Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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 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. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the notes thereto contained elsewhere in this report and with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC. References to the “Company,” “us” or “we” refer to Binah Capital Group, Inc.
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the sections entitled “Part I, Item 1A. Risk Factors” and “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2024; “Part I, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q for the period ended March 31, 2025; and “Part I, Item 1. Financial Statements” in this Quarterly Report on Form 10-Q for the period ended June 30, 2025.
Business Overview
The Company is a leading consolidator of retail wealth management businesses that owns and operates ten entities, four of which are broker-dealers, three of which are registered investment advisors, and three of which are insurance entities, that have over 1900 registered individuals working within the financial services industries.
The Company focuses on three critical areas comprised of the hybrid, independent, and W2 business models to allow affiliated advisors to choose the operating model that works best for them and run their practices on their own terms. The Company’s platform adds to its flexibility by providing a variety of custody and clearing firm options to accommodate the unique business needs of advisors.
Our Sources of Revenue
Our revenue is derived primarily 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.
Executive Summary
Financial Highlights
Results for the three and six-month period ended June 30, 2025 included a net loss and net income of approximately $(0.7) million and $0.4 million and total revenue of approximately $41.5 million and $90.4 million, respectively, which compares to a net loss and total revenue of $(0.7) million and $(2.3) million and approximately $40.6 million and $82.1 million, respectively, for the three and six-month period ended June 30, 2024.
Asset Trends
Total advisory and brokerage assets served were $27.8 billion at June 30, 2025, compared to $25.1 billion at June 30, 2024. Total net new assets were $(0.9) billion and $(1.1) billion for the three and six-month period ended June 30, 2025, respectively, compared to $(0.8) billion and ($2.1) billion for the same period in 2024.
Net new advisory assets were $(0.1) billion and $0.0 billion for the three and six-month period ended June 30, 2025, respectively, compared to $0.0 billion and 0.0 billion for the same period in 2024. Advisory assets were $2.7 billion at June 30, 2025, which is an increase of 18% as compared to the $2.3 billion at June 30, 2024.
Net new brokerage assets were $(0.8) billion and $(1.1) billion for the three and six-month period ended June 30, 2025, compared to $(0.8) billion and $(2.1) billion for the same period in 2024. Brokerage assets were $25.1 billion at June 30, 2025, up 10% from $22.8 billion at June 30, 2024.
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Gross Profit Trend
Gross profit, a non-GAAP financial measure, was $8.8 million and $17.4 million for the three and six-month period ended June 30, 2025, respectively, an increase of 20% and 15% from $7.3 million and $15.1 million for the same period in 2024. See the “Key Performance Metrics and Non-GAAP Financial Measures” section for additional information on gross profit.
Key Performance Metrics and Non-GAAP Financial Measures
We focus on several key metrics in evaluating the success of our business relationships and our resulting financial position and operating performance. Our key metrics of Gross Profit and EBITDA are “non-GAAP financial measures.” Our management periodically uses certain “non-GAAP financial measures,” as such term is defined under the rules of the SEC, to supplement our financial information presented in accordance with GAAP and to clarify and enhance understanding of past performance and prospects for the future. 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 GAAP. 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. 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. GAAP. Further, the calculation of these non-GAAP financial measures may differ from the calculation of similarly titled financial measures presented by other companies and therefore may not be comparable among companies.
Gross profit is defined as total revenue less commissions paid to financial advisors and registered representatives and other fees that generate the revenue. We consider our gross profit amounts to be non-GAAP financial measures that may not be comparable to those of others in our industry. 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 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.
