B. Riley Financial, Inc. Aktie

Good day, and welcome to the BRC Group Holdings, Inc. First Quarter 2026 Earnings Call. My name is Isabelle, and I will be your Evercall moderator. The format of the call includes prepared remarks from the company followed by a question-and-answer session. [Operator Instructions]

At this time, I will turn the call over to Bryant Riley, Co-CEO of B. Riley. You may now begin.

Good afternoon, and thanks for joining our call. I want to stress by saying how enthusiastic our entire team is by where our firm sits today. The deliberate steps we have taken to strengthen our balance sheet and align our core operating platform have positioned us well to capture the current market opportunity. That conviction is reflected in our momentum, which carried over from 2025 into our first quarter.

For the first quarter, we generated net income available to common shareholders of $211.3 million and adjusted EBITDA of $262.2 million. Operating adjusted EBITDA was $34.6 million, up close to 40% sequentially. Net debt stands at $372 million, down approximately $255 million from year-end. Our CFO, Scott Yessner, will walk through the financials in detail.

My remarks today focus on 3 points: our first quarter execution, our strategic path forward and our ongoing commitment to our core franchise. During the quarter, our team executed against 2 key priorities: strengthening our balance sheet and delivering for our clients. On the balance sheet, we continue to optimize our capital structure. In March, we fully redeemed our 5.5% senior notes due 2026. We also retired $40.4 million of debt through bond for equity exchanges and open market repurchases through the end of March. Altogether, total debt is down $129 million in the quarter, and we expect that trend to continue.

While we enjoyed a solid quarter across the entire platform, B. Riley Securities delivered our most active quarter for capital raising in 5 years. During the quarter, we executed on nearly $10 billion in total debt and equity raises for clients. We acted as joint lead book runner on WhiteFiber's $230 million convert, participated in a [indiscernible] $1.3 million follow-on and led key advisory mandates with the TrueCar take private. We are active across the entire capital structure. We filed $8.7 billion in new ATMs in the first quarter, including a $6 billion facility for IREN and a $1 billion facility for SMR.

We also expanded our research footprint, initiating coverage of 26 companies in the first quarter alone. We see a deep expanding opportunity set for our team in the quarters ahead and expect momentum to continue. Ultimately, our broader strategy remains straightforward. We reinvest operating cash flows into our businesses and compelling market opportunities with our core franchise serving as a primary engine.

Next year marks our 30th anniversary. And over the last 3 decades, we've intentionally built our business based on a commitment to be an active, dedicated advisory and liquidity partners for companies in the historically underserved small and mid-cap market. We have navigated every market cycle. During periods of macro stress, we have stayed committed to the strategy while others have cycled in and out. This consistency and our commitment to this market have proven to be our structural advantage.

That same commitment is why we launched BRC Specialty Finance to enhance our commitment to small and mid-cap companies by providing capital and liquidity solutions. We will continue to leverage our platform and put capital to work to back our clients and our long-term partners.

Executing our strategy requires absolute operational discipline and a world-class team. We're incredibly grateful for our team's hard work and continued dedication to the firm and our clients.

I will now turn the call over to Co-CEO, Tom Keller, to provide additional context on our operating performance. Tom?

Thanks, Bryant. In April, we announced our intention to repurchase the outstanding minority stake of B. Riley Securities and combine B. Riley Securities with B. Riley Wealth. We are incredibly excited about this. The proposed transaction streamlines our corporate structure, but more importantly, it intentionally aligns our investment banking, our broad retail and institutional distribution and our equity research engine.

Scott will spend some more time on the numbers. But from an operational standpoint, the platform is continuing to normalize from all the activity that has transpired over the last 2 years. Targus continues to stabilize their business, operating at roughly breakeven. We're encouraged by recent improvements in distribution channel sales as tariff concerns begin to ease.

Our communications group continues to deliver high-margin cash flow by leveraging our team in India, and we remain relentlessly focused on efficiency across the entire enterprise. We are actively deploying AI, not just as a corporate efficiency tool, but as a force multiplier across our entire revenue-generating platform.

By equipping our bankers, sales force and research teams with advanced tools to accelerate analysis and insights, we are empowering our teams to scale their output and capture more market opportunity without proportionately increasing our cost structure. While technology allows us to operate faster and smarter, our core business is fundamentally a relationship business. Our ultimate differentiator remains our people and the partnerships we build.

In 2 weeks, we will host our 26th Annual Investor Conference at the Ritz-Carlton in Marina del Ray. With approximately 200 companies and 1,000 attendees, this conference remains the clearest expression of who we work with and the partnerships we build. During the conference, we will once again host our annual Big Fighters, Big Cause charitable boxing gala, benefiting the Sugar Ray Leonard Foundation in its mission to knock out pediatric diabetes. We are proud to have raised over $6 million for this cause since inception.

And next week, on May 13, B. Riley Securities is hosting our Annual Commissions for Charity Day, where 100% of our equity trading commissions will be donated to Children's Hospital L.A.

For nearly 3 decades, our firm has been defined not just by the deals we execute, but by the relationships we build. While we are incredibly proud of our operational execution this quarter, these events reflect the true character of our firm and our commitment to our clients, our partnerships and our community.

Our proprietary platform continues to serve as a major differentiator for recruiting, and we are actively leveraging it to add high-impact talent. We are fielding numerous conversations for positions across the company. And just last month, we welcomed back one senior sales trader as well as brought on an institutional salesman new to the firm. High-performing producers want to be part of a company where deals are actively getting done, where the platform supports them and where the culture is set by the fellow producers across our management team.

With that, I will turn the call over to our CFO, Scott Yessner, to walk through the detailed financials. Scott?

Thanks, Tom. I'm pleased to share an update on our first quarter 2026 financial performance, investment holdings and capital and liquidity. To start, I would like to walk through our financial performance. Year-over-year first quarter total revenues were $352 million compared to $186 million. The increase in total revenues was driven by $161 million of higher trading gains on investments primarily in Babcock & Wilcox common stock, $130 million of which is related to the value appreciation in the first quarter of 2026.

Service and fee income was $152 million for the quarter, lower year-over-year by $6.7 million. Investment banking and brokerage revenues increased $12 million, offset by lower revenues from exited businesses in the prior year of $10.4 million, lower B. Riley Wealth Management revenues of $4.6 million and lower Communications Business Group revenues of $4.1 million from normal subscriber attrition.

Next, year-over-year first quarter total operating expenses were $199 million compared to $247.5 million in 2025, a reduction of $48 million. The reduction was primarily due to a combined $28 million of eliminated costs from exiting businesses and the Communications Business Group subscriber declines, with the remaining reduction of approximately $20 million from across a range of operating expenses, including lower legal fees of $3.7 million.

Despite the lower operating expenses in total and in varying expense lines, accounting fees related to the audit and accounting activities was $4 million higher than 2025, which was also at an elevated level. We have returned to a normal operating calendar, which will allow us to drive infrastructure improvements that we believe will ultimately lower our accounting fees and other elevated costs.

Continuing down the income statement. First quarter other income, excluding interest expense was $106 million, primarily due to a $99 million increase in the Babcock & Wilcox fair value appreciation. The company's total increase in the Babcock & Wilcox investment across trading income and unrealized income for the first quarter in 2026 was $229 million, booked in different revenue lines due to the investment being owned by multiple entities within the BRC Holdings structure.

Year-over-year first quarter interest expense was $20 million, a decline of $10 million from 2025, driven by lower average borrowing balances from senior note redemptions and other debt reductions. These details culminate with first quarter 2026 net income attributable to common shareholders of $211 million, diluted income per share of $6.57 compared to a net loss of $12 million, diluted loss per share of $0.39 in the first quarter of 2025.

First quarter 2026 adjusted EBITDA was $262 million compared to a loss of $45 million in 2025. Please refer to the reconciliation tables in our earnings press release for the adjusted EBITDA calculation.

