Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “future,” “intend,” “seek,” “likely,” “potential” or “continue,” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we, nor any other person, assumes responsibility for the accuracy and completeness of the forward-looking statements. Except as required by law, we are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report to conform such statements to actual results or to changes in our expectations.
The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Quarterly Report. Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in Item 1A of Part II of this Quarterly Report under the caption “Risk Factors.”
Factors that could cause actual results to differ from those contained in the forward-looking statements include, but are not limited to: volatility in our revenues and results of operations; changing conditions in the financial markets; developments that may arise related to our prior investment in Freedom VCM Holdings, LLC (“Freedom VCM”) and prior business relationship with Brian Kahn (the former CEO of Freedom VCM); the receipt by the Company and Bryant Riley of subpoenas from the SEC; material weaknesses in internal control over financial reporting; our ability to generate sufficient revenues to achieve and maintain profitability; failure to comply with the terms of our credit agreements or senior notes; the level of our indebtedness; our ability to meet future capital requirements; our exposure to credit risk; the short term nature of our engagements; failure to successfully compete in any of our businesses; the illiquidity of, and additional potential losses from, our proprietary investments; potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation; potential mark-downs in inventory in connection with purchase transactions; loss of key personnel; our ability to borrow under our credit facilities; our dependence on communications, information and other systems and third parties; the potential loss of financial institution clients; the diversion of management time on divestiture-related issues; the impact of legal proceedings, including in respect of matters related to Freedom VCM and Brian Kahn; the activities of short sellers and their impact on our business and reputation; changing economic and market conditions, including inflation and any actions by the Federal Reserve to address inflation, and the possibility of recession or an economic downturn; the effects of tariffs and other governmental initiatives, and related impacts including supply chain disruptions, labor shortages and increased labor costs; and the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia’s invasion of Ukraine and conflicts in the Middle East. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Except as otherwise required by the context, references in this Quarterly Report to the “Company,” “BRCGH,” “BRC,” “BRC Group Holdings,” “we,” “us” or “our” refer to the combined business of BRC Group Holdings, Inc. and all of its subsidiaries.
Overview
Description of the Company
BRC Group Holdings, Inc. (Nasdaq: RILY) (the “Company” or “BRCGH”), which changed its name from B. Riley Financial, Inc. effective January 1, 2026, is a diversified holding company offering a platform of businesses, including financial services (with complementary banking and wealth management businesses), telecom, retail, and investments in equity, debt and venture capital. We refer to BRCGH as having a “platform” because of the unique composition of our financial services businesses and diversification of its operations. Our core financial services platform provides small cap and middle market companies customized end-to-end solutions at every stage of the enterprise life cycle. Our complementary banking business offers comprehensive services in capital markets, sales, trading, research, merchant banking, M&A, and restructuring. Our complementary wealth management business offers wealth management and financial planning services including brokerage, investment management, insurance, and tax preparation. Our telecom
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businesses provide consumer and business services including traditional, mobile and cloud phone, internet and data, security, and email. Our consumer products and retail companies provide mobile computing accessories and home furnishings. BRCGH, through its investment business, deploys its capital inside and outside its core financial services business to generate shareholder value through opportunistic investments.
The Company opportunistically invests in and acquires companies or assets with attractive risk-adjusted return, with a focus on making operational improvements within these companies in an effort to maximize free cash flow.
We are headquartered in Los Angeles, California and maintain offices throughout the U.S., including in New York, New Jersey, Chicago, Metro District of Columbia, Boston, Dallas, Memphis, Miami, San Francisco, Boca Raton, and Palm Beach Gardens, as well as an office located in India.
Our Business Segments
We maintain a diverse composition of businesses that operate in seven reportable business segments: Capital Markets, Wealth Management, Lingo, magicJack, Marconi Wireless, UOL, and Consumer Products. The descriptions below illustrate the businesses that comprise our segments.
Management evaluates many different financial and non-financial metrics to assess the individual performance of each of these various businesses. However, across most businesses, management primarily assesses each business’s financial performance based upon each business’s revenues and operating profits generated excluding non-cash charges and the impact of gains and losses related to securities and other investments held. Management believes that gains and losses on individual investments are generally impacted by individual characteristics specific to each investment and although this has an impact on our overall financial performance the impact of these gains and losses may not be indicative of the overall strength or weakness in each of our business operations. Additionally, in evaluating the financial performance of each of our businesses, management monitors the increase or decrease in operating results from period to period while factoring in the relative volatility inherent in each industry in which these businesses operate. Management recognizes that some of the Company’s businesses exhibit more volatile results.
Capital Markets – We provide investment banking, equity research and institutional brokerage services to publicly traded and privately held companies, institutional investors, and financial sponsors; and direct lending services to middle market companies. We also trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries. We maintain an investment portfolio comprised of public and private equities and debt securities. We also opportunistically provide loans to our clients and we engage in securities-based lending which involves the borrowing and lending of equity and fixed income securities.
Our investment approach is value-oriented and represents a core competency of our capital markets strategy. We act as an advisor to our clients, which at times involves complex transactions consistent with our value-oriented investment philosophy. We often provide consulting, capital raising, or investment banking services for companies in which BRC may have significant influence through equity ownership, representation on the board of directors (or similar governing body), or both.
