What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-08 compared with 2022-11-04 · 261 added, 477 removed, 161 unchanged (82% of the section changed)

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the accuracy of our estimates and valuations of inventory or assets in “guarantee” based engagements;

competition in the asset management business;

failure to successfully compete in any of our businesses;

potential losses related to our auction or liquidation engagements;

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potential losses from or illiquidity of our proprietary investments;

changing economic and market conditions, including increasing inflation and actions by the Federal Reserve to address inflation and the possibility of recession;

changing economic and market conditions, including increasing inflation and actions by the Federal Reserve to address inflation and the possibility of recession or an economic downturn;

the continuing effects of the COVID-19 pandemic, or other pandemics or severe public health crises, and other related impacts including supply chain disruptions, labor shortages and increased labor costs;

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potential mark-downs in inventory in connection with purchase transactions;

failure to successfully compete in any of our segments;

loss of key personnel;

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the failure of our brand investment portfolio licensees to pay us royalties;

the intense competition to which our brand investment portfolio is subject;

and the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia’s invasion of Ukraine.

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and all of its subsidiaries.

Restatement of Previously Issued Consolidated Financial Statements

We have restated certain previously reported financial information for the years ended March 31, 2022 and 2021 in this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations and Revenue sections.

See the Explanatory Note preceding Part I, Financial Information, for background on the restatement, the fiscal periods impacted, and other information.

Description of the Company

Riley Financial, Inc.

Riley” or the “Company”) is a diversified financial services platform and opportunistically invests in companies or assets with attractive risk-adjusted return profiles to benefit its shareholders.

Through its affiliated subsidiaries, B.

Riley provides a full suite of investment banking, corporate finance research, sales, and trading, as well as advisory, valuation, and wealth management, services.

The Company’s major business lines include:

Riley Securities, a leading, full service investment bank that provides corporate finance, lending, research, securities lending and sales and trading services to corporate, institutional, and high net worth individual clients.

is nationally recognized for its proprietary small and mid-cap equity research.

Riley Securities was established from the merger of B.

Riley & Co, LLC and FBR Capital Markets & Co.

Riley Wealth Management, which provides comprehensive wealth management and brokerage services to individuals and families, corporations and non-profit organizations, including qualified retirement plans, trusts, foundations, and endowments.

The firm was formerly known as Wunderlich Securities, Inc., which the Company acquired in July 2017.

• National Holdings Corporation (“National”), which provides wealth management, brokerage, insurance brokerage, tax preparation and advisory services, was acquired in February 2021.

Riley Capital Management, which is a Securities and Exchange Commission (“SEC”) registered investment advisor, that includes B.

Riley Asset Management, an advisor to and/or manager of certain private funds.

Riley Advisory Services, which provides expert witness, bankruptcy, financial advisory, forensic accounting, valuation and appraisal, and operations management services to companies, financial institutions, and the legal community.

Riley Advisory Services is primarily comprised of the bankruptcy and restructuring, forensic accounting, litigation support, and appraisal and valuation practices.

Riley Retail Solutions, which is a leading provider of asset disposition, liquidation, and auction solutions to a wide range of retail and industrial clients.

Riley Real Estate, which advises companies, financial institutions, investors, family offices and individuals on real estate projects worldwide.

A core focus of B.

Riley Real Estate, LLC is the restructuring of lease obligations in both distressed and non-distressed situations, both inside and outside of the bankruptcy process, on behalf of corporate tenants.

Riley Principal Investments, which identifies attractive investment opportunities and seeks to control or influence the operations of our portfolio company investments to deliver financial and operational improvements that will maximize the Company’s free cash flow, and therefore, shareholder returns.

The team concentrates on opportunities presented by distressed companies or divisions that exhibit challenging market dynamics.

Representative transactions include recapitalization, direct equity investment, debt investment, active minority investment and buyouts.

• Communications and other primarily consist of United Online, Inc.

(“UOL” or “United Online”), which was acquired in July 2016, magicJack VocalTec Ltd.

(“magicJack”), which was acquired in November 2018, Lingo Management, LLC (“Lingo”) in which the Company increased its ownership interest from 40% to 80% in May 2022, a mobile virtual network operator business (“Marconi Wireless”), which was acquired in October 2021, and BullsEye Telecom (“BullsEye”), which was acquired in August 2022.

The following briefly describes each such business:

◦ UOL is a communications company that offers consumer subscription services and products, consisting of Internet access services and devices under the NetZero and Juno brands.

◦ magicJack is a Voice over IP (“VoIP”) cloud-based technology and services and wireless mobile communications provider.

◦ Lingo is a global cloud/unified communications and managed service provider.

◦ Marconi Wireless is a mobile virtual network operator business that provides mobile phone voice, text, and data services and devices.

◦ BullsEye is a single source communications and cloud technology provider.

• BR Brand Holding (“BR Brands”), in which the Company owns a majority interest, provides licensing of certain brand trademarks.

BR Brands owns the assets and intellectual property related to licenses of six brands:

Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore as well as investments in the Hurley and Justice brands with Bluestar Alliance LLC (“Bluestar”), a brand management company.

We are headquartered in Los Angeles with offices in major cities throughout the United States including New York, Chicago, Boston, Atlanta, Dallas, Memphis, Metro Washington D.C., West Palm Beach, and Boca Raton.

For financial reporting purposes we classify our businesses into six operating segments:

(i) Capital Markets, (ii) Wealth Management, (iii) Auction and Liquidation, (iv) Financial Consulting, (v) Principal Investments – Communications and Other and (vi) Brands.

Capital Markets Segment.

Our Capital Markets segment provides a full array of investment banking, corporate finance, financial advisory, research, securities lending and sales and trading services to corporate, institutional, and individual clients.

Our corporate finance and investment banking services include merger and acquisitions as well as restructuring advisory services to public and private companies, initial and secondary public offerings, and institutional private placements.

In addition, we trade equity securities as a principal for our account, including investments in funds managed by our subsidiaries.

Our Capital Markets segment also includes our asset management businesses that manage various private and public funds for institutional and individual investors.

This segment also includes the results of operations of FocalPoint Securities, LLC (“FocalPoint”) from the date of acquisition on January 19, 2022.

Wealth Management Segment .

Our Wealth Management segment provides wealth management and tax services to corporate and high net worth clients.

We offer comprehensive wealth management services for corporate businesses that include investment strategies, executive services, retirement plans, lending & liquidity resources, and settlement solutions.

Our wealth management services for individual client services provide investment management, education planning, retirement planning, risk management, trust coordination, lending & liquidity solutions, legacy planning, and wealth transfer.

In addition, we supply market insights to provide unbiased guidance to make important financial decisions.

Wealth management resources include market views from our investment strategists and B.

Riley Securities’ proprietary equity research.

Auction and Liquidation Segment.

Our Auction and Liquidation segment utilizes our significant industry experience, a scalable network of independent contractors and industry-specific advisors to tailor our services to the specific needs of a multitude of clients, logistical challenges, and distressed circumstances.

Our scale and pool of resources allow us to offer our services across North America as well as parts of Europe, Asia, and Australia.

Our Auction and Liquidation segment operates through two main divisions, retail store liquidations and wholesale and industrial assets dispositions.

Our wholesale and industrial assets dispositions division operates through limited liability companies that are controlled by us.

Financial Consulting Segment.

Our Financial Consulting segment provides services to law firms, corporations, financial institutions, lenders, and private equity firms.

These services primarily include bankruptcy, financial advisory, forensic accounting, litigation support, operations management consulting, real estate consulting, and valuation and appraisal services.

Our Financial Consulting segment operates through limited liability companies that are wholly owned or majority owned by us.

Principal Investments - Communications and Other Segment.

Our Principal Investments - Communications and Other segment consists of businesses which have been acquired primarily for attractive investment return characteristics.

Currently, this segment includes, among other investments, UOL, through which we provide consumer Internet access, magicJack, through which we provide VoIP communication and related product and subscription services, and Marconi Wireless, through which we provide mobile phone services and devices.

This segment also includes the results of operations of Lingo from the date of acquisition on May 31, 2022 and BullsEye from the date of acquisition on August 16, 2022.

Brands Segment.

Our Brands segment consists of our brand investment portfolio that is focused on generating revenue through the licensing of trademarks and is held by BR Brands.

RILY) (the “Company”) is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners.

We operate through several consolidated subsidiaries (collectively, “B.

Riley”) that provide investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services to a broad client base spanning public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals.

The Company opportunistically invests in and acquires companies or assets with attractive risk-adjusted return profiles to benefit our shareholders.

We own and operate several uncorrelated consumer businesses and invest in brands on a principal basis.

Our approach is focused on high quality companies and assets in industries in which we have extensive knowledge and can benefit from our experience to make operational improvements and maximize free cash flow.

Our principal investments often leverage the financial, restructuring, and operational expertise of our professionals who work collaboratively across disciplines.

We refer to B.

Riley as a “platform” because of the unique composition of our business.

Our platform has grown considerably and become more diversified over the past several years.

We have increased our market share and expanded the depth and breadth of our businesses both organically and through opportunistic acquisitions.

Our increasingly diversified platform enables us to invest opportunistically and to deliver strong long-term investment performance throughout a range of economic cycles.

We are headquartered in Los Angeles, California and maintain offices throughout the U.S.

including in New York, Chicago, Metro District of Columbia, Atlanta, Boston, Dallas, Metro Detroit, Houston, Memphis, Miami, San Francisco, Boca Raton, and West Palm Beach.

We report our activities in six reportable business segments:

Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer segment.

During the fourth quarter of 2022, we realigned our segment reporting structure to reflect organizational changes from recent acquisitions and the manner in which capital is allocated.

The Consumer segment includes the previously reported Brands segment and Targus, which we acquired in the fourth quarter of 2022.

We have also re-aligned our previously reported Principal Investments - Communications and Other segment into the Communications segment and the All Other category that is reported with Corporate and Other.

Recent Developments

On October 18, 2022, a subsidiary of ours acquired all of the issued and outstanding shares of Targus Cayman Holdco Limited (“Targus”) in a transaction with an enterprise value of approximately $250.0 million, pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) with Targus, the sellers identified therein, and the other parties thereto.

The purchase price consisted of a combination of cash, 6.75% senior notes due 2024, shares of our common stock, and seller financing (the “Targus Transaction”).

Mikel Williams, the chief executive officer of Targus and formerly a member

of our board of directors, resigned from our board upon the closing of the Targus Transaction.

Williams continues to serve as the chief executive officer of Targus.

On September 23, 2022, our subsidiary, B.

Riley Receivables II, LLC, a Delaware limited liability company, entered into a credit agreement (the “Pathlight Credit Agreement”) by and among PLC Agent, LLC in the capacity as administrative agent and Pathlight Capital Fund I LP, Pathlight Capital Fund II LP, and Pathlight Capital Fund III LP as the lenders for a five-year $148.2 million term loan.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable.

On August 25, 2022, certain of our subsidiaries acquired the assets of Atlantic Coast Fibers, LLC (and related businesses), which provides residential and commercial recycling services in the New York City metropolitan area.

The purchase price consideration totaled $27.5 million, which consisted of $14.5 million in cash, $1.6 million in assumed debt, and $11.4 million in contingent consideration payable over approximately the next two years.

In accordance with Accounting Standards Codification (“ASC”) 805, we used the acquisition method of accounting for this acquisition.

Goodwill of $3.9 million and other intangible assets of $13.1 million were recorded as a result of the acquisition.

On August 16, 2022, our majority-owned subsidiary, Lingo, acquired BullsEye, a single source communications and cloud technology provider.

The purchase price consideration totaled $64.9 million, which Lingo partially funded using a $52.5 million term loan.

In accordance with ASC 805, we used the acquisition method of accounting for this acquisition.

Goodwill of $29.3 million and other intangible assets of $28.7 million were recorded as a result of the acquisition.

The acquisition is expected to bring revenue from multi-location enterprise business customers to Lingo, improving scale and flexibility in our Principal Investments - Communications and Other segment.

On August 16, 2022, Lingo entered into a credit agreement (the “Lingo Credit Agreement”) by and among Lingo, the Company as the secured guarantor, and Banc of California, N.A.

in its capacity as administrative agent and lender, for a five-year $45.0 million term loan.

On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank for an incremental term loan of $7.5 million, increasing the principal balance of the term loan to $52.5 million.