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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Our key operating, business and financial metrics are as follows:
As of and for the Periods Ended June 30,
Operating Metric (dollars in billions)
2025
2024
Advisory and Brokerage Assets
Brokerage assets
$
25.1
$
22.8
Advisory assets
2.7
2.3
Total Advisory and Brokerage Assets
$
27.8
$
25.1
Three Months Ended June 30,
Six Months Ended June 30,
Net New Assets
2025
2024
2025
2024
Net new brokerage assets
$
(0.8)
$
(0.8)
$
(1.1)
$
(2.1)
Net new advisory assets
(0.1)
(0.0)
0.0
0.0
Total Net New Assets
$
(0.9)
$
(0.8)
$
(1.1)
$
(2.1)
For the three months ended
For the six months ended
June 30,
June 30,
Financial Metrics (dollars in millions)
2025
2024
2025
2024
Total revenue
$
41.5
$
40.6
$
90.4
$
82.1
Net income (loss)
$
(0.7)
$
(0.7)
$
0.4
$
(2.3)
Non-GAAP Financial Metrics (dollars in millions)
Gross Profit (1)
$
8.8
$
7.3
$
17.4
$
15.1
EBITDA (2)
$
1.0
$
0.6
$
3.2
$
0.5
(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. We consider our gross profit amounts to be non-GAAP financial measures that may not be comparable to those of others in our industry. 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. Below is a calculation of gross profit for the periods presented (in millions):
For the three months ended June 30,
For the six months ended June 30,
Gross Profit
2025
2024
2025
2024
Total revenue
$
41.5
$
40.7
$
90.4
$
82.1
Commission and fees
32.7
33.4
73.0
67.0
Gross Profit
$
8.8
$
7.3
$
17.4
$
15.1
(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. 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. Below is a reconciliation of net income to EBITDA for the periods presented (in millions):
For the three months ended June 30,
For the six months ended June 30,
EBITDA Reconciliation
2025
2024
2025
2024
Net income (loss)
$
(0.7)
$
(0.7)
$
0.4
$
(2.3)
Interest expense
0.5
0.8
1.1
1.9
Share-based compensation
0.8
—
0.8
—
Provision for income taxes
0.1
0.2
0.5
0.3
Depreciation and amortization
0.2
0.3
0.4
0.6
EBITDA
$
1.0
$
0.6
$
3.2
$
0.5
Economic Overview and Impact of Financial Market Events
Our business is directly and indirectly sensitive to several macroeconomic factors and the state of the United States financial markets.
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According to the most recent estimate from the U.S. Bureau of Economic Analysis, the U.S. economy grew by 3.0% in the second quarter of 2025. Although inflation, interest rates and volatile global markets were all headwinds, the U.S. economy added roughly 190,00 jobs in the second quarter of 2025, while the unemployment rate was 4.1% in the second quarter of 2025, which is consistent with the prior quarter. The unemployment rate has remained in a narrow range of 4.0% to 4.2 since May 2024.
Our business is also sensitive to current and expected short-term interest rates, which are largely driven by Fed policy. During the second quarter of 2025, Fed policymakers maintained the target range for the federal funds rate in the 4.25% to 4.5% range. The equity markets increased during the second quarter of 2025 resulting in the S&P 500 increasing 10.3%.
Please consult the Factors Affecting Our Financial Condition and Results of Operations, including those described in the section titled “ Risk Factors .”
Basis of Presentation
Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Currently, we conduct business through one operating segment. The condensed consolidated financial statements have been prepared assuming that we will continue as a going concern. See Note 2 in the accompanying condensed consolidated financial statements for further details.
