Prepared remarks
Good morning, and welcome to the B. Riley Financial Preliminary Fourth Quarter Earnings Results Conference Call. My name is Tom, and I will be your call coordinator. Earlier today, B. Riley issued a press release announcing our preliminary results for the fourth quarter of 2024, which can be found on its Investor Relations website at ir.brileyfin.com. Today's call includes prepared remarks from the company followed by a question-and-answer session. Joining us today from B. Riley are Bryant Riley, Chairman, Co-Founder and Co-CEO; Tom Kelleher, Co-Founder and Co-CEO; and Phillip Ahn, CFO and COO. As a reminder, this call is being recorded, and an audio replay will be available on the company's Investor Relations website later today. Today's call will also include non-GAAP measures. The reconciliations for these as well as an explanation for the use of these metrics and the definition of these terms is available in the press release, which is available on the company's Investor Relations website. And before we conclude today's call, I will provide the necessary cautions regarding forward-looking statements. Now I will turn the call over to Mr. Bryant Riley. Mr. Riley, please proceed.
Thank you, and good afternoon, everyone, on today's call. We appreciate everyone joining us. I want to start by expressing my appreciation for your patience as we work towards becoming current with our financials and regain NASDAQ Listing Compliance. And while we still need to finalize our fourth quarter results and file our Annual Report for 2024, we wanted to provide investors with a brief update as to where things currently stand and our priorities for the year. Given the substantial number of strategic initiatives we've undertaken, including several transactions, we thought it would be helpful to start with a recap of the actions we've taken since the start of the fourth quarter and an overview of where our business is today. The common thread across all of these actions is our responsiveness to the challenges created by certain principal investments. These losses have been recognized, and while there is still work to do, we are moving forward with a stronger balance sheet and capacity to reinvest in our core businesses.
Let me touch on a few notable developments. First, we established a joint venture with Oaktree Capital Management for Great American Group. Under the terms of this transaction, we contributed all of the interest on B. Riley's appraisal and valuation services, retail, wholesale and industrial solutions, and real estate advisory businesses to a new holding company. At closing, B. Riley received total consideration consisting of approximately $203 million in cash plus ownership interest amounting to approximately 44% of the company. In effect, we sold a majority stake in these businesses, which provided substantial capital to meaningfully delever our balance sheet while still retaining significant equity upside in a business with compelling growth prospects. Critical to our thinking with this transaction is that there are now two firms with a vested interest in seeing that GA will continue to thrive.
We believe Oaktree's scale, expertise in alternative investments, and the strength of a capital provider, combined with the GA Group's leading position as a provider of asset disposition, financial advisory and real estate advisory services will prove complementary as we join forces to deliver financial products and services to better serve our clients. We've already seen the benefits of this partnership with last week's successful bid in a competitive bankruptcy process to manage the liquidation of all 800-plus JOANN fabric and craft stores. This liquidation, which includes approximately $2 billion in retail inventory, represents one of the largest transactions in GA Group's 40-year history. Had we not established this joint venture, it is unlikely we would have secured this opportunity, which we expect to be meaningful to the shareholders of B. Riley. I can safely say that the initial results are exceeding our expectations.
Given the relationship and our involvement, B. Riley was able to participate in the transaction as a strategic investor and loan in the joint venture overseeing a liquidation. We invested approximately $30 million and expect to make a sizable return on the short-duration investment. Second, we received approximately $236 million in gross proceeds through the financing of our brand assets, including BB. Third, we announced the signing of a definitive agreement to sell a portion of our traditional W-2 Wealth Management business to Stifel Financial Corp. The transaction does not include B. Riley's approximately 170 independent advisers and 81 W-2 advisers and tax professionals with assets under management of $15 billion. Subject to the terms of the agreement, the final consideration will be based on the number of advisers that joined Stifel at closing. At this time, we expect that cash consideration will be approximately $26 million, but it is subject to change.