Next, I'll review our segment operating performance. Please note our former Communications business segment has been separated into 4 reportable segments, which we aggregate and describe as the Communications Business Group. The Capital Markets segment, which is comprised solely of B. Riley Securities, had first quarter 2026 total revenues of $172 million compared to $2 million in 2025, and segment income of $137 million compared to a segment loss of $36 million in 2025. The revenue and segment income increases were primarily driven by fair value increases in Babcock & Wilcox recorded in trading gains. Additionally, core investment banking revenues also increased $9.7 million year-over-year.

Next, the Wealth segment had first quarter 2026 revenues of $52 million compared to $47 million in 2025, a $5 million increase. And segment income of $16 million compared to $2 million in 2025, a $14 million increase. The revenue and profit increases were driven by an $8.9 million increase in market value of carried interest in a fund that owns SpaceX for the portion owned by the Wealth segment. Wealth segment ended the first quarter with $11.9 billion in assets under management and 190 registered representatives.

The Communications Business Group is the aggregate results of Lingo, magicJack, Marconi and UOL reportable segments. The Communications Business Group had first quarter aggregate revenues of $60 million compared to $64.5 million in 2025, a $4.5 million decline. And aggregate income in the first quarter of $12.6 million compared to $10.6 million in 2025, a $2 million increase. The first quarter results are in line with our expectations. The operating leverage continues to be a core business strength as demonstrated by the results.

Our Targus business, which comprises the Consumer Products segment, had first quarter revenues of $44 million compared to $42 million in 2025 and operating segment loss of $2.6 million compared to a loss of $5.1 million in 2025. After a period of declining sales, we are pleased with the revenue increase and the narrowing operating loss, which is due to improving the sales mix margins and lowering operating costs.

Next, I'd like to provide an update on the company's investment holdings portfolio, which is reported on our balance sheet in securities and other investments, loans receivable at fair value and equity investments. Investments are held across consolidated entities where valuation changes are primarily booked as revenue in either trading gains and losses or realized and unrealized gains and losses.

At March 31, 2026, securities and other investments increased $193 million to $640 million from December 31, 2025. The increase is primarily driven by a $229 million value increase in the Babcock & Wilcox investment and a $12.6 million increase in the partnership interest related to our marked value of carried interest in funds that own SpaceX for all BRC entities, offset by a sale exit of $41 million of private stock holdings, rounding out the balance change.

At March 31, 2026, the Babcock & Wilcox stock price used in the valuation was $14.69 a share with the company owning approximately 27.4 million shares. And the SpaceX carrying value was marked at $526 per share. Securities and other investments are reported in detail in the 10-Q with subtotals including public equities, private equities, corporate bonds, other fixed income securities and partnership interest and other.

In the public equity subtotal, the Babcock & Wilcox valuation was the primary driver. The private equity subtotal amount, which has over 50 investments, including the venture capital portfolio, was lower by $42 million, primarily from the private stock holding exit described earlier. Partnerships and other investments increased $13.4 million, primarily due to the SpaceX carried interest value increase described earlier.

Continuing with investment holdings, loans receivable at fair value declined $1.4 million in the first quarter to an ending balance of $24.9 million at March 31, 2026. In the quarter, loan lending activity included approximately $20.1 million in fundings and $21.8 million in repayments. Also we received a $6.7 million loan recovery recognized through the income statement in fair value adjustments on loans.

For the last balance sheet line item of our investment holdings, equity method investments were $90.7 million at March 31, 2026, virtually flat from December 31, 2025. The GA Group investment, formerly Great American, comprises $83.7 million of the March 31, '26 balance, also virtually flat to December 31, 2025. GA Group had good quarterly performance, which is disclosed in summary in the filed 10-Q.

Next, I'll provide an update on our liquidity and capital. At March 31, 2026, cash, cash equivalents and restricted cash had total balances of $178 million compared to $229 million at December 31, 2025. In the first quarter of 2026, BRC reduced total debt by $129 million, which includes a $96 million RILYK bond redemption on March 30, 2026, and $40 million of bond exchanges and buybacks.

At March 31, 2026, total debt was $1.3 billion and net debt declined $255 million to $372 million. For the remainder of 2026, the company has 2 senior note series maturing, $167 million in principal amount of RILYN senior notes due September 30, and $170 million principal amount of RILYG senior notes due on December 31. These amounts have been reduced through Section 3(a)(9) bond exchanges since March 31. We also have $7 million in scheduled paydowns on a subsidiary lending facility.

As previously described, we will continue to use capital actions, cash generated from operations and investment liquidations to fund market opportunities and the operating companies, while also redeeming the scheduled senior note paydowns. We look forward to answering your questions.

I'll turn the call back to the operator for the Q&A session.

[Operator Instructions] Our first question comes from Sean of Charles Lane Capital.

Congrats on the quarter. I just had a few questions here. You guys touched on it a bit, but just can you kind of elaborate on your philosophy for kind of harvesting some of these gains that you have and maybe applying them to the debt, if that's your preferred use of capital?

So Sean, I think you touched on this last call. We are -- I think we've done a pretty good job of creating optionality. And that's really important. And that means -- optionality might mean buying back bonds in the open market, swapping bonds for other bonds. We sold some assets and repurchased bonds. And so for us, we appreciate and we are asked often about our largest position. And we don't -- our head is not in the sand. We are taking all of our portfolio as one, and we will make the decisions, I think, that are in the best interest of the shareholders and the bondholders.

So there's not a -- I think I said last time, there's no playbook in this business. DDI, which is a big position for us, is trying to go private. We have $40 million of that. SpaceX, we didn't really value nearly as high a year ago as it is today, and that's on our books for over $50 million. So there's a fair amount of cash, and we've got investments. So it is a daily discussion and analysis, but I can't -- I just can't give you the answer that you want, which is A, B, C, D. We are being very active and I think thoughtful about where do we invest in the business, where do we invest to grow the business, when do we buy back bonds, what's the right price to buy back bonds, when do we swap bonds and all of those things.

Okay. Fair enough. And then on the merger with the Wealth division, I might have missed it, but have you put out any sort of quantitative synergies that you think you're going to realize out of that?

We haven't. And I think from my perspective, and Scott can touch on this a little bit, there's a lot of onetime costs that we have had to deal with as we've gotten our financials current. And our team has done an amazing job of getting our financials current. But it was just a massive group of people. And we've been -- we are now at a point where we're on a normal cadence where we can really focus on that, not that we haven't been focusing on it, but we're not -- not everything is a mad rush. And so as we look through our overall corporation and then we look through the subsidiaries and the mergers, we'll be more clear now that we can really, I won't say focus is the wrong word, but maybe focus on some of those things and not just the mad scramble to get our financials current.

Scott, anything you want to add on that?

Bryant, I think you touched on the important points there. The merger is going to have synergies across revenues and cost lines, and those are in the early parts. And early on, we're focusing in on the client side and the connectivity between the wealth and the retail -- the wealth retail side and the institutional part of the business. So that client focus and that connectivity is sort of the top part as we -- in the back office sort of determine what the right steps are in there.

But I'd echo Bryant's comments with respect to we're really just in the early innings of evaluating our operating cost structure at the company and coming out of a very intensive period and now we're going to have a very normal operating environment. That's going to give us a lot of bandwidth to evaluate our cost structure. And there are some easy wins in this. Our audit fees were high just due to the demands we had put on our auditor and with the normal time line that we're going to be able to use this year, that's a pretty easy win for us. And we have several of those across the entity in different parts of our business and operating expenses.

So now we're still seeing at the directional, hey, there's a lot of opportunity the OpEx has. And I understand that, that's not as easily calculatable into a model. But in the future quarters, when we start realizing those and have more dimension, Bryant can share you more specifics.