On May 31, 2022, our ownership interest in Lingo increased from 40% to 80% as a result of the conversion of $17.5 million of existing debt owed by Lingo to equity.

As a result of the consolidation of Lingo, the pre-existing equity investment was remeasured at fair value resulting in the recognition of a gain of $6.8 million, which is included in trading (losses) income and fair value adjustments on loans in the condensed consolidated statement of operations.

In accordance with ASC 805, we used the acquisition method of accounting.

The total fair value of the assets of Lingo was $115.5 million and the fair value of the 20% noncontrolling interest was $8.0 million at May 31, 2022.

Goodwill of $33.6 million and other intangible assets of $63.0 million were recorded as a result of the acquisition.

The acquisition is expected to expand the services offered in our Principal Investments - Communications and Other segment.

On January 19, 2022, we acquired FocalPoint, an independent investment bank headquartered in Los Angeles, California.

The purchase price consideration totaled $124.5 million, which consisted of $64.2 million in cash, $20.3 million in issuance of our common stock, and $39.9 million in deferred cash and contingent consideration payable over the next three years.

We used the acquisition method of accounting for this acquisition.

Goodwill of $110.5 million and other intangible assets of $10.8 million that was recorded as a result of the acquisition will be deductible for tax purposes.

The acquisition is expected to expand B.

Riley Securities’ mergers and acquisitions (“M&A”) advisory business and enhance its debt capital markets and financial restructuring capabilities.

Our diversified financial platform is affected by a variety of factors including the continuing impact of the COVID-19 pandemic, higher inflation, the actions by the Federal Reserve to address inflation, the possibility of recession, Russia's invasion of Ukraine, and rising energy prices.

Our diversified financial platform is affected by a variety of factors including the continuing high inflation, the actions by the Federal Reserve to address inflation, the possibility of recession or an economic downturn, Russia's invasion of Ukraine, and rising energy prices.

These factors create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods.

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The following period to period comparisons of our financial results and our interim results are not necessarily indicative of future results.

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Three Months Ended September 30, Change

Three Months Ended March 31, Change

2023 2022 Amount %

(As Restated)

Services and fees $ 235,559 $ 202,814 $ 32,745 16.1 %

Trading income and fair value adjustments on loans 12,154 18,197 (6,043) (33.2) %

Trading income (loss) and fair value adjustments on loans 51,568 (19,278) 70,846 n/m

Interest income - Loans and securities lending 77,186 61,426 15,760 25.7 %

Sale of goods 4,130 34,959 (30,829) (88.2) %

Sale of goods 67,777 1,878 65,899 n/m

Total revenues 432,090 246,840 185,250 75.0 %

Operating expenses:

Direct cost of services 44,523 18,019 26,504 147.1 %

Cost of goods sold 3,089 12,442 (9,353) (75.2) %

Direct cost of services 54,397 11,651 42,746 n/m

Cost of goods sold 47,626 2,251 45,375 n/m

Selling, general and administrative expenses 212,627 175,199 37,428 21.4 %

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Interest income 2,574 67 2,507 n/m

Dividend income 13,204 7,861 5,343 68.0 %

Realized and unrealized losses on investments (28,442) (49,112) 20,670 (42.1) %

Change in fair value of financial instruments and other (209) 5,981 (6,190) 100.0 %

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Interest expense (47,561) (30,436) (17,125) 56.3 %

Income before income taxes 68,995 74,351 (5,356) (7.2) %

Provision for income taxes (16,350) (22,693) 6,343 (28.0) %

Net income 52,645 51,658 987 1.9 %

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 4,808 1,108 3,700 n/m

Net income attributable to B.

Riley Financial, Inc.

47,837 50,550 (2,713) (5.4) %

Preferred stock dividends 2,002 1,929 73 3.8 %

Net income available to common shareholders $ 45,835 $ 48,621 $ (2,786) (5.7) %

n/m - Not applicable or not meaningful.

The table below and the discussion that follows are based on how we analyze our business.

Three Months Ended September 30, Change

2022 2021 Amount %

Revenues - Services and fees:

Capital Markets segment $ 113,217 $ 134,849 $ (21,632) (16.0) %

Wealth Management segment 47,145 117,572 (70,427) (59.9) %

Auction and Liquidation segment 1,949 2,745 (796) (29.0) %

Financial Consulting segment 22,835 21,291 1,544 7.3 %

Principal Investments - Communications and Other segment 76,316 18,669 57,647 n/m

Brands segment 5,023 6,372 (1,349) (21.2) %

Subtotal 266,485 301,498 (35,013) (11.6) %

Revenues - Sale of goods:

Auction and Liquidation segment 2,550 34,327 (31,777) (92.6) %

Principal Investments - Communications and Other segment 1,580 631 949 150.4 %

Subtotal 4,130 34,958 (30,828) (88.2) %

Trading income and fair value adjustments on loans

Capital Markets segment 11,127 16,935 (5,808) (34.3) %

Wealth Management segment 1,027 1,262 (235) (18.6) %

Subtotal 12,154 18,197 (6,043) (33.2) %

Interest income - Loans and securities lending:

Capital Markets segment 55,054 26,869 28,185 104.9 %

Auction and Liquidation segment 2,540 — 2,540 100.0 %

Subtotal 57,594 $ 26,869 30,725 114.4 %

Total revenues $ 340,363 $ 381,522 $ (41,159) (10.8) %

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n/m - Not applicable or not meaningful.

Total revenues decreased approximately $41.2 million to $340.4 million during the three months ended September 30, 2022 from $381.5 million during the three months ended September 30, 2021.

The decrease in revenues during the three months ended September 30, 2022 was primarily due to decreases in services and fees of $35.0 million, sale of goods of $30.8 million and the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $6.0 million, which is included in trading (losses) income and fair value adjustments on loans above, partially offset by an increase in interest income from loans and securities lending of $30.7 million.

The decrease in the fair value of the portfolio of securities and other investments owned as of September 30, 2022 was primarily due to the decrease in overall values in the stock market.

The decrease in revenue from services and fees in the three months ended September 30, 2022 consisted of decreases in revenue of $70.4 million in the Wealth Management segment, $21.6 million in the Capital Markets segment, $1.3 million in the Brands segment, and $0.8 million in the Auction and Liquidation segment, partially offset by increases in revenues of $57.6 million in the Principal Investments — Communications and Other segment and $1.5 million in the Financial Consulting segment.

Revenues from services and fees in the Capital Markets segment decreased $21.6 million to $113.2 million during the three months ended September 30, 2022 from $134.8 million during the three months ended September 30, 2021.

The decrease in revenues was primarily due to decreases of $74.7 million from corporate finance, consulting, and investment banking fees, partially offset by increases of $41.9 million in incentive fees, $6.2 million in dividends, $2.6 million in asset management fees, and $2.4 million in interest income.

Revenues from services and fees in the Wealth Management segment decreased $70.4 million to $47.1 million during the three months ended September 30, 2022 from $117.6 million during the three months ended September 30, 2021.

The decrease in revenues was primarily due to decreases in revenue of $42.3 million in wealth and asset management fees, $26.7 million in commission fees, and $1.5 million in other income.

Revenues from services and fees in the Auction and Liquidation segment decreased $0.8 million to $1.9 million during the three months ended September 30, 2022 from $2.7 million during the three months ended September 30, 2021.

The decrease in revenues was primarily due to fewer large retail fee liquidation engagements.

Revenues from services and fees in the Financial Consulting segment increased $1.5 million to $22.8 million during the three months ended September 30, 2022 from $21.3 million during three months ended September 30, 2021.

The increase in revenues was primarily due to an increase of $1.4 million within our Advisory Services division.

Revenues from services and fees in the Principal Investments - Communications and Other segment increased $57.6 million to $76.3 million during the three months ended September 30, 2022 from $18.7 million during the three months ended September 30, 2021.

The increase in revenues was primarily due to increases in subscription services of $27.8 million from the acquisition of an additional equity interest in Lingo in the second quarter of 2022, $15.3 million from the acquisition of BullsEye in the third quarter of 2022, $12.3 million from the acquisition of Marconi in the fourth quarter of 2021, and $3.3 million from another acquisition in the third quarter of 2022.

We expect the UOL and magicJack subscription revenues to continue to decline year over year.

Revenues from services and fees in the Brands segment decreased $1.3 million to $5.0 million during the three months ended September 30, 2022 from $6.4 million during the three months ended September 30, 2021.

The primary source of revenue included in this segment is the licensing of trademarks.

Trading income and fair value adjustments on loans decreased $6.0 million to $12.2 million during the three months ended September 30, 2022 compared to $18.2 million during the three months ended September 30, 2021.

This decrease was primarily due to a decrease of $5.8 million in the Capital Markets segment and a decrease of $0.2 million in the Wealth Management segment.

The income of $12.2 million during the three months ended September 30, 2022 was primarily due to realized and unrealized gains on investments made in our proprietary trading accounts of $31.3 million, partially offset by an unrealized loss on our loans receivable, at fair value of $19.2 million.

Interest income – loans and securities lending increased $30.7 million to $57.6 million during the three months ended September 30, 2022 from $26.9 million during the three months ended September 30, 2021.

Interest income from securities lending was $21.9 million and $13.0 million during the three months ended September 30, 2022 and 2021, respectively.

Interest income from loans was $35.7 million and $13.9 million during the three months ended September 30, 2022 and 2021, respectively.

Revenues – Sale of Goods

Revenues from the sale of goods decreased $30.8 million to $4.1 million during the three months ended September 30, 2022 from $35.0 million during three months ended September 30, 2021.

Revenues from sale of goods were attributable to a decrease of $31.8 million from sales of retail goods related to retail liquidation engagements in Europe that ended, partially offset by an increase of $1.1 million from sales of retail goods due to the acquisition of Marconi Wireless in the fourth quarter of 2021.

Cost of goods sold for three months ended September 30, 2022 was $3.1 million, resulting in a gross margin of 25.2%.

Operating Expenses

Direct Cost of Services

Direct cost of services increased $26.5 million to $44.5 million during the three months ended September 30, 2022 from $18.0 million during the three months ended September 30, 2021.

The activity is primarily driven by an increase of $37.1 million from the Principal Investments — Communications and Other segment, partially offset by a decrease of $10.6 million from the Auction and Liquidation segment.

The increase in the Principal Investments — Communications and Other segment was primarily due to increases of $20.2 million from the acquisition of Lingo in the second quarter of 2022, $9.7 million from the acquisition of BullsEye in the third quarter of 2022, $4.8 million from the acquisition Marconi Wireless in the fourth quarter of 2021, and $3.0 million from an other acquisition in the third quarter of 2022.

The decrease in the Auction and Liquidation segment was primarily due to retail liquidation engagements in Europe that ended.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the three months ended September 30, 2022 and 2021 were comprised of the following:

Three Months Ended September 30, 2022 Three Months Ended

September 30, 2021 Change

Amount % Amount % Amount %

Capital Markets segment $ 37,847 23.1 % $ 80,666 32.9 % $ (42,819) (53.1) %

Wealth Management segment 53,563 32.7 % 112,250 46.0 % (58,687) (52.3) %

Auction and Liquidation segment 2,228 1.4 % 5,153 2.1 % (2,925) (56.8) %

Financial Consulting segment 20,131 12.3 % 18,522 7.6 % 1,609 8.7 %

Principal Investments -Communications and Other segment 28,702 17.5 % 7,954 3.3 % 20,748 n/m

Brands segment 1,424 0.9 % 1,686 0.7 % (262) (15.5) %

Corporate and Other segment 19,832 12.1 % 17,987 7.4 % 1,845 10.3 %

Total selling, general & administrative expenses $ 163,727 100.0 % $ 244,218 100.0 % $ (80,491) (33.0) %

____________________________________

n/m - Not applicable or not meaningful.

Total selling, general and administrative expenses decreased approximately $80.5 million to $163.7 million during the three months ended September 30, 2022 from $244.2 million during the three months ended September 30, 2021.

The decrease was primarily due to decreases of $58.7 million in the Wealth Management segment, $42.8 million in the Capital Markets segment, and $2.9 million in the Auction and Liquidation segment, partially offset by increases of $20.7 million in the Principal Investments — Communications and Other segment, $1.8 million in the Corporate and Other segment, and $1.6 million in the Financial Consulting segment.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment decreased by $42.8 million to $37.8 million during the three months ended September 30, 2022 from $80.7 million during the three months ended September 30, 2021.