Wealth Management – We provide retail brokerage, investment management, and insurance, and tax preparation services to individuals and families, small businesses, non-profits, trusts, foundations, endowments, and qualified retirement plans through a boutique private wealth and investment management firm to meet the individual financial needs and goals of our customers. Our experienced financial advisors provide investment management, retirement planning, education planning, wealth transfer and trust coordination, and lending and liquidity solutions. Our investment strategists provide strategies and real-time market views and commentary to help our clients make important and informed financial and investment decisions.
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Revenues from the Wealth Management segment are comprised of the following:
Three Months Ended
March 31,
2026
2025
Revenues - Services and fees
Brokerage revenues $ 15,661 $ 18,346
Advisory revenues 10,971 16,434
Other 15,447 11,886
Total services and fees revenue 42,079 46,666
Trading income 10,096 612
Total revenues $ 52,175 $ 47,278
Total assets under management were approximately $11.9 billion and $13.0 billion at March 31, 2026 and December 31, 2025, respectively. Of these amounts, advisory assets under management totaled approximately $4.0 billion at March 31, 2026, and $4.3 billion at December 31, 2025. Advisory revenues were 0.28% and 0.25% of average advisory assets under management during the three months ended March 31, 2026 and 2025, respectively. The average revenues earned on advisory assets under management are not expected to fluctuate significantly from period to period as a percentage of advisory assets under management. Broker revenues are primarily comprised of commissions and fees earned from trading activities from brokerage client assets. Other revenues are primarily comprised of tax service fees and management fees earned from comprehensive client focused services performed.
Lingo Segment – Lingo Management, LLC and its subsidiary Bullseye Telecom (together, “Lingo”) is a global cloud/unified communications (“UC”) and managed service provider to Enterprise and Small to Medium Businesses in the United States. Lingo primarily re-sells Plain Old Telephone Services (“POTS”), Broadband data services and Managed Security services in addition to the Cloud Voice, POTS Alternative and business collaboration communication services.
magicJack Segment – magicJack VoIP Services, LLC and related subsidiaries (together, “magicJack”) is a non-interconnected Voice-over-IP (“VoIP”) cloud-based communications service provider that offers related devices and subscription services within the United States and Canada. The magicJack services allow its subscribers to stay connected at low costs.
Marconi Wireless Segment – Marconi Wireless Holdings, LLC (“Marconi Wireless”) is a mobile virtual network operator that provides mobile phone voice, text, and data services and devices using the Credo Mobile brand.
UOL Segment – United Online, Inc. (“UOL”) is an Internet access provider that offers dial-up and digital subscriber line (“DSL”) services under the NetZero and Juno brands across the United States. UOL also provides paid and free e-mail subscription services that also generate advertising revenues.
Consumer Products Segment – This segment is comprised of Tiger US Holdings, Inc. (“Targus”), which is a multinational company that, together with its subsidiaries, designs, manufactures, and sells consumer and enterprise productivity products with a large business-to-business (B2B) customer client base and global distribution in over 100 countries. The Targus product line includes laptop and tablet cases, backpacks, universal docking stations, and computer accessories.
Our operating results are primarily comprised of the operations of these businesses within our seven reportable operating segments. However, we also generate revenues from investment and lending entities and other businesses that we may acquire with the goal to expand their operations, drive growth, and create operational efficiencies to improve cash flows to reinvest across other business operations in our platform. These businesses are typically in fragmented markets and include the operations of a regional environmental services business, which was sold in March 2025 and bebe stores inc. (“bebe”) which operates rent-to-own stores.
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Securities and Other Investments Owned Portfolio – We have a portfolio of securities and other investments owned that consists of public equity securities, private securities, partnership interests and other investments, corporate bonds and other fixed income securities as follows at March 31, 2026 and December 31, 2025:
March 31,
2026 December 31,
2025
Public Equity Securities:
Babcock & Wilcox Enterprises, Inc. - common stock $ 403,189 $ 174,011
Double Down Interactive Co., Ltd - common stock 29,300 30,010
Synchronoss Technologies, Inc. - common stock — 3,503
Other public equities 22,668 25,675
Total public equity securities 455,157 233,199
Private Equity Securities:
Other private equities 93,970 135,605
Total private equity securities 93,970 135,605
Total equity securities 549,127 368,804
Corporate bonds 33,134 31,751
Other fixed income securities 2,081 4,373
Partnership interest and other 55,326 41,915
Total securities and other investments owned $ 639,668 $ 446,843
Total securities and other investments owned increased $192.8 million during the three months ended March 31, 2026 primarily due to the following:
• $229.2 million increase in the carrying values of Babcock & Wilcox Enterprises, Inc.’s (“B&W”) common stock due to an increase in the public share price during the period.
• $(0.7) million decrease in the carrying values of our Double Down Interactive Co., Ltd common stock primarily driven by sales of the securities and a decrease in the public share price during the period.
• $(3.5) million decrease due to the disposition of our investment in Synchronoss Technologies, Inc. in the current year period.
• $(3.0) million decrease in the carrying values of our investments in other public equities driven by net decreases in public share prices, partially offset by net additions during the period.
• $(41.6) million decrease in the carrying values of our investments in other private equities driven primarily by dispositions of certain private securities.
• $13.4 million increase in the carrying values of our investments in partnership interests and other securities primarily driven by net increase in market value of certain securities during the period.
