News

B. Riley Financial Announces Record Results for Second Quarter 2019 and Increases Quarterly Cash Dividend

Reports record revenues of $164.7 million, adjusted EBITDA of $52.9 million, net income of $22.2 million

Declares regular dividend of $0.175 per share and special dividend of $0.325 per share

LOS ANGELES, Aug. 01, 2019 (GLOBE NEWSWIRE) -- B. Riley Financial, Inc. (NASDAQ:RILY) (the “Company”), a diversified financial services company which operates through several wholly-owned subsidiaries, today announced results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

Total revenues of $164.7 million
Net income of $22.2 million or $0.82 per diluted share
Adjusted EBITDA of $52.9 million
Adjusted net income of $28.3 million or $1.05 per diluted share

“Our strong performance demonstrates successful execution in diversifying our revenue while continuing to improve profitability across our distinct businesses. Our record results were primarily driven by the completion of several retail liquidation projects and an increase in investment banking revenues over the prior quarter. GlassRatner and magicJack have contributed meaningfully to our results, while appraisal and wealth management maintain steady contributions,” said Bryant Riley, Chairman and Co-CEO, B. Riley Financial. “The increase in our regular quarterly dividend to $0.175 reflects continued confidence in our long-term outlook and reinforces our commitment to deliver strong returns to shareholders. We remain excited by the proprietary investment opportunities that our growing platform offers, and we expect continued momentum in our business as we look ahead.”

Second Quarter 2019 Financial Summary
For the three-month period ending June 30, 2019, total revenues increased to $164.7 million, up from $125.5 million in revenues for the second quarter of 2018.

Capital Markets Segment: Revenues increased to $94.2 million from $77.8 million for the same year ago period. The year-over-year increase was primarily driven by the addition of GlassRatner, which the Company acquired on August 1, 2018, and income from investments. Segment income increased to $24.4 million from $12.0 million for the same year ago period. Improved performance from investment banking contributed to an increase from the prior quarter which recorded segment revenue of $85.3 million and segment income of $13.9 million for the first quarter of 2019.
Auction and Liquidation Segment: Revenues increased to $34.9 million from $26.8 million for the same year ago period. Segment income increased to $17.8 million from $16.3 million for the same year ago period. The increase was driven by the completion of several retail liquidation projects during the quarter. Results also increased compared to the first quarter of 2019 which recorded revenues of $20.7 million and segment income of $11.5 million. Results for this segment are expected to vary from quarter-to-quarter and year-to-year due to the episodic and cyclical nature of the retail liquidation industry in which Great American Group conducts business.
Valuation and Appraisal Segment: Revenues for Great American Group Advisory & Valuations Services increased to $9.7 million from $9.5 million for the same year ago period. Segment income totaled $2.7 million compared to $2.9 million for the same year ago period. Results for this segment remain relatively steady quarter-over-quarter.
Principal Investments Segment: Revenues increased to $25.8 million compared to $11.4 million for the same year ago period. Segment income increased to $7.8 million compared to $4.7 million for the same year ago period. The increase in segment revenue and income was primarily driven by the acquisition of magicJack on November 14, 2018. Results for this segment also include contributions from United Online.

Net income attributable to B. Riley Financial increased to $22.2 million or $0.82 per diluted share compared to $17.0 million or $0.64 per diluted share for the same year ago period.

Adjusted EBITDA increased to $52.9 million for the second quarter of 2019 compared to $41.4 million for the same year ago period. Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring, share-based payments, and transaction related and other costs. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)

Adjusted net income increased to $28.3 million or $1.05 per diluted share compared to $22.8 million or $0.86 per diluted share for the same year ago period, and $16.4 million or $0.61 per diluted share for the first quarter of 2019. Adjusted net income excludes the impact of share-based payments, amortization of intangible assets, restructuring costs, transaction related and other costs, and tax impact of aforementioned adjustments. (See “Note Regarding Use of Non-GAAP Financial Measures” below for further discussion of this non-GAAP term.)

