B. Riley Financial Reports Fourth Quarter and Full Year 2018 Financial Results

Woodland Hills, California, UNITED STATES


Results in Line with Previously Released Estimates for Q4 and FY 2018
Reiterates Previous 2019 Guidance
Declares Regular Dividend of $0.08 Per Share

LOS ANGELES, March 05, 2019 (GLOBE NEWSWIRE) -- B. Riley Financial, Inc. (NASDAQ:RILY), a diversified financial services company which operates through several wholly-owned subsidiaries, announced results for the fourth quarter and full year ended December 31, 2018 and reiterated guidance for 2019.

Fourth Quarter 2018 Highlights

  • Revenues of $102.0 million compared to $110.2 million in the same year ago period
  • Adjusted EBITDA of $11.2 million
  • Net loss of $8.8 million or $0.34 per diluted share (included restructuring charge of $6.3 million)
  • Adjusted net income of $0.7 million, or $0.03 per diluted share

Full Year 2018 Highlights

  • Revenues rose to $423.0 million from $322.2 million in the same year ago period
  • Adjusted EBITDA of $89.6 million
  • Net income of $15.5 million or $0.58 per diluted share
  • Adjusted net income of $38.8 million, or $1.45 per diluted share

“2018 was another year of profitable growth for B. Riley Financial. Our results reflect positive momentum across our collection of businesses as we continue to develop and expand our platform of assets. We have worked extensively at organic growth in each of our divisions in addition to revenue and cost synergies as we continuously integrate our various operating subsidiaries. To that end, we successfully onboarded GlassRatner and magicJack in 2018 and look forward to growing earnings and cash flow in those businesses,” said Bryant Riley, Chairman and Co-CEO, B. Riley Financial. “Looking ahead, we believe our platform, in partnership with our strong and nimble balance sheet, will continue to generate attractive returns on our capital. We are particularly excited about the opportunities for Great American Group as store closings across the retail industry continue to be active. This is evidenced by recent engagements with Payless ShoeSource and Gymboree in addition to our expectation of realizing significant revenues from the completion of Bon-Ton Stores’ asset liquidation in our results for the first half of 2019. Our valuation and appraisal business continues to provide steady earnings and revenue growth which we expect to continue in 2019. Lastly, we will continue to use our balance sheet to support our clients and as an engine to drive outsized returns over a long period of time. While the volatility in financial markets dampened our fourth quarter results, we have seen a rebound in the first quarter of 2019 and we view this activity as both core to our business and attractively positioned as we look to the rest of 2019 and beyond. We believe the company is stronger than ever and we remain excited for the opportunities ahead.”

Fourth Quarter 2018 Financial Summary
For the three months ended December 31, 2018, total revenues were $102.0 million compared to $110.2 million for the same year ago period. Revenues in the Auction and Liquidation, Valuation and Appraisal, and Principal Investments segments increased $5.9 million, $2.8 million and $7.0 million respectively compared to the same year ago period. Revenues in the Capital Markets segment for the fourth quarter of 2018 were down partly as a result of declines in the Company’s proprietary investment account which were in line with declines in the broader equity markets in Q4 2018.

  • Capital Markets Segment: Revenues totaled $60.6 million for the fourth quarter of 2018 compared to $84.4 million for the same year ago period. Capital Markets segment revenues included mark-to-market losses during the quarter. Segment loss of $12.5 million included $1.1 million of impairment of intangible assets, and $4.8 million of severance and other restructuring costs related to the rebrand of B. Riley Wealth Management.
  • Auction and Liquidation Segment: Revenues increased to $10.1 million from $4.2 million for the same year ago period. Segment income increased to $2.3 million from $0.1 million for the same year ago period. Results for this segment are expected to vary from quarter-to-quarter and year-to-year due to the episodic nature of Great American Group’s retail liquidation engagements.
  • Valuation and Appraisal Segment: Revenues increased to $11.3 million from $8.5 million for the same year ago period. Segment income for the quarter increased to $3.4 million from $2.5 million for the same year ago period. Fourth quarter results represented record revenue growth for Great American Group Advisory & Valuation Services primarily driven by an increase in appraisal engagements.
  • Principal Investments Segment: Revenues increased to $20.0 million from $13.0 million for the same year ago period. Segment income increased to $5.7 million compared to $5.3 million for the same year ago period. Results for this segment were primarily driven by United Online and partially by magicJack which the Company acquired on November 14, 2018.