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Critical Accounting Estimates
The preparation of our unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities, and reported amounts of revenue and expense during the reporting period. The estimates and assumptions are based on historical experience and on other factors that management believes to be reasonable. Actual results may significantly differ from those estimates. Critical accounting estimates represent the areas where more significant judgments and estimates are used in the preparation of our unaudited condensed consolidated financial statements. A discussion of such critical accounting estimates, which include fair value measurements, goodwill and other intangible assets, and accounting for income tax valuation allowances can be found in our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2025.
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Results of Operations
The following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results.
Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025
Condensed Consolidated Statements of Operations
(Dollars in thousands)
Three Months Ended March 31, Change
2026 2025 Amount %
Revenues:
Services and fees $ 152,122 $ 158,839 $ (6,717) (4.2) %
Trading gains (losses), net 145,061 (16,171) 161,232 (997.0) %
Fair value adjustments on loans 6,545 (8,096) 14,641 (180.8) %
Interest income - loans 1,714 3,196 (1,482) (46.4) %
Interest income - securities lending 1,251 840 411 48.9 %
Sale of goods 45,367 47,455 (2,088) (4.4) %
Total revenues 352,060 186,063 165,997 89.2 %
Operating expenses:
Direct cost of services 31,702 42,700 (10,998) (25.8) %
Cost of goods sold 32,365 36,733 (4,368) (11.9) %
Selling, general and administrative expenses 134,348 167,388 (33,040) (19.7) %
Interest expense - Securities lending and loan participations sold 717 719 (2) (0.3) %
Total operating expenses 199,132 247,540 (48,408) (19.6) %
Operating income (loss) 152,928 (61,477) 214,405 (348.8) %
Other income (expense):
Interest income 358 1,486 (1,128) (75.9) %
Dividend income 669 135 534 395.6 %
Realized and unrealized gains (losses) on investments 105,100 (14,500) 119,600 (824.8) %
Change in fair value of financial instruments and other (4,427) 922 (5,349) (580.2) %
Gain on sale and deconsolidation of businesses — 80,841 (80,841) (100.0) %
Gain on senior note exchange — 10,532 (10,532) (100.0) %
Income (loss) from equity investments 1,326 (552) 1,878 (340.2) %
Gain (loss) on extinguishment of debt 2,890 (10,427) 13,317 (127.7) %
Interest expense (19,794) (29,964) 10,170 (33.9) %
Income (loss) from continuing operations before income taxes 239,050 (23,004) 262,054 (1,139.2) %
(Provision for) benefit from income taxes (16,891) 3,042 (19,933) (655.3) %
Income (loss) from continuing operations 222,159 (19,962) 242,121 (1,212.9) %
Income from discontinued operations, net of income taxes — 3,395 (3,395) (100.0) %
Net income (loss) 222,159 (16,567) 238,726 (1,441.0) %
Net income (loss) attributable to noncontrolling interests 8,886 (6,592) 15,478 (234.8) %
Net income (loss) attributable to BRC Group Holdings, Inc. 213,273 (9,975) 223,248 (2,238.1) %
Preferred stock dividends 2,015 2,015 — — %
Net income (loss) available to common shareholders $ 211,258 $ (11,990) $ 223,248 (1,862.0) %
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Revenues
The table below, and the discussion that follows, are based on how we analyze our business.
Three Months Ended March 31, Change
2026 2025 Amount %
Services and fees:
Capital Markets segment $ 35,550 $ 21,592 $ 13,958 64.6 %
Wealth Management segment 42,079 46,666 (4,587) (9.8) %
Lingo segment 40,790 41,553 (763) (1.8) %
magicJack segment 8,473 9,446 (973) (10.3) %
Marconi Wireless segment 7,026 8,541 (1,515) (17.7) %
UOL segment 2,821 3,633 (812) (22.4) %
Corporate and All Other 15,383 27,408 (12,025) (43.9) %
Subtotal $ 152,122 $ 158,839 $ (6,717) (4.2) %
Trading gains (losses), net:
Capital Markets segment $ 135,303 $ (17,266) $ 152,569 (883.6) %
Wealth Management segment 10,096 612 9,484 1,549.7 %
Corporate and All Other (338) 483 (821) (170.0) %
Subtotal $ 145,061 $ (16,171) $ 161,232 (997.0) %
Fair value adjustments on loans:
Capital Markets segment $ — $ (3,131) $ 3,131 (100.0) %
Corporate and All Other 6,545 (4,965) 11,510 n/m
Subtotal $ 6,545 $ (8,096) $ 14,641 (180.8) %
Interest income - loans:
Capital Markets segment $ 7 $ 65 $ (58) (89.2) %
Corporate and All Other 1,707 3,131 (1,424) (45.5) %
Subtotal $ 1,714 $ 3,196 $ (1,482) (46.4) %
Interest income - securities lending:
Capital Markets segment $ 1,251 $ 840 $ 411 48.9 %
Sale of goods:
magicJack segment $ 310 $ 355 $ (45) (12.7) %
Marconi Wireless segment 511 946 (435) (46.0) %
Consumer Products segment 44,115 42,103 2,012 4.8 %
Corporate and All Other 431 4,051 (3,620) (89.4) %
Subtotal $ 45,367 $ 47,455 $ (2,088) (4.4) %
Total revenues $ 352,060 $ 186,063 $ 165,997 89.2 %
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Services and Fees Revenues
Total decrease in services and fees revenues during the three months ended March 31, 2026, compared to the same period in the prior year, was primarily due to the following:
• $(12.0) million decrease in Corporate and All Other non-reportable operating segments driven by decreases of $7.0 million due to the sale of Atlantic Coast Recycling in the prior year quarter, $3.5 million due to the deconsolidation of our investments in Nogin, Inc. (“Nogin”) and a $0.9 million decline at bebe;