Got it. And then just lastly, just because you called it out in the release. For the 26 initiations in the quarter, how much of that is attributable to new hires versus kind of increasing coverage for existing hires?

So I'm going to -- I don't have that number handy, but I'm just going to -- just a general thesis. I think that the world is much more efficient given all the capabilities of everything, everything from AI. And so just the ability to gather information, the ability to -- I think a research analyst 12 years ago, it would have been 12 to 15 companies per analyst. And if you can't get to 25, I think that would be -- you're just able to sell information quicker. You don't have to download every 10-K and 10-Q and make your analysis faster. So yes, I think that the vast majority of that is just from analysts that are already on board.

Our next question comes from Griffin of Owl Creek Asset Management.

Congrats on the good trajectory here. It looks like the clouds are starting to part. I was hoping you could provide some further clarification on a couple of things. I guess the first thing is, can you kind of walk through the rationale of buying back the minority stake of BRS? Initially, we thought that this was another lever that you had created to potentially partially monetize to help with the cap structure. And now it seems like you're walking back that. Can you kind of help us understand the rationale behind that?

Yes. I think we laid that out when we made the announcement. When we carved that out, it was a different time. I mean we have to acknowledge it was in the middle of a very unique situation for us and carving it out and separating it at that time felt like the best thing to do for keeping people and for managing the business and from circling and ring-fencing it. I think as we've gotten through and as you said, are seeing some bluer skies, we have balance sheets that have been separated and utilized in different ways and now can be utilized in one way. So you might have a -- BRS had a lot of money at the money market of 4% as a broker-dealer while we're on corporate, utilizing money at much higher rates. And then there's also operating synergies.

And we still think that, that business could be very easily separated if we needed to do that or if somebody came along and determined that, that was worth the value that we thought it was worth. But in the near term, just from a cost of capital perspective, from an operating efficiencies perspective, we felt like that was the right thing to do.

TK or Scott, anything you want to add to that?

Yes. I would just say, again, a year ago, 2 years ago, different landscape. And again, a big part of the reason was just the optionality. You heard earlier, that's one of our focuses here to make sure that we're in the right position to take advantage of whatever situation we find ourselves in. And we went down that road. A year later, 1.5 years later, the landscape has changed. And it has proven to be operationally really challenging among other reasons. So rather than persist with what we're doing, we're going to simplify our lives and put it back to the way it was.

So can I infer that ex sale of BRS, you think you have all the solutions necessary in-house to solve the 26s?

Yes.

Okay. Understood. And then I guess one of the statements you made, which I thought was obviously great is we have seen the most deal activity in 5 years in BRS in terms of capital raising. And maybe I missed the nuance on that. But it doesn't look like that massive increase is showing up in the numbers. Is that because of you're trying to regain market share with lower pricing? Or is that -- can you kind of help me out there?

So we are -- yes, so if we are 30% of a deal, that's obviously a lot more valuable than [ 5% ] of a deal. And so I think over the -- what I've been super impressed with is that companies value our research and value our distribution. The noise that has surrounded us and is dissipating, and actually, I'm hopeful, turns the other way, but as it surrounded us, those percentages of those deals, we lost economics. So ideally, we would rather be a smaller number and be 100% of the economics.

But I think it speaks to our position. I think it speaks to the value that we provide to companies and to the markets. And as we've been playing, I think, with one hand behind our back. We haven't had our financials current. We've had to spend a lot of time on that. And as we are now in a completely different position, I would expect that our percentages of those deals will go up meaningfully. I would hope. That is the goal.

Got it. And then the last one for me is you had mentioned that because the company was a delinquent filer, there was certain business that was pulled from you guys. How are you thinking about -- or how are you seeing the cadence of that recovery of former clients returning?

Yes, it's been strong. So we measure it weekly. We have seen a lot of onboarding of accounts again. It was a big deal for, I think, some of the bigger institutions that just check a box, and that box was we're delinquent, so let's cut them off for now. And so it's been dramatic over the course of the last quarter.

Okay. Good to hear. Congratulations on the quarter.

This concludes the Q&A session. Handing it back to Bryant Riley for any final remarks.

Thank you, operator. It's been a -- it really feels good to report on the 7th and have a normal cadence. And now we get to go after, as I mentioned, some of these operating costs that were onetime in nature. None of this would have happened if we didn't have an amazing group that worked 24/7 to get to this not only our revenues in line, but also our -- get the financials done.

So super thankful, and thanks, everyone, for calling in, and we look forward to talking to you. Our conference is coming up. So hopefully, we'll see some of you at our conference on the 20th, and appreciate the interest. We'll see you next quarter. Thank you.

Before we conclude, we'd like to inform listeners that today's call may include forward-looking statements. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For a discussion of these risks, please refer to our most recent SEC filings, including our annual report on Form 10-K and subsequent 10-Qs. We do not undertake any obligation to update these forward-looking statements.

This concludes today's Evercall. A replay will be made available shortly after today's call. Thank you, and have a great day.

Good day, and welcome to the BRC Group Holdings Fourth Quarter and Full Year 2025 Financial Results Conference Call. My name is Isabelle and I will be your Evercall moderator. The format of the call includes prepared remarks from the company, followed by a question-and-answer session.

[Operator Instructions]

And I will turn the call over to Bryant Riley from BRC Group Holdings. You may now begin.

Thank you, and good afternoon. We appreciate everyone joining us. To start, we are pleased to report that our 10-K was filed on time. It's an important milestone for our counterparties, shareholders and the organization as a whole. With that, for nearly 30 years, BRC Group Holdings has been defined by a key principle, our willingness to be opportunistic. In the deals we took on, the capital we deployed, the companies we backed and the businesses we built. Over the years, our team has grown adept at rising to the challenges associated with capitalizing on those opportunities. The last 2 years required the firm to apply those same skills to itself, rebuilding our balance sheet, shifting operations, refocusing parts of the platform and positioning BRC GH for what comes next.

We made some hard decisions along the way, but we made them deliberately and we made them so that we could get back to doing what we do best. The bedrock of success of BRC GH's platform is our ability to bring together diverse companies, aligning them to partner creatively for our clients and building a collaborative ecosystem, advisory, capital markets, wealth management, principal investments and businesses that generate recurring steady cash flow. That combination creates real value for clients and shareholders alike. Over the past 2 years, we made the difficult decision to sell some of those businesses to strengthen our balance sheet. As we sit here today, the model is intact as exemplified by our recent results.

Our Communications Business Group continues to generate consistent predictable cash flow. Our broker-dealer executes complex transactions, raise significant capital for our clients and continues to grow and add talent. In our investment portfolio, anchored by our position in Babcock & Wilcox delivered results that reflect the hands-on work our team put into our portfolio over many years. In 2025, we reported net income available to common shareholders of $299.4 million and earnings per share of $9.80. We reduced net debt significantly and continue to invest in the businesses and people that drive the platform. We welcomed the new CFO, Scott Yessner, enhanced our finance staff and transitioned to BDO as our auditing partner.

Looking at the opportunity in the market for BRC GH, the small and mid-cap market we've always served is at an inflection point. Traditional lenders have pulled back, generalist firms can't cover the complexity, companies in the space need experienced partners will understand the capital structure, know the equity story and can move with speed uncertainty. That's our lane, and it's been our lane for 30 years, and the demand for what we do is growing. To that end, yesterday, we announced BRC Specialty Finance, a dedicated platform that addresses this exact issue, which is very exciting for us.

Also yesterday, the Delaware Court of Chancery dismissed, in full, the Marstons versus Riley derivative action, finding that the planet failed to adequately plead demand futility. BRC GH believes this outcome reflects the integrity of its Board and the governance processes. We will not be commenting further on pending litigation. We're proud of what we accomplished in 2025, and we're committed to building upon these results. We are laser focused on continued growth and maximizing profitable outcomes. The world is changing fast, AI included, and we will continue to make the shifts necessary to stay relevant and competitive.