The Company recorded a loss of $8.8 million or $0.34 per diluted share during the fourth quarter of 2018. Results for the fourth quarter of 2018 included a restructuring charge of $6.3 million, which comprised of $1.1 million of impairment of intangible assets, and $5.2 million of severance and other restructuring charges primarily related to the rebrand of B. Riley Wealth Management. This compared to a loss of $6.1 million or $0.23 per diluted share for the fourth quarter of 2017. The loss in the fourth quarter of 2017 included a one-time tax expense of $13.1 million in a form of non-cash charge related to the U.S Tax Cuts and Jobs Act.

Adjusted EBITDA totaled $11.2 million for the fourth quarter of 2018 compared to $21.4 million for the same year ago period. Adjusted EBITDA includes earnings before taxes, interest, depreciation and amortization, share-based payments, fair value adjustments, insurance settlement recovery, restructuring costs and transaction-related and other costs. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term).

Adjusted net income totaled $0.7 million or $0.03 per diluted share for the fourth quarter of 2018. This compares to $11.6 million or $0.44 per diluted share for the fourth quarter of 2017. Adjusted net income excludes the impact of share-based payments, fair value adjustments, amortization of intangible assets, restructuring costs, insurance settlement recovery, transaction-related and other costs, tax impact of aforementioned adjustments and certain tax items. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term).

Full Year 2018 Financial Summary
Total revenues increased $100.8 million to $423.0 million for the full year 2018 from $322.2 million for the same year ago period. Results for 2018 included a full year of revenues for B. Riley FBR and B. Riley Wealth Management. All four segments recorded an increase in revenues in 2018.

  • Capital Markets Segment: Revenues increased to $275.1 million from $189.7 million for the same year ago period. Results were driven primarily by an increase in revenues from investment banking, wealth management services, and consulting fees as result of the acquisition of GlassRatner on August 1, 2018. Segment income for the year totaled $10.2 million compared to $15.9 million for the same year ago period.
  • Auction and Liquidation Segment: Revenues increased to $55.0 million from $47.4 million in the same year ago period. Segment income increased to $27.0 million from $11.2 million for the same year ago period. Results for this segment were primarily driven by the firm’s involvement in several significant retail liquidations.
  • Valuation and Appraisal Segment: Revenues increased to $38.7 million from $33.3 million in the same year ago period, representing another record year for Great American Group Advisory & Valuation Services. Segment income totaled $11.1 million compared to $9.7 million for the same year ago period.
  • Principal Investments Segment: Revenues increased to $54.2 million from $51.7 million for the same year ago period. Segment income totaled $19.4 million compared to $19.5 million for the same year ago period. The increase in revenue was primarily attributable to the addition of magicJack in the fourth quarter.

Net income for the full year 2018 increased to $15.5 million or $0.58 per diluted share from $11.6 million or $0.48 per diluted share for the same year ago period.

Adjusted EBITDA for the full year 2018 increased to $89.6 million compared to $69.8 million for the same year ago period. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term).

Adjusted net income for the full year 2018 increased to $38.8 million or $1.45 per diluted share. This compares to $38.5 million or $1.59 per diluted share for the same year ago period. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term).

As of December 31, 2018, B. Riley Financial had $179.4 million in unrestricted cash and cash equivalents, approximately $0.8 million in restricted cash, $37.7 million due from clearing brokers, $38.8 million of loans receivable, $236.0 million in net securities and other investments owned, and $540.5 million in total debt. Total B. Riley Financial stockholders’ equity at December 31, 2018 was $258.1 million.

Full Year 2019 Guidance
The Company reiterates its previously-released guidance for the full year 2019 and forecasts adjusted EBITDA to be in the range of $115 million to $135 million and net income in the range of $39 million to $45 million.

The above financial results exclude any historical or anticipated effects of the pending dispute regarding the Rent-a-Center Merger Agreement. For additional information, investors may refer to the Company’s Current Report on Form 8-K filed on January 4, 2019. An adverse result in the trial regarding the purported termination of the Rent-a-Center Merger Agreement may cause anticipated results for 2019 to differ materially from those contained in this press release. The Company can provide no assurance about the outcome of that trial or any related actions that may arise related to the purported termination of that merger agreement.