As of June 30, 2019, the Company had $55.6 million in cash and cash equivalents, $29.2 million due from clearing brokers, $5.3 million in advances against customer contracts, $250.5 million of loans receivable, $227.5 million in net securities and other investments owned, and $664.6 million of total debt. The Company had a net cash and investments balance of approximately $13 million, net of debt. The investment balance includes approximately $107 million in equity investments and deposits included in prepaid expenses and other assets.

During the quarter, the Company announced the repurchase of approximately 638,000 warrants representing over two percent of total shares outstanding at June 30, 2019. Total B. Riley Financial stockholders’ equity increased to $276.5 million as of June 30, 2019.

Declaration of Dividend
The Company’s Board of Directors declared an increase to the regular quarterly dividend from $0.08 per share to $0.175 per share. The Board of Directors also declared a special dividend of $0.325 per share, when combined with the $0.175 regular dividend, amounts to a total cash dividend of $0.50, which will be paid on or about August 29, 2019 to stockholders of record as of August 15, 2019.

Conference Call
Bryant Riley, Chairman and Co-CEO; Tom Kelleher, Co-CEO; and Phillip Ahn, CFO and COO, will host a conference call today at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) to discuss the Company’s financial and operational results, followed by a question and answer period.

Please call the conference line 10 minutes prior to the start time and an operator will register your name and organization. The live broadcast and archive will be available on the Company’s investor relations website.

B. Riley Financial Q2 2019 Earnings Call Details
Date:		Thursday, August 1, 2019
Time:		4:30 p.m. Eastern time (1:30 p.m. Pacific time)
Toll-Free:		1-855-327-6837
International:		1-631-891-4304

Replay Dial-In (expires on Thursday, August 8, 2019)
Toll-Free:		1-844-512-2921
International:		1-412-317-6671
Replay Pin:		10007337

For more information, visit ir.brileyfin.com.

About B. Riley Financial
B. Riley Financial (NASDAQ:RILY) provides collaborative financial services and solutions tailored to fit the capital raising and financial advisory needs of public and private companies and high-net-worth individuals. The Company operates through several wholly-owned subsidiaries, including B. Riley FBR, a full-service investment bank and institutional brokerage; Great American Group, a leading provider of asset disposition, appraisal, corporate advisory and valuation services; GlassRatner, a specialty financial advisory services and consulting firm; B. Riley Wealth Management, B. Riley Asset Management and B. Riley Alternatives, which offer investment management to institutional and high net worth investors; Great American Capital Partners, which originates and underwrites senior secured loans for asset-rich companies; and B. Riley Principal Investments, which invests in or acquires companies and assets with attractive return profiles. For more information, visit www.brileyfin.com.

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 the Company’s anticipated results of operations for 2019, expectations regarding the size and consistency of returns, expectations regarding market dynamics, as well as statements regarding our excitement and the expected grown of our business segments. Other factors that could adversely affect our operating results and cash flows include (without limitation) those 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, 2018 under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019. 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, Inc. undertakes no duty to update this information.

Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including adjusted net income and 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 cash flow, excluding net interest expense, provisions for or benefit from income taxes, depreciation, amortization, fair value adjustment, transaction and other expenses, restructuring costs, and stock-based compensation 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, 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.

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands, except par value)

		June 30,			December 31,
		2019			2018
			(Unaudited)
Assets
Assets:
	Cash and cash equivalents	$	55,609		$	179,440
	Restricted cash		2,635			838
	Due from clearing brokers		29,245			37,738
	Securities and other investments owned, at fair value		270,290			273,577
	Securities borrowed		759,921			931,346
	Accounts receivable, net		56,450			42,123
	Due from related parties		4,318			1,729
	Advances against customer contracts		5,322			—
	Loans receivable		250,521			38,794
	Prepaid expenses and other assets		140,817			79,477
	Operating lease right-of-use assets		50,943			—
	Property and equipment, net		13,997			15,523
	Goodwill		220,181			223,368
	Other intangible assets, net		82,765			91,358
	Deferred income taxes		35,969			42,399
	Total assets	$	1,978,983		$	1,957,710
Liabilities and Equity
Liabilities:
	Accounts payable	$	2,136		$	5,646
	Accrued expenses and other liabilities		93,832			108,662
	Deferred revenue		68,097			69,066
	Due to related parties and partners		1,563			2,428
	Securities sold not yet purchased		42,754			37,623
	Securities loaned		759,109			930,522
	Mandatorily redeemable noncontrolling interests		4,224			4,633
	Operating lease liabilities		65,499			—
	Notes payable		1,193			1,550
	Term loan		80,916			79,166
	Senior notes payable		582,482			459,754
	Total liabilities		1,701,805			1,699,050

