RILY 8-K
BRC Group Holdings, Inc. (RILY)
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
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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:
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Item 2.02. Results of Operations and Financial Condition.
On October 28, 2021, B. Riley Financial, Inc. (the “Company”) issued a press release reporting its financial results for the fiscal quarter ended September 30, 2021. A copy of the press release is attached hereto as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
Additionally, on October 28, 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 September 30, 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 October 28, 2021 | |
| 99.2 | Third Quarter 2021 Supplemental Financial Data dated October 28, 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.
| October 28, 2021 | B. RILEY FINANCIAL, INC. | ||
| By: | /s/ Phillip J. Ahn | ||
| Name: | Phillip J. Ahn | ||
| Title: | Chief Financial Officer and Chief Operating Officer | ||
2
Exhibit 99.1
B. Riley Financial Reports Third Quarter 2021 Results; Declares $4.00 Dividend
Net income of $48.6 million, $1.69 diluted EPS
Total revenues increased to $381.5 million, total adjusted EBITDA of $114.1 million
Operating revenues increased to $363.3 million, operating adjusted EBITDA of $101.1 million
Strong earnings driven by investment banking,
in addition to wealth management, principal investments, and brands
Increases regular quarterly dividend to $1.00
from previous $0.50, declares $3.00 special
Total third quarter dividend of $4.00 per common share
Board of Directors approve new annual share repurchase plan of up to $50 million
LOS ANGELES, October 28, 2021 – B. Riley Financial, Inc. (NASDAQ: RILY), a diversified financial services company, today announced results for the three- and nine-month period ended September 30, 2021.
Third Quarter 2021 Highlights
| ● | Net income of $48.6 million, up 3% year-over-year |
| ● | Total revenues of $381.5 million, up 69% year-over-year |
| ● | Total adjusted EBITDA (1) of $114.1 million, up 21% year-over-year |
| ● | Operating revenues (2) of $363.3 million, up 87% year-over-year |
| ● | Operating adjusted EBITDA (3) of $101.1 million, up 50% year-over-year |
Bryant Riley, Chairman and Co-Chief Executive Officer of B. Riley Financial, said: “We have never been more confident in the power of our combined platform and the opportunities we see ahead. In line with our stated commitment to return capital to our shareholders, we have increased our regular quarterly dividend to $1.00 and declared a special dividend of $3.00 for a total third quarter dividend of $4.00 per common share. Upon payment of our third quarter dividend, we will have returned a total of $9.00 per share, or approximately $247 million, in common stock dividends to shareholders for the first three quarters. The increase in our regular dividend reflects our increasing confidence in our recurring cash flows, as well as the continued growth in our episodic businesses. Our balance sheet continues to be very strong, and our capital base has continued to increase, reflecting the growing cash flows and strong fundamentals of our business. We acknowledge that our diversified business can be difficult to analyze and believe a recurring dividend is an important measure for our shareholders. Our goal is to continue to utilize our cash flows to enhance our business, make accretive acquisitions, and return capital to our shareholders. Over the last year, we have made meaningful progress in reducing our debt expense by redeeming two of our higher rate corporate bonds and issuing debt at a rate that is over 200 basis points lower. We will continue to seek opportunities to improve our capital structure in the coming quarters.”
Tom Kelleher, Co-Chief Executive Officer of B. Riley Financial, added: “Over the last year, B. Riley Securities has established itself as a preferred investment banking partner for small- and mid-cap companies. Our investment banking division drove our strong quarterly performance, supported by contributions from our newly expanded wealth management division, cash flow generated by our principal investment companies, and growth in our brands. The momentum of our combined platform continues to benefit each of our distinct businesses. Our strengthened execution capabilities have enabled us to uncover additional new business opportunities while attracting talented professionals to our platform. During the quarter, we acquired 272 Capital in line with our stated intent to build out asset management and named a senior professional to lead the expansion of our fixed income division. We also added several quality financial advisors to our roster as we work to combine our legacy wealth management business with National Holdings. We are continuing to recruit across our business lines and believe our ability to attract talent of this caliber speaks to the value of our diversified platform.”
| www.brileyfin.com | NASDAQ: RILY | 1 |
Declaration of Common Dividend
B. Riley has declared a total quarterly cash dividend of $4.00 per common share which is payable on or about November 23, 2021 to common stockholders of record as of November 9, 2021. The total dividend payment reflects an increased regular quarterly dividend of $1.00 from the previous regular quarterly dividend of $0.50, in addition to a $3.00 special one-time dividend.
Bond Redemption and Share Repurchases
In September, the Company redeemed its 7.375% Senior Notes due 2023 in full for an aggregate redemption price of approximately $140.5 million, including accrued interest.
Under the current share repurchase plan, effective as of October 27, 2020, the Company repurchased approximately 495,000 of its common shares for an aggregate amount of approximately $12.6 million through September 30, 2021.
