B. Riley Financial Reports Second Quarter 2022 Results; Declares $1.00 Dividend

Q2 GAAP Revenues of $42.7 million; Operating Revenues of $266.6 million

Q2 GAAP Net Loss of ($142.2 million), Operating Adjusted EBITDA of $74.2 million

Declares Quarterly Dividend of $1.00 per common share

LOS ANGELES, July 28, 2022 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ: RILY) ("B. Riley" or the "Company"), a diversified financial services platform, today announced results for the three-month period ended June 30, 2022.

Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, commented: "Our second quarter results demonstrated the relative strength and ability of our non-cyclical businesses to steadily perform amid disruptive markets. Periods of volatility have historically presented our most attractive opportunities to differentiate ourselves with clients, attract top talent, and generate sustainable share gains across key business lines. We believe the current environment is no exception."

"Despite the markdown on our investments and declines in our underwriting business, our dynamic platform has demonstrated continued resiliency. We have earned over $17.00 per share for our shareholders since 2019, and despite a GAAP net loss of ($43.4 million) over the trailing twelve-month period, we delivered operating EBITDA of $366 million in the same period, representing a meaningful increase compared to $114 million in 2019. Increasing contributions from less cyclical and less episodic businesses have exceeded the capital needed to support our dividend while providing us flexibility to continue to invest across our business."

"At the same time, strategic investments remain an integral part of our business, as a strategy that helps competitively advantage our clients. Our cash and investment portfolio has been diversified to balance our allocation between debt and equity-related investments. In our credit positions, we have demonstrated an ability to structure lending opportunities that enable us to earn attractive spreads with minimal impairments over time. The remainder of our portfolio is focused on public and private small-cap companies where we have high conviction in capital appreciation over our investment horizon. Securities in our investment portfolio have exceeded the Russell 2000 Index in multiple market cycles, having generated total returns of more than 90% to B. Riley since 2019. As we look ahead, we remain optimistic about the total return potential of our investment portfolio, as well as our ability to capitalize on opportunities being presented by the current market dislocation."

Tom Kelleher, Co-Chief Executive Officer of B. Riley Financial, added: "During the quarter, the balance of our operating businesses continued to deliver steady cash flow to our platform while performing to support our clients. Amid another transformative period for B. Riley, we have made meaningful progress in expanding our existing businesses while consolidating recent acquisitions. Our communications business with Lingo serves as a leading source of recurring cash flow for our platform as financial consulting performs steadily quarter-to-quarter and year-to-year. With core capabilities in restructuring, asset disposition, and distressed financing, we believe our diversified platform stands to benefit during periods of market austerity. As we begin to realize synergies from combining National Holdings and FocalPoint into our respective legacy wealth and investment banking businesses, we are looking to the horizon and evaluating other accretive acquisitions to accelerate our growth."

Declaration of Common Dividend

B. Riley has declared a regular quarterly cash dividend of $1.00 per common share which is payable on or about August 23 to common stockholders of record as of August 11.

Financial Summary

Net loss available to common shareholders of ($142.2 million), or ($5.07) diluted earnings per share (EPS), was driven by investment loss ⁽⁴⁾ of ($223.9 million) related to the decline in capital markets which impacted the value of the Company's investment portfolio. Net loss was ($154.2 million) year-to-date, or diluted EPS of ($5.52).

• Total revenues were $42.7 million for the quarter and $248.3 million year-to-date.
• Operating revenues ⁽²⁾ were $266.6 million for the quarter and $540.6 million year-to-date.
• Operating adjusted EBITDA ⁽³⁾ of $74.2 million for the quarter and $158.4 million year-to-date.
• Total adjusted EBITDA ⁽¹⁾ loss of ($135.8 million) for the quarter and ($95.1 million) year-to-date.

As of June 30, 2022, cash and investments ⁽⁶⁾ totaled approximately $2.2 billion including cash and cash equivalents of $216.1 million. Total cash and investments, ⁽⁶⁾ net of debt, was $61.5 million.

Segment Financial Summary

For the three months ended June 30, 2022:

Excluding investment loss of ($225.5 million),⁽⁴⁾ Capital Markets segment operating revenues decreased to $129.8 million from $151.5 million in the prior year period. Segment operating income ⁽⁷⁾ fell to $53.3 million from $74.7 million in the prior year period. Results for the quarter were impacted by declines in investment banking and institutional brokerage activities that were consistent with the industry-wide reduction in deal activity.

Wealth Management revenues fell to $62.4 million with a segment loss of ($7.3 million) due to reduced activity and the impact of a settlement related to a legacy National Securities regulatory matter which pre-dated the Company's acquisition in 2021.

Auction and Liquidation revenues were $3.9 million with segment income of $0.5 million. Results for this segment vary from quarter-to-quarter and year-to-year due to the episodic impact of large retail liquidation engagements.

Financial Consulting revenues increased to $24.3 million, up from $23.7 million in the prior year period. Segment income increased to $4.3 million, up from $4.2 million in the prior year period. The increase was driven primarily by bankruptcy restructuring and forensic litigation consulting matters, in addition to appraisal engagements and real estate dispositions.