Declaration of Dividend
B. Riley Financial’s board of directors has approved a regular quarterly dividend of $0.08 per share, which will be paid on or about March 28, 2019 to stockholders of record as of March 19, 2019.

Conference Call
B. Riley Financial will host a conference call today at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). Bryant Riley, Chairman and Co-CEO; Tom Kelleher, Co-CEO; and Phillip Ahn, CFO and COO, will discuss the Company’s financial and operational results, followed by a question and answer period. The conference call will be broadcast simultaneously and available for replay via the Company's investor relations website. A replay of the call will be available on the site until March 12, 2019.

For more information, visit ir.brileyfin.com.

About B. Riley Financial, Inc. (NASDAQ:RILY)
B. Riley Financial, through its subsidiaries, provides collaborative financial services and solutions tailored to fit the capital raising and financial advisory needs of public and private companies and high net worth individuals. The Company operates through several wholly-owned subsidiaries, including B. Riley FBR, a full-service investment bank and institutional brokerage; Great American Group, a leading provider of asset disposition, appraisal, corporate advisory and valuation services; GlassRatner, a specialty financial advisory services and consulting firm; B. Riley Wealth Management, B. Riley Asset Management and B. Riley Alternatives, which offer investment management to institutional and high net worth investors; Great American Capital Partners, which originates and underwrites senior secured loans for asset-rich companies; and B. Riley Principal Investments, which invests in or acquires companies and assets with attractive return profiles.

Forward-Looking Statements
Statements in this press release 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 the date of this press release. Such forward looking statements include but are not limited to statements regarding the Company’s anticipated results of operations for 2018 and 2019 as well as express or implied statements regarding the outcome of the trial regarding the validity of Rent-A-Center's purported termination of the Merger Agreement. Due to the inherent uncertainties of litigation, we may not prevail in the upcoming trial or related actions. Moreover, both the costs of defending lawsuits and any settlements or judgments against us could materially adversely affect our anticipated results of operations and cash flows. Other factors that could adversely affect our operating results and cash flows include (without limitation) those 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, 2017 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 our Annual Report on Form 10-K for the year ended December 31, 2018. These factors should be considered carefully, and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and B. Riley Financial, Inc. undertakes no duty to update this information.

Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including adjusted net income and adjusted EBITDA, may be considered non-GAAP financial measures. B. Riley Financial believes this information is useful to investors because it provides a basis for measuring the Company's available capital resources, the operating performance of its business and its cash flow, excluding net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, insurance settlement recovery, transaction and other expenses, restructuring costs, and stock-based compensation that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP"). In addition, the Company's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company's operating performance, capital resources and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies.

Investor Contact
Investor Relations
ir@brileyfin.com 
(310) 966-1444

Media Contact
Jo Anne McCusker
jmccusker@brileyfin.com 
(646) 885-5425

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except par value)

             
        December 31, December 31,
        2018  2017 
        (Unaudited)
   
Assets      
Assets          
 Cash and cash equivalents  $ 179,440   $ 132,823 
 Restricted cash  838   19,711 
 Due from clearing brokers  37,738   31,479 
 Securities and other investments owned, at fair value  273,577   145,360 
 Securities borrowed  931,346   807,089 
 Accounts receivable, net  42,123   20,015 
 Due from related parties  1,729   5,689 
 Advances against customer contracts     5,208 
 Loans receivable  38,794    
 Prepaid expenses and other assets  79,477   22,605 
 Property and equipment, net  15,523   11,977 
 Goodwill    223,368   98,771 
 Other intangible assets, net  91,358   56,948 
 Deferred income taxes  42,399   29,229 
  Total assets  $ 1,957,710   $ 1,386,904 
Liabilities and Equity      
Liabilities         
 Accounts payable  $ 5,646   $ 2,650 
 Accrued expenses and other liabilities  108,662   71,685 
 Deferred revenue  69,066   3,141 
 Due to partners  2,428   1,578 
 Securities sold not yet purchased  37,623   28,291 
 Securities loaned  930,522   803,371 
 Mandatorily redeemable noncontrolling interests  4,633   4,478 
 Notes payable  1,550   2,243 
 Term loan    79,166    
 Senior notes payable  459,754   203,621 
  Total liabilities  1,699,050   1,121,058 
             