B. Riley’s Board of Directors has approved a new annual share repurchase program for up to $50 million.
Financial Summary
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Dollars in thousands, except for share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net income available to common shareholders | $ | 48,621 | $ | 47,291 | $ | 375,415 | $ | 30,324 | ||||||||
| Basic income per common share | $ | 1.76 | $ | 1.86 | $ | 13.75 | $ | 1.18 | ||||||||
| Diluted income per common share | $ | 1.69 | $ | 1.75 | $ | 13.07 | $ | 1.14 | ||||||||
For the third quarter, net income available to common shareholders was $48.6 million, or $1.69 diluted earnings per share (EPS). For the first nine months of 2021, net income available to common shareholders was $375.4 million, or $13.07 diluted EPS.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Operating Revenues (2) | $ | 363,325 | $ | 194,500 | $ | 1,000,633 | $ | 528,657 | ||||||||
| Investment Gains (Loss)(4) | 18,197 | 31,753 | 317,818 | (36,142 | ) | |||||||||||
| Total Revenues | $ | 381,522 | $ | 226,253 | $ | 1,318,451 | $ | 492,515 | ||||||||
| Operating Adjusted EBITDA (3) | $ | 101,091 | $ | 67,222 | $ | 315,932 | $ | 184,886 | ||||||||
| Investment Adjusted EBITDA (5) | 13,010 | 26,911 | 308,537 | (38,554 | ) | |||||||||||
| Total Adjusted EBITDA (1) | $ | 114,101 | $ | 94,133 | $ | 624,469 | $ | 146,332 | ||||||||
For the three months ended September 30, 2021:
| ● | Total revenues increased 69% to $381.5 million compared to $226.3 million for the prior year quarter. |
| ● | Total adjusted EBITDA (1) increased 21% to $114.1 million compared to $94.1 million for the prior year period. |
| ● | Operating revenues (2) increased 87% to $363.3 million from $194.5 million for the prior year period. |
| ● | Operating adjusted EBITDA (3) increased 50% to $101.1 million from $67.2 million for the prior year period. |
| ● | Quarterly investment gains (4) were $18.2 million which reflect certain strategic investments held by the Company. |
| www.brileyfin.com | NASDAQ: RILY | 2 |
For the first nine months of 2021:
| ● | Total revenues increased 168% to $1.3 billion compared to $492.5 million for the prior year period. |
| ● | Total adjusted EBITDA (1) increased 327% to $624.5 million compared to $146.3 million for the prior year period. |
| ● | Operating revenues (2) increased 89% to $1.0 billion compared to $528.7 million for the prior year period. |
| ● | Operating adjusted EBITDA (3) increased 71% to $315.9 million from $184.9 million for the prior year period. |
As of September 30, cash and investments (6) totaled approximately $2.3 billion including cash and cash equivalents of $378.2 million. Total cash and investments, (6) net of debt, was $593.4 million.
Segment Financial Summary and Highlights
| Operating Revenues (2) | Investment Gains (4) | Total Segment Revenue | ||||||||||||||||||||||
| Three Months Ended September 30, | Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||
| Capital Markets | $ | 161,718 | $ | 81,841 | $ | 16,935 | $ | 31,399 | $ | 178,653 | $ | 113,240 | ||||||||||||
| Wealth Management | 117,572 | 17,289 | 1,262 | 354 | 118,834 | 17,643 | ||||||||||||||||||
| Auction and Liquidation | 37,072 | 44,185 | - | - | 37,072 | 44,185 | ||||||||||||||||||
| Financial Consulting | 21,291 | 25,583 | - | - | 21,291 | 25,583 | ||||||||||||||||||
| Principal Investments | 19,300 | 21,602 | - | - | 19,300 | 21,602 | ||||||||||||||||||
| Brands | 6,372 | 4,000 | - | - | 6,372 | 4,000 | ||||||||||||||||||
| Segment Operating Income (7) | Investment Income (5) | Total Segment Income | ||||||||||||||||||||||
| Three Months Ended September 30, | Three Months Ended September 30, | Three Months Ended September 30, | ||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||
| Capital Markets | $ | 76,142 | $ | 33,198 | $ | 11,748 | $ | 26,557 | $ | 87,890 | $ | 59,755 | ||||||||||||
| Wealth Management | 5,322 | 426 | 1,262 | 354 | 6,584 | 780 | ||||||||||||||||||
| Auction and Liquidation | 6,298 | 12,000 | - | - | 6,298 | 12,000 | ||||||||||||||||||
| Financial Consulting | 2,769 | 7,248 | - | - | 2,769 | 7,248 | ||||||||||||||||||
| Principal Investments | 6,506 | 8,368 | - | - | 6,506 | 8,368 | ||||||||||||||||||
| Brands | 4,686 | 2,292 | - | - | 4,686 | 2,292 | ||||||||||||||||||
Capital Markets segment revenues increased 58% to $178.7 million for the third quarter. Excluding investment gains (4) of $16.9 million, segment operating revenues (2) increased 98% year-over-year to $161.7 million, and segment operating income (7) increased 129% to $76.1 million for the quarter. Strong performance was primarily driven by investment banking and fees generated from several significant debt and equity capital markets transactions completed during the quarter.
Wealth Management segment revenues and segment income increased to $118.8 million and $6.6 million, respectively, reflecting the addition of National Holdings which was acquired in February 2021. Combined wealth management assets under management were approximately $32 billion as of September 30, 2021.
Auction and Liquidation segment revenues totaled $37.1 million, driven by retail liquidation activity in Europe. Results for this segment vary from quarter-to-quarter and year-to-year due to the episodic impact of large retail liquidation engagements.
| www.brileyfin.com | NASDAQ: RILY | 3 |
Principal Investments segment companies, magicJack and United Online, continued to perform above expectations, contributing recurring cash flow to the Company.
Supplemental Financial Data
Additional metrics related to operating results and investments can be found in the Third Quarter 2021 Financial Supplement on B. Riley’s investor relations website.
