B. Riley Financial Q3 2026 Earnings Results & Report

B. Riley Financial EPS Results

• Actual EPS: -$6.04
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

B. Riley Financial Revenue Results

• Actual Revenue: $161.33 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

B. Riley Financial (NASDAQ:RILY) is a diversified financial services company that provides investment banking, institutional brokerage, wealth management, asset appraisal, valuation, liquidation and restructuring services. Through its businesses, the company works with public and private companies, institutional investors, private equity firms, financial institutions and individual clients.

The company’s capital markets operations, including B. Riley Securities, offer investment banking, equity research, sales and trading, and related advisory services. Its wealth management business provides investment management, financial planning and brokerage services, while its auction and liquidation operations assist lenders, companies and other stakeholders with asset valuation, disposition and restructuring needs.

B. Riley Financial was founded in 1997 and is headquartered in Los Angeles, California. The company serves clients primarily in the United States, with activities and relationships that extend to international markets. Bryant R. Riley is the company’s chairman and chief executive officer.

B. Riley Financial Q3 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: BRC reported a $243 million third-quarter net loss, driven largely by mark-to-market declines in its investment portfolio, including roughly $227 million in pre-tax losses tied to Babcock & Wilcox and a $14.6 million GA Group impairment. Babcock & Wilcox still represented $160.3 million of investments at quarter-end.
• Positive Sentiment: Despite the quarterly loss, nine-month Operating Adjusted EBITDA was $103.3 million, which management said was on plan, while operating expenses declined year over year. The communications business group also grew year-to-date income despite lower revenue.
• Positive Sentiment: BRC completed the sale of its remaining GA Group interest for $62.3 million and reduced debt by $291.7 million year to date. Management said available cash, operating cash flow, asset proceeds, and expected receipts—including up to $50 million related to SpaceX shares and other funding—are expected to support the Sangoma acquisition and the $164 million senior-note redemption due in December.
• Positive Sentiment: The pending Sangoma acquisition is expected to more than double communications revenue and add $35 million–$40 million of EBITDA, including synergies, according to management; the deal is targeted to close in January 2027. BRC also regained full ownership of B. Riley Securities and is combining infrastructure with its wealth business.
• Negative Sentiment: Capital-markets activity and fees were pressured by volatile markets and lower underwriting, private-placement, and ATM activity; Targus also faced weaker consumer demand and lower laptop-peripheral sales. BRC ended September with $1.14 billion of total debt and has not yet specified its plan for substantial maturities due in 2028 and beyond.

Presentation

[Operator]

Good afternoon, and welcome to the BRC Group Holdings Third Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode for the duration of the prepared remarks. After the speaker's presentation, there will be a question-and-answer session. Please note that this event is being recorded. I would now like to turn the conference over to Bryant Riley, Chairman, Founder, and Co-CEO. Mr. Riley, please go ahead.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Good afternoon, everyone, and thank you for joining us today. With me today are Tom Kelleher, our Co-CEO, and Scott Yessner, our Chief Financial Officer. I want to start with our corporate strategy before we review the quarter. We spent the last year deliberately repositioning our balance sheet and business, redeploying capital into durable operating businesses that generate cash flow.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Earlier this week, we completed the sale of our remaining interest in GA Group, a non-core legacy business that generated significant value for our shareholders over more than a decade. Monetizing GA reduced debt, added liquidity, and supports our pending acquisition of Sangoma. Between the GA proceeds, cash generated by our operating businesses, and anticipated realizations from our carried interests, we expect to fund both the Sangoma acquisition and the redemption of our senior notes due December 2026 without needing to sell long-term investment positions in a dislocated market.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Sangoma is a business communications provider that fits squarely with our existing communications platform and will bring meaningful scale, recurring revenue, and clear opportunities for operating synergies. Sangoma's management team has built a strong, resilient business, and we believe we are acquiring it at an attractive valuation. We know this business model well.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Since acquiring United Online in 2016, we have built our communications portfolio by acquiring and integrating magicJack, Marconi Wireless, BullsEye, and Lingo. We have consistently converted their revenue into cash, generating $52.5 million of operating income over the last 12 months and growing income again this quarter. We also restored 100% ownership of B. Riley Securities in October, and we are advancing its integration with B. Riley Wealth under a shared infrastructure to create a simpler, more efficient platform.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Turning to the quarter, our headline results were weighed down by a few specific items, and I want to be clear about the drivers. Mark-to-market declines in our investment portfolio drove a GAAP net loss, principally our position in Babcock & Wilcox, which accounted for roughly $227 million of pre-tax losses. We also recorded a $14.6 million non-cash impairment to align our GA's investment's carrying value with its sales price.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Excluding B&W, the rest of our securities portfolio generated net gains of $4.8 million. Our investment approach remains deliberate, focused on selective longer and shorter duration opportunities that support our client franchise. We also continue to redeploy capital, convert our loan book to cash, collecting roughly $36 million in loan repayments and receivables this quarter. Operating Adjusted EBITDA was $2.9 million.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Two specific items reduced that figure by $17.4 million: the reversal of a second-quarter unrealized gain on a structured equity financing that we exited for cash in Q3, and a non-cash net markdown of our SpaceX carried interest. Scott will walk through the mechanics. Through the first nine months, Operating Adjusted EBITDA was $103.3 million, and our year-to-date GAAP net loss was $13.2 million.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

