Investment portfolio losses and strong operating revenues were among results highlighted in B. Riley Financial’s fourth-quarter and full-year results, which detailed the impact of a challenging capital markets environment on the financial services company.
“Throughout 2022, we continue to execute our strategy amid a tough environment with markets taking back the investment gains we saw in 2021, contributing to a net loss of $168 million for the year,” B. Riley Co-Chief Executive Bryant Riley said in a recent earnings call. “Despite the marks in our investment portfolio, we delivered operating revenues of $1.3 billion in 2022, which is close to where we were at the end of 2021 during the record year that produced operating revenues of $1.4 billion.”
Riley noted that over the course of the last two years, B. Riley’s income and losses were largely influenced by its “effectively flat” investment book.
The firm experienced investment losses of $124 million for the quarter and $404 million for the year. The numbers, according to B. Riley, primarily reflected broad market declines and mark-to-market losses in the company’s equities portfolio.
Mark-to-market losses are losses generated through accounting entries rather than the actual sale of a security.
Such losses occur when things such as stocks and bonds held by a company are valued at the current market value, according to Investopedia.
B. Riley’s total revenues clocked in at $327 million for the quarter and $916 million for the full year.
The company reclassified its segment-reporting structure during the fourth quarter, outlining wealth management, auction and liquidation, financial consulting, communications and consumer.
The firm’s communications segment revenues reached $236 million for the year, followed closely by wealth management, which brought in $234 million.
The new consumer segment includes the company’s previously reported brands segment, which historically represented licensing revenues of six portfolio brands and laptop accessory company Targus, which B. Riley acquired in the fourth quarter of last year. The transaction was valued at approximately $250 million on an enterprise value basis.
“Our consumer segment revenues increased to $171 million with segment income of $96 million for the year,” Phil Ahn, B. Riley’s chief financial officer and chief operating officer, said in the earnings call. “The significant increase was primarily due to the acquisition of Targus in the fourth quarter of 2022.”
B. Riley’s loan portfolio had 12 loans with a total sales value of $384 million at the end of the year, with approximately 95% of the portfolio represented by secured loans.
“As a general view, we believe that our loan portfolio, which is almost entirely fair valued by an outside valuation firm, provides a very attractive risk-adjusted return potential for us over the course of the year,” Riley said in the call, adding that his team is confident from an earnings power and liquidity perspective.
The company’s regular quarterly dividend of $1 per share will be paid to common stockholders around March 23 according to Ahn.
“And to our shareholders, we know we’re a somewhat difficult story, and we have some ups and downs,” Riley said in his final statement of the earnings call. “But overall, I think we performed, and we’re dedicated to continue to perform.”