Results of Operations
The following presents an analysis of our results of operations for the three and six-month periods ended June 30, 2025 and 2024 ( in thousands ):
For the three months ended June 30,
For the six months ended June 30,
2025
2024
% Change
2025
2024
% Change
Revenues:
Revenue from Contracts with Customers:
Commissions
33,998
33,663
1.0
%
75,137
68,057
10.4
%
Advisory Fees
6,627
6,320
4.9
%
13,542
12,004
12.8
%
Total Revenue from Contracts with Customers
40,625
39,983
1.6
%
88,679
80,061
Interest and other income
872
665
31.3
%
1,752
2,034
(13.9)
%
Total revenues
41,497
40,648
2.1
%
90,431
82,095
10.2
%
For the three months ended June 30,
For the periods ended June 30,
2025
2024
% Change
2025
2024
% Change
Expenses:
Commissions and fees
32,740
33,352
(1.8)
%
73,038
67,007
9.0
%
Employee compensation and benefits
4,926
3,594
37.1
%
9,277
7,051
31.6
%
Rent and occupancy
286
290
(1.5)
%
571
585
(2.4)
%
Professional fees
713
602
18.4
%
1,249
4,939
(74.7)
%
Technology fees
690
480
43.8
%
1,443
842
71.4
%
Interest
543
795
(31.6)
%
1,109
1,857
(40.3)
%
Depreciation and amortization
183
293
(37.4)
%
370
594
(37.7)
%
Other
1,977
1,765
(12.0)
%
2,479
1,187
108.8
%
Total expenses
42,058
41,171
(0.5)
%
89,536
84,062
5.2
%
Income (loss) before provision for income taxes
(561)
(523)
25.7
%
895
(1,967)
154.1
%
Provision for income taxes
93
213
(43.0)
%
516
352
54.4
%
Net income (loss)
(654)
(736)
30.7
%
$
379
$
(2,319)
122.5
%
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Revenues
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. In accordance with ASC 606, Revenue from Contracts with Customers, we record revenue when control of the promised services is transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Revenues are analyzed to determine whether the Company is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenues on a net basis) in the contract. Principal or agent designations depend primarily on the control an entity has over the product or service before control is transferred to a customer. The indicators of which party exercises control include primary responsibility over performance obligations, inventory risk before the good or service is transferred and discretion in establishing the price.
Commissions
Commission revenues represent sales commissions generated by advisors for their clients’ purchases and sales of securities on exchanges and over-the-counter, as well as purchases of other investment products.
The Company generates two types of commission revenues: sales-based commissions that are recognized at the point of sale on the trade date and trailing commissions that are recognized over time as earned. Sales-based commission revenues vary by investment product and are recognized on the trade date or the transaction date, which represents the completion of the Company’s performance obligation because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon, and the risks and rewards of ownership have been transferred to/from the customer at a point in time. The rates at which commissions are charged to the customers range from 1% to 7% based on the investment product. Trailing commission revenues which are preliminarily related to the sales of mutual funds and variable annuities held by clients of the Company’s advisors are generally based on a percentage of the current market value of clients’ investment holdings in trail-eligible assets, and are recognized over the time the client owns the investment or holds the contract and is generally based on a fixed rate applied, generally twenty-five to fifty basis points (25-50 bps) of the current market value of the clients’ holdings. Trailing commissions are generally received monthly or quarterly. The ongoing revenue is not recognized at the time of sale because it is variably constrained due to factors outside the Company’s control including market volatility and the client’s investment hold period and the Company does not believe that it can overcome such constraints until the market value of the fund and the investor activities are known. The revenues will not be recognized until it is probable that a significant reversal will not occur.
The Company is principal for the commission revenue, as it is responsible for the execution of the clients’ purchases and sales and maintains relationships with the product sponsors. Advisors assist the Company in performing it obligations. Accordingly, total commission revenue is reported on a gross basis. See Note 4 - Revenues From Contracts with Customers within the notes to the condensed consolidated financial statements for the three and six-month periods ended June 30, 2025, and 2024 for further details regarding our commission revenue by product category.