In capital markets, the third quarter was a volatile period for small and mid-cap issuers, as rising rates, wider credit spreads, and a pullback in the Russell 2000 weighed on deal activity and concentrated equity issuance among the larger names. We believe the continued wholesale sell-off in small-cap companies, particularly in technology, and the dislocation associated with it make it incumbent on us to be there 24/7 for our clients across capital markets, advisory, wealth management, and fully across our platform.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Our nearly 30-year dedication to small-cap companies has been unwavering and will continue to be. During the quarter, we helped clients raise north of $4.5 billion in combined equity and debt capital. Smaller average deal sizes across the small and mid-cap market and lower ATM activity tempered underwriting fee revenue relative to deal volume, but M&A and advisory revenues grew year-over-year, led by sell-side and restructuring mandates.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

We also continue to invest in the people who drive the franchise. We have added senior banking talent, and our research platform now covers more than 430 companies. In a quarter when investor attention concentrated in the larger names, that depth of small and mid-cap coverage is what keeps us relevant to the issuers and investors we serve. Wealth management advisory fees grew year-over-year as we continue expanding our recurring revenue base.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

We head into year-end with a clear strategy, streamlined operations, an active pipeline across equity, debt, and M&A advisory, and the capital base and partnership to support our clients as those opportunities develop. We look forward to demonstrating the full capabilities of our platform at our Convergence Conference in December. Our focus remains on execution and disciplined capital allocation to deliver for our colleagues, clients, partners, and shareholders. With that, I'll turn the call over to our CFO, Scott Yessner, to provide a detailed review of our financial performance. Scott?

[Scott Yessner, CFO at BRC Group Holdings]

Thanks, Bryant. I'll share an update on our third quarter and year-to-date 2026 financial performance, segment earnings, investment holdings, capital, and liquidity. As Bryant highlighted, we executed on several important corporate strategies from July through this week while also experiencing a volatile market, which had a downward impact on some mark-to-market positions and constrained capital markets transaction activity.

[Scott Yessner, CFO at BRC Group Holdings]

The third quarter market decline gave back some market gains achieved in the first half of 2026, which aligns with the volatile third quarter performance, while the nine-month results are flatter. Operating Adjusted EBITDA, which removes most of the market and investment volatility, is a primary performance measurement of management. To start, I would like to walk through our financial performance for the third quarter and nine months of 2026.

[Scott Yessner, CFO at BRC Group Holdings]

For the third quarter, total revenues were $33 million, a decrease of $244.8 million year-over-year, primarily driven by an unrealized third quarter loss in Babcock & Wilcox of $128.6 million compared to a $30.2 million prior period fair value gain. Included in total revenues was service and fee revenues of $112.5 million, which decreased $58.2 million year-over-year, further comprised of $28.9 million decrease from lower ATM, private placement, and underwriting fees, partially offset by $6.3 million in higher M&A and advisory fees, lower management fees of $13 million from carried interest in funds that own SpaceX, and lower commissions, and a $5.5 million lower amount of telecom revenues. Nine-month total revenues were $624.2 million, a decrease of $65 million year-over-year.

[Scott Yessner, CFO at BRC Group Holdings]

Service and fee revenue was $438.2 million, a decrease of $37.1 million, comprised of $15.1 million in lower revenues from exited and deconsolidated businesses, net of $7.7 million of increase in SpaceX carried interest, $20.9 million in lower ATM, private placement, and underwriting fees, partially offset by $12.9 million in higher M&A and advisory fees, and $13.5 million in lower telecom revenues. Trading gains were $33.5 million, lower by $31 million due to $7.8 million in unrealized losses on Babcock & Wilcox compared to a $19.6 million unrealized gain in the prior year period. Next, third quarter total operating expenses declined $39.7 million from $212.5 million to $172.7 million.

[Scott Yessner, CFO at BRC Group Holdings]

The reduction was driven by $29.5 million in lower SG&A costs, primarily lower investment banking compensation on lower revenues and lower cost in wealth management, $6.1 million in lower cost of goods sold, primarily from lower consumer product sales and tariff refunds, and $4.2 million in lower direct cost of services in our telecom businesses. Year-to-date total operating expenses declined $101.7 million from $674.5 million to $572.8 million, driven by $71.5 million in lower SG&A costs across capital markets, corporate, and wealth management, $19 million in lower direct cost of services from exited businesses and telecom, and $14.2 million in lower cost of goods sold, primarily in the consumer products segment. Included in our year-to-date results are restructuring charges of $1.9 million related to the B. Riley Securities and Wealth combination and Targus trade name impairment charges of $5.2 million, including $1.2 million in the third quarter.

[Scott Yessner, CFO at BRC Group Holdings]

Continuing down the income statement, third quarter other income, excluding interest expense, was a loss of $111.8 million compared to income of $52 million in the third quarter 2025. The third quarter 2026 included a $98.1 million unrealized loss on our Babcock & Wilcox investment and a $14.6 million non-cash impairment on our GA Group investment to reflect its subsequent sale price, while the third quarter of 2025 included $32.8 million in realized and unrealized investment gains, $12.2 million in senior note exchange gains, and $9.2 million in income from equity investments. Year-to-date, other income, excluding interest expense, was $1.5 million compared to $208.3 million in the first nine months of 2025, which included $86.2 million from the sale of and deconsolidation of businesses, $67.2 million in senior note exchange gains, and $34.2 million in income from equity investments.

[Scott Yessner, CFO at BRC Group Holdings]

Interest expense declined $1 million from $18.8 million to $17.8 million in the third quarter and declined $17 million from $72.7 million to $55.7 million year-to-date. The decline in interest expense has tracked our total debt reduction of $291.7 million from December 31, 2025 to the ending balance of $1.1 billion at September 30, 2026. We recorded an income tax benefit of $24 million in the third quarter. Concluding, the remaining difference in the third quarter and year-to-date year-over-year financial performance was $1.9 million from loss of a discontinued GlassRatner operations booked in 2025. These details culminate in a third quarter 2026 net loss available to common shareholders of $243 million, a diluted loss per share of $6.04, Adjusted EBITDA of negative $219.1 million, and Operating Adjusted EBITDA of $2.9 million.

[Scott Yessner, CFO at BRC Group Holdings]

For the nine months of 2026, a net loss of $13.2 million, a diluted loss per share of $0.40, Adjusted EBITDA of $104.3 million, and Operating Adjusted EBITDA of $103.3 million. Operating Adjusted EBITDA is on plan for the year. Next, I will review our segment operating performance. Our former communications segment is reported as four reportable segments, which we aggregate and describe as the communications business group in 2026. The capital market segment, which is comprised solely of B. Riley Securities, had revenues of negative $90.2 million and segment loss of $120 million in the third quarter, and revenues of $135.6 million and segment income of $30.3 million year-to-date.

[Scott Yessner, CFO at BRC Group Holdings]

Third quarter results were driven by $125 million in trading losses, primarily the unrealized loss on our Babcock & Wilcox investment, and a $28.9 million decline in service and fee revenue on lower ATM, private placement, underwriting activity, partially offset by higher M&A and advisory fees. Year-to-date, lower trading gains and lower ATM, private placement, and underwriting fees were partially offset by $12.5 million in higher M&A and advisory fees, and $30.9 million in lower SG&A. In October, BRC Group Holdings acquired the outstanding minority interest in B. Riley Securities, making B. Riley Securities wholly owned. Next, the wealth segment had revenues of $24.3 million and segment loss of $3.7 million in the third quarter, and revenues of $134.5 million and segment income of $29.8 million year-to-date.

[Scott Yessner, CFO at BRC Group Holdings]

The third quarter loss reflected an $8 million decrease in management fees from carried interest in funds that own SpaceX, a $5.9 million decrease in commissions, and lower trading income, partially offset by higher investment advisory fees. The year-to-date 2026 revenue and profit increase were driven by a $7.7 million increase in trading income and $16 million in lower SG&A costs. The wealth segment ended the third quarter with $12.8 billion in assets under management and 181 financial advisors. Next, the communications business group had aggregate revenues of $54.6 million and income of $13.2 million in the third quarter, and revenues of $172.2 million and income of $39.7 million year-to-date. Nine-month income increased $5.1 million despite a $14.9 million revenue reduction, reflecting cost reductions across the group. In September, we announced the Sangoma acquisition, which is targeted to close in January 2027.

[Scott Yessner, CFO at BRC Group Holdings]

The Sangoma transaction will more than double our revenues, with significant synergies bringing important scale and product and service capabilities. We look forward to updating the transaction next quarter. Next, our Targus business, which comprises the Consumer Products segment, had revenues of $39.3 million and a loss of $4.3 million in the third quarter, and revenues of $126.9 million and a loss of $12.7 million year to date. Year-to-date revenues were $5.4 million lower than the prior year, reflecting weaker consumer demand, partially offset by lower sales allowance and customer programs. During the third quarter, there was a market-wide laptop sales decline that led to lower sales of our peripheral laptop products. Next, I would like to provide an update on the company's investment holdings portfolio, which is reported on our balance sheet in securities and other investments owned, loans receivable at fair value, and equity investments.

[Scott Yessner, CFO at BRC Group Holdings]

Investments are held across consolidated entities where valuation changes are primarily booked as revenue in either trading gains or losses or in other income as realized and unrealized gains and losses. At September 30, 2026, securities and other investments decreased by $77 million to $369.8 million from December 31, 2025. The decrease was primarily driven by the exit of structured equity financing positions and related common stock of $41.1 million and $12.1 million, the sale of DoubleDown Interactive common stock of $30 million, net dispositions of corporate bonds of $19.8 million, and a $13.7 million increase in our Babcock & Wilcox investment, partially offset by a $31.3 million increase in partnership interests related to the market value of carried interest in funds that own SpaceX, and $9.7 million in net additions to other public equities. Babcock & Wilcox comprised $160.3 million of the September 30 balance.

[Scott Yessner, CFO at BRC Group Holdings]

Continuing with investment holdings, loans receivable at fair value decreased by $15.5 million in the period to an ending balance of $10.8 million at September 30, 2026, with a reduction of $9.8 million of our loan to XBP Americas. We have shifted our lending strategy to shorter duration lending in support of our investment banking clients. Notably, we originated a $21.5 million loan in the second quarter, which was repaid in the third quarter. Lastly, equity investments were $68.1 million at September 30, a decline of $22.4 million from December 31, 2025. The GA Group investment comprised $62.3 million of the September 30 balance, a decline of $21 million, reflecting our $6.5 million share of the year-to-date losses and the $14.6 million impairment booked in the third quarter. On November 3, we sold GA Group for $62.3 million, facilitating debt reduction and funding the Sangoma transaction.

[Scott Yessner, CFO at BRC Group Holdings]

These transactions reflect our corporate strategy to enhance our operating cash flow and results through realigning capital to our core business operations, including the communications business group and B. Riley Securities. Next, I'll provide an update on our liquidity and capital. At September 30, 2026, cash equivalents, and restricted cash had a total balance of $145.7 million compared to $229.3 million at December 31, 2025. Year to date, we reduced total debt by $291.7 million, which included the full redemption of the $238.1 million senior notes, comprised of $96 million of RILYK notes in March, $142.1 million of RILYN notes in September, and the exchange of $69.1 million of senior notes for approximately 8.4 million shares of common stocks, partially offset by $25.6 million in higher revolver borrowings.

[Scott Yessner, CFO at BRC Group Holdings]

At September 30, 2026, total debt was $1.14 billion, and net debt declined $64.7 million-$562.3 million from December 31, 2025. Concluding our 2026 senior note redemptions, our RILYG senior notes are due on December 31 in the principal amount of $164 million. We have cash on hand, cash flow from operations, and expected cash flows from balance sheet assets to fund the RILYG redemption. We do not have any senior note maturities in 2027. As described earlier, on November 3, we completed the sale of our remaining interest in GA Group to Oaktree for $62.3 million, consisting of $10.6 million in cash and a $51.7 million reduction of our Oaktree loan. Concurrently, we added a $26.5 million incremental term loan and paid a $3.3 million transaction fee in kind. There are no remaining prepayment fees on the Oaktree loan.

[Scott Yessner, CFO at BRC Group Holdings]

After this transaction, our Oaktree loan total amount will be $43.7 million. Please refer to our earnings press release for reconciliation tables and descriptions of Non-GAAP calculations in my remarks, including an updated calculation and description of our Operating Adjusted EBITDA Non-GAAP measure. We had very strong strategic execution during this period, purchasing Sangoma, acquiring the minority interest in B. Riley Securities Holdings, returning to full ownership, selling our GA Group remaining interest, and redeeming $142.1 million of RILYN notes while navigating a volatile capital market period. These strategies strengthened our long-term cash flows and operating model while improving our balance sheet. I look forward to taking your questions. I will turn the call over to Tom Kelleher, our Co-Chief Executive Officer.

[Tom Kelleher, Co-CEO at BRC Group Holdings]

Thanks, Scott. I will now walk through some of the operating highlights across our businesses. In capital markets, our banking business leaned on breadth. Advisory fees came from a restructuring and two sell-side assignments, and we were active on follow-ons across technology and healthcare and on a critical minerals IPO. While the market favored larger issuers, companies with a public currency continue to access the market through follow-ons, converts, and debt. As a result, our convertible and debt activity is at a record nine-month pace. Our position in deals continues to improve, with sole and lead managed volume up 20% year to date. Institutional brokerage held steady, and securities lending revenue stayed near its second-quarter high. Our recruiting pipeline remains active across banking and institutional sales, including the recent addition of two senior bankers.

[Tom Kelleher, Co-CEO at BRC Group Holdings]

In wealth management, reported results gave back part of the carried interest gains recognized earlier in the year, but the core business is building. Advisory fees grew 11% year-over-year in the third quarter and reached a 12-month high in September, and we are growing our tax and accounting into a year-round advisory offering. Operationally, the integration of B. Riley Securities and B. Riley Wealth is moving from planning to execution. We have consolidated key corporate and back office functions onto shared infrastructure while rolling out firm-wide AI tools that automate internal reporting and support our banking, research, and wealth teams, creating a more scalable operating platform. Our communications business group, which includes Lingo, magicJack, Marconi Wireless, and United Online, delivered another quarter of income growth on lower revenue, which is exactly the playbook. Manage attrition, take out costs, and convert revenue to cash.

[Tom Kelleher, Co-CEO at BRC Group Holdings]

The group continues to track ahead of budget for the full year. Our pending acquisition of Sangoma extends that playbook, as contemplated, bringing on a recurring revenue base that complements Lingo and our existing business services, and it gives us the scale to apply the same operating discipline across a larger platform. The transaction is expected to close early next year, subject to customary closing conditions. Finally, in the consumer products segment, Targus faced weaker consumer demand in the third quarter. Tariff refunds helped cost of goods sold, and the team relocated to a new corporate site to lower its long-term cost base. Our focus across every operating subsidiary is consistent cash generation, and we continue to evaluate the optimal path forward to maximize value at Targus. Before we open the line, I want to thank our colleagues.

[Tom Kelleher, Co-CEO at BRC Group Holdings]

The strength of this platform is a direct reflection of your hard work, resilience, and dedication to our clients, both internal and external. I will now hand the call back to the operator to open the line for questions.

[Operator]

Thank you. Our question comes from Kirk with Raymond James. Your line is open. You may proceed.

[Kirk Ludtke, Analyst at Raymond James]

Hello, Bryant, Tom, Scott. Thank you for the call.

[Tom Kelleher, Co-CEO at BRC Group Holdings]

Hey, Kirk.

[Kirk Ludtke, Analyst at Raymond James]

I know, Scott, you touched on the fourth quarter cash requirements. I just wanted to make sure I have all the pieces here. It looks like the cash on hand at September 30 plus the proceeds from the sale of Great American gets you to about $180 million on a pro forma basis of cash, and looks like you have at least $200 million of cash requirements, the debt maturity and the equity that you're contributing to the Sangoma acquisition, and I suspect you have some minimum cash requirements. I'm just curious how maybe you could help us understand how the pieces fit.

[Scott Yessner, CFO at BRC Group Holdings]

Yeah. Thank you so much for the question. You did do a nice job of piecing those parts together. So, our initial cash and some of the cash that we accrued from the GA Group sale proceeds, and then stepping forward to our cash flow requirements, which for the listeners on the call, that was a nice combination of the cash we're going to, equity you're going to put into the Sangoma transaction early in January, and then the $164 million redemption of our notes. In between that is we have, as I described in my comments, I'll be more specific about it, we have a number of balance sheet fundings that are going to come through, and that's going to add another up to $50 million of cash flow for us. We have a significant amount of resources.

[Scott Yessner, CFO at BRC Group Holdings]

Without having to make any investment or balance sheet moves that we don't necessarily want to, we have all the resources you just described, including the SpaceX shares that are coming due to us, and that's going to give us an additional up to $50 million of cash to support our funding needs through the end of the quarter.

[Kirk Ludtke, Analyst at Raymond James]

Great. Thank you. So, that SpaceX alone is $50 million?

[Scott Yessner, CFO at BRC Group Holdings]

Yes.

[Kirk Ludtke, Analyst at Raymond James]

Or that's a combination of things? Okay. Have you already sold the SpaceX shares?

[Scott Yessner, CFO at BRC Group Holdings]

It's in the middle of the process of capturing. We've put on a small amount of hedge for some of the pricing volatility on SpaceX, but we still are due on delivery a majority of the shares that we're contractually can receive.

[Kirk Ludtke, Analyst at Raymond James]

Great. Thank you. You mentioned you don't have any more debt maturities until 2028, which is great, but how are you thinking about those maturities? Those are a lot more substantial. That's at least $800 million. Are you thinking about global refinancing or an exchange or something even more creative?

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Yeah. Kirk, I will start on that, and Scott, you can chime in. If you go back to a year ago and you review the transactions that took place, whether they were 3(a)(9)s, whether they were bond swaps, selling GA, all the different things. We do not make widgets, and we have a pretty steady business in telecom and a volatile business in our capital markets business, and we have some volatile investments. We will do is make sure that every different strategy is available to us, and most importantly is we will keep our heads down and create as much value within our subsidiaries and in our investments during that time. We cannot give you, I think we said this before, the playbook. The playbook has changed 10x over the course of the last 12 months. We recognize that there is debt due.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

We recognize that we have investments. I think three months ago, that net debt was $280 million. It is more now, but we will just remain focused on generating cash flow, improving our investments, and utilize whatever other things we can, working with our debt holders and our equity holders. Scott, feel free to add anything that I missed.

[Scott Yessner, CFO at BRC Group Holdings]

Thanks, Bryant. Yeah, I think that answer covered all the elements to how we think about funding 2028 and beyond. The only thing I would add to that is just the strategic moves we have made just over the last 45 days. Specifically Sangoma. Sangoma is going to add $35 million-$40 million of EBITDA to the business. When you think about 2027 and 2028, that is getting you now into $75 million-$80 million of additional cash flows. We are building on all the different elements to our business. We have created a great number of options. We have taken off a fairly illiquid legacy business, GA Group, as we described earlier, to create more liquidity and cash flow for cash flow generating business in the firm.

[Scott Yessner, CFO at BRC Group Holdings]

I would just emphasize that deals like the Sangoma deal, which was not on anyone's radar, as we would not have signaled that, are just all the different dimensions here. We are going to be able to improve the operating performance of the company, and that is going to be a big factor in how we manage the balance sheet going forward.

[Kirk Ludtke, Analyst at Raymond James]

That is helpful. Thank you. Is the $35 million-$40 million of incremental EBITDA from Sangoma, I guess that includes synergies?

[Scott Yessner, CFO at BRC Group Holdings]

Yes.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Yeah, I mean, you can look at their public statements. There is $28 million or $29 million trailing 12, and then public company costs and synergies, it is not hard to get there.

[Kirk Ludtke, Analyst at Raymond James]

Okay, great. Thank you very much. I know you have also got some accounting and legal expenses that are probably still elevated from the restatements and other things. Can you maybe give us a sense for how much of those, what you would consider excess professional fees, flowed through in the September quarter, and when you think those excess fees go away?

[Scott Yessner, CFO at BRC Group Holdings]

Yeah, we were probably about $1.5 million-$2 million on the excess fees with all of the activity we just incurred. We would expect in the fourth quarter to see those numbers come down roughly about that same number, $2 million. As you look into 2027, we are right now ranging between $5 million and $10 million of expected savings from accounting and legal costs. On the accounting side, we are still going to carry a pretty decent size audit fee, not nearly as big as the ones we have been burdened with before, but we are working through a big group of material weaknesses, which does take cost. We are a non-widget company, so we do generate a lot of auditor activity in addition to the base audit.

[Scott Yessner, CFO at BRC Group Holdings]

As we get into 2027, as we have started stabilizing our financial operations, we will be able to, in 2027, pull down on the external resources, which are great. They are very sophisticated and help us on all these surge activities that we have. It is a little bit more costly than we would like. That, along with our auditor, will have a full year of walking down a clean audit with controls in place that allow them to rely more on our business. At least that is where we are headed to on that. Those are going to pull it down. Those are the 80%-90% likelihood to get those down. We are hoping that we can do better than that, but in that $5 million-$10 million range of legal and accounting, that right there is about $5 million on the accounting side.

[Scott Yessner, CFO at BRC Group Holdings]

On the legal fees, as we start working down to concluding matters on some of the legal activity on the business that we have been incurring over the last couple years, we are expecting that to come down. In addition to, we have moved to some more efficient legal cost models with Fred Knopf, who took over as the General Counsel. We moved in some different attorneys into different parts of our business that we are getting the double bang for it. We are getting a lot more resource at a lower cost, and that is driving a ton of execution. We are refining that legal model, and that is how we get from picking up those accounting savings, which are roughly around $5 million-ish, to potentially another $5 million in savings on the legal side.

[Scott Yessner, CFO at BRC Group Holdings]

Somewhere between $5 million and $10 million is where we think about getting the accounting legal fees down next year.

[Kirk Ludtke, Analyst at Raymond James]

That is significant. Thank you. Can we just touch on what I consider the core business for a sec? B. Riley Securities. Can you maybe give us a little more color as to the backlog and the trend there, and the composition of the backlog, how you feel about it?

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Sure. If you are in this business, there are long tail transactions, there is restructuring, which we have seen a big pickup. There is advisory, which is active, and then there are the things that you do not know about a day before or a month before, and that is usually around capital markets. I believe strongly that the markets that we are entering or may have entered, and we all saw what happened today, those are tailored for us. Being one of nine underwriters in a convertible debt, we like that business. I think we are good at that. I think that a little bit more dislocation in the markets, I think lends to our experience in the small cap and being a little bit more creative. We are not middle of the fairway kind of a firm. I think we will think differently and we will put transactions together differently.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

I would say from a team perspective, I think this is the best team we have ever had. The bankers that we have recruited, the bankers that have come back, bankers who have been here for a long time. I am really confident that in an environment like this, we will create a lot of market share. That is how we built the business. We did not build a business in up 25% markets and really easy capital markets. I am not answering your question specifically quantitatively, but qualitatively, I am really excited about the next 12 months and the next three months. We will see, but that is how I think about it.

[Kirk Ludtke, Analyst at Raymond James]

Okay, great. I appreciate it. Thank you. One last question. On page 80 of the 10-Q, there is something called other private equity investments. It is $92.4 million. It is a sizable number. I was just curious if you could give us any color as to what is in there and how you account for it.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

I do not know how we missed that in our commentary around the financials. Scott, do you want to pick that one up?

[Scott Yessner, CFO at BRC Group Holdings]

Yeah. That $92 million is our private holdings, essentially what we call our venture capital book, and the nature of those holdings are primarily venture capital at roughly $92 million. Just comments on the valuation on them, because they're venture capital positions, the mark to market on those are quite lumpy. You generally are only marking whenever there's a cap raise that you can reprice that to. They can get kind of stale. So, like a venture capital portfolio, you're going to have ups and downs in the nature of the holdings. We have some very exciting and interesting holdings in that portfolio that we have the potential to get some nice realizations between 2027 and 2028. We're hoping it exceeds the $92 million balance we have there. That's why we're in those type of investments.

[Scott Yessner, CFO at BRC Group Holdings]

I'd probably describe it as, of the $92 million, the top five holdings are about $40 million of that. These holdings are, I think from a time duration standpoint, you're probably averaging between four and five years. So they're getting closer to that stage when you're looking for the liquidity event that we would ultimately be able to cash out on.

[Kirk Ludtke, Analyst at Raymond James]

Okay. That's very helpful. I appreciate it. Thank you. Good luck, guys.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

All right. Thank you.

[Operator]

Great. Thank you. Thank you. I will now turn the call back over to management for closing remarks.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Okay, great. Well, there are a few things, excuse me, a few things I want to acknowledge. First of all, the accounting team and all the accomplishments they have made, and joking aside about the disclosures, I think we are really providing a thorough disclosure, and hopefully our constituents appreciate that. The fact that we are reporting quarters on the fourth or fifth is a real testament to that team. To the telecom side, we are very excited about this acquisition. I know there are some Sangoma people on the call, and we are excited for that transaction and all that will bring. On the capital markets wealth side, a lot of teammates here. I just want to emphasize, this is our time. We are made for these more difficult markets. Really excited to report those results to you as the year goes forward, and appreciate everyone for taking the time.

[Bryant Riley, Chairman, Founder, and Co-CEO at BRC Group Holdings]

Thank you very much.

[Operator]

Thank you, Mr. Riley. Before we conclude today's call, I would like to provide the company's safe harbor statement. Please note that today's call contains forward-looking statements within the means of the Private Securities Litigation Reform Act of 1995. Statements are based on management's current expectations and beliefs, turning future developments and their potential effect on the company. Forward-looking statements involve risk and uncertainties, and actual results may differ materially from those expressed or implied. We encourage you to review the company's recent filings with the SEC, including the annual report on Form 10-K for the year ending December 31st, 2025, as amended, and quarterly reports on Form 10-Q, for a more detailed discussion of the risk factors that could impact performance. The company assumes no obligation to update any forward-looking statements made during this call, except as required by law.

[Operator]

Additionally, Non-GAAP financial measures may have been discussed during this call. Reconciliations to the most direct comparable GAAP measures are included in the earnings release, which is available on the investor relations section of the BRC Group Holdings website. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Bryant Riley, Chairman, Founder, and Co-CEO

Analysts

• Scott Yessner, CFO at BRC Group Holdings
• Tom Kelleher, Co-CEO at BRC Group Holdings
• Kirk Ludtke, Analyst at Raymond James