• $(4.6) million decrease in Wealth Management segment driven by a $9.2 million decline in wealth and asset management fees following the sale of a portion of the Company’s wealth management business to Stifel Financial Corp. (“Stifel”) in April 2025, partially offset by $4.8 million in SpaceX SPV carried interest revenue;
• $(1.5) million decrease in Marconi Wireless segment, driven by lower service revenues attributable to an ongoing decline in active customers;
• $(1.0) million decrease in magicJack segment, driven by fewer active customers driving lower renewal revenues, fewer device sales and first-year service customers, and a decline in ancillary services such as porting, number services, and termination fees;
• $(0.8) million decrease in UOL segment, driven by declines in internet access subscribers in addition to discontinuing telecom resale services;
• $(0.8) million decrease in Lingo segment, driven by fewer POTS and broadband subscribers as customers migrated to VoIP services, partially offset by VoIP growth from those same conversions; partially offset by
• $14.0 million increase in Capital Markets segment, driven by higher M&A and advisory fees of $9.9 million, increased private placement revenues of $3.8 million, higher secondary commissions of $2.2 million, increased finder fees of $1.6 million, and higher underwriting revenues of $1.3 million, partially offset by a $5.2 million decrease in ATM fees.
Trading Gains (Losses), Net
Total increase in net trading gains (losses) during the three months ended March 31, 2026, compared to the same period in the prior year, was primarily due to the following:
• $152.6 million increase in Capital Markets segment, driven by gains of $130.0 million in B&W, $3.9 million in Applied Digital Corporation (“APLD”), and $2.4 million in U.S. Treasuries, compared to a $15.1 million loss in the prior period;
• $9.5 million increase in Wealth Management segment, driven by revenue from the APLD Variable Rate Transactions (“VRT”); partially offset by
• $(0.8) million decrease in Corporate and All Other non-reportable operating segments driven by overall increase in unrealized losses for certain equity securities in the current year period.
Fair Value Adjustments On Loans
In our Capital Markets segment, we have a portfolio of loans receivable that are measured at fair value with changes in fair value reported in our results of operations. The loan portfolio and fair value adjustments on loans consisted of the following:
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Fair Value Adjustments on Loans Receivables
At Fair Value Three Months Ended March 31,
Industry or Type of Loan March 31, 2026 December 31, 2025 2026 2025
Related Party Loans Receivable:
Vintage Capital Management, LLC Retail / consumer $ — $ 1,835 $ 20 $ 276
W.S. Badcock Corporation Consumer receivable portfolio — — — 250
Freedom VCM Receivables, Inc. Consumer receivable portfolio — — — 1,393
Conn’s, Inc. (1)
Retail / consumer n/a — n/a (4,065)
Other related party loans Services, oil & gas and industrial 953 1,000 (46) —
Total related party loans receivable 953 2,835 (26) (2,146)
XBP Americas, LLC Technology 21,825 21,415 (95) (2,677)
Norlin EV Limited Real estate — 10 22 (227)
Conn’s, Inc. (1)
Retail / consumer — n/a 6,670 n/a
Other loans receivable Various 2,149 2,043 (26) (3,046)
Total loans receivable $ 24,927 $ 26,303 $ 6,545 $ (8,096)
(1) The Conn’s, Inc. loan receivable was written off in January 2026 and is no longer a related party loan receivable. Recovery of proceeds from the loan receivable is contingent upon collecting amounts from the Conn’s bankruptcy estate. During the three months ended March 31, 2026, the Company recovered $6,670 of proceeds from the Conn’s bankruptcy estate and is reported as a fair value adjustment.
The $14.6 million favorable variance in fair value adjustments related to our loans receivable during the three months ended March 31, 2026, when compared to the same period in the prior year, was primarily driven by unfavorable adjustments of $4.1 million, $2.7 million, and $3.0 million recorded for loans receivable with Conn’s, Inc., XBP Americas, LLC (formerly Exela Technologies, Inc.), and other non-related party loans receivable, respectively, in the prior year period with no adjustments of comparable magnitude recorded in the current year period, and a $6.7 million favorable adjustment recorded in the current year period related to the recovery of proceeds from the Conn’s, Inc. bankruptcy estate. These were partially offset by a $1.4 million favorable adjustment related to Freedom VCM Receivables, Inc. recorded in the prior year quarter with no fair value adjustments of comparable magnitude recorded in the current year period.
Interest Income - Loans
The $(1.5) million decrease in interest income related to loans receivable for the three months ended March 31, 2026, compared to the same period in the prior year, was primarily due to declines across the XBP Americas, LLC and GA Group portfolios, which decreased by $0.9 million and $0.5 million, respectively.
Interest Income - Securities Lending
The $0.4 million increase in interest income related to securities lending was driven by a higher volume of securities on loan, partially offset by lower average spreads earned on those loans compared to the prior period.