Commitments and contingencies      
B. Riley Financial, Inc. stockholders' equity:      
 Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued      
 Common stock, $0.0001 par value; 100,000,000 shares authorized; 26,603,355  2   2 
 and 26,569,462 issued and outstanding as of December 31, 2018 and       
 December 31, 2017, respectively      
 Additional paid-in capital  258,638   259,980 
 Retained earnings  1,579   6,582 
 Accumulated other comprehensive loss  (2,161)  (534)
  Total B. Riley Financial, Inc. stockholders' equity  258,058   266,030 
Noncontrolling interests  602   (184)
  Total equity  258,660   265,846 
   Total liabilities and equity  $ 1,957,710   $ 1,386,904 
             


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Operations
(Dollars in thousands, except share data)

                   
        Three Months Ended Year Ended 
        December 31, December 31,
        2018  2017  2018  2017 
         (Unaudited)  (Unaudited)  (Unaudited)   
Revenues:             
 Services and fees $92,569  $102,178  $390,555  $304,841   
 Interest income - Securities lending  8,962   7,913   31,798   17,028   
 Sale of goods  500   86   638   307   
  Total revenues  102,031   110,177   422,991   322,176   
Operating expenses:            
 Direct cost of services  17,847   9,277   51,580   55,501 
 Cost of goods sold  658   85   800   398 
 Selling, general and administrative expenses  77,079   80,172   293,682   213,008 
 Restructuring charge  6,259   890   8,506   12,374 
 Interest expense - Securities lending  6,722   5,536   23,039   12,051 
  Total operating expenses  108,565   95,960   377,607   293,332 
   Operating (loss) income  (6,534)  14,217   45,384   28,844 
Other income (expense):            
 Interest income  590   62   1,326   420 
 Income (loss) from equity investments  2,937   (280)  7,986   (437)
 Interest expense  (9,467)  (3,187)  (33,393)  (8,382)
  (Loss) income before income taxes  (12,474)  10,812   21,303   20,445 
Benefit from (provision for) income taxes  3,509   (16,263)  (4,903)  (8,510)
  Net (loss) income  (8,965)  (5,451)  16,400   11,935 
Net (loss) income attributable to noncontrolling interests  (160)  662   891   379 
  Net (loss) income attributable to B. Riley Financial, Inc. $(8,805) $(6,113) $15,509  $11,556 
                   
Basic (loss) income per share  $(0.34) $(0.23) $0.60  $0.50 
Diluted (loss) income per share  $(0.34) $(0.23) $0.58  $0.48 
                   
Weighted average basic shares outstanding  26,177,560   26,150,502   25,937,305   23,181,388 
Weighted average diluted shares outstanding  26,177,560   26,150,502   26,764,856   24,290,904 
                   


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
 (Dollars in thousands)