Conference Call Details
Management will host an investor call to discuss its third quarter results today, Thursday, October 28, 2021, at 4:30 p.m. Eastern time (1:30 p.m. Pacific time). Investors may access the live broadcast and archived recording via the Company’s investor relations website at ir.brileyfin.com.
| Date and Time: | Thursday October 28, 2021 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time) | |
| Dial In: | 1-855-327-6837 (toll-free) or 1-631-891-4304 (international) | |
| Audio Webcast: | https://ir.brileyfin.com/events-and-presentations | |
| Replay (expires Thursday, November 4, 2021) | ||
| Dial In: | 1-844-512-2921; 10016591 (pin) | |
| Replay Link: | https://ir.brileyfin.com/events-and-presentations | |
About B. Riley Financial
B. Riley Financial provides collaborative solutions tailored to fit the capital raising and business 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. For more information, please visit www.brileyfin.com.
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, gain on extinguishment of loans, 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 (loss) is defined as trading income and fair value adjustments on loans. |
| (5) | Investment adjusted EBITDA and investment income (loss) are defined as trading income (losses) and fair value adjustments on loans, less other investment related expenses. |
| (6) | 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 (i) securities sold not yet purchased and (ii) noncontrolling interest related to investments, advances against customer contracts, loans receivable, at fair value net of loan participations sold, and other investments reported in prepaid and other assets. |
| (7) | Segment operating income (loss) is defined as segment income (loss) excluding trading income (losses) and fair value adjustments on loans and other investment related expenses. |
| www.brileyfin.com | NASDAQ: RILY | 4 |
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, 2020 and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 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 September 30, 2021. 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.
Contacts
| Investors | Media |
| Mike Frank | Jo Anne McCusker |
| [email protected] | [email protected] |
| (212) 409-2424 | (646) 885-5425 |
| www.brileyfin.com | NASDAQ: RILY | 5 |
B. RILEY FINANCIAL, INC.
Consolidated Balance Sheets
(Dollars in thousands, except par value)
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Assets: | ||||||||
| Cash and cash equivalents | $ | 378,205 | $ | 103,602 | ||||
| Restricted cash | 927 | 1,235 | ||||||
| Due from clearing brokers | 599,715 | 7,089 | ||||||
| Securities and other investments owned, at fair value | 1,352,100 | 777,319 | ||||||
| Securities borrowed | 1,347,656 | 765,457 | ||||||
| Accounts receivable, net | 54,790 | 46,518 | ||||||
| Due from related parties | 1,513 | 986 | ||||||
| Loans receivable, at fair value (includes $140,064 and $295,809 from related parties at September 30, 2021 and December 31, 2020, respectively) | 350,762 | 390,689 | ||||||
| Prepaid expenses and other assets | 448,985 | 87,462 | ||||||
| Operating lease right-of-use assets | 59,735 | 48,799 | ||||||
| Property and equipment, net | 13,720 | 11,685 | ||||||
| Goodwill | 237,961 | 227,046 | ||||||
| Other intangible assets, net | 196,697 | 190,745 | ||||||
| Deferred tax assets, net | 4,085 | 4,098 | ||||||
| Total assets | $ | 5,046,851 | $ | 2,662,730 | ||||
| Liabilities and Equity | ||||||||
| Liabilities: | ||||||||
| Accounts payable | $ | 4,028 | $ | 2,722 | ||||
| Accrued expenses and other liabilities | 277,586 | 168,478 | ||||||
| Deferred revenue | 68,310 | 68,651 | ||||||
| Deferred tax liabilities, net | 67,023 | 34,248 | ||||||
| Due to related parties and partners | 176 | 327 | ||||||
| Due to clearing brokers | — | 13,672 | ||||||
| Securities sold not yet purchased | 419,211 | 10,105 | ||||||
| Securities loaned | 1,345,825 | 759,810 | ||||||
| Mandatorily redeemable noncontrolling interests | 4,196 | 4,700 | ||||||
| Operating lease liabilities | 72,158 | 60,778 | ||||||
| Notes payable | 357 | 37,967 | ||||||
| Loan participations sold | — | 17,316 | ||||||
| Revolving credit facility | 80,000 | — | ||||||
| Term loans, net | 252,927 | 74,213 | ||||||
| Senior notes payable, net | 1,362,847 | 870,783 | ||||||
| Total liabilities | 3,954,644 | 2,123,770 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable noncontrolling interests in equity of subsidiaries | 345,000 | — | ||||||
| B. Riley Financial, Inc. equity: | ||||||||
| Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 4,485 and 3,971 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively; and liquidation preference of $112,128 and $99,260 as of September 30, 2021 and December 31, 2020, respectively | — | — | ||||||
| Common stock, $0.0001 par value; 100,000,000 shares authorized; 27,554,664 and 25,777,796 issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | 3 | 3 | ||||||
| Additional paid-in capital | 399,349 | 310,326 | ||||||
| Retained earnings | 309,550 | 203,080 | ||||||
| Accumulated other comprehensive loss | (2,207 | ) | (823 | ) | ||||
| Total B. Riley Financial, Inc. stockholders' equity | 706,695 | 512,586 | ||||||