Sale Of Goods
The decrease in sale of goods revenue during the three months ended March 31, 2026, compared to the same period in the prior year, was primarily due to the following:
• $(3.6) million decrease in the Corporate and All Other non-reportable operating segments driven primarily by a $3.5 million decrease due to the deconsolidation of Nogin in the prior year quarter;
• $(0.4) million decrease in the Marconi Wireless segment, driven by lower product sales attributable to an ongoing decline in active customers; partially offset by
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• $2.0 million increase in the Consumer Products segment, driven by stronger distributor demand ahead of anticipated price increases from rising transportation costs, compared to an unusually weak prior period impacted by tariff uncertainty.
Operating Expenses
Direct cost of services
The decrease in direct cost of services during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $6.9 million decrease from the Corporate and All Other category primarily driven by decreases of $4.9 million due to the sale of Atlantic Coast Recycling and $1.6 million due to the deconsolidation of Nogin in the prior year quarter;
• $2.1 million decrease from the Marconi Wireless segment due to fewer active lines and migration of its customer base to a lower-cost third-party network;
• $1.5 million decrease from the Lingo segment due to lower POTS unit volume, consistent with the decline in POTS revenue, partially offset by higher costs associated with the conversion to VoIP services;
• $0.3 million decrease from the magicJack segment due to lower carrier charges, reduced salary costs from restructuring, and lower professional services and depreciation; and
• $0.3 million decrease from the UOL segment due to lower telecom costs due to declines in internet access subscribers in addition to discontinuing telecom resale services.
Cost of goods sold
The decrease in cost of goods sold during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $3.2 million decrease from the Corporate and All Other category primarily driven by a $3.1 million decrease from the deconsolidation of Nogin in the prior year quarter;
• $0.7 million decrease from the Marconi Wireless segment driven by lower product costs resulting from a decrease in the quantity of phones sold;
• $0.5 million decrease from the Consumer Products segment due to improved product margins driven by price increases and a favorable shift in product mix toward higher margin products, partially offset by higher inventory reserve charges recorded in the prior year quarter; and
• $0.1 million decrease from the magicJack segment due to lower hardware-related costs resulting from a decline in product sales, partially offset by an increase in shipping and freight costs.
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Selling, general and administrative expenses
Selling, general and administrative expenses during the three months ended March 31, 2026 and 2025 were comprised of the following:
Three Months Ended March 31, 2026 Three Months Ended
March 31, 2025 Change
Amount % Amount % Amount %
Capital Markets segment $ 34,159 25.5 % $ 37,349 22.2 % $ (3,190) (8.5) %
Wealth Management segment 36,191 26.9 % 45,554 27.2 % (9,363) (20.6) %
Lingo segment 13,363 9.9 % 13,990 8.4 % (627) (4.5) %
magicJack segment 2,543 1.9 % 2,861 1.7 % (318) (11.1) %
Marconi Wireless segment 1,714 1.3 % 2,264 1.4 % (550) (24.3) %
UOL segment 453 0.3 % 605 0.4 % (152) (25.1) %
Consumer Products segment 15,578 11.6 % 15,615 9.3 % (37) (0.2) %
Corporate and All Other 30,347 22.6 % 49,150 29.4 % (18,803) (38.3) %
Total selling, general & administrative expenses $ 134,348 100.0 % $ 167,388 100.0 % $ (33,040) (19.7) %
Capital Markets
The decrease in selling, general and administrative expenses in the Capital Markets segment during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $6.8 million decrease in other selling, general and administrative expenses primarily due to lower corporate allocations, the absence of non-recurring charges incurred in the prior period, lower bad debt expense reflecting a reserve established in the prior period that was not repeated, and higher transaction costs in the prior period related to a carve-out that did not recur;
• $0.4 million decrease in depreciation and amortization due to the expiration of an office lease during the current period, resulting in no further amortization for that location;
• $0.4 million decrease in occupancy-related costs primarily due to the expiration of two office leases during the period, generating combined savings, partially offset by moving costs incurred in connection with office relocations during the current period; partially offset by
• $4.5 million increase in employee compensation and benefits driven by higher primary commissions resulting from increased investment banking revenues during the period.
Wealth Management
The decrease in selling, general and administrative expenses in the Wealth Management segment during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the sale of a portion of the Company’s wealth management business to Stifel in April 2025 and the departure of advisors and support staff. The decrease was driven by the following:
• $4.8 million decrease in other selling, general and administrative expenses;
• $2.5 million decrease in employee compensation and benefits, partially offset by bonus accruals related to APLD VRT and unrealized carried interest;
• $1.3 million decrease in occupancy-related costs;
• $0.6 million decrease in depreciation and amortization; and
• $0.2 million decrease in professional services primarily due to fewer legal cases and related consulting fees.
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Lingo
The decrease in selling, general and administrative expenses in the Lingo segment during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $0.2 million decrease in employee compensation and benefits primarily due to lower salaries from a reduction in force, partially offset by higher allocated personnel costs from affiliates;
• $0.2 million decrease in professional services primarily due to lower audit-related costs and legal fees;
• $0.2 million decrease in occupancy-related costs primarily due to reduced software and computer-related expenses following the reduction in force; and
• $0.1 million decrease in depreciation and amortization primarily due to certain software assets becoming fully amortized in 2025.
magicJack
The decrease in selling, general and administrative expenses in the magicJack segment during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $0.2 million decrease in professional services primarily due to lower outside consulting costs from reduced allocations and decreased legal services activity; and
• $0.1 million decrease in other selling, general and administrative expenses primarily due to reduced headcount and outside consulting costs, partially offset by higher corporate cost allocations.
