3 2024, outpacing revenue growth.
• Employee compensation and benefits increased by $4.474 million in Q3 2025, primarily due to increased commission payouts and additional personnel.
• Interest, marketing and distribution fees decreased by $1.365 million in Q3 2025, primarily due to a decline in interest rates.
• Nine-month net income available to common stockholders decreased by 51.8% to $5.567 million from $11.554 million.
• Nine-month EPS decreased by 51.7% to $0.14 from $0.29.
• Nine-month operating income decreased by 55.9% to $6.852 million from $15.520 million.
• Nine-month employee compensation and benefits increased by $9.101 million.
• Commissions and fees for the nine months decreased by $794,000 due to lower customer demand.
• Interest, marketing and distribution fees for the nine months decreased by $4.149 million due to a decline in interest rates.
• The acquisition of BMLG assets has not yet contributed positively to operating results.

Risks

• Economic, social, and political conditions, including global economic downturns, can impact financial results.
• Changes and volatility in tariffs and trade policies.
• Securities industry risks, including interest rate risks, liquidity risks, and credit risk with clients and counterparties.
• Risk of liability for errors in clearing functions and systemic risk.
• Systems failures, delays, capacity constraints, and network security risks.
• Intense competition within the financial services industry.
• Reliance on external service providers.
• New laws and regulations affecting the business, extensive regulation, and regulatory uncertainties.
• Failure to maintain relationships with employees, customers, business partners, or governmental entities.
• Inability to achieve synergies or implement integration plans from acquisitions.
• Potential for material adverse impact from legal proceedings, although currently not expected to be material.
• Exposure to off-balance sheet risk from customer activities if customers or other brokers fail to fulfill contractual obligations.
• Uncertainty regarding the timing or magnitude of future earnings from new business lines like the music label.

Future Outlook

Management anticipates that future revenues from recorded music sales, streaming, and licensing will drive profitability over time from the BMLG acquisition, expecting the music label to contribute positively to overall operating results as its catalogue matures. Technology development projects for the Retail Platform are expected to go live in early 2026, with ongoing investments in technology seen as key for meeting customer needs and market expansion. The company believes its available cash, credit lines, and access to capital markets will be adequate for liquidity needs for the foreseeable future. Significant changes are expected in income tax and expense disclosures due to new accounting standards (ASU 2023-09 and ASU 2024-03) becoming effective in future periods, and the company is evaluating the impact of other new standards (ASU 2025-05 and ASU 2025-06).

Management Comments

• "As expected, these investments [BMLG acquisition] have not yet contributed positively to operating results."
• "Management believes these expenditures are essential to building the labels catalogue and brand, and anticipates that future revenues from recorded music sales, streaming, and licensing will drive profitability over time."
• "While there is no assurance regarding the timing or magnitude of future earnings, we expect the label to contribute positively to overall operating results as its catalogue matures."
• "We believe that these ongoing investments in technology will be key in meeting the needs of our retail customers, correspondent clearing, corporate services as well as our expansion into new markets and demographics."
• "Based on our current level of operations, we believe our available cash, available lines of credit, overall access to capital markets, and cash provided by operations will be adequate to meet our current liquidity needs for the foreseeable future."
• "The Company believes that it is unlikely it will have to make material payments related to early termination fees and has not recorded any contingent liability in the financial statements related to this arrangement."
• "In our opinion, based on currently available information, the ultimate resolution of current matters will not have a material adverse impact on our financial position and results of operations."

Industry Context

The company's financial performance is highly correlated with general economic conditions and the U.S. equity and fixed-income markets, indicating sensitivity to broader market trends, interest rates, and regulatory changes. The decline in interest, marketing, and distribution fees reflects a challenging interest rate environment. Diversification into music and sports operations, including NIL revenue and the BMLG acquisition, suggests a strategic move to tap into new growth areas beyond traditional brokerage. Significant investments in technology, such as the Retail Platform and FusionIQ, align with the broader financial industry's push towards digital transformation and enhanced client experience.

Comparison to Industry Standards

• The filing does not provide specific comparisons to industry benchmarks, comparable companies, projects, or global standards.

Legal Proceedings

• The company is subject to various proceedings and claims arising from business activities, including lawsuits, arbitration claims, and regulatory matters.
• Management believes the ultimate resolution of current matters will not have a material adverse impact on the company's financial position and results of operations as of September 30, 2025.
• Resolution of one or more matters may have a material effect on the results of operations in any future period, depending upon the ultimate resolution and the level of income for such period.

