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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-04-16 · 118 added, 79 removed, 227 unchanged (46% of the section changed)

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Please also refer to the section under heading “Special Note Regarding Forward-Looking Statements.”

The information for the years ended December 31, 2023 and 2022 are derived from Wentworth Management Services LLC’s audited consolidated financial statements and the notes thereto included elsewhere in this report.

The information for the years ended December 31, 2024 and 2023 are derived from the Company’s audited consolidated financial statements and the notes thereto included elsewhere in this report.

Any reference to Binah Capital Group, Inc.

refers to Binah Capital Group, Inc.

and our consolidated subsidiaries on a forward-looking basis or as the context requires, to the historical results of Wentworth Management Services LLC.

Any reference to “Wentworth Management Services LLC” refers to the entities comprising the Binah Capital Group, Inc.

and our consolidated subsidiaries on a forward-looking basis or as the context requires, to the historical results of BMS Management Services LLC.

Any reference to “BMS Management Services LLC” refers to the entities comprising the Binah Capital Group, Inc.

business prior to the consummation of the Business Combination.

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Financial Highlights

Results for the year ended December 31, 2023 included net income of approximately $571,000 and total revenue of approximately $168.0 million, which compares to net income and total revenue of $910,331 and approximately $178.0 million, respectively, for the year ended December 31, 2022.

Results for the year ended December 31, 2024 included a net loss of approximately $4.6 million and total revenue of approximately $168.9 million, which compares to net income and total revenue of $0.5 million and approximately $168.0 million, respectively, for the year ended December 31, 2023.

Total advisory and brokerage assets served were $27.1 billion at December 31, 2024, compared to $23.9 billion at December 31, 2023.

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Net new advisory assets were $0.0 million for the year ended December 31, 2024, compared to $(0.5) million in 2023.

Advisory assets were $2.1 billion at December 31, 2023, which is consistent from the $2.1 billion at December 31, 2022.

Advisory assets were $2.5 billion at December 31, 2024, which is an increase of approximately 21% from the $2.1 billion at December 31, 2023.

Net new brokerage assets were $(2.1) billion for the year ended December 31, 2024, compared to $(3.1) billion in 2023.

Brokerage assets were $21.8 billion at December 31, 2023, up 8% from $20.1 billion at December 31, 2022.

Brokerage assets were $24.5 billion at December 31, 2024, an increase of approximately 12% from $21.8 billion at December 31, 2023.

Gross Profit Trend

Gross profit, a non-GAAP financial measure, was $31.8 million for the year ended December 31, 2023, a decrease of 4% from $33.2 million for the year ended December 31, 2022.

Gross profit, a non-GAAP financial measure, was $32.0 million for the year ended December 31, 2024, an increase of 0.6% from $31.8 million for the year ended December 31, 2023.

See the “Key Performance Metrics and Non-GAAP Financial Measures” section for additional information on gross profit.

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Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with U.S.

Management believes that the non-GAAP financial measures of Gross Profit and EBITDA provide investors and analysts useful insight into our financial position and operating performance.

Management believes that the non-GAAP financial measures of Gross Profit, EBITDA and Adjusted EBITDA provide investors and analysts useful insight into our financial position and operating performance.

Any non-GAAP measure provided should be viewed in addition to, and not as an alternative to, the most directly comparable measure determined in accordance with U.S.

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We believe that gross profit amounts can provide investors with useful insight into our core operating performance before other costs that are general and administrative in nature.

EBITDA and Adjusted EBITDA

EBITDA is a non-GAAP financial measure defined as net income plus interest expense, provision for income taxes, and depreciation and amortization.

The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations.

EBITDA is not a measure of the Company’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP.

Adjusted EBITDA is defined as EBITDA, a non-GAAP measure, plus business combination and re-financing costs.

The Company presents EBITDA and Adjusted EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations.

EBITDA and Adjusted EBITDA are not a measure of the Company’s financial performance under GAAP and should not be considered as an alternative to net income or any other performance measure derived in accordance with GAAP.

A reconciliation of our non-GAAP financial measures to their most directly comparable GAAP financial measures appears below in the footnotes to the table of our key operating, business and financial metrics.