Marconi Wireless
The decrease in selling, general and administrative expenses in the Marconi Wireless segment during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $0.4 million decrease in employee compensation and benefits primarily due to headcount reductions and severances paid in 2025 due to terminations; and
• $0.1 million decrease in occupancy-related costs primarily due to a reduction in chat services costs, reflecting lower third-party headcount following the Company’s completion of its platform migration in 2025.
UOL
The decrease in selling, general and administrative expenses in the UOL segment during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $0.1 million decrease in employee compensation and benefits primarily due to reduction in headcount.
Consumer Products
The decrease in selling, general and administrative expenses in the Consumer Products segment during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $0.6 million decrease in employee compensation and benefits primarily due to lower headcount as the Company continues to implement workforce reductions, which are expected to continue over the near term;
• $0.3 million decrease in depreciation and amortization primarily due to certain fixed assets becoming fully depreciated during the prior period; mostly offset by
• $0.5 million increase in professional services primarily due to legal fees incurred in connection with the Targus/FGI Credit Agreement and higher audit fees during the current period; and
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• $0.2 million increase in other selling, general and administrative expenses primarily due to higher personnel costs within the Global Sourcing Group; and
• $0.1 million increase in occupancy-related costs primarily due to higher IT costs incurred in connection with the Company’s ERP system implementation during the current period.
Corporate and All Other
The decrease in selling, general and administrative expenses in the Corporate and All Other category during the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily due to the following:
• $8.4 million decrease due to the deconsolidation of Nogin in the prior year quarter;
• $4.8 million decrease due to the sale of Atlantic Coast Recycling;
• $3.9 million decrease in other selling, general and administrative expenses driven primarily by an impairment of a loan receivable, costs associated with the merger of B. Riley Securities Holdings, Inc . with a shell corporation, and losses on the extinguishment of debt recognized in the prior year quarter;
• $1.6 million decrease in employee compensation and benefits primarily driven by decreases in employee compensation and occupancy-related costs at bebe due to a reduction in store count, and decreases at Corporate due to lower share-based compensation expense resulting from the vesting of previously granted shares with no new grants issued, and a reduction in headcount; partially offset by
• $0.7 million increase in professional services driven by higher spend on audit and accounting services.
Other Income (Expense). Other income included interest income of $0.4 million and $1.5 million during the three months ended March 31, 2026 and 2025, respectively. Dividend income was $0.7 million during the three months ended March 31, 2026 compared to $0.1 million during the three months ended March 31, 2025.
Realized and unrealized (losses) gains on investments was a gain of $105.1 million during the three months ended March 31, 2026 compared to a loss of $14.5 million during the three months ended March 31, 2025, which is comprised of the following:
Realized and Unrealized Gains (Losses)
Three Months Ended March 31,
2026 2025
Other Income (Expense) - Realized & Unrealized Gains (Losses)
Public Equity Securities:
Babcock & Wilcox Enterprises, Inc. - common stock $ 99,141 $ (11,488)
Babcock & Wilcox Enterprises, Inc. - preferred stock — (462)
Double Down Interactive Co., Ltd - common stock (680) (2,077)
Applied Digital Corporation - common stock 1,400 —
Other public equities 6,690 (208)
Subtotal 106,551 (14,235)
Private Equity Securities:
Other private equities (591) (1,622)
Subtotal (591) (1,622)
Corporate bonds (860) 1,357
Total $ 105,100 $ (14,500)
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The favorable variance of $119.6 million was primarily due to a $110.6 million change in realized and unrealized gains on B&W common stock, driven by an increase in the company’s public share price during the period.
Other income (expense) also includes changes in the fair value of financial and other instruments reflecting a loss of $4.4 million during the three months ended March 31, 2026 primarily related to unrealized losses on liability-classified warrants.
Gain on sale and deconsolidation of businesses of $80.8 million during the three months ended March 31, 2025 was primarily related to $52.4 million net gain on the sale of Atlantic Coast Recycling, as more fully discussed in Note 4 - Discontinued Operations and Assets Held For Sale, and $28.4 million related to the deconsolidation of Nogin.
Gain on senior note exchange was $10.5 million during the three months ended March 31, 2025 related to private transactions with institutional investors whereby senior notes were exchanged for new notes bearing interest at 8.00% due in 2028, as more fully discussed in Note 15 - Senior Notes Payable.
Income from equity investments was $1.3 million during the three months ended March 31, 2026, compared to a loss of $(0.6) million during the three months ended March 31, 2025.
Gain on extinguishment of debt during the three months ended March 31, 2026 was $2.9 million due to Section 3(a)(9) exchanges, compared to a loss of $10.4 million during the three months ended March 31, 2025 due to amendments to credit agreements with Oaktree, Nomura, and BRPI Acquisition Co LLC (“BRPAC”), as more fully discussed in Note 14 - Term Loans and Revolving Credit Facility.
Interest expense was $19.8 million during the three months ended March 31, 2026, compared to $30.0 million during the three months ended March 31, 2025. The decreases in interest expense primarily consisted of $10.0 million from Corporate and All Other primarily due to lower debt balances.