The decrease was primarily due to decreases of $21.5 million in consulting expenses and $20.1 million in payroll and related expenses.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment decreased by $58.7 million to $53.6 million during the three months ended September 30, 2022 from $112.3 million during the three months ended September 30, 2021.

The decrease was primarily due to a decrease of $58.3 million in payroll and related expenses.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment decreased $2.9 million to $2.2 million during the three months ended September 30, 2022 from $5.2 million during the three months ended September 30, 2021.

The decrease was primarily due to decreases of $2.6 million in business development expenses and $0.2 million in payroll and related expenses.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $1.6 million to $20.1 million during the three months ended September 30, 2022 from $18.5 million during the three months ended September 30, 2021.

The increase was primarily due to increases of $1.3 million in payroll and related expenses and $0.3 million in travel and entertainment expenses.

Principal Investments — Communications and Other

Selling, general and administrative expenses in the Principal Investments — Communications and Other segment increased $20.7 million to $28.7 million for the three months ended September 30, 2022 from $8.0 million for the three months ended September 30, 2021.

The increase was primarily due to increases of $12.4 million from the acquisition of additional equity interest in Lingo in the second quarter of 2022, $5.0 million from the acquisition of BullsEye in the third quarter of 2022, and $3.5 million from the acquisition of Marconi in the fourth quarter of 2021.

Selling, general and administrative expenses in the Brands segment decreased $0.3 million to $1.4 million during the three months ended September 30, 2022 from $1.7 million during the three months ended September 30, 2021.

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment increased approximately $1.8 million to $19.8 million during the three months ended September 30, 2022 from $18.0 million during the three months ended September 30, 2021.

The increase was primarily due to an increase of $1.6 million in payroll and related expenses.

Other Income (Expense).

Other income included interest income of $0.7 million and $0.1 million during the three months ended September 30, 2022 and 2021, respectively.

Change in fair value of financial instruments and other in the amount of $0.6 million during the three months ended September 30, 2022 was primarily due to the change in fair value of warrant liabilities.

Interest expense was $34.6 million during the three months ended September 30, 2022 compared to $25.4 million during the three months ended September 30, 2021.

The increase in interest expense was primarily due to increases in interest expense of $3.5 million from the issuance of senior notes, $3.0 million from the Nomura term loan, $0.9 million from the Nomura revolving credit facility, and a total of $0.8 million from the Pathlight and Lingo term loans entered into during the third quarter of 2022.

During the three months ended September 30, 2022, loss from equity investments was $0.1 million compared to income of $1.1 million during the three months ended September 30, 2021.

Income Before Income Taxes .

Income before income taxes was $69.0 million during the three months ended September 30, 2022 compared to income of $74.4 million during the three months ended September 30, 2021.

The increase was primarily due to a decrease in operating expenses of approximately $48.0 million and an increase in interest income of $0.6 million, partially offset by a decrease in revenue of $41.2 million, increase in interest expense of $9.2 million, decrease in change in fair value of financial instruments and other of $2.3 million, and an increase in loss from equity investments of $1.2 million.

Provision for Income Taxes.

Provision for income taxes was $16.4 million during the three months ended September 30, 2022 compared to a provision of $22.7 million during the three months ended September 30, 2021.

The effective income tax rate was 23.7% for the three months ended September 30, 2022 as compared to 30.5% for the three months ended September 30, 2021.

Net Income Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests .

Net income attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own.

The net income attributable to

noncontrolling interests and redeemable noncontrolling interests was $4.8 million during the three months ended September 30, 2022 compared to $1.1 million during the three months ended September 30, 2021.

Net Income Attributable to the Company .

Net income attributable to the Company was $47.8 million during the three months ended September 30, 2022 compared to $50.6 million during the three months ended September 30, 2021.

The increase was primarily due to an increase in operating income of $6.8 million, a decrease in provision for income taxes of $6.3 million, and an increase in interest income of $0.6 million, partially offset by an increase in interest expense of $9.2 million, increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $3.7 million, decrease in change in fair value of financial instruments and other of $2.3 million, and an increase in loss from equity investments of $1.2 million,

Preferred Stock Dividends .

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25,000 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.

On January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25,000 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.

On January 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

Net Income Available to Common Shareholders .

Net income available to common shareholders was $45.8 million during the three months ended September 30, 2022 compared to $48.6 million during the three months ended September 30, 2021.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Condensed Consolidated Statements of Operations

(Dollars in thousands)

Nine Months Ended September 30, Change

2022 2021 Amount %

Services and fees $ 678,065 $ 857,109 $ (179,044) (20.9) %

Trading (losses) income and fair value adjustments on loans (280,163) 317,818 (597,981) (188.2) %

Interest income - Loans and securities lending 182,855 89,280 93,575 104.8 %

Sale of goods 7,895 54,244 (46,349) (85.4) %

Total revenues 588,652 1,318,451 (729,799) (55.4) %

Operating expenses:

Direct cost of services 73,959 41,435 32,524 78.5 %

Cost of goods sold 7,334 21,394 (14,060) (65.7) %

Selling, general and administrative expenses 506,062 635,484 (129,422) (20.4) %

Restructuring charge 8,016 — 8,016 100.0 %

Interest expense - Securities lending and loan participations sold 43,757 40,269 3,488 8.7 %

Total operating expenses 639,128 738,582 (99,454) (13.5) %

Operating (loss) income (50,476) 579,869 (630,345) (108.7) %

Other income (expense):

Interest income 1,253 175 1,078 n/m

Change in fair value of financial instruments and other 9,728 8,267 1,461 17.7 %

Income from equity investments 3,285 1,172 2,113 180.3 %

Interest expense (96,787) (66,014) (30,773) 46.6 %

(Loss) income before income taxes (132,997) 523,469 (656,466) (125.4) %

Benefit from (provision for) income taxes 39,858 (140,113) 179,971 (128.4) %

Net (loss) income $ (93,139) 383,356 (476,495) (124.3) %

Net income attributable to noncontrolling interests and redeemable noncontrolling interests 9,245 2,474 6,771 n/m

Net (loss) income attributable to B.

Income (loss) before income taxes 24,479 (12,891) 37,370 n/m

(Provision for) benefit from income taxes (7,919) 3,695 (11,614) n/m

Net income (loss) 16,560 (9,196) 25,756 n/m

Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests (595) 866 (1,461) (168.7) %

Net income (loss) attributable to B.

Riley Financial, Inc.

$ (102,384) $ 380,882 $ (483,266) (126.9) %

17,155 (10,062) 27,217 n/m

Preferred stock dividends 2,012 2,002 10 0.5 %

Net (loss) income available to common shareholders $ (108,390) $ 375,415 $ (483,805) (128.9) %

Net income (loss) available to common shareholders $ 15,143 $ (12,064) $ 27,207 n/m

n/m - Not applicable or not meaningful.

The table below and the discussion that follows are based on how we analyze our business.

Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2023 2022 Amount %

Revenues - Services and fees:

(As Restated)

Capital Markets segment $ 57,929 $ 61,223 $ (3,294) (5.4) %

2 unchanged sentences

Financial Consulting segment 25,010 25,936 (926) (3.6) %

Principal Investments - Communications and Other segment 147,748 57,394 90,354 157.4 %

Brands segment 14,754 15,261 (507) (3.3) %

Communications segment 85,052 30,087 54,965 182.7 %

Consumer segment 4,309 4,557 (248) (5.4) %

All Other 9,273 699 8,574 n/m

Subtotal 235,559 202,814 32,745 16.1 %

1 unchanged sentence

Auction and Liquidation segment 216 — 216 100.0 %

Principal Investments - Communications and Other segment 5,345 2,081 3,264 156.8 %

Subtotal 7,895 54,243 (46,348) (85.4) %

Trading (losses) income and fair value adjustments on loans

Capital Markets segment (283,240) 311,335 (594,575) (191.0) %

Communications segment 1,867 1,878 (11) (0.6) %

Consumer segment 65,694 — 65,694 100.0 %

Subtotal 67,777 1,878 65,899 n/m

Trading income (loss) and fair value adjustments on loans

Capital Markets segment 50,296 (19,800) 70,096 n/m

Wealth Management segment 1,272 522 750 143.7 %

Subtotal (280,163) 317,818 (597,981) (188.2) %

Subtotal 51,568 (19,278) 70,846 n/m

Interest income - Loans and securities lending:

Capital Markets segment 77,186 61,426 15,760 25.7 %

Auction and Liquidation segment 3,976 — 3,976 100.0 %

182,855 89,280 93,575 104.8 %

Total revenues $ 432,090 $ 246,840 $ 185,250 75.0 %

1 unchanged sentence

n/m - Not applicable or not meaningful.

Total revenues decreased approximately $729.8 million to $588.7 million during the nine months ended September 30, 2022 from $1,318.5 million during the nine months ended September 30, 2021.

The decrease in revenues during the nine months ended September 30, 2022 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $598.0 million, which is included in trading (losses) income and fair value adjustments on loans above, services and fees of $179.0 million, and sale of goods of $46.3 million, partially offset by an increase in interest income from loans and securities lending of $93.6 million.

The decrease in the fair value of the portfolio of securities and other investments owned as of September 30, 2022 was primarily due to the decrease in overall values in the stock market.

The decrease in revenue from services and fees in the nine months ended September 30, 2022 consisted of decreases in revenue of $182.1 million in the Capital Markets segment, $85.6 million in the Wealth Management segment, $7.8 million in the Auction and Liquidation segment, and $0.5 million in the Brands segment, partially offset by increases in revenues of $90.4 million in the Principal Investments — Communications and Other segment and $6.6 million in the Financial Consulting segment.

Revenues from services and fees in the Capital Markets segment decreased $182.1 million to $249.7 million during the nine months ended September 30, 2022 from $431.8 million during the nine months ended September 30, 2021.

The decrease in revenues was primarily due to decreases in revenue of $251.9 million from corporate finance, consulting, and investment banking fees, partially offset by increases of $41.9 million in incentive fees, $20.8 million in dividends, $4.4 million in interest income, and $2.6 million in asset management fees.

Revenues from services and fees in the Wealth Management segment decreased $85.6 million to $185.0 million during the nine months ended September 30, 2022 from $270.6 million during the nine months ended September 30, 2021.

The decrease in revenues was primarily due to decreases of $42.3 million in wealth and asset management fees and $42.1 million in commission fees.

Revenues from services and fees in the Auction and Liquidation segment decreased $7.8 million to $7.8 million during the nine months ended September 30, 2022 from $15.6 million during the nine months ended September 30, 2021.

The decrease in revenues was primarily due to fewer large retail fee liquidation engagements.

Revenues from services and fees in the Financial Consulting segment increased $6.6 million to $73.1 million during the nine months ended September 30, 2022 from $66.4 million during the nine months ended September 30, 2021.

The increase in revenues was primarily due to increases of $3.5 million within our Real Estate division and $3.1 million within our Advisory Services division.

Revenues from services and fees in the Principal Investments - Communications and Other segment increased $90.4 million to $147.7 million during the nine months ended September 30, 2022 from $57.4 million during the nine months ended September 30, 2021.

The increase in revenues was primarily due to an increase in subscription services of $38.4 million from the acquisition of an additional equity interest in Lingo in the second quarter of 2022, $37.1 million from the acquisition of Marconi Wireless in the fourth quarter of 2021, $15.3 million from the acquisition of BullsEye in the third quarter of 2022, and $5.4 million from other acquisitions in 2022, partially offset by a decrease of $5.8 million in subscription services for UOL and magicJack.

We expect the UOL and magicJack subscription revenues to continue to decline year over year.

Revenues from services and fees in the Brands segment decreased $0.5 million to $14.8 million during the nine months ended September 30, 2022 from $15.3 million during the nine months ended September 30, 2021.

The primary source of revenue included in this segment is the licensing of trademarks.

Trading (losses) income and fair value adjustments on loans decreased $598.0 million to a loss of $280.2 million during the nine months ended September 30, 2022 compared to income of $317.8 million during the nine months ended September 30, 2021.

This decrease was primarily due to decreases of $594.6 million in the Capital Markets segment and $3.4 million in the Wealth Management segment.

