This report contains forward-looking statements. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "future," "intend," "seek," "likely," "potential" or "continue," the
negative of such terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we, nor any other
person, assume responsibility for the accuracy and completeness of the
forward-looking statements. We are under no obligation to update any of the
forward-looking statements after the filing of this Quarterly Report to conform
such statements to actual results or to changes in our expectations.
The following discussion of our financial condition and results of operations
should be read in conjunction with our condensed consolidated financial
statements and the related notes and other financial information appearing
elsewhere in this Quarterly Report. Readers are also urged to carefully review
and consider the various disclosures made by us which attempt to advise
interested parties of the factors which affect our business, including without
limitation the disclosures made in Item 1A of Part II of this Quarterly Report
under the caption "Risk Factors."
Risk factors that could cause actual results to differ from those contained in
the forward-looking statements include but are not limited to risks related to:
volatility in our revenues and results of operations; the unpredictable and
ongoing impact of the COVID-19 pandemic; changing conditions in the financial
markets; our ability to generate sufficient revenues to achieve and maintain
profitability; our exposure to credit risk; the short term nature of our
engagements; the accuracy of our estimates and valuations of inventory or assets
in "guarantee" based engagements; competition in the asset management business;
potential losses related to our auction or liquidation engagements; our
dependence on communications, information and other systems and third parties;
potential losses related to purchase transactions in our auction and
liquidations business; the potential loss of financial institution clients;
potential losses from or illiquidity of our proprietary investments; changing
economic and market conditions; potential liability and harm to our reputation
if we were to provide an inaccurate appraisal or valuation; potential mark-downs
in inventory in connection with purchase transactions; failure to successfully
compete in any of our segments; loss of key personnel; our ability to borrow
under our credit facilities or at-the-market offering as necessary; failure to
comply with the terms of our credit agreements or senior notes; our ability to
meet future capital requirements; our ability to realize the benefits of our
completed acquisitions, including our ability to achieve anticipated
opportunities and operating cost savings, and accretion to reported earnings
estimated to result from completed and proposed acquisitions in the time frame
expected by management or at all; the diversion of management time on
acquisition- related issues; the failure of our brand investment portfolio
licensees to pay us royalties; and the intense competition to which our brand
investment portfolio is subject. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Except as otherwise required by the context, references in this Quarterly Report
to the "Company," "B. Riley," "B. Riley Financial," "we," "us" or "our" refer to
the combined business of B. Riley Financial, Inc. and all of its subsidiaries.
B. Riley Financial, Inc. (NASDAQ: RILY) and its subsidiaries provide
collaborative financial services and solutions through several operating
? B. Riley Securities, Inc. ("B. Riley Securities") is a leading, full service
investment bank providing financial advisory, corporate finance, research,
securities lending and sales and trading services to corporate, institutional
and high net worth individual clients. B. Riley Securities, (fka B. Riley FBR)
was formed in November 2017 through the merger of B. Riley & Co, LLC and FBR
Capital Markets & Co., which the Company acquired in June 2017.
? B. Riley Wealth Management, Inc. ("B. Riley Wealth Management") provides
comprehensive wealth management and brokerage services to individuals and
families, corporations and non-profit organizations, including qualified
retirement plans, trusts, foundations and endowments. B. Riley Wealth
Management was formerly Wunderlich Securities, Inc., which the Company
acquired on July 3, 2017 and whose name was changed in June 2018.
? National Holdings Corporation ("National") provides wealth management,
brokerage, insurance, tax preparation and advisory services.On February 25,
2021, the Company completed a tender offer to acquire all of the outstanding
shares of National not already owned by the Company. The merger expands the
Company's investment banking, wealth management and financial planning
? B. Riley Capital Management, LLC, a Securities and Exchange Commission ("SEC")
registered investment advisor, which includes:
? B. Riley Asset Management, an advisor to certain private funds and to
institutional and high net worth investors;
? Great American Capital Partners, LLC ("GACP"), the general partner of two
private funds, GACP I, L.P. and GACP II, L.P., both direct lending funds
managed by WhiteHawk Capital Partners, L.P. pursuant to an investment advisory
services agreement, that provide senior secured loans and second lien secured
loan facilities to middle market public and private U.S. companies.