Finally, we need to take a moment to acknowledge our team. These past few years have been a demanding period for the firm. Our people leaned in, stayed focused on clients and kept us moving forward, showing exactly what the platform is built on. There are a competitive advantage, the continuity, experience, institutional knowledge, we cannot be more proud of what this team has accomplished.

I will now turn the call over to Co-CEO, Tom Kelleher, for a few additional comments.

Thanks, Bryant. As mentioned in our earnings release, we completed a number of strategic and operational objectives throughout the year. In March 2025, we closed the sale of Atlantic Coast recycling for a purchase price of approximately $102 million with net cash proceeds to BRC GH of approximately $69 million after adjustments. In April 2025, we sold a portion of our W2 Wealth Management business representing 36 financial advisers and approximately $4 billion in assets under management for a net consideration of $26 million.

In June 2025, we completed the sale of GlassRatner Advisory and Capital Group and B. Riley Farber advisory, generating cash consideration of approximately $118 million. While every one of these divestitures was a challenging decision to make, they fit with our strategy to deleverage the platform and focus the business going forward. With the GlassRatner sale, we executed a Transition Services Agreement, or TSA, whereby we operationally supported that business through the end of 2025. Similarly, we also executed a TSA with our 2024 partial sale of Great American and that TSA was also completed at the end of 2025. In 2025, we also completed a multiyear project to consolidate the clearing arrangement for our Wealth Management business, which streamlines back-office operations and will materially lower costs. Effective January 1, 2026, we rebranded as BRC Group Holdings, reflecting our evolution from a financial services platform into a diversified portfolio of distinct businesses, spanning financial services, communications, retail and investments across equity, debt and venture capital.

Like many other firms, BRC GH has begun deploying artificial intelligence tools. We standardized around Claude a year ago and are well positioned to capitalize on the opportunities presented by this emerging technology. More than half our corporate staff is using AI tools. Across our operating companies, AI adoption has accelerated guided by a centralized team focused on developing and expanding these capabilities throughout the enterprise. The story heading into 2026 is straightforward, a stronger balance sheet, a growing business and a market that needs exactly what we offer.

Our CFO, Scott Yessner, will now walk through the financials in detail. Scott, Over to you.

Thank you. I'm pleased to share an update on our 2025 financial performance, investment holdings and liquidity. To start, I'd like to walk through our financial performance for the fourth quarter and full year 2025. Year-over-year, fourth quarter revenues were $279 million compared to $179 million and full year revenues were $968 million compared to $746 million. The increase in fourth quarter year-over-year revenue was driven by $68 million on higher trading gains on investments, primarily in Babcock & Wilcox common stock and by a loss of $72 million in fair value adjustments on loans receivable in 2024, which were offset by lower service and fee income of $33 million, which was comprised of $15 million in lower investment banking revenue and $20 million in revenues related to exited businesses.

These fee declines were partially offset by higher net investment advisory fees related to a fund that holds SpaceX. The full year 2025 revenue increase was driven by $183 million in higher trading gains due to $126 million in investment appreciation, primarily in Babcock & Wilcox and a loss of $325 million on fair value adjustments on loans in 2024. The year-over-year revenue increase was offset by $150 million of lower service and fee revenues and $64 million in lower interest income from securities lending. The components of lower service and fee revenue decline were $66 million lower revenue from exited businesses of Revel, Noggin and the Stifel Wealth sale, partially offset by higher net investment advisory fees related to a fund that holds SpaceX.

Further, $44 million lower Communication Business Group subscription revenue, driven by subscriber attrition and a divestiture of a Lingo wholesale business, and finally, $22 million of lower investment banking revenue. Fourth quarter operating expenses were $218 million compared to $345 million in 2024 and full year operating expenses in 2025 were $892 million compared to $1.24 billion in 2024. The $128 million fourth quarter year-over-year reduction of operating expenses was primarily due to costs from exited businesses and a $78 million goodwill impairment in 2024. The $352 million full year reduction of operating expenses was due to $186 million from exited businesses and lower cost of sales linked to revenue declines. $61 million lower interest expense from securities lending and a $104 million goodwill impairment in 2024.

Our administrative costs have been elevated in the past 2 years, particularly on professional fees. As we return to a normalized operating cadence, we expect to reduce these costs and will update in the future calls. Continuing down the income statement. Fourth quarter other income, excluding interest expense, was $38 million compared to a loss of $59 million in 2024. And full year other income excluding interest expense was $247 million compared to a loss of $270 million. The $98 million fourth quarter year-over-year increase was primarily driven by fair value total markups of $66 million on Babcock & Wilcox stock and double down Interactive Holdings.

The $516 million full year year-over-year increase was due to gains of $86 million on gain on sale of deconsolidation businesses, $76 million in Babcock & Wilcox stock value increase $67 million on senior note exchanges, $34 million in equity gains on the JOANN's GA Group liquidation deal and $273 million in investment markdowns in 2024. Fourth quarter interest expense was $20 million compared to $31 million in 2024 and interest expense for the full year of 2025 was $93 million compared to $133 million in 2024, which was driven by debt reduction of $347 million during 2025.

These details culminate with fourth quarter net income attributable to common shareholders in 2025 of $85 million compared to $900,000 in 2024 and full year net income attributable to common shareholders in 2025 of $299 million compared to a net loss of $772 million in 2024. Fourth quarter adjusted EBITDA in 2025 was $104 million compared to a loss of $114 million in 2024 and full year adjusted EBITDA in 2025 was $231 million compared to a loss of $568 million in 2024. Please refer to the reconciliation tables in our earnings press release for the adjusted EBITDA calculations.

Next, I'll review our segment operating performance. Our segment presentation has been revised with the following changes. Our former Communications segment has been separated into 4 reportable segments, which we aggregate and described as the Communications Business Group. The Capital Markets segment had a few investment entities reclassified as nonreportable segments. These NAs are now captured in Corporate and Other. The Capital Markets segment, which is comprised solely of B. Riley Securities, had fourth quarter and full year revenues of $93 million and $265 million and segment income of $53 million and $89 million. The revenue and segment income increases are primarily due to a fair value increase in Babcock & Wilcox in trading gains. Core Investment Banking revenues were lower by approximately $222 million in 2025, which was a result of lower banker headcount, reduced client engagement from among things, late SEC filings at the corporate parent.

The Wealth segment had fourth quarter and full year revenues of $47 million and $176 million and operating segment income of $8 million and $15 million. After completing the sale of $4 billion in assets under management in April 2025, the wealth segment completed a back-office integration and cost reduction program. Wealth ended 2025 with $13 billion in assets under management and 197 registered representatives. The Communications Business Group is the aggregate results of Lingo, MagicJack, Marconi and United Online Reportable segments.

The Communications Business Group had fourth quarter and full year aggregate revenues of $63 million and $250 million and aggregate income for the fourth quarter and full year of $13 million and $47 million. The results exceeded our expectations in 2025. While the Communication Services have a declining customer base, we have a strong team who does a very good job of servicing our customers and offering a very profitable and strong cash flow business. We will continue to evaluate opportunities to leverage this business model. The Targus business, which comprises the Consumer Products segment had fourth quarter and full year revenues of $49 million and $182 million and operating segment loss of $4 million and $16 million. Lower revenues, inventory write-downs, goodwill impairments and tariff costs led to the 2025 operating loss. Tariff costs were approximately $4 million, which have been submitted for reimbursement. We'll update if the reimbursement is realized. Tariffs, complex, chip shortages remain risk to the business in 2026. After several years of declining sales from the consumer product surge around the time of COVID, sales revenues have stabilized year-over-year in the fourth quarter of 2025 and into the first quarter of 2026. We are evaluating options to refine our pricing model and cost structure as key opportunities in 2026.