Related Party Transactions

• KCA (license from Muriel Siebert Estate/Foundation) passed through costs of $0 for Q3 and 9 months 2025 (vs $15,000 and $45,000 in 2024).
• PW (insurance services) generated revenue from related parties of $4,000 for Q3 2025 (vs $26,000 in 2024) and $66,000 for 9 months 2025 (vs $75,000 in 2024).
• Compensation for the three sons of Gloria E. Gebbia and John J. Gebbia (CEO and Director) holding executive positions: $1,547,000 for Q3 2025 (vs $1,054,000 in 2024) and $3,406,000 for 9 months 2025 (vs $2,593,000 in 2024).
• Gloria E. Gebbia issued a warrant to BCW Securities LLC to purchase 403,780 shares of common stock at $2.15 per share on May 22, 2023.
• Month-to-month lease agreement for Omaha, Nebraska office with Gebbia Sullivan County Land Trust (trustee is Gebbia Family member): rent expense $15,000 for Q3 2025 and 2024, and $45,000 for 9 months 2025 and 2024.
• John J. Gebbia, Gloria E. Gebbia, and the John and Gloria Living Trust guarantee obligations under the EWB Credit Agreement (entered August 15, 2024).
• Acquired 100% of Gebbia Media, LLC on August 12, 2024, a music and entertainment company owned by members of the Gebbia family.
• Kakaopay Corporation acquired 8,075,607 shares of common stock at $2.15 per share on April 27, 2023. MSCO provides an omnibus trading account and trade execution services to Kakaopay Securities Corp.
• MSCO and RISE (majority-owned subsidiary, now wholly-owned) have a clearing arrangement.
• Sales Agreement for At the Market Offering entered into with MSCO (subsidiary) and Ladenburg Thalmann & Co. Inc. as agents.
• On October 28, 2025, the company purchased the remaining 32% of RISE, including 24% owned by Gloria E. Gebbia, for $3.7 million.

Stakeholder Impact

• Shareholders face dilution risk from potential future capital raises (shelf registration, ATM offering) and experienced decreased EPS in Q3 and YTD 2025, though there is potential for future growth from new business lines and technology investments.
• Employees benefit from increased compensation and benefits, and additional personnel have been hired for technology and new business lines, with a share-based compensation plan in place.
• Customers are targeted for enhanced services through investments in technology (Retail Platform, FusionIQ), and the company reported growth in retail customer accounts and net worth.
• Creditors are impacted by the company's compliance with debt covenants for its East West Bank mortgage and BMO Credit Agreement, with personal guarantees from key executives for the EWB Credit Agreement.
• Suppliers and partners maintain ongoing relationships, as evidenced by the extended clearing agreement with NFS and continued service agreement with Broadridge.

Next Steps

• Technology development projects for the Retail Platform are anticipated to go live in early 2026.
• The company will continue to monitor the financial significance of the GM acquisition and may report additional segments.
• Evaluating the presentational effect of ASU 2023-09 on its consolidated financial statements, expecting considerable changes to its income tax footnote.
• Evaluating the impact of ASU 2024-03 on its consolidated financial statements, anticipating significant changes to its expense disclosures.
• Evaluating the impact of ASU 2025-05 and ASU 2025-06 on its financial statements and disclosures.
• The music label is expected to contribute positively to overall operating results as its catalogue matures.

Key Dates

Recommendation

The company presents mixed results with revenue growth driven by strategic diversification into music and sports, and strong performance in stock borrow/loan. However, profitability has significantly declined due to rising operating expenses and lower interest income, leading to a substantial drop in EPS. While investments in technology and new business lines offer long-term potential, their positive impact on earnings is not yet realized. The company maintains strong regulatory capital and liquidity, but the immediate financial performance warrants caution. A 'hold' recommendation reflects the balance between growth initiatives and current profitability challenges, suggesting investors monitor the execution of strategic plans and the impact of rising costs.

Keywords

Broker-dealer, Financial services, SEC filing, 10-Q, Earnings report, Q3 2025, Siebert Financial Corp., SIEB, Retail brokerage, Investment advisory, Music business, NIL revenue, Stock borrow/loan, Principal transactions, Proprietary trading, Net capital, Regulatory compliance, Technology initiatives, Acquisition, Financial performance, Market risk, Interest rates, Capital raise