? B. Riley Advisory Services provides expert witness, bankruptcy, financial
advisory, forensic accounting, valuation and appraisal, and operations
? B. Riley Retail Solutions, LLC (fka Great American Group, LLC), a leading
provider of asset disposition and auction solutions to a wide range of retail
and industrial clients.
? B. Riley Real Estate works with real estate owners and tenants through all
stages of the real estate life cycle. Our real estate advisors advise
companies, financial institutions, investors, family offices and individuals
on real estate projects worldwide. A core focus of B. Riley real estate is the
restructuring of lease obligations in both distressed and non-distressed
situations, both inside and outside of the bankruptcy process, on behalf of
? B. Riley Principal Investments identifies attractive investment opportunities
and aims to deliver financial and operational improvement to its portfolio
companies. Our team concentrates on opportunities presented by distressed
companies or divisions that exhibit challenging market dynamics.
Representative transactions include recapitalization, direct equity
investment, debt investment, active minority investment and buyouts. B. Riley
Principal Investments seeks to control or influence the operations of our
investments to deliver financial and operational improvements that will
maximize free cash flow, and therefore, shareholder returns. As part of our
principal investment strategy, we acquired United Online, Inc. ("UOL" or
"United Online") on July 1, 2016, magicJack VocalTec Ltd. ("magicJack") on
November 14, 2018 and on November 30, 2020 we acquired a 40% equity interest
in with Lingo Management, LLC ("Lingo"), with the ability to acquire an
additional 40% equity interest therein.
? UOL is a communications company that offers consumer subscription services and
products, consisting of Internet access services and devices under the NetZero
and Juno brands primarily sold in the United States.
? magicJack is a Voice over IP ("VoIP") cloud-based technology and services
? Lingo is a global cloud/UC and managed service provider.
? BR Brand Holding, LLC ("BR Brands"), in which the Company owns a majority
interest, provides licensing of certain brand trademarks. BR Brands owns the
assets and intellectual property related to licenses of six brands: Catherine
Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette
Lepore as well as investments in the Hurley and Justice brands with Bluestar
Alliance LLC ("Bluestar"), a brand management company.
We are headquartered in Los Angeles with offices in major cities throughout the
United States including New York, Chicago, Boston, Atlanta, Dallas, Memphis,
Metro Washington D.C., West Palm Beach, and Boca Raton.
During the fourth quarter of 2020, the Company realigned its segment reporting
structure to reflect organizational management changes. Under the new structure,
the valuation and appraisal businesses are reported in the Financial Consulting
segment and our bankruptcy, financial advisory, forensic accounting, and real
estate consulting businesses that were previously reported in the Capital
Markets segment are now reported as part of the Financial Consulting segment. In
conjunction with the new reporting structure, the Company recast its segment
presentation for all periods presented. During the first quarter of 2021, in
connection with the acquisition of National on February 25, 2021, the Company
further realigned its segment reporting structure to reflect organizational
management changes in the Company's wealth management business and created a new
Wealth Management segment that was previously reported as part of the Capital
Markets segment in 2020. In conjunction with the new reporting structures, the
Company recast its segment presentation for all periods presented.
For financial reporting purposes we classify our businesses into six operating
segments: (i) Capital Markets, (ii) Wealth Management, (iii) Auction and
Liquidation, (iv) Financial Consulting, (v) Principal Investments - United
Online and magicJack and (vi) Brands.
Capital Markets Segment. Our Capital Markets segment provides a full array of
investment banking, corporate finance, consulting, financial advisory, research,
securities lending and sales and trading services to corporate, institutional
and individual clients. Our corporate finance and investment banking services
include merger and acquisitions as well as restructuring advisory services to
public and private companies, initial and secondary public offerings, and
institutional private placements. In addition, we trade equity securities as a
principal for our account, including investments in funds managed by our
subsidiaries. Our Capital Markets segment also includes our asset management
businesses that manage various private and public funds for institutional and
Wealth Management Segment. Our Wealth Management segment provides wealth
management and tax services to corporate, and high net worth clients. We offer
comprehensive wealth management services for corporate businesses that include
investment strategies, executive services, retirement plans, lending & liquidity
resources, and settlement solutions. Our wealth management services for
individual client services provide investment management, education planning,
retirement planning, risk management, trust coordination, lending & liquidity
solutions, legacy planning, and wealth transfer. In addition, we supply market
insights to provide unbiased guidance to make important financial decisions.