The loss of $280.2 million during the nine months ended September 30, 2022 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts of $267.8 million and unrealized loss on our loans receivable, at fair value of $19.2 million, partially offset by a realized gain on disposal of equity method investment of $6.8 million.

Interest income – loans and securities lending increased $93.6 million to $182.9 million during the nine months ended September 30, 2022 from $89.3 million during the nine months ended September 30, 2021.

Interest income from securities lending was $55.7 million and $49.8 million during the nine months ended September 30, 2022 and 2021, respectively.

Interest income from loans was $127.2 million and $39.5 million during the nine months ended September 30, 2022 and 2021, respectively.

Total revenues increased approximately $185.3 million to $432.1 million during the three months ended March 31, 2023 from $246.8 million during the three months ended March 31, 2022.

The increase in revenues during the three months ended March 31, 2023 was primarily due to an increase in revenue from trading (loss) income and fair value adjustments on loans of $70.8 million, sale of goods of $65.9 million, services and fees of $32.7 million, and an increase in revenue interest income from loans and securities lending of $15.8 million.

The increase in revenue from services and fees in the three months ended March 31, 2023 consisted of increases in revenue of $55.0 million in the Communications segment, $8.6 million in All Other, and $2.1 million in the Auction and Liquidation segment, partially offset by decreases in revenues of $28.4 million in the Wealth Management segment, $3.3 million in the Capital Markets segment, $0.9 million in the Financial Consulting segment, and $0.2 million in the Consumer segment.

Revenues from services and fees in the Capital Markets segment decreased $3.3 million to $57.9 million during the three months ended March 31, 2023 from $61.2 million during the three months ended March 31, 2022.

The decrease in revenues was primarily due to decreases of $2.8 million of commission fees, $2.5 million of corporate finance, consulting, and investment banking fees, and $1.7 million of asset management fees, partially offset by an increase of $3.8 million in other income.

Revenues from services and fees in the Wealth Management segment decreased $28.4 million to $48.5 million during the three months ended March 31, 2023 from $77.0 million during the three months ended March 31, 2022.

The decrease in revenues was primarily due to a decrease in revenue of $20.9 million from wealth and asset management fees and $8.9 million of commission fees, partially offset by an increase of $1.4 million in other income.

Revenues from services and fees in the Auction and Liquidation segment increased $2.1 million to $5.4 million during the three months ended March 31, 2023 from $3.4 million during the three months ended March 31, 2022.

The increase in revenues was primarily due to an increase in retail fee liquidation engagements.

Revenues from services and fees in the Financial Consulting segment decreased $0.9 million to $25.0 million during the three months ended March 31, 2023 from $25.9 million during the three months ended March 31, 2022.

The decrease in revenues was primarily due to a decrease of $2.2 million within our Real Estate division, partially offset by an increase of $1.3 million within our Advisory Services division.

Revenues from services and fees in the Communications segment increased $55.0 million to $85.1 million during the three months ended March 31, 2023 from $30.1 million during the three months ended March 31, 2022.

The increase in revenues was primarily due to an increase of $29.4 million in subscription services from the acquisition of BullsEye Telecom (“BullsEye”) in the third quarter of 2022, $28.4 million in subscription services from the acquisition of the remaining non-controlling interests in Lingo Management, LLC (“Lingo”) in the second quarter of 2022, partially offset by decreases in subscription revenue of $2.6 million for United Online, Inc.

(“UOL”), magicJack VocalTec Ltd.

(“magicJack”), and Marconi Wireless Holdings, LLC (“Marconi”).

We expect the subscription revenue to continue to decline year over year.

Revenues from services and fees in the Consumer segment decreased $0.2 million to $4.3 million during the three months ended March 31, 2023 from $4.6 million during the three months ended March 31, 2022.

The primary source of revenue from services and fees included in this segment is the licensing of trademarks.

Revenues from services and fees in All Other, which includes the operations of a regional environmental services business and a landscaping business that we acquired in 2022, increased $8.6 million to $9.3 million during the three months ended March 31, 2023 from $0.7 million during the three months ended March 31, 2022.

Trading income (loss) and fair value adjustments on loans increased $70.8 million to income of $51.6 million during the three months ended March 31, 2023 compared to a loss of $19.3 million during the three months ended March 31, 2022.

This increase was primarily due to increases of $70.1 million in the Capital Markets segment and $0.8 million in the Wealth Management segment.

The income of $51.6 million during the three months ended March 31, 2023 was primarily due to an unrealized gain on our loans receivable, at fair value of $43.3 million and realized and unrealized gain on investments made in our proprietary trading accounts of $8.3 million.

Interest income – loans and securities lending increased $15.8 million to $77.2 million during the three months ended March 31, 2023 from $61.4 million during the three months ended March 31, 2022.

Interest income from securities lending was $37.2 million and $15.0 million during the three months ended March 31, 2023 and 2022, respectively.

Interest income from loans was $40.0 million and $46.4 million during the three months ended March 31, 2023 and 2022, respectively.

Revenues – Sale of Goods

Revenues from the sale of goods decreased $46.3 million to $7.9 million during the nine months ended September 30, 2022 from $54.2 million during nine months ended September 30, 2021.

Revenues from sale of goods were attributable to a decrease of $49.6 million from sales of retail goods related to retail liquidation engagements in Europe that ended, partially offset by an increase of $3.7 million from sales of retail goods due to the acquisition of Marconi Wireless in the fourth quarter of 2021.

Cost of goods sold for nine months ended September 30, 2022 was $7.3 million, resulting in a gross margin of 7.1%.

Revenues from the sale of goods increased $65.9 million to $67.8 million during the three months ended March 31, 2023 from $1.9 million during the three months ended March 31, 2022.

Revenues from sale of goods were attributable to an increase of $65.7 million from the Consumer segment due to the acquisition of Targus in the fourth quarter of 2022 and an increase of $0.2 million from the Auction and Liquidation segment.

Cost of goods sold for three months ended March 31, 2023 was $47.6 million, resulting in gross margin of 29.7%.

Cost of goods sold for three months ended March 31, 2022 was $2.3 million, resulting in negative gross margin of 19.9%.

The change in gross margin was primarily due to the acquisition of Targus in the fourth quarter of 2022.

Operating Expenses

Direct Cost of Services

Direct cost of services increased $32.5 million to $74.0 million during the nine months ended September 30, 2022 from $41.4 million during the nine months ended September 30, 2021.

The increase in direct cost of services was primarily driven by an increase of $53.6 million in the Principal Investments — Communications and Other segment, partially offset by a decrease of $21.1 million in the Auction and Liquidation segment.

The increase in the Principal Investments — Communications and Other segment was primarily due to increases of $27.6 million from the acquisition of an additional equity interest in Lingo in the second quarter of 2022, $15.2 million from the acquisition Marconi Wireless in the fourth quarter of 2021, and $9.7 million from the acquisition of BullsEye in the third quarter of 2022, partially offset by decreases in magicJack and UOL.

The decrease in the Auction and Liquidation segment was primarily due to a large retail liquidation engagements in Europe in 2021.

Direct cost of services increased $42.7 million to $54.4 million during the three months ended March 31, 2023 from $11.7 million during the three months ended March 31, 2022.

The increase in direct cost of services was primarily

attributable to increases of $35.4 million from the Communications segment from the acquisitions of Lingo in the second quarter of 2022 and BullsEye in the third quarter of 2022, $6.5 million from All Other due to other acquisitions made during 2022, and $0.8 million from the Auction and Liquidation segment.

Selling, General and Administrative Expenses

Selling, general and administrative expenses during the nine months ended September 30, 2022 and 2021 were comprised of the following:

Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 Change

Selling, general and administrative expenses during the three months ended March 31, 2023 and 2022 were comprised of the following:

Three Months Ended March 31, 2023 Three Months Ended

March 31, 2022 Change

Amount % Amount % Amount %

3 unchanged sentences

Financial Consulting segment 21,227 10.0 % 21,024 12.0 % 203 1.0 %

Principal Investments -Communications and Other segment 57,358 11.3 % 22,654 3.6 % 34,704 153.2 %

Brands segment 4,164 0.8 % 4,481 0.7 % (317) (7.1) %

Corporate and Other segment 44,368 8.8 % 42,007 6.6 % 2,361 5.6 %

Communications segment 29,175 13.7 % 11,429 6.5 % 17,746 155.3 %

Consumer segment 22,951 10.8 % 1,339 0.8 % 21,612 n/m

Corporate and All Other 21,619 10.2 % 16,002 9.1 % 5,617 35.1 %

Total selling, general & administrative expenses $ 212,627 100.0 % $ 175,199 100.0 % $ 37,428 21.4 %

1 unchanged sentence

n/m - Not applicable or not meaningful.

Total selling, general and administrative expenses decreased approximately $129.4 million to $506.1 million during the nine months ended September 30, 2022 from $635.5 million during the nine months ended September 30, 2021.

The decrease was primarily due to decreases of $111.4 million in the Capital Markets segment, $56.3 million in the Wealth Management segment, and $3.5 million in the Auction and Liquidation segment, partially offset by increases of $34.7 million in the Principal Investments — Communications and Other segment and $5.0 million in the Financial Consulting segment, and $2.4 million in the Corporate and Other segment.

Total selling, general and administrative expenses increased approximately $37.4 million to $212.6 million during the three months ended March 31, 2023 from $175.2 million during the three months ended March 31, 2022.

The increase was primarily due to an increase of $31.0 million in the Capital Markets segment, $21.6 million in the Consumer segment, $17.7 million in the Communications segment, $5.6 million in Corporate and All Other, $0.5 million in the Auction and Liquidation segment and $0.2 million in the Financial Consulting segment, partially offset by a decrease of $39.2 million in the Wealth Management segment.

Capital Markets

Selling, general and administrative expenses in the Capital Markets segment decreased by $111.4 million to $121.9 million during the nine months ended September 30, 2022 from $233.3 million during the nine months ended September 30, 2021.

The decrease was primarily due to decreases of $64.7 million in consulting expenses and $56.2 million in payroll and related expenses, partially offset by increases of $4.9 million from the settlement of a regulatory matter and $4.7 million in depreciation and amortization.

Selling, general and administrative expenses in the Capital Markets segment increased by $31.0 million to $67.0 million during the three months ended March 31, 2023 from $36.0 million during the three months ended March 31, 2022.

The increase was primarily due to increases of $32.8 million in consulting expenses and $1.4 million in investment and banking deal expenses, partially offset by decreases of $2.8 million in payroll and related expenses.

Wealth Management

Selling, general and administrative expenses in the Wealth Management segment decreased by $56.3 million to $210.8 million during the nine months ended September 30, 2022 from $267.2 million during the nine months ended September 30, 2021.

The decrease was primarily due to a decrease of $75.3 million in payroll and related expenses, partially offset by

increases of $13.7 million from settlements and penalties, $1.4 million in clearing charges, $1.2 million in other expenses, $0.5 million in occupancy expenses, and $0.5 million in insurance costs.

Selling, general and administrative expenses in the Wealth Management segment decreased by $39.2 million to $48.4 million during the three months ended March 31, 2023 from $87.6 million during the three months ended March 31, 2022.

The decrease was primarily due to decreases of $25.8 million in payroll and related expenses, $6.8 million in legal settlements made in the prior year, $4.5 million in other expenses, $1.4 million in clearing charges, and $0.9 million in software and equipment expenses.

Auction and Liquidation

Selling, general and administrative expenses in the Auction and Liquidation segment decreased $3.5 million to $6.2 million during the nine months ended September 30, 2022 from $9.7 million during the nine months ended September 30, 2021.

The decrease was primarily due to decreases of $3.0 million in business development expenses and $0.2 million in other expenses.

Selling, general and administrative expenses in the Auction and Liquidation segment increased $0.5 million to $2.3 million during the three months ended March 31, 2023 from $1.8 million during the three months ended March 31, 2022.

Financial Consulting

Selling, general and administrative expenses in the Financial Consulting segment increased by $5.0 million to $61.2 million during the nine months ended September 30, 2022 from $56.2 million during the nine months ended September 30, 2021.

The increase was primarily due to increases of $4.0 million in payroll and related expenses and $1.1 million in travel and entertainment expenses.