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Total revenue

Net (loss) income

Non-GAAP Financial Metrics (dollars in millions)

Gross Profit (1)

Adjusted EBITDA (2)

(1) Gross profit is a non-GAAP financial measure defined as total revenue less commissions paid to financial advisors and registered representatives and other fees that generate the revenue.

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Below is a calculation of gross profit for the periods presented (in millions):

As of and for the Years Ended December 31,

For the Years Ended December 31,

Total revenue

Commission and fees

(2) EBITDA is a non-GAAP financial measure defined as net income plus interest expense, provision for income taxes, and depreciation and amortization.

The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations.

Below is a reconciliation of net income to EBITDA for the periods presented (in millions):

As of and for the Years Ended December 31,

(2) EBITDA and Adjusted EBITDA are non-GAAP financial measures.

EBITDA is defined as net income plus interest expense, provision for income taxes, and depreciation and amortization.

Adjusted EBITDA is defined as EBITDA plus non-recurring costs related to our business combination as well as re-financing the senior credit facility costs.

The Company presents EBITDA and Adjusted EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations.

Below is a reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA for the periods presented (in millions):

For the Years Ended December 31,

EBITDA Reconciliation

Net (loss) income

Interest expense

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Depreciation and amortization

Business combination and re-financing costs

Adjusted EBITDA (2)

Economic Overview and Impact of Financial Market Events

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economy grew 2.8% in 2024, and at an annualized pace of 2.3% in the fourth quarter of 2024 after growing at an annualized pace of 2.8% in the third quarter of 2024.

Although inflation, rising interest rates and volatile global markets were all headwinds the U.S.

Although inflation, interest rates and volatile global markets were all headwinds the U.S.

economy added roughly 500,000 jobs in the fourth quarter of 2024, while the unemployment rate averaged 4.2% in the fourth quarter of 2024, up slightly from the average in the prior quarter.

Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Fed policy.

During the fourth quarter of 2023, Fed policymakers maintained the target range for the federal funds rate to 5.25% to 5.50%.

During the fourth quarter of 2024, Fed policymakers maintained the target range for the federal funds rate at 4.25% to 4.50%.

Please consult the Factors Affecting Our Financial Condition and Results of Operations, including those described in the section of this proxy statement/prospectus titled “ Risk Factors .”

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Total expenses

Income before provision for income taxes

(Benefit) Provision for income taxes

Wentworth’s primary source of revenue is from fees and commissions from products and advisory services offered by our advisors to their clients, a substantial portion of which we pay out to our advisors.

(Loss) income before provision for income taxes

Provision (benefit) for income taxes

Net (loss) income

The Company’s primary source of revenue is from fees and commissions from products and advisory services offered by our advisors to their clients, a substantial portion of which we pay out to our advisors.

We also generate interest income in accordance with our agreements with our clearing partners.

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Accordingly, total commission revenue is reported on a gross basis.

See Note 4 — Revenues From Contracts with Customers within the notes to the audited

consolidated financial statements for the years ended December 31, 2023, and 2022 for further details regarding our commission revenue by product category.

See Note 5 — Revenues From Contracts with Customers within the notes to the audited consolidated financial statements for the years ended December 31, 2024, and 2023 for further details regarding our commission revenue by product category.

The following table sets forth the components of our commission revenue for years December 31, 2024 and 2023 (in thousands):

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Total commission revenue

Sales based revenue decreased by approximately $9.5 million or 11% year ended December 31, 2023 as compared to 2022.

Trailing based revenue decreased by approximately $3.1 million of 3% for the year ended December 31, 2023 as compared to 2022.

Sales based revenue decreased by approximately $11.7 million or 15.7% for the year ended December 31, 2024 as compared to 2023.

Trailing based revenue increased by approximately $16.2 million or 19.0% for the year ended December 31, 2024 as compared to 2023.

The decrease in sales based revenue for the year ended December 31, 2024 as compared to 2023 is attributable to a decrease in the generation of transactional based products.

The decrease in the trailing based revenues is primarily due to volatility driven declines in trail eligible assets.

