B. Riley Financial, Inc. Stock

Good afternoon, and welcome to the BRC Group Holdings Second Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note that this event is being recorded. I would now like to turn the conference over to Bryant Riley, Chairman, Founder and Co-CEO, Mr. Riley, please go ahead.

Thank you to everyone for joining us today. Joining me on the call are Tom Kelleher, co-CEO; and Scott Yessner, our Chief Financial Officer. This quarter builds on the momentum for our platform we have demonstrated over the last 12 months. We reported second quarter net income available to common shareholders of $18.5 million and delivered $66 million in operating adjusted EBITDA, making this our best core operating quarter in nearly 3 years. These results demonstrate the underlying earnings power of our core operating units. Over the trailing 12 months, we generated net income attributable to common shareholders of $404 million and operating adjusted EBITDA of $182 million. Our execution strategy for B. Riley Securities and B. Riley Wealth remains straightforward, deepening client relationships and extending our reach, and we are executing on that front.

During the quarter, we added 5 senior producers, including welcoming back B. Riley Securities alumni. In my mind, there is no stronger validation of our culture than bringing experienced talent back. During the quarter, we successfully reactivated several key institutional accounts that have been inactive over the past year with positive engagement continuing into July. This, combined with higher secondary commission revenues, highlights our continued progress in further strengthening our franchise. Our relationship-driven execution is anchored by our long-tenured sales and trading team who are traditional idea generators with the decades of experience and are publishing research analysts who are the caretakers of our brand.

In Investment Banking, favorable markets drove robust overall deal activity. In Q2, we participated in transactions representing $21 billion in aggregate deal value. While larger syndicates and a strong market naturally lower our average economic share per deal, the sheer volume of our participation anchored by lead mandates demonstrates our proven execution capabilities and our importance to the issuers. Within that broader deal participation, we supported combined equity and debt issuances totaling $8.5 billion and served as an agent on new ATM filings representing over $12 billion in aggregate value.

We're also seeing our restructuring practice continuing to find meaningful import and out of core opportunities in this environment. Above all, a value ethos permeates every part of this organization. This is the most evident in our merchant banking approach. We built this firm to execute for the small and mid-cap market and to provide dedicated capital and advice to a space that remains structurally underserved.

A core differentiator of our platform is our willingness to actively deploy our balance sheet to solve complex client needs. This includes facilitating structured financing products and driving new originations in our Specialty Finance Direct Lending Group. We operate on a fundamental view that if we are not on a commit our own capital on set of clients, we cannot ask the same from our partners.

To that end, our [indiscernible] investment positions provide us flexibility to pursue opportunities in front of us and our pipeline of actionable opportunities is substantial. Importantly, we have the capital base and partnerships to support our clients as those opportunities develop. Taken together, our second quarter performance as well as our trailing 12-month results, are the same as what we have done since our firm's formation nearly 30 years ago, operating as idea generators and serving as trusted advisers to our clients.

Our platform is performing as designed and the alignment continues to drive our results today. Together, this translates to proven deal execution in capital markets, disciplined operating leverage in Wealth Management, reliable cash conversion within our Communications portfolio and steady operational progress in our consumer products portfolio. Our focus remains firmly on execution and disciplined capital allocation to deliver for our colleagues, clients, partners and shareholders.

As we look ahead, we believe we have the optionality and the discipline to maximize value and will work diligently to execute on all fronts. With that, I'll now turn the call over to our CFO, Scott Yessner, to provide a detailed review of our financial performance. Scott?

Thanks, Bryant. I'll share an update on our second quarter and first half 2026 financial performance, segment earnings, investment holdings, capital and liquidity. Please refer to our earnings press release for the reconciliation tables and descriptions of non-GAAP calculations in my remarks, including an updated calculation and description to our operating adjusted EBITDA non-GAAP measurement. To start, I would like to walk through our financial performance for the second quarter and first half of 2026. For the second quarter, total revenues were $239 million, an increase of $14 million year-over-year. Included in total revenues was service and fee revenue of $174 million, which increased $27.8 million year-over-year further comprised of increases of $5.7 million in investment banking and brokerage fees and a $30 million in management fees from carried interest in funds that own SpaceX, partially offset by $5.8 million in lower telecom and other revenues.