Principal Investments — Communications and Other

Selling, general and administrative expenses in the Principal Investments — Communications and Other segment increased $34.7 million to $57.4 million for the nine months ended September 30, 2022 from $22.7 million for the nine months ended September 30, 2021.

The increase was primarily due to increases of $15.7 million from the acquisition of an additional equity interest in Lingo in the second quarter of 2022, $12.2 million from the acquisition of Marconi in the fourth quarter of 2021, $5.0 million from the acquisition of Bullseye in the third quarter of 2022, and $3.1 million from other acquisitions in 2022.

Selling, general and administrative expenses in the Brands segment decreased $0.3 million to $4.2 million during the nine months ended September 30, 2022 from $4.5 million for the nine months ended September 30, 2021.

Corporate and Other

Selling, general and administrative expenses for the Corporate and Other segment increased approximately $2.4 million to $44.4 million during the nine months ended September 30, 2022 from $42.0 million for the nine months ended September 30, 2021.

The increase was primarily due to increases of $1.6 million in transaction expenses and $1.2 million in software and equipment expenses, partially offset by a decrease of $0.2 million in communication expenses.

Selling, general and administrative expenses in the Financial Consulting segment increased by $0.2 million to $21.2 million during the three months ended March 31, 2023 from $21.0 million during the three months ended March 31, 2022.

Communications

Selling, general and administrative expenses in the Communications segment increased $17.7 million to $29.2 million for the three months ended March 31, 2023 from $11.4 million for the three months ended March 31, 2022.

The increase was primarily due to increases of $10.7 million from the acquisition of the remaining non-controlling interests in Lingo in the first quarter of 2023 and $9.1 million from the acquisition of Bullseye in the third quarter of 2022, partially offset by a decrease of $1.3 million in payroll and related expenses and $0.8 million in other expenses.

Selling, general and administrative expenses in the Consumer segment increased $21.6 million to $23.0 million for the three months ended March 31, 2023 from $1.3 million during the three months ended March 31, 2022.

The increase was primarily due to an increase of $21.9 million from the acquisition of Targus in the fourth quarter of 2022.

Corporate and All Other

Selling, general and administrative expenses for Corporate and All Other increased approximately $5.6 million to $21.6 million during the three months ended March 31, 2023 from $16.0 million for the three months ended March 31, 2022.

The increase was primarily due to increases of $2.4 million from the acquisition of other businesses in 2022, $1.9 million in accounting expenses, and $1.2 million in other expenses.

Other Income (Expense).

Other income included interest income of $1.3 million and $0.2 million during the nine months ended September 30, 2022 and 2021, respectively.

Change in fair value of financial instruments and other in the amount of $9.7 million during the nine months ended September 30, 2022 was primarily due to the change in fair value of warrant liabilities and the forgiveness of a Paycheck Protection Program loan issued to FocalPoint prior to its acquisition by the Company during the first quarter of 2022.

Interest expense was $96.8 million during the nine months ended September 30, 2022 compared to $66.0 million during the nine months ended September 30, 2021.

The increase in interest expense was primarily due to increases in interest expense of $14.2 million from the issuance of senior notes, $11.6 million from the Nomura term loan, $3.2 million from the Nomura revolving credit facility, and a total of $0.8 million from the Pathlight and Lingo term loans entered into during the third quarter of 2022.

During the nine months ended September 30, 2022, income from equity investments was $3.3 million compared to $1.2 million during the nine months ended September 30, 2021.

The increase was primarily due to $6.9 million in earnings related to the bebe equity method investment, partially offset by $3.7 million loss recognized from the conversion of debt to equity in the acquisition of an additional equity interest in Lingo during the second quarter of 2022.

(Loss) Income Before Income Taxes .

Loss before income taxes was $133.0 million during the nine months ended September 30, 2022 compared to income of $523.5 million during the nine months ended September 30, 2021.

The change was primarily due to a decrease in revenue of $729.8 million and an increase in interest expense of $30.8 million, partially offset by a decrease in operating expenses of approximately $99.5 million, increase in income from equity investments of $2.1 million, increase in change in fair value of financial instruments and other of $1.5 million, and an increase in interest income of $1.1 million.

Benefit from (Provision for) Income Taxes.

Benefit from income taxes was $39.9 million during the nine months ended September 30, 2022 compared to a provision for income taxes of $140.1 million during the nine months ended September 30, 2021.

The effective income tax rate was 30.0% for the nine months ended September 30, 2022 compared to 26.8% for the nine months ended September 30, 2021.

Net Income Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests .

The net income attributable to noncontrolling interests and redeemable noncontrolling interests was $9.2 million during the nine months ended September 30, 2022 compared to $2.5 million during the nine months ended September 30, 2021.

Net (Loss) Income Attributable to the Company .

Net loss attributable to the Company was $102.4 million during the nine months ended September 30, 2022 compared to net income attributable to the Company of $380.9 million during the nine months ended September 30, 2021.

The change was primarily due to a change from operating income to loss of $630.3 million, increase in interest expense of $30.8 million, and an increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $6.8 million, partially offset by a change from provision for to benefit from income taxes of $180.0 million, increase in income from equity investments of $2.1 million, increase in change in fair value of financial instruments and other of $1.5 million, and an increase in interest income of $1.1 million.

Other income included interest income of $2.6 million and $0.1 million during the three months ended March 31, 2023 and 2022, respectively.

Dividend income was $13.2 million during the three months ended March 31, 2023 compared to $7.9 million during the three months ended March 31, 2022.

Realized and unrealized losses on investments was $28.4 million during the three months ended March 31, 2023 compared to $49.1 million during the three months ended March 31, 2022.

The change was primarily due to an increase in overall values of our investments.

Change in fair value of financial instruments and other was $0.2 million during the three months ended March 31, 2023 and $6.0 million during the three months ended March 31, 2022.

The change was primarily due to the change in fair value of warrant liabilities and the forgiveness of a Paycheck Protection Program loan in 2022.

Interest expense was $47.6 million during the three months ended March 31, 2023 compared to $30.4 million during the three months ended March 31, 2022.

The increase in interest expense was due to additional debt incurred during the three months ended March 31, 2023 and higher interest rates due to variable rates on certain of our outstanding debt.

The increases in interest expense primarily consisted of $6.4 million from the Pathlight term loan, $1.8 million from the issuance of senior notes, $1.6 million from the Lingo term loan, $0.6 million and $1.2 million from the Targus term loan and revolving credit facility, respectively, $0.9 million from the BRPAC term loan and $3.2 million and $0.9 million from the Nomura term loan and revolving credit facility, respectively.

During the three months ended March 31, 2023, loss from equity investments was $0.01 million compared to income from equity investments of $6.8 million during the three months ended March 31, 2022.

The decrease was primarily due to $6.7 million in earnings related to the bebe equity method investment in the prior year.

Income (Loss) Before Income Taxes .

Income before income taxes was $24.5 million during the three months ended March 31, 2023 compared to loss of $12.9 million during the three months ended March 31, 2022.

The change was primarily due to an increase in revenue of $185.3 million, a decrease in realized and unrealized losses on investments of $20.7 million, an increase of $5.3 million in dividend income, and an increase of $2.5 million in interest income, partially offset by an increase in operating expenses of approximately $146.3 million, increase in interest expense of $17.1 million, decrease in income from equity investments of $6.8 million, and a decrease in change in fair value of financial instruments and other of $6.2 million.

(Provision for) Benefit from Income Taxes.

Provision for income taxes was $7.9 million during the three months ended March 31, 2023 compared to a benefit of $3.7 million during the three months ended March 31, 2022.

The effective income tax rate was 32.4% for the three months ended March 31, 2023 as compared to 28.7% for the three months ended March 31, 2022.

Net (Loss) Income Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests.

Net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own.

The net loss attributable to noncontrolling interests was $0.6 million during the three months ended March 31, 2023 compared to net income of $0.9 million during the three months ended March 31, 2022.

Net Income (Loss) Attributable to the Company .

Net income attributable to the Company was $17.2 million during the three months ended March 31, 2023 compared to net loss attributable to the Company of $10.1 million for the three months ended March 31, 2022.

The change was primarily due to an increase in operating income of $39.0 million, a decrease in realized and unrealized loss on investments of $20.7 million, an increase of $5.3 million in dividend income, an increase of $2.5 million in interest income, and a decrease in net (loss) income attributable to noncontrolling interests and redeemable noncontrolling interests of $1.5 million, partially offset by an increase in interest expense of $17.1 million, a change from benefit from to provision for income taxes of $11.6 million, a decrease in income (loss) from equity investments of $6.8 million, and a decrease in change in fair value of financial instruments and other of $6.2 million.

Preferred Stock Dividends .

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, 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.

On January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

On January 9, 2023, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on January 31, 2023 to holders of record as of the close of business on January 20, 2023.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, 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.

On January 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

Net (Loss) Income Available to Common Shareholders .

Net loss available to common shareholders was $108.4 million during the nine months ended September 30, 2022 compared to net income available to common shareholders of $375.4 million during the nine months ended September 30, 2021.

The change was primarily due to a change from operating income to loss of $630.3 million, increase in interest expense of $30.8 million, increase in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $6.8 million, and an increase in preferred stock dividends of $0.5 million, partially offset by a change from provision for to benefit from income taxes of $180.0 million, increase in income from equity investments of $2.1 million, increase in change in fair value of financial instruments and other of $1.5 million, and an increase in interest income of $1.1 million.

On January 9, 2023, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on January 31, 2023 to holders of record as of the close of business on January 20, 2023.

Net Income (Loss) Available to Common Shareholders .

Net income available to common shareholders was $15.1 million during the three months ended March 31, 2023 compared to net loss available to common shareholders of $12.1 million during the three months ended March 31, 2022.

The change was primarily due to an increase in operating income of $39.0 million, a decrease in realized and unrealized loss on investments of $20.7 million, an increase of $5.3 million in dividend income, an increase of $2.5 million in interest income, and a decrease in net income attributable to noncontrolling interests and redeemable noncontrolling interests of $1.5 million, partially offset by an increase in interest expense of $17.1 million, a change from benefit from to provision for income taxes of $11.6 million, a decrease in income (loss) from equity investments of $6.8 million, and a decrease in change in fair value of financial instruments and other of $6.2 million.

Liquidity and Capital Resources

Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purposes financing arrangements.

During the nine months ended September 30, 2022 and 2021, we generated a net loss of $93.1 million and net income of $383.4 million, respectively.

Our net loss of $93.1 million included $280.2 million of losses that primarily related to a decrease in the fair value of our portfolio of securities and other investments owned during the nine months ended September 30, 2022.

During the three months ended March 31, 2023 and 2022, we generated net income of $16.6 million and net loss of $9.2 million, respectively.

Our cash flows and profitability are impacted by capital market engagements performed on a quarterly and annual basis and amounts realized from the sale of our investments in marketable securities.

As of September 30, 2022, we had $231.8 million of unrestricted cash and cash equivalents, $1.6 million of restricted cash, $1,238.6 million of securities and other investments owned at fair value, $814.7 million of loans receivable, at fair value, and $2,319.0 million of borrowings outstanding.

The borrowings outstanding of $2,319.0 million as of September 30, 2022 included $1,661.2 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $558.0 million in term loans borrowed pursuant to the Pathlight, Lingo, BRPI Acquisition Co LLC (“BRPAC”), and Nomura Credit Agreements discussed below, $74.7 million of revolving credit under the Nomura Credit Agreement discussed below, and $25.1 million of notes payable.

We believe that our current cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility, funds available under the Pathlight, Lingo, BRPAC, and Nomura term loans, funds available under the Nomura revolving credit facility, and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.

As of March 31, 2023, we had $210.0 million of unrestricted cash and cash equivalents, $2.4 million of restricted cash, $1,049.2 million of securities and other investments, at fair value, $772.1 million of loans receivable, at fair value, and $2,508.9 million of borrowings outstanding.

The borrowings outstanding of $2,508.9 million as of March 31, 2023 included $1,723.0 million of borrowings from the issuance of the series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $626.6 million in term loans borrowed pursuant to the Targus, Pathlight, Lingo, BRPI Acquisition Co LLC (“BRPAC”), and Nomura credit agreements discussed below, $139.5 million of revolving credit facility under the Targus and Nomura credit facilities discussed below, and $19.9 million of notes payable.