Principal Investments – Communications and Other segment revenues increased to $42.5 million, up from $19.6 million in the prior year period due to the addition of Lingo and Marconi Wireless. On a combined basis, communications businesses – magicJack, United Online, Marconi Wireless and Lingo—along with other principal investments, generated segment income of $7.6 million for the quarter.

Brands segment revenues increased to $5.2 million, up from $4.4 million in the prior year period related to the licensing of trademarks for six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too, and Nanette Lepore. Segment income increased to $3.8 million, up from $3.0 million in the prior year period.

For the six months ended June 30, 2022:

Excluding the year-to-date investment loss ⁽⁴⁾ of ($294.4 million), Capital Markets segment operating revenues ⁽²⁾ were $260.3 million with segment operating income ⁽⁷⁾ of $111.2 million.

Wealth Management segment revenues were $139.9 million with segment loss of ($17.4 million), year-to-date.

Auction and Liquidation segment revenues were $7.3 million with a segment loss of ($0.3 million), year-to-date.

Financial Consulting year-to-date segment revenues increased to $50.2 million, up from $45.1 million for the prior year-ago period. Segment income of $9.2 million increased compared to $7.5 million in the prior year-ago period.

Principal Investments – Communications and Other segment revenues were $75.2 million with segment income of $16.5 million, year-to-date.

Brands segment year-to-date revenues increased to $9.7 million, up from $8.9 million in the prior year-ago period. Segment income increased to $7.0 million, up from $6.1 million in the prior year ago period.

Investments in the Hurley and Justice brands contributed dividend income of $7.4 million for the quarter, and $13.3 million year-to-date. Results related to the Hurley and Justice investments are recognized as Capital Markets segment operating income. ⁽⁷⁾

Supplemental Financial Data

Additional details related to operating results and investment performance can be found in the Second Quarter 2022 Financial Supplement on B. Riley's investor relations website.

Conference Call Details

Management will host an investor call to discuss its second quarter results today, Thursday, July 28, 2022 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). Investors may access the live broadcast and archived recording via ir.brileyfin.com.

About B. Riley Financial

B. Riley Financial is a diversified financial services platform that delivers tailored solutions to meet the strategic, operational, and capital needs of its clients and partners. B. Riley leverages cross-platform expertise to provide clients with full service, collaborative solutions at every stage of the business life cycle. Through its affiliated subsidiaries, B. Riley provides end-to-end, collaborative financial services across investment banking, institutional brokerage, private wealth and investment management, financial consulting, corporate restructuring, operations management, risk and compliance, due diligence, forensic accounting, litigation support, appraisal and valuation, auction, and liquidation services. B. Riley opportunistically invests to benefit its shareholders, and certain registered affiliates originate and underwrite senior secured loans for asset-rich companies. B. Riley refers to B. Riley Financial, Inc. and/or one or more of its subsidiaries or affiliates. For more information, please visit www.brileyfin.com.

Note Regarding Use of Non-GAAP Financial Measures

Certain of the information set forth herein, including operating revenues, adjusted EBITDA, operating adjusted EBITDA, and investment adjusted EBITDA, may be considered non-GAAP financial measures. B. Riley Financial believes this information is useful to investors because it provides a basis for measuring the Company's available capital resources, the operating performance of its business and its revenues and cash flow, (i) excluding in the case of operating revenues, trading income (losses) and fair value adjustments on loans, (ii) excluding in the case of adjusted EBITDA, net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, restructuring costs, gain on extinguishment of loans, impairment of trade names, stock-based compensation and transaction and other expenses, (iii) excluding in the case of operating adjusted EBITDA, the aforementioned adjustments for adjusted EBITDA as well as trading income (losses) and fair value adjustments on loans, and other investment related expenses, (iv) including in the case of investment adjusted EBITDA, trading income (losses) and fair value adjustments on loans, net of other investment related expenses, and (v) including in the case of total cash and investments, net of debt, total cash, net securities and investments, and other minus total debt, that would normally be included in the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles ("GAAP"). In addition, the Company's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company's operating performance, management compensation, capital resources, and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-financial measures as reported by the Company may not be comparable to similarly titled amounts reported by other companies.

Forward-Looking Statements

Statements in this press release that are not descriptions of historical facts are forward-looking statements that are based on management's current expectations and assumptions and are subject to risks and uncertainties. If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition, and stock price could be materially negatively affected. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date of this press release. Such forward-looking statements include, but are not limited to, statements regarding our excitement and the expected growth of our business segments. Factors that could cause such actual results to differ materially from those contemplated or implied by such forward-looking statements include, without limitation, the risks associated with the unpredictable and ongoing impact of the COVID-19 pandemic and other risks described from time to time in B. Riley Financial, Inc.'s periodic filings with the SEC, including, without limitation, the risks described in B. Riley Financial, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2021 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (as applicable). Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. These factors should be considered carefully, and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and B. Riley Financial undertakes no duty to update this information.

SOURCE B. Riley Financial