| Noncontrolling interests | 40,512 | 26,374 | ||||||
| Total equity | 747,207 | 538,960 | ||||||
| Total liabilities and equity | $ | 5,046,851 | $ | 2,662,730 | ||||
| www.brileyfin.com | NASDAQ: RILY | 6 |
B. RILEY FINANCIAL, INC.
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenues: | ||||||||||||||||
| Services and fees | $ | 301,497 | $ | 144,823 | $ | 857,109 | $ | 429,799 | ||||||||
| Trading income (losses) and fair value adjustments on loans | 18,197 | 31,753 | 317,818 | (36,142 | ) | |||||||||||
| Interest income - Loans and securities lending | 26,869 | 26,026 | 89,280 | 72,383 | ||||||||||||
| Sale of goods | 34,959 | 23,651 | 54,244 | 26,475 | ||||||||||||
| Total revenues | 381,522 | 226,253 | 1,318,451 | 492,515 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Direct cost of services | 18,019 | 23,264 | 41,435 | 51,201 | ||||||||||||
| Cost of goods sold | 12,442 | 9,813 | 21,394 | 11,442 | ||||||||||||
| Selling, general and administrative expenses | 244,218 | 97,143 | 635,484 | 291,449 | ||||||||||||
| Restructuring charge | — | 1,557 | — | 1,557 | ||||||||||||
| Impairment of tradenames | — | — | — | 12,500 | ||||||||||||
| Interest expense - Securities lending and loan participations sold | 10,097 | 10,975 | 40,269 | 30,669 | ||||||||||||
| Total operating expenses | 284,776 | 142,752 | 738,582 | 398,818 | ||||||||||||
| Operating income | 96,746 | 83,501 | 579,869 | 93,697 | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 70 | 67 | 175 | 537 | ||||||||||||
| Gain on extinguishment of loans and other | 1,758 | — | 8,267 | — | ||||||||||||
| Income (loss) from equity investments | 1,149 | 409 | 1,172 | (145 | ) | |||||||||||
| Interest expense | (25,372 | ) | (16,374 | ) | (66,014 | ) | (48,537 | ) | ||||||||
| Income before income taxes | 74,351 | 67,603 | 523,469 | 45,552 | ||||||||||||
| Provision for income taxes | (22,693 | ) | (18,711 | ) | (140,113 | ) | (13,380 | ) | ||||||||
| Net income | 51,658 | 48,892 | 383,356 | 32,172 | ||||||||||||
| Net income (loss) attributable to noncontrolling interests | 1,108 | 513 | 2,474 | (1,382 | ) | |||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 50,550 | $ | 48,379 | $ | 380,882 | $ | 33,554 | ||||||||
| Preferred stock dividends | 1,929 | 1,088 | 5,467 | 3,230 | ||||||||||||
| Net income available to common shareholders | $ | 48,621 | $ | 47,291 | $ | 375,415 | $ | 30,324 | ||||||||
| Basic income per common share | $ | 1.76 | $ | 1.86 | $ | 13.75 | $ | 1.18 | ||||||||
| Diluted income per common share | $ | 1.69 | $ | 1.75 | $ | 13.07 | $ | 1.14 | ||||||||
| Weighted average basic common shares outstanding | 27,570,716 | 25,446,292 | 27,297,917 | 25,699,735 | ||||||||||||
| Weighted average diluted common shares outstanding | 28,794,066 | 27,050,448 | 28,726,492 | 26,689,700 | ||||||||||||
| www.brileyfin.com | NASDAQ: RILY | 7 |
B. RILEY FINANCIAL, INC.
Segment Financial Information
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Capital Markets segment: | ||||||||||||||||
| Revenues - Services and fees | $ | 134,849 | $ | 55,815 | $ | 431,825 | $ | 189,779 | ||||||||
| Trading income (loss) and fair value adjustments on loans | 16,935 | 31,399 | 311,335 | (36,536 | ) | |||||||||||
| Interest income - Loans and securities lending | 26,869 | 26,026 | 89,280 | 72,383 | ||||||||||||
| Total revenues | 178,653 | 113,240 | 832,440 | 225,626 | ||||||||||||
| Selling, general and administrative expenses | (80,152 | ) | (40,920 | ) | (231,765 | ) | (125,844 | ) | ||||||||
| Restructuring charge | — | (917 | ) | — | (917 | ) | ||||||||||
| Interest expense - Securities lending and loan participations sold | (10,097 | ) | (10,975 | ) | (40,269 | ) | (30,669 | ) | ||||||||
| Depreciation and amortization | (514 | ) | (673 | ) | (1,526 | ) | (1,864 | ) | ||||||||
| Segment income | 87,890 | 59,755 | 558,880 | 66,332 | ||||||||||||
| Wealth Management segment: | ||||||||||||||||
| Revenues - Services and fees | 117,572 | 17,289 | 270,558 | 51,494 | ||||||||||||
