b. riley financial (rily) overview march 2020. riley financi… · b. riley financial at a glance...
TRANSCRIPT
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Investor Overview
March 2020
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This presentation contains statements that are forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended that are based on management’s current expectations and
assumptions and are subject to risks and uncertainties. These forward looking statements can often be identified by their use of words such as
“anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “forecast,” “intends,” “may,” “outlook,” “plans,” “potential,” “predicts,”
“projects,” “should,” “target,” “will,” “would” or the negative of these terms or other comparable terminology. Such forward looking statements include,
but are not limited to, expressed or implied statements regarding future financial performance and future dividends, the effects of our business model,
the effects of our balance sheet on our ability to pursue business opportunities, statements regarding the terms and conditions and timing of the senior
notes offering and the intended use of proceeds, the effects and anticipated benefits of our acquisitions and related actions, the strength of our
business segments, assessments of future opportunities and performance, expectations regarding future transactions, and the financial impact, size
and consistency of returns and timing thereof, expectations regarding market dynamics, as well as statements regarding the effect of investments in
our business segments. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors
that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements.
Factors that could cause actual results to differ from those contained in the forward-looking statements include but are not limited to risks related to:
volatility in our revenues and results of operations; changing conditions in the financial markets; our ability to generate sufficient revenues to achieve
and maintain profitability; the short term nature of our engagements; the accuracy of our estimates and valuations of inventory or assets in “guarantee”
based engagements; competition in the asset management business; potential losses related to our auction or liquidation engagements; our
dependence on communications, information and other systems and third parties; potential losses related to purchase transactions in our auctions and
liquidations business; the potential loss of financial institution clients; potential losses from or illiquidity of our proprietary investments; changing
economic and market conditions; potential liability and harm to our reputation if we were to provide an inaccurate appraisal or valuation; failure to
successfully compete in any of our segments; loss of key personnel; our ability to borrow under our credit facilities or raise additional funds through
offerings as necessary; failure to comply with the terms of our credit agreements; our ability to meet future capital requirements; and the diversion of
management time on acquisition-related issues. Other factors that could adversely affect our operating results and cash flows include (without
limitation) those risks described from time to time in B. Riley Financial, Inc.’s periodic filings with the SEC, including, without limitation, the risks
described in B. Riley Financial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2018 under the captions "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of Operations“ and our Annual Report on Form 10-K for the year ended
December 31, 2019. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking
statements. All information is current as of the date this presentation is issued, and B. Riley Financial, Inc. undertakes no duty to update this
information.
Safe Harbor Statement
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B. Riley Financial at a Glance
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B. Riley Financial at a Glance (NASDAQ:RILY)
Bryant Riley
Chairman &
Co-CEO
● Founded in 1997 and headquartered in Los Angeles, CA
● Approx. 1,000 employees in major markets across the U.S.
● Operates through several subsidiaries which offer collaborative
financial services tailored to fit the capital raising and business
advisory needs of public and private companies, investors and
high-net-worth individuals
● Long-standing executive management and leadership team
Tom Kelleher
Co-CEO
Alan Forman
EVP
General Counsel
Phil Ahn
CFO & COO
Kenny Young
President
Company overview
Key executives
* International operations in Germany, Australia and India
Locations *
Dan Shribman
Chief Investment
Officer
5
Investment Metrics
1. As of December 31, 2019.
2. Includes approximately $451.6M in securities and other investments owned net of $41.8M in securities sold not yet purchased.
3. Includes approximately $0.5M in restricted cash, $23.8M in due from clearing brokers, $27.3M in advances against customer contracts, and $53.2M in other equity investments reported in prepaid expenses and other assets.
4. Excludes (i) operating lease liabilities, (ii) incremental sales of senior notes under our at-the-market sales program after 12/31/19, and (iii) $132.3M senior notes offering in February 2020.
5. Total cash and investments, net of debt is defined as total cash, net securities, and other minus total debt.
6. Revenue and Adjusted EBITDA based on 12/31/19 LTM results.
7. For a definition of Adjusted EBITDA and a reconciliation to GAAP financial measures, please see the Appendix.
8. Enterprise value is defined as market capitalization, less cash and cash equivalents, restricted cash, amounts due from clearing brokers, advances against customer contracts, the net amount of loans receivable and loan participations sold, the net
amount of securities and other investments owned and securities sold not yet purchased, and other equity investments reported in prepaid expenses and other assets, plus notes payable, term loan and senior notes payable.