The following tables sets forth the components of our commission revenue for the three and six-month periods ended June 30, 2025 and 2024 (in thousands):
For the three-month periods ended June 30,
2025
2024
$ Change
% Change
Sales-based
$
14,868
$
15,850
(982)
(6.2)
%
Trailing
19,130
17,813
1,317
7.4
%
Total commission revenue
$
33,998
$
33,663
335
1.0
%
For the six-month periods ended June 30,
2025
2024
$ Change
% Change
Sales-based
$
35,278
$
31,617
3,661
11.6
%
Trailing
39,858
36,441
3,417
9.4
%
Total commission revenue
$
75,136
$
68,058
7,078
10.4
%
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Sales-based revenue decreased by approximately $1.0 million and increased approximately $3.7 million or (6.2)% and 11.6% for the three and six-month period ended June 30, 2025, respectively, as compared to 2024. Trailing based revenue increased by approximately $1.3 million and $3.4 million or 7.4% and 9.4% for the three and six-month period ended June 30, 2025, respectively, as compared to 2024. The decrease in sales-based revenue for the three month period ended June 30, 2025 as compared to 2024 is attributable to a decrease in the sales of insurance related products. The increase in sales-based revenue for the six-month period ended June 30, 2025, as compared to 2024 is attributable to an increase in the generation of transactional based products, specifically alternative investment products. The increase in the trailing based revenues is due to the increase in trail-based assets resulting from inflows of assets and positive market volatility. Commission revenue is generated from brokerage assets. The following tables summarize the brokerage assets for the three and six-month periods ended June 30, 2025 and 2024 (in billions):
As of June 30,
2025
2024
Brokerage Assets
$
25.1
$
22.8
Included in the brokerage assets above are trail-eligible assets as follows (in billions):
As of June 30,
2025
2024
Trail-Eligible Assets
$
18.1
$
16.3
The following table summarizes activity impacting brokerage assets for the periods ended (in billions):
For the three months ended June 30,
For the six months ended June 30,
Net Flows-Brokerage Assets
2025
2024
2025
2024
Balance – beginning of period
$
23.2
$
22.7
24.5
21.8
Net new brokerage assets(1)
$
(0.8)
$
(0.8)
(1.1)
(2.1)
Market impact(2)
$
2.7
$
0.9
1.7
3.1
Balance – End of period
$
25.1
$
22.8
25.1
22.8
(1) Net new brokerage assets consist of total client deposits less client withdrawals from brokerage accounts, plus dividends, plus interest.
(2) Market impact is the difference between the beginning and ending asset balances less the net new asset amounts, representing the implied growth or decline in asset balances due to market change over the same period of time.
Advisory Fees
Advisory fees represent fees charged to advisors’ clients’ accounts on the Company’s corporate advisory platform. The Company provides ongoing investment advice, brokerage and execution services on transactions, and performs administrative services for these accounts. These fees are recognized ratably over time to match the continued delivery of the performance obligations to the client over the life of the contract. 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 increased by approximately 4.9% and 12.8% for the three and six month periods ended June 30, 2025, respectively, as compared to the same period in June 30, 2024, due to positive returns in the market from the period of June 30, 2024 to the period ending June 30, 2025.
The following tables summarizes the advisory assets as of June 30, 2025 and 2024 (in billions):
As of June 30,
2025
2024
Advisory Assets
$
2.7
$
2.3
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The following table summarizes activity impacting advisory assets for the periods ended (in billions):
For the three months ended June 30,
For the six months ended June 30,
Net Flows-Advisory Assets
2025
2024
2025
2024
Balance – beginning of period
$
2.5
$
2.2
2.5
2.1
Net new brokerage assets(1)
$
(0.1)
$
(0.0)
—
(0.1)
Market impact(2)
$
0.3
$
0.1
0.2
0.3
Balance – End of period
$
2.7
$
2.3
$
2.7
$
2.3
(1) Net new advisory assets consist of total client deposits less client withdrawals from custodial accounts, plus dividends, plus interest, minus advisory fees.
(2) Market impact is the difference between the beginning and ending asset balances less the net new asset amounts, representing the implied growth or decline in asset balances due to market change over the same period of time.
Interest and other income
Interest income includes amounts earned on balances held at the Company’s clearing brokers related to cash balances and margin balances. The Company’s clearing agreements include provisions that provide for a sharing of the interest income earned on such balances with the clearing brokers. The rate varies based on the clearing broker.
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 increase in interest and other income for the three month period ended June 30, 2025, compared to 2024 is primarily related to the increase in the interest income shared with the Company’s clearing brokers. The decrease in interest and other income for the six-month period ended June 30, 2025 is primarily related to a non-recurring income item that was earned during the same period in 2024.