The increase in the trailing based revenues is primarily due to volatility driven increases in trail eligible assets.

Commission revenue is generated from brokerage assets.

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The advisory fees generated from the Company’s corporate advisory platform are based on a percentage of the market value of the eligible assets in the clients’ advisory accounts.

Advisory fees decreased by approximately 2% for the year ended December 31, 2023 as compared to December 31, 2022, due to a net outflow of advisory assets.

The following tables summarizes the advisory assets for the years ended December 31, 2023 and 2022 (in millions):

Advisory fees increased by approximately 15% for the year ended December 31, 2024 as compared to December 31, 2023, due to the positive impact from the financial markets.

The following tables summarizes the advisory assets for the years ended December 31, 2024 and 2023 (in billions):

Advisory Assets

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Other income primarily includes amounts earned by the Company related to marketing and incentives earned from the sales of certain investment products by the financial advisors to its clients, primarily alternative investments, as well as sponsorship income.

The growth in interest and other income for the year ended December 31, 2023, compared to 2022 is primarily related to an increase in interest rates and an increase in marketing revenue from alternative investments, and an increase in sponsorship revenue.

Operating Expenses

The decrease in interest and other income for the year ended December 31, 2024, compared to 2023 is primarily related to certain non-recurring income items earned during 2023.

Commissions and Fees

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For the years ended December 31,

For the year ended December 31, 2023, the payout rate increased as compared to 2022 as a result of the addition of a team of financial advisors whose payout percentages range from 90-94%.

For the year ended December 31, 2024, the payout rate decreased as compared to 2023 as a result of the reduction in non-recurring commission products that carried a payout at 90%.

Employee compensation and benefits

Employee compensation and benefits includes salaries, wages, benefits and related taxes for our employees.

Employee compensation and benefits for the year ended December 31, 2023 decreased by $0.8 million which is directly related to the decrease in headcount of approximately 6%.

Employee compensation and benefits for the year ended December 31, 2024 increased by $2.2 million which is directly related to the additional personnel costs attributed to the Company now operating as a public company.

Rent and occupancy

Rent and occupancy increased by $0.2 million for the year ended December 31, 2023 compared to 2022 relating to a new lease agreement entered into by World Equity Group, Inc.

Rent and occupancy remained relative consistent for the year ended December 31, 2024 compared to 2023, decreasing by 3.3% or $0.04 million.

Professional fees

Professional fees includes costs incurred related to legal and accounting services.

Professional fees for the year ended December 31, 2023 as compared to 2022 decreased by $1.4 million, respectively, which is related to decrease in tax and audit costs related to the preparation and audit of the financial statements required to be included in the initial proxy and registration statements filed with the SEC.

Professional fees for the year ended December 31, 2024 as compared to 2023 increased by $2.3 million which is directly related to transaction costs associated with the Business Combination, the re-financing of the senior credit facility and specific costs related to the Company now operating as a public company.

Technology fees

Technology fees primarily represent infrastructure costs that support the Company’s technology and communications costs.

Technology fees increased by $0.6 million for the year ended December 31, 2023 as compared to 2022.

Technology fees decreased by $1.2 million for the year ended December 31, 2024 as compared to 2023.

Interest expense

Interest expense primarily includes interest associated with the Company’s credit facility and other debt obligations.

Interest expense increased by $1.8 million for the year ended December 31, 2023 as compared to 2022 resulting from an increase in the interest rate of the credit facility.

Interest expense decreased by $1.1 million for the year ended December 31, 2024 as compared to 2023 resulting from the repayments and restructuring of the related party debt obligations of BMS.

Depreciation and amortization

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Our effective income tax rate was (45.09)% and (17.49)% for the years ended December 31, 2024 and 2023, respectively.

The decrease in our effective tax rate was related to the change in deferred adjustments.

The change in our effective tax rate was related to the change in deferred adjustments.

Liquidity and capital resources

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Parent Company Liquidity

Wentworth Management Services LLC (the “Parent”), the direct holding company of our operating subsidiaries, considers its primary sources of liquidity to be dividends and management fees from our operating subsidiaries.