(Provision for) benefit from income taxes. (Provision for) benefit from income taxes was $(16.9) million during the three months ended March 31, 2026, compared to $3.0 million during the three months ended March 31, 2025. The effective income tax rate was 7.1% for the three months ended March 31, 2026, as compared to 13.2% for the three months ended March 31, 2025.
Income From Discontinued Operations, Net Of Income Taxes. On June 27, 2025, we signed an equity purchase agreement to sell all of the membership interests of GlassRatner Advisory & Capital Group, LLC (“GlassRatner”) and B. Riley Farber Advisory Inc. (“Farber”), and their results have been presented as discontinued operations for the three months ended March 31, 2025. Income from discontinued operations, net of tax, for GlassRatner and Farber was $3.4 million for the three months ended March 31, 2025. Refer to Note 4 -Discontinued Operations and Assets Held for Sale to the accompanying unaudited condensed consolidated financial statements for additional information.
Preferred Stock Dividends . Preferred stock dividends accrued were $2.0 million for the three months ended March 31, 2026 and 2025. On January 21, 2025, the Company announced that we had temporarily suspended dividends on our Series A and B Preferred Stock. Unpaid dividends will accrue until paid in full.
On April 30, 2026, the sixth quarterly Dividend Period (as defined in the applicable Certificate of Designation) for which dividends on our Series A Preferred Stock and Series B Preferred Stock have not been paid since the suspension occurred. See Note 27 – Subsequent Events.
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Liquidity and Capital Resources
Our operations and debt obligations are funded through a combination of existing cash on hand, cash generated from operations, monetization of investments and asset sales, borrowings under our senior notes payable, term loans and credit facilities, other financing arrangements, and obligations under operating leases. The Company operates multiple business segments that provide sources of cash flow and operating income, which include a mix of businesses with recurring revenue models and transactional businesses with uneven cashflows. With our primary business in capital markets and investment banking, we have expertise in accessing public and private capital markets and in transacting investments and operating companies. We use our expertise to buy and sell assets and investments on our balance sheet and to access private and public capital, which are described in the 2026 activity summarized below.
During the three months ended March 31, 2026, the Company’s sources and uses of cash from investing, financing and operations included the following. The Company fully redeemed the $96.0 million of outstanding 5.50% Senior Notes due 2026 on the day prior to their maturity date. During the three months ended March 31, 2026, the Company completed a series of Section 3(a)(9) Exchanges with the Investor whereby the Company exchanged an aggregate principal amount of $36.1 million of senior notes which included (i) $11.0 million of the 5.50% Senior Notes due March 31, 2026, (ii) $11.4 million of the 6.50% Senior Notes due September 30, 2026, (iii) $2.7 million of the 5.00% Senior Notes due December 31, 2026, (iv) $5.6 million of the 6.00% Senior Notes due January 31, 2028, and (v) $5.4 million of the 5.25% Senior Notes due August 31, 2028 for an aggregate of 4,553,866 shares of the Company’s common stock. The Investor owns more than five percent of the Company’s common stock. Additionally, from our securities and investments owned we had net proceeds of approximately $8.6 million, which excludes certain trading activity related to broker dealer operations and approximately $8.4 million in net proceeds from loans receivable. Net cash provided by operating activities was $38.1 million inclusive of a balance sheet increase in Securities and other investments owned of $192.8 million in operating assets.
In the next 12 months, in addition to funding the Company’s operations, several debt obligations will be due including approximately $337.3 million in Senior Note maturities (RILYN in September 2026 and RILYG in December 2026) and a total of $16.0 million in term loan amortization payments. The Company also has approximately $11.4 million of obligations due under operating leases, along with operational expenditures and investment opportunities in the ordinary course of business. For additional information regarding our debt obligations and related agreements, refer to Note 14 - Term Loans and Revolving Credit Facility and Note 15 - Senior Notes Payable in the accompanying unaudited condensed consolidated financial statements. The Company expects capital expenditures to be less than $6.3 million for the next 12 months.
To fund the short-term obligations due in the next 12 months, management plans to use a combination of existing cash on hand, cash generated from continuing operations, proceeds from investment and assets sales, and public and private capital market options. As of March 31, 2026, the Company had $175.8 million of unrestricted cash and cash equivalents, $2.2 million of restricted cash, $639.7 million of securities and other investments owned, and $24.9 million of loans receivable, at fair value. Additionally, the Company will evaluate external sources of liquidity including public and private debt refinancing, bond swaps, buybacks or exchanges, and equity capital raises. Among many factors, the Company considers the timing of debt obligation payoffs, the cost of capital, and future value of assets when determining the sources used to fund debt obligations. We believe these liquidity sources provide sufficient cash resources to meet our debt obligation and operating cash flow requirements in the next 12 months.
Our long-term debt obligations beyond 12 months include approximately $569.9 million on Senior Notes, $268.0 million Senior Secured Second Lien Notes due 2028 and $62.5 million in Oaktree term loans maturing February 2028. Additionally, the Company’s term loan through Banc of California has $16.0 million annually in amortization payments due through maturity in January 2030 with approximately $24.1 million of obligations due under operating leases. The Company has $10.7 million outstanding through the revolving credit facility through FGI as of March 31, 2026, with a final maturity date of August 20, 2028. The Company expects capital expenditures to be less than $6.3 million annually.