We expect the transaction will close early in the second quarter of this year. Fourth, we completed the full redemption of our February 2025 senior notes through February 28, thereby retiring our only significant 2025 maturity. Fifth, last week, we announced a new $160 million senior secured credit facility with Oaktree. We use this facility to retire outstanding senior security credit facility with Nomura, providing working capital and to fund the previously mentioned investment loan in JOANN liquidation. This new three-year facility provides us with greater financial and strategic flexibility than we had under our previous loan with Nomura. And lastly, just this afternoon, we announced the sale and close of Atlantic Coast Recycling for approximately $70 million in cash proceeds. Our total investment was approximately $39 million, and we expect to record a gain of about $30 million in the first quarter.
This was a successful deal made by our principal investment team a few years ago. However, in light of our stated goal to reinvest in our core business, we continue to look for opportunities to monetize states and investments that are no longer core to our future growth plans. With this in mind, we will continue to look to monetize other non-core assets on our balance sheet as opportunities arise in the normal course of business. This will go a long way to further strengthening our balance sheet and providing the necessary foundation for renewed growth. So where does that leave us today? We expect to emerge from this period of asset monetization and debt reduction as a more nimble and focused company, concentrating predominantly on our leading middle market investment bank B. Riley Securities, Wealth Management, and our advisory services businesses, including our 44% ownership of Great American.
Those core businesses are supplemented by our other investments like telecom and our communications segment, which provides steady cash flow and EBITDA. Let me run through each briefly, starting with B. Riley Securities. B. Riley Securities is uniquely positioned as the top provider to the middle market segment. This group consists of a brokerage capital markets and advisory business with approximately 180 employees spread across key offices. The key leadership of these units have remained in place despite the headwinds of the past year. Despite the noise, the broker-dealer ended the year with a strong December, and we are well positioned to invest resources to grow the team over the coming quarters. As a reminder, in a normalized environment, this is a business that can produce substantial operating EBITDA as detailed at our December 2023 Investor Day. At that time, we shared that B. Riley Securities produced $72 million and $84 million in operating adjusted EBITDA in 2022 and the trailing 12-month period, respectively.
I'm not implying we'll cover to those levels this year, but this is a business we strongly believe is capable of recovering to and eclipsing these levels in the near future. The team leading this business has spent over 20 years establishing our middle-market credibility. They've outworked and outperformed the competition consistently. It's really a testament to the talent they've gathered and the culture they've built, one focused on placing the interests of our clients and our teammates ahead of their own. We continue to explore other strategic opportunities to further unlock value within this business and hope to share additional news in the near future. Turning to B. Riley Wealth, which is stable following the announced transaction with Stifel. This transaction provides an opportunity for W-2 employees who wanted a fresh start to transition to a new owner, with the sale expected to be completed in the early part of the second quarter of this year.
Following the sale, we will retain a core group of approximately 170 independent advisers and 81 W-2 advisers and 90 tax professionals. We believe there are substantial benefits and synergies to maintaining a wealth management business in our portfolio and expect this group to manage approximately $15 billion in client assets. The leadership of this business has done a tremendous job managing it and has remained profitable. These two businesses are supplemented by our advisory services business, otherwise known as GlassRatner. This business continues to perform well across its core expertise in bankruptcy and turnaround management, forensic accounting, litigation support, and financial due diligence and it had a record year in 2024. We have seen consistent growth in this business, which remains well-positioned in the specialized industry. Before I turn it over to Phil to provide a brief update on our financials, I'd like to address the outstanding take-private proposal I put forward in August, in my capacity as a shareholder of the company.
This afternoon, I have communicated to my Board that I no longer propose to take B. Riley Financial Private. There were a few key factors that went into this decision. One, there remains substantial potential in our business, and the steps we've taken to improve our balance sheet, I believe shareholders, many of which are employees should have an opportunity to participate in this recovery. We have recognized significant losses in our principal investment portfolio, and I want our shareholders to realize the benefit of our business going forward. And two, our debt structure, notably remaining baby bonds, complicated how a take-private could proceed at this time. Instead, I believe there are alternative ways of addressing our outstanding debt maturities as a public company while limiting dilution. While there are ways we could pursue to take private after careful consideration, I determined it was not the best course of action given other priorities of the company. With that, I'd like to turn it over to Phil to provide a brief update on our financials on our preliminary Q4 results.