Next, I would like to provide an update on the company's Investment Holdings portfolio. which are reported in our balance sheet in Securities and Other investments, Loans Receivable at fair value and Equity Investments. Investments are held across the consolidated entities where valuation changes are booked as revenue and either trading gains or realized and unrealized gains, depending on the entity. Securities and other investments increased by $165 million to $447 million at year-end 2025. The increase was primarily driven by a $129 million value increase in Babcock & Wilcox and a $28 million increase in partnership interest and other related to our carried interest in funds that own SpaceX. At 12/31 2025, the Babcock & Wilcox stock price used in the valuation was $6.34. The company owned approximately 27.5 million shares at December 31, 2025, and at March 31, 2026.

The SpaceX carried value was marked at $421 per share at 12/31 2025. Securities and other investments are reported in the 10-K table with subtotals, including public equities, private equities, corporate bonds and other fixed income securities, along with partnership interest and other. In the public equities in addition to the Babcock & Wilcox valuation change, DoubleDown Interactive and Synchronoss were lower primarily from selling a portion of the holdings with small changes in price.

The private equities subtotal amount, which has over 60 investments, including the Venture Capital portfolio, had $34 million in new investments, $10 million in liquidations and the balance of the year-over-year change due to valuation updates. The venture capital portfolio has a few maturing investments that may be realized in the next 12 to 24 months. Corporate bonds increased $2.7 million, primarily due to an increase in value, partnerships and other investments increased primarily due to the SpaceX security interest value increase identified earlier. We operate the securities and investment portfolio to maximize shareholder returns and to support operational funding and liquidity requirements.

Continuing with investment holdings loans receivable at fair value declined $64 million in 2025 to an ending balance of $26 million at 12/31 2025. Loan lending activity included approximately $110 million of fundings and $170 million of repayments, primarily driving the balance decline. Exela Technologies represents $21 million of the remaining balance, of which approximately $15 million is due in 2026. We expect to continue to fund loan and credit structures for our clients in 2026. For the last balance sheet line item in our investment holdings, equity method investments were $90 million at 12/31 2025, increasing $5 million from December 31, 2024, increase was primarily due to $4 million of investments transferred from partnerships.

The GA Group investment formerly Great American, comprises $83 million of the 12/31/25 balance. In 2025, the GA Group had good financial performance and hired new executives to support their expansion, including a new CEO. Due to the GA Group capital structure, we've recorded the investment using the hypothetical liquidation at book value method. Well, we don't anticipate this booking method will result in a significant movement in our balance sheet valuation periodically, we believe the value will grow over the next few years. Having grown GA Group since 2014, we know this business well. We'll continue to update business performance periodically and seek to participate in equity and debt deals as partners to GA Group, as we did in 2025 with a $34 million equity gain in the JOANN's liquidation equity earnings and the lending we provided to GA Group in 2025.

Next, I'll provide an update and remarks on our liquidity and capital. At year-end December 31, 2025, cash, restricted cash and cash equivalents balance was $229 million compared to $247 million at December 31, 2024. In 2025, BRC Group produced total debt by $347 million, which included a $147 million RILYN bond redemption on February 28, 2025, $127 million in bond exchanges and $98 million in pay downs of term loans offset by $23 million of other increases in debt borrowings.

Net debt declined $437 million in 2025 to $627 million at December 31, 2025. As we enter 2026, we have 3 senior note series maturing in 2026 for a total principal amount of $457 million with an additional $16 million in scheduled paydowns on a subsidiary lending facility. On March 30, 2026. The Riley K senior notes were fully redeemed for approximately $96 million, inclusive of accrued interest. Remaining in 2026 and based on the balances at 12/31 2025 we have $178 million in principal amount of RILYN in senior notes due September 30 and $177 million in principal amount of Riley G notes due December 31, maturing. On March 12, we announced $30 million in senior note reductions through Section 39 exchanges and buybacks, which are across the senior note series, including all 3 series in 2026. We will continue to use capital actions and also use cash generated from operations and investment liquidations to fund the scheduled senior note paydowns and support our operations.

Continuing interest expense in 2025 totaled $93 million. In 2026, interest expense based on scheduled paydowns is estimated to be approximately $81 million expected to be lower due to the debt exchanges already announced in our anticipation of continuing these capital actions.

To conclude, our capital and liquidity plan in 2026 is to fund our emerging credit market opportunities, support our clients with capital and advisory services, support holding investments to their optimal assets, while funding the remaining senior note redemptions in 2026. Thank you for the opportunity to share this update today. We look forward to answering your questions. I'll turn the call back to the operator for a Q&A session.

[Operator Instructions]

Our first question comes from Amer with Imperial Capital.

Guys, first of all, congratulations on filing the 10-K. Am I reading this correctly that the remaining $350 million you'll potentially use the investment portfolio as the primary source and some cash flow from operations? Or there are other levers that you intend to pull as well?

So thanks for the questions. And Scott, feel free to join in. I think the way that we've looked over the last 2 years, if you try to put in a playbook you would have changed directions 15x. So our portfolio is opportunistic. You don't know it's going to pop up in different ways. I think the year ago, it wasn't known that we had -- and we hadn't counted as much of a SpaceX partnership, ownership that we had. And -- and so there's just -- it's a pretty big book. And we've got a fair amount of assets, and we're going to be opportunistic. So I wouldn't point to one thing or another. I would point to a combination of opportunities, whether it's SPAN Swaps, which we've done a lot of, whether it's buying bonds in the market or selling some investments, all of those things will be considered. Scott or Tom, do you want to add anything to that?

Yes. Thanks, Bryant. Really appreciate the question. And I think Bryant had summarized it very well. The way we look at it is we have investments and assets to the company that we want to maximize the value to. And we also have opportunities to supply capital to our clients. And so we balance all those different factors against our liquidity requirements for those bond redemptions. And so we have some high cash flow generating businesses and other opportunities, and then the capital actions that Bryant had levered on. So we'll be opportunistic and make the best decision for the shareholder, but we have many different levers in which to pay down the redemptions this year.

And I'd also just note that the redemptions because we have had these capital actions so far this year. The principal balance on the RILYN's due in September 30 is $167 million. And then the Riley G's are -- which are due on December 31, 2026, they're down to $170 million. So those have already reduced from our reported in our 10-K.

My next question is, when you guys look at BRF, I know you guys have talked about a SPAC transaction. Is there any sense of the timing for that?

Well, if anyone talked about a SPAC transaction, maybe it was -- yes, we have not talked about a stock transaction. We have carved it out so that it is an entity that you can -- there is some equity ownership by the management team, some of the partners there, and it's an asset of BRC and we're always evaluating our assets to maximize value. But it's very much an integrated part of our business as well and it does feed off -- we still do feed off of each other in terms of creating opportunities, whether it's myself being involved on the BRF side or some of the BRF helping on the wealth management side. And so we're really -- when we did have a carve-out to identify that asset a little more clearly. I would view those as still pretty integrated.

Congratulations you guys have accomplished an incredible amount over the last year or so. So it's been pretty frenetic in terms of things that have happened. But seems like you guys have found yourself in a very good spot at this point in time. So congratulations.

Our next question comes from Sean Haydon of Charles Lane Capital.

Thanks for all the information and congrats on the recent developments. Bryant, in your prepared remarks, you spoke of a, I believe, the word Specialty Finance Platform within the boundaries, could you kind of expand on that? And is that going to be something that's going to be on balance sheet or shared with investors? How should we kind of think about that going forward?

Sure. So Thanks, Sean. This is not incredibly different from what we've done for a long time, helping facilitate transactions. And as we mentioned in our in our press release, there is a gap in the market for more short-term loans, especially around public companies when you're willing to also underwrite not only the business, but the equity and all the assets of the estate. And so we will -- we did a loan -- we completed a loan. I think it's done maybe was done today, but it was for a public company, a $10 million loan against receivables and those receivables go directly a lot, so we take a fee off of those and they'll pay us back in 4 months, but they had a direct use for that.