Binah Capital Group, Inc., through its indirectly wholly owned subsidiary BMS, is the direct holding company of our operating subsidiaries, considers its primary sources of liquidity to be dividends and management fees from our operating subsidiaries.

Sources of Liquidity

As of December 31, 2023, we had $20.82 million outstanding under our Senior Credit Facility with Oak Street Funding, LLC, net of debt issuance costs.

As of December 31, 2024, we had $19.6 million outstanding under our Credit Agreement with Byline Bank, net of unamortized debt issuance costs.

The associated debt facilities are as follows:

Oak Street Funding, LLC

On April 2, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) with Oak Street Funding LLC (“Oak Street”) in the amount of $25 million.

This note payable bears interest at the prime rate (“Prime”) (8.50% as of December 31, 2023) plus 2.25% and has a 10-year term and a 3-month interest only repayment provision.

As of December 31, 2023 and 2022, the outstanding balance of the Oak Street note, net of unamortized debt issuance costs was $17.6 million and $19.5 million, respectively.

On April 25, 2021, the Company entered into an additional promissory note with Oak Street in the amount of $4.1 million related to the acquisition of WEG (“WEG Note”).

This note payable bears interest at Prime plus 2.25% and has a 10-year term.

As of December 31, 2023 and 2022, the outstanding balance of this note, net of unamortized debt issuance costs was $3.2 million and $3.4 million, respectively.

Under the Oak Street notes, the Company is subject to certain covenants as defined in the agreements.

As of December 31, 2022 and March 31, 2023, the Company did not meet a certain debt service coverage ratio and subsequently obtained a waiver from Oak Street for such covenant violations.

For the period from April 1, 2023 to December 31, 2023, the Company was in compliance with all financial related covenants.

The minimum calendar year payments and maturities of the Oak Street notes as of December 31, 2023 were as follows (in thousands):

Other promissory notes

On November 30, 2017, WMS issued subordinated promissory notes in the aggregate principal amount of approximately $3.6 million to certain sellers in connection with the acquisition of the PKSH Entities.

On December 23, 2024 (the “ Credit Agreement Closing Date ”), BMS, entered into a Credit Agreement (the “ Credit Agreement ”) with Byline Bank, as lender (the “ Lender ”), pursuant to which the Lender agreed, at the BMS’s request, to (i) make to BMS a term loan in the original principal amount of $20.3 million (the “ Term Loan ”), which was funded on the Credit Agreement Closing Date;

(ii) make to BMS, from time to time, certain non-revolving loans (the “ Non-Revolving Loans ”) in an aggregate principal amount of up to $1.0 million (the “ Non-Revolving Loan Commitment ”), to be funded through, but excluding, the Maturity Date (as defined below);

and (iii) issue to BMS, from time to time, letters of credit (the “ Letters of Credit ” and together with the Term Loan and Non-Revolving Loans, the “ Loans ”) until the earliest to occur of (a) the one year from the Credit Agreement Closing Date and (b) the date on which the Non-Revolving Loans are fully drawn.

As of December 31, 2024, the outstanding balance on the Term Loan was $19.6 million, net of debt issuance costs.

Under the terms of the Credit Agreement, to the extent that the Company requests a Letter of Credit, the Non-Revolving Loan Commitment shall be permanently reduced in an amount equal to the amount of such Letter of Credit.

The Non-Revolving Loans may not be requested by the Company and may only be advanced in connection with a repayment of a Letter of Credit (“ LC Payment ”).

As of December 31, 2024 there are no amount outstanding under the Non-Revolving Loan or Letters of Credit.

The Loans (both principal and any remaining unpaid interest) made by the Lender to BMS are scheduled to mature and become immediately due and payable in full on December 23, 2029 (“Maturity Date”).