Wealth management resources include market views from our highly regarded Chief
Investment Strategist and Capital Markets segment's research.
Auction and Liquidation Segment. Our Auction and Liquidation segment utilizes
our significant industry experience, a scalable network of independent
contractors and industry-specific advisors to tailor our services to the
specific needs of a multitude of clients, logistical challenges and distressed
circumstances. Furthermore, our scale and pool of resources allow us to offer
our services across North America as well as parts of Europe, Asia and
Australia. Our Auction and Liquidation segment operates through two main
divisions, retail store liquidations and wholesale and industrial assets
dispositions. Our wholesale and industrial assets dispositions division operates
through limited liability companies that are controlled by us.
Financial Consulting Segment. Our Financial Consulting segment provides services
to law firms, corporations, financial institutions, lenders, and private equity
firms. These services primarily include bankruptcy, financial advisory, forensic
accounting, litigation support, real estate consulting and valuation and
appraisal services. Our Financial Consulting segment operates through limited
liability companies that are wholly owned or majority owned by us.
Principal Investments - United Online and magicJack Segment. Our Principal
Investments - United Online and magicJack segment consists of businesses which
have been acquired primarily for attractive investment return characteristics.
Currently, this segment includes UOL, through which we provide consumer Internet
access, and magicJack, through which we provide VoIP communication and related
product and subscription services.
Brands Segment. Our Brands segment consists of our brand investment portfolio
that is focused on generating revenue through the licensing of trademarks and is
held by BR Brands.
On June 23, 2021, we and our wholly owned subsidiaries, BR Financial Holdings,
LLC, a Delaware limited liability company (the "Primary Guarantor"), and BR
Advisory & Investments, LLC, a Delaware limited liability company
(the "Borrower"), entered into a credit agreement (the "Credit Agreement") by
and among us, Primary Guarantor, the Borrower, the lenders party thereto, Nomura
Corporate Funding Americas, LLC, as administrative agent and Wells Fargo Bank,
N.A., as collateral agent, providing for a four-year $200.0 million secured term
loan credit facility (the "Term Loan Facility") and a four-year $80.0 million
secured revolving loan credit facility (the "Revolving Credit Facility" and,
together with the Term Loan Facility, the "Credit Facilities"). The Credit
Facilities will mature on June 23, 2025, subject to acceleration or prepayment.
On the closing date, the Borrower borrowed the full $200.0 million under the
Term Loan Facility. The Revolving Credit Facility is available for borrowing
from time to time prior to the final maturity of the Revolving Credit Facility.
Subsequent to June 30, 2021, we borrowed the full $80.0 million that was
available under the Revolving Credit Facility.
On July 26, 2021, we redeemed, in full, $122.8 million aggregate principal
amount of its 7.25% Senior Notes due 2027 ("7.25% 2027 Notes") pursuant to the
third supplemental indenture dated December 31, 2017. The total redemption
payment included approximately $2.1 million in accrued interest. In connection
with the full redemption, the 7.25% 2027 Notes were delisted from NASDAQ.
On January 30, 2020, the World Health Organization ("WHO") announced a global
health emergency because of a new strain of coronavirus (the "COVID-19
outbreak"). In March 2020, the WHO classified the COVID-19 outbreak as a
pandemic, based on the rapid increase in exposure globally. During the second
quarter of 2021, the full impact of the COVID-19 outbreak continues to evolve.
As the U.S. economy recovers, aided by additional stimulus packages and positive
momentum in the domestic vaccine rollout, countries across the world continue to
manage repeated waves of the pandemic, including variant strains of COVID-19,
amid uneven progress toward vaccination. The impact of the COVID-19 outbreak on
our results of operations, financial position and cash flows will depend on
future developments, including the duration and spread of the outbreak and
related advisories and restrictions and the success of vaccines in slowing or
halting the pandemic. These developments and the impact of the COVID-19 outbreak
on the financial markets and the overall economy continue to be highly uncertain
and cannot be predicted. If the financial markets and/or the overall economy
continue to be impacted, our results of operations, financial position and cash
flows may be materially adversely affected.
Results of Operations
The following period to period comparisons of our financial results and our
interim results are not necessarily indicative of future results.
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