| Trading income and fair value adjustments on loans | 1,262 | 354 | 6,483 | 394 | ||||||||||||
| Total revenues | 118,834 | 17,643 | 277,041 | 51,888 | ||||||||||||
| Selling, general and administrative expenses | (110,157 | ) | (16,395 | ) | (260,331 | ) | (49,226 | ) | ||||||||
| Depreciation and amortization | (2,093 | ) | (468 | ) | (6,832 | ) | (1,421 | ) | ||||||||
| Segment income | 6,584 | 780 | 9,878 | 1,241 | ||||||||||||
| Auction and Liquidation segment: | ||||||||||||||||
| Revenues - Services and fees | 2,745 | 21,473 | 15,637 | 49,340 | ||||||||||||
| Revenues - Sale of goods | 34,327 | 22,712 | 52,162 | 23,757 | ||||||||||||
| Total revenues | 37,072 | 44,185 | 67,799 | 73,097 | ||||||||||||
| Direct cost of services | (13,622 | ) | (18,373 | ) | (27,742 | ) | (36,406 | ) | ||||||||
| Cost of goods sold | (11,999 | ) | (9,046 | ) | (19,578 | ) | (9,360 | ) | ||||||||
| Selling, general and administrative expenses | (5,153 | ) | (4,625 | ) | (9,719 | ) | (8,880 | ) | ||||||||
| Restructuring charge | — | (140 | ) | — | (140 | ) | ||||||||||
| Depreciation and amortization | — | (1 | ) | — | (2 | ) | ||||||||||
| Segment income | 6,298 | 12,000 | 10,760 | 18,309 | ||||||||||||
| Financial Consulting segment: | ||||||||||||||||
| Revenues - Services and fees | 21,291 | 25,583 | 66,435 | 65,142 | ||||||||||||
| Selling, general and administrative expenses | (18,436 | ) | (17,759 | ) | (55,896 | ) | (48,756 | ) | ||||||||
| Restructuring charge | — | (500 | ) | — | (500 | ) | ||||||||||
| Depreciation and amortization | (86 | ) | (76 | ) | (273 | ) | (216 | ) | ||||||||
| Segment income | 2,769 | 7,248 | 10,266 | 15,670 | ||||||||||||
| Principal Investments - United Online and magicJack segment: | ||||||||||||||||
| Revenues - Services and fees | 18,669 | 20,663 | 57,394 | 63,037 | ||||||||||||
| Revenues - Sale of goods | 631 | 939 | 2,081 | 2,718 | ||||||||||||
| Total revenues | 19,300 | 21,602 | 59,475 | 65,755 | ||||||||||||
| Direct cost of services | (4,397 | ) | (4,891 | ) | (13,693 | ) | (14,795 | ) | ||||||||
| Cost of goods sold | (443 | ) | (767 | ) | (1,816 | ) | (2,082 | ) | ||||||||
| Selling, general and administrative expenses | (5,458 | ) | (4,840 | ) | (15,096 | ) | (14,352 | ) | ||||||||
| Depreciation and amortization | (2,496 | ) | (2,736 | ) | (7,558 | ) | (8,466 | ) | ||||||||
| Segment income | 6,506 | 8,368 | 21,312 | 26,060 | ||||||||||||
| Brands segment: | ||||||||||||||||
| Revenues - Services and fees | 6,372 | 4,000 | 15,261 | 11,007 | ||||||||||||
| Selling, general and administrative expenses | (972 | ) | (994 | ) | (2,338 | ) | (2,207 | ) | ||||||||
| Depreciation and amortization | (714 | ) | (714 | ) | (2,143 | ) | (2,143 | ) | ||||||||
| Impairment of tradenames | — | — | — | (12,500 | ) | |||||||||||
| Segment income (loss) | 4,686 | 2,292 | 10,780 | (5,843 | ) | |||||||||||
| Consolidated operating income from reportable segments | 114,733 | 90,443 | 621,876 | 121,769 | ||||||||||||
| Corporate and other expenses | (17,987 | ) | (6,942 | ) | (42,007 | ) | (28,072 | ) | ||||||||
| Interest income | 70 | 67 | 175 | 537 | ||||||||||||
| Gain on extinguishment of loans and other | 1,758 | — | 8,267 | — | ||||||||||||
| Income (loss) on equity investments | 1,149 | 409 | 1,172 | (145 | ) | |||||||||||
| Interest expense | (25,372 | ) | (16,374 | ) | (66,014 | ) | (48,537 | ) | ||||||||
| Income before income taxes | 74,351 | 67,603 | 523,469 | 45,552 | ||||||||||||
| Provision for income taxes | (22,693 | ) | (18,711 | ) | (140,113 | ) | (13,380 | ) | ||||||||
| Net income | 51,658 | 48,892 | 383,356 | 32,172 | ||||||||||||
| Net income (loss) income attributable to noncontrolling interests | 1,108 | 513 | 2,474 | (1,382 | ) | |||||||||||
| Net income attributable to B. Riley Financial, Inc. | 50,550 | 48,379 | 380,882 | 33,554 | ||||||||||||
| Preferred stock dividends | 1,929 | 1,088 | 5,467 | 3,230 | ||||||||||||
| Net income available to common shareholders | $ | 48,621 | $ | 47,291 | $ | 375,415 | $ | 30,324 | ||||||||