          
         Year Ended December 31,
         2018  2017 
          (Unaudited)   
Cash flows from operating activities:        
 Net income   $16,400  $11,935 
 Adjustments to reconcile net income to net cash used in operating activities:        
  Depreciation and amortization    13,809   11,140 
  Provision for doubtful accounts    1,308   1,066 
  Share-based compensation    13,042   10,341 
  Recovery of key man life insurance       (6,000)
  Non-cash interest and other    4,068   456 
  Effect of foreign currency on operations    (916)  (769)
  (Income) loss from equity investments    (7,986)  437 
  Deferred income taxes    1,990   5,729 
  Impairment of leaseholds and intangibles, lease loss accrual and loss on disposal of fixed assets    4,142   3,602 
  Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests    1,222   10,799 
  Change in operating assets and liabilities:        
   Due from clearing brokers    (6,259)  3,359 
   Securities and other investments owned    (128,217)  (82,143)
   Securities borrowed    (124,257)  47,595 
   Accounts receivable and advances against customer contracts    (12,948)  1,614 
   Prepaid expenses and other assets    (24,395)  (1,506)
   Accounts payable, accrued payroll and related expenses, accrued value     3,559   (30,374)
    added tax payable and other accrued expenses        
   Amounts due to/from related parties and partners    4,705   (11,826)
   Securities sold, not yet purchased    9,332   7,678 
   Deferred revenue    (564)  (668)
   Securities loaned    127,151   (64,255)
    Net cash used in operating activities    (104,814)  (81,790)
Cash flows from investing activities:        
 Purchases of loans receivable    (38,794)   
 Acquisition of magicJack, net of cash acquired $53,875    (89,240)   
 Acquisition of Wunderlich, net of cash acquired $4,259       (25,478)
 Cash acquired from acquisition of FBR & Co.       15,738 
 Acquisition of other businesses, net of cash acquired    (4,000)  (2,052)
 Acquisition of United Online, net of cash acquired $125,542 in 2016       (10,381)
 Purchases of property and equipment and intangible assets    (5,432)  (825)
 Proceeds from key man life insurance       6,000 
 Proceeds from sale of property and equipment and intangible assets    37   836 
 Equity investments    (16,640)  (1,674)
 Dividends from equity investments    2,628    
    Net cash used in investing activities    (151,441)  (17,836)
Cash flows from financing activities:        
 Proceeds from asset based credit facility    300,000   65,987 
 Repayment of asset based credit facility    (300,000)  (65,987)
 Proceeds from notes payable    51,020    
 Repayment of notes payable    (51,713)  (8,336)
 Payment of participating note payable and contingent consideration       (1,250)
 Proceeds from term loan    80,000    
 Proceeds from issuance of senior notes    258,997   179,471 
 Payment of debt issuance costs    (7,260)  (4,289)
 ESPP shares and payment of employment taxes on vesting of restricted stock    (3,731)  (3,486)
 Dividends paid    (22,684)  (16,755)
 Repurchase of common stock    (18,703)   
 Distribution to noncontrolling interests    (1,067)  (11,261)
    Net cash provided by financing activities    284,859   134,094 
    Increase in cash, cash equivalents and restricted cash    28,604   34,468 
    Effect of foreign currency on cash, cash equivalents and restricted cash    (860)  2,667 
    Net increase in cash, cash equivalents and restricted cash    27,744   37,135 
Cash, cash equivalents and restricted cash, beginning of  year    152,534   115,399 
Cash, cash equivalents and restricted cash, end of year   $180,278  $152,534 
              
Supplemental disclosures:        
 Interest paid   $50,103  $18,840 
 Taxes paid    $6,497  $14,986 
              


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Segment Financial Information
 (Dollars in thousands)

      Three Months Ended Year Ended 
      December 31, December 31, 
      2018  2017  2018  2017 
       (Unaudited)  (Unaudited)  (Unaudited)   
Capital Markets segment:            
 Revenues - Services and fees$51,647  $76,514  $243,268  $172,695 
 Interest income - Securities lending 8,962   7,913   31,798   17,028 
   Total revenues  60,609   84,427   275,066   189,723 
 Selling, general, and administrative expenses (59,215)  (62,339)  (227,774)  (150,092)
 Restructuring charge  (5,921)  (610)  (8,378)  (7,855)
 Interest expense - Securities lending (6,722)  (5,536)  (23,039)  (12,051)
 Depreciation and amortization (1,295)  (1,627)  (5,723)  (3,794)
  Segment (loss) income  (12,544)  14,315   10,152   15,931 
Auction and Liquidation segment:           
 Revenues - Services and fees 10,111   4,197   54,923   47,376 
 Revenues - Sale of goods  15   2   63   3 
  Total revenues  10,126   4,199   54,986   47,379 
 Direct cost of services  (7,364)  (2,359)  (19,627)  (27,841)
 Cost of goods sold        (41)  (2)
 Selling, general, and administrative expenses (487)  (1,767)  (8,274)  (8,329)
 Depreciation and amortization (8)  (6)  (31)  (21)
  Segment income  2,267   67   27,013   11,186 
Valuation and Appraisal segment:           
 Revenues - Services and fees 11,322   8,532   38,705   33,331 
 Direct cost of services  (4,438)  (3,845)  (16,826)  (14,876)
 Selling, general, and administrative expenses (3,439)  (2,166)  (10,577)  (8,561)
 Depreciation and amortization (46)  (51)  (205)  (181)
  Segment income  3,399   2,470   11,097   9,713 
Principal Investments - United Online and magicJack segment:           
 Revenues - Services and fees 19,489   12,935   53,659   51,439 
 Revenues - Sale of goods  485   84   575   304 
   Total revenues  19,974   13,019   54,234   51,743 
 Direct cost of services  (6,045)  (3,073)  (15,127)  (12,784)
 Cost of goods sold  (658)  (85)  (759)  (396)
 Selling, general, and administrative expenses (4,641)  (2,768)  (10,962)  (11,304)
 Depreciation and amortization (2,560)  (1,720)  (7,600)  (7,033)
 Restructuring charge  (338)  (90)  (338)  (723)
  Segment income  5,732   5,283   19,448   19,503 
Consolidated operating (loss) income from reportable segments (1,146 )  22,135   67,710   56,333 
                 