Commitments and contingencies
B. Riley Financial, Inc. stockholders' equity:
	Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued		—			—
	Common stock, $0.0001 par value; 100,000,000 shares authorized; 26,919,941		3			2
	and 26,603,355 issued and outstanding as of June 30, 2019 and December 31, 2018, respectively.
	Additional paid-in capital		255,865			258,638
	Retained earnings		22,424			1,579
	Accumulated other comprehensive loss		(1,824	)		(2,161	)
	Total B. Riley Financial, Inc. stockholders' equity		276,468			258,058
Noncontrolling interests			710			602
	Total equity		277,178			258,660
	Total liabilities and equity	$	1,978,983		$	1,957,710

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except share data)

			Three Months Ended							Six Months Ended
			June 30,							June 30,
			2019			2018			2019			2018
Revenues:
	Services and fees		$	154,859		$	118,882		$	286,712		$	207,331
	Interest income - Securities lending			7,665			6,591			16,995			13,882
	Sale of goods			2,160			28			3,105			66
		Total revenues		164,684			125,501			306,812			221,279
Operating expenses:
	Direct cost of services			24,232			13,925			42,769			25,577
	Cost of goods sold			1,805			49			2,924			90
	Selling, general and administrative expenses			87,338			76,723			177,881			144,821
	Restructuring charge			1,552			1,602			1,699			1,819
	Interest expense - Securities lending			5,502			4,724			12,306			9,892
		Total operating expenses		120,429			97,023			237,579			182,199
		Operating income		44,255			28,478			69,233			39,080
Other income (expense):
	Interest income			331			166			968			294
	(Loss) income from equity investments			(1,400	)		4,893			(5,162	)		4,221
	Interest expense			(11,588	)		(10,359	)		(22,358	)		(14,586	)
		Income before income taxes		31,598			23,178			42,681			29,009
Provision for income taxes				(9,289	)		(5,377	)		(12,393	)		(6,366	)
		Net income		22,309			17,801			30,288			22,643
Net income attributable to noncontrolling interests				152			804			108			1,143
		Net income attributable to B. Riley Financial, Inc.	$	22,157		$	16,997		$	30,180		$	21,500

Basic income per share			$	0.84		$	0.67		$	1.15		$	0.83
Diluted income per share			$	0.82		$	0.64		$	1.13		$	0.80

Weighted average basic shares outstanding				26,278,352			25,424,178			26,247,952			25,799,077
Weighted average diluted shares outstanding				26,896,573			26,397,513			26,770,922			26,785,169

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Dollars in thousands)