Operating Expenses
Commissions and Fees
Commissions and fees primarily consist of commissions paid to the financial advisors, technology costs associated with the platform for which the financial advisors operate their business, insurance costs and regulatory costs. Certain of the technology, insurance and regulatory costs are passed through to the financial advisors and any excess costs are included as fees within commissions and fees. The commissions and fees paid to the financial advisors are based on the advisory and commission revenue earned on each client’s account. The payout amount is production based, which is the gross revenue produced by the financial advisor, and varies based on the level of such production ranging from 50% to 95% of the revenue generated. The production levels begin at gross revenue of $15,000 up to $4,000,000 and up, and the payout rate starts at 50% and increases to a top payout rate of 94% for annual production of $4,000,000 and up.
The following table sets forth our payout rate, which is a statistical or operating measure and monitored to review that such costs of revenue remain consistent on a period over period basis:
For the three months ended June 30,
2025
2024
Change
Payout range
80.59
%
83.42
%
2.82
%
For the six months ended June 30,
2025
2024
Change
Payout range
82.36
%
83.69
%
1.33
%
For the three and six-month periods ended June 30, 2025, the payout rate decreased as compared to 2024 as a result of the non-recurring nature of certain transactional products sold during the first quarter of 2024 which included a pay-out to the financial advisors in the range of 90%.
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Employee compensation and benefits
Employee compensation and benefits includes salaries, wages, benefits and related taxes for our employees.
Employee compensation and benefits for the three and six-month period ended June 30, 2025 increased by approximately $1.4 million and $2.2 million as compared to June 30, 2024, which is directly related to the additional personnel costs attributed to the Company now operating as a public company, including issuance of non-cash compensation awards to officers and directors during the period ended June 30, 2025.
Rent and occupancy
Rent and occupancy remained relatively consistent for the three and six-month period ended June 30, 2025 as compared to June 30, 2024 decreasing slightly by approximately 2.0%.
Professional fees
Professional fees includes costs incurred related to legal and accounting services. Professional fees for the three month period ended June 30, 2025 as compared to 2024 increased by approximately $0.1 which is related to an increase in SEC filings in the current period. Professional fees for the six-month period ended June 30, 2025, as compared to 2024, decreased by $3.7 million, which is directly related to the non-recurring transaction costs associated with the closing of the Business Combination that were incurred during the period ended June 30, 2024.
Technology fees
Technology fees primarily represent infrastructure costs that support the Company’s technology and communications costs. Technology fees increased by $0.2 million and $0.7 million and for the three and six-month period ended June 30, 2025, respectively, as compared to 2024.
Interest expense
Interest expense primarily includes interest associated with the Company’s credit facility and other debt obligations. Interest expense decreased by $0.2 million and $0.7 million for the three and six-month period ended June 30, 2025, respectively, as compared to 2024 resulting from the repayment and restructuring of the related party debt obligations of BMS and the re-financing of the senior credit facility.
Depreciation and amortization
Depreciation and amortization relates to the use of property, equipment and leasehold improvements. Amortization also includes the amortization related to certain intangible assets.
Other expense
Other expense includes insurance, travel-related expenses, office expenses, marketing and other miscellaneous expenses.
Provision for Income Taxes
Our effective income tax rate was approximately 22% for the six-month period ended June 30, 2025 as compared to (15.2)% for the same period in 2024. The increase in our effective tax rate was related to the net income generated for the six-month period ended June 30, 2025.
Liquidity and capital resources
We have established liquidity policies intended to support the execution of strategic initiatives, while meeting regulatory capital requirements and maintaining ongoing and sufficient liquidity. We believe liquidity is of critical importance to the Company and, in particular, to our broker-dealer subsidiaries, PKSI, CLS, MSI and WEG. The objective of our policies is to ensure that we can meet our strategic, operational and regulatory liquidity and capital requirements under both normal operating conditions and under periods of stress in the financial markets.
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Parent Company Liquidity
Binah Capital Group, Inc. through its indirectly wholly owned subsidiary BMS, is the direct holding company of our operating subsidiaries, and considers its primary sources of liquidity to be dividends and management fees from our operating subsidiaries.