We believe that our current cash and cash equivalents, securities and other investments owned, funds available under our asset based credit facility, funds available under the Targus, Pathlight, Lingo, BRPAC, and Nomura term loans, funds available under the Targus and Nomura revolving credit facilities, and cash expected to be generated from operating activities will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from issuance date of the accompanying financial statements.

We continue to monitor our financial performance to ensure sufficient liquidity to fund operations and execute on our business plan.

From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations.

On November 3, 2022, we declared a regular dividend of $1.00 per share that will be paid on or about November 29, 2022 to stockholders of record as of November 15, 2022.

On July 28, 2022, we declared a regular dividend of $1.00 per share that was paid on August 23, 2022 to stockholders of record as of August 11, 2022.

On April 28, 2022, we declared a regular dividend of $1.00 per share that was paid on May 20, 2022 to stockholders of record as of May 11, 2022.

On May 4, 2023, we declared a regular dividend of $1.00 per share that will be paid on or about May 23, 2023 to stockholders of record as of May 16, 2023.

On February 22, 2023, the Company declared a regular quarterly dividend of $1.00 per share, which was paid on March 23, 2023 to stockholders of record as of March 10, 2023.

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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.

A summary of dividend activity for the nine months ended September 30, 2022 and the year ended December 31, 2021 was as follows:

A summary of common stock dividend activity for the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows:

Date Declared Date Paid Stockholder

July 8, 2022 August 23, 2022 August 11, 2022 $ 1.000 $ — $ 1.000

April 28, 2022 May 20, 2022 May 11, 2022 1.000 — 1.000

February 22, 2023 March 23, 2023 March 10, 2023 $ 1.000 $ — $ 1.000

October 28, 2021 November 23, 2021 November 9, 2021 1.000 3.000 4.000

November 3, 2022 November 29, 2022 November 15, 2022 1.000 — 1.000

July 28, 2022 August 23, 2022 August 11, 2022 1.000 — 1.000

May 3, 2021 May 28, 2021 May 17, 2021 0.500 2.500 3.000

April 28, 2022 May 20, 2022 May 11, 2022 1.000 — 1.000

February 23, 2022 March 23, 2022 March 9, 2022 1.000 — 1.000

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share).

Dividends will be payable quarterly in arrears, on or about the last day of January, April, July, and October.

As of September 30, 2022, dividends in arrears in respect of the Depositary Shares were $0.8 million.

On January 11, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of business on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.On January 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4296875 per Depositary

Share, which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $25 thousand liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share).

Dividends will be payable quarterly in arrears, on or about the last day of January, April, July, and October.

As of September 30, 2022, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On January 11, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on January 29, 2021 to holders of record as of the close of business on January 21, 2021.

On April 5, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 30, 2021 to holders of record as of the close of business on April 20, 2021.

On July 8, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on August 2, 2021 to holders of record as of the close of business on July 21, 2021.

On October 6, 2021, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on November 1, 2021 to holders of record as of the close of business on October 21, 2021.

On January 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid January 31, 2022 to holders of record as of the close of business on January 21, 2022.

On April 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on April 29, 2022 to holders of record as of the close of business on April 19, 2022.

On July 7, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on July 29, 2022 to holders of record as of the close of business on July 19, 2022.

On October 10, 2022, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on October 31, 2022 to holders of record as of the close of business on October 21, 2022.

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, 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, on or about the last day of January, April, July, and October.

As of March 31, 2023, dividends in arrears in respect of the Depositary Shares were $0.8 million.

On April 10, 2023, the Company declared a cash dividend $0.4296875 per Depositary Share, which was paid on May 1, 2023 to holders of record as of the close of business on April 21, 2023.

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, 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, on or about the last day of January, April, July, and October.

As of March 31, 2023, dividends in arrears in respect of the Depositary Shares were $0.5 million.

On April 10, 2023, the Company declared a cash dividend $0.4609375 per Depositary Share, which was paid on May 1, 2023 to holders of record as of the close of business on April 21, 2023.

A summary of preferred stock dividend activity for the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows:

Stockholder Preferred Dividend per Depositary Share

Date Declared Date Paid Record Date Series A Series B

January 9, 2023 January 31, 2023 January 20, 2023 $ 0.4296875 $ 0.4609375

October 10, 2022 October 31, 2022 October 21, 2022 0.4296875 0.4609375

July 7, 2022 July 29, 2022 July 19, 2022 0.4296875 0.4609375

April 7, 2022 April 29, 2022 April 19, 2022 0.4296875 0.4609375

January 10, 2022 January 31, 2022 January 21, 2022 0.4296875 0.4609375

Our principal sources of liquidity to finance our business is our existing cash on hand, cash flows generated from operating activities, funds available under revolving credit facilities and special purpose financing arrangements.

Cash Flow Summary

Nine Months Ended

September 30,

Three Months Ended

(Dollars in thousands)

Net cash (used in) provided by:

Net cash provided by (used in):

Operating activities $ 52,617 $ (14,898)

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Effect of foreign currency on cash 1,280 (496)

Net (decrease) increase in cash, cash equivalents and restricted cash $ (46,477) $ 274,295

Cash used in operating activities was $72.8 million during the nine months ended September 30, 2022 compared to cash used in operating activities of $166.7 million during the nine months ended September 30, 2021.

Cash used in operating activities for the nine months ended September 30, 2022 consisted of the negative impact of net loss of $93.1 million, noncash items of $13.3 million, and changes in operating assets and liabilities of $33.7 million.

The negative cash flow impact from noncash items of $13.3 million included deferred income taxes of $81.8 million, de-consolidation of B.

Riley Principal 150 Merger Corporation (“BRPM 150”) of $8.3 million, gain on equity investment of $6.8 million, noncash interest and other of $5.4 million, income from equity investments of $3.3 million, and gain on extinguishment of loan of $1.1 million, partially offset by share-based compensation of $45.8 million, depreciation and amortization of $26.5 million, fair value adjustments of $6.3 million, impairment of intangibles and loss on disposal of fixed assets of $5.5 million, effect of foreign currency of $3.2 million, provision for doubtful accounts of $2.8 million, dividends from equity investments of $2.5 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.8 million.

Cash used in operating activities for the nine months ended September 30, 2021 consisted of the positive impact of net income of $383.4 million and noncash items of $40.0 million, partially offset by the negative impact of changes in operating assets and liabilities of $590.0 million.

The positive cash flow impact from noncash items of $40.0 million included deferred income taxes of $28.6 million, share-based compensation of $23.5 million, depreciation and amortization of $19.1 million, loss on extinguishment of debt of $4.9 million, dividends from equity investments of $1.4 million, provision for doubtful accounts of $1.2 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.5 million, partially offset by noncash interest and other of $15.7 million, fair value adjustments of $10.7 million, gain on extinguishment of loans of

$6.5 million gain on equity investment of $3.5 million, and effect of foreign currency on operations of $1.3 million, income from equity investments of $1.2 million, and gain on disposal of fixed assets and other of $0.1 million.

Cash used in investing activities was $41.7 million during the nine months ended September 30, 2022 compared to cash used in investing activities of $416.7 million for the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, cash used in investing activities consisted of cash used for purchases of loans receivable of $421.7 million, cash used for acquisition of businesses of $113.6 million, purchases of equity and other investments of $2.8 million, and purchases of property and equipment of $1.4 million, partially offset by cash received from loans receivable repayment of $408.7 million and funds received from trust account of subsidiary of $172.6 million.

During the nine months ended September 30, 2021, cash used in investing activities consisted of cash used to fund a trust account for the future redemption of one of our subsidiaries’ redeemable common stock of $345.0 million, purchases of loans receivable of $186.3 million, repayments of loan participations sold of $15.2 million, acquisition of businesses of $2.1 million, and purchases of property and equipment of $0.6 million, partially offset by cash received from loans receivable repayment of $132.5 million.

Cash used in financing activities was $8.8 million during the nine months ended September 30, 2022 compared to cash provided by financing activities of $859.4 million during the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, cash used in financing activities primarily consisted of $172.6 million used in the redemption of subsidiary temporary equity and distributions, $90.4 million used to pay dividends on our common shares, $60.9 million used in the repayment of term loan, $6.7 million used in payment of employment taxes on vesting of restricted stock, $6.0 million used to pay dividends on our preferred shares, $5.3 million used in repayment of revolving line of credit, $3.4 million in distributions to noncontrolling interests, $1.4 million used in the payment of debt issuance and offering costs, $0.7 million used in the payment of contingent consideration, and $0.4 million used to repay our notes payable, partially offset by cash provided by $275.7 million in proceeds from borrowings under a term loan, $51.2 million in proceeds from issuance of senior notes, $11.4 million in contributions from noncontrolling interests, and $0.6 million in proceeds from issuance of preferred stock.

During the nine months ended September 30, 2021, cash provided by financing activities primarily consisted of $890.6 million in proceeds from issuance of senior notes, $345.0 million in proceeds from initial public offering of subsidiaries, $200.0 million in proceeds from the Nomura term loan, $80.0 million in proceeds from Nomura revolving credit line, $64.7 million in net proceeds from issuance of common stock, $14.0 million in net proceeds from offerings of preferred stock and $12.7 million contributions from noncontrolling interests, partially offset by $390.5 million used to repurchase our senior notes, $236.6 million used to pay dividends on our common shares, $37.6 million used to repay our notes payable, $31.0 million used to pay debt issuance costs, $16.1 million used for repayment on our BRPAC term loan, $15.7 million in distributions to noncontrolling interests, $10.5 million used to pay employment taxes on vesting of restricted stock, $5.5 million used to pay dividends on our preferred shares, $2.7 million used in the repurchase of common stock, and $1.6 million used to pay for contingent consideration.

Net decrease in cash, cash equivalents and restricted cash $ (58,604) $ (65,348)

Cash provided by operating activities was $52.6 million during the three months ended March 31, 2023 compared to cash used in operating activities of $14.9 million during the three months ended March 31, 2022.

Cash provided by operating activities for the three months ended March 31, 2023 consisted of the impact of net income of $16.6 million, noncash items of $10.7 million, and changes in operating assets and liabilities of $46.7 million.

The negative cash flow impact from noncash items of $10.7 million included fair value adjustments of $46.1 million and non-cash interest and other of $1.1 million, partially offset by share-based compensation of $13.7 million, depreciation and amortization of $13.1 million, deferred income taxes of $5.8 million, provision for doubtful accounts of $3.2 million, effect of foreign currency of $0.3 million, income allocated for mandatorily redeemable noncontrolling interests of $0.3 million and dividends from equity investments of $0.1 million.

Cash used in operating activities for the three months ended March 31, 2022 consisted of the negative impact of net loss of $9.2 million and noncash items of $42.7 million, partially offset by the negative impact of changes in operating assets and liabilities of $37.0 million.

The negative cash flow impact from noncash items of $42.7 million included deferred income taxes of $41.9 million, fair value adjustments of $15.8 million, income from equity investments of $6.8 million, noncash interest and other of $3.6 million, and gain on extinguishment of loan of $1.1 million, partially offset by share-based compensation of $17.0 million, depreciation and amortization of $7.8 million, dividends from equity investments of $0.8 million, provision for doubtful accounts of $0.4 million, loss on disposal of fixed assets and other of $0.3 million, and income allocated for mandatorily redeemable noncontrolling interests of $0.2 million.

Cash used in investing activities was $57.2 million during the three months ended March 31, 2023 compared to cash used in investing activities of $35.5 million for the three months ended March 31, 2022.

During the three months ended March 31, 2023, cash used in investing activities consisted of cash used for purchases of loans receivable of $312.0 million, acquisition of businesses and minority interest of $12.3 million, purchases of property and equipment of $1.7 million, and purchase of equity and other investments of $0.7 million, partially offset by cash received from loans receivable repayment of $260.6 million, sale of loan receivable of $7.5 million, and proceeds from sale of property, equipment, intangible assets, and other of $1.4 million.

During the three months ended March 31, 2022, cash used in investing activities consisted of cash used for purchases of loans receivable of $93.9 million, acquisition of businesses of $40.0 million, purchases of equity and other investments of $2.4 million, and purchases of property and equipment of $0.2 million partially offset by cash received from loans receivable repayment of $101.0 million.

Cash used in financing activities was $55.3 million during the three months ended March 31, 2023 compared to cash used in financing activities of $14.4 million during the three months ended March 31, 2022.

