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OFFON

B. RILEY FINANCIAL, INC.

(RILY)
  Report
Real-time Estimate Quote. Real-time Estimate Cboe BZX - 09/17 09:55:19 am
60.255 USD   -0.32%
09/14INSIDER BUY : B. Riley Financial
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09/13B RILEY FINANCIAL : . Riley Plans Tender Offer to uy More Shares of Game Development Company DouleDown
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B RILEY FINANCIAL : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

08/02/2021 | 06:06am EDT

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.



Overview

General


B. Riley Financial, Inc. (NASDAQ: RILY) and its subsidiaries provide collaborative financial services and solutions through several operating subsidiaries including:

? 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.




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? 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

offerings.

? 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

management services.

? 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

corporate tenants.

? 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

communications provider.

? 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.




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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 individual investors.

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.




Recent Developments



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.



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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.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2020 795 M - -
Net income 2020 205 M - -
Net Debt 2020 174 M - -
P/E ratio 2020 5,85x
Yield 2020 2,66%
Capitalization 1 667 M 1 667 M -
EV / Sales 2019 1,79x
EV / Sales 2020 1,63x
Nbr of Employees 996
Free-Float 56,7%
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Managers and Directors
Bryant Richard Riley Chairman & Co-Chief Executive Officer
Thomas John Kelleher Co-Chief Executive Officer & Director
Kenneth M. Young President
Phillip J. Ahn Chief Operating & Financial Officer
Daniel Shribman Chief Investment Officer
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