B Riley Financial Inc

Previous wording

We report our activities in six reportable business segments: Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer Products segment. These reportable segments are all distinct businesses, each with a different marketing strategy and management structure. During the fourth quarter of 2023, we reassessed our previously reported Consumer segment due to organizational changes and financial information provided to the Chief Operating Decision Maker (“CODM”). These changes resulted in Targus’ operations being reported on a stand-alone basis in the Consumer Products segment and the operations related to brand licensing that was previously reported in the Consumer segment being reported in the All Other Category that is reported with Corporate and Other.

Current wording

We report our activities in six reportable business segments: Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer segment. The descriptions below illustrate the businesses that comprise our segments.

Previous wording

Total revenues decreased $89.1 million to $343.0 million during the three months ended March 31, 2024 from $432.1 million during the three months ended March 31, 2023. The decrease in revenues during the three months ended March 31, 2024 was primarily due to decreases in the fair value of the portfolio of securities and other investments owned and fair value adjustments on loans of $81.4 million, interest income from loans and securities lending of $17.2 million, and sale of goods of $12.1 million, partially offset by an increase in revenues from services and fees of $21.7 million. The increase in revenue from services and fees in the three months ended March 31, 2024 consisted of increases in revenue of $12.5 million in All Other, $10.1 million in the Financial Consulting segment, $2.6 million in the Wealth Management segment, and $2.4 million in the Capital Markets segment, partially offset by decreases in revenue of $4.0 million in the Communications segment, and $1.9 million in the Auction and Liquidation segment.

Current wording

Total revenues decreased $257.9 million to $148.4 million during the three months ended June 30, 2024 from $406.3 million during the three months ended June 30, 2023. The decrease in revenues during the three months ended June 30, 2024 was primarily due to decreases in the fair value adjustments on loans of $184.8 million, fair value of the portfolio of securities and other investments owned of $64.5 million, interest income from loans of $16.6 million, and interest income from securities lending of $15.3 million, partially offset by increases in revenues from services and fees of $17.7 million and sale of goods of $5.6 million. Of the $184.8 million decrease in fair value adjustments on loans, $151.1 million related to the loan to Vintage Capital Management, LLC (“VCM”), $12.0 million related to the loan to Freedom VCM, $7.4 million related to the loan to Badcock Receivables I, and $7.2 million related to the loan to Conn’s Inc. (“Conn’s”). The increase in revenue from services and fees in the three months ended June 30, 2024 consisted of increases in revenue of $15.6 million in All Other, $5.3 million in the Financial Consulting segment, $5.3 million in the Capital Markets segment, and $2.3 million in the Wealth Management segment, partially offset by decreases in revenue of $5.6 million in the Communications segment and $5.3 million in the Auction and Liquidation segment.

Previous wording

Revenues from services and fees in the Capital Markets segment increased $2.4 million to $60.3 million during the three months ended March 31, 2024 from $57.9 million during the three months ended March 31, 2023. The increase in revenues was primarily due to increases of $11.0 million of corporate finance, consulting, and investment banking fees, $0.5 million of other income, and $0.4 in asset management fees, partially offset by decreases of $6.5 million in dividends and $3.0 million of commission fees.

Current wording

Revenues from services and fees in the Capital Markets segment increased $5.3 million to $50.2 million during the three months ended June 30, 2024 from $45.0 million during the three months ended June 30, 2023. The increase in revenues was primarily due to increases of $9.4 million of corporate finance, consulting, and investment banking fees and $0.5 million in dividends, partially offset by decreases of $2.3 million in other income, $1.3 million of interest income, and $0.9 million in commission fees.

Previous wording

Revenues from services and fees in All Other increased $12.5 million to $26.1 million during the three months ended March 31, 2024 from $13.6 million during the three months ended March 31, 2023. These revenues include the licensing of brand trademarks, merchandise rental fees and sales from bebe stores, inc. (“bebe”) in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, and the operations of a regional environmental services business and a landscaping business that we acquired in 2022 and sold in the third quarter of 2023. Revenues from services and fees in All Other increased by approximately $14.0 million related to merchandise rental fees from bebe, $0.3 million related to the regional environmental services business, and $0.3 million related to licensing of brand trademarks, partially offset by a decrease in revenues of $2.1 million due to the sale of the landscaping business in the fourth quarter of 2023.

Current wording

Revenues from services and fees in All Other increased $15.6 million to $30.3 million during the three months ended June 30, 2024 from $14.7 million during the three months ended June 30, 2023. These revenues include the licensing of brand trademarks, merchandise rental fees and sales from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, commission fees from Nogin Inc. (“Nogin”) which we acquired in the second quarter of 2024, and the operations of a regional environmental services business and a landscaping business that we acquired in 2022 and sold in the third quarter of 2023. Revenues from services and fees in All Other increased by approximately $13.1 million related to merchandise rental fees from bebe, $2.7 million in commission fees from Nogin, and $2.7 million related to the regional environmental services business, partially offset by a decrease in revenues of $2.8 million due to the sale of the landscaping business in the fourth quarter of 2023.

Previous wording

Trading income (loss) and fair value adjustments on loans decreased approximately $81.4 million to a loss of $29.9 million during the three months ended March 31, 2024 compared to income of $51.6 million during the three months ended March 31, 2023. The loss of $29.9 million during the three months ended March 31, 2024 was primarily due to realized and unrealized losses on our loans receivable, at fair value of $12.2 million, partially offset by realized and unrealized losses on investments made in our proprietary trading accounts of $17.7 million. The income of $51.6 million during the three months ended March 31, 2023 was primarily due to unrealized gains on our loans receivable, at fair value of $43.3 million and realized and unrealized gains on investments made in our proprietary trading accounts of $8.3 million.

Current wording

Trading income (loss) decreased approximately $64.5 million to a loss of $31.3 million during the three months ended June 30, 2024 compared to income of $33.2 million during the three months ended June 30, 2023. The loss of $31.3 million during the three months ended June 30, 2024 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts.

Previous wording

Interest income – loans and securities lending decreased $17.2 million to $59.9 million during the three months ended March 31, 2024 from $77.2 million during the three months ended March 31, 2023. Interest income from securities lending was $37.8 million and $37.2 million during the three months ended March 31, 2024 and 2023, respectively. Interest income from loans was $22.1 million and $40.0 million during the three months ended March 31, 2024 and 2023, respectively, with the decrease due to a reduction in loan receivable balances from $772.1 million as of March 31, 2023 to $452.5 million as of March 31, 2024.

Current wording

Interest income - loans decreased $16.6 million to $18.5 million during the three months ended June 30, 2024 from $35.1 million during the three months ended June 30, 2023. The decrease was due to a reduction in loan receivable balances from $683.8 million as of June 30, 2023 to $229.2 million as of June 30, 2024.

Previous wording

Direct cost of services increased approximately $6.7 million to $61.1 million during the three months ended March 31, 2024 from $54.4 million during the three months ended March 31, 2023. The increase in direct cost of services was primarily attributable to increases of $4.1 million from the Communications segment and $4.3 million from All Other due to bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, partially offset by a decrease of $1.7 million from the Auction and Liquidation segment due to the size of the fee deals.

Current wording

Direct cost of services increased approximately $5.6 million to $61.6 million during the three months ended June 30, 2024 from $55.9 million during the three months ended June 30, 2023. The increase in direct cost of services was primarily attributable to increases of $0.2 million from the Communications segment and $6.0 million from All Other due to bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023 and Nogin which we acquired in the second quarter of 2024, partially offset by a decrease of $0.6 million from the Auction and Liquidation segment due to the size of the fee deals.

Previous wording

Selling, general and administrative expenses in the Communications segment decreased $5.3 million to $23.9 million for the three months ended March 31, 2024 from $29.2 million for the three months ended March 31, 2023. The decrease was primarily due to decreases of $2.7 million in payroll and related expenses, $1.9 million in other expenses, and $0.7 million in depreciation and amortization expenses. The decrease in payroll and related expenses and other expenses was primarily due to cost savings in 2024 resulting from the implementation of cost savings programs in second half of 2023 that included a reduction in headcount and other operating expenses.

Current wording

Selling, general and administrative expenses in the Communications segment decreased $1.2 million to $25.5 million for the three months ended June 30, 2024 from $26.6 million for the three months ended June 30, 2023. The decrease was primarily due to decreases of $2.7 million in payroll and related expenses and $0.3 million in other expenses, partially offset by increases $1.0 million in legal settlements and $0.7 million in legal fees. The decrease in payroll and related expenses and other expenses was primarily due to cost savings in 2024 resulting from the implementation of cost savings programs in second half of 2023 that included a reduction in headcount and other operating expenses.

Previous wording

Other Income (Expense). Other income included interest income of $0.7 million and $2.6 million during the three months ended March 31, 2024 and 2023, respectively. Dividend income was $11.8 million during the three months ended March 31, 2024 compared to $13.2 million during the three months ended March 31, 2023. Realized and unrealized gains (losses) on investments was a loss of $29.5 million during the three months ended March 31, 2024 compared to a loss of $28.4 million during the three months ended March 31, 2023. The change was primarily due to a decrease in the overall values of our investments. Change in fair value of financial instruments and other was a gain of $0.3 million during the three months ended March 31, 2024 and a loss of $0.2 million during the three months ended March 31, 2023. Interest expense was $44.9 million during the three months ended March 31, 2024 compared to $47.6 million during the three months ended March 31, 2023. The decrease in interest expense was due to lower debt balances during the three months ended March 31, 2024. The decreases in interest expense primarily consisted of $6.4 million from the Pathlight term loan, $1.8 million from the issuance of senior notes, $1.5 million from the Nomura revolving credit facility, $0.1 million and $0.4 million from the Targus term loan and revolving loan, respectively, and $0.4 million from the BRPAC term loan, partially offset by increases in interest expense of $7.7 million from the Nomura term loan and $0.7 million from the bebe term loan.

Current wording

Other Income (Expense). Other income included interest income of $0.8 million and $0.7 million during the three months ended June 30, 2024 and 2023, respectively. Dividend income was $9.2 million during the three months ended June 30, 2024 compared to $9.6 million during the three months ended June 30, 2023. Realized and unrealized (losses) gains on investments was a loss of $155.7 million during the three months ended June 30, 2024 compared to a gain of $18.8 million during the three months ended June 30, 2023. The change was primarily due to a decrease in the valuation of our investment in Freedom VCM of $181.0 million. Change in fair value of financial instruments and other was a loss of $0.2 million during the three months ended June 30, 2024 and a gain of $0.4 million during the three months ended June 30, 2023. Interest expense was $42.7 million during the three months ended June 30, 2024 compared to $47.3 million during the three months ended June 30, 2023. The decrease in interest expense was due to lower debt balances during the three months ended June 30, 2024. The decreases in interest expense primarily consisted of $5.9 million from the Pathlight term loan, $3.8 million from the issuance of senior notes, $1.0 million from the Nomura revolving credit facility, $0.1 million and $0.7 million from the Targus term loan and revolver, respectively, and $0.4 million from the BRPAC term loan, partially offset by increases in interest expense of $7.1 million from the Nomura term loan, $0.7 million from the bebe term loan, and $0.3 million from the Nogin secured convertible promissory note.

Previous wording

(Loss) Income Before Income Taxes. Loss before income taxes was $65.0 million during the three months ended March 31, 2024 compared to income before income taxes of $24.5 million during the three months ended March 31, 2023. The change was due to a decrease in revenue of $89.1 million, a decrease of $1.9 million in interest income, a decrease of $1.4 million in dividend income, and a change in realized and unrealized losses on investments of $1.1 million, partially offset by a decrease in interest expense of $2.7 million, a decrease in operating expenses of $0.7 million, and an increase in change in fair value of financial instruments and other of $0.5 million.

Current wording

(Loss) Income Before Income Taxes. Loss before income taxes was $408.8 million during the three months ended June 30, 2024 compared to income before income taxes of $65.3 million during the three months ended June 30, 2023. The change was due to a decrease in revenue of $257.9 million, a change in realized and unrealized (losses) gains on investments of $174.5 million, an increase in operating expenses of $45.3 million, a decrease in change in fair value of financial instruments and other of $0.5 million, and a decrease of $0.3 million in dividend income, partially offset by a decrease in interest expense of $4.6 million and an increase of $0.1 million in interest income.

Previous wording

Benefit from (Provision for) Income Taxes. Benefit from income taxes was $17.1 million during the three months ended March 31, 2024 compared to a provision for income taxes of $7.9 million during the three months ended March 31, 2023. The effective income tax rate was 26.3% for the three months ended March 31, 2024 as compared to 32.4% for the three months ended March 31, 2023.

Current wording

Provision for Income Taxes. Provision for income taxes was $25.0 million during the three months ended June 30, 2024 compared to a provision for income taxes of $21.5 million during the three months ended June 30, 2023. The effective income tax rate was 6.1% for the three months ended June 30, 2024 as compared to 32.9% for the three months ended June 30, 2023.

Previous wording

Net (Loss) Income Attributable to the Company. Net loss attributable to the Company was $49.2 million during the three months ended March 31, 2024 compared to net income attributable to the Company of $17.2 million for the three months ended March 31, 2023. The decrease was due to a change in operating (loss) income of $88.4 million, a decrease of $1.9 million in interest income, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $1.8 million, a decrease of $1.4 million in dividend income, and a decrease in realized and unrealized gains (losses) on investments of $1.1 million, partially offset by a change from provision for to benefit from income taxes of $25.0 million, a decrease in interest expense of $2.7 million, and an increase in change in fair value of financial instruments and other of $0.5 million.

Current wording

Net (Loss) Income Attributable to the Company. Net loss attributable to the Company was $433.6 million during the three months ended June 30, 2024 compared to net income attributable to the Company of $46.4 million for the three months ended June 30, 2023. The decrease was due to a change in operating (loss) income of $303.3 million, a decrease in realized and unrealized (losses) gains on investments of $174.5 million, a change in net loss attributable to noncontrolling interests and redeemable noncontrolling interests of $2.4 million, an increase in change in fair value of financial instruments and other of $0.5 million, and a decrease of $0.3 million in dividend income, partially offset by a decrease in interest expense of $4.6 million, a change in provision for income taxes of $3.5 million, and an increase of $0.1 million in interest income.

Previous wording

Net (Loss) Income Available to Common Shareholders. Net loss available to common shareholders was $51.2 million during the three months ended March 31, 2024 compared to net income available to common shareholders $15.1 million during the three months ended March 31, 2023. The decrease was due to a change in operating (loss) income of $88.4 million, a decrease of $1.9 million in interest income, a change in net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests of $1.8 million, a decrease of $1.4 million in dividend income, and a decrease in realized and unrealized gains (losses) on investments of $1.1 million, partially offset by a decrease in interest expense of $2.7 million, a change from provision for to benefit from income taxes of $25.0 million, and an increase in change in fair value of financial instruments and other of $0.5 million.

Current wording

Net (Loss) Income Available to Common Shareholders. Net loss available to common shareholders was $435.6 million during the three months ended June 30, 2024 compared to net income available to common shareholders $44.4 million during the three months ended June 30, 2023. The decrease was due to a change in operating (loss) income of $303.3 million, a decrease in realized and unrealized (losses) gains on investments of $174.5 million, a change in net loss attributable to noncontrolling interests and redeemable noncontrolling interests of $2.4 million, an increase in change in fair value of financial instruments and other of $0.5 million, and a decrease of $0.3 million in dividend income, partially offset by a decrease in interest expense of $4.6 million, a change in provision for income taxes of $3.5 million, and an increase of $0.1 million in interest income.

Previous wording

Revenues from services and fees in the Wealth Management segment increased $2.6 million to $51.2 million during the three months ended March 31, 2024 from $48.5 million during the three months ended March 31, 2023. The increase in revenues was primarily due to an increase in revenue of $2.7 million from wealth and asset management fees.

Current wording

Revenues from services and fees in the Wealth Management segment increased $5.0 million to $100.8 million during the six months ended June 30, 2024 from $95.8 million during the six months ended June 30, 2023. The increase in revenues was primarily due to increases in revenue of $4.5 million from wealth and asset management fees and $0.5 million in other income.

Previous wording

Revenues from services and fees in the Auction and Liquidation segment decreased $1.9 million to $3.6 million during the three months ended March 31, 2024 from $5.4 million during the three months ended March 31, 2023. The decrease in revenues was primarily due to a decrease of $2.9 million in commission fees, partially offset by an increase of $1.0 million in service contract revenues. The decrease in commission fees was related to a decrease in the size of fee engagements.

Current wording

Revenues from services and fees in the Auction and Liquidation segment decreased $7.1 million to $7.2 million during the six months ended June 30, 2024 from $14.3 million during the six months ended June 30, 2023. The decrease in revenues was primarily due to a decrease of $8.1 million in commission fees, partially offset by an increase of $1.0 million in service contract revenues. The decrease in commission fees was related to a decrease in the size of fee engagements.

Previous wording

Revenues from services and fees in the Financial Consulting segment increased $10.1 million to $35.1 million during the three months ended March 31, 2024 from $25.0 million during the three months ended March 31, 2023. The increase in revenues was primarily due to an increase of $8.5 million within our Advisory Services division primarily consisting of $2.9 million due to a full quarter of revenues from acquisitions in the prior year and $5.6 million in advisory services. The remaining increase in revenues was due to an increase of $1.6 million in Appraisal due to an increase in the number of appraisals performed.

Current wording

Revenues from services and fees in the Financial Consulting segment increased $15.4 million to $71.6 million during the six months ended June 30, 2024 from $56.2 million during the six months ended June 30, 2023. The increase in revenues was primarily due to an increase of $13.4 million within our Advisory Services division combined with an increase of $2.0 million in Appraisal due to an increase in the number of appraisals performed.

Previous wording

Revenues from services and fees in the Communications segment decreased $4.0 million to $81.1 million during the three months ended March 31, 2024 from $85.1 million during the three months ended March 31, 2023. The decrease in revenues was primarily due to decreases in subscription revenue of $3.3 million and $0.7 million in advertising, licensing and other revenue. We expect UOL, magicJack, and Marconi subscription revenue to continue to decline year over year.

Current wording

Revenues from services and fees in the Communications segment decreased $9.6 million to $158.8 million during the six months ended June 30, 2024 from $168.4 million during the six months ended June 30, 2023. The decrease in revenues was primarily due to decreases in subscription revenue of $9.1 million and $0.5 million in advertising, licensing and other revenue. We expect UOL, magicJack, and Marconi subscription revenue to continue to decline year over year.

Previous wording

Revenues from the sale of goods decreased $12.1 million to $55.7 million during the three months ended March 31, 2024 from $67.8 million during the three months ended March 31, 2023.The decrease in revenues from sale of goods was attributable to a decrease of $14.2 million from the Consumer Products segment due to a decrease in computer and laptop sales worldwide and a decrease of $0.6 million from the Communications segment, partially offset by an increase of $2.0 million from the Auction and Liquidation segment due to larger international asset deals and an increase of $0.6 million in All Other due to sale of goods from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023. Cost of goods sold for the three months ended March 31, 2024 decreased approximately $8.0 million to $39.6 million from $47.6 million during the three months ended March 31, 2023. The decrease in cost of goods sold was primarily attributable to decreases of $8.5 million in the Consumer Products segment and $0.8 million in the Communications segment, partially offset by increases of $0.7 million from the Auction and Liquidation segment and $0.6 million from All Other.

Current wording

Revenues from the sale of goods decreased $6.6 million to $119.6 million during the six months ended June 30, 2024 from $126.2 million during the six months ended June 30, 2023. The decrease in revenues from sale of goods was attributable to a decrease of $17.8 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide and a decrease of $0.7 million from the Communications segment, partially offset by an increase of $8.7 million from the Auction and Liquidation segment due to larger international asset deals and an increase of $3.3 million from All Other consisting of $2.3 million in sale of goods from Nogin which we acquired in the second quarter of 2024 and $1.0 million in sale of goods from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023. Cost of goods sold for the six months ended June 30, 2024 decreased approximately $1.6 million to $86.3 million from $87.9 million during the six months ended June 30, 2023. The decrease in cost of goods sold was primarily attributable to decreases of $10.2 million in the Consumer Products segment and $1.2 million in the Communications segment, partially offset by increases of $7.1 million from the Auction and Liquidation segment and $2.7 million from All Other consisting of $1.6 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023 and $1.1 million from Nogin which we acquired in the second quarter of 2024.

Previous wording

Selling, general and administrative expenses in the Auction and Liquidation segment decreased $0.8 million to $1.5 million during the three months ended March 31, 2024 from $2.3 million during the three months ended March 31, 2023. The decrease was primarily due to a decrease of $0.8 million in foreign currency fluctuation.

Current wording

Selling, general and administrative expenses in the Auction and Liquidation segment decreased $1.2 million to $3.4 million during the six months ended June 30, 2024 from $4.6 million during the six months ended June 30, 2023. The decrease was primarily due to decreases of $1.0 million in foreign currency fluctuation and $0.2 million in other expenses.

Previous wording

Selling, general and administrative expenses for Corporate and All Other increased approximately $10.9 million to $33.6 million during the three months ended March 31, 2024 from $22.7 million for the three months ended March 31, 2023. The increase was primarily due to increases of $10.0 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $4.5 million in legal expenses, and $2.6 million in accounting expenses, partially offset by decreases of $3.7 million in payroll and related expenses, $2.1 million in foreign currency fluctuation, and $0.4 million in depreciation and amortization expense.

Current wording

Selling, general and administrative expenses for Corporate and All Other increased approximately $25.4 million to $70.1 million during the six months ended June 30, 2024 from $44.7 million for the six months ended June 30, 2023. The increase was primarily due to increases of $19.3 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $6.0 million from Nogin which was acquired in the second quarter of 2024, $5.9 million in legal expenses, $4.3 million in accounting expenses, and $2.3 million in transaction expenses related to the

Previous wording

Net Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests. Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net income generated by membership interests of partnerships that we do not own. The net income attributable to noncontrolling interests was $1.2 million during the three months ended March 31, 2024 compared to net loss of $0.6 million during the three months ended March 31, 2023.

Current wording

Net Income (Loss) Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests. Net income (loss) attributable to noncontrolling interests and redeemable noncontrolling interests represents the proportionate share of net (loss) income generated by membership interests of partnerships that we do not own. The net income attributable to noncontrolling interests was $1.0 million during the six months ended June 30, 2024 compared to net loss of $3.2 million during the six months ended June 30, 2023.

Previous wording

Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purposes financing arrangements. During the three months ended March 31, 2024 and 2023, we generated net loss of $48.0 million and net income of $16.6 million, respectively. The Company operates a number of businesses in its segments that provide steady cash flows and operating income throughout the year, however, our cash flows and profitability are impacted by capital market engagements and retail liquidation engagements performed on a quarterly and annual basis, which may be episodic in nature, and amounts realized from the sale of our investments in marketable securities.

Current wording

Our operations are funded through a combination of existing cash on hand, cash generated from operations, borrowings under our senior notes payable, term loans and credit facilities, and special purposes financing arrangements. During the six months ended June 30, 2024 and 2023, we generated net loss of $481.7 million and net income of $60.3 million, respectively. The Company operates a number of businesses in its segments that provide steady cash flows and operating income throughout the year, however, our cash flows and profitability are impacted by capital market engagements and retail liquidation engagements performed on a quarterly and annual basis, which may be episodic in nature, and amounts realized from the sale of our investments in marketable securities.

Previous wording

As of March 31, 2024, we had $190.7 million of unrestricted cash and cash equivalents, $1.9 million of restricted cash, $949.9 million of securities and other investments, at fair value, $452.5 million of loans receivable, at fair value, and $2,186.4 million of borrowings outstanding. The borrowings outstanding of $2,186.4 million as of March 31, 2024 included $1,553.6 million from the issuance of series of senior notes that are due at various dates ranging from May 31, 2024 to August 31, 2028 with interest rates ranging from 5.00% to 6.75%, $596.3 million in term loans borrowed pursuant to the Tiger US Holdings Inc. (“Targus”), Lingo Management, LLC (“Lingo Management”), BRPI Acquisition Co LLC (“BRPAC”), Nomura Corporate Fundings Americas, LLC (“Nomura”), and bebe stores, inc. (“bebe”) credit agreements discussed below, $22.2 million of revolving credit facility under the Targus credit facility discussed below, and $14.3 million of notes payable.

Current wording

As of June 30, 2024, we had $236.9 million of unrestricted cash and cash equivalents, $1.7 million of restricted cash, $664.1 million of securities and other investments, at fair value, $229.2 million of loans receivable, at fair value, and $2,159.8 million of borrowings outstanding. The borrowings outstanding of $2,159.8 million as of June 30, 2024 included $1,528.6 million from the issuance of series of senior notes that are due at various dates ranging from February 28, 2025 to August 31, 2028 with interest rates ranging from 5.00% to 6.50%, $581.4 million in term loans borrowed pursuant to the Tiger US Holdings Inc. (“Targus”), Lingo Management, LLC (“Lingo Management”), BRPI Acquisition Co LLC (“BRPAC”), Nomura Corporate Fundings Americas, LLC (“Nomura”), and bebe credit agreements discussed below, $19.8 million of revolving credit facility under the Targus credit facility discussed below, and $30.0 million of notes payable.

Previous wording

From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. On May 15, 2024, we declared a regular dividend of $0.50 per share that will be paid on or about June 11, 2024 to stockholders of record as of May 27, 2024. During the year ended December 31, 2023, we paid cash dividends on our common stock of $141.1 million. While it is the Board’s current intention to make regular dividend payments each quarter and special dividend payments dependent upon exceptional circumstances from time to time, our Board of Directors may reduce or discontinue the payment of dividends at any time for any reason it deems relevant. The declaration and payment of any future dividends or repurchases of our common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

Current wording

From time to time, we may decide to pay dividends which will be dependent upon our financial condition and results of operations. During the six months ended June 30, 2024, we paid cash dividends on our common stock of $33.6 million. During the year ended December 31, 2023, we paid cash dividends on our common stock of $141.1 million. In August 2024, we announced the suspension of our common stock dividend as we prioritize reducing our debt. The declaration and payment of any future dividends or repurchases of our common stock will be made at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, cash flows, capital expenditures, and other factors that may be deemed relevant by our Board of Directors.

Previous wording

A summary of common stock dividend activity for the three months ended March 31, 2024 and the year ended December 31, 2023 was as follows:

Current wording

A summary of common stock dividend activity for the six months ended June 30, 2024 and the year ended December 31, 2023 was as follows:

Previous wording

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October. As of March 31, 2024, dividends in arrears in respect of the Depositary Shares were $0.8 million. On April 9, 2024, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on April 30, 2024 to holders of record as of the close of business on April 22, 2024.

Current wording

Holders of Series A Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 6.875% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,718.75 or $1.71875 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October. As of June 30, 2024, dividends in arrears in respect of the Depositary Shares were $0.8 million. On July 9, 2024, the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on July 31, 2024 to holders of record as of the close of business on July 22, 2024. On October 16, 2024 the Company declared a cash dividend of $0.4296875 per Depositary Share, which was paid on October 31, 2024 to holders of record as of the close of business on October 28, 2024.

Previous wording

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October. As of March 31, 2024, dividends in arrears in respect of the Depositary Shares were $0.5 million. On April 9, 2024, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on April 30, 2024 to holders of record as of the close of business on April 22, 2024.

Current wording

Holders of Series B Preferred Stock, when and as authorized by the board of directors of the Company, are entitled to cumulative cash dividends at the rate of 7.375% per annum of the $0.03 million liquidation preference ($25.00 per Depositary Share) per year (equivalent to $1,843.75 or $1.84375 per Depositary Share). Dividends are payable quarterly in arrears, on or about the last day of January, April, July, and October. As of June 30, 2024, dividends in arrears in respect of the Depositary Shares were $0.5 million. On July 9, 2024, the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on July 31, 2024 to holders of record as of the close of business on July 22, 2024. On October 16, 2024 the Company declared a cash dividend of $0.4609375 per Depositary Share, which was paid on October 31, 2024 to holders of record as of the close of business on October 28, 2024.

Previous wording

A summary of preferred stock dividend activity for the three months ended March 31, 2024 and the year ended December 31, 2023 was as follows:

Current wording

A summary of preferred stock dividend activity for the six months ended June 30, 2024 and the year ended December 31, 2023 was as follows:

Previous wording

Cash provided by operating activities was $135.4 million during the three months ended March 31, 2024 compared to cash provided by operating activities of $52.6 million during the three months ended March 31, 2023. Cash provided by operating activities for the three months ended March 31, 2024 consisted of the impact of net loss of $48.0 million, noncash items of $19.8 million, and changes in operating assets and liabilities of $163.5 million. The positive cash flow impact from noncash items of $19.8 million included fair value adjustments of $13.7 million, depreciation and amortization of $11.1 million, share-based compensation of $8.7 million, depreciation of rental merchandise of $4.2 million, provision for credit losses of $0.4 million, income allocated for mandatorily redeemable noncontrolling interests of $0.3 million, effect of foreign currency of $0.3 million, partially offset by deferred income taxes of $16.0 million, non-cash interest and other of $2.7 million, and gain on sale of business and other of $0.2 million. Cash provided by operating activities for the three months ended March 31, 2023 consisted of the impact of net income of $16.6 million, noncash items of $10.7 million, and changes in operating assets and liabilities of $46.7 million. The negative cash flow impact from noncash items of $10.7 million included fair value adjustments of $46.1 million and noncash interest and other of $1.1 million, partially offset by share-based compensation of $13.7 million, depreciation and amortization of $13.1 million, deferred income taxes of $5.8 million, provision for credit losses of $3.2 million, effect of foreign currency of $0.3 million, income allocated for mandatorily redeemable noncontrolling interests of $0.3 million, and dividends from equity investments of $0.1 million.

Current wording

Cash provided by operating activities was $246.8 million during the six months ended June 30, 2024 compared to cash provided by operating activities of $77.1 million during the six months ended June 30, 2023. Cash provided by operating activities for the six months ended June 30, 2024 consisted of the impact of net loss of $481.7 million, noncash items of $263.4 million, and changes in operating assets and liabilities of $465.2 million. The positive cash flow impact from noncash items of $263.4 million included fair value adjustments of $189.5 million, impairment of goodwill and tradenames of $27.7 million, depreciation and amortization of $22.9 million, share-based compensation of $14.9 million, depreciation of rental merchandise of $8.2 million, deferred income taxes of $1.4 million, provision for credit losses of $1.2 million, income allocated for mandatorily redeemable noncontrolling interests of $0.8 million, effect of foreign currency of $0.3 million, partially offset by non-cash interest and other of $3.3 million, and gain on sale of business and other of $0.2 million. Cash provided by operating activities for the six months ended June 30, 2023 consisted of the impact of net income of $60.3 million, noncash items of $12.5 million, and changes in operating assets and liabilities of $4.2 million.

Previous wording

Cash provided by investing activities was $18.3 million during the three months ended March 31, 2024 compared to cash used in investing activities of $57.2 million for the three months ended March 31, 2023. During the three months ended March 31, 2024, cash provided by investing activities consisted of cash provided by loans receivable repayment of $39.5 million and sale of loans receivable of $22.8 million, partially offset by cash used in purchases of loans receivable of $42.9 million, purchases of property and equipment of $0.9 million, and sale of business, net of cash sold and other of $0.2 million. During the three months ended March 31, 2023, cash used in investing activities consisted of cash used for purchases of loans receivable of $312.0 million, acquisition of businesses and minority interest of $12.3 million, purchases of property and equipment of $1.7 million, and purchases of equity and other investments of $0.7 million, partially offset by cash received from loans receivable repayment of $260.6 million, sale of loan receivable of $7.5 million, and proceeds from sale of property, equipment, intangible assets, and other of $1.4 million.

Current wording

Cash provided by investing activities was $6.7 million during the six months ended June 30, 2024 compared to cash provided by investing activities of $216.3 million for the six months ended June 30, 2023. During the six months ended June 30, 2024, cash provided by investing activities consisted of cash provided by loans receivable repayment of $72.4 million, and sale of loans receivable of $22.8 million, partially offset by cash used in purchases of loans receivable of $63.2 million, acquisition of businesses and minority interest, net of cash acquired of $19.1 million, purchases of property and equipment of $5.4 million, purchases of equity and other investments of $0.5 million, and sale of business, net of cash sold and other of $0.1 million. During the six months ended June 30, 2023, cash provided by investing activities consisted of cash received from loans receivable repayment of $413.4 million, funds received from trust account of subsidiary of $175.8 million, sale of loan receivable of $7.5 million, and sale of business, net of cash sold and other of $1.5 million, partially offset by cash used for purchases of loans receivable of $360.0 million, acquisition of businesses and minority interest of $12.3 million, purchases of equity and other investments of $4.9 million, and purchases of property and equipment of $4.8 million.

Previous wording

Cash used in financing activities was $190.9 million during the three months ended March 31, 2024 compared to cash used in financing activities of $55.3 million during the three months ended March 31, 2023. During the three months ended March 31, 2024, cash used in financing activities primarily consisted of $115.5 million used to redeem senior notes, $39.3 million used in payment of revolving lines of credit, $30.0 million used in the repayment of term loan, $16.0 million used to pay dividends on our common shares, $5.4 million used to repay our notes payable and other, $2.0 million used to pay dividends on our preferred shares, $1.5 million in distributions to noncontrolling interests, $1.2 million used in payment of employment taxes on vesting of restricted stock, $0.2 million used to pay debt issuance and offering costs, and $0.1 million used to pay contingent consideration, partially offset by cash provided by $17.7 million in proceeds from revolving line of credit and $2.5 million in contributions from noncontrolling interests. During the three months ended March 31, 2023, cash used in financing activities primarily consisted of $72.9 million used in the repayment of term loan, $53.8 million used to repurchase our common shares, $46.9 million used to pay dividends on our common shares, $17.2 million used in repayment of revolving line of credit, $11.5 million used to repay our notes payable, $4.8 million used in payment of employment taxes on vesting of restricted stock, $2.0 million used in the payment of debt issuance and offering costs, $2.0 million used to pay dividends on our preferred shares, $1.3 million used in the payment of contingent consideration, and $1.0 million in distributions to noncontrolling interests, partially offset by cash provided by $128.2 million in proceeds from borrowings under a term loan, $29.0 million in proceeds from revolving line of credit, $0.5 million in proceeds from issuance of preferred stock, and $0.4 million in contributions from noncontrolling interests.

Current wording

Cash used in financing activities was $243.5 million during the six months ended June 30, 2024 compared to cash used in financing activities of $456.8 million during the six months ended June 30, 2023. During the six months ended June 30, 2024, cash used in financing activities primarily consisted of $140.5 million used to redeem senior notes, $64.3 million used in payment of revolving lines of credit, $45.6 million used in the repayment of term loan, $33.6 million used to pay dividends on our common shares, $5.7 million used to repay our notes payable and other, $4.0 million used to pay dividends on our preferred shares, $3.2 million in distributions to noncontrolling interests, $3.1 million used in payment of employment taxes on vesting of restricted stock, $1.4 million used to pay contingent consideration, and $1.0 million used to pay debt issuance and offering costs, partially offset by cash provided by $40.3 million in proceeds from revolving line of credit, $15.0 million in proceeds from notes payable, $3.0 million in contributions from noncontrolling interests, and $0.7 million in proceeds from exercise of warrants. During the six months ended June 30, 2023, cash used in financing activities primarily consisted of $175.8 million used in redemption of subsidiary temporary equity and distributions, $172.8 million used in the repayment of term loan, $80.3 million used to pay dividends on our common shares, $78.8 million used in repayment of revolving line of credit, $58.9 million used to redeem senior notes, $53.8 million used to repurchase our common shares, $11.7 million used to repay our notes payable, $8.3 million used in payment of employment taxes on vesting of restricted stock, $4.0 million used to pay dividends on our preferred shares, $3.2 million used in the payment of debt issuance and offering costs, $2.5 million in distributions to noncontrolling interests, and $1.3 million used in the payment of contingent consideration, partially offset by cash provided by $128.2 million in proceeds from term loans, $62.0 million in proceeds from revolving line of credit, $4.0 million in contributions from noncontrolling interests, and $0.5 million in proceeds from issuance of preferred stock.

Previous wording

The Targus Credit Agreement is secured by substantially all Targus assets as collateral defined in the Targus Credit Agreement. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. The Targus Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts outstanding under the Targus Credit Agreement. On October 31, 2023 and February 20, 2024, the Company entered into Amendment No. 1 and Amendment No. 2 to the Targus Credit Agreement, which, among other things, modified the fixed charge coverage ratio and the minimum earnings before interest, taxes, depreciation, and amortization requirements which waived the financial covenant breaches for the periods ended September 30, 2023 and December 31, 2023, respectively. We are in compliance with all financial covenants in the Targus Credit Agreement as of March 31, 2024.

Current wording

The Targus Credit Agreement is secured by substantially all Targus assets as collateral defined in the Targus Credit Agreement which totals approximately $216.9 million . The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. The Targus Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts outstanding under the Targus Credit Agreement. On October 31, 2023 and February 20, 2024, we entered into Amendment No. 1 and Amendment No. 2 to the Targus Credit Agreement, which, among other things, modified the fixed charge coverage ratio and the minimum earnings before interest, taxes, depreciation, and amortization requirements which waived the financial covenant breaches for the periods ended September 30, 2023 and December 31, 2023, respectively. Amendment No. 2 also provided, among other things, with a cure right for us to provide a capital contribution to Targus in the event of a financial covenant breach. For the period ended September 30, 2023, the Fixed Charge Coverage Ratio “FCCR” covenant was not fulfilled in accordance with the Targus Credit Agreement and for the period ended December 31, 2023, the FCCR and minimum EBITDA covenant was not fulfilled in accordance with the Targus Credit Agreement. However, the amendments to the Targus Credit Agreement and the capital contributions made to the subsidiary cured the covenant breaches. On June 27, 2024 we entered into Amendment No. 3 to the Targus Credit Agreement to replace the terminating Canadian benchmark interest rate with the Term CORRA Reference Rate. For the period ended June 30, 2024, the minimum EBITDA covenant was also breached. On August 14, 2024, we contributed $1,602 to Targus to cure a minimum EBITDA financial covenant requirement for the period ended June 30, 2024.

Previous wording

Principal outstanding for the term loan under the amended Targus Credit Agreement is due in quarterly installments. The quarterly installment on June 30, 2024 is in the amount of $1.4 million. Quarterly installments from September 30, 2024 to December 31, 2025 are in the amount of $2.1 million per quarter and the remaining principal balance is due on March 31, 2026.

Current wording

Principal outstanding for the term loan under the amended Targus Credit Agreement is due in quarterly installments. Quarterly installments from September 30, 2024 to December 31, 2025 are in the amount of $2.1 million per quarter and the remaining principal balance is due on March 31, 2026.

Previous wording

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $14.4 million (net of unamortized debt issuance costs of $0.3 million) and $17.8 million (net of unamortized debt issuance costs of $0.4 million), respectively, and the outstanding balance on the revolver loan was $22.2 million and $43.8 million, respectively. Interest expense on these loans during the three months ended March 31, 2024 and 2023 was $1.4 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.03 million) and $1.8 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.0 million), respectively. The interest rate on the term loan was 11.16% and 10.20% and the interest rate on the revolver loan ranged between 9.19% to 11.50% and between 8.45% to 11.25% as of March 31, 2024 and December 31, 2023, respectively. The weighted average interest rate on the revolver loan was 9.77% and 8.53% as of March 31, 2024 and December 31, 2023, respectively.

Current wording

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $13.0 million (net of unamortized debt issuance costs of $0.3 million) and $17.8 million (net of unamortized debt issuance costs of $0.4 million), respectively, and the outstanding balance on the revolver loan was $19.8 million and $43.8 million, respectively. Interest expense on these loans during the three and six months ended June 30, 2024 was $1.1 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.03 million) and $2.4 million (including amortization of deferred debt issuance costs of $0.4 million and unused commitment fees of $0.1 million), respectively. Interest expense on these loans during the three and six months ended June 30, 2023 was $2.1 million (including amortization of deferred debt issuance costs of $0.2 million and unused commitment fees of $0.02 million) and $3.8 million (including amortization of deferred debt issuance costs of $0.3 million and unused commitment fees of $0.04 million), respectively. The interest rate on the term loan was 11.18% and 10.20% and the interest rate on the revolver loan ranged between 9.19% to 11.50% and between 8.45% to 11.25% as of June 30, 2024 and December 31, 2023, respectively. The weighted average interest rate on the revolver loan was 10.21% and 8.53% as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus a margin of 3.00% to 3.75% per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus applicable spread adjustment. As of March 31, 2024 and December 31, 2023, the interest rate on the Lingo Credit Agreement was 8.69% and 8.70%, respectively.

Current wording

The term loan bears interest on the outstanding principal amount equal to the term SOFR rate plus a margin of 3.00% to 3.75% per annum, depending on the consolidated total funded debt ratio as defined in the Lingo Credit Agreement, plus applicable spread adjustment. As of June 30, 2024 and December 31, 2023, the interest rate on the Lingo Credit Agreement was 8.70%.

Previous wording

The Lingo Credit Agreement is guaranteed by the Company and Lingo's subsidiaries and secured by certain Lingo assets and equity interests as collateral defined in the Lingo Credit Agreement. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of its businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the Lingo Credit Agreement requires the Borrower to maintain certain financial ratios. The Lingo Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the Lingo Credit Agreement. We are in compliance with all financial covenants in the Lingo Credit Agreement as of March 31, 2024.

Current wording

The Lingo Credit Agreement is guaranteed by the Company and Lingo's subsidiaries and secured by certain Lingo assets and equity interests as collateral which totals approximately $238.5 million defined in the Lingo Credit Agreement. The agreement contains certain covenants, including those limiting the Borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of its businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the Lingo Credit Agreement requires the Borrower to maintain certain financial ratios. The Lingo Credit Agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. If an event of default occurs, the agent would be entitled to take various actions, including the acceleration of amounts due under the Lingo Credit Agreement. We are in compliance with all financial covenants in the Lingo Credit Agreement as of June 30, 2024. We received a series of extensions under our credit agreement with Banc of California, N.A. with the most recent being dated December 18, 2024 to extend the required time to deliver our second quarter unaudited condensed consolidated financial statements to January 21, 2025.

Previous wording

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $60.4 million (net of unamortized debt issuance costs of $0.7 million) and $63.2 million (net of unamortized debt issuance costs of $0.7 million), respectively. Interest expense on the term loan during the three months ended March 31, 2024 and 2023 was $1.5 million (including amortization of deferred debt issuance costs of $0.1 million) and $1.6 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

Current wording

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $57.8 million (net of unamortized debt issuance costs of $0.6 million) and $63.2 million (net of unamortized debt issuance costs of $0.7 million), respectively. Interest expense on the term loan during the three and six months ended June 30, 2024 was $1.4 million (including amortization of deferred debt issuance costs of $0.1 million) and $2.9 million (including amortization of deferred debt issuance costs of $0.1 million), respectively. Interest expense on the term loan during the three and six months ended June 30, 2023 was $1.6 million (including amortization of deferred debt issuance costs of $0.1 million) and $3.2 million (including amortization of deferred debt issuance costs of $0.1 million), respectively.

Previous wording

As a result of the Company obtaining a majority ownership interest in bebe on October 6, 2023, bebe's credit agreement with SLR Credit Solutions (the “bebe Credit Agreement”) for a $25.0 million five-year term loan with a maturity date of August 24, 2026 is included in the Company's long-term debt. The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 5.50% to 6.00% per annum, depending on the total fixed charge coverage ratio as defined in the bebe Credit Agreement. As of March 31, 2024 and December 31, 2023, the interest rate on the bebe Credit Agreement was 11.10% and 11.14%, respectively.

Current wording

As a result of the Company obtaining a majority ownership interest in bebe on October 6, 2023, bebe's credit agreement with SLR Credit Solutions (the “bebe Credit Agreement”) for a $25.0 million -year term loan with a maturity date of August 24, 2026 is included in the Company's long-term debt. The term loan bears interest on the outstanding principal amount equal to the Term SOFR rate plus a margin of 5.50% to 6.00% per annum, depending on the total fixed charge coverage ratio as defined in the bebe Credit Agreement. As of June 30, 2024 and December 31, 2023, the interest rate on the bebe Credit Agreement was 11.11% and 11.14%, respectively.

Previous wording

The bebe Credit Agreement is collateralized by a first lien on all bebe assets and pledges of capital stock including equity interests. The agreement contains certain covenants, including those limiting the borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the agreement requires bebe to maintain certain financial ratios. The agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. We are in compliance with all financial covenants in the bebe Credit Agreement as of March 31, 2024.

Current wording

The bebe Credit Agreement is collateralized by a first lien on all bebe assets and pledges of capital stock including equity interests which totals approximately $129.8 million. The agreement contains certain covenants, including those limiting the borrower’s ability to incur indebtedness, incur liens, sell or acquire assets or businesses, change the nature of their businesses, engage in transactions with related parties, make certain investments or pay dividends. In addition, the agreement requires bebe to maintain certain financial ratios. The agreement also contains customary representations and warranties, affirmative covenants, and events of default, including payment defaults, breach of representations and warranties, covenant defaults and cross defaults. We are in compliance with all financial covenants in the bebe Credit Agreement as of June 30, 2024.

Previous wording

As of March 31, 2024 and December 31, 2023, the outstanding balance on the term loan was $22.2 million (net of unamortized debt issuance costs of $0.6 million) and $22.5 million (net of unamortized debt issuance costs of $0.6 million), respectively. Interest expense on the term loan during the three months ended March 31, 2024 was $0.7 million (including amortization of deferred debt issuance costs of $0.1 million).

Current wording

As of June 30, 2024 and December 31, 2023, the outstanding balance on the term loan was $22.0 million (net of unamortized debt issuance costs of $0.5 million) and $22.5 million (net of unamortized debt issuance costs of $0.6 million), respectively. Interest expense on the term loan during the three and six months ended June 30, 2024 was $0.7 million (including amortization of deferred debt issuance costs of $0.1 million) and $1.4 million (including amortization of deferred debt issuance costs of $0.1 million), respectively. On October 25, 2024, upon the closing of the Brands Transaction as described in Note 21 – Subsequent Events proceeds of $22.2 million was used to pay off the then outstanding balance of the loan in full and $0.2 million of loan payoff expenses.