9. Source: NASDAQ as of 2/28/20.
10. Calculated based on total quarterly dividends paid to common shareholders in 2019 divided by share price as of 3/2/20.
Trading Data
Stock Price, at 3/2/20 $24.48
52 Week High/Low $30.17/$16.10
Shares Outstanding (1) 27.0M
Public Float, est. (1) 75.7%
Inst. Holdings (9) 47.6%
Insider Holdings (1) 24.3%
Dividend Yield – YTD (10) $1.49 (6.1%)
Balance Sheet Summary (1)
Cash & Cash
Equivalents$104.3M
Marketable Securities,
net (2) $409.7M
Loans Receivable, net of
Loan Participations Sold$213.4M
Other investment assets (3) $104.8M
Total Cash, Net
Securities, and Other (2)(3) $832.2M
Term Loan $66.7M
Senior Notes and other
Notes Payable $726.3M
Total Debt (4) $792.9M
Valuation Measures
Market Cap $660.3M
Enterprise Value (8) $621.1M
EV/Revenue (6)(8) 1.0x
EV/Adj. EBITDA (6)(7)(8) 3.0x
Financial Highlights (6)
Revenues $652.1M
Adj. EBITDA (7) $207.9M
Total Cash and
Investments, Net of Debt (5) $39.2M
Strong balance sheet with attractive dividend yield
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Financial Summary
Historical Stock Performance (3)
1. Excludes results from FBR & Co. prior to 6/1/17, Wunderlich Investment Company, Inc. prior to 7/3/17, GlassRatner Advisory & Capital Group LLC prior to 8/1/18, and magicJack VocalTec Ltd. prior to 11/14/18.
2. For a definition of Adjusted EBITDA and a reconciliation to GAAP financial measures, please see the Appendix.
3. Source: Capital IQ for period from 1/04/19 to 1/31/20.
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Jan-19 Apr-19 Jul-19 Oct-19 Jan-20
RILY S&P 500 Russell 2000
29%
78%
19%
Revenues (1)
$190.4M
$322.2M
$423.0M
$652.1M
FY 2016 FY 2017 FY 2018 FY 2019
Adjusted EBITDA (1) (2)
$48.9M$69.8M
$89.6M
$207.9M
FY 2016 FY 2017 FY 2018 FY 2019
7
Common Stock Dividends
Historical Dividends Paid (per share) (1) Cumulative Dividend Payout (per share) (1)
$0.63
$1.30
$2.04
$3.53
$3.88
2016 2017 2018 2019 Mar 2020YTD
Dividends Paid Dividend to be paid 3/31/20
$0.28
$0.67$0.74
$1.49
$0.35
2016 2017 2018 2019 Mar 2020YTD
Regular Dividend Special Dividend
Dividend to be paid 3/31/20
1. There can be no assurance that we will continue to generate sufficient cash to pay dividends or that we will pay dividends in future periods. Further, the issuance of preferred stock may reduce or eliminate our ability to make common stock dividends.
● Regular quarterly dividend of $0.25 per common share, supplemented with special dividend as approved by the Board
● Declared total quarterly dividend of $0.35 for Q4 2019 ($0.25 regular; $0.10 special)
