• Net Loss: Estimated between $435 million to $475 million for Q2 2024.

• Operating Adjusted EBITDA: Expected to be in the range of $50 million to $55 million for Q2 2024.

• Non-Cash Impairment Charge: Approximately $28 million related to Targa's.

• Deferred Tax Benefit Charge: $25 million.

• Non-Cash Write Down: Approximately $330 million to $370 million related to Freedom VCM investment.

• Great American Group Revenue: Approximately $153 million for fiscal year 2023.

• Great American Group Operating Income: Approximately $35 million for fiscal year 2023.

• Advisory Practice Revenue: Approximately $23 million EBITDA run rate.

• Warning! GuruFocus has detected 9 Warning Signs with RILY.

Release Date: August 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Operating adjusted EBITDA is expected to be in the range of $50 million to $55 million, indicating consistent contribution from core businesses.

• The company is focused on maximizing value from existing principal positions and has a strategic review process for the Great American Group business.

• B. Riley Financial Inc (NASDAQ:RILY) has a strong history of returning capital to shareholders, having paid a dividend every quarter since becoming listed.

• The acquisition of Interface Consulting International is expected to enhance the company's forensic accounting and litigation support practice.

• There is renewed optimism in small-cap stocks, and B. Riley Financial Inc (NASDAQ:RILY) is well-positioned in core financial services businesses.

Negative Points

• The company reported a significant net loss in the range of $435 million to $475 million for the second quarter.

• A non-cash write-down of approximately $330 million to $370 million was recorded in the Freedom VCM investment.

• The rapid deterioration in consumer spending negatively impacted the operating performance and investments, including a bankruptcy filing by a subsidiary.

• The company and its CEO received subpoenas from the SEC related to dealings with a former CEO, creating scrutiny and criticism.

• B. Riley Financial Inc (NASDAQ:RILY) has paused its dividend to focus on retiring outstanding debt, indicating financial strain.

Q & A Highlights

Q: Can you provide more details on the preliminary financial results for the second quarter of 2024? A: Bryant Riley, Chairman of the Board and Co-CEO, stated that the company expects a net loss between $435 million and $475 million, primarily due to non-cash write-downs related to investments in Freedom VCM and Targa. Operating adjusted EBITDA is anticipated to be between $50 million and $55 million, reflecting the consistent contribution of core businesses.

Q: What factors contributed to the significant net loss this quarter? A: Bryant Riley explained that the net loss was largely due to a non-cash impairment charge of approximately $28 million for Targa, a $25 million charge related to a deferred tax benefit, and a substantial write-down of $330 million to $370 million in the Freedom VCM investment. This was influenced by the rapid deterioration in consumer spending and issues related to FRG's former CEO.

Q: How is B. Riley Financial addressing the challenges with FRG and related investments? A: Bryant Riley mentioned that the company is focused on reducing the overhang from these investments and restoring stakeholder confidence. They are cooperating with the SEC regarding subpoenas related to dealings with Brian Kahn and are confident in their internal investigation's findings of no misconduct.

Q: What strategic decisions are being made in response to the current financial situation? A: The company has decided to pause its dividend to focus on retiring outstanding debt and maintaining a strong balance sheet. This decision supports other strategic priorities and helps manage leverage ratios.

Q: Can you elaborate on the company's focus and future plans for its core businesses? A: Bryant Riley highlighted that B. Riley Financial is refocusing on its core financial services, including asset appraisal and disposition, and continues to benefit from steady cash flow from communications and brand portfolios. They are also expanding their advisory services through acquisitions like Interface Consulting International.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.