Sources of Liquidity
As of June 30, 2025, we had $18.6 million outstanding under our Credit Agreement with Byline Bank, net of unamortized debt issuance costs. The associated debt facilities are as follows:
Byline Bank
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 June 30, 2025 and December 31, 2024, the outstanding balance on the Term Loan was $18.6 million and $19.6 million, net of debt issuance costs, respectively.
Under the terms of the Credit Agreement, to the extent that BMS 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 BMS and may only be advanced in connection with a repayment of a Letter of Credit (“LC Payment”). As of June 30, 2025 and 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 June 30, 2025 and December 31, 2024, the effective interest rate was 8.3%.
During the period ending June 30, 2025, BMS entered into an interest rate swap agreement with a notional amount of $10 million in connection with the above-mentioned Credit Agreement. Under the terms of the swap, BMS pays a fixed rate of 3.98% plus four percent (4.00%) and receives a variable interest rate based on SOFR plus 4.00% as defined above. The swap agreement requires monthly payments to be made or received. The swap is designated as cash flow hedge of the variability of the SOFR-based interest payments on $10 million of BMS’s outstanding variable-rate debt.
As of June 30, 2025, the interest rate swap had a fair value of $0.15 million and was recorded as a liability and included in accounts payable, accrued expenses and other liabilities on the consolidated statement of financial condition. The Company has adopted the shortcut method allowing it to assume perfect hedge effectiveness. Changes in the effective portion of the swap’s fair value are recognized in accumulated other comprehensive income (“AOCI”).
The Term Loan was 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
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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 Term Loan as of June 30, 2025 were as follows ( in thousands ) :
2025
$
1,015
2026
2,030
2027
3,045
2028
3,045
2029
10,150
$
19,285
Series A Redeemable Convertible Preferred Stock
On March 15, 2024 (the “Funding Date”) in connection with the consummation of the Business Combination, Holdings and Wentworth 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. As of June 30, 2025, the Company accrued 50% of the dividend to be paid in cash in the amount of $0.2 million and paid an in - kind dividend in the amount $0.2 million. As of December 31, 2024, the Company accrued 50% of the dividend to be paid in cash in the approximate amount of $0.2 million.
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.
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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. As of June 30, 2025 and December 31, 2024, included in accounts payable, accrued expenses and other liabilities on the accompanying consolidated statement of financial condition is an accrued dividend in the amount of $0.03 million that was paid subsequent to June 30, 2025 and 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, Wentworth 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 continued to accrue until such time as these notes were paid.
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 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 continued to accrue until such time as these notes were paid.
In connection with the closing of the Business Combination, the Company paid approximately $3.4 million on these notes. In addition to the paydown, the noteholders (all of whom are stockholders and/or key employees) 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 amounts outstanding as of June 30, 2025 was $5.3 million. The amount outstanding as of December 31, 2024 was $5.4 million which included accrued interest that was paid subsequently. 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. Related interest expense was approximately $0.3 and $0.1 for the six-months ended June 30, 2025 and 2024, respectively.
Cash Flows
The following table sets forth a summary of cash flows for the six-month periods ended June 30, 2025 and 2024:
(in thousands)
2025
2024
Net cash provided by (used in) operating activities
$
1,117
$
(2,113)
Net cash used in investing activities
(8)
(18)
Net cash (used in) provided by financing activities
(1,425)
1,535
Net change in cash flows
$
(316)
$
(596)
Cash Flows from Operating Activities . Net cash provided by operating activities was $1.1 million for the six-month period ended June 30, 2025, compared to net cash used in of $2.1 million for the six-month period ended June 30, 2024, representing an increase of approximately $3.2 million or 150%. The increase was primarily attributable to the decrease in the net loss of approximately $2.3 million to net income of $0.4 million or a change of $2.7 million.
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Cash Flows from Investing Activities . Net cash used in investing activities was $0.01 million for the six-month period ended June 30, 2025, compared with the $0.01 million for the six-month period ended June 30, 2024.