Strong track record of returning capital to stockholders
8
Shareholder Alignment
Insider24%
1. As of December 31, 2019.
2. As of February 29, 2020.
450K+
2.7M+
Management and Board Company Buybacks
Insider Holdings (1) Shares Repurchased since 2018 (2)
Insider Ownership
● 24% of shares held by Management and Directors
● 450K+ shares purchased by Management and Board
in open market since January 2018
Share Repurchases
● 2.7M+ shares and warrants repurchased since Q1 2018
● 2.1M+ shares repurchased
● 638K+ warrants repurchased
Insider ownership Shares repurchases
Executives and board maintain significant ownership, strong shareholder alignment
9
Origin and Historical Timeline
With over 20 years of continued growth, B. Riley has developed a unique platform that offers
diverse revenue streams and a full suite of end-to-end services and solutions for clients and partners
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Trusted Advisors
We offer a wide range of end-to-end business advisory and financial
services solutions tailored to fit the needs of our clients through
our diverse mix of complementary businesses
Strategic Partners
We partner with clients in providing senior-led services and financing
to support the execution of mission-critical strategic growth
objectives at any stage in the company life cycle
Value Investors
We leverage the deep investment, operational and industry expertise
of our affiliated companies to source attractive opportunities
that are proprietary to B. Riley
Who We Are
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Our Structure and Diverse Business Mix
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Banking & Capital Markets
• Full service investment bank
• Capital markets, M&A, restructuring
• Equity research (400+ companies covered)
• Institutional sales & trading (1,000+ clients)
Liquidation and Asset Appraisal
• Retail, wholesale, industrial auction
and liquidation services
• Equipment, inventory, real estate ABL
appraisal and valuation
• 1,000+ company appraisals per year
Specialty Financial Consulting
• Bankruptcy, financial, operational
restructuring advisory
• Forensic accounting, litigation support
• Valuation disputes
• Due diligence and QOE analysis
Capital Management
• Fund management
• Alternative investments
• Specialty middle market lending
Wealth Management
• Private wealth services
• 160+ financial advisors
• $10B+ in client AUM
Principal Investments
• Proprietary investments
• Control and minority
investments
Provides complementary mix
of steady cash flow and
episodic, higher margin
businesses
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Our diverse platform provides proprietary investment and business opportunities
● We create end-to-end solutions for clients and partners through a mix of complementary businesses
● Co-investing alongside our clients and partners creates opportunity to generate returns for our investors
Our Platform and Approach
● We actively invest in opportunities which:
o Create opportunities for service fee revenue
o Generate yield and drive incremental returns
o Offer growth, FCF and recurring revenue
Proprietary cross-platform opportunities
● Our diverse business mix provides us with:
o In-house partnership opportunities
o Competitive cross-selling advantage
o Ability to develop differentiated solutions for our clients
Business opportunities
Illustrative examples
Led restructuring and co-acquired rights to certain assets to facilitate pay-down of ABL and DIP
credit facilities. Conducted store closing and real estate asset liquidation.
Led restructuring and transformation into online-only retailer. Leveraging NOL for attractive
investment yields. Assisting in acquiring licenses and paying dividends. Own approx. 30%
Arranged $150M in secured financing and provided necessary liquidity needed to continue its
operational transformation.
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Opportunistic investments and acquisitions are accretive and drive shareholder value
● Leverages core operational and investment expertise and industry knowledge
● Focused on delivering financial improvements to maximize free cash flow
● Self-sourced proprietary opportunities created from the B. Riley platform
Our Platform and Approach (cont)
● Established brand investment platform in Oct. 2019
● Acquired majority ownership of six major brands
● Significant investment in acquisition of Hurley from Nike
Brands offer recurring licensing revenue and cash flow
Brand portfolio (new)
● Raised approximately $144M in Apr. 2019 IPO
● Combined with Alta Equipment (NYSE:ALTG) in Feb. 2020
● Created publicly-traded equipment dealership platform
valued at approx. $540M
B. Riley sponsored SPAC
Illustrative examples
Acquisitions
Majority Ownership
Minority Ownership
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Recent News and Developments
Diversification Working for B. Riley Financial San Fernando Valley Business Journal, Published Feb. 17, 2020
B. Riley Financial is firing on all cylinders as it pushes subsidiaries to create wealth for shareholders. “Being able to pool
from all of these resources, while utilizing our balance sheet, has created more opportunities and better returns than we
could have expected. While we are excited by these opportunities, and are aggressively pursuing them, none of this would
be possible without the continued momentum, leadership and buy-in from our various operating entities,” said Bryant Riley.
BRPM and Alta Complete Combination
News Release, Published February 14, 2020
BRPM, a special purpose acquisition company
sponsored by an affiliate of B. Riley Financial, and Alta
announced the completion of their previously
announced business combination, forming a leading
publicly traded equipment dealership platform valued at
approximately $540 million.
B. Riley Adds Retail Brands
LA Business Journal, Published November 1, 2019
Bryant Riley says his firm’s experience with brick-and-
mortar closures has left it well-equipped to make the right
bets on retail. “The best investments are investments that
you understand,” said Riley. He says investing in
businesses with strong brand identities would allow his firm
to benefit from the rise of ecommerce.