Thanks, Bryant. As you saw in our press release, we released preliminary estimates of financial results for the fourth quarter ending December 31, 2024. As a reminder, these numbers are unaudited and subject to change. For the fourth quarter, we expect to report net income available to common shareholders of $48 million to $68 million, which includes approximately $236 million to $247 million of income from discontinued operations, primarily related to the divestiture of a majority interest in the Great American businesses. Diluted net income per common share is expected to be $1.57 to $2.22 per share and net loss from continuing operations of $178 million to $187 million. This net loss is primarily impacted by estimated impairment charges of goodwill and intangible assets of $73 million to $79 million and $49 million of trading losses and realized and unrealized losses on investments. Additionally, we expect operating adjusted EBITDA from continuing operations to be $12 million to $14 million.
As of the end of December 31, 2024, we had cash, cash equivalents, and restricted cash of approximately $257 million, which included approximately $156 million of cash and cash equivalents and $101 million of restricted cash primarily reserved for the redemption of the company's February 2025 senior notes. We had total debt of $1.78 billion as of December 31, 2024, and total debt, net of cash and investments of approximately $991 million. Notably, this represented a decline of $221 million from the third quarter. And finally, I'd note that as an accelerated filer, our deadline for filing our 10-K this year is March 17. If we are unable to file the 10-K at that time, we would expect to file a Form 12b-25 with the SEC to receive a 15-day extension. After we file the 10-K, we expect to resume our normal quarterly filing cadence. With that, I'll turn the call back to the operator for Q&A.
Questions and answers
Thank you, team. Ladies and gentlemen, we will now begin the question-and-answer session. Our first question comes from Amer with Imperial Capital. Your line is open.
Thank you. Good evening. Thank you for the detailed summary of the transactions that you have accomplished. My question is, can you give us a sense of what you intend to accomplish in the next six months to sort of beef up liquidity and the balance sheet?
Our strategies are adaptable, with one key exception: we are at a pivotal point in transitioning from past operations to current practices. Our primary emphasis is on investing in our business, particularly in our broker-dealer, wealth management, and advisory sectors to foster growth. I acknowledge that we have several baby bonds outstanding, and we are committed to ensuring our balance sheet remains solid. Over the past year, we have made significant progress. For instance, we recently sold Atlantic Recycling for $70 million. Moving forward, we will remain opportunistic while primarily focusing on our business investments.
Can you provide some insight into your core business? You mentioned that it includes the BRS business, Wealth Management, and Advisory. How should we consider these on a run-rate basis? Specifically, I'm trying to understand if EBITDA will be positive or if these businesses will generate free cash flow in the next quarter or for the entire year of 2025.
Sure. The best way to assess this is to look back at 2021, 2022, and 2023. The only segment we are missing from our core business, which wasn't a core focus but did contribute $40 million in EBITDA, is our brands business. We sold 57% of our Great American business, and as expected, there have been other opportunities with that joint venture that could help offset some of the direct cash flow loss. I mentioned the direct equity investment in JOANN and other lending opportunities as examples. Our balance sheet and cash reserves for debt investment are smaller now, and the wealth management business has also decreased slightly. Our broker-dealer has been with us for 27 years, and our telecom business remains steady, as reflected in the historical EBITDA. GlassRatner had a record year this year. Overall, we are indeed a smaller company than we were, having utilized significant funds to reduce our debt, and the principal investments have impacted us. However, we remain enthusiastic about the operating EBITDA potential of our core portfolio. While I won't share specific numbers, I can discuss our past performance or provide details on our Investor Day, where we outlined our business. We need to actively pursue opportunities, generate revenue, and get back on track with the operational side of the business.
Sure. Maybe if I can sneak in 1 more, and then I'll get back in the queue. You have a pretty asset-rich balance sheet. Still, you mentioned you have GlassRatner, you have the telecom businesses, targets. Can you talk about what you think or how we should think about the value of those businesses and the EBITDA generation potential? If you can just shed some light on that.