| www.brileyfin.com | NASDAQ: RILY | 8 |
B. RILEY FINANCIAL, INC.
Adjusted EBITDA and Operating Adjusted EBITDA Reconciliation
(Unaudited)
(Dollars in thousands)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 50,550 | $ | 48,379 | $ | 380,882 | $ | 33,554 | ||||||||
| Adjustments: | ||||||||||||||||
| Provision for income taxes | 22,693 | 18,711 | 140,113 | 13,380 | ||||||||||||
| Interest expense | 25,372 | 16,374 | 66,014 | 48,537 | ||||||||||||
| Interest income | (70 | ) | (67 | ) | (175 | ) | (537 | ) | ||||||||
| Share based payments | 9,374 | 4,778 | 23,508 | 14,267 | ||||||||||||
| Depreciation and amortization | 6,142 | 4,886 | 19,066 | 14,765 | ||||||||||||
| Restructuring costs | — | 1,557 | — | 1,557 | ||||||||||||
| Gain on extinguishment of loans | — | — | (6,509 | ) | — | |||||||||||
| Impairment of tradenames | — | — | — | 12,500 | ||||||||||||
| Transactions related costs and other | 40 | (485 | ) | 1,570 | 8,309 | |||||||||||
| Total EBITDA adjustments | 63,551 | 45,754 | 243,587 | 112,778 | ||||||||||||
| Adjusted EBITDA | $ | 114,101 | $ | 94,133 | $ | 624,469 | $ | 146,332 | ||||||||
| Operating EBITDA Adjustments: | ||||||||||||||||
| Trading (income) losses and fair value adjustments on loans | (18,197 | ) | (31,753 | ) | (317,818 | ) | 36,142 | |||||||||
| Other investment related expenses | 5,187 | 4,842 | 9,281 | 2,412 | ||||||||||||
| Total Operating EBITDA Adjustments | (13,010 | ) | (26,911 | ) | (308,537 | ) | 38,554 | |||||||||
| Operating Adjusted EBITDA | $ | 101,091 | $ | 67,222 | $ | 315,932 | $ | 184,886 | ||||||||
| www.brileyfin.com | NASDAQ: RILY | 9 |
B. RILEY FINANCIAL, INC.
Adjusted Net Income Reconciliation
(Unaudited)
(Dollars in thousands, except share data)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income attributable to B. Riley Financial, Inc. | $ | 50,550 | $ | 48,379 | $ | 380,882 | $ | 33,554 | ||||||||
| Adjustments: | ||||||||||||||||
| Share based payments | 9,374 | 4,778 | 23,508 | 14,267 | ||||||||||||
| Amortization of intangible assets | 5,156 | 3,919 | 16,176 | 11,967 | ||||||||||||
| Restructuring costs | — | 1,557 | — | 1,557 | ||||||||||||
| Gain on extinguishment of loans | — | — | (6,509 | ) | — | |||||||||||
| Impairment of tradenames | — | — | — | 12,500 | ||||||||||||
| Transactions related costs and other | 40 | (485 | ) | 1,570 | 8,309 | |||||||||||
| Income tax effect of adjusting entries | (4,514 | ) | (2,725 | ) | (9,587 | ) | (13,456 | ) | ||||||||
| Adjusted net income attributable to B. Riley Financial, Inc. | $ | 60,606 | $ | 55,423 | $ | 406,040 | $ | 68,698 | ||||||||
| Adjusted income per common share: | ||||||||||||||||
| Adjusted basic income per share | $ | 2.20 | $ | 2.18 | $ | 14.87 | $ | 2.67 | ||||||||
| Adjusted diluted income per share | $ | 2.10 | $ | 2.05 | $ | 14.13 | $ | 2.57 | ||||||||
| Shares used to calculate adjusted basic net income per share | 27,570,716 | 25,446,292 | 27,297,917 | 25,699,735 | ||||||||||||
| Shares used to calculate adjusted diluted net income per share | 28,794,066 | 27,050,448 | 28,726,492 | 26,689,700 | ||||||||||||
# # #
Source: B. Riley Financial, Inc.
| www.brileyfin.com | NASDAQ: RILY | 10 |
Exhibit 99.2
1 NASDAQ: RILY Third Quarter 2021 Supplemental Financial Data October 28, 2021
Reconciliation of U.S. GAAP to Non - GAAP Measures 2 (Unaudited, dollars in thousands) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Adj. EBITDA and Operating Adj. EBITDA Reconciliation Net income attributable to B. Riley Financial, Inc. $ 48,379 $ 171 , 594 $ 254,656 $ 75,6 76 $ 50,550 EBITDA Adjustments: Provision for income taxes 18,711 62,060 97,518 19,902 22,693 Interes t expense 16,374 16,712 19,786 20,856 25,372 Interes t income (67) (27) (49) (56) (70) Share based payments 4,778 4,321 5,526 8,608 9,374 Depreciation and amortization 4,886 4,604 6,759 6,165 6,142 Restructuri n g costs 1,557 — — — — Gain on extinguishment of loans — — — (6,509) — Impairment of tradenames — — — — — Transactions related costs and other (485) 1,222 1,285 245 40 Total EBITDA Adjustments 45,754 88,892 130,825 49,211 63,551 Adjusted EBITDA $ 94,133 $ 260,486 $ 385,481 $ 124,887 $ 114,101 Operating EBITDA Adjustments: Trading income and fair value adjustments on loans (31,753) (140,160) (266,942) (32,679) (18,197) Other investment related expenses 4,842 6,461 4,178 (84) 5,187 Total Operating EBITDA Adjustments (26,911) (133,699) (262,764) (32,763) (13,010) Operating Adjusted EBITDA $ 67,222 $ 126,787 $ 122,717 $ 92,124 $ 101,091