B. Riley Forms New Real Estate Vertical
News Release, Published February 4, 2020
B. Riley Real Estate specializes in maximizing value for
distressed real estate. This new vertical complements the
end-to-end capabilities offered by its investment banking,
corporate valuation and consulting affiliates and aligns
with its work in the retail sector.
B. Riley Affiliates Support Franchise
Group's Acquisition of American Freight
News Release, Published February 24, 2020
"Our role in the successful closing of Franchise Group's
acquisition of American Freight demonstrates the power of
our collective platform and our ability to provide a diverse
set of end-to-end capabilities to support our partners," said
Bryant Riley.
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Segment Overview
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Segment Overview
($25.5M)$10.2M
$35.8M
$179.3M
Auction & Liquidation
Valuation & Appraisal
Principal Investments and Brands
Capital Markets
FY 2019 Highlights
● Strong performance from episodic Capital Markets
● Steady contributions from Consulting, Appraisal, Wealth
● Stable FCF generated by Principal Investments
Opportunities and Outlook
● Robust cross-platform opportunities for RILY
● Active retail liquidation environment
● Brand holdings offer recurring revenue and FCF
Segment Revenue Mix (1) Segment Income Mix (1)
1. Based on FY 2019 results.
Offers revenue diversification and downside protection through mix of
steady, recurring revenue sources and opportunities to generate outsized returns
FY 2019 Highlights Opportunities and Outlook
$22.5M$38.8M
$104.9M
$485.9MAuction & Liquidation
Valuation & Appraisal
Principal Investments and Brands
Capital Markets
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Capital Markets Segment Businesses
Record revenues and continued profitability in 2019 driven by episodic investment banking
and steady consulting, asset and wealth management businesses
Investment Banking
● Banking, capital markets
● Sales and trading
● Equity research
Wealth Management
● Private wealth services
● Investment management
● Retirement planning
Capital Management
● Asset management
● Fund management
● Direct lending
Financial Consulting
● Bankruptcy advisory
● Litigation support
● Forensic accounting
1. Acquired FBR & Co. June 2017 and renamed merged broker-dealers to B. Riley FBR in November 2017; Acquired Wunderlich Investment Company in July 2017 and renamed B. Riley Wealth Management in June 2018; Acquired
GlassRatner Advisory & Capital Group LLC in August 2018.
2. Excludes pre-acquisition results for FBR & Co., Wunderlich Investment Company and GlassRatner Advisory & Capital Group LLC.
Investment Banking Wealth Management Capital Management Financial Consulting
Segment Revenue (1) (2)
$39.3M
$189.7M
$275.1M
$485.9M
FY 2016 FY 2017 FY 2018 FY 2019
Segment Income (1) (2)
$6.1M $15.9M $10.2M
$179.3M
FY 2016 FY 2017 FY 2018 FY 2019
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Recent transactions
Capital Markets (cont)
● Proven expertise in lead-left small cap common equity offerings; established franchise in SPAC transactions
● Deep sector and stock specific knowledge, consistently recognized for stock-picking selection
● Long-term institutional relationships across the U.S. and internationally
● Sources, structures, prices and allocates own transactions
• 80+ sales and trading professionals
• 1,000+ institutional client relationships
• Market-maker in approx. 1,000
securities
• 45+ research professionals
• Covers 400+ companies
• Median market cap of ~$670M
• #2 most small-caps under coverage
Leading small- and mid-cap focused investment bank and institutional brokerage
• 80+ investment banking professionals
• Capital markets, M&A, restructuring
• Dominates pre-public private
placements (144A)
Banking & Capital Markets (1) Sales & Trading (1) Equity Research (1)
October 2019
$20,000,000
Sole Placement Agent
SPAC IPO De-SPACM&A PIPE
November 2019
Capital Markets Advisor
November 2019
$149,500,000
Sole Bookrunner
December 2019
Buy-Side Advisor
Fishing & Remedial,
DRILCO, and Thomas Tools
from Schlumberger
completed business
combination with
acquired 3 businesses
1. Employee data as of December 31, 2019, institutional client and market-maker data as of January 24, 2020, and covered companies as of February 6, 2020.
