B. Riley Financial Reports Strong Third Quarter 2020 Results

LOS ANGELES, Oct. 29, 2020 /PRNewswire/ -- B. Riley Financial, Inc. (NASDAQ: RILY) ("B. Riley" or the "Company") today announced results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Highlights

• GAAP consolidated revenues of $226.3 million
• Net income available to common shareholders of $47.3 million, or $1.75 per diluted share
• Adjusted EBITDA (1) of $94.1 million
• Operating revenues (2) of $194.5 million and operating adjusted EBITDA (3) of $67.2 million

"We delivered strong third quarter results across our business lines which generated net income of $47.3 million compared to $34.3 million last year and operating adjusted EBITDA growth of over 90%," said Bryant Riley, Chairman and Co-Chief Executive Officer. "Our capital markets group was the primary driver of growth this quarter, having realized impressive performance in all of its verticals. Our focus on helping small cap companies navigate financial markets with advisory, capital raising, and restructuring services is the ethos of our firm and this quarter confirmed that we provide vital services during periods of market turmoil like we have seen with COVID-19. As we continue to creatively gain market share in each of our segments within capital markets, we anticipate becoming the market leader within the small cap ecosystem. In addition to capital markets, we have continued to see strong performance out of our liquidation business given the unfortunate ramifications of COVID-19. Additionally, our valuation business, brand portfolio, and wholly owned subsidiaries within our principal investments business continue to generate steady cash flows and healthy returns on invested capital. Finally, we continue to view our balance sheet as a vital differentiator that sets us apart from the competition. We saw investment gains of $32 million in the quarter which marks a continued recovery from our first quarter losses. This understates the importance that our strong balance sheet and our net cash and investments have on driving growth and cash flow across our segments. We pride ourselves on being solution providers to companies in need and use our balance sheet as a tool to generate both fees and returns. When I look through our portfolio, I am as optimistic as I have ever been about its future performance and love our set up as we finish the remainder of the year. Year-to-date, we have delivered net income of $30.3 million and almost $185 million of operating adjusted EBITDA, up 90% over last year. In addition, we have a clear line of sight to delivering strong growth in the fourth quarter as well. Our strong performance and the confidence we have in our business strategy and future are the primary reasons for our increasing our regular quarterly dividend to $0.375."

Mr. Riley added, "Since the formation of B. Riley Financial in 2014, our philosophy has been to provide a regular dividend enhanced by special dividends based on the strength of our episodic businesses. As our overall business has become increasingly diversified and recurring in nature, we feel a larger regular dividend annualized at $1.50 per share is more appropriate to reflect the underlying cash flow generating power of our business. To be clear, we will continue to consider special dividends when appropriate, and trust that a stable and growing regular dividend will be appreciated by our shareholders. In addition, we will continue to opportunistically repurchase shares as noted by our buyback authorization. Year-to-date, we repurchased approximately 1.7 million shares representing approximately 7% of our shares outstanding."

Co-Chief Executive Officer Tom Kelleher added, "This past quarter we took concerted steps to position our platform to drive increased client and shareholder value by rebranding our operating companies and providing greater visibility into the breadth of our offerings. In addition, we launched our venture capital business which should strengthen our capabilities to identify, acquire and invest in attractive emerging growth companies and is a highly strategic addition to our already broad platform. Moving forward, we are confident in our strategy and our ability to drive continued growth."

Third Quarter 2020 Financial Summary

B. Riley Financial reported total revenues of $226.3 million for the three months ended September 30, 2020, up from $180.1 million in total revenues for the prior year period. Operating revenues (2) totaled $194.5 million compared to $139.8 million in the prior year period.

Net income available to common shareholders totaled $47.3 million, or $1.75 per diluted share, compared to net income of $34.3 million, or $1.21 per diluted share, for the prior year period.

Total adjusted EBITDA (1) increased to $94.1 million from $70.3 million for the third quarter of 2019. Operating adjusted EBITDA (3) increased to $67.2 million from $35.2 million for the prior year period.

For the first nine months of 2020, B. Riley's total revenues were $492.5 million, operating revenues (2) totaled $528.7 million and net income totaled $30.3 million. During that same period, total adjusted EBITDA was $146.3 million and operating adjusted EBITDA was $184.9 million.

Investment gains (4) of $31.8 million in the third quarter reflected a continued recovery from the significant mark-to-market losses experienced in the first quarter of 2020 due to the impact of COVID-19 on equity markets. B. Riley's proprietary investments are comprised of certain private and public securities and loans which also create revenue opportunities for the Company's operating business while driving long-term value for its clients, partners, and shareholders.

Supplemental Financial DataB. Riley has presented information related to its operating results and investments to provide investors with additional metrics regarding its performance and overall results of operations. Further details related to these metrics can be found in a Financial Supplement on the Company's investor relations website at ir.brileyfin.com.

Third Quarter 2020 Segment Financial Summary

• Capital Markets segment revenues increased to $146.8 million compared to $134.1 million for the prior year period. The increase was primarily driven by increased fees from advisory services, the addition of our real estate consulting business and an increase in income related to minority investments.
• Auction and Liquidation performance was driven by a number of retail liquidations in the US and in Europe as our group further capitalized on the current challenging retail market conditions created by COVID-19.
• Valuation and Appraisal results continue to be negatively impacted by COVID-19 but overall business conditions and activity continue to show signs of recovery.
• Principal Investments companies, United Online and magicJack, continued to deliver solid operating performance and cash flow generation despite the impact of COVID-19.

As of September 30, 2020, cash and investments totaled $991.7 million, including cash and cash equivalents of $169.7 million. The Company's investment balance included approximately $58.4 million of other equity investments reported in prepaid and other assets. Total cash and investments net of debt, including investments reported in prepaid and other assets, was $83.6 million.

Share RepurchasesThe Board of Directors has approved an additional share repurchase program for up to $50 million. In July, B. Riley announced an agreement to repurchase 900,000 shares of its common stock as part of a privately negotiated transaction. During the third quarter, the Company repurchased 450,000 shares of these 900,000 shares and expects to purchase the remaining shares by year-end, subject to various factors including price, trading volume, corporate requirements, and market conditions. Year-to-date through September 30th, B. Riley has repurchased approximately 1.7 million of its common shares.

DividendB. Riley's Board of Directors approved an increase in the Company's regular quarterly dividend to $0.375 per common share, from the previous regular quarterly dividend of $0.30 per common share. The quarterly dividend of $0.375 per common share will be paid on or about November 24, 2020 to stockholders of record as of November 10, 2020.

Conference CallManagement will host a conference call today, Thursday, October 29, 2020 at 4:30 p.m. Eastern time (1:30 p.m. Pacific time), to discuss the Company's quarterly results. The live broadcast and archived recording will be available on the Company's investor relations website at https://ir.brileyfin.com/events-and-presentations.

About B. Riley Financial, Inc. (NASDAQ: RILY)B. Riley Financial, Inc. 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 which offer a diverse range of complementary end-to-end capabilities spanning investment banking and institutional brokerage, private wealth and investment management, corporate advisory, restructuring, due diligence, forensic accounting, litigation support, appraisal and valuation, and 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 more information about B. Riley and its affiliated companies, 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, 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.(2)  Operating revenue is defined as the sum of revenues from service and fees, interest income - loans and securities lending, and sales 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 (losses) and fair value adjustments on loans.(5)  Investment adjusted EBITDA and investment gains income are defined as trading income (losses) 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

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 2020, 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 and June 30, 2020 under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (as applicable)and any additional information included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 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 MeasuresCertain 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.

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SOURCE B. Riley Financial