Trading gains in the second quarter were $12.9 million, lower by $14.8 million year-over-year primarily due to a lower fair value on the Beko and Wilcox investment. 6-month total revenues were $591 million, an increase of $180 million year-over-year. The increase in the first half total revenues was driven by higher trading gains of $146 million, primarily due to higher trading gains on Babcock and Wilcox investment of $131 million and by a $21 million increase in service and fee income, which is further comprised of increases of [ $15 million ] in investment banking and brokerage fees and a $36 million in SpaceX carried interest management fees, partially offset by $10 million in lower revenues from exited businesses and $12 million lower telecom and other fees.

Next, second quarter total operating expenses declined $13.6 million to $201 million. The reduction was due to lower SG&A costs across occupancy, legal and other expenses of $9 million, lower cost of goods sold and services of $7.6 million from lower telecom sales and lower consumer product cost of goods sold. First half total operating expenses declined $62 million to $400 million for the first half. The reduction was driven by lower SG&A costs across occupancy, legal and other expenses of $29 million. Lower cost of goods sold and services of $9.3 million from telecom, $9.6 million from exited businesses and $3.2 million from consumer products. Included in our second quarter and first half results are restructuring charges related to the contemplated B. Riley Securities and Wealth combination of $1.9 million.

Continuing down the income statement. Second quarter other income, excluding interest expense was $8 million compared to $88 million in the second quarter of 2025. The second quarter 2025 had $44 million in senior note exchange gains, $26 million in JOANN's liquidation gains and $22 million in investment and financial instrument fair value increases comprising the difference year-over-year.

First half other income, excluding interest expense, was $114 million, driven by a [ $92 million ] increase in the B&W investment compared to $156 million in the first half of 2025, which included $86 million in income in the sale and deconsolidation of businesses and $55 million in senior note exchange gains.

Interest expense declined $6 million to $18 million in the second quarter and declined $16 million to $38 million in the first half year-over-year. The interest expense decline has tracked our total debt reduction of $497 million from December 31, 2024, to the ending balance of $1.277 billion at June 30, 2026. And concluding, the remaining difference in the second quarter and first half year-over-year financial performance, was $69 million and $73 million from income of a discontinued GlassRatner operation booked in 2025. These details culminate with second quarter 2026 net income attributable to common shares of $19 million, diluted income per share of $0.45 per share, adjusted EBITDA of $61 million and adjusted operating EBITDA of $66 million.

And in the first half of 2026, net income of $230 million with diluted income per share of $6.47, adjusted EBITDA was $323 million and adjusted operating EBITDA of $100 million.

Next, I'll review our segment operating performance. Please note our Forward Communications 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 revenues of $54 million and income of $13 million in the second quarter and revenues of $226 million and income of $150 million in the first half of 2026.

Segment revenue and income for the first half have been driven by a $22 million increase in investment banking and capital markets service and fee income and $136 million in trading gains, primarily from the Babcock & Wilcox investment in the first half of 2026.

Next, the Wealth segment had revenues of $58 million and income of $18 million in the second quarter and revenues of $110 million and income of $34 million in the first half of 2026. The first half 2026 revenue and profit increases were driven by a $26.4 million increase in the market value of carried interest in a funded own SpaceX, and an $18 million increase in trading income. The wealth segment ended second quarter with $12 billion in assets under management and 184 financial advisers. The communications business group had aggregate revenues of $58 million and income of $14 million in the second quarter and revenues of $118 million and income of $27 million in the first half. First half income increased $4.6 million despite a $9 million revenue reduction.

Targus, our Consumer Products segment had revenues of $44 million and a loss of $6 million in the second quarter and revenues of $88 million and a loss of $8 million in the first half of 2026. Revenues are $2 million higher in the first half year-over-year.

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 in equity investments. Investments are held across consolidating where valuation changes are apparently booked as revenue in either trading gains or losses or realized or unrealized gains and losses. At June 30, 2026, securities and other investments increased $277 million to $724 million from December 31, 2025. The increase was primarily driven by a $213 million fair value increase in the Babcock & Wilcox investment and a $43 million increase in partnership interest related to our marked value of carried interest in funds that own SpaceX for all the BRC entities with portfolio trades and fair value changes comprising the remainder of the 6-month increase.