There's not a lot of places you can go for that type of transaction. We certainly have a lot of relationships, just like anyone does that has a loan business like that, where we will consider syndicating. We have a dedicated family office that is -- partnership is a wrong word. It's not formalized, but we have a high degree of confidence that, that family office will be a participant to the extent we want to do some things bigger. So on balance sheet, depending on timing, depending on size, syndicated depending on timing, depending on size. I think the most proprietary thing and the reason that we wanted to make sure that we were in this business is, one, it's serving clients that are long-term clients, and we think we can put that in perspective.

Two, we don't think it's a hugely competitive market because most lenders need a duration of their capital and a defined MOIC and have very kind of strict mandates within the lending portfolio. So we think we can be opportunistic and also be really good partners. And so we're really excited about formalizing it. And we think we're already seeing just from that press release, we're seeing opportunities. So that's how that will work. Does that answer your question?

Yes. Yes. No, that was helpful. And then kind of piggybacking on the first question from the previous person where are you guys comfortable bringing the balance sheet in terms of net debt? I mean should we expect it to be lower? And how should we kind of think about it getting there?

So that's -- it's a question every day based on your cash flows and realize this year, our expenses -- our cash flows were hit quite a bit because of these expenses associated with the financials and changing orders and all the legal things. And so we expect to get some tailwinds there. We think that from operations, obviously, there's going to be meaningful cash flows. And we look at it all the time. If you were to take to market our portfolio now, the debt-to-EBITDA on a trailing basis would not be hugely uncomfortable, but that's net debt, right? So we have to constantly hit these things. I don't think there's -- I don't think there's a number of mine. We just want to make sure that we can, one way or another, be on the offense and helping our clients and being able to utilize capital to do that.

And so that will always be mindful of that, and we'll balance that against whether we need to utilize other methods, selling an asset or doing bond swaps. So I can give you a target. I could tell you that we feel pretty good about where we are right now, obviously, relative to where we were 18 months ago, and we're just going to keep grinding away.

Yes. I guess obviously, we don't have to get any specifics here, but directionally, when those maturities come up in the latter half of the year, should we expect replenishment from that? Or is that going to be the level we should expect going forward once they've matured.

I kind of answered the same way I answered the prior call or if -- in this business, 6 months and 9 months is like equivalent to 5 years in a legit business, if things changed 18 different ways. And I just -- I would I couldn't tell you exactly what the next steps are going to be other than we feel really comfortable about our -- about 2026 and going forward. So I would love to give you an exact linear description on the next steps, but we're just going to continue to think through what is best for the overall business and where we are in markets and how markets are. And if we're seeing a ton of opportunities, as Scott said, to put money to work at really good rates are really good opportunities that we'll be thoughtful of that.

But it's similar to how we got to March. I mean, by the time we got to March, there was $96 million of maturities, and we had tipped away at them from a couple of different ways. And that's how I would think about September and December.

Congrats. It's been a ride.

Well, I know you've been on the ride, and we appreciate it, going forward and accomplished a lot and just are charging forward.

[Operator Instructions]

Our next question is a follow-up from Amer of Imperial Capital.

I just wanted to dig into the Great American business. Can we talk a little bit about what -- how do you guys value the business on your balance sheet? And secondly, you guys had invested some additional capital for the JOANN liquidation. Can you talk about what kind of returns you got are expecting on those investments?

Yes. I was going to just touch on the accounting and the booking and that part of it, and then turn to you, Bryant. Yes. So there's -- the nature of the capital structure at GA Group after we did sold a portion and now have roughly 43% to 45% of that business. Because of that structure, we had to use an accounting treatment hypothetical liquidation and book value method. And it just sort of gives you a book value of that company. And when you think about the value of a firm like the GA Group, the balance sheet is not primarily the element to it. It's a fantastic business, which you know, we've honed for well over a decade. And so the part of the reason for my remarks on the call was just to identify that the -- well, we will communicate its performance as we are required to the 10-K of the actual business, the valuation on the balance sheet won't move much, and we think that's helpful to communicate to our shareholders and analysts to understand that the performance of the business may not necessarily be reflective of a hypothetical liquidation, but value, which I know everyone is very good at understanding book value versus market value.

And so that's how -- sort of how to think about it is that we want to communicate the performance in its P&L sense and earnings sense, but may not be able to reflect the actual valuation change in the balance sheet. And with respect to the equity. The equity returns that we earned on the JOANN's deal, that was -- those are very, very high. We -- that was a very, very successful deal for us, something that we were very comfortable in being with as part of our means of organizing that partnership with Oaktree, the majority owner now. And those are equity participations in transactions or something that we want to supply capital for and continue to. And we also provided some lending last year to that business operation. And so we want to outside of our ownership through that equity investment, provide additional capital to support the business.

So Bryant, I'd like to pick it up from there.

No, that was perfect. Yes, I wouldn't add anything more.

Our next question comes from Jonathan of JH Lane Partners.

I had a couple of quick ones for you guys. Number one is -- what is your ability to sell any of your shares in Babcock for liquidity purposes? Are there any restrictions associated with that given your significant ownership stake of the company. I have 2 other follow-ups. Maybe if you just want to answer that one first, and then I'm happy to get to the other questions.

We are -- we've been very involved in BW in a number of ways and advisory roles, et cetera. But in terms of restrictions outside of being restricted because we would have information. Our shares are subject to 144A requirements, which means that because we own a fair amount of shares, we would have to measure the volume per month of those shares, but the volume of that company is far more than the shares that we own. So we do have a requirement to follow some volume restrictions based on our ownership, but they are not -- they don't come into play with volumes here.

Okay. Great. And then just on the -- I've been following the story for a little bit. You guys have made obviously, a lot of progress. Is there any general comment you could comment you could provide to the broader market about changes maybe at the governance level given, obviously, it's obviously great that you got the positive litigation rule today or yesterday. But for someone new to the story and perhaps for people to just understand, there's a lot that went on here in the last couple of years. Have you had changes to the Board, other than changing your auditor is the law firm that you had worked with closely over the last couple of years, still kind of involved in your company at all? Like how can we understand kind of OldCo and NewCo, just understanding that is this kind of a new company, a new stage, obviously, some of the management have been the same, but is there any kind of fresh moves on the board and just a sense how we're going into the...

There hasn't been any new member to the board. I think you can tell by -- as you may know we had a lot of governance around investigations and things like that. I think that center newer to the story, and I certainly appreciate the dynamics around FRG. But BW which you spoke of was not a dissimilar situation. That's a 20-year relationship with the management team and that company, obviously, with our help and with the number that the management team has really ended up having great returns for us. And so you're balancing things that you've done in the past and things -- and the way you're going to look in the future and what is best for the business.

And I think that certainly, we have -- Scott Yessner is here, and we've implemented I think the proper amount of procedures, and I think our Board is incredibly additive and we have a new auditor, which we're very thankful for. And so I wouldn't -- I think that's how I'd answer it. I think I feel good about the procedures we have in place and balancing the opportunities with creating the right environment for everyone. And I think the disclosures we're providing, that Scott is providing is more and more, and we're trying to walk the right line between thinking about the dynamic of an FRG, but also realizing that a lot of the opportunities we have in front of us are going to be -- we need to take advantage of. So Tom or Scott...

Yes, that's very helpful. And I appreciate it. I just would note that obviously, like a situation like Babcock is just now such a meaningful part of the situation where in the past, like obviously, FRG ended up being a very significant part of the story, obviously, not comparing the 2, but just in terms of like as a percentage of your value and assets is something cognizant from the ex markets in terms of people that invest with you, obviously, that's the more diversified you could be, I think, the better. And then the last question I had would be, is there any update on liquidity or maybe your cash position or something you could provide to us as of 3/31 or post those transactions we did in post the bond pay down that was -- that took place at the end March, I guess now.