The obligations under the Credit Agreement shall bear interest (i) as to the Term Loan, a per annum variable interest rate equal to the Applicable Margin (as defined in the Credit Agreement) plus the greater of (x) the Term Secured Overnight Financing Rate (“SOFR”) (as defined in the Credit Agreement) and (y) one percent (1.00%) (the “ Term Loan Interest Rate ”);

(ii) as to the Non-Revolving Loans or any reimbursement obligations relating to a Letter of Credit, at an interest rate equal to SOFR plus four percent (4.00%) per annum;

and (iii) if any other obligations is created under the Loan Documents (as defined in the Credit Agreement), at the Term Loan Interest Rate.

As of December 31, 2024, the effective interest rate was 8.3%.

The Term Loan must be used by BMS to refinance Existing Credit Facilities (as defined in the Credit Agreement) and the Non-Revolving Loans must be used solely to reimburse the Lender with respect to any Letters of Credit issued to BMS.

The Term Loan refinanced and retired the previous Oak Street Funding Facility.

The Credit Agreement also includes customary covenants for a transaction of this type, including covenants limiting the indebtedness that can be incurred by BMS and restricting BMS’s ability to make certain loans and investments.

Additionally, BMS is subject to financial covenants whereby BMS and its subsidiaries on a consolidated basis may not have, as of the last day of each fiscal quarter, commencing with fiscal quarter ending on March 31, 2025, (1) a fixed charge coverage ratio as of the last day of the fiscal quarter for the twelve (12) month period then ended of not less than 1.20 to 1.00;

(ii) a senior net leverage ratio as of the last day of such Fiscal Quarter for the twelve (12) month period then ended, of (A) for the fiscal quarter ended March 31, 2025 and each fiscal quarter through

and including September 30, 2025, not more than 3.00 to 1.00;

and (B) for the fiscal quarter ended December 31, 2025 and each fiscal quarter ending thereafter, not more than 2.75 to 1.00;

or (iii) an annualized revenue received from custodians of at least $18.0 million.

Also, in accordance with the Credit Agreement, BMS has deposited $1.0 million into an A/P Reserve Account and is classified as restricted cash.

The minimum calendar year payments and maturities of the Byline Term Loan as of December 31, 2024 were as follows ( in thousands ) :

Series A Redeemable Convertible Preferred Stock

On March 15, 2024 (the “Funding Date”) in connection with the consummation of the Business Combination, Holdings and BMS entered into a Subscription Agreement with an investor for the purchase of 1,500,000 shares of Holdings’ Series A Redeemable Convertible Preferred Stock (the “ Holdings Series A Stock ”) in a private placement at $9.60 per share, for an aggregate purchase price of $14.4 million (the “ Series A PIPE ”).

The Holdings Series A Stock may be converted into shares of Holdings Common Stock after the second anniversary of the closing of the Series A PIPE, which such conversion shall initially be 1.5 shares of Holdings Common Stock for each share of Series A Convertible Preferred Stock, subject to certain adjustments provided in the Certificate of Designations.

Additionally, the Holdings Series A Stock carries a cumulative dividend at a rate of nine percent (9%) per annum, payable and compounded quarterly on the last day of each quarter.

At the discretion of Holdings the payment may be made in cash or up to 50% of the amount due, in duly authorized, validly issued, fully paid and non-assessable share of Holdings Series A Stock at a value of $10 per share.

For the year ended December 31, 2024, the Company paid dividends under the Series A PIPE in the amount of approximately $1.1 million of which $0.56 million was paid in cash and $0.55 was paid in-kind.

The Holdings Series A Stock has liquidation preferences in the event of a voluntary or involuntary liquidation as follows:

● The greater of $12.50 per share of Holdings Series A Stock if such liquidation occurs prior to the first anniversary of the Funding Date;

● $13.00 per share of Holdings Series A Stock if such liquidation occurs prior to the second anniversary of the Funding Date;

● $15.00 per share of Holdings Series A Stock if such liquidation occurs prior to the third anniversary of the Funding Date;

● $16.00 per share of Holdings Series A Stock if such liquidation occurs prior to the fourth anniversary of the Funding Date.