						Six Months Ended June 30,
					2019			2018
Cash flows from operating activities:
	Net income				$	30,288		$	22,643
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation and amortization				9,744			6,670
		Provision for doubtful accounts				1,067			648
		Share-based compensation				5,548			5,559
		Non-cash interest and other				(3,144	)		1,870
		Effect of foreign currency on operations				339			(582	)
		Loss (income) from equity investments				5,162			(4,221	)
		Deferred income taxes				6,430			7
		Impairment of leaseholds and intangibles, lease loss accrual and gain on disposal of fixed assets				(344	)		1,403
		Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests				446			543
		Change in operating assets and liabilities:
			Due from clearing brokers			8,493			(3,763	)
			Securities and other investments owned			3,287			(15,180	)
			Securities borrowed			171,425			(206,899	)
			Accounts receivable and advances against customer contracts			(22,420	)		(208,658	)
			Prepaid expenses and other assets			(45,500	)		(16,108	)
			Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities			1,143			5,320
			Amounts due to/from related parties and partners			(3,454	)		3,362
			Securities sold, not yet purchased			5,131			(10,708	)
			Deferred revenue			(790	)		459
			Securities loaned			(171,413	)		208,869
				Net cash provided by (used in) operating activities		1,438			(208,766	)
Cash flows from investing activities:
	Purchases of loans receivable					(225,072	)		—
	Repayments of loans receivable					17,640			—
	Purchases of property, equipment and intangible assets					(2,514	)		(1,836	)
	Proceeds from sale of property, equipment and intangible assets					503			37
	Equity investments					(25,183	)		(3,575	)
	Proceeds from sale of division of magicJack					6,196			—
	Dividends from equity investments					854			1,695
				Net cash used in investing activities		(227,576	)		(3,679	)
Cash flows from financing activities:
	Proceeds from asset based credit facility					—			300,000
	Repayment of asset based credit facility					—			(194,460	)
	Proceeds from notes payable					—			51,020
	Repayment of notes payable					(357	)		(357	)
	Proceeds from term loan					10,000			—
	Repayment of term loan					(8,305	)		—
	Proceeds from issuance of senior notes					123,935			132,123
	Payment of debt issuance costs					(2,039	)		(4,936	)
	Payment of employment taxes on vesting of restricted stock					(2,291	)		(3,570	)
	Dividends paid					(9,991	)		(9,549	)
	Repurchase of common stock					(3,252	)		(17,338	)
	Repurchase of warrants					(2,777	)		—
	Distribution to noncontrolling interests					(856	)		(782	)
				Net cash provided by financing activities		104,067			252,151
				(Decrease) increase in cash, cash equivalents and restricted cash		(122,071	)		39,706
				Effect of foreign currency on cash, cash equivalents and restricted cash		37			(499	)
				Net (decrease) increase in cash, cash equivalents and restricted cash		(122,034	)		39,207
Cash, cash equivalents and restricted cash, beginning of year						180,278			152,534
Cash, cash equivalents and restricted cash, end of period					$	58,244		$	191,741

Supplemental disclosures:
	Interest paid				$	22,112		$	21,868
	Taxes paid				$	891		$	2,306

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Segment Financial Information
(Unaudited)
(Dollars in thousands)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019			2018
Capital Markets segment:
	Revenues - Services and fees	$	86,583		$	71,194		$	162,554		$	124,232
	Interest income - Securities lending		7,665			6,591			16,995			13,882
	Total revenues		94,248			77,785			179,549			138,114
	Selling, general and administrative expenses		(63,041	)		(57,713	)		(126,430	)		(111,352	)
	Restructuring (charge) recovery		(25	)		(1,774	)		4			(2,029	)
	Interest expense - Securities lending		(5,502	)		(4,724	)		(12,306	)		(9,892	)
	Depreciation and amortization		(1,287	)		(1,555	)		(2,563	)		(3,119	)
	Segment income		24,393			12,019			38,254			11,722
Auction and Liquidation segment:
	Revenues - Services and fees		33,740			26,836			54,449			42,353
	Revenues - Sale of goods		1,176			—			1,176			—
	Total revenues		34,916			26,836			55,625			42,353
	Direct cost of services		(12,939	)		(6,849	)		(19,213	)		(11,425	)
	Cost of goods sold		(852	)		(16	)		(866	)		(17	)
	Selling, general and administrative expenses		(3,295	)		(3,617	)		(6,210	)		(6,498	)
	Depreciation and amortization		(2	)		(8	)		(4	)		(16	)
	Segment income		17,828			16,346			29,332			24,397
Valuation and Appraisal segment:
	Revenues - Services and fees		9,742			9,459			18,325			17,979
	Direct cost of services		(4,569	)		(4,123	)		(8,990	)		(8,321	)
	Selling, general and administrative expenses		(2,405	)		(2,414	)		(5,171	)		(4,759	)
	Depreciation and amortization		(31	)		(54	)		(64	)		(103	)
	Segment income		2,737			2,868			4,100			4,796
Principal Investments - United Online and magicJack segment:
	Revenues - Services and fees		24,794			11,393			51,384			22,767
	Revenues - Sale of goods		984			28			1,929			66
	Total revenues		25,778			11,421			53,313			22,833
	Direct cost of services		(6,724	)		(2,953	)		(14,566	)		(5,831	)
	Cost of goods sold		(953	)		(33	)		(2,058	)		(73	)
	Selling, general and administrative expenses		(5,495	)		(2,015	)		(12,515	)		(3,973	)
	Depreciation and amortization		(3,300	)		(1,679	)		(6,763	)		(3,358	)
	Restructuring charge		(1,527	)		—			(1,703	)		—
	Segment income		7,779			4,741			15,708			9,598
Consolidated operating income from reportable segments			52,737			35,974			87,394			50,513

Corporate and other expenses (including restructuring recovery of			(8,482	)		(7,496	)		(18,161	)		(11,433	)
$172 and $210 during the three and six months ended June 30, 2018, respectively)
Interest income			331			166			968			294
(Loss) income on equity investments			(1,400	)		4,893			(5,162	)		4,221
Interest expense			(11,588	)		(10,359	)		(22,358	)		(14,586	)
	Income before income taxes		31,598			23,178			42,681			29,009
Provision for income taxes			(9,289	)		(5,377	)		(12,393	)		(6,366	)
	Net income		22,309			17,801			30,288			22,643
Net income attributable to noncontrolling interests			152			804			108			1,143
	Net income attributable to B. Riley Financial, Inc.	$	22,157		$	16,997		$	30,180		$	21,500

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)

				Three Months Ended June 30,						Six Months Ended June 30,
				2019			2018			2019			2018
Net income attributable to B. Riley Financial, Inc.				$	22,157		$	16,997		$	30,180		$	21,500
Adjustments:
	Provision for income taxes				9,289			5,377			12,393			6,366
	Interest expense				11,588			10,359			22,358			14,586
	Interest income				(331	)		(166	)		(968	)		(294	)
	Share based payments				2,934			2,678			5,548			5,236
	Depreciation and amortization				4,831			3,333			9,744			6,670
	Restructuring costs				1,552			1,602			1,699			1,819
	Transactions related costs and other				836			1,191			6,332			1,545

		Total EBITDA adjustments			30,699			24,374			57,106			35,928

			Adjusted EBITDA	$	52,856		$	41,371		$	87,286		$	57,428

B. RILEY FINANCIAL, INC. AND SUBSIDIARIES
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)

			Three Months Ended					Six Months Ended
			June 30,					June 30,
			2019		2018			2019			2018
Net income attributable to B. Riley Financial, Inc.		$	22,157		$	16,997		$	30,180		$	21,500
Adjustments:
	Share based payments		2,934			2,678			5,548			5,236
	Amortization of intangible assets		3,344			2,146			6,721			4,306
	Restructuring costs		1,552			1,602			1,699			1,819
	Transactions related costs and other		836			1,191			6,332			1,545
	Income tax effect of adjusting entries		(2,560	)		(1,831	)		(5,805	)		(2,783	)
Adjusted net income attributable to B. Riley Financial, Inc.		$	28,263		$	22,783		$	44,675		$	31,623

Adjusted income per common share:
	Adjusted basic income per share	$	1.08		$	0.90		$	1.70		$	1.23
	Adjusted diluted income per share	$	1.05		$	0.86		$	1.67		$	1.18

Shares used to calculate adjusted basic net income per share			26,278,352			25,424,178			26,247,952			25,799,077
Shares used to calculate adjusted diluted net income per share			26,896,573			26,397,513			26,770,922			26,785,169

Contacts

Investors
B. Riley Financial
ir@brileyfin.com
(310) 966-1444

Media
Jo Anne McCusker
jmccusker@brileyfin.com
(646) 885-5425

Source: B. Riley Financial, Inc.

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