Yes. So I mean, we're going to be back on the phone, hopefully, in 5 weeks, right? I think maybe my [ otters ] are listening. So that's absolutely a hope or 4 or 5 weeks. So we'll get back to -- we're not providing guidance right now. So hopefully, we...

[Operator Instructions]

I think, operator, I think we're good. Thank You. Just before we go, I'll just speak personally as we've gone through this last couple of years and where we are and the momentum we have, and I'm just humbled by the team that we work with every day, and the new team members, it's been just an amazing experience to be able to be in a situation where you watch arms and you go and you battle and and we're seeing the rewards of that.

And I think that the people that have been fighting through it are seeing the rewards of that. So very thankful for this team, very thankful for for TK and Scott and everybody else from our team on the call, and we're excited to be able to have a quarterly earnings call that will be normal and normalized and have a regular cadence. So thank you very much, and we really appreciate everyone for joining.

This concludes today's Evercall. A replay will be made available shortly after today's call. Thank you, and have a great day.

Good day, and welcome to the Fiscal Year 2024 Preliminary Results (sic) [ Fiscal Year 2024 Results ] and a Preliminary Financial and Business Update for First Half 2025.

My name is Matthew, and I will be your Evercall moderator. [Operator Instructions]

At this time, I will turn the call over to Bryant Riley, Chairman, Co-Founder and Co-CEO of B. Riley Financial. You may now begin.

Thank you, and good afternoon. We appreciate everyone joining us. In the last 12 months, B. Riley has made significant progress with our strategy to realign our operating businesses towards Financial Services and Capital Markets, improve our capital structure and reduce our debt. Before I expand on these achievements, I would like to share a 2024 audit status update.

We are in the late stages of documenting the 2024 annual audit and we expect to file the 10-K shortly. Simultaneously, we have been documenting our first and second quarter 10-Qs, with both filings ready for auditor review after the 10-K filing. Scott will expand on our financial operations later in the call.

Before walking through the details, we need to first thank our coworkers who have labored tirelessly to deliver for our shareholders. This commitment has resonated and helped drive strong client retention. With their collective efforts, we have refocused our strategy on our Financial Services companies, supplemented by strong cash flows from our other subsidiaries, primarily Telecom.

We believe we are well positioned to deploy capital and leverage cash generation from our diversified operating company portfolio. We've strengthened our balance sheet through reducing debt, extending maturities and optimizing our capital structure.

With respect to our business realignment, the March 2025 carve-out of B. Riley Securities was an essential step in maximizing value for the stakeholders of B. Riley Financial. To date, the carve-out has exceeded our expectations, as highlighted in our recent public update. BRS has excelled despite constraints driven by our late filings. Its management team has experienced and dedicated professionals, operational autonomy and sufficient capital for growth as evidenced by its recent dividend. Since the carve-out, BRS has added to its talent base, recruiting important new hires in Investment Banking, Research and Capital Markets.

Transaction highlights include acting as lead bookrunner on an AI infrastructure company's $159 million IPO; joint lead placement agent on a fabless semiconductor's $384 million capital raise; the sole bookrunner for an Ethereum treasury company's $240 million equity raise across 2 transactions; and capital provider as part of a successful $150 million variable rate transaction for a digital infrastructure company. Since 1997, B. Riley has been a leader in small cap and middle market investment banking, research, trading, capital markets and financial advisory. It is well positioned with long-time leadership and capital to service clients.

Also in Financial Services, B. Riley Wealth is committed to having a world-class wealth platform to support our wealth advisers and clients and will seek increased efficiencies, further strengthening our overall realignment Financial Services foundation.

The sale of GA Group, formerly Great American, to Oaktree Funds provides significant strategic benefits supporting our transformation. The sale proceeds also generated cash to support our debt reduction plans. It partnered us with a large financial sponsor, enabling competitive access to larger liquidation deals while maintaining our capacity to participate as an equity and credit investor in future liquidation transactions.

Early benefits of this strategy were realized in February when GA Group won the liquidation of JOANN's, the largest retail liquidation in history by square foot. We are an equity participant in the JOANN liquidation deal, earning a realized investment gain of approximately $29 million as an equity investor. We expect to receive approximately $4 million of incremental profit in the coming months. With new financial owners, we are looking forward to GA Group's continued growth in liquidation and other businesses.

While completing our business realignment toward our Financial Services businesses, our nonfinancial services operating companies, Telecom and Consumer Products, are providing a diversified source of cash flow and business opportunity.

Our debt reduction strategy has led to significant progress, achieving a debt reduction from quarter-end September '24 of approximately $600 million through investment and asset sales, our amended credit facility with Oaktree and bond exchanges. Net debt ranges from $809 million to $839 million as of June 30, 2025.

The investment sales, business exits and divestitures include selling GlassRatner for $117.8 million. And in March, we announced the sale of our investment in Atlantic Coast Recycling for approximately $70 million in cash proceeds. As mentioned in April, we've completed the divestiture of B. Riley's W-2 Wealth Management business to Stifel Financial Corporation for approximately $25 million. As I described earlier, in the fourth quarter of 2024, we divested 53% of Great American, now GA Group.

Also, we improved our capital structure in February 2025 when we secured a $160 million senior secured facility with Oaktree Capital Management, which we used to retire outstanding senior secured credit facility with Nomura, invest in the JOANN transaction and provide additional working capital.

Approximately 4 months later, we have reduced our outstanding balance of $62.5 million, positioning us to negotiate an amended senior secured facility with Oaktree that provides a substantial increase in operational flexibility. New terms include a new investment basket, enabling us an incremental $100 million to facilitate transactions using our balance sheet, a $30 million investment basket for parent company investments, upsized from $20 million.

Lastly, bond exchanges have been an important strategy to reducing our outstanding debt. Since March 2025, we have executed 5 bond exchanges, reducing total outstanding debt by approximately $126 million. Additionally, in February 2025, the company fully redeemed its February 2025 senior notes at 100% of their principal amount.

As a result of our activities, cash at June 30, 2025 is over $260 million. We will leverage cash to support our business and clients while also funding debt reduction plans.

I would now like to turn the call over to my co-CEO, Tom Kelleher, for some additional context around a few operational items.

Thanks, Bryant. First, regarding B. Riley Securities. Due to the long operating history and the longevity of the workforce, the carve-out has progressed very smoothly. In addition, the transaction afforded us the opportunity to methodically review all parts of the business, which not only helped in the transition but also allowed us to tweak certain operations and drive efficiencies.

In Wealth, here again, the carve-out of a portion of the business to Stifel went well. As it took a number of months to clear regulatory hurdles, it provided plenty of time to plan and execute the transaction. It's worth noting here that the group has undertaken 2 material projects in 2025 that will further streamline operations and reduce costs. The first is the consolidation of our 2 principal clearing arrangements under Fidelity, as well as the installation of a new commission system.

The Telecom group continues to enjoy an effective business model with steady cash flow generation. We continue to leverage our India team to normalize and streamline operations, and recently initiated an $80 million refinancing with current lender Banc of California with additional capacity to upsize.

Targus has faced a prolonged down market, notably broader macro consumer electronic headwinds and tariff uncertainties, which is putting pressure on all parts of its business. Management is navigating the headwinds well, rationalizing expenses and maintaining lean inventory levels.

With respect to Great American and GlassRatner, the transition services agreement, or TSA, that we had with Great American is soon to be completed. And we just began another 1 with GlassRatner that is scheduled to be completed by year-end.

Real estate has been a focus. Half of our larger offices have been sublet or exited via divestiture or normal expirations. We will continue to assess our office footprint as our needs evolve. We are also actively reviewing our systems, identifying consolidation opportunities as they emerge.

One final note, like many companies, we have progressed in our utilization of AI. We are actively engaged in identifying and deploying safe, enterprise-wide AI tools to increase productivity and expand capabilities.