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Capital Markets (cont)
Provides steady, recurring revenue; $10B+ in assets
● Offers comprehensive financial management and investment services
to individuals, families, corporations and non-profits
● Provides enhanced distribution through network of HNW, family office
and traditional accounts
● Large private client network with strong demand for new issues
provides distribution and aftermarket benefits
● Benefits from B. Riley infrastructure, deals syndicate and ancillary
investment offerings
1. As of December 31, 2019.
2. Figures shown are approximations and do not reflect actual number of Assets under Administration, Active Client Accounts. Financial Advisors and Branch Locations
Key Statistics (1) (2)
$10B+ assets under administration
160+ experienced financial advisors
33,000+ active client accounts
19 branch locations across 13 states
Wealth management core services
● Financial planning
● Retirement income
● Estate planning
● Risk management
and insurance
● Trust management
● Qualified plan and 401(K) advisory services
● Investment banking and directed share programs
● Business lending resources through 3rd party institutions
Individuals Corporations
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Capital Markets (cont)
SEC registered investment advisor for fund management businesses
Asset Management Credit Platform
● Certain affiliates of B. Riley
serve as an advisor to various
private and public funds for
institutional and high-net-worth
investors
● Provides services to emerging
manager platform and internal
funds
● Gateway Credit Partners
provides discretionary fixed
income investment
management services
● Focused on identifying and
acquiring undervalued securities
in the non-investment grade
corporate debt market
Direct Lending
● General partner for direct lending
funds
● Provides financing to asset-rich
companies seeking capital in
addition to traditional debt
● Underwriting analysis based on
net recovery from liquidation of
assets
Our platform provides opportunity and insight for our fund management businesses
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Capital Markets (cont)
Nationally recognized bankruptcy & litigation advisor
● Strong referral network among prominent law firms, financial institutions
● International reach via BTG Global Advisory network throughout
Europe, Asia, Australia, South Africa, Canada and Brazil
● Over 100 professionals across the U.S.
● Complements B. Riley’s core financial and operational restructuring
capabilities
Recent accolades
2019 (1)
● #1 Overall Expert Witness
● #1 Forensic Accounting Firm
● #1 Litigation Valuation Firm
● Cross Border Special Situation M&A Deal of the Year
2018 (2)
● Best End-to-End Litigation Consulting Firm
● Best Expert Witness Provider
● Valuation Service Provider of the Year
● Refinancing Deal of the Year
1. Source: ALM’s Daily Report, “Best of 2019” and Global M&A Network, “Turnaround Atlas Awards” (2019)
2. Source: Corporate Counsel, “Best Of” Awards (2018); National Law Journal, “Best Of” Awards (2018); and Global M&A Network, “Turnaround Atlas Awards” (2018)
Financial Consulting Services
● Bankruptcy & Restructuring Advisory
● Forensic Accounting
● Litigation Support
● Valuation Disputes
● Due Diligence and QOE Analysis
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Auction & Liquidation
Leading provider of large-scale retail liquidations
● Highly profitable, cyclical business with robust store closing project pipeline
● Leverages balance sheet to develop creative deal structures
● International resources in Europe, Canada and Australia
● Offers synergies with expanded real estate services vertical focused on
maximizing distressed real estate values
$47.4M
$55.0M
$22.5M
FY 2017 FY 2018 FY 2019
Annual Liquidation RevenueIllustrative clients
$2.9B+total value of assets
liquidated in 2019 (1)
3,900+store closures
conducted in 2019 (1)
1. Figures shown are approximations and do not reflect actual number of store closures or liquidated asset values.
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1,350
1,450
1,550
FY 2017 FY 2018 FY 2019
Annual Completed Appraisals (1)
Appraisal & Valuation
One of the largest appraisal practices in the U.S.
● Conducts company valuations primarily supporting asset based loans
● Provides opportunities and expertise for direct lending business
● High recurring business rate among financial institution clients
● Completed 1,500+ engagements for 1,100+ unique companies in 2019
Annual Appraisal RevenuesIllustrative clients
$33.3M
$38.7M $38.8M
FY 2017 FY 2018 FY 2019
1. Figures shown are approximations and do not reflect actual number of completed appraisals or unique company appraisals.