Continuing with investment holdings, loan receivables at fair value increased $12 million in the second quarter to an ending balance of $39 million at 6/30/2026. In the quarter, lending activity included approximately $24 million in new fundings. Additionally, we received a $1.9 million loan recovery recognized through the income statement and the fair value adjustments on loans. And concluding the investment holdings, equity method investments were $85 million at June 30, a decline of $5.6 million from December 31. The GEA Group investment comprises $77.8 million of the June 30 balance with a decline of $5.5 million due to lower seasonal income and retaining cash in lieu of distribution to equity holders.

Next, I'll provide an update on our liquidity and capital. At June 30, 2026, cash, cash equivalents and restricted cash paid a total balance of $156 million compared to $229 million at December 31, 2025. In the second quarter of 2026, B. Riley Corporation reduced debt by $22 million, which included $33 million of bond exchanges with a net $11 million increase in working capital borrowings.

At June 30, total debt was $1.3 billion and net debt declined $87 million to $285 million. For the remainder of 2026, the company has 2 senior notes series is maturing, $142 million in principal amount of Riley N senior notes due September 30, and $164 million in principal amount of Riley G senior notes due on December 31. We also have $4.5 million in scheduled paydowns on a subsidiary lending facility. We will continue to use capital actions, cash generated from operations and investment liquidations to fund market opportunities and operating companies while also redeeming the scheduled senior note paydowns. We've had a very strong second quarter and first half of 2026. I'll turn the call over to Tom Keller, Co-Chief Executive Officer.

Thanks, Scott. Our second quarter operational performance underscores the strength of our diversified platform and our deliberate execution across key segments. In Capital Markets, this quarter validated the strategy Bryant described. A meaningful driver was the client-initiated reactivation of several key trading accounts, which contributed to secondary flow. Talent, both newly recruited and internally developed, remains the engine of our execution. Our recruiting pipeline is active with multiple conversations underway with senior bankers and institutional sales professionals. We are also seeing a strong influx of senior producers interested in returning to the platform. These are professionals who know our culture, have watched our operation turnaround and are choosing to rejoin.

Operationally, what those returns give us is an immediate capacity, seasoned veterans who need no ramp arriving with relationships intact and widening our coverage across products and sectors from day 1. In investment banking, equity and debt capital market activity increased year-over-year, particularly in small and mid-cap issuance. Our ATM franchise has reaccelerated with ATM fees more than doubling sequentially. Increasingly, issuers are electing us to lead market equity rather than simply support it, and our follow-on conversion rate improved. We continue to see distinct pockets of strengths in AI data center infrastructure, power and BDC capital raising. Our recent financing deal in the AI data center space demonstrated B. Riley Securities capabilities as a provider in AI infrastructure, and the forward pipeline we are seeing here is substantial.

Our specialty financing direct lending practice continues to broaden its footprint with existing clients, allowing us to serve them across the full capital life cycle. Finally, our ability to convene the market remains a core differentiator. In May, our 26th Annual Institutional Investor Conference in Marina Del Rey, brought issuers and investors together around nearly 180 companies alongside our 15th Big Fighters, Big Cause charity box in Galla with the Sugar Ray Leonard Foundation. We also look forward to creating further connections for our institutional partners at our Consumer TMT Conference in New York in September and our annual Convergence conference in December.

In Wealth Management, while a meaningful part of the first half improvement reflected investment in carried interest activity, we've also stabilized the platform and permanently reset its cost base. The structural work is what positions the reoccurring fee-based business to grow more profitably from here. Operationally, we have delivered structural cost savings by completing key back-office integrations between B. Riley Securities and B. Riley Wealth consolidating our accounting, finance and end market teams and executing a comprehensive firm-wide vendor rationalization.

More broadly, across both organizations, we are executing a dedicated AI build-out for our teams, integrating AI tools across the platform and back office to lift producer productivity and streamline daily workflows. In our Communications business group, which includes Lingo, Magic Jack, Marconi Wireless and United Online, the portfolio continues to prove itself as a reliable engine of cash generation. Segment income grew nicely year-over-year despite a slight top line decline, in line with expected natural customer attrition.