So again, I'm not going to speculate on multiples. Firstly, secondly, the operating businesses that we have at this time might be different than a year from now or a year ago. Our focus is on investing in those operating businesses and growing those operating businesses and going back to where we were without the noise and the distraction of some ill-timed investments. And so I appreciate that the goal is to kind of walk through a sum of the parts. But I think right now, based on where we are, which is not a normalized environment still. Having said that, staying profitable on our wealth management business, still generating meaningful EBITDA at the broker-dealer, having a record year of GlassRatner, and having a record year at Great American Telecom is still doing its thing. I think that we have an unbelievable base and group to build on. We've taken some hits. I readily acknowledge that. But I think it's our job to make sure that our clients or companies that we work with understand that this is the same B. Riley Financial that they were working with before and that we are getting our financials current and it's go time for us. And so that's how I would answer that.
Okay. Can I sneak one more in, actually?
Sneak.
Okay. Sure. So you guys recently refiled the Nomura facility. You have the Oaktree facility in place now. As cash comes in, for instance, from this sale that you announced and whatever cash is on the balance sheet. Do you guys have the ability to buy back debt under this new credit agreement?
No. The senior facility, they are clearly, I think most senior facilities, and not all, but at this point, we do not have the ability to buy bonds in the open market.
Understood, I’ll get back in the queue.
Thank you for your questions.
Thank you, Amer. Our next question comes from Sean. Sean, your line is open.
Hi, Bryant. It’s Sean Hayden. How are you?
I'm good. We are here. It's good to hear from you.
Yes. Yes. It's been a little while. So a quick question for you on wealth. What does that business look like now? I'm just trying to get a sense of the kind of proportionality of the business you sold and what you held on to.
The vast majority were W-2 employees. So I think I outlined the numbers in my presentation regarding the remaining wealth management group. But just to put it in perspective, assets under management before these sales and some attrition were closer to $24 billion, and now it's closer to $15 billion. So that should give you some perspective.
Got it. Okay. Yes, that's helpful. And then just as far as further asset monetization. Is it safe to say most of that will be coming from the Principal Investment Group going forward?
I've been very careful about monetizing what I consider non-core assets. Selling those brands at the price we did was a challenging decision, but we needed to act based on how we could reinvest that money. If you can sell something for $1 and potentially bring back $2, that's the choice you have to make. I don't believe we're in that situation now. We can be more selective and thoughtful. While I'm aware of upcoming financial obligations in '26 and '28, our priority is to grow our businesses and return to our previous status, focusing on maintaining stability in the process.
Got it. All right. Well, that's all for me. And best of luck with everything. Thanks.
I appreciate it. Thank you.
Thank you, Sean. It seems there are currently no more questions. I'll now turn it back to Bryant Riley for any closing comments.
All right. Well, thank you. In closing, I want to again thank all our employees, shareholders, and partners for their patience and support in seeing through what has been a difficult period for our firm. I want to reinforce that the fourth quarter represented an important strategic line of demarcation, one of which our non-core principal investments have largely been monetized or written down, allowing us to focus on what we've done best for 28 years: being the go-to partner for small cap companies and those who invest in them. While we still have work to do, I am excited to turn the corner, and I look forward to announcing more of our plans in the near future. Thank you.
Thank you, team. Ladies and gentlemen, before we conclude today's call, I’d like to provide B. Riley's financial Safe Harbor statement, which includes important cautions regarding forward-looking statements made during this call. Statements made during this call that are not descriptions of historical facts are forward-looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of today's date. Such forward-looking statements include, but are not limited to, those regarding the expected growth and recovery of our business segments, our efforts to monetize non-core assets and the review of our operating and capital structure.
Factors that could cause such actual results to differ materially from those contemplated or implied by such forward-looking statements include, without limitation, the risks described from time to time in B. Riley Financial, Inc.'s periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2023, under the captions Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations. Additional information will be set forth in B. Riley Financial's Quarterly Report on Form 10-Q for the three-month period ended September 30, 2024. These factors should be considered carefully, and participants are cautioned not to place undue reliance on such forward-looking statements. All information is current as of today's call, and B. Riley Financial undertakes no duty to update this information. Thank you for joining us for today's call. You may now disconnect.