The Company will fund long-term obligations beyond 12 months using the same tactics described in the short-term liquidity. Additionally, the Company will evaluate operating company sales as a source of long-term liquidity. As with short-term obligations, the Company considers many factors including timing of debt obligation payoffs, the cost of capital, and future value when determining the source used to fund debt obligations. As long-term capital planning is a continual process, the Company may also choose to address certain long-term capital and obligations over the next 12 months.
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The Company’s debt structure as of March 31, 2026 included borrowings of $1.3 billion primarily comprised of $1.2 billion of Senior Notes and Senior Secured Second Lien Notes with varying maturity dates from September 30, 2026 through August 31, 2028, with fixed interest rates ranging from 5.00% to 8.00%. Additionally, we have $116.7 million in outstanding term loans borrowed pursuant to the Oaktree Capital Management, L.P. and BRPI Acquisition Co LLC (“BRPAC”) credit agreements, and $10.7 million of revolving credit facility under the Targus credit facility, which are all subject to variable rates. The Company is compliant with its debt obligation requirements and maintains processes to monitor ongoing compliance. For additional information regarding our debt obligations, covenant compliance, and related agreements, refer to Note 14 - Term Loans and Revolving Credit Facility and Note 15 - Senior Notes Payable in the accompanying unaudited condensed consolidated financial statements.
The Company believes it has sufficient excess liquidity to meet our short-term obligations within the next 12 months and will pursue capital market options to reduce long-term debt, extend maturities, or remix our capital structure when advantageous. There is no assurance on favorable refinancing terms, which will be subject to market conditions and our credit profile.
Dividends
From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. During the three months ended March 31, 2026, we did not pay any cash dividends on our common stock. In August 2024, we announced the suspension of our common stock dividend as we prioritize reducing our debt. The declaration and payment of any future dividends or repurchases of our common stock will be made at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our board of directors.
Holders of Series A Preferred Stock, when and as authorized by our board of directors, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends are payable quarterly in arrears. As of March 31, 2026, dividends in arrears in respect of the Depositary Shares were $6.9 million. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series A Preferred Stock. Unpaid dividends will accrue until paid in full.
Holders of Series B Preferred Stock, when and as authorized by our board of directors, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends are payable quarterly in arrears. As of March 31, 2026, dividends in arrears in respect of the Depositary Shares were $4.5 million. On January 21, 2025, the Company announced that it had temporarily suspended dividends on its Series B Preferred Stock. Unpaid dividends will accrue until paid in full.
On April 30, 2026, the sixth quarterly Dividend Period for which dividends on the Series A Preferred Stock and Series B Preferred Stock have not been paid since the January 21, 2025 suspension occurred. As a result, a “Preferred Dividend Default” has occurred under each Certificate of Designation. See Note 27 – Subsequent Events.
Our principal sources of liquidity to finance our business are our existing cash on hand, cash flows generated from operating activities, funds available under revolving credit facilities and special purpose financing arrangements.
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Cash Flow Summary
Three Months Ended
March 31,
2026 2025
(Dollars in thousands)
Net cash provided by (used in):
Operating activities $ 38,073 $ 184
Investing activities 8,333 59,181
Financing activities (96,790) (172,529)
Effect of foreign currency on cash (871) (465)
Net decrease in cash, cash equivalents and restricted cash
$ (51,255) $ (113,629)
The increase of $37.9 million in net cash provided by operating activities in the first quarter of 2026 was primarily due to the following:
• An increase of $288.8 million in net income, net of non-cash items, partially offset by a $242.0 million decrease in cash flows from securities and other investments owned, primarily driven by increased investment activity in equity securities, with higher share prices also contributing to the period-over-period change.
• The increase in net income, net of non-cash items was also partially offset by $8.9 million of net working capital outflows, primarily driven by an increase in accounts receivable primarily due to an increase in investment banking receivables and an increase in securities borrowing activity, partially offset by cash inflows from securities sold, not yet purchased, reflecting net increases in short positions.
The decrease of $50.8 million in net cash provided by investing activities in the first quarter of 2026 was primarily due to the following:
• Proceeds of $68.9 million received from the sale of the Atlantic Coast Recycling business in the prior-year period with no comparable activity in the current period and a decrease in repayments of loans receivable of $18.3 million, partially offset by a decrease in purchases of loans receivable of $41.4 million. The cash flows from loans receivable were driven by the repayment of certain loans outstanding in the prior-year period that did not recur, offset by the addition of the XBP Americas, LLC facility and recovery of proceeds from the Conn’s, Inc. bankruptcy estate. Refer to Note 9 - Loans Receivable, at Fair Value in the accompanying unaudited condensed consolidated financial statements for further details.
The decrease of $75.7 million in net cash used in financing activities in the first quarter of 2026 was primarily due to the following:
• $211.2 million net decrease in debt proceeds and a $288.8 million net decrease in debt-related payments, primarily due to the absence of term loan issuances and related repayments that occurred in the prior-year period and did not recur in the current period, with lower cash paid for the redemption of senior notes also contributing to the decrease in payments.
Recent Accounting Standards
See Note 2(o) - Recent Accounting Standards to the accompanying unaudited condensed consolidated financial statements for recent accounting standards.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, the Company is not required to provide the information called for by this Item.
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