On a combined basis, the group came in ahead of budget for the quarter, driven by operational efficiencies across all units, and we expect the full year 2026 to finish ahead of budget. To provide some historical context, our communications portfolio began in mid-2016 with the acquisition of United Online. Our thesis was simple: Buy mature late-stage companies with predictable revenues, strong gross margins and the potential for high cash flows.

Through our selective approach and strict operational oversight, this group has delivered. Between United Online, Magic Jack, Marconi, Bulls Eye and Lingo, we have generated over $1.5 billion in revenue and approximately $300 million in operating income since 2018. A significant achievement considering the combined total enterprise value at acquisition was just under $280 million. Our communications group's operations remain lean, highly efficient and continue to generate highly predictable cash flows, and we continue to look for companies with similar characteristics that can leverage our operational capabilities. Meanwhile, our B2B telecom businesses in the unified communications space remains stable and provide a natural platform for rolling up complementary assets where substantial cost synergies can be realized.

Across the group, we generate over $200 million in annual revenues, giving us a meaningful scale to build from. Finally, in our Consumer Products segment, which is primarily Targus, we saw targeted distribution channel improvements that helped narrow our segment loss over the first half. We are also taking deliberate action on the cost side, streamlining operations and reducing structural expense to strengthen the underlying business. We remain highly focused on optimizing the long-term value of this asset. Overall, our business segments are execution-focused, generating strong cash flow and are well positioned for the second half of 2026.

Before we open the line, I want to take a moment to directly thank our colleagues. The underlying strength of this platform is a direct reflection of your hard work, resilience and your unwavering dedication to our clients, both internal and external. You were the engine of this firm and your efforts are what make our success possible. I will now hand the call back to open the line for questions.

[Operator Instructions]

Our first question is from Kurt with Raymond James.

Tom, Scott, thank you for the call and congratulations on the quarter. Just obviously, the mean we'd all like to hear more about how you plan to address the 2026 maturities. I think Scott mentioned that asset sales may be part of the solutions. And curious if there are any other levers you plan to pull like exchanges, equity offerings, anything you can share on that front would be helpful.

Scott, why don't you take this one? I'll follow up if I have anything to add.

Great. Thank you so much, Kirk, for joining the call in your question. Yes, I think the way we think about it is creating optionality and options to fund our business and the pay downs of those debts. And so while we don't have an explicit set of tactics, we have a number of ways to go about the fundings. We have enough investment in cash to easily fund through the end of the year, the 2 debt maturities are just over $300 million. We also have to focus our capital towards supporting our investment banking and capital markets businesses. So we sort of have in parallel of an evaluation of our capital structure to allow our go-forward business and to also pay these down.

So looking at our investments in securities, we have $723 million of those securities along with over $150 million of cash with $300 million due. We can clear the bar fairly comfortably on that. And so when we think through how we deploy capital, the bonds are definitely in line of sight, and we have clear plans to make that happen. But we're also very much focused on optimizing our operating company's investment portfolio and getting cash deployed to the maximum benefit of our shareholders.

Yes. I think, Kirk, that's right. I don't think I have anything else to add. I would just say that when we look at the big picture over the last couple of years, our net debt got as high as $1.2 billion. And as of Q2, at the end of Q2, and obviously, positions move up and down, it's $286 million. And our trailing 12 months EBITDA is $180 million. So by any metric, those leverage ratios are, I think, pretty good. Clearly, we have liquid investments. We have some less liquid investments. And -- with cash, and we have really good opportunities to put that cash to work. So all those things are balanced. But we don't -- we have no issue on those maturities.

Okay. That's great to hear. So should we be -- do you expect to address them entirely with cash and asset sales you're not contemplating an exchange or any capital raises?

Yes. I mean I think it would be appropriate. And I've said this on other calls, we have our playbook. The playbook changes based on we live in a very volatile world, and that playbook changes. And so we're not going to eliminate anything or we're going to be -- as a team, we review our assets all the time, and we think through what is the most productive asset to liquidate or to -- where to put our cash. And so I would tell you that we're going to utilize whatever we think makes sense, and I wouldn't eliminate our overspeculate on any of those things.