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● Acquired November 2018
● VoIP cloud technology, services communications provider
● Offers operational synergies with United Online
● Acquired July 2016
● Internet access and online advertising produce high gross
margins; predictable subscriber attrition
● Low overhead from successful execution of cost synergies
● Highly profitable business generating significant cash flows
Principal Investments
● Operationally-focused, control equity investments which leverage B. Riley’s expertise and resources
● United Online has exceeded net initial investment since acquisition, generating steady income for B. Riley platform
Strong cash-flow companies generating attractive returns
1. Includes results from United Online, Inc. since Q3 2016, and results from magicJack VocalTec Ltd. since Q4 2018.
Cumulative Segment Income (1)
$9.2M
$28.7M
$48.2M
$81.3M
2016 2017 2018 2019
United Online magicJack
United Online, Inc.
magicJack VocalTec, Ltd.
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Principal Investments (cont)
Brand holdings offer recurring revenue and cash flow
● Established brand portfolio under Principal Investments in October 2019
● Added revenue of $4.1M and $2.7M in operating income in Q4 2019
● Trends in traditional brick and mortar retail creates opportunity to acquire IP
● Leverages retail sector deal flow and brand management partnerships
● Focused on generating revenue through the licensing of trademarks
Brand holdings
1. Brand holdings as of February 29, 2020. Percentages represent approximate ownership stakes in these brands.
Brand Asset Ownership (1)
80% ownership in six brands
43% ownership in Hurley brand
30% ownership in bebe brand
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Financial Overview
27
Financial Highlights
Select Income Items
(000’s) Q4 2019
Revenues $165,237
Adjusted EBITDA(1) 50,269
Income before income taxes 25,358
Net income attributable to B. Riley Financial 17,129
Net income applicable to common shareholders 16,865
Adjusted net income attributable to B. Riley
Financial (2) $23,615
Diluted income per share $0.59
Adjusted diluted income per share (2) $0.83
Select Balance Sheet Items
(000’s) 12/31/19
Cash and cash equivalents $104,268
Due from clearing brokers 23,818
Securities and other investments owned,
at fair value451,551
Advances against customer contracts 27,347
Loans receivable 225,848
Securities sold not yet purchased 41,820
Notes payable 38,167
Loan participations sold 12,478
Term loan 66,666
Senior notes payable 688,112
1. For a definition of Adjusted EBITDA and a reconciliation to GAAP financial measures, please see the Appendix.
2. For a definition of Adjusted Net Income and a reconciliation to GAAP financial measures, please see the Appendix.
28
Financial Highlights (cont.)
Cash and Net Investments
(000’s) 12/31/19
Cash and cash equivalents $104,268
Restricted cash 471
Due from clearing brokers 23,818
Advances against customer contracts 27,347
Loans receivables, net of loan participations
sold213,370
Marketable securities, net (1) 409,731
Other equity investments and deposits (2) 53,172
Total Cash, Net Securities, and Other $832,177
Debt
(000’s) 12/31/19
Senior notes payable $688,112
Term loan 66,666
Notes payable 38,167
Total Debt $792,945
Total Cash and Investments,
Net of Debt (3)$39,232
1. Includes approximately $451.6M in securities and other investments owned net of $41.8M in securities sold not yet purchased.
2. Other equity investments reported in prepaid expenses and other assets.
3. Defined as total cash, net securities, and other minus total debt.
Total cash and investments, net of debt of $39.2M as of December 31, 2019
29
Appendix
30
Historical Financial Results for B. Riley Financial
1. Excludes FBR & Co. results prior to 6/1/17, Wunderlich Investment Company, Inc. results prior to 7/3/17, and GlassRatner Advisory & Capital Group LLC results prior to 8/1/18.
2. Excludes magicJack VocalTec Ltd. results prior to 11/14/18.
3. Adjusted EBITDA: earnings before interest expense, interest income, provision for or benefit from income taxes, depreciation and amortization, share-based payments, fair
value adjustments, litigation settlement, insurance settlement recovery, transactions-related costs, and restructuring costs.