Operating Income Summary 3 1. Other investment related expenses. (Unaudited, dollars in thousands) Operating Investment Combined Operating Investment Combined Revenues: Services and fees $ 301,497 - $ 301,497 $ 144,823 - $ 144,823 Trading income and fair value adjustments on loans - 18,197 18,197 - 31,753 31,753 Interest income – loans & securities lending 26,869 - 26,869 26,026 - 26,026 Sale of goods 34,959 - 34,959 23,651 - 23,651 Total revenues $ 363,325 $ 18,197 $ 381,522 $ 194,500 $ 31,753 $ 226,253 Operating expenses: Direct cost of services $ 18,019 - $ 18,019 $ 23,264 - $ 23,264 Cost of goods sold 12,442 - 12,442 9,813 - 9,813 Selling, general and administrative expenses 239,031 5,187 (1) 244,218 92,301 4,842 (1) 97,143 R e structuring c harge - - - 1,557 - 1,557 Interest expense – securities lending & loan participations sold 10,097 - 10,097 10,975 - 10,975 Total operating expenses $ 279,589 $ 5,187 $ 284,776 $ 137,910 $ 4,842 $ 142,752 Operating income $ 83,736 $ 13,010 $ 96,746 $ 56,590 $ 26,911 $ 83,501 Three Months Ended September 30, 2021 Three Months Ended September 30, 2020
Quarterly Operating Revenue and Operating Adjusted EBITDA Ope ra ting R e v e nue a nd Ope ra ting A d j usted EBIT DA (1)(3)(5)(6 ) (Dollars in thousands) Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Operating Revenue (1) $ 194,500 $ 270,046 $ 333,217 $ 304,091 $ 363,325 Investme n t Gain s ( 2 ) 31,753 140,160 266,942 32,679 18,197 Tot a l Re venu e $ 226,253 $ 410,206 $ 600,159 $ 336,770 $ 381,522 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Operating Adjusted EBITDA (3) $ 67,222 $ 126,787 $ 122,717 $ 92,124 $ 101,091 Investment Adjusted EBITDA (4) 26,911 133,699 262,764 32,763 13,010 Adjusted EBITDA (5)(6) $ 94,133 $ 260,486 $ 385,481 $ 124,887 $ 114,101 Quarterly Revenue and Adjusted EBITDA 1. 2. 3. 4. 5. 6. 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. Investment Gains (Loss) is defined as Trading Income (Losses) and Fair Value Adjustments on Loans. 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. Investment Adjusted EBITDA is defined as Trading Income (Losses) and Fair Value Adjustments on Loans, less other investment related expenses. Adjusted EBITDA includes earnings before interest, taxes, depreciation, amortization, restructuring costs, share - based payments, gain on extinguishment of loans, impairment of tradenames, and transaction related and other costs. For a reconciliation to GAAP financial measures, please see slide 2. $194.5M $270.0M $333.2M $304.1M $363.3M $67.2M $126.8M $122.7M $92.1M $101.1M Q3 2 0 2 0 Q4 2 0 2 0 Q1 2 0 2 1 Q2 2 0 2 1 Q3 2 0 2 1 Operating Revenue Operating Adj. EBITDA 4
Cash and Investments Summary 5 (Dollars in thousands) Sep 30, 2020 Dec 31, 2020 Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Cash and Cash Equivalents $ 169,676 $ 103,602 $ 237,590 $ 297,396 $ 378,205 Restricte d Cash 1,410 1,235 8,532 1,335 927 Due from Clearing Brokers, net 19,589 (6,583) 416,925 424,949 599,715 Advances Against Customer Contracts 900 200 200 200 200 Securities and Other Investments Owned Equity Securities 392,674 697,288 1,006,019 1,129,217 1,276,191 Corporat e Bonds 5,956 3,195 41,754 42,912 5,401 Other Fixed Income Securities 3,557 1,913 5,165 3,227 4,436 P a rtn e rship Int e res t s an d Other 57,293 74,923 113,766 103,417 66,072 Securities Sold Not Yet Purchased (48,125) (10,105) (288,058) (272,088) (419,211) Loans Receivable, net of Loan Participations Sold 330,420 373,373 282,855 265,851 350,762 Othe r investm e nt s an d deposit s ( 1 ) 58,389 59,612 48,881 53,510 43,369 Noncontrol l in g interes t ( 2 ) — — (4,326) (11,254) (16,558) Total Cash, Net Securities, and Other $ 991,739 $1,298,653 $1,869,303 $2,038,672 $2,289,509 Debt Summary (Dollars in thousands) Sep 30, 2020 Dec 31, 2020 Mar 31, 2021 Jun 30, 2021 Sep 30, 2021 Term Loans, net $ 52,452 $ 74,213 $ 69,543 $ 257,104 $ 252,927 Revolvin g Credi t Facili ty — — — — 80,000 Notes Payable 714 37,967 6,908 357 357 Senior Notes Payable 854,926 870,783 1,139,100 1,213,105 1,362,847 Total Debt 908,092 982,963 1,215,551 1,470,566 1,696,131 Total Cash and Investments, Net of Debt $ 83,647 $ 315,690 $ 653,752 $ 568,106 $ 593,378 1. 2. Other investments and investment related deposits reported in prepaid and other assets. Noncontrolling interest related to investments reported in Securities and Other Investments Owned.
