管理層發言
Good day, and welcome to the BRC Group Holdings, Inc. First Quarter 2026 Earnings Call. My name is Isabelle, and I will be your moderator. The format of the call includes prepared remarks from the company followed by a question-and-answer session. Operator instructions were provided. 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 about 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 three points: our first quarter execution, our strategic path forward and our ongoing commitment to our core franchise. During the quarter, our team executed against two 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 five years. During the quarter, we executed on nearly $10 billion in total debt and equity raises for clients. We acted as joint lead bookrunner on WhiteFiber's $230 million convert, participated in a $1.3 billion 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 three decades, we've intentionally built our business based on a commitment to be an active, dedicated advisory and liquidity partner 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, Thomas Kelleher, 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 two years. Targus continues to stabilize its 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 two weeks, we will host our 26th Annual Investor Conference at the Ritz-Carlton in Marina del Rey. 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 three 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 were $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 four 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, 2026 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 two 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.
分析師問答
Operator instructions were provided. 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 can you kind of elaborate on your philosophy for 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 have 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 that are in the best interest of the shareholders and the bondholders. So there's not a 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 one-time 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. Early on, we're focusing in on the client side and the connectivity between the wealth and the retail side and the institutional part of the business. So that client focus and that connectivity is the top part as we, in the back office, 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 timeline 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 directionally that there's a lot of opportunity in OpEx. I understand that that's not as easily calculable into a model. But in the future quarters, when we start realizing those and have more dimension, Bryant can share more specifics.
Got it. And then just lastly, 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 increasing coverage for existing hires?
So I'm going to be candid — I don't have that number handy, but a general thesis: the world is much more efficient given all the capabilities, everything from AI. The ability to gather information and to analyze it is materially faster. I think a research analyst 12 years ago might have covered 12 to 15 companies per analyst. Today, getting to 25 is feasible. You don't have to download every 10-K and 10-Q manually and make your analysis slower. Yes, I think 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 walk through the rationale of buying back the minority stake of B. Riley Securities? 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 help us understand the rationale behind that? Also, one of the statements you made — which I thought was obviously great — is that you have seen the most deal activity in five years in BRS in terms of capital raising. 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 you're trying to regain market share with lower pricing? Or can you help us understand that dynamic? And lastly, 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 seeing the cadence of that recovery of former clients returning?
Yes. I think we laid that out when we made the announcement. When we carved that out, it was a different time. 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 for circling and ring-fencing it. 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. For example, BRS had a lot of money at money market rates as a broker-dealer while at the corporate level we were utilizing money at much higher rates. There are also operating synergies. We still think that business could be easily separated if we needed to do that or if somebody came along and determined it was worth the value we thought it was worth. But in the near term, from a cost-of-capital perspective and from an operating efficiencies perspective, we felt like recombining was the right thing to do. Tom or Scott, anything you want to add to that?
Yes. I would just say, again, a year ago, two years ago, it was a different landscape. A big part of the reason for the carve-out was optionality. That's one of our focuses here: to make sure we're in the right position to take advantage of whatever situation we find ourselves in. We went down that road. A year later, a year and a half 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 the way it was.
So can I infer that, excluding a sale of BRS, you think you have all the solutions necessary in-house to solve the issues?
Yes.
Got it. And on the deal activity: if you are getting more mandates, why isn't that showing up more materially in the revenue numbers? Is that because your role on deals is smaller and you're trying to regain market share with lower pricing, or is there another explanation?
So yes: positioning on deals matters a lot. If we are 30% of a deal, that's obviously a lot more valuable than 5% of a deal. Over the period when there was a lot of noise around the company, those percentages on deals shrank and we lost economics. Ideally, we would rather hold a meaningful percentage and capture more economics. I think this speaks to our position and the value we provide to companies and to the markets. As we've been playing with one hand behind our back — having to get our financials current and spending a lot of time on that — now that we are in a completely different position, I would expect our percentages of those deals will go up meaningfully. That is the goal.
Okay. And on the delinquent filer issue, have you seen former clients come back, and how quickly is that recovery happening?
Yes, it's been strong. We measure it weekly. We have seen a lot of onboarding of accounts again. It was a big deal for some of the bigger institutions that just check a box; that box was 'we're delinquent, so let's cut them off for now.' The reversal of that has 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 really feels good to report on the seventh and have a normal cadence. Now we get to go after some of these operating costs that were one-time 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 to get the financials done. I'm super thankful. 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. 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 call. A replay will be made available shortly after today's call. Thank you, and have a great day.