Our substantial accomplishments reflect the collective skill and commitment of our team. This strength resonates with our clients, driving strong client retention. Serving clients and stakeholders is the core mission of our business at every level.

With that, I'd like to turn it over to our new CFO, Scott Yessner. Scott?

Thank you, Tom. I would like to provide an update on our financial operations.

The 2024 audit and 10-K filing is very large and complex. The 10-K has been complicated by a fast-evolving operating environment, including the divestitures of several operating companies and investments, requiring significant transaction support and transition services agreements. Further, the process was impacted by our auditor's sale to CBIZ, causing them to pause work for 6 weeks.

These factors placed our financial operations on a continual track of work outstripping our determined team's capacity. In early July, we hired a national accounting advisory firm to staff-augment our team with technical accounting, financial operations, documentation construction, GAAP and internal control support. The firm will remain engaged through the 2025 annual audit and 10-K.

With the additional staff, we have been documenting our 1Q and 2Q 10-Qs during the 2024 audit, with both filings ready for auditor review after the 10-K filing. We'll plan for the audit to require 30 to 45 days to complete the interim reviews of both 10-Qs. We expect the third quarter filing will be on a normal quarterly schedule and filed timely.

The next item that I would like to provide an update on is our investment portfolio. Our investment portfolio is estimated to be $320 million to $355 million at June 30, 2025, which is lower by approximately $75 million to $106 million from 12/31. The decline was driven by $48 million in debt paydowns, $66 million in investment position sales and an $8 million increase in fair value marks. The portfolio consists of equity and debt structures with varying levels of liquidity.

At this time, with our high level of cash, we intend to optimize investment portfolio financial performance, exiting positions when market timing is appropriate or when paid off in the case of debt instruments. We are prioritizing capital markets clients for our operating and investment capital. As opportunities to improve our capital structure and debt maturities arrive, we will adjust the investment portfolio.

Next, I would like to walk through our financial performance in the first half of 2025. We are estimating first half 2025 net income available to common shareholders to be in the range of $125 million to $145 million, despite our operating companies being constrained by our 10-K filing delay.

The first half estimated results were driven by gains on sale of $159 million comprised of $53 million for Atlantic Recycling, $68 for GlassRatner and multiple other sale gains of $38 million. Additionally, we had a $29 million gain on equity participation in the JOANN liquidation and a $39 million net gain on bond retirements from the bond exchange program net of the Nomura facility termination fees. Our operating companies are estimated to perform at about a combined breakeven in the first half of 2025.

Finally, our corporate interest expense and other expenses had a total estimated cost of $102 million. Our operating company segments at 6/30 are Capital Markets, Wealth, Telecom, Consumer Products, with Corporate completing the group. We'll have disclosures on segment performance with our first quarter and second quarter 10-Q filings.

The GA Group, formerly Great American, is booked as an investment now, which is not consolidated nor a business segment post the sale in late 2024. Equity and/or credit investments in the GA Group liquidations by B. Riley Financial directly will be booked in the Capital Markets segment.

Next, with respect to debt and capital structure, Bryant highlighted the significant progress in lowering our net debt, which is estimated to range between $809 million to $839 million as of 6/30. As we evaluate our cash, investments and other resources, we have sufficient cash and capital to fund our clients' needs and business operations while also servicing our debt over the next 12 months.

The bond exchange program has been an important lever in reducing our debt. We have capacity to execute more bond exchanges and remain active in the program. The Oaktree facility and bond exchange program are examples of how we will explore options to lower our debt and improve our capital structure. Lastly, we are pursuing additional tactics to enhance financial operations, and we'll provide an update shortly.

Thank you for your time today. I joined B. Riley in June after 2 months working for the firm as an adviser because I can see the great opportunity ahead B. Riley Financial and to work with an incredibly talented team. I'm looking forward to updating the results in the next earnings call.

I'll turn the call back to the operator for Q&A.

[Operator Instructions] Our first question comes from Griffin with Owl Creek Asset Management.

Congratulations on the progress you've made here. Well done. I have a few questions. So I guess the first 2 pertain to the filing of the financials. The first would be, if you can kind of elaborate on the main cause for the delay in the 10-K filing for B. Riley Financial. And the second would be, when do they expect the financials for B. Riley Securities to be public?

Scott, you want to answer that one?

Yes, absolutely. Thank you so much for the question, Griffin. Yes, so as highlighted in my script, there's multiple -- a complex of events that have driven the delays in our 10-K. We have a very, very complex operating environment with all the changes we've made at the firm. And that's led into a very large and complex 10-K filing. It will be -- it's probably going to be over 200 pages. And that amount of documentation, along with some other things that have created delays, we've sort of gotten in this continual process of fighting uphill.

We have an incredibly and talented team here, very sophisticated and knowledgeable and -- but the demands and requirements on our team with all these complexities sort of outstripped the incredible will and determination the group has. So we added that staffing firm that I mentioned in my remarks to help the team that -- it's important for our companies and our shareholders and stakeholders for us to get timely in our filings. We also needed to support our team and auditor with resources that can pull us forward.

So we're -- with those things and understanding how complex it is, we have -- we're very close to, we're in the final stages of documenting our 10-K. I can't be specific to the date. I can only describe it as shortly. And we're all motivated to get the 10-K done as soon as possible. So I hope those comments have helped you understand where we're at.

I think I just would also add that we have the view that we also needed to -- to get ourselves caught up and to be on time, we were going to have to work simultaneously on the 10-K and our 1Q and 2Q. And so in addition to the staffing firm elements around the 10-K, we needed to bolster ourselves to do essentially 3 filings' worth of work in a very compressed amount of time.

And we believe that strategy is yielding very favorable results for the company. By the time the 10-K is filed, we should have our 1Q and 2Q documented so we can start the review process with our auditors. And they're going to need time to do their interim review. And then ultimately, by having this enhanced capacity at the firm to process our financial operations, we'll get ourselves on track to be on time with the Q3 filing.

Okay. Great. And then the second part was just, when will the financials for B. Riley Securities be public, the entity that you've carved out?

So that's a live kind of decision. Right now, as you know, we own 90% and employees own 10%. They gave an update on their business 2 weeks ago to demonstrate the momentum. I think I mentioned in my script that that momentum -- or that performance has been higher than we expected, better than we expected. And there's an opportunity there to, I think, create value for BRF and BRS shareholders. But that decision is not something we're going to update right now.

Okay. Understood. So I have 2 more questions. So I guess you've got a set of bond maturities coming up in '26. What are the different levers that you're contemplating using to help refinance these upcoming maturities? And I guess what would be the time frame to deal with each issuance? Or are you considering something more holistic?

Yes. I would say, Griffin, we're obviously -- we've been very active in the last 9 months. Things that we utilized to help pay down debt were not expected a year ago. We did not expect to make $29 million in JOANN Fabrics, for example. And some of the bond swaps have been stronger than we expected, and there's other opportunities obviously there, as Scott mentioned. And generating cash solves a lot of problems.

So I'm not going to get into specifics on our strategies. We feel very confident. I think we've done a pretty good job of managing a difficult situation in '24 and coming out of it focused and with a lot of cash to be able to generate revenues and for our BD. And I feel really confident we will resolve that over the course of the next 12 months. But I can't get into any details.

[Operator Instructions] This concludes the Q&A. Handing it back to Bryant Riley for any final remarks.

Great. Thank you, operator. Scott, welcome. Really appreciate all the effort that's gone on, as you had mentioned, in this complex audit. To our team, I think what we've demonstrated is that we are coming out of this stronger. We're seeing more and more momentum, particularly at BRS, and look forward to reporting on that momentum over the course of the next year.

Thank you, everybody, for your time. Thank you to our employees and thank you to our counterparties for being so supportive. We are excited for the next year. Thank you.

This concludes today's Evercall. Thank you, and have a great day.