Holdings, at its option, may redeem the Series A Stock on any anniversary of the Funding date up to an including the fourth anniversary of the Funding date at the following redemption prices:

● $11.50 per share of Series A Stock on the first anniversary of the Funding Date;

● $13.00 per share of Series A Stock on the second anniversary of the Funding Date;

● $15.00 per share of Series A Stock on the third anniversary of the Funding Date;

● $16.00 per share of Series A Stock on the fourth anniversary of the Funding Date;

If the Series A Stock have not previously been redeemed or converted, the Series A Stock will be redeemed by Holdings on the fourth anniversary of the Funding Date.

Series B Convertible Preferred Stock

On September 4, 2024, the Company entered into a Subscription Agreement with an investor for the purchase of 150,000 shares of Holdings’ Series B Convertible Preferred Stock (the “ Holdings Series B Stock ”) in a private placement at $10.00 per share, for an aggregate purchase price of $1.5 million.

The Holdings Series B Stock may be converted into shares of Holdings Common Stock, at the option of the investor at a rate equal to the quotient of (i) $10.00 divided, by (ii) the product of (A).

80 multiplied by, (B) the volume weighted average price for the 20 trading days during the 30-day period immediately prior to such conversion, provided that in no event shall the denominator be less than $6.00 per share (the “Conversion Rate”).

Additionally, the Holdings Series B Stock carries a cumulative dividend at a rate of nine percent (7%) per annum, payable and compounded quarterly on the last day of each quarter.

At the discretion of Holdings, the payment may be made in cash or up to 50% of the amount due, in duly authorized, validly issued, fully paid and non-assessable share of Holdings Series B Stock at a value of $10 per share.

For the year ended December 31, 2024 total dividends related to the Holdings Series B Stock amounted to approximately $0.03 million, which is payable as of December 31, 2024.

The Company may, at its option, in whole, or part, redeem the Holdings Series B Stock any time after the first anniversary of the date of the Subscription Agreement at a redemption price equal to the greater of (i) $12.00 per share of Holdings Series B Stock, plus accrued but unpaid dividends or (A) 1.20 multiplied by (B) the volume weighted average price for 20 trading days during the 30-day period immediately prior to the redemption;

provided that such price shall not greater than $20.00.

Promissory notes - affiliates

On November 30, 2017, BMS issued subordinated promissory notes in the aggregate principal amount of approximately $3.6 million to certain sellers in connection with the acquisition of the PKSH Entities.

These notes had a maturity date of May 17, 2023 and accrued interest at a rate of 10% annually.

The interest on these notes has continued to accrue until such time as these notes are paid.

Contingent consideration subordinated promissory notes

Additionally, in connection with the acquisition of the PKSH Entities, the Company agreed to pay contingent consideration in the amount of $5.0 million to certain sellers.

The conditions related to this contingency were met on November 30, 2018, and thus the notes have been issued to the sellers.

The interest on these notes continued to accrue until such time as these notes were paid or restructured.

Also, in connection with the acquisition of the PKSH Entities, BMS agreed to pay contingent consideration in the amount of $5.0 million to certain sellers.

The conditions related to this contingency were met on November 30, 2018, and thus the notes had been issued to the sellers.

These subordinated promissory notes had a maturity date of May 30, 2023, and accrued interest at a rate of 10% annually.

The interest on these notes has continued to accrue until such time as these notes are paid.

As of December 31, 2023 and 2022, the amount of principal and accrued interest related to these promissory notes were approximately $12.2 million and $11.6 million, respectively.

Related interest expense was approximately $0.9 million for each of the years ended December 31, 2023 and 2022.

Other commitments

Other commitments include amounts due to members of Wentworth related to promissory notes entered into between certain members and Wentworth to provide for working capital.

The outstanding balance of these promissory notes as of December 31, 2023, and December 31, 2022 are $5.2 million and $4.7 million, respectively.

The interest on these notes continued to accrue until such time as these notes were paid or restructured.

In connection with the closing of the Business Combination, the Company paid approximately $3.5 million on these notes.

In addition to the paydown, the noteholders agreed to forgive the remaining accrued but unpaid interest of approximately $3.8 million and entered into new promissory notes in the principal amount of approximately $5.3 million in the aggregate.

The terms of these new promissory notes provide for maturity on May 15, 2027 and carries an interest rate of Prime plus 1.00%, but no less than 7.50% per annum.