Condensed Consolidated Balance Sheets 6 (Dollars in thousands) September 30, 2021 (Unaudited) December 31, 2020 Cash and cash equivalents $ 378,205 $ 103,602 Restricted cash 927 1,235 Due from clearing brokers 599,715 7,089 Securities and other investments owned, at fair value 1,352,100 777,319 Securities borrowed 1,347,656 765,457 Accounts receivable, net 54,790 46,518 Due from related parties 1,513 986 Loans receivable, at fair value 350,762 390,689 Prepaid expenses and other assets 448,985 87,462 Operating lease right - of - use assets 59,735 48,799 Property and equipment, net 13,720 11,685 Goodwill 237,961 227,046 Other intangible assets, net 196,697 190,745 Deferred tax assets, net 4,085 4,098 Total assets $ 5,046,851 $ 2,662,730 Accounts payable $ 4,028 $ 2,722 Accrued expenses and other liabilities 277,586 168,478 Deferred revenue 68,310 68,651 Deferred tax liabilities, net 67,023 34,248 Due to related parties and partners 176 327 Due to clearing brokers — 13,672 Securities sold not yet purchased 419,211 10,105 Securities loaned 1,345,825 759,810 Mandatorily redeemable noncontrolling interests 4,196 4,700 Operating lease liabilities 72,158 60,778 Notes payable 357 37,967 Loan participations sold — 17,316 Revolving credit facility 80,000 — Term loans, net 252,927 74,213 Senior notes payable, net 1,362,847 870,783 Total liabilities $ 3,954,644 $ 2,123,770 Redeemable noncontrolling interests in equity of subsidiaries 345,000 — Total B. Riley Financial, Inc. stockholders' equity 706,695 512,586 Noncontrolling interests 40,512 26,374 Total equity 747,207 538,960 Total liabilities and equity $ 5,046,851 $ 2,662,730
Condensed Consolidated Statements of Income 7 (Unaudited, dollars in thousands, except share data) Three Months Ended September 30, 2021 2020 Revenues: S e rvic e s an d fe e s $ 301,497 $ 144,823 Trading income and fair value adjustments on loans 18,197 31,753 Interest income - Loans and securities lending 26,869 26,026 Sale of goods 34,959 23,651 Total revenues 381,522 226,253 Operating expenses: Direct cost of services 18,019 23,264 Cost of goods sold 12,442 9,813 Selling, general and administrative expenses 244,218 97,143 Restructuri n g charge — 1,557 Interest expense - Securities lending and loan participations sold 10,097 10,975 Total operating expenses 284,776 142,752 Opera ting income 96,746 83,501 Other income (expense): Interes t income 70 67 Gai n o n ex ti ng u i s h m e n t o f loa n s a n d oth e r 1,758 — Income from equity investments 1,149 409 Interes t expense (2 5 ,3 72) (1 6 ,3 74) Income before income taxes 74,351 67,603 Provision for income taxes (2 2 ,6 93) (1 8 ,7 11) Net income 51,658 48,892 Net income attributable to noncontrolling interests 1,108 513 Net income attributable to B. Riley Financial, Inc. $ 50,550 $ 48,379 Preferred stock dividends 1,9 2 9 1,0 8 8 Net income available to common shareholders $ 48,621 $ 47,291 Basic income per common share $ 1 .76 $ 1 .86 Diluted income per common share $ 1 .69 $ 1 .75 Weighted average basic common shares outstanding 27,570,716 25,446,292 Weighted average diluted common shares outstanding 28,794,066 27,050,448
Segment Financial Information 8 (Unaudited, dollars in thousands) Three Months Ended September 30, 2021 2020 Capital Markets segment: Revenues - Services and fees $ 134,849 $ 55,815 Trading income and fair value adjustm e nt s o n loans 16,935 31,399 Interest income - Loans and securities lending 26,869 26,026 Total revenues 178,653 113,240 S elling , genera l an d administ r at i v e expenses (80,152) (40,920) Restructuri n g charge — (917) Interest expense - Securities lending and loan participations sold (10,097) (10,975) Depreciation and amortization (514) (673) Segment income 87,890 59,755 We alt h Manage m e nt seg m e nt Revenues - Services and fees 117,572 17,289 Trading income and fair value a d justm e nt s o n loa n s 1,262 354 Total revenues 118,834 17,643 Selling, general and administrative expenses (110,157) (16,395) Depreciation and amortization (2,093) (468) Segment income 6,584 780 Auction and Liquidation segment: Revenues - Services and fees 2,745 21,473 Revenues - Sale of goods 34,327 22,712 Total revenues 37,072 44,185 Direct cost of services (13,622) (18,373) Cost of goods sold (11,999) (9,046) S elling , genera l an d administ r at i v e expenses (5,153) (4,625) Restructuri n g charges — (140) Depreciation and amortization — (1) S e gm e nt in c ome $ 6,298 $ 12,000 Three Months Ended September 30, 2021 2020 Financial Consulting segment Revenue s - S e rvic e s an d fe e s $ 21,2 9 1 $ 25,583 Selling, general and administrative expenses (18,436) (17,759) Restructuri n g charge — (500) Depreciation and amortization (86) (76) Segment income 2,769 7,248 Principal Inve s tments – United Online and magicJack segment: Revenues - Services and fees 18,669 20,663 Revenues - Sale of goods 631 939 Total revenues 19,300 21,602 Direct cost of services (4,397) (4,891) Cost of goods sold (443) (767) S elling , genera l an d administ r at i v e expenses (5,458) (4,840) Depreciation and amortization (2,496) (2,736) Segment income 6,506 8,368 Brands segment: Revenues - Services and fees 6,372 4,000 S elling , genera l an d administ r at i v e expenses (972) (994) Depreciation and amortization (714) (714) Segment income 4,686 2,292 Consolidated operating income from reportable segments $ 114,733 $ 90,443
Definition of US GAAP to Non - GAAP Financial Measures 9 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, 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, aforementioned adjustments for adjusted EBITDA, as well as 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 .