Corporate and other expenses (including restructuring (5,388)  (7,918)  (22,326)  (27,489)
recovery of $210 for the year ended December 31, 2018; and            
restructuring charge of $190 and $3,796 for the three months and            
year ended December 31, 2017 respectively.)           
Interest income   590   62   1,326   420 
Income (loss) on equity investments 2,937   (280)  7,986   (437)
Interest expense   (9,467)  (3,187)  (33,393)  (8,382)
 (Loss) income before income taxes (12,474)  10,812   21,303   20,445 
Benefit from (provision for) income taxes 3,509   (16,263)  (4,903)  (8,510)
 Net (loss) income  (8,965)  (5,451)  16,400   11,935 
Net (loss) income attributable to noncontrolling interests (160)  662   891   379 
 Net (loss) income attributable to B. Riley Financial, Inc.$(8,805) $(6,113) $15,509  $11,556 
                 


B. RILEY FINANCIAL, INC. AND SUBSIDIARIES

Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)

                    
        Three Months Ended  Yead Ended 
        December 31,  December 31, 
        2018  2017  2018  2017  
 Net (loss) income attributable to B. Riley Financial, Inc.$(8,805) $(6,113) $15,509  $11,556  
                    
 Adjustments:              
  (Benefit from) provision for  income taxes (3,509)  16,263   4,903   8,510  
  Interest expense 9,467   3,187   33,393   8,382  
  Interest income (590)  (62)  (1,326)  (420) 
  Share based payments 3,286   2,662   11,596   7,950  
  Depreciation and amortization 4,041   3,434   13,809   11,140  
  Restructuring costs  6,259   890   8,506   12,374  
  Transactions related and other costs 1,048   1,136   3,241   7,291  
  Fair value adjustment          9,000  
  Insurance settlement recovery          (6,000) 
   Total EBITDA adjustments 20,002   27,510   74,122   58,227  
                    
    Adjusted EBITDA$11,197  $21,397  $89,631  $69,783  
                    

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)

                    
         Three Months Ended Year Ended
         December 31, December 31,
         2018  2017  2018  2017 
 Net (loss) income attributable to B. Riley Financial, Inc.$ (8,805) $(6,113) $15,509  $11,556 
 Adjustments:              
  Share based payments  3,286   2,662   11,596   7,950 
  Amortization of intangible assets  2,734   2,174   9,133   7,422 
  Restructuring costs   6,259   890   8,506   12,374 
  Transactions related and other costs  1,048   1,136   3,241   7,291 
  Fair value adjustment           9,000 
  Insurance settlement recovery           (6,000)
  Income tax effect of adjusting entries  (3,798)  (2,172)  (9,209)  (15,741)
  Tax benefit from tax election to treat acquisition of UOL           (8,389)
   as a taxable business combination            
  Tax expense from new tax legislation change - Reduction     13,051      13,051 
   in Federal rate from 35% to 21%            
 Adjusted net income attributable to B. Riley Financial, Inc.$ 724  $11,628  $38,776  $38,514 
                    
 Adjusted income per common share:            
  Adjusted basic income per share $ 0.03  $0.44  $1.49  $1.66 
  Adjusted diluted income per share $ 0.03  $0.44  $1.45  $1.59 
                    
 Shares used to calculate adjusted basic net income per share  26,177,560   26,150,502   25,937,305   23,181,388 
 Shares used to calculate adjusted diluted net income per share  26,177,560   26,150,502   26,764,856   24,290,904