As of December 31, 2024, there was approximately $0.1 interest that was accrued and paid subsequent to December 31, 2024.

The following table sets forth a summary of cash flows for the years ended December 31, 2024 and 2023:

(in thousands)

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash used in financial activities

Net cash provided by (used in) financing activities

Net change in cash flows

Cash Flows from Operating Activities.

Net provided by operating activities was $2.5 million for the year ended December 31, 2023 compared to $5.3 million for the year ended December 31 2022, representing a decrease of $2.8 million or 52%.

The decrease was primarily attributable to the the decrease in commissions receivable offset by decreases in commissions payable.

Net cash used in operating activities was $0.6 million for the year ended December 31, 2024 compared to net cash provided by $2.6 million for the year ended December 31 2023, representing a decrease of approximately $3.2 million or 124%.

The decrease was primarily attributable to the decrease in net income offset by increases in accounts payable, accrued expenses and commissions payable.

Cash Flows from Investing Activities.

Net cash used in investing activities was $0.08 million for the year ended December 31, 2023 compared to $0.33 million for the year ended December 31, 2022.

The decrease was primarily related to the decrease in the purchases of property and equipment.

Net cash used in investing activities was $0.09 million for the year ended December 31, 2024 consistent with the $0.08 million for the year ended December 31, 2023.

Cash Flows from Financing Activities.

Net cash used in financing activities was $2.7 million for the year ended December 31, 2023 compared to cash used in financing activities of $4.5 million for the year ended December 31, 2022.

The decrease is primarily related to the decrease in the distribution of capital during the year ended December 31, 2023.

Net cash provided by financing activities was approximately $1.6 million for the year ended December 31, 2024 compared to cash used in financing activities of $2.7 million for the year ended December 31, 2023.

The change is primarily related to the proceeds from the preferred financings offset by the repayments of the BMS related party debt obligations and the re-financing of the senior credit facility.

Contractual Obligations and Commitments

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Long-term debt obligations (1)

Interest payments

Promissory notes – affiliates (2)

Due to member (4)

Operating lease obligations (3)

(1) Represents principal obligations related to the Oak Street credit facility that was entered into during the years ended December 31, 2020 and 2021.

(1) Represents principal obligations related to the Byline Credit Agreement that was entered into during the years ended December 31, 2024.

(2) Represents the obligations under the amounts due to certain sellers of the PKSH entities.

The amount includes accrued interest as of December 31, 2023 and the notes matured in May 2023.

The amount includes accrued interest as of December 31, 2024 and the notes mature in March 2027.

(3) Represents future minimum lease payments as of December 31, 2024, under non-cancelable office leases.

(4) Represents amounts due to WMS members which are payable on demand.

Critical Accounting Policies and Estimates

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We have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing the two-step impairment test is not required.

If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is greater

than its carrying amount, then performing the two-step impairment test is not required.

However, if we conclude otherwise, we are then required to perform the first step of the two-step impairment test.

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Our guideline public company method incorporates revenue and earnings multiples from publicly traded companies with operations and other characteristics similar to each reporting unit.

As a result of the 2023 and 2022 annual impairment tests, the fair value of the reporting units was 257% and 266% greater than its carrying value, respectively.

As a result of the 2024 and 2023 annual impairment tests, the fair value of the reporting units was approximately 270% and 257% greater than its carrying value, respectively.

Since there have been no events or circumstances which indicated that it was more likely than not the fair value of the reporting units were below their carrying amount, interim goodwill tests were not considered necessary.

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In addition to discounted cash flows, we consider other information, such as public market comparable and multiples of recent mergers and acquisitions of similar businesses.

Although we believe the

assumptions, judgments, and estimates we have made in the past have been reasonable and appropriate, different assumptions, judgments, and estimates could materially affect our reported financial results.

Although we believe the assumptions, judgments, and estimates we have made in the past have been reasonable and appropriate, different assumptions, judgments, and estimates could materially affect our reported financial results.

Intangible assets that are deemed to have definite lives are amortized over their useful lives, generally ranging from 5 to 10 years.

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis