{
  "docId": "019dd923-622c-750b-8b9a-6cf89b81fe9e",
  "docSlug": "377026890e4d",
  "documentTitle": "B. Riley Financial, Inc. (RILY)",
  "authorId": "60_Wolfpack_Research",
  "authorName": "Wolfpack Research",
  "documentKindSlug": "research-note",
  "documentKindLabel": "Research note",
  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2023-02-08 00:00:00",
  "orientation": "portrait",
  "aspectRatio": 0.77272725,
  "pageNumber": 14,
  "pageCount": 24,
  "prevPage": 13,
  "nextPage": 15,
  "slideType": "expose_contradiction",
  "function": "expose_contradiction",
  "density": "dense",
  "nDataPoints": 5,
  "notes": "Includes a screenshot of a Badcock advertisement and a line chart showing the rapid increase in FRG's provision for doubtful accounts.",
  "elementsJson": [
    "headline_text",
    "paragraph",
    "screenshot",
    "line_chart",
    "footnote"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b9a-6cf89b81fe9e/14",
  "deckHref": "/decks/019dd923-622c-750b-8b9a-6cf89b81fe9e",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b9a-6cf89b81fe9e.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b9a-6cf89b81fe9e#slide-14",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "Our assessment is that Badcock’s receivables are extremely low quality, especially with a looming recession.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-70f7-7334-b220-10851e4ea91c",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.25,
        "w": 0.7,
        "x": 0.15,
        "y": 0.51
      },
      "kind": "chart",
      "text": "FRG Provision For Doubtful Accounts ($000's)",
      "attrs": null,
      "subkind": "line",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "285c6ba4-5a53-4146-bcbf-c119179a7ca7",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.11,
        "w": 0.78,
        "x": 0.11,
        "y": 0.26
      },
      "kind": "image",
      "text": "Badcock No Credit Needed advertisement",
      "attrs": null,
      "subkind": "screenshot",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "b779b799-f725-429e-a283-73da66a5fc03",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "metric",
      "text": "Provision for Doubtful Accounts: $97,575",
      "attrs": null,
      "subkind": "primary",
      "toolName": "Quantification",
      "toolSlug": "quantification",
      "confidence": null,
      "componentId": "019dd953-70f7-7334-b220-16e3e97a6f04",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.07,
        "w": 0.78,
        "x": 0.11,
        "y": 0.81
      },
      "kind": "paragraph",
      "text": "In Q3, according to RILY's disclosures, it took on a $148 million term loan to finance the purchase of $168 million in receivables. This loan carries an interest rate of 10%, and it is a floating rate.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "6b071b43-2188-4711-83e2-1d01b669141a",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.08,
        "w": 0.78,
        "x": 0.11,
        "y": 0.39
      },
      "kind": "paragraph",
      "text": "Our assessment is that Badcock's receivables are extremely low quality, especially with a looming recession. The proof is in the data. Badcock's disclosures indicated that its allowance for doubtful accounts was $75 million for short term receivables.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "a412d5c2-45c4-462b-9acc-164520a64482",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.78,
        "x": 0.11,
        "y": 0.16
      },
      "kind": "paragraph",
      "text": "A large chunk of RILY's loan portfolio is comprised of furniture receivables that they purchased from a related party, Franchise Group Inc. (FRG) These furniture receivables were brought on as a part of FRG's purchase of Badcock Receivables.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "f6de585a-edb5-48fd-b21d-d2bbc15599f0",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.78,
        "x": 0.11,
        "y": 0.11
      },
      "kind": "title",
      "text": "RILY Attempted to Grow its Assets in Q3 2022 by Purchasing Questionable Furniture Financing Contracts from a Subsidiary of a Related Party at a Discount of Just 15%:",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "1d81c929-eedc-416d-b0ce-775d9cb59d26",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [],
  "frameworks": [],
  "arcBeats": [
    {
      "to": 15,
      "from": 11,
      "beatId": "d5705850-3a1d-49e1-982c-228f08ab89ea",
      "arcName": "Problem-Agitate-Solution",
      "arcSlug": "problem-agitate-solution",
      "beatName": "Solution",
      "beatSlug": "problem-agitate-solution-solution-provide-relief",
      "evidence": "The document provides a solution, or rather, a reason for shorting the company, citing its systemic weakness in equity portfolio and telecom rollup based on obsolete assets.",
      "position": 2,
      "confidence": 0.8,
      "parentBeatName": "Resolution",
      "parentBeatSlug": "resolution"
    }
  ],
  "loops": [
    {
      "to": 14,
      "from": 11,
      "name": "Iceberg",
      "slug": "10-iceberg",
      "bestFor": "Consulting, complex problem solving, organizational change",
      "matchId": "e82e8ce9-b936-416a-bdf8-405e4bae75ad",
      "evidence": "The document exposes the contradictions in RILY's investment strategy, including its investment in FAZE and its attempt to grow its assets in Q3 2022.",
      "position": 1,
      "objective": "To expose the contradictions in RILY's investment strategy",
      "structure": "The Symptom (Visible) -> The System (Hidden) -> The Root Cause",
      "confidence": 0.7,
      "description": "Reveal that the visible problem is merely a symptom of a deeper root cause"
    }
  ],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}