During the three months ended March 31, 2023, cash used in financing activities primarily consisted of $72.9 million used in the repayment of term loan, $53.8 million used to repurchase our common shares, $46.9 million used to pay dividends on our common shares, $17.2 million used in payment of revolving lines of credit, $11.5 million used to repay our notes payable, $4.8 million used in payment of employment taxes on vesting of restricted stock, $2.0 million used to pay debt issuance and offering costs, $2.0 million used to pay dividends on our preferred shares, $1.3 million used to pay contingent consideration, and $1.0 million in distributions to noncontrolling interests, partially offset by cash provided by $128.2 million proceeds from term loans, $29.0 million proceeds from revolving line of credit, $0.5 million proceeds from issuance of preferred stock, and $0.4 million contributions from noncontrolling interests.

During the three months ended March 31, 2022, cash used in financing activities primarily consisted of $27.9 million used to pay dividends on our common shares, $4.1 million used in the repayment of term loan, $2.0 million used to pay dividends on our preferred shares, $1.3 million used in payment of employment taxes on vesting of restricted stock, $1.1 million in distributions to noncontrolling interests, and $0.4 million used to repay our notes payable, partially offset by cash provided by $20.0 million in proceeds from issuance of senior notes, $1.8 million in contributions from noncontrolling interests, and $0.6 million in proceeds from issuance of preferred stock.

Credit Agreements

Targus Credit Agreement

On October 18, 2022, our subsidiary, Tiger US Holdings, Inc.

(the “Borrower”), a Delaware corporation, among others, entered into a credit agreement (“Targus Credit Agreement”) with PNC Bank, National Association (“PNC”), as agent and security trustee for a five-year $28.0 million term loan and a five-year $85.0 million revolver loan, which was used to finance part of the acquisition of Targus.

The Targus Credit Agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

The Targus Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts outstanding under the Targus Credit Agreement.

We are in compliance with all financial covenants in the Targus Credit Agreement as of March 31, 2023.

The term loan bears interest on the outstanding principal amount equal to the Term Secured Overnight Financing Rate (“SOFR”) rate plus an applicable margin of 3.75%.

The revolver loan consists of base rate loans that bear interest on the outstanding principal amount equal to the base rate plus an applicable margin of 1.00% to 1.75% and term rate loans that bear interest on the outstanding principal amount equal to the revolver SOFR rate plus an applicable margin of 2.00% to 2.75%.

Principal outstanding is due in quarterly installments starting on December 31, 2022.

Quarterly installments from December 31, 2022 to September 30, 2027 are in the amount of $1.4 million per quarter and the remaining principal balance is due at final maturity on October 18, 2027.

As of March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $24.7 million (net of unamortized debt issuance costs of $0.5 million) and $26.0 million (net of unamortized debt issuance costs of $0.6 million) and the outstanding balance on the revolver loan was $62.5 million and $53.0 million, respectively.

Interest expense on these loans during the three months ended March 31, 2023 was $1.7 million (including amortization of deferred debt issuance costs and unused commitment fees of $0.2 million).

The interest rate on the term loan was 8.66% and 8.43% and the interest rate on the revolver loan ranged between 6.66% to 9.75% and 6.03% to 9.25% as of March 31, 2023 and December 31, 2022, respectively.

Pathlight Credit Agreement

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Riley Receivables II, LLC, a Delaware limited liability company (the “Borrower”), entered into a credit agreement (the “Pathlight Credit Agreement”) by and among PLC Agent, LLC in the capacity as administrative agent and Pathlight Capital Fund I LP, Pathlight Capital Fund II LP, and Pathlight Capital Fund III LP as the lenders (collectively, “Pathlight”) for a five-year $148.2 million term loan.

The Pathlight Credit Agreement was entered in connection with the purchase of the 2022 Badcock Receivable.

On January 12, 2023, Amendment No.

2 to the Pathlight Credit Agreement increased the term loan by an additional $78.3 million.

On March 31, 2023, Amendment No.

3 to the Pathlight Credit Agreement increased the term loan by an additional $49.9 million.

The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus an applicable margin of 6.5%.

As of September 30, 2022, the interest rate on the Pathlight Credit Agreement was 10.00%.

As of March 31, 2023 and December 31, 2022, the interest rate on the Pathlight Credit Agreement was 11.4% and 11.0%, respectively.

The Pathlight Credit Agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

The Pathlight Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be

entitled to take various actions, including the acceleration of amounts due under the outstanding Pathlight Credit Agreement.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding Pathlight Credit Agreement.

We are in compliance with all financial covenants in the Pathlight Credit Agreement as of March 31, 2023.

Principal outstanding under the Pathlight Credit Agreement is repaid based on collections of the 2022 Badcock Receivable less other application of payments as defined in the Pathlight Credit Agreement and the remaining principal balance is due at final maturity on September 23, 2027.

As of September 30, 2022, the outstanding balance on the term loan was $144.6 million (net of unamortized debt issuance costs of $3.6 million).

Interest expense on the term loan during the three and nine months ended September 30, 2022 was $0.4 million (including amortization of deferred debt issuance costs of $0.1 million).

As of March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $184.4 million (net of unamortized debt issuance costs of $3.8 million) and $118.4 million (net of unamortized debt issuance costs of $2.4 million).

Interest expense on the term loan during the three months ended March 31, 2023 was $6.4 million (including amortization of deferred debt issuance costs of $1.7 million).

Lingo Credit Agreement

On August 16, 2022, our subsidiary, Lingo, a Delaware limited liability company, (the “Borrower”) entered into a credit agreement (the “Lingo Credit Agreement”) by and among the borrower, the Company as the secured guarantor, and Banc of California, N.A.

On August 16, 2022, our subsidiary, Lingo (the “Borrower”), entered into a credit agreement (the “Lingo Credit Agreement”) by and among the Borrower, the Company as the secured guarantor, and Banc of California, N.A.

in its capacity as administrative agent and lender, for a five-year $45.0 million term loan.

This loan was used to finance part of the purchase of BullsEye by Lingo.

On September 9, 2022, Lingo entered into the First Amendment to the Lingo Credit Agreement with Grasshopper Bank (the “New Lender”) for an incremental term loan of $7.5 million, increasing the principal balance of the term loan to $52.5 million.

On November 10, 2022, Lingo entered into the Second Amendment to the Lingo Credit Agreement with KeyBank National Association for an incremental term loan of $20.5 million, increasing the principal balance of the term loan to $73.0 million.

The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus a margin of 3.00% to 3.75% per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus applicable spread adjustment.

As of September 30, 2022, the interest rate on the Lingo Credit Agreement was 6.29%.

The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

In addition, the agreement requires the Borrower to maintain certain financial ratios.

The agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the outstanding agreement.

Principal outstanding is due in quarterly installments starting on March 31, 2023.

Quarterly installments from March 31, 2023 to December 31, 2023 are in the amount of $1.6 million per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $2.0 million per quarter, from March 31, 2025 to June 30, 2027 are in the amount of $2.6 million, and the remaining principal balance is due at final maturity on August 16, 2027.

As of September 30, 2022, the outstanding balance on the term loan was $51.6 million (net of unamortized debt issuance costs of $0.9 million).

Interest expense on the term loan during the three and nine months ended September 30, 2022 was $0.4 million (including amortization of deferred debt issuance costs of $0.03 million).

As of March 31, 2023 and December 31, 2022, the interest rate on the Lingo Credit Agreement was 8.48% and 7.89%, respectively.

The Lingo Credit Agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of its businesses, engage in transactions with related parties, make certain investments or pay dividends.

In addition, the Lingo Credit Agreement requires the Borrower to maintain certain financial ratios.

The Lingo Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the Lingo Credit Agreement.

We are in compliance with all financial covenants in the Lingo Credit Agreement as of March 31, 2023.

Principal outstanding is due in quarterly installments.

Quarterly installments from June 30, 2023 to December 31, 2023 are in the amount of $2.3 million per quarter, from March 31, 2024 to December 31, 2024 are in the amount of $2.7 million per quarter, from March 31, 2025 to June 30, 2027 are in the amount of $3.7 million, and the remaining principal balance is due at final maturity on August 16, 2027.

As of March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $69.8 million (net of unamortized debt issuance costs of $0.9 million) and $72.0 million (net of unamortized debt issuance costs of $1.0 million), respectively.

Interest expense on the term loan during the three months ended March 31, 2023 was $1.6 million (including amortization of deferred debt issuance costs of $0.1 million).

Nomura Credit Agreement

On June 23, 2021, we and our wholly owned subsidiaries, BR Financial Holdings, LLC (the “Primary Guarantor”), and BR Advisory & Investments, LLC (the “Borrower”) entered into a credit agreement (as amended, the “Credit Agreement”) with Nomura Corporate Funding Americas, LLC, as administrative agent (the “Administrative Agent”), and Wells Fargo Bank, N.A., as collateral agent (the “Collateral Agent”), for a four-year $200.0 million secured term loan credit facility (the “Term Loan Facility”) and a four-year $80.0 million revolving loan credit facility (the “Revolving Credit Facility”).

On December 17, 2021 (the “Amendment Date”), we, the Primary Guarantor, and the Borrower entered into a Second Incremental Amendment to Credit Agreement, pursuant to which the Borrower established an incremental facility in an aggregate principal amount of $100.0 million (the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to the Term Loan Facility.

On December 17, 2021 (the “Amendment Date”), we, the Primary Guarantor, and the Borrower entered into a Second Incremental Amendment to Credit Agreement (the “Second Amendment”), by and among the Company, the Primary Guarantor, the Borrower, each of the subsidiary guarantors signatory thereto, each of the lenders party thereto, the Administrative Agent and the Collateral Agent, pursuant to which the Borrower established an incremental facility in an aggregate principal amount of $100.0 million (the “Incremental Facility” and the incremental term loans made thereunder, the “Incremental Term Loans”) of secured term loans under the Credit Agreement on terms identical to those applicable to

the Term Loan Facility.

The Borrower borrowed the full amount of the Incremental Term Loans on the Amendment Date.

The Term Loan Facility, Revolving Credit Facility, and Incremental Facility (together, the “Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment.

Eurodollar loans under the Credit Facilities accrue interest at the Eurodollar Rate plus an applicable margin of 4.50%.

The Term Loan Facility, Revolving Credit Facility, and Incremental Facility, together, (“Credit Facilities”), mature on June 23, 2025, subject to acceleration or prepayment.

SOFR rate loans under the Credit Facilities accrue interest at the term SOFR rate plus a term SOFR adjustment determined by the selected interest period and an applicable margin of 4.50%.

Base rate loans accrue interest at the Base Rate plus an applicable margin of 3.50%.

3 unchanged sentences

The Credit Agreement contains certain representations and warranties (subject to certain agreed qualifications) that are customary for financings of this kind.

The Credit Agreement contains certain affirmative and negative covenants customary for financings of this type that, among other things, limit our, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests.

In addition, the Credit Agreement contains a financial covenant that requires us to maintain operating earnings before interest, taxes, depreciation, and amortization (“EBITDA”) of at least $135.0 million and the Primary Guarantor to maintain net asset value of at least $1,100.0 million.

The Credit Agreement contains customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility will amortize in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity.

Quarterly installments from September 30, 2022 to March 31, 2025 are in the amount of $3.8 million per quarter.

As of September 30, 2022 and December 31, 2021, the outstanding balances on the Term Loan Facility and Incremental Facility were $290.4 million (net of unamortized debt issuance costs of $5.8 million) and $292.7 million (net of unamortized debt issuance costs of $7.4 million), respectively.

Interest on the term loan during the three months ended September 30, 2022 and 2021 was $5.7 million (including amortization of deferred debt issuance costs of $0.5 million) and $2.7 million (including amortization of deferred debt issuance costs of $0.4 million), respectively.

Interest on the term loan during the nine months ended September 30, 2022 and 2021 was $14.6 million (including amortization of deferred debt issuance costs of $1.5 million) and $3.0 million (including amortization of deferred debt issuance costs of $0.4 million), respectively.

The interest rate on the term loan as of September 30, 2022 and December 31, 2021 was 8.10% and 4.72%, respectively.

We had an outstanding balance of $74.7 million and $80.0 million under the Revolving Credit Facility as of September 30, 2022 and December 31, 2021, respectively.