Cash Flows from Financing Activities . Net cash used in financing activities was approximately $1.4 million for the six-month period ended June 30, 2025 compared to cash provided by financing activities of approximately $1.5 million for the six-month period ended June 30, 2024. The change is primarily related to the proceeds received from the Redeemable Convertible Preferred Financing and the exercise of warrants offset by the repayments of the BMS related party debt obligations.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and other commitments as of June 30, 2025:
Payments Due by period
Total
Less than 1 Year
1-3 Years
3-5 Years
More than 5 Years
Contractual obligations
(in thousands)
Long-term debt obligations (1)
$
19,285
$
1,015
$
8,120
$
10,150
$
—
Promissory notes - affiliates (2)
5,313
—
5,313
—
—
Operating lease obligations (3)
4,405
777
2,228
1,400
—
$
29,003
$
1,792
$
15,661
$
11,550
$
—
(1) Represents principal obligations related to the Byline Credit Agreement that was entered into during the year ended December 31, 2024.
(2) Represents the obligations under the amounts due to certain sellers of the PKSH entities. The notes mature in March 2027.
(3) Represents future minimum lease payments as of June 30, 2025, under non-cancelable office leases.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates are based on the Company’s knowledge of current events and actions the Company may undertake in the future, actual results could differ from those estimates and assumptions.
We define our critical accounting policies and estimates as those that require us to make subjective judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of our financial statements which require significant estimates and judgments are as follows:
Revenue Recognition
Revenues from contracts with customers are recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Management exercises judgment in determining whether the Company is the principal (i.e., reports revenues on a gross basis) or agent (i.e., reports revenue on a net basis). For additional information see Note 4 in the consolidated financial statements as of and for the three and six-months periods ended June 30, 2025 and 2024.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets are tested annually for impairment or if certain events occur indicating that the carrying amounts may be impaired. 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. However, if we conclude otherwise, we are then required to perform the first step of the two-step impairment test. Goodwill impairment is determined by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not deemed to be impaired. If the estimated fair value is below carrying value, however, further analysis is required to determine the amount of the impairment. Additionally, if the carrying value of a reporting unit is zero or a negative value and it is determined that it is more likely than not the goodwill is impaired, further analysis is required. The estimated fair values of the reporting units are derived based on valuation techniques we believe market participants would use for each of the reporting units.
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We performed our goodwill impairment test as of and for the years ended December 31, 2024, and 2023. The estimated fair value of the reporting units were determined using the market approach for each reporting unit, relying specifically on the guideline public company method. 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 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.
The goodwill impairment test requires us to make judgments in determining what assumptions to use in the calculation. Assumptions, judgments, and estimates about future cash flows and discount rates are complex and often subjective. They can be affected by a variety of factors, including, among others, economic trends and market conditions, changes in revenue growth trends or business strategies, unanticipated competition, discount rates, technology, or government regulations. In assessing the fair value of our reporting units, the volatile nature of the securities markets and industry requires us to consider the business and market cycle and assess the stage of the cycle in estimating the timing and extent of future cash flows. 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.
Intangible assets that are deemed to have definite lives are amortized over their useful lives, generally ranging from 5 to 10 years. They are reviewed for impairment when there is evidence that events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the estimated fair value.
Contingent Liabilities
The Company recognizes liabilities for contingencies when there is an exposure that, when fully analyzed, indicates potential losses become probable and can be reasonably estimated. Whether a potential loss is probable and can be reasonably estimated is based on currently available information and is subject to significant judgment, a variety of assumptions and uncertainties.
When a potential loss is probable and the loss or range of loss can be estimated, the Company will accrue the most likely amount within that range. No liability is recognized for those matters which, in management’s judgment, the determination of a reasonable estimate of potential loss is not possible, or for which a potential loss is not determined to be probable.
Recently Issued Accounting Pronouncements
Refer to Note 2 - Summary of Significant Accounting Policies, within the notes to the condensed consolidated financial statements for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.