B Riley Financial Inc

Previous wording

B. Riley Financial, Inc. (Nasdaq: RILY) (the “Company”) is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. We operate through several consolidated subsidiaries (collectively, “B. Riley”) that provide investment banking, brokerage, wealth management, asset management, direct lending, business advisory, valuation, and asset disposition services to a broad client base spanning public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals.

Current wording

B. Riley Financial, Inc. (Nasdaq: RILY) (the “Company”) is a diversified financial services “platform” that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. We operate through several consolidated subsidiaries (collectively, “B. Riley”) that provide investment banking, brokerage, wealth management, asset management, direct lending, and business advisory services to a broad client base spanning public and private companies, financial sponsors, investors, financial institutions, legal and professional services firms, and individuals.

Previous wording

The Company opportunistically invests in and acquires companies or assets with attractive risk-adjusted return profiles to benefit our shareholders. We own and operate several uncorrelated consumer businesses and invest in brands on a principal basis. Our approach is focused on high quality companies and assets in industries in which we have extensive knowledge and can benefit from our experience to make operational improvements and maximize free cash flow. Our principal investments often leverage the financial, restructuring, and operational expertise of our professionals who work collaboratively across disciplines.

Current wording

The Company opportunistically invests in and acquires companies or assets with attractive risk-adjusted return profiles to benefit our shareholders. We own and operate several uncorrelated consumer businesses on a principal basis. Our approach is focused on high quality companies and assets in industries in which we have extensive knowledge and can benefit from our experience to make operational improvements and maximize free cash flow. Our principal investments often leverage the financial, restructuring, and operational expertise of our professionals who work collaboratively across disciplines.

Previous 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.

Current wording

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

Previous wording

We maintain a diverse composition of businesses that operate in six reportable segments. Management evaluates many different financial and non-financial metrics to assess the individual performance of each of these various businesses. However, across most businesses, management primarily assesses each business’s financial performance based upon each of the business’s revenues and operating profits generated excluding non-cash charges and the impact of gains and losses related to securities and other investments held. Management believes that gains and losses on individual investments are generally impacted by individual characteristics specific to each investment and although this has an impact on our overall financial performance the impact of these gains and losses may not be indicative of the overall strength or weakness in each of our business operations. Additionally, in evaluating the financial performance of each of our businesses, management monitors the increase or decrease in operating results from period to period while factoring in the relative volatility inherent in each industry in which these businesses operate. Management recognizes that some of the Company’s businesses, such as the Auctions and Liquidations business, exhibit more volatile results due to the nature of the business having substantial revenue associated with a limited number of retail liquidation engagements.

Current wording

We maintain a diverse composition of businesses that operate in five reportable segments. Management evaluates many different financial and non-financial metrics to assess the individual performance of each of these various businesses. However, across most businesses, management primarily assesses each business’s financial performance based upon each of the businesses revenues and operating profits generated excluding non-cash charges and the impact of gains and losses related to securities and other investments held. Management believes that gains and losses on individual investments are generally impacted by individual characteristics specific to each investment and although this has an impact on our overall financial performance the impact of these gains and losses may not be indicative of the overall strength or weakness in each of our business operations. Additionally, in evaluating the financial performance of each of our business, management monitors the increase or decrease in operating results from period to period while factoring in the relative volatility inherent in each industry in which these businesses operate. Management recognizes that some of the Company’s businesses exhibit more volatile results.

Previous wording

The fair value adjustments on loans receivable for the three months ended June 30, 2024 and 2023 were $(175.6) million and $9.2 million, respectively. The fair value adjustments on loans receivable for the six months ended June 30, 2024 and 2023 was $(187.8) million and $52.5 million, respectively. During the three and six months ended June 30, 2024, we recorded $(151.1) million and $(168.4) million of fair value adjustments to the loan receivable from Vintage Capital Management, LLC ("VCM"). The fair value adjustments are related primarily to the decline in the equity fair value of Freedom VCM Holdings, LLC which, along with certain guarantees, is the primary collateral for this loan. The decline in equity fair value of Freedom VCM Holdings, LLC is primarily due to increases in net debt as well as declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc. common stock, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business units. Subsequent to June 30, 2024, the collateral value for the VCM loan receivable was impacted due to the filing of Freedom VCM’s voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024. The fair value of the underlying collateral for this loan subsequently decreased to a fair value of approximately $2.2 million at September 30, 2024. The $45.5 million of loans receivable from Core Scientific, Inc. (“Core Scientific”) at December 31, 2023 included a loan in the amount of $42.1 million that was settled in full upon Core Scientific’s exit from Chapter 11 bankruptcy in January 2024. The Company received common shares of Core Scientific in accordance with the bankruptcy emergence plan which became publicly traded. The Company received Core Scientific common stock with a fair value of $50.4 million for settlement of the $42.1 million loan receivable. The fair value of the Core Scientific common stock received was measured using an amount that approximated the share price of Core at emergence from bankruptcy as set forth in Core’s bankruptcy emergence plan and a gain in the amount of $9.1 million was recognized.

Current wording

During the three and nine months ended September 30, 2024, fair value adjustments for the loan receivable for Vintage Capital Management, LLC was $(54.3) million and $(222.7) million, respectively. The fair value adjustments are related primarily to the decline in the equity fair value of Freedom VCM Holdings, LLC (“Freedom VCM”) which, along with certain guarantees, is the primary collateral for this loan. The decline in the equity fair value of Freedom VCM is due to increases in net debt, a decrease in the operational performance of Freedom VCM various business units during 2024, and a decline in the equity value of Freedom VCM’s investment in Conn’s, Inc. common stock which was impacted by Conn’s Inc. voluntary petition filing on July 23, 2024 for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). Subsequent to September 30, 2024, the collateral value for the VCM loan receivable was also impacted due to the filing of Freedom VCM’s voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024. These factors resulted in a decrease in the fair value of the Freedom VCM loan receivable to $2.3 million at September 30, 2024.

Previous wording

During the three and six months ended June 30, 2024, we recorded $(12.0) million and $(13.7) million of fair value adjustments to the loan receivable for Freedom VCM Receivables, Inc.. The fair value adjustments are related to higher projected charge offs of receivables on the consumer receivable portfolio that are currently serviced by Conn's, Inc. which is expected to be impacted by Conn’s voluntary petition filing on July 23, 2024 for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

Current wording

During the three and nine months ended September 30, 2024, we recorded $0.5 million and $(13.2) million of fair value adjustments to the loan receivable for Freedom VCM Receivables, Inc.. The fair value adjustment of $(13.2) million during the nine months ended September 30, 2024 was primarily due to a fair value adjustment of $12.0 million recorded in the second quarter of 2024 resulting from higher projected charge offs of receivables on the consumer receivable portfolio that are serviced by Conn's, Inc. which was impacted by Conn’s voluntary petition filing on July 23, 2024 for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

Previous wording

The fair value adjustments on loans receivable were $9.2 million and $52.5 million during the three and six months ended June 30, 2023. The fair value adjustment to the loan receivable for Core Scientific, Inc. was $3.1 million and $35.5 million for the three and six months ended June 30, 2023. Core Scientific, Inc. provides digital infrastructure for bitcoin mining and high-performance computing. Core Scientific, Inc. filed Chapter 11 bankruptcy in 2022, leading to a significant mark down of the loan receivable in the fourth quarter of 2022. Subsequent to the Chapter 11 restructuring, and during the first quarter of 2023, there was an increase in bitcoin prices resulting in significant growth and value assumptions for the Core Scientific, Inc. loan receivable. As a result, the Core Scientific, Inc. loan receivable received a fair value adjustment of $35.5 million for the six months ended June 30, 2023.

Current wording

During the nine months ended September 30, 2024, fair value adjustments for the loan receivable from Core Scientific, Inc. was $8.5 million. In the prior year nine months ended September 30, 2023, fair value adjustments for the loans receivable from Core Scientific, Inc. was $34.8 million. Core Scientific, Inc. provides digital infrastructure for bitcoin mining and high-performance computing. Core Scientific, Inc. filed Chapter 11 bankruptcy in 2022, leading to a significant mark down of the loan receivable in the fourth quarter of 2022. Subsequent to the Chapter 11 restructuring, and during the first quarter of 2023, there was a significant rebound in bitcoin prices resulting in significant growth and value assumptions. As a result, the Core Scientific, Inc. loan receivable had a fair value adjustment of $34.8 million for the nine months ended September 30, 2023.

Previous wording

Total assets under management were approximately $25.6 billion, $25.4 billion, and $24.9 billion at June 30, 2024, December 31, 2023, and June 30, 2023, respectively. Of these amounts, advisory assets under management totaled approximately $8.0 billion at June 30, 2024, and December 31, 2023, and $7.7 billion at June 30, 2023. Advisory revenues were 0.25% and 0.24% of average advisory assets under management during the three months ended June 30, 2024 and 2023, respectively, and 0.25% and 0.23% of average advisory assets under management during the six months ended June 30, 2024 and 2023, respectively. The average revenues earned on advisory assets under management are not expected to fluctuate significantly from period to period as a percentage of advisory assets under management. Broker revenues are primarily comprised of commissions and fees earned from trading activities from brokerage client assets. Other revenues is primarily comprised of tax service fees and management fees earned from comprehensive client focused services performed. On October 31, 2024, we signed a definitive agreement to sell a portion of the Company’s traditional (W-2) Wealth Management business to Stifel Financial Corp. (“Stifel”) as more fully described in recent developments.

Current wording

Total assets under management were approximately $25.7 billion, $25.4 billion, and $24.0 billion at September 30, 2024, December 31, 2023, and September 30, 2023, respectively. Of these amounts, advisory assets under management totaled approximately $8.1 billion at September 30, 2024, and $8.0 billion at December 31, 2023, and $7.5 billion at September 30, 2023. Advisory revenues were 0.24% of average advisory assets under management during the three months ended September 30, 2024 and 2023, respectively, and 0.25% and 0.24% of average advisory assets under management during the nine months ended September 30, 2024 and 2023, respectively. The average revenues earned on advisory assets under management are not expected to fluctuate significantly from period to period as a percentage of advisory assets under management. Broker revenues are primarily comprised of commissions and fees earned from trading activities from brokerage client assets. Other revenues is primarily comprised of tax service fees and management fees earned from comprehensive client focused services performed.

Previous wording

Financial Consulting Segment -We provide a variety of specialized advisory services spanning bankruptcy, restructuring, turnaround management, forensic accounting, crisis and litigation support, appraisal and valuation, real estate, and operations management. On November 15, 2024, as more fully described in recent developments, the Company entered into a transaction whereby, approximately 52.6% of the common equity interests of a newly formed subsidiary that included the Company’s appraisal and valuation and real estate advisory services operations, along with the Company’s auction and liquidations operations, was sold to an investment management firm. These operations are expected to be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% in the business.

Current wording

Financial Consulting Segment -We provide a variety of specialized advisory services spanning bankruptcy, restructuring, turnaround management, forensic accounting, crisis and litigation support, and operations management. On November 15, 2024, as more fully described in recent developments, the Company entered into a transaction whereby approximately 52.6% of the common equity interests of a newly formed subsidiary that included the Company’s appraisal and valuation and real estate advisory services operations along with the Company’s auction and liquidations operations was sold to an investment management firm. These operations are included in discontinued operations as discussed in Note 4 to the accompanying condensed consolidated financial statements and are expected to be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% in the business.

Previous wording

Our operating results are primarily comprised of the operations of these businesses within our six reportable operating segments. However, we also generate revenues from other businesses that we may acquire with the goal to expand their operations, drive growth, and create operational efficiencies to improve cash flows to reinvest across other business operations in our platform. These businesses are typically in fragmented markets and include the operations of a regional environmental services business, bebe which operates rent-to-own stores, and a technology company that provides e-commerce platforms, marketing and technology services acting as a merchant for consumer brand companies.

Current wording

Our operating results are primarily comprised of the operations of these businesses within our five reportable operating segments. However, we also generate revenues from other businesses that we may acquire with the goal to expand their operations, drive growth, and create operational efficiencies to improve cash flows to reinvest across other business operations in our platform. These businesses are typically in fragmented markets and include the operations of a regional environmental services business, bebe which operates rent-to-own stores, and a technology company that provides e-commerce platforms, marketing and technology services acting as a merchant for consumer brand companies.

Previous wording

We also generate operating revenues from our majority owned subsidiary that licenses the trademarks and intellectual properties from our ownership of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore. We also generate other income from dividends we receive from our equity ownership of investments that range from 10% to 50% in companies that license the trademark and intellectual property of the Hurley, Justice, and Scotch & Soda brands and bebe and Brookstone brands (equity ownership of bebe stores, inc., our majority owned subsidiary). We have elected to account for these equity investments using the fair value method of accounting and the fair value of these investments totaled $288.0 million and $283.1 million at June 30, 2024 and December 31, 2023, respectively. These investments are in private companies where the fair value at each reporting date is measured using valuation models that require significant estimates made by our management where we use operational data received from each of these individual operating companies that we do not manage. The changes in fair value for these brand investments could have a material impact on our net income that we report each reporting period. The change in fair value of these investments include unrealized gains which are reported in other income (expense) – realized and unrealized gains (losses) on investments and totaled $4.9 million and ($9.9) million during the six months ended June 30, 2024 and 2023, respectively. Dividends from these investments which are reported in other income (expense) – dividend income and totaled $17.6 million and $16.6 million during the six months ended June 30, 2024 and 2023, respectively. On October 25, 2024, as more fully described below in recent developments, the Company’s majority owned subsidiary bebe stores, inc.

Current wording

In prior years, we also generated operating revenues from our majority owned subsidiary that licenses the trademarks and intellectual properties from our ownership of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore and we generated other income from dividends we receive from our equity ownership of investments that range from 10% to 50% in companies that license the trademark and intellectual property of the Hurley, Justice, and Scotch & Soda brands and bebe and Brookstone brands (equity ownership of bebe stores, inc., our majority owned subsidiary). We also reported fair value adjustments from these equity investments since we elected to account for these equity investments using the fair value method of accounting. These operations are included in discontinued operations as discussed in Note 4 to the accompanying condensed consolidated financial statements and are expected to be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% in the business. These operating results are included in discontinued operations and are expected to be deconsolidated as a result of the Sale by bebe and completion of the Secured Financing of the Brand Interests as discussed in Note 4 to the accompanying condensed consolidated financial statements.

Previous wording

Securities and Other Investments Owned Portfolio –We have a portfolio of securities and other investments owned that consists of public equity securities, private securities that are primarily comprised of our 31% investment in Freedom VCM Holdings, LLC and brand investments described above, partnership interests and other investments, corporate bonds and other fixed income securities as follows at June 30, 2024 and December 31, 2023:

Current wording

Securities and Other Investments Owned Portfolio –We have a portfolio of securities and other investments owned that consists of public equity securities, private securities that are primarily comprised of our 31% investment in Freedom VCM Holdings, LLC described above, partnership interests and other investments, corporate bonds and other fixed income securities as follows at September 30, 2024 and December 31, 2023:

Previous wording

Securities and other investments owned was $664.1 million and $1,092.1 million as of June 30, 2024 and December 31, 2023. Of this amount, the fair value of equity securities totaled $606.2 million and $994.6 million as of June 30, 2024 and December 31, 2023. Of these amounts, public equity securities totaled $137.5 million and $194.5 million as of June 30, 2024 and December 31, 2023, and private equity securities totaled $468.7 million and $800.1 million as of June 30, 2024 and December 31, 2023.

Current wording

Securities and other investments owned was $341.8 million and $809.0 million as of September 30, 2024 and December 31, 2023. Of this amount, the fair value of equity securities totaled $289.3 million and $711.6 million as of September 30, 2024 and December 31, 2023. Of these amounts, public equity securities totaled $161.6 million and $194.5 million as of September 30, 2024 and December 31, 2023, and private equity securities totaled $127.7 million and $517.0 million as of September 30, 2024 and December 31, 2023.

Previous wording

The fair value of Double Down Interactive Co., Ltd common stock held as of June 30, 2024 and December 31, 2023 was $53.5 million and $30.4 million, respectively. The change in fair value for the six months ended June 30, 2024 is primarily related to an increase in the public trading price during the period.

Current wording

The fair value of our Double Down Interactive Co., Ltd common stock held as of September 30, 2024 and December 31, 2023 was $66.5 million and $30.4 million, respectively. The change in fair value for the nine months ended September 30, 2024 is primarily related to an increase in the public share price during the period.

Previous wording

The fair value of the investment in Freedom VCM Holdings, LLC held as of June 30, 2024 and December 31, 2023 was $63.7 million and $287.0 million, respectively. During the six months ended June 30, 2024, fair value adjustments were recorded in the amount of $(223.3) million primarily due to increases in net debt, declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc. common stock and impact of Conn's bankruptcy filing on July 23, 2024, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business segments.

Current wording

The fair value of our investment in Freedom VCM Holdings, LLC held as of September 30, 2024 and December 31, 2023 was zero and $287.0 million, respectively. During the nine months ended September 30, 2024, we recorded fair value adjustments of $(221.0) million primarily due to increases in net debt, declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc. common stock and impact of Conn's bankruptcy filing on July 23, 2024, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business segments. Subsequent to September 30, 2024, the investment in Freedom VCM Holdings, LLC was also impacted due to the filing of Freedom VCM’s voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024.

Previous wording

During the three and six months ended June 30, 2024, realized and unrealized losses of $(155.7) million and $(185.2) million were recorded to other income as realized and unrealized losses on investments. These realized and unrealized losses are made up of realized and unrealized gains (losses) recorded to public equity securities, private equity securities, corporate bonds, and partnership interest and other investments. The majority of realized and unrealized (losses) gains on investments during the three and six months ended June 30, 2024 are related to public equity securities (equity securities that trade on major exchanges), and private equity securities.

Current wording

During the three and nine months ended September 30, 2024, realized and unrealized losses of $(22.2) million and $(212.4) million were recorded to other income as realized and unrealized losses on investments. These realized and unrealized losses are made up of realized and unrealized gains (losses) recorded to public equity securities, private equity securities, corporate bonds, and partnership interest and other investments. The majority of realized and unrealized (losses) gains on investments during the three and nine months ended September 30, 2024 are related to public equity securities (equity securities that trade on major exchanges), and private equity securities.

Previous wording

During the three and six months ended June 30, 2024, $9.2 million and $18.0 million of realized and unrealized gains were recorded for public equity securities to other income as realized and unrealized gains on investments. Of these amounts, Double Down Interactive Co., Ltd common stock made up the majority of the gains which amounted to $7.7 million and $21.8 million during the three and six months ended June 30, 2024, which was primarily related to an increase in the public trading share price during the period.

Current wording

During the three and nine months ended September 30, 2024, $29.3 million and $47.3 million of realized and unrealized gains were recorded for public equity securities to other income as realized and unrealized gains on investments. Of these amounts, Double Down Interactive Co., Ltd common stock made up the majority of the balances. During the three and nine months ended September 30, 2024, we recorded $13.1 million and $35.0 million, respectively, to realized and unrealized gains related to Double Down Interactive Co., Ltd. primarily related to public share price movements during these periods.

Previous wording

During the three and six months ended June 30, 2024, $(164.5) million and $(206.3) million of realized and unrealized losses were recorded for private equity securities to other income as realized and unrealized losses on investments. Of these amounts, our investment in Freedom VCM Holdings, LLC made up the majority of the balances. During the three and six months ended June 30, 2024, we recorded $(139.4) million and $(172.0) million of unrealized losses related to our investment in Freedom VCM Holdings, LLC. The decrease in fair values was primarily due to increases in net debt, declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc. common stock, and a decrease in the operational performance of Freedom VCM Holdings, LLC’s various business segments. Subsequent to June 30, 2024, Freedom VCM filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on November 3, 2024 which impacts the future fair value of the investment in Freedom VCM. The fair value of the investment in Freedom VCM was reduced to zero at September 30, 2024 and a fair value adjustment of approximately $(63.7) million was recorded in the quarter ended September 30, 2024.

Current wording

During the three and nine months ended September 30, 2024, $(50.8) million and $(262.0) million of realized and unrealized losses were recorded for private equity securities to other income as realized and unrealized losses on investments. Of these amounts, our investment in Freedom VCM Holdings, LLC made up the majority of the balances. During the three and nine months ended September 30, 2024, we recorded $(49.0) million and $(221.0) million to realized and unrealized losses related to our investment in Freedom VCM Holdings, LLC. The entirety of the balances were made related to fair value adjustments due primarily to increases in net debt as well as significant declines in Freedom VCM Holdings, LLC’s investment in Conn’s, Inc., market-related inputs, and overall operational performance.

Previous wording

Financial, including, but not limited to, requiring BR Financial approval for certain fundamental actions. The Investors will have certain drag-along rights following the second-year anniversary of the Closing Date and certain call rights exercisable starting on the fifth-year anniversary of the Closing Date. The Great American NewCo LLCA sets forth distribution mechanics pursuant to which Great American NewCo will make distributions in cash and payment-in-kind at any time the board of directors may authorize, with the Class A Preferred Units having priority in any such distribution over Class B Preferred Units. In addition, the Great American NewCo LLCA will contain certain transfer restrictions and other transfer rights and obligations that apply to BR Financial, the Investors and other unitholders, as applicable, in certain circumstances. Upon closing the Equity Purchase Agreement on November 15, 2024, B. Riley will record a gain of approximately $235.0 million and the operations of Great American NewCo will be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% of the common units along with the Preferred B units described above. After the closing of the Equity Purchase Agreement, the Company will account for this equity method investment under the equity method of accounting.

Current wording

Under the Great American NewCo LLCA, Great American NewCo will initially have a five-member board of directors that will oversee the day-to-day management of Great American NewCo, subject to certain approval rights reserved for the Investors and/or BR Financial, as applicable. The Investors will be entitled to appoint a majority of the directors of the board for so long as they collectively hold at least 25% of their combined amount of Common Units owned immediately following the Closing. The Great American NewCo LLCA will also contain certain protections for BR Financial, including, but not limited to, requiring BR Financial approval for certain fundamental actions. The Investors will have certain drag-along rights following the second-year anniversary of the Closing Date and certain call rights exercisable starting on the fifth-year anniversary of the Closing Date. The Great American NewCo LLCA sets forth distribution mechanics pursuant to which Great American NewCo will make distributions in cash and payment-in-kind at any time the board of directors may authorize, with the Class A Preferred Units having priority in any such distribution over Class B Preferred Units. In addition, the Great American NewCo LLCA will contain certain transfer restrictions and other transfer rights and obligations that apply to BR Financial, the Investors and other unitholders, as applicable, in certain circumstances. Upon closing the Equity Purchase Agreement on November 15, 2024, B. Riley will record a gain of approximately $235.0 million and the operations of Great American NewCo will be deconsolidated since B. Riley will no longer have control and will own a non-controlling equity investment ownership interest of 44.2% of the common units along with the Preferred B units described above. After the closing of the Equity Purchase Agreement, the Company will account for this equity method investment under the equity method of accounting.

Previous wording

Additionally, in connection with the Transfer and Contribution Agreement, bebe stores, inc., a California corporation and majority owned subsidiary of the Company (“bebe”), entered into a membership interest purchase agreement, dated October 25, 2024 (the “bebe Purchase Agreement”), by and among bebe, HBN 120, LLC, a Delaware limited liability company (“Buyer”), BB Brand Holdings LLC, a Delaware limited liability company (“BB Brand Holdings”), and BKST Brand Management LLC, a New York limited liability company (“BKST Brand Management” and together with BB Brand Holdings, the “bebe Brands”), pursuant to which, among other things, bebe sold its limited liability company interests in the bebe Brands to Buyer, an affiliate of the Purchaser for approximately $46.6 million in net proceeds (such sale, the “Sale”), with certain of such proceeds applied towards indebtedness related to the bebe holdings. Upon closing of the Sale proceeds of $22.2 million was used to pay off the then outstanding balance of the bebe Credit Agreement in full (see note 10) and $0.2 million of loan related pay off expenses.

Current wording

Additionally, in connection with the Transfer and Contribution Agreement, bebe stores, inc., a California corporation and majority owned subsidiary of the Company (“bebe”), entered into a membership interest purchase agreement, dated October 25, 2024 (the “bebe Purchase Agreement”), by and among bebe, HBN 120, LLC, a Delaware limited liability company (“Buyer”), BB Brand Holdings LLC, a Delaware limited liability company (“BB Brand Holdings”), and BKST Brand Management LLC, a New York limited liability company (“BKST Brand Management” and together with BB Brand Holdings, the “bebe Brands”), pursuant to which, among other things, bebe sold its limited liability company interests in the bebe Brands to Buyer, an affiliate of the Purchaser for approximately $46.6 million in net proceeds (such sale, the “Sale”), with certain of such proceeds applied towards indebtedness related to the bebe holdings. Upon closing of the Sale proceeds of $22.2 million was used to pay off the then outstanding balance of the bebe Credit Agreement in full (see note 11 to the accompanying condensed consolidated financial statements) and $0.2 million of loan related pay off expenses.

Previous wording

CEO and his alleged involvement in fraudulent schemes despite the fact that these allegations are unrelated to FRG and its businesses. In the meantime, the consumer-facing portion of the U.S. economy has deteriorated. On July 23, 2024, Conn’s, Inc. (“Conn’s”) and certain of its subsidiaries filed voluntary petitions for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). FRG, pursuant to a transaction consummated in January 2024, acquired a substantial equity investment in Conn’s in exchange for the sale of its Badcock Home Furniture & more business to Conn’s. The commencement of the Chapter 11 Cases constitute an event of default that accelerated the obligations under the Term Loan and Security Agreement, dated as of December 18, 2023 (the “Conn’s Term Loan”), among Conn’s, W.S. Badcock LLC, as borrowers, and an affiliate of the Company, as administrative agent, collateral agent, and lender. As of the date of the filing of the Chapter 11 Cases, $93.0 million in outstanding borrowings existed under the Conn’s Term Loan. Any efforts to enforce payment obligations under the Conn’s Term Loan are automatically stayed as a result of the Chapter 11 Cases and the Company’s rights of enforcement in respect of the Conn’s Term Loan are subject to the applicable provisions of the Bankruptcy Code.