Interest on the revolving facility during the three months ended September 30, 2022 and 2021 was $1.4 million (including unused commitment fee of $0.01 million and amortization of deferred financing costs of $0.1 million) and $0.8 million (including unused commitment fee of $0.1 million and amortization of deferred financing costs of $0.1 million), respectively.

Interest on the revolving facility during the nine months ended September 30, 2022 and 2021 was $3.7 million (including unused commitment fee of $0.01 million and amortization of deferred financing costs of $0.4 million) and $0.8 million (including unused commitment fee of $0.08 million and amortization of deferred financing costs of $0.2 million).

The interest rate on the revolving facility as of September 30, 2022 and December 31, 2021 was 7.64% and 4.67%, respectively.

The Credit Agreement and the Second Amendment contain certain affirmative and negative covenants customary for financings of this type that, among other things, limit our, the Primary Guarantor’s, the Borrower’s, and the Borrower’s subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness and to pay dividends or to make other distributions or redemptions/repurchases in respect of their respective equity interests.

In addition, the Credit Agreement and the Second Amendment contain a financial covenant that requires us to maintain Operating EBITDA of at least $135.0 million and the Primary Guarantor to maintain net asset value of at least $1,100.0 million.

The Credit Agreement and the Second Amendment contain customary events of default, including with respect to a failure to make payments under the credit facilities, cross-default, certain bankruptcy and insolvency events and customary change of control events.

We are in compliance with all financial covenants in the Nomura Credit Agreement as of March 31, 2023.

Commencing on September 30, 2022, the Term Loan Facility and Incremental Facility began to amortize in equal quarterly installments of 1.25% of the aggregate principal amount of the term loan as of the closing date with the remaining balance due at final maturity on June 23, 2025.

Quarterly installments from June 30, 2023 to March 31, 2025 are in the amount of $3.8 million per quarter.

As of March 31, 2023 and December 31, 2022, the outstanding balances on the Term Loan Facility and Incremental Facility were $283.7 million (net of unamortized debt issuance costs of $5.0 million) and $287.0 million (net of unamortized debt issuance costs of $5.5 million), respectively.

Interest on the term loan during the three months ended March 31, 2023 and 2022 was $7.3 million (including amortization of deferred debt issuance costs of $0.5 million) and $4.1 million (including amortization of deferred debt issuance costs of $0.5 million), respectively.

The interest rate on the term loan as of March 31, 2023 and December 31, 2022 was 9.59% and 9.23%, respectively.

We had an outstanding balance of $77.0 million and $74.7 million under the Revolving Credit Facility as of March 31, 2023 and December 31, 2022, respectively.

Interest on the revolving facility during the three months ended March 31, 2023 and 2022 was $2.0 million (including amortization of deferred financing costs of $0.2 million) and $1.1 million (including amortization of deferred financing costs of $0.1 million), respectively.

The interest rate on the Revolving Credit Facility as of March 31, 2023 and December 31, 2022 was 9.69% and 9.23%, respectively.

Wells Fargo Credit Agreement

5 unchanged sentences

The interest rate for each revolving credit advance under the related credit agreement is, subject to certain terms and conditions,

equal to the Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided.

equal to the SOFR plus a margin of 2.25% to 3.25% depending on the type of advance and the percentage such advance represents of the related transaction for which such advance is provided.

The credit facility provides for success fees in the amount of 1.0% to 10.0% of the net profits, if any, earned on liquidation engagements that are financed under the credit facility as set forth in the related Credit Agreement.

The credit facility also provides for funding fees in the amount of 0.05% to 0.20% of the aggregate principal amount of all credit advances and letters of credit issued in connection with a liquidation sale.

There was no outstanding balance on this credit facility as of September 30, 2022 and December 31, 2021.

As of September 30, 2022 and December 31, 2021, there were no open letters of credit outstanding.

Interest expense totaled $0.02 million and $0.1 million during the three months ended March 31, 2023 and 2022, respectively.

There was no outstanding balance on this credit facility as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December 31, 2022, there were no open letters of credit outstanding.

We are in compliance with all financial covenants in the asset based credit facility as of March 31, 2023.

BRPAC Credit Agreement

On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of ours, in the capacity of borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with Banc of California, N.A.

in its capacity as agent (the “Agent”) and lender and with the other lenders party (the “Closing Date Lenders”).

On December 19, 2018, BRPI Acquisition Co LLC (“BRPAC”), a Delaware limited liability company, UOL, and YMAX Corporation, Delaware corporations (collectively, the “Borrowers”), indirect wholly owned subsidiaries of ours, in the capacity as borrowers, entered into a credit agreement (the “BRPAC Credit Agreement”) with the Banc of California, N.A.

in the capacity as agent (the “Agent”) and lender and with the other lenders party thereto (the “Closing Date Lenders”).

Certain of the Borrowers’ U.S.

subsidiaries are guarantors of all obligations under the BRPAC Credit Agreement and are parties to the BRPAC Credit Agreement in such capacity (collectively, the “Secured Guarantors”;

and together with the Borrowers, the “Credit Parties”).

In addition, the Company and B.

Riley Principal Investments, LLC, the parent corporation of BRPAC and a subsidiary of ours, are guarantors of the obligations under the BRPAC Credit Agreement pursuant to standalone guaranty agreements pursuant to which the shares outstanding membership interests of BRPAC are pledged as collateral.

The obligations under the BRPAC Credit Agreement are secured by first-priority liens on, and first priority security interest in, substantially all of the assets of the Credit Parties, including a pledge of (a) 100% of the equity interests of the Credit Parties;

(b) 65% of the equity interests in United Online Software Development (India) Private Limited, a private limited company organized under the laws of India;

and (c) 65% of the equity interests in magicJack VocalTec LTD., a limited company organized under the laws of Israel.

Such security interests are evidenced by pledge, security, and other related agreements.

The BRPAC Credit Agreement contains certain covenants, including those limiting the Credit Parties’, and their subsidiaries’, ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends.

In addition, the BRPAC Credit Agreement requires the Credit Parties to maintain certain financial ratios.

The BRPAC Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults.

If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the BRPAC Credit Agreement.

We are in compliance with all financial covenants in the BRPAC Credit Agreement as of March 31, 2023.

Through a series of amendments, including the most recent Fourth Amendment to the BRPAC Credit Agreement (the “Fourth Amendment”) on June 21, 2022, the Borrowers, the Secured Guarantors, the Agent and the Closing Date Lenders agreed to the following, among other things:

(i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing terms loans and optional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50% was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make certain distributions to the parent company of the Borrowers.

(i) the Lenders agreed to make a new $75.0 million term loan to the Borrowers, the proceeds of which the Borrowers’ used to repay the outstanding principal amount of the existing terms loans and optional loans and will use for other general corporate purposes, (ii) a new applicable margin level of 3.50% was established as set forth from the date of the Fourth Amendment, (iii) Marconi Wireless Holdings, LLC (“Marconi Wireless”) was added to the Borrowers, (iv) the maturity date of the term loan was set to June 30, 2027, and (v) the Borrowers were permitted to make certain distributions to the parent company of the Borrowers.

The borrowings under the amended BRPAC Credit Agreement bear interest equal to the term SOFR rate plus a margin of 2.75% to 3.50% per annum, depending on the Borrowers’ consolidated total funded debt ratio as defined in the BRPAC Credit Agreement.

As of September 30, 2022 and December 31, 2021, the interest rate on the amended BRPAC Credit Agreement was at 6.04% and 3.17%, respectively.

As of March 31, 2023 and December 31, 2022, the interest rate on the BRPAC Credit Agreement was 8.23% and 7.65%, respectively.

Principal outstanding under the Amended BRPAC Credit Agreement is due in quarterly installments.

Quarterly installments on December 31, 2022 are in the amount of $2.8 million, from March 31, 2023 to December 31, 2023 are in the amount of $4.7 million per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $3.8 million per quarter, on March 31, 2027 is in the amount of $2.8 million, and the remaining principal balance is due at final maturity on June 30, 2027 .

As of September 30, 2022 and December 31, 2021, the outstanding balance on the term loan was $71.4 million (net of unamortized debt issuance costs of $0.8 million), and $53.7 million (net of unamortized debt issuance costs of $0.6 million), respectively.

Interest expense on the term loan during the three months ended September 30, 2022 and 2021 was $1.1 million (including amortization of deferred debt issuance costs of $0.1 million ) and $0.6 million (including amortization of deferred debt issuance costs of $0.07 million), respectively.

Interest expense on the term loan during the nine months ended September 30, 2022 and 2021 was $2.2 million (including amortization of deferred debt issuance costs of $0.3 million) and $1.9 million (including amortization of deferred debt issuance costs of $0.2 million), respectively.

Quarterly installments from June 30, 2023 to December 31, 2023 are in the amount of $4.7 million per quarter, from March 31, 2024 to December 31, 2026 are in the amount of $3.8 million per quarter, on March 31, 2027 is in the amount of $2.8 million, and the remaining principal balance is due at final maturity on June 30, 2027.

As of March 31, 2023 and December 31, 2022, the outstanding balance on the term loan was $64.1 million (net of unamortized debt issuance costs of $0.6 million) and $68.7 million (net of unamortized debt issuance costs of $0.7 million), respectively.

Interest expense on the term loan during the three months ended March 31, 2023 and 2022 was $1.4 million (including amortization of deferred debt issuance costs of $0.1 million) and $0.5 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

Senior Note Offerings

During the three months ended September 30, 2022 and 2021, we issued $15.4 million and $97.7 million, respectively, of senior notes, and during the nine months ended September 30, 2022 and 2021, we issued $51.3 million and $183.0 million, respectively, of senior notes due with maturities dates ranging from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

During the three months ended March 31, 2023 and 2022, we issued zero and $20.1 million, respectively, of senior notes due with maturities dates ranging from May 2024 to August 2028 pursuant to At the Market Issuance Sales Agreements with B.

Riley Securities, Inc.

which governs the program of at-the-market sales of the Company’s senior notes.

A series of prospectus supplements were filed by the Company with the SEC which allowed the Company to sell these senior notes.

As of September 30, 2022 and December 31, 2021, the total senior notes outstanding was $1,661.2 million (net of unamortized debt issue costs of $18.2 million) and $1,606.6 million (net of unamortized debt issue costs of $21.5 million) with a weighted average interest rate of 5.70% and 5.69%, respectively.

We filed a series of prospectus supplements with the SEC in respect of our offerings of these senior notes.

As of March 31, 2023 and December 31, 2022, the total senior notes outstanding was $1,723.0 million (net of unamortized debt issue costs of $16.9 million) and $1,721.8 million (net of unamortized debt issue costs of $18.1 million) with a weighted average interest rate of 5.75% and 5.75%, respectively.

Interest on senior notes is payable on a quarterly basis.

Interest expense on senior notes totaled $25.1 million and $21.5 million for the three months ended September 30, 2022 and 2021, respectively, and totaled $74.2 million and $60.0 million for the nine months ended September 30, 2022 and 2021, respectively.

The most recent sales agreement prospectus was filed by us with the SEC on January 5, 2022 (the “January 2022 Sales Agreement Prospectus”), supplementing the prospectus filed on August 11, 2021, the prospectus filed on April 6, 2021, and the prospectus filed on January 28, 2021.

Interest expense on senior notes totaled $26.2 million and $24.4 million during the three months ended March 31, 2023 and 2022, respectively.

The most recent sales agreement prospectus was filed by us with the SEC on January 5, 2022 (the “January 2022 Sales Agreement Prospectus”).

This program provides for the sale by the Company of up to $250.0 million of certain of the Company’s senior notes.

As of September 30, 2022, and December 31, 2021 the Company had $60.6 million and $111.9 million, respectively, remaining availability under the January 2022 Sales Agreement.

Off Balance Sheet Arrangements

Information about our off-balance sheet arrangements is included in Note 15 of the Notes to the Condensed Consolidated Financial Statements.

Such information is hereby incorporated by reference.

As of March 31, 2023 and December 31, 2022, the Company had $0.1 million remaining availability under the January 2022 Sales Agreement.

Recent Accounting Standards

See Note 2(t) to the accompanying financial statements for recent accounting standards we have not yet adopted and recently adopted.

See Note 3(p) to the accompanying financial statements for recent accounting standards we have recently adopted.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis