BRC Group Holdings, Inc 8-K, filed Feb 25, 2021
BRC Group Holdings, Inc. (RILY)
About this 8-K
BRC Group Holdings, Inc filed this 8-K on February 25, 2021.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported):
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Depositary Shares (each representing a 1/1000th interest in a 6.875% Series A Cumulative Perpetual Preferred Share, par value $0.0001 per share) | RILYP | Nasdaq Global Market | ||
| Depositary Shares (each representing a 1/1000th interest in a 7.375% Series B Cumulative Perpetual Preferred Share, par value $0.0001 per share) | RILYL | Nasdaq Global Market | ||
| 7.25% Senior Notes due 2027 | RILYG | Nasdaq Global Market | ||
| 7.50% Senior Notes due 2027 | RILYZ | Nasdaq Global Market | ||
| 7.375% Senior Notes due 2023 | RILYH | Nasdaq Global Market | ||
| 6.875% Senior Notes due 2023 | RILYI | Nasdaq Global Market | ||
| 6.75% Senior Notes due 2024 | RILYO | Nasdaq Global Market | ||
| 6.50% Senior Notes due 2026 | RILYN | Nasdaq Global Market | ||
| 6.375% Senior Notes due 2025 | RILYM | Nasdaq Global Market | ||
| 6.00% Senior Notes due 2028 | RILYT | Nasdaq Global Market |
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 25, 2021, B. Riley Financial, Inc. (the “Company”) issued a press release reporting its financial results for the fiscal quarter and year ended December 31, 2020. A copy of the press release is attached hereto as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
Additionally, on February 25, 2021, in conjunction with the press release described above, the Company posted to its website at https://ir.brileyfin.com/events-and-presentations, certain supplemental financial information for the fiscal quarter ended February 25, 2021 and certain prior periods. A copy of the information is attached hereto as Exhibit 99.2.
The information set forth in this Current Report, including Exhibits 99.1 and 99.2 attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report, including Exhibits 99.1 and 99.2 attached hereto, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing to this Current Report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 99.1 | Earnings Release dated February 25, 2021 | |
| 99.2 | Fourth Quarter 2020 Supplemental Financial Data dated February 25, 2021 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 1 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| February 25, 2021 | B. RILEY FINANCIAL, INC. | ||
| By: | /s/ Phillip J. Ahn | ||
| Name: | Phillip J. Ahn | ||
| Title: | Chief Financial Officer and Chief Operating Officer | ||
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Exhibit 99.1
 |
www.brileyfin.com |
B. Riley Financial Reports Record Fourth
Quarter and Full Year 2020 Results,
Declares $3.50 Dividend
Declares special dividend of $3.00 and
Increases quarterly dividend to $0.50 from $0.375
LOS ANGELES, February 25, 2021 — B. Riley Financial, Inc. (NASDAQ: RILY) (“B. Riley” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2020.
Fourth Quarter 2020 Financial Highlights
| · | Record quarterly total revenues of $410.2 million vs. $165.2 million for Q4 2019 |
| · | Record investment banking results driven by increased activity and larger transactions |
| · | Net income of $170.1 million vs. $16.9 million, EPS of $6.55 vs. $0.59 per diluted share |
| · | Operating revenues of $270.0 million vs. $130.5 million, Operating EBITDA of $126.8 million vs. $16.4 million |
| · | Q4 total adjusted EBITDA of $260.5 million vs. $50.3 million |
Full Year 2020 Financial Highlights
| · | Record annual total revenues of $902.7 million vs. $652.1 million for FY 2019 |
| · | Net income of $200.4 million vs. $81.3 million, EPS of $7.56 vs. $2.95 per diluted share |
| · | Operating revenues of $798.7 million vs. $545.6 million, Operating EBITDA of $311.7 million vs. $113.6 million |
| · | Annual investment gains of approximately $104 million |
| · | Annual total adjusted EBITDA of $406.8 million vs. $207.9 million |
Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, said: “Given the strength and performance of both our episodic and steady recurring businesses, we are increasingly confident in the earnings power of our platform. The increase in our regular quarterly dividend to $0.50 reflects the continued growth of our recurring businesses, namely our brands, advisory, and principal investments; and our special $3.00 dividend reflects the strength of our episodic businesses, including brokerage and retail liquidation. While these businesses tend to be cyclical, we believe issuing a special dividend allows us to maintain flexibility. As we continue to see extremely attractive uses for our capital, we also believe it is important to reward our shareholders with the cash flow that we generate. We feel strongly that a balanced capital allocation policy includes substantial dividends to our partners.”
“Our results demonstrated increased profitability from all of our businesses, and particularly our brokerage. Investment banking delivered an impressive quarter driven not only by an acceleration in capital markets activity, but also from an increased number of larger transactions and significant retail restructuring assignments. In addition, SPAC activity contributed strong earnings, while our at-the-market (ATM) business saw another record quarter,” continued Riley.
Tom Kelleher, Co-Chief Executive Officer of B. Riley Financial, added: “During the quarter, we also made further enhancements to our platform with the addition of a venture capital business, an operations management vertical, and our investment in the Justice brand. Our growth has enabled us to deliver greater value to our clients and partners and to attract talent to our platform.”
“As we continue to invest in strategically scaling service offerings that complement core capabilities, our acquisition of National Holdings meaningfully enhances both steady and episodic results and further solidifies our small-cap capital markets leadership. While B. Riley’s momentum has never been stronger, we will remain focused on delivering for our clients and partners as we continue to capitalize on the opportunities ahead,” said Riley.
B. Riley Financial, Inc. | www.brileyfin.com | NASDAQ: RILY
Fourth Quarter and Full Year 2020 Financial Summary
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| (Dollars in thousands) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
| Revenues | ||||||||||||||||
| Operating Revenues (2) | $ | 270,046 | $ | 130,504 | $ | 798,703 | $ | 545,649 | ||||||||
| Investment Gains (4) | 140,160 | 34,733 | 104,018 | 106,463 | ||||||||||||
| Total Revenues | $ | 410,206 | $ | 165,237 | $ | 902,721 | $ | 652,112 | ||||||||
| Adjusted EBITDA (1) | ||||||||||||||||
| Operating Adjusted EBITDA (3) | $ | 126,787 | $ | 16,394 | $ | 311,673 | $ | 113,603 | ||||||||
| Investment Adjusted EBITDA (5) | 133,699 | 33,875 | 95,145 | 94,282 | ||||||||||||
| Total Adjusted EBITDA | $ | 260,486 | $ | 50,269 | $ | 406,818 | $ | 207,885 | ||||||||
For the three months ended December 31, 2020:
| · | B. Riley Financial reported record quarterly total revenues of $410.2 million, up from $165.2 million for the fourth quarter of 2019. |
| · | Net income available to common shareholders totaled $170.1 million, or $6.55 per diluted share, up from $16.9 million, or $0.59 per diluted share, for the prior-year quarter. |
| · | Total adjusted EBITDA (1) increased to $260.5 million from $50.3 million for the fourth quarter of 2019. |
| · | Operating revenues (2) increased to $270.0 million compared to $130.5 million for the fourth quarter of 2019. Operating adjusted EBITDA (3) increased to $126.8 million from $16.4 million for the prior-year quarter. |
For the twelve months ended December 31, 2020:
| · | B. Riley Financial reported record annual total revenues of $902.7 million, up from $652.1 million for 2019. |
| · | Net income available to common shareholders was $200.4 million, or $7.56 per diluted share, up from $81.3 million or $2.95 per diluted share for 2019. |
| · | Total adjusted EBITDA (1) increased to $406.8 million compared to $207.9 million for the prior-year period. |
| · | Operating revenues (2) increased to $798.7 million compared to $545.6 million for 2019. Operating adjusted EBITDA (3) totaled $311.7 million for the year, compared to $113.6 million for 2019. |
The Company reported quarterly investment gains (4) of approximately $140 million, resulting in investment gains (4) of approximately $104 million for the year. Investment gains (4) are primarily unrealized mark-to-market valuations on strategic investments held by the Company. Gains for the year represented a sharp recovery from the markdown in the first quarter of 2020.
As of December 31, 2020, cash and investments (7) totaled approximately $1.3 billion, including cash and cash equivalents of $103.6 million. B. Riley Financial’s cash and investments, (7) net of debt, totaled over $315 million at year-end.
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Segment Financial Summary
| Three Months Ended | ||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| (Dollars in thousands) | Capital Markets | Auction and Liquidation | Financial Consulting | Principal Investments | Brands | |||||||||||||||
| Operating Revenues (2) | $ | 201,065 | $ | 15,667 | $ | 26,480 | $ | 21,383 | $ | 5,451 | ||||||||||
| Investment Gains (4) | 140,160 | - | - | - | - | |||||||||||||||
| Segment Revenue | $ | 341,225 | $ | 15,667 | $ | 26,480 | $ | 21,383 | $ | 5,451 | ||||||||||
| Segment Operating Income (6) | $ | 102,503 | $ | 7,460 | $ | 6,873 | $ | 7,300 | $ | 4,054 | ||||||||||
| Investment Gains Income (5) | 133,699 | - | - | - | - | |||||||||||||||
| Segment Income | $ | 236,202 | $ | 7,460 | $ | 6,873 | $ | 7,300 | $ | 4,054 | ||||||||||
For the fourth quarter of 2020:
| · | Capital Markets operating revenues totaled $201.1 million with segment operating income of $102.5 million for the fourth quarter of 2020. Record investment banking activity, profits from institutional brokerage, and wealth management contributed to strong earnings for the quarter. Investment banking benefitted from an increase in larger capital markets transactions and significant retail and consumer restructuring advisory engagements completed during the fourth quarter. |
| · | Auction and Liquidation quarterly results included revenues of $15.7 million and segment income of $7.5 million from B. Riley Retail Solutions (formerly known as Great American Group) retail liquidation and store closing projects. |
| · | Financial Consulting revenues totaled $26.5 million, up from $20.1 million for the fourth quarter of 2019. Segment income totaled $6.9 million compared to $4.7 million for the prior-year period. Results were primarily driven by B. Riley Advisory Services bankruptcy, forensic accounting and appraisal assignments. |
| · | Principal Investments companies, magicJack and United Online, contributed fourth quarter revenues of $21.4 million and segment income of $7.3 million. |
| · | Brands generated revenues of $5.5 million related to the licensing of brand trademarks including Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too, and Nanette Lepore (“six brands”). |
| Twelve Months Ended | ||||||||||||||||||||
| December 31, 2020 | ||||||||||||||||||||
| (Dollars in thousands) | Capital Markets | Auction and Liquidation | Financial Consulting | Principal Investments | Brands | |||||||||||||||
| Operating Revenues (2) | $ | 514,721 | $ | 88,764 | $ | 91,622 | $ | 87,138 | $ | 16,458 | ||||||||||
| Investment Gains (4) | 104,018 | - | - | - | - | |||||||||||||||
| Segment Revenue | $ | 618,739 | $ | 88,764 | $ | 91,622 | $ | 87,138 | $ | 16,458 | ||||||||||
| Segment Operating Income (6) | $ | 208,630 | $ | 25,769 | $ | 22,543 | $ | 33,360 | $ | (1,789 | ) | |||||||||
| Investment Gains Income (5) | 95,145 | - | - | - | - | |||||||||||||||
| Segment Income (Loss) | $ | 303,775 | $ | 25,769 | $ | 22,543 | $ | 33,360 | $ | (1,789 | ) | |||||||||
For the full year of 2020:
| · | Capital Markets operating revenues increased to $514.7 million with segment operating income of $208.6 million, compared to operating revenues of $341.9 million and segment operating income of $77.4 million in 2019. |
| · | Auction and Liquidation generated annual revenues of $88.8 million and segment income of $25.8 million related to retail liquidation and store closing projects completed during 2020. |
| · | Financial Consulting annual revenues increased to $91.6 million from $76.3 million in 2019. Segment income increased to $22.5 million, up from $17.8 million for the prior-year period. |
| · | Principal Investments companies continued to outperform initial investment estimates and provide steady cash flow for the B. Riley platform. For the full year, magicJack and United Online contributed revenues of $87.1 million and segment income of $33.4 million. |
| · | Brands contributed licensing revenues of $16.5 million for 2020. The Brands segment was established in October 2019. |
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The Company has presented information related to its operating results and investments to provide investors with additional metrics regarding its performance and overall results of operations. Additional information related to operating and investment results can be found in a Financial Supplement on the Company’s investor relations website.
Segment Reclassification
The Company has realigned its segment reporting structure to reflect certain organizational changes. In conjunction with the new reporting structure, the Company recast its segment presentation. Valuation and Appraisal are reported in the Financial Consulting segment. Bankruptcy, forensic accounting, and real estate results that were previously reported in the Capital Markets segment are now reported as part of the Financial Consulting segment.
Declaration of Common Stock Dividend
A total fourth quarter dividend of $3.50 per share will be paid to common stockholders of record as of March 10, 2021 on or about March 24, 2021. The Company has increased its regular quarterly dividend to $0.50 per share from the previous $0.375 regular dividend and has declared a special quarterly dividend of $3.00 per share. B. Riley Financial intends to continue to review its dividend policy to align with its business outlook. Upon payment of the fourth quarter dividend, the Company will have returned a total of $4.475 per share in common dividends related to its fiscal 2020 earnings.
Conference Call Details
Management will host a conference call to discuss the Company’s financial results followed by a question and answer period today, February 25, 2021, at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). Investors may access the live broadcast and archived recording at https://ir.brileyfin.com/events-and-presentations.
| Date: | Thursday, February 25, 2021 |
| Time: | 4:30 p.m. Eastern time (1:30 p.m. Pacific time) |
| Toll Free: | 1-855-327-6838 |
| International: | 1-604-235-2082 |
Replay Dial-In (expires on Thursday, March 4, 2021)
| Toll Free: | 1-844-512-2921 |
| International: | 1-412-317-6671 |
| Replay Pin: | 10013068 |
For more information, visit B. Riley Financial’s investor relations website at ir.brileyfin.com.
About B. Riley Financial
B. Riley Financial (NASDAQ: RILY) provides collaborative financial services solutions tailored to fit the capital raising, business, operational, and financial advisory needs of its clients and partners. B. Riley operates through several subsidiaries that offer a diverse range of complementary end-to-end capabilities spanning investment banking and 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. Certain registered affiliates of B. Riley originate and underwrite senior secured loans for asset-rich companies. B. Riley also makes proprietary investments in companies and assets with attractive return profiles. For the latest news and developments, follow B. Riley on Twitter @BRileyFinancial and LinkedIn. For more information, visit www.brileyfin.com.
B. Riley refers to B. Riley Financial and/or one or more of its subsidiaries or affiliates. For more information about B. Riley’s affiliated companies, visit www.brileyfin.com/platform.
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Footnotes (See “Note Regarding Use of Non-GAAP Financial Measures” for further discussion of these non-GAAP terms.)
| (1) | Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share-based payments, impairment of tradenames, and transaction related and other costs. For a definition of adjusted EBITDA and a reconciliation to GAAP financial measures, please see the Appendix hereto. |
| (2) | Operating revenue is defined as the sum of revenues from services and fees, interest income - loans and securities lending, and sale of goods. |
| (3) | Operating adjusted EBITDA is defined as adjusted EBITDA excluding trading income (losses) and fair value adjustments on loans and other investment related expenses. |
| (4) | Investment gains is defined as trading income and fair value adjustments on loans. |
| (5) | Investment adjusted EBITDA and investment gains income are defined as trading income and fair value adjustments on loans, less other investment related expenses. |
| (6) | Segment operating income is defined as segment income excluding trading income (losses) and fair value adjustments on loans and other investment related expenses. |
| (7) | Total cash and investments is defined as the sum of cash and cash equivalents, restricted cash, due from clearing brokers net of due to clearing brokers, securities and other investments owned, at fair value net of securities sold not yet purchased, advances against customer contracts, loans receivable, at fair value net of loan participations sold, and other equity investments reported in prepaid and other assets. |
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 2021, as well as 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, 2019, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020, 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 Annual Report on Form 10-K for the year ended December 31, 2020. 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 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, impairment of trade names, stock-based compensation and transaction and other expenses, (iii) excluding in the case of operating adjusted EBITDA, aforementioned adjustments for adjusted EBITDA, 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, 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.
|
Contacts Investors Mike Frank ir@brileyfin.com (212) 409-2424 |
Media Jo Anne McCusker jmccusker@brileyfin.com (646) 885-5425 |
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B. RILEY FINANCIAL, INC.
Consolidated Balance Sheets
(Dollars in thousands, except par value)
| December 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 103,602 | $ | 104,268 | ||||
| Restricted cash | 1,235 | 471 | ||||||
| Due from clearing brokers | 7,089 | 23,818 | ||||||
| Securities and other investments owned, at fair value | 777,319 | 408,213 | ||||||
| Securities borrowed | 765,457 | 814,331 | ||||||
| Accounts receivable, net | 46,518 | 46,624 | ||||||
| Due from related parties | 986 | 5,832 | ||||||
| Advances against customer contracts | 200 | 27,347 | ||||||
| Loans receivable, at fair value (includes $295,809 from related parties at December 31, 2020) | 390,689 | 43,338 | ||||||
| Loans receivable, at cost (includes $157,080 from related parties at December 31, 2019) | — | 225,848 | ||||||
| Prepaid expenses and other assets | 87,262 | 81,808 | ||||||
| Operating lease right-of-use assets | 48,799 | 47,809 | ||||||
| Property and equipment, net | 11,685 | 12,727 | ||||||
| Goodwill | 227,046 | 223,697 | ||||||
| Other intangible assets, net | 190,745 | 220,525 | ||||||
| Deferred tax assets, net | 4,098 | 31,522 | ||||||
| Total assets | $ | 2,662,730 | $ | 2,318,178 | ||||
| Liabilities and Equity | ||||||||
| Liabilities: | ||||||||
| Accounts payable | $ | 2,722 | $ | 4,477 | ||||
| Accrued expenses and other liabilities | 168,478 | 130,714 | ||||||
| Deferred revenue | 68,651 | 67,121 | ||||||
| Deferred tax liabilities, net | 34,248 | — | ||||||
| Due to related parties and partners | 327 | 1,750 | ||||||
| Due to clearing brokers | 13,672 | — | ||||||
| Securities sold not yet purchased | 10,105 | 41,820 | ||||||
| Securities loaned | 759,810 | 810,495 | ||||||
| Mandatorily redeemable noncontrolling interests | 4,700 | 4,616 | ||||||
| Operating lease liabilities | 60,778 | 61,511 | ||||||
| Notes payable | 37,967 | 38,167 | ||||||
| Loan participations sold | 17,316 | 12,478 | ||||||
| Term loan | 74,213 | 66,666 | ||||||
| Senior notes payable, net | 870,783 | 688,112 | ||||||
| Total liabilities | 2,123,770 | 1,927,927 | ||||||
| Commitments and contingencies | ||||||||
| B. Riley Financial, Inc. stockholders’ equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 3,971 and 2,349 shares issued and outstanding as of December 31, 2020 and 2019, respectively; liquidation preference of $99,260 and $58,723 as of December 31, 2020 and 2019, respectively. | — | — | ||||||
| Common stock, $0.0001 par value; 100,000,000 shares authorized; 25,777,796 and 26,972,332 issued and outstanding as of December 31, 2020 and 2019, respectively. | 3 | 3 | ||||||
| Additional paid-in capital | 310,326 | 323,109 | ||||||
| Retained earnings | 203,080 | 39,536 | ||||||
| Accumulated other comprehensive loss | (823 | ) | (1,988 | ) | ||||
| Total B. Riley Financial, Inc. stockholders’ equity | 512,586 | 360,660 | ||||||
| Noncontrolling interests | 26,374 | 29,591 | ||||||
| Total equity | 538,960 | 390,251 | ||||||
| Total liabilities and equity | $ | 2,662,730 | $ | 2,318,178 | ||||
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B. RILEY FINANCIAL, INC.
Consolidated Statements of Income
(Dollars in thousands, except share data)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| Revenues: | ||||||||||||||||
| Services and fees | $ | 237,270 | $ | 103,518 | $ | 667,069 | $ | 460,493 | ||||||||
| Trading income and fair value adjustments on loans | 140,160 | 34,733 | 104,018 | 106,463 | ||||||||||||
| Interest income - Loans and securities lending | 30,116 | 23,074 | 102,499 | 77,221 | ||||||||||||
| Sale of goods | 2,660 | 3,912 | 29,135 | 7,935 | ||||||||||||
| Total revenues | 410,206 | 165,237 | 902,721 | 652,112 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Direct cost of services | 9,250 | 17,109 | 60,451 | 58,824 | ||||||||||||
| Cost of goods sold | 1,018 | 3,740 | 12,460 | 7,575 | ||||||||||||
| Selling, general and administrative expenses | 137,088 | 97,256 | 428,537 | 385,219 | ||||||||||||
| Restructuring charge | — | — | 1,557 | 1,699 | ||||||||||||
| Impairment of tradenames | — | — | 12,500 | — | ||||||||||||
| Interest expense - Securities lending and loan participations sold | 11,782 | 9,565 | 42,451 | 32,144 | ||||||||||||
| Total operating expenses | 159,138 | 127,670 | 557,956 | 485,461 | ||||||||||||
| Operating income | 251,068 | 37,567 | 344,765 | 166,651 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 27 | 248 | 564 | 1,577 | ||||||||||||
| (Loss) income from equity investments | (478 | ) | 2,618 | (623 | ) | (1,431 | ) | |||||||||
| Interest expense | (16,712 | ) | (15,075 | ) | (65,249 | ) | (50,205 | ) | ||||||||
| Income before income taxes | 233,905 | 25,358 | 279,457 | 116,592 | ||||||||||||
| Provision for income taxes | (62,060 | ) | (7,842 | ) | (75,440 | ) | (34,644 | ) | ||||||||
| Net income | 171,845 | 17,516 | 204,017 | 81,948 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 251 | 387 | (1,131 | ) | 337 | |||||||||||
| Net income attributable to B. Riley Financial, Inc. | 171,594 | 17,129 | 205,148 | 81,611 | ||||||||||||
| Preferred stock dividends | 1,480 | 264 | 4,710 | 264 | ||||||||||||
| Net income available to common shareholders | $ | 170,114 | $ | 16,865 | $ | 200,438 | $ | 81,347 | ||||||||
| Basic income per common share | $ | 6.72 | $ | 0.64 | $ | 7.83 | $ | 3.08 | ||||||||
| Diluted income per common share | $ | 6.55 | $ | 0.59 | $ | 7.56 | $ | 2.95 | ||||||||
| Weighted average basic common shares outstanding | 25,331,918 | 26,547,023 | 25,607,278 | 26,401,036 | ||||||||||||
| Weighted average diluted common shares outstanding | 25,966,501 | 28,412,871 | 26,508,397 | 27,529,157 | ||||||||||||
7
B. RILEY FINANCIAL, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 204,017 | $ | 81,948 | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 19,369 | 19,048 | ||||||
| Provision for doubtful accounts | 3,385 | 2,126 | ||||||
| Share-based compensation | 18,588 | 15,916 | ||||||
| Fair value adjustments, non-cash | 21,954 | 12,258 | ||||||
| Non-cash interest and other | (16,810 | ) | (12,267 | ) | ||||
| Effect of foreign currency on operations | (460 | ) | (78 | ) | ||||
| Loss from equity investments | 623 | 1,431 | ||||||
| Dividends from equity investments | 1,343 | 3,194 | ||||||
| Deferred income taxes | 61,619 | 10,874 | ||||||
| Impairment of leaseholds and intangibles, lease loss accrual and gain on disposal of fixed assets | 14,107 | (286 | ) | |||||
| Gain on extinguishment of debt | (1,556 | ) | — | |||||
| Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests | 1,230 | 1,220 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Amounts due to/from clearing brokers | 30,401 | 13,920 | ||||||
| Securities and other investments owned | (331,759 | ) | (178,023 | ) | ||||
| Securities borrowed | 48,873 | 117,015 | ||||||
| Accounts receivable and advances against customer contracts | 24,488 | (33,927 | ) | |||||
| Prepaid expenses and other assets | 4,423 | 9,588 | ||||||
| Accounts payable, accrued payroll and related expenses, accrued expenses and other liabilities | 31,301 | 32,553 | ||||||
| Amounts due to/from related parties and partners | 3,423 | (4,781 | ) | |||||
| Securities sold, not yet purchased | (31,715 | ) | 4,197 | |||||
| Deferred revenue | 1,530 | (3,098 | ) | |||||
| Securities loaned | (50,685 | ) | (120,026 | ) | ||||
| Net cash provided by (used in) operating activities | 57,689 | (27,198 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Purchases of loans receivable | (207,466 | ) | (343,811 | ) | ||||
| Repayments of loans receivable | 90,083 | 159,186 | ||||||
| Sale of loan receivable to related party | 1,800 | — | ||||||
| Proceeds from loan participations sold | 6,900 | 31,806 | ||||||
| Repayment of loan participations sold | (2,233 | ) | (18,911 | ) | ||||
| Asset acquisition - BR Brand, net of cash acquired $2,160 | — | (114,912 | ) | |||||
| Acquisition of magicJack, net of cash acquired $53,875 | — | — | ||||||
| Acquisition of other businesses | (1,500 | ) | — | |||||
| Proceeds from sale of division of magicJack | — | 6,196 | ||||||
| Purchases of property, equipment and intangible assets | (2,045 | ) | (3,461 | ) | ||||
| Proceeds from sale of property, equipment and intangible assets | 1 | 513 | ||||||
| Purchases of equity investments | (13,986 | ) | (33,391 | ) | ||||
| Distributions from equity investments | — | 18,195 | ||||||
| Net cash used in investing activities | (128,446 | ) | (298,590 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from asset based credit facility | — | 140,439 | ||||||
| Repayment of asset based credit facility | (37,096 | ) | (103,343 | ) | ||||
| Proceeds from notes payable | — | — | ||||||
| Repayment of notes payable | (357 | ) | (478 | ) | ||||
| Payment of participating note payable and contingent consideration | (4,250 | ) | (4,250 | ) | ||||
| Proceeds from term loan | 75,000 | 10,000 | ||||||
| Repayment of term loan | (67,266 | ) | (22,734 | ) | ||||
| Proceeds from issuance of senior notes | 186,796 | 281,924 | ||||||
| Redemption of senior notes | (1,829 | ) | (52,154 | ) | ||||
| Payment of debt issuance costs | (3,359 | ) | (3,425 | ) | ||||
| Payment of employment taxes on vesting of restricted stock | (22,578 | ) | (2,022 | ) | ||||
| Common dividends paid | (38,792 | ) | (41,138 | ) | ||||
| Preferred dividends paid | (4,710 | ) | (264 | ) | ||||
| Repurchase of common stock | (48,248 | ) | (4,273 | ) | ||||
| Repurchase of warrants | — | (2,777 | ) | |||||
| Distribution to noncontrolling interests | (3,826 | ) | (1,958 | ) | ||||
| Contributions from noncontrolling interests | 604 | — | ||||||
| Proceeds from offering common stock | — | 63 | ||||||
| Proceeds from offering preferred stock | 39,455 | 56,566 | ||||||
| Net cash provided by financing activities | 69,544 | 250,176 | ||||||
| Decrease in cash, cash equivalents and restricted cash | (1,213 | ) | (75,612 | ) | ||||
| Effect of foreign currency on cash, cash equivalents and restricted cash | 1,311 | 73 | ||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 98 | (75,539 | ) | |||||
| Cash, cash equivalents and restricted cash, beginning of year | 104,739 | 180,278 | ||||||
| Cash, cash equivalents and restricted cash, end of year | $ | 104,837 | $ | 104,739 | ||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | 98,595 | $ | 75,625 | ||||
| Taxes paid | $ | 2,368 | $ | 8,649 | ||||
8
B. RILEY FINANCIAL, INC.
Segment Financial Information
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Year Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Capital Markets segment: | ||||||||||||||||
| Revenues - Services and fees | $ | 170,949 | $ | 103,975 | $ | 412,222 | $ | 264,703 | ||||||||
| Trading income and fair value adjustments on loans | 140,160 | 34,733 | 104,018 | 106,463 | ||||||||||||
| Interest income - Loans and securities lending | 30,116 | 23,074 | 102,499 | 77,221 | ||||||||||||
| Total revenues | 341,225 | 161,782 | 618,739 | 448,387 | ||||||||||||
| Selling, general and administrative expenses | (92,260 | ) | (64,501 | ) | (267,330 | ) | (239,716 | ) | ||||||||
| Restructuring (charge) recovery | — | — | (917 | ) | 4 | |||||||||||
| Interest expense - Securities lending and loan participations sold | (11,782 | ) | (9,565 | ) | (42,451 | ) | (32,144 | ) | ||||||||
| Depreciation and amortization | (981 | ) | (1,100 | ) | (4,266 | ) | (4,858 | ) | ||||||||
| Segment income | 236,202 | 86,616 | 303,775 | 171,673 | ||||||||||||
| Auction and Liquidation segment: | ||||||||||||||||
| Revenues - Services and fees | 13,761 | (47,385 | ) | 63,101 | 18,296 | |||||||||||
| Revenues - Sale of goods | 1,906 | 2,990 | 25,663 | 4,220 | ||||||||||||
| Total revenues | 15,667 | (44,395 | ) | 88,764 | 22,516 | |||||||||||
| Direct cost of services | (4,324 | ) | (11,712 | ) | (40,730 | ) | (33,295 | ) | ||||||||
| Cost of goods sold | (406 | ) | (3,024 | ) | (9,766 | ) | (4,016 | ) | ||||||||
| Selling, general and administrative expenses | (3,477 | ) | (1,685 | ) | (12,357 | ) | (10,731 | ) | ||||||||
| Restructuring charge | — | — | (140 | ) | — | |||||||||||
| Depreciation and amortization | — | (2 | ) | (2 | ) | (7 | ) | |||||||||
| Segment income (loss) | 7,460 | (60,818 | ) | 25,769 | (25,533 | ) | ||||||||||
| Financial Consulting segment: | ||||||||||||||||
| Revenues - Services and fees | 26,480 | 20,109 | 91,622 | 76,292 | ||||||||||||
| Selling, general and administrative expenses | (19,476 | ) | (15,379 | ) | (68,232 | ) | (58,226 | ) | ||||||||
| Restructuring charge | — | — | (500 | ) | — | |||||||||||
| Depreciation and amortization | (131 | ) | (66 | ) | (347 | ) | (252 | ) | ||||||||
| Segment income | 6,873 | 4,664 | 22,543 | 17,814 | ||||||||||||
| Principal Investments - United Online and magicJack segment: | ||||||||||||||||
| Revenues - Services and fees | 20,629 | 22,764 | 83,666 | 97,147 | ||||||||||||
| Revenues - Sale of goods | 754 | 922 | 3,472 | 3,715 | ||||||||||||
| Total revenues | 21,383 | 23,686 | 87,138 | 100,862 | ||||||||||||
| Direct cost of services | (4,926 | ) | (5,398 | ) | (19,721 | ) | (25,529 | ) | ||||||||
| Cost of goods sold | (612 | ) | (716 | ) | (2,694 | ) | (3,559 | ) | ||||||||
| Selling, general and administrative expenses | (6,000 | ) | (5,846 | ) | (20,352 | ) | (24,256 | ) | ||||||||
| Depreciation and amortization | (2,545 | ) | (2,939 | ) | (11,011 | ) | (12,658 | ) | ||||||||
| Restructuring charge | — | — | — | (1,703 | ) | |||||||||||
| Segment income | 7,300 | 8,787 | 33,360 | 33,157 | ||||||||||||
| Brands segment: | ||||||||||||||||
| Revenues - Services and fees | 5,451 | 4,055 | 16,458 | 4,055 | ||||||||||||
| Selling, general and administrative expenses | (682 | ) | (881 | ) | (2,889 | ) | (881 | ) | ||||||||
| Depreciation and amortization | (715 | ) | (507 | ) | (2,858 | ) | (507 | ) | ||||||||
| Impairment of tradenames | — | — | (12,500 | ) | — | |||||||||||
| Segment income (loss) | 4,054 | 2,667 | (1,789 | ) | 2,667 | |||||||||||
| Consolidated operating income from reportable segments | 261,889 | 41,916 | 383,658 | 199,778 | ||||||||||||
| Corporate and other expenses | (10,821 | ) | (4,349 | ) | (38,893 | ) | (33,127 | ) | ||||||||
| Interest income | 27 | 248 | 564 | 1,577 | ||||||||||||
| (Loss) income on equity investments | (478 | ) | 2,618 | (623 | ) | (1,431 | ) | |||||||||
| Interest expense | (16,712 | ) | (15,075 | ) | (65,249 | ) | (50,205 | ) | ||||||||
| Income before income taxes | 233,905 | 25,358 | 279,457 | 116,592 | ||||||||||||
| Provision for income taxes | (62,060 | ) | (7,842 | ) | (75,440 | ) | (34,644 | ) | ||||||||
| Net income | 171,845 | 17,516 | 204,017 | 81,948 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 251 | 387 | (1,131 | ) | 337 | |||||||||||
| Net income attributable to B. Riley Financial, Inc. | 171,594 | 17,129 | 205,148 | 81,611 | ||||||||||||
| Preferred stock dividends | 1,480 | 264 | 4,710 | 264 | ||||||||||||
| Net income available to common shareholders | $ | 170,114 | $ | 16,865 | $ | 200,438 | $ | 81,347 | ||||||||
9
B. RILEY FINANCIAL, INC.
Adjusted EBITDA and Operating Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 171,594 | $ | 17,129 | $ | 205,148 | $ | 81,611 | ||||||||
| Adjustments: | ||||||||||||||||
| Provision for income taxes | 62,060 | 7,842 | 75,440 | 34,644 | ||||||||||||
| Interest expense | 16,712 | 15,075 | 65,249 | 50,205 | ||||||||||||
| Interest income | (27 | ) | (248 | ) | (564 | ) | (1,577 | ) | ||||||||
| Share based payments | 4,321 | 5,640 | 18,588 | 15,916 | ||||||||||||
| Depreciation and amortization | 4,604 | 4,831 | 19,369 | 19,048 | ||||||||||||
| Restructuring costs | — | — | 1,557 | 1,699 | ||||||||||||
| Impairment of tradenames | — | — | 12,500 | — | ||||||||||||
| Transactions related costs and other | 1,222 | — | 9,531 | 6,339 | ||||||||||||
| Total EBITDA adjustments | 88,892 | 33,140 | 201,670 | 126,274 | ||||||||||||
| Adjusted EBITDA | $ | 260,486 | $ | 50,269 | $ | 406,818 | $ | 207,885 | ||||||||
| Operating EBITDA Adjustments: | ||||||||||||||||
| Trading income and fair value adjustments on loans | (140,160 | ) | (34,733 | ) | (104,018 | ) | (106,463 | ) | ||||||||
| Other investment related expenses | 6,461 | 858 | 8,873 | 12,181 | ||||||||||||
| Total Operating EBITDA Adjustments | (133,699 | ) | (33,875 | ) | (95,145 | ) | (94,282 | ) | ||||||||
| Operating Adjusted EBITDA | $ | 126,787 | $ | 16,394 | $ | 311,673 | $ | 113,603 | ||||||||
10
B. RILEY FINANCIAL, INC.
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 171,594 | $ | 17,129 | $ | 205,148 | $ | 81,611 | ||||||||
| Adjustments: | ||||||||||||||||
| Share based payments | 4,321 | 5,640 | 18,588 | 15,916 | ||||||||||||
| Amortization of intangible assets | 3,769 | 3,815 | 15,736 | 13,846 | ||||||||||||
| Restructuring costs | — | — | 1,557 | 1,699 | ||||||||||||
| Impairment of tradenames | — | — | 12,500 | — | ||||||||||||
| Transactions related costs and other | 1,222 | — | 9,531 | 6,339 | ||||||||||||
| Income tax effect of adjusting entries | (2,473 | ) | (2,969 | ) | (15,929 | ) | (11,154 | ) | ||||||||
| Adjusted net income attributable to B. Riley Financial, Inc. | $ | 178,433 | $ | 23,615 | $ | 247,131 | $ | 108,257 | ||||||||
| Adjusted income per common share: | ||||||||||||||||
| Adjusted basic income per share | $ | 7.04 | $ | 0.89 | $ | 9.65 | $ | 4.10 | ||||||||
| Adjusted diluted income per share | $ | 6.87 | $ | 0.83 | $ | 9.32 | $ | 3.93 | ||||||||
| Shares used to calculate adjusted basic net income per share | 25,331,918 | 26,547,023 | 25,607,278 | 26,401,036 | ||||||||||||
| Shares used to calculate adjusted diluted net income per share | 25,966,501 | 28,412,871 | 26,508,397 | 27,529,157 | ||||||||||||
Source: B. Riley Financial, Inc.
# # #
11
Exhibit 99.2
1 NASDAQ: RILY Fourth Quarter 2020 Supplemental Financial Data February 25, 2021
2 2 Reconciliation of U.S. GAAP to Non - GAAP Measures (Unaudited, dollars in thousands) Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Adj. EBITDA and Operating Adj. EBITDA Reconciliation Net income (loss) attributable to B. Riley Financial, Inc. $17,129 $(98,665) $83,840 $48,379 $171,594 EBITDA Adjustments: Provision (benefit) for income taxes 7,842 (37,539) 32,208 18,711 62,060 Interest expense 15,075 15,654 16,509 16,374 16,712 Interest income (248) (246) (224) (67) (27) Share based payments 5,640 5,322 4,167 4,778 4,321 Depreciation and amortization 4,831 4,956 4,923 4,886 4,604 Restructuring costs — — — 1,557 — Impairment of tradenames — 4,000 8,500 — — Transactions related costs and other — 10,454 (1,660) (485) 1,222 Total EBITDA Adjustments 33,140 2,601 64,423 45,754 88,892 Adjusted EBITDA $50,269 $(96,064) $148,263 $94,133 $260,486 Operating EBITDA Adjustments: Trading (income) losses and fair value adjustments on loans (34,733) 182,442 (114,547) (31,753) (140,160) Other investment related expenses 858 (15,470) 13,040 4,842 6,461 Total Operating EBITDA Adjustments (33,875) 166,972 (101,507) (26,911) (133,699) Operating Adjusted EBITDA $16,394 $70,908 $46,756 $67,222 $126,787
3 3 Operating Income Summary 1. Other investment related expenses. (Unaudited, dollars in thousands) Operating Investment Combined Operating Investment Combined Revenues: Services and fees $ 237,270 - $ 237,270 $ 667,069 - $ 667,069 Trading income and fair value adjustments on loans - 140,160 140,160 - 104,018 104,018 Interest income – loans & securities lending 30,116 - 30,116 102,499 - 102,499 Sale of goods 2,660 - 2,660 29,135 - 29,135 Total revenues $ 270,046 $ 140,160 $ 410,206 $ 798,703 $ 104,018 $ 902,721 Operating expenses: Direct cost of services $ 9,250 - $ 9,250 $ 60,451 - $ 60,451 Cost of goods sold 1,018 - 1,018 12,460 - 12,460 Selling, general and administrative expenses 130,627 6,461 (1) 137,088 419,664 8,873 (1) 428,537 Restructuring charges - - - 1,557 - 1,557 Impairment of tradenames - - - 12,500 - 12,500 Interest expense – securities lending & loan participation sold 11,782 - 11,782 42,451 - 42,451 Total operating expenses $ 152,677 $ 6,461 $ 159,138 $ 549,083 $ 8,873 $ 557,956 Operating income $ 117,369 $ 133,699 $ 251,068 $ 249,620 $ 95,145 $ 344,765 Three Months Ended December 31, 2020 Year Ended December 31, 2020
4 4 Quarterly Operating Revenue and Operating Adjusted EBITDA Operating Revenue and Operating Adjusted EBITDA (1)(3)(5)(6) $130.5M $182.2M $151.9M $194.5M $270.0M $16.4M $70.9M $46.8M $67.2M $126.8M Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Operating Revenue Operating Adj. EBITDA (Dollars in thousands) Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Operating Revenue (1) $130,504 $182,236 $ 151,921 $ 194,500 $ 270,046 Investment Gains (Loss) (2) 34,733 (182,442) 114,547 31,753 140,160 Total Revenue $165,237 $(206) $ 266,468 $ 226,253 $ 410,206 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Operating Adjusted EBITDA (3) $16,394 $70,908 $46,756 $67,222 $126,787 Investment Adjusted EBITDA (4) 33,875 (166,972) 101,507 26,911 133,699 Adjusted EBITDA (5)(6) $50,269 $(96,064) $148,263 $94,133 $260,486 Quarterly Revenue and Adjusted EBITDA 1. Operating Revenue is defined as the sum of revenues from ( i ) Service and Fees, (ii) Interest Income - Loans and Securities Lending and (iii) Sales of Goods. 2. Investment Gains (Loss) is defined as Trading Income (Losses) and Fair Value Adjustments on Loans. 3. Operating Adjusted EBITDA is defined as Adjusted EBITDA excluding ( i ) Trading Income (Losses) and Fair Value Adjustments on Loans and (ii) other investment related expenses. 4. Investment Adjusted EBITDA is defined as Trading Income (Losses) and Fair Value Adjustments on Loans, less other investment r ela ted expenses. 5. Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share - based payments, impairment of tradenames, and transaction related and other costs. 6. For a reconciliation to GAAP financial measures, please see slide 2.
5 5 Cash and Investments Summary (Dollars in thousands) Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Cash and Cash Equivalents $104,268 $124,231 $ 106,253 $ 169,676 $ 103,602 Restricted Cash 471 471 471 1,410 1,235 Due from Clearing Brokers, net 23,818 5,753 29,089 19,589 (6,583) Advances Against Customer Contracts 27,347 11,121 1,413 900 200 Securities and Other Investments Owned Equity Securities 353,162 234,867 341,515 392,674 697,288 Corporate Bonds 19,020 18,429 5,375 5,956 3,195 Other Fixed Income Securities 8,414 5,243 2,768 3,557 1,913 Partnership Interests and Other 27,617 29,247 49,386 57,293 74,923 Securities Sold Not Yet Purchased (41,820) (14,298) (9,804) (48,125) (10,105) Loans Receivable, net of Loan Participation Sold 256,708 313,894 311,408 330,420 373,373 Other Equity I nvestments and Deposits (1) 54,855 48,765 61,588 58,389 59,612 Total Cash, Net Securities, and Other $833,860 $777,723 $899,462 $991,739 $1,298,653 (Dollars in thousands) Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Term Loan $66,666 $61,932 $ 57,195 $ 52,452 $ 74,213 Notes Payable 38,167 714 714 714 37,967 Senior Notes Payable, net 688,112 853,523 854,037 854,926 870,783 Total Debt 792,945 916,169 911,946 908,092 982,963 Total Cash and Investments, Net of Debt $40,915 $(138,446) $(12,484) $83,647 $315,690 1. Other equity investments and investment related deposits reported in prepaid and other assets. Debt Summary
6 6 Condensed Consolidated Balance Sheets (Dollars in thousands) December 31, 2020 (Unaudited) December 31, 2019 Cash and cash equivalents $103,602 $104,268 Restricted cash 1,235 471 Due from clearing brokers 7,089 23,818 Securities and other investments owned, at fair value 777,319 408,213 Securities borrowed 765,457 814,331 Accounts receivable, net 46,518 46,624 Due from related parties 986 5,832 Advances against customer contracts 200 27,347 Loans receivable, at fair value 390,689 43,338 Loans receivable, at cost — 225,848 Prepaid expenses and other assets 87,262 81,808 Operating lease right - of - use assets 48,799 47,809 Property and equipment, net 11,685 12,727 Goodwill 227,046 223,697 Other intangible assets, net 190,745 220,525 Deferred tax assets, net 4,098 31,522 Total assets $2,662,730 $2,318,178 Accounts payable $2,722 $4,477 Accrued expenses and other liabilities 168,478 130,714 Deferred revenue 68,651 67,121 Deferred tax liabilities, net 34,248 — Due to related parties and partners 327 1,750 Due to clearing brokers 13,672 — Securities sold not yet purchased 10,105 41,820 Securities loaned 759,810 810,495 Mandatorily redeemable noncontrolling interests 4,700 4,616 Operating lease liabilities 60,778 61,511 Notes payable 37,967 38,167 Loan participations sold 17,316 12,478 Term loan 74,213 66,666 Senior notes payable, net 870,783 688,112 Total liabilities $2,123,770 $1,927,927 Total B. Riley Financial, Inc. stockholders' equity 512,586 360,660 Noncontrolling interests 26,374 29,591 Total equity 538,960 390,251 Total liabilities and equity $2,662,730 $ 2,318,178
7 7 Condensed Consolidated Statements of Income (Dollars in thousands, except share data) Three Months Ended Year Ended December 31, December 31, 2020 2019 2020 2019 ( Unaudited ) ( Unaudited ) ( Unaudited ) Revenues: Services and fees $237,270 $103,518 $667,069 $460,493 Trading income and fair value adjustments on loans 140,160 34,733 104,018 106,463 Interest income - Loans and securities lending 30,116 23,074 102,499 77,221 Sale of goods 2,660 3,912 29,135 7,935 Total revenues 410,206 165,237 902,721 652,112 Operating expenses: Direct cost of services 9,250 17,109 60,451 58,824 Cost of goods sold 1,018 3,740 12,460 7,575 Selling, general and administrative expenses 137,088 97,256 428,537 385,219 Restructuring charge — — 1,557 1,699 Impairment of tradenames — — 12,500 — Interest expense - Securities lending and loan participations sold 11,782 9,565 42,451 32,144 Total operating expenses 159,138 127,670 557,956 485,461 Operating income 251,068 37,567 344,765 166,651 Other income (expense): Interest income 27 248 564 1,577 (Loss) income from equity investments (478) 2,618 (623) (1,431) Interest expense (16,712) (15,075) (65,249) (50,205) Income before income taxes 233,905 25,358 279,457 116,592 Provision for income taxes (62,060) (7,842) (75,440) (34,644) Net income 171,845 17,516 204,017 81,948 Net income (loss) attributable to noncontrolling interests 251 387 (1,131) 337 Net income attributable to B. Riley Financial, Inc. $171,594 $17,129 $205,148 $81,611 Preferred stock dividends 1,480 264 4,710 264 Net income available to common shareholders $170,114 $16,865 $200,438 $81,347 Basic income per common share $6.72 $0.64 $7.83 $3.08 Diluted income per common share $6.55 $0.59 $7.56 $2.95 Weighted average basic common shares outstanding 25,331,918 26,547,023 25,607,278 26,401,036 Weighted average diluted common shares outstanding 25,966,501 28,412,871 26,508,397 27,529,157
8 8 Condensed Consolidated Statements of Cash Flows (Dollars in thousands) Year Ended December 31, 2020 2019 (Unaudited) Cash flows from operating activities: Net income $204,017 $81,948 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 19,369 19,048 Provision for doubtful accounts 3,385 2,126 Share - based compensation 18,588 15,916 Fair value adjustments, non - cash 21,954 12,258 Non - cash interest and other (16,810) (12,267) Effect of foreign currency on operations (460) (78) Loss from equity investments 623 1,431 Dividends from equity investments 1,343 3,194 Deferred income taxes 61,619 10,874 Impairment of leaseholds and intangibles, lease loss accrual and gain on disposal of fixed assets 14,107 (286) Gain on extinguishment of debt (1,556) — Income allocated and fair value adjustment for mandatorily redeemable noncontrolling interests 1,230 1,220 Change in operating assets and liabilities (269,720) (162,582) Net cash provided by (used in) operating activities 57,689 (27,198) Cash flows from investing activities: Net cash used in investing activities (128,446) (298,590) Cash flows from financing activities: Net cash provided by financing activities 69,544 250,176 Effect of foreign currency on cash, cash equivalents and restricted cash 1,311 73 Net increase (decrease) in cash, cash equivalents and restricted cash 98 (75,539) Cash, cash equivalents and restricted cash, beginning of year 104,739 180,278 Cash, cash equivalents and restricted cash, end of year $104,837 $104,739
9 9 Segment Financial Information (Unaudited, dollars in thousands) Three Months Ended December 31, 2020 2019 Capital Markets segment: Revenues - Services and fees $170,949 $103,975 Trading income and fair value adjustments on loans 140,160 34,733 Interest income - Loans and securities lending 30,116 23,074 Total revenues 341,225 161,782 Selling, general and administrative expenses (92,260) (64,501) Interest expense - Securities lending and loan participations sold (11,782) (9,565) Depreciation and amortization (981) (1,100) Segment income 236,202 86,616 Auction and Liquidation segment: Revenues - Services and fees 13,761 (47,385) Revenues - Sale of goods 1,906 2,990 Total revenues 15,667 (44,395) Direct cost of services (4,324) (11,712) Cost of goods sold (406) (3,024) Selling, general and administrative expenses (3,477) (1,685) Depreciation and amortization — (2) Segment income (loss) 7,460 (60,818) Financial Consulting segment: Revenues - Services and fees 26,480 20,109 Selling, general and administrative expenses (19,476) (15,379) Depreciation and amortization (131) (66) Segment income 6,873 4,664 Three Months Ended December 31, 2020 2019 Principal Investments – United Online and magicJack segment: Revenues - Services and fees 20,629 22,764 Revenues - Sale of goods 754 922 Total revenues 21,383 23,686 Direct cost of services (4,926) (5,398) Cost of goods sold (612) (716) Selling, general and administrative expenses (6,000) (5,846) Depreciation and amortization (2,545) (2,939) Segment income 7,300 8,787 Brands segment: Revenues - Services and fees 5,451 4,055 Selling, general and administrative expenses (682) (881) Depreciation and amortization (715) (507) Segment income 4,054 2,667 Consolidated operating income from reportable segments $261,889 $41,916
10 10 Segment Financial Information (Unaudited, dollars in thousands) Year Ended December 31, 2020 2019 Capital Markets segment: Revenues - Services and fees $412,222 $264,703 Trading income and fair value adjustments on loans 104,018 106,463 Interest income - Loans and securities lending 102,499 77,221 Total revenues 618,739 448,387 Selling, general and administrative expenses (267,330) (239,716) Restructuring (charge) recovery (917) 4 Interest expense - Securities lending and loan participations sold (42,451) (32,144) Depreciation and amortization (4,266) (4,858) Segment income 303,775 171,673 Auction and Liquidation segment: Revenues - Services and fees 63,101 18,296 Revenues - Sale of goods 25,663 4,220 Total revenues 88,764 22,516 Direct cost of services (40,730) (33,295) Cost of goods sold (9,766) (4,016) Selling, general and administrative expenses (12,357) (10,731) Restructuring charge (140) — Depreciation and amortization (2) (7) Segment income (loss) 25,769 (25,533) Financial Consulting segment: Revenues - Services and fees 91,622 76,292 Selling, general and administrative expenses (68,232) (58,226) Restructuring charge (500) — Depreciation and amortization (347) (252) Segment income 22,543 17,814 Year Ended December 31, 2020 2019 Principal Investments – United Online and magicJack segment: Revenues - Services and fees 83,666 97,147 Revenues - Sale of goods 3,472 3,715 Total revenues 87,138 100,862 Direct cost of services (19,721) (25,529) Cost of goods sold (2,694) (3,559) Selling, general and administrative expenses (20,352) (24,256) Restructuring charge — (1,703) Depreciation and amortization (11,011) (12,658) Segment income 33,360 33,157 Brands segment: Revenues - Services and fees 16,458 4,055 Selling, general and administrative expenses (2,889) (881) Impairment of Tradenames (12,500) — Depreciation and amortization (2,858) (507) Segment (loss) income (1,789) 2,667 Consolidated operating income from reportable segments $383,658 $199,778
11 11 Definition of US GAAP to Non - GAAP Financial Measures Certain of the information set forth herein, including operating revenue, 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, impairment of trade names, stock - based compensation and transaction and other expenses, (iii) excluding in the case of operating adjusted EBITDA, aforementioned adjustments for adjusted EBITDA, trading income (losses) and fair value adjustments on loans, and other investment related expenses, and (iv) in the case of investment adjusted EBITDA this includes trading income (losses) and fair value adjustments on loans, net of other investment related expenses, 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 .