B. Riley Financial Segment Financial Results
(000’s) FY 2017 FY 2018 FY 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019
Revenues:
Capital Markets (1) $189,723 $275,066 $485,858 $85,301 $94,248 $134,096 $172,213
Auction and Liquidation 47,379 54,986 22,516 20,709 34,916 11,286 (44,395)
Valuation and Appraisal 33,331 38,705 38,821 8,583 9,742 10,818 9,678
Principal Investments - UOL and MJ (2) 51,743 54,234 100,862 27,535 25,778 23,863 23,686
Brands - - 4,055 - - - 4,055
Total Revenue 322,176 422,991 652,112 142,128 164,684 180,063 165,237
Segment Operating Income (Loss):
Capital Markets (1) 15,931 10,152 179,250 13,861 24,393 52,402 88,594
Auction and Liquidation 11,186 27,013 (25,533) 11,504 17,828 5,953 (60,818)
Valuation and Appraisal 9,713 11,097 10,237 1,363 2,737 3,451 2,686
Principal Investments - UOL and MJ (2) 19,503 19,448 33,157 7,929 7,779 8,662 8,787
Brands - - 2,667 - - - 2,667
Total Segment Income (Loss) 56,333 67,710 199,778 34,657 52,737 70,468 41,916
Corporate and Other Expenses (27,489) (22,326) (33,127) (9,679) (8,482) (10,617) (4,349)
Adjusted EBITDA (3) $69,783 $89,631 $207,885 $34,430 $52,856 $70,330 $50,269
31
Non-GAAP Financial Measures
1. Excludes FBR & Co. results prior to 6/1/17, Wunderlich Investment Company, Inc. results prior to 7/3/17, GlassRatner Advisory & Capital Group LLC results prior to
8/1/18, and magicJack VocalTec Ltd. results prior to 11/14/18.
2. FY 2017 includes $9.0M fair value adjustment.
3. In addition to restructuring costs, FY 2017 includes $6.0M insurance settlement recovery, and FY 2018 include $0.5M litigation settlement.
B. Riley Financial Adjusted EBITDA Reconciliation (1)
(000’s) FY 2017 FY 2018 FY 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019
Net Income (Loss) $11,556 $15,509 $81,611 $8,023 $22,157 $34,302 $17,129
Provision for (Benefit from) Income Taxes 8,510 4,903 34,644 3,104 9,289 14,409 7,842
Interest Expense, net 7,962 32,067 48,628 10,133 11,257 12,411 14,827
Depreciation and Amortization 11,140 13,809 19,048 4,913 4,831 4,473 4,831
Share-based Compensation and Fair Value Adjustment (2) 16,950 11,596 15,916 2,614 2,934 4,728 5,640
Transaction-Related Costs 7,291 2,741 6,339 5,496 836 7 -
Restructuring Costs and Other (3) 6,374 9,006 1,699 147 1,552 - -
Total Adjustments 58,227 74,122 126,274 26,407 30,699 36,028 33,140
Adjusted EBITDA $69,783 $89,631 $207,885 $34,430 $52,856 $70,330 $50,269
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Non-GAAP Financial Measures
1. Excludes FBR & Co. results prior to 6/1/17, Wunderlich Investment Company, Inc. results prior to 7/3/17, GlassRatner Advisory & Capital Group LLC results prior to
8/1/18, and magicJack VocalTec Ltd. results prior to 11/14/18.
2. FY 2017 includes $9.0M fair value adjustment.
3. In addition to restructuring costs, FY 2017 includes $6.0M insurance settlement recovery, and FY 2018 include $0.5M litigation settlement.
B. Riley Financial Adjusted Net Income Reconciliation (1)
(000’s) FY 2017 FY 2018 FY 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019
Net Income (Loss) $11,556 $15,509 $81,611 $8,023 $22,157 $34,302 $17,129
Amortization of Intangible Assets 7,422 9,133 13,846 3,377 3,344 3,310 3,815
Share-based Compensation and Fair Value Adjustment (2) 16,950 11,596 15,916 2,614 2,934 4,728 5,640
Transaction-Related Costs 7,291 2,741 6,339 5,496 836 7 -
Restructuring Costs and Other (3) 6,374 9,006 1,699 147 1,552 - -
Income Tax Effect of Adjusting Entries (15,741) (9,209) (11,154) (3,245) (2,560) (2,380) (2,969)
Tax Benefit from Tax Election to Treat Acquisition of UOL
as a Taxable Business Combination (8,389) - - - - - -
Tax Expense from New Tax Legislation Change -
Reduction in Federal Rate from 35% to 21% 13,051 - - - - - -
Total Adjustments 26,958 23,267 26,646 8,389 6,106 5,665 6,486
Adjusted Net Income $38,514 $38,776 $108,257 $16,412 $28,263 $39,967 $23,615
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