Current wording

The Company’s results during the three and nine months ended September 30, 2024 were negatively impacted by a significant non-cash markdown of $(54.3) million and $(222.7) million related to its investment in Freedom VCM Holdings, LLC (“Freedom VCM”), the indirect parent entity for Franchise Group (“FRG”). Freedom VCM’s strategy, which included the potential divestiture or monetization of certain assets, was materially negatively impacted by the unexpected announcement in November 2023 concerning FRG’s former CEO and his alleged involvement in fraudulent schemes despite the fact that these allegations are unrelated to FRG and its businesses. In the meantime, the consumer-facing portion of the U.S. economy has deteriorated. On July 23, 2024, Conn’s, Inc. (“Conn’s”) and certain of its subsidiaries filed voluntary petitions for relief (the “Chapter 11 Cases”) under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). FRG, pursuant to a transaction consummated in January 2024, acquired a substantial equity investment in Conn’s in exchange for the sale of its Badcock Home Furniture & more business to Conn’s. The commencement of the Chapter 11 Cases constitute an event of default that accelerated the obligations under the Term Loan and Security Agreement, dated as of December 18, 2023 (the “Conn’s Term Loan”), among Conn’s, W.S. Badcock LLC, as borrowers, and an affiliate of the Company, as administrative agent, collateral agent, and lender. As of the date of the filing of the Chapter 11 Cases, $93.0 million in outstanding borrowings existed under the Conn’s Term Loan. Any efforts to enforce payment obligations under the Conn’s Term Loan are automatically stayed as a result of the Chapter 11 Cases and the Company’s rights of enforcement in respect of the Conn’s Term Loan are subject to the applicable provisions of the Bankruptcy Code. The fair value adjustment on the Conn’s loan receivable was $(18.6) million and $(27.1) million for the three and nine months ended September 30, 2024.

Previous wording

On November 3, 2024, FRG, its operating businesses, and certain other affiliates, including Freedom VCM, filed voluntary petitions for relief (the “FRG Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code. As a result, on November 4, 2024, we concluded that we are required to record an additional impairment of with respect to the Freedom VCM Investment and the Vintage Loan Receivable. The additional non-cash impairments of the Freedom VCM Investment and the Vintage Loan Receivable are $118.0 million in the aggregate as of November 4, 2024. As a result of such additional impairment we have ascribed no value to the Freedom VCM Investment and the Vintage Loan Receivable was valued at $2,250 at September 30, 2024. Subsequent to September 30, 2024, the fair value of the underlying collateral for this loan, which is comprised of other public securities, decreased to a fair value of $2,006 at December 20, 2024. As of the date of this Quarterly Report on Form 10-Q, we are in compliance with our Nomura credit agreement notwithstanding the aforementioned events.

Current wording

On November 3, 2024, FRG, its operating businesses, and certain other affiliates, including Freedom VCM, filed voluntary petitions for relief (the “FRG Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code. As a result, on November 4, 2024, we concluded that we are required to record an additional impairment of with respect to the Freedom VCM Investment and the Vintage Loan Receivable. The additional non-cash impairments of the Freedom VCM Investment and the Vintage Loan Receivable are $118.0 million in the aggregate as of November 4, 2024. The fair value adjustment for the Conn’s loan receivable was $(18.6) million for the three months ended September 30, 2024 and $(27.1) million for the nine months ended September 30, 2024. As a result of such additional impairment we have ascribed no value to the Freedom VCM Investment and the Vintage Loan Receivable was valued at $2.3 million at September 30, 2024 which approximates the fair value of the underlying collateral for this loan which is primarily comprised of other securities. Subsequent to September 30, 2024, the fair value of the underlying collateral for this loan, which is comprised of other public securities, decreased to a fair value of $2.2 million at February 7, 2025.

Previous 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.

Current wording

Total revenues decreased $164.0 million to $199.3 million during the three months ended September 30, 2024 from $363.3 million during the three months ended September 30, 2023. The decrease in revenues during the three months ended September 30, 2024 was primarily due to decreases in fair value adjustments on loans of $70.6 million, revenues from services and fees of $45.6 million, interest income from securities lending of $35.3 million, interest income from loans of $16.1 million, and sale of goods of $4.8 million, partially offset by increases in fair value of the portfolio of securities and other investments owned of $8.5 million. Of the $70.6 million decrease in fair value adjustments related to loans, $54.3 million related to the loan to Vintage Capital Management, LLC (“VCM”), and $18.6 million related to the loan to Conn’s Inc. (“Conn’s”), partially offset by fair value gains of $6.0 million related to the loan to Badcock Receivables I. The decrease in revenue of $45.6 million from services and fees in the three months ended September 30, 2024 consisted of decreases in revenue of $50.5 million in the Capital Markets segment, $15.9 million in the Communications segment, and $1.5 million in the Wealth Management segment, partially offset by increases in revenues of $18.6 million in All Other, and $3.7 million in the Financial Consulting segment.

Previous 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.

Current wording

Revenues from services and fees in the Capital Markets segment decreased $50.5 million to $30.4 million during the three months ended September 30, 2024 from $80.9 million during the three months ended September 30, 2023 related to a decrease in underwriting engagements. The decrease in revenues was primarily due to decreases of $46.1 million of corporate finance, consulting, and investment banking fees, $1.9 million in commission fees, $1.0 million in dividends, $0.9 million in asset management fees, and $0.8 million of interest income, partially offset by an increase of $0.2 million in other income.

Previous 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.

Current wording

Revenues from services and fees in the Wealth Management segment decreased $1.5 million to $49.4 million during the three months ended September 30, 2024 from $50.9 million during the three months ended September 30, 2023. The decrease in revenues was primarily due to decreases in revenue of $1.6 million from wealth and asset management fees and $0.1 million in commission fees, partially offset by an increase of $0.2 million in other income.

Previous 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.

Current wording

Revenues from services and fees in the Communications segment decreased $15.9 million to $66.2 million during the three months ended September 30, 2024 from $82.2 million during the three months ended September 30, 2023. The decrease in revenues was primarily due to decreases in subscription revenue of $15.7 million and $0.2 million in advertising and other revenue. We expect UOL, magicJack, and Marconi subscription revenue to continue to decline year-over-year.

Previous 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.

Current wording

Revenues from services and fees in All Other increased $18.6 million to $28.5 million during the three months ended September 30, 2024 from $9.9 million during the three months ended September 30, 2023. These revenues include 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 $12.1 million related to merchandise rental fees from bebe, $5.2 million in commission fees from Nogin, and $4.4 million related to the regional environmental services business, partially offset by a decrease in revenues of $3.1 million due to the sale of the landscaping business in the fourth quarter of 2023.

Previous 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.

Current wording

Trading income (loss) increased approximately $8.5 million to a loss of $1.2 million during the three months ended September 30, 2024 compared to loss of $9.7 million during the three months ended September 30, 2023. The loss of $1.2 million during the three months ended September 30, 2024 was primarily due to realized and unrealized losses on investments made in our proprietary trading accounts.

Previous wording

The fair value adjustment of $175.6 million on our loans receivable during the three months ended June 30, 2024 was primarily due to $151.1 million related to VCM, $12.0 million related to Freedom VCM, $7.4 million related to Badcock Receivables I, and $7.2 million related to Conn’s.

Current wording

The decrease in fair value adjustment of $70.6 million on our loans receivable during the three months ended September 30, 2024 was primarily due to $54.3 million related to VCM, and $18.6 million related to Conn’s, partially offset by an increase of $6.0 million related to Badcock Receivables I.

Previous 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.

Current wording

Interest income – loans decreased $16.1 million to $11.3 million during the three months ended September 30, 2024 from $27.4 million during the three months ended September 30, 2023 due to a reduction in loan receivable balances from $549.1 million as of September 30, 2023 to $151.7 million as of September 30, 2024.

Previous wording

Interest income - securities lending decreased $15.3 million to $24.8 million during the three months ended June 30, 2024 from $40.1 million during the three months ended June 30, 2023. The decrease was due to a decrease in the securities borrowed balance from $2,938.5 million as of June 30, 2023 to $742.9 million as of June 30, 2024.

Current wording

Interest income – securities lending decreased $35.3 million to $7.0 million during the three months ended September 30, 2024 from $42.3 million during the three months ended September 30, 2023. The decrease was due to a reduction in the securities borrowed balance from $2,782.0 million as of September 30, 2023 to $64.0 million as of September 30, 2024.

Previous wording

Revenues from the sale of goods increased $5.6 million to $63.9 million during the three months ended June 30, 2024 from $58.4 million during the three months ended June 30, 2023. The increase was primarily related to an increase of $6.7 million from the Auction and Liquidation segment due to larger international asset deals and an increase of $2.7 million in All Other consisting of $2.3 million in sales of goods from Nogin which we acquired in the second quarter of 2024 and $0.4 million in sales of goods from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, partially offset by a decrease of $3.6 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide and a decrease of $0.2 million from the Communications segment. Cost of goods sold for the three months ended June 30, 2024 increased approximately $6.4 million to $46.7 million from $40.3 million during the three months ended June 30, 2023. The increase in cost of goods sold was primarily attributable to increases of $6.3 million from the Auction and Liquidation segment and $2.2 million from All Other consisting of $1.2 million from Nogin which we acquired in the second quarter of 2024 and $1.0 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, partially offset by decreases of $1.7 million in the Consumer Products segment and $0.4 million in the Communications segment.

Current wording

Revenues from the sale of goods decreased $4.8 million to $55.2 million during the three months ended September 30, 2024 from $60.0 million during the three months ended September 30, 2023. The decrease was primarily related to a decrease of $8.6 million from the Consumer Products segment due to a decrease in computer and peripheral sales worldwide and a decrease of $0.3 million from the Communications segment, partially offset by an increase of $4.1 million in All Other consisting of $3.7 million in sales of goods from Nogin which we acquired in the second quarter of 2024 and $0.4 million in sales 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 September 30, 2024 decreased approximately $1.9 million to $40.3 million from $42.2 million during the three months ended September 30, 2023. The decrease in cost of goods sold was primarily attributable to decreases of $4.1 million in the Consumer Products segment and $0.4 million in the Communications segment, partially offset by an increase of $2.6 million from All Other, primarily from Nogin which we acquired in the second quarter of 2024.

Previous wording

Selling, general and administrative expenses in the Wealth Management segment increased by $0.2 million to $49.2 million during the three months ended June 30, 2024 from $49.0 million during the three months ended June 30, 2023.

Current wording

Selling, general and administrative expenses in the Wealth Management segment increased by $0.3 million to $49.3 million during the three months ended September 30, 2024 from $49.0 million during the three months ended September 30, 2023, primarily due to payroll and related expenses.

Previous wording

Selling, general and administrative expenses in the Financial Consulting segment increased by $5.8 million to $28.7 million during the three months ended June 30, 2024 from $22.9 million during the three months ended June 30, 2023. The increase was primarily due to an increase of $4.5 million in payroll and related expenses related to a business acquired in the third quarter of 2023 and an increase in headcount and an increase of $0.8 million in other expenses.

Current wording

Selling, general and administrative expenses in the Financial Consulting segment increased by $1.9 million to $19.8 million during the three months ended September 30, 2024 from $17.9 million during the three months ended September 30, 2023. The increase was primarily due to an increase of $1.6 million in payroll and related expenses related to a business acquired in the third quarter of 2023 and an increase in headcount and an increase of $0.3 million in other expenses.

Previous 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.

Current wording

Selling, general and administrative expenses in the Communications segment decreased $6.9 million to $21.5 million for the three months ended September 30, 2024 from $28.4 million for the three months ended September 30, 2023. The decrease was primarily due to decreases of $2.7 million in payroll and related expenses, $1.9 million in depreciation and amortization expenses, non-recurring receipt of $1.2 million refund of regulatory taxes that were overpaid in the prior year based on estimated billing, $0.8 million in communications expenses, and $0.3 million in other 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 and sale of the Lingo carrier business in the third quarter of 2024.

Previous wording

Selling, general and administrative expenses in the Consumer Products segment decreased $2.0 million to $17.0 million for the three months ended June 30, 2024 from $19.1 million during the three months ended June 30, 2023. The decrease was primarily due to decreases of $1.4 million in payroll and related expenses due to reduced headcount, $0.9 million in other expenses due to efforts to reduce costs, and $0.7 million in depreciation and amortization expense due to items being fully amortized, partially offset by an increase of $0.8 million in share based compensation due to a reversal of unvested performance based shares compensation expense in the prior year.

Current wording

Selling, general and administrative expenses in the Consumer Products segment decreased $1.9 million to $16.9 million for the three months ended September 30, 2024 from $18.8 million during the three months ended September 30, 2023. The decrease was primarily due to decreases of $0.7 million in payroll and related expenses due to reduced headcount, $0.7 million in depreciation and amortization expense due to items being fully amortized, $0.7 million in currency fluctuation, and $0.6 million in other expenses due to efforts to reduce costs, partially offset by an increase of $0.8 million in professional fees.

Previous wording

Selling, general and administrative expenses for Corporate and All Other increased approximately $14.5 million to $36.5 million during the three months ended June 30, 2024 from $22.1 million during the three months ended June 30, 2023. The increase was primarily due to increases of $9.2 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $6.0 million from Nogin which we acquired in the second quarter of 2024, $2.3 million in transaction costs related to the Nogin acquisition, $1.7 million in legal settlements, and $1.0 million in other expenses, partially offset by a decrease of $5.8 million in payroll and related expenses which primarily related to decreases in share based compensation and other variable compensation.

Current wording

Selling, general and administrative expenses for Corporate and All Other increased approximately $21.4 million to $45.8 million during the three months ended September 30, 2024 from $24.4 million during the three months ended September 30, 2023. The increase was primarily due to increases of $9.3 million from bebe in which we acquired a controlling interest and consolidated during the fourth quarter of 2023, $9.1 million from Nogin which we acquired in the second quarter of 2024, $3.1 million in legal expenses, $2.8 million in currency fluctuation, $2.0 million from the regional environmental services business, $1.6 million in accounting expenses, $1.0 million in transaction costs, $0.9 million in other expenses, and $0.5 million in consulting expenses, partially offset by decreases of $7.5 million in payroll and related expenses, which primarily related to decreases in share based compensation and other variable compensation, $0.9 million related to the landscaping business that was sold in 2023 and $0.7 million in outside contractor expenses.

Previous 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.

Current wording

Other Income (Expense). Other income included interest income of $1.4 million and $0.2 million during the three months ended September 30, 2024 and 2023, respectively. Dividend income was $0.7 million during the three months ended September 30, 2024 compared to $3.4 million during the three months ended September 30, 2023. Realized and unrealized (losses) gains on investments was a loss of $22.2 million during the three months ended September 30, 2024 compared to a loss of $77.3 million during the three months ended September 30, 2023. The change was primarily due to increases in the valuation of our investments in Babcock & Wilcox Enterprises, Inc. of $43.2 million, Alta Equipment Group, Inc. of $17.9 million, Double Down Interactive Co., Ltd of $17.3 million, partially offset by a decrease in valuation of Freedom VCM Holdings, LLC of $49.0 million. Change in fair value of financial instruments and other was a gain of $0.5 million during the three months ended September 30, 2024 and a loss of $4.2 million during the three months ended September 30, 2023. Interest expense was $33.0 million during the three months ended September 30, 2024 compared to $37.5 million during the three months ended September 30, 2023. The decrease in interest expense was due to lower debt balances during the three months ended September 30, 2024. The decreases in interest expense primarily consisted of $5.4 million from the Nomura term loan, $2.1 million from the Pathlight term loan, $2.5 million from the issuance of senior notes, $1.5 million from the Nomura revolving credit facility, $0.2 million and $0.6 million from the Targus term loan and revolver, respectively, $0.4 million from the BRPAC term loan, and $0.3 million from the Lingo term loan, partially offset by increases in interest expense of $0.7 million from the bebe term loan, and $0.4 million from the Nogin secured convertible promissory note.

Previous 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.

Current wording

Loss from Continuing Operations Before Income Taxes. Loss from continuing operations before income taxes was $134.3 million during the three months ended September 30, 2024 compared to loss before income taxes of $123.7 million during the three months ended September 30, 2023. The change was due to a decrease in revenue of $164.0 million, an decrease in operating expenses of $90.2 million, and a decrease of $2.7 million in dividend income, partially offset by a change in realized and unrealized (losses) gains on investments of $55.1 million, a decrease in change in fair value of financial instruments and other of $4.6 million, a decrease in interest expense of $4.5 million and an increase of $1.3 million in interest income.

Previous 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.

Current wording

(Provision for) Benefit from Income Taxes. Provision for income taxes was $14.5 million during the three months ended September 30, 2024 compared to a benefit from income taxes of $23.6 million during the three months ended September 30, 2023. The effective income tax rate was 10.8% for the three months ended September 30, 2024 as compared to 19.1% for the three months ended September 30, 2023.