Okay. That's helpful. I appreciate it. Just with respect to the capital markets business, you mentioned the pipeline. I know you don't provide guidance, but can you maybe elaborate on how the pipeline looked at June 30 versus, say, same time last year or March quarter? Or any kind of color as to where the pipeline is for the back half of the year? And maybe if you could elaborate on the mix, like what type of business it is.

Sure. So let me comment a year ago. A year ago, the noise around our business was pretty loud. There were a number of accounts that had turned off, and we were grinding through that. And I think our team was fighting with one hand behind their back. That is totally different now. We cited that a little bit in my comments. We are, I think, taking a much more aggressive approach. We -- and so we're seeing a lot more activity. What I've really been excited about is doing this whole process our participation in deals was really high. We have -- I think we have a very loyal company base that we've been around for a long time. We did see some market share deterioration, and we're going to get that back.

We have a bought deal I can't talk about today, but we're using our balance sheet to do a bought deal that we're excited about. We're involved in a $100 million deal yesterday. We don't -- as you know, this is a little bit of at-once business. And then there's -- whether it's M&A or longer-term deals. But I think overall, I can't quantify it for you. So I'll just say qualitatively, I feel a lot better about the backlog and opportunities that we see than we did a year ago. And just a testament to to our team and to -- as we mentioned, we're seeing some -- I don't want to under-appreciate the people who have been here throughout this because they've been the most meaningful, but we are also seeing really important people coming back. And so that combination puts us in a better place.

That's good to hear. Would you say that the sequential trends are -- look like if the market remains receptive or you think that they'll continue into the second half?

[indiscernible] you've been doing this a long time, and I've been doing this a long time and markets can turn off and on. And it feels like right now, given the environment can turn off in a week and turn back on in a week. And that's important to us. So I would not -- I think if there's a steady state that I would feel like we would be higher quarter-over-quarter. But I can't -- it's awfully hard to when you're dealing with such a macro thing that you cannot control, it's hard. So what our -- the way that we've always run the business is make sure you run it tight, and you make sure that you have really good people and when the markets are on, you go after as hard as you can go after it and the incremental margin of those revenues are meaningful, 50%. And that's the way we look at it. And so it would just be -- I'd be making things up, if I could tell you with any certainty quarter-over-quarter, but I will say that I feel every quarter -- over the last few years, we are better positioned in the beginning of that quarter than we were the quarter before as we continue to be on a more normalized kind of operations, if that makes sense.

Got it. I appreciate it. Sounds like all sounds good. On the preferred, are you -- how are you thinking about the dividends on the cash -- restoring cash dividends on the preferred.

So we are all equity holders and we're all here for the equity to go as high as it deserves to go based on our earnings. The preferred is senior to that, so we understand that. At this point, I think the best use of our capital are doing -- utilizing it for other things. We appreciate that we are behind on those dividends, and we understand that. But at this point, we're going to get those eyes on capital where we think we're just going to have kind of higher returns on that capital for now.

Okay. And then last topic. The principal investments, at least some of them are down a bit third quarter to date. Are you hedged in any way on those?

No.

[Operator Instructions]

Our next question is from -- this concludes the Q&A. I'll turn the call back over to management for closing remarks.

Great. Well, again, I appreciate. I think we laid it out our appreciation for number one, all of our partners at the firm, the loyalty of our client base. We appreciate them for really coming back, and we're really excited about the quarters to come and look forward to reporting on them. So thank you very much, and we'll talk to you in 90 days. Thank you, operator.

Thank you, Mr. Riley. Before we conclude today's call, I would like to provide the company's safe harbor statement. Please note that today's call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs concerning future developments and their potential effect on the company. Forward-looking statements involve risks and uncertainties, and actual results may differ materially from those expressed or implied. We encourage you to review the company's recent filings with the SEC, including the annual report on Form 10-K and quarterly reports on Form 10-Q.

For a more detailed discussion of the risk factors that could impact performance, the company assumes no obligation to update any forward-looking statements made during this call, except as required by law. Additionally, non-GAAP financial measures may have been discussed during this call. Reconciliations to the most directly comparable GAAP measures are included in the earnings release, which is available on the Investor Relations section of the BRC Group Holdings website. The conference has now concluded.

Thank you for attending today's presentation. You may now disconnect.

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.