(Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q For the quarterly period ended March 31, 2022 Or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-37503 B. RILEY FINANCIAL, INC. (Exact Name of Registrant as Specified in Its Charter) | Delaware | 27-0223495 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-37503 B. RILEY FINANCIAL, INC. (Exact name of registrant as specified in its charter) | Delaware | 27-0223495 | | --- | --- | | (Stat ...

B. Riley Financial, Inc. (NASDAQ:RILY) Q4 2021 Earnings Conference Call February 23, 2022 4:30 PM ET Company Participants Bryant Riley - Chairman and Co-Founder and Co-CEO Tom Kelleher - Co-Founder and Co-CEO Phillip Ahn - CFO and COO Conference Call Participants Sam Sheldon - Punch & Associates Keith Rosenbloom - Cruiser Capital Sean Haydon - Charles Lane Operator Good afternoon and welcome to B. Riley Financials Fourth Quarter and Full Year 2021 Earnings Call. Earlier today, B. Riley issued a press releas ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents B. Riley Financial's unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021 and 2020, including Balance Sheets, Statements of Operations, Comprehensive Income, Equity, and Cash Flows with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2021, total assets increased to approximately $5.05 billion from $2.66 billion, driven by cash and securities, while total liabilities rose to $3.95 billion and equity grew to $747.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $378,205 | $103,602 | | Securities and other investments owned, at fair value | $1,352,100 | $777,319 | | Securities borrowed | $1,347,656 | $765,457 | | **Total assets** | **$5,046,851** | **$2,662,730** | | **Liabilities** | | | | Securities sold not yet purchased | $419,211 | $10,105 | | Securities loaned | $1,345,825 | $759,810 | | Senior notes payable, net | $1,362,847 | $870,783 | | **Total liabilities** | **$3,954,644** | **$2,123,770** | | **Total equity** | **$747,207** | **$538,960** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2021 total revenues increased to $381.5 million with net income of $51.7 million, while nine-month revenues surged to $1.32 billion with net income of $383.4 million, significantly up from 2020 Q3 2021 vs Q3 2020 Performance (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | | :--- | :--- | :--- | | Total revenues | $381,522 | $226,253 | | Operating income | $96,746 | $83,501 | | Net income | $51,658 | $48,892 | | Diluted income per common share | $1.69 | $1.75 | Nine Months 2021 vs 2020 Performance (in thousands, except per share data) | Metric | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | | Total revenues | $1,318,451 | $492,515 | | Operating income | $579,869 | $93,697 | | Net income | $383,356 | $32,172 | | Diluted income per common share | $13.07 | $1.14 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash used in operating activities was $166.7 million, investing activities used $416.7 million, and financing activities provided $859.4 million, driven by debt and IPO proceeds Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(166,652) | $87,902 | | Net cash used in investing activities | $(416,662) | $(126,065) | | Net cash provided by financing activities | $859,364 | $104,103 | | **Net increase in cash, cash equivalents and restricted cash** | **$274,295** | **$66,347** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's financial status, including the February 2021 National Holdings acquisition, segment realignment into six core businesses, significant accounting policies, fair value measurements, debt, revenue recognition, and segment data - On February 25, 2021, the Company completed the acquisition of **National Holdings Corporation**, expanding its investment banking and wealth management offerings, leading to a realignment of segment reporting with a dedicated Wealth Management segment[29](index=29&type=chunk)[203](index=203&type=chunk) - The company operates across **six segments**: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Principal Investments (United Online and magicJack), and Brands[30](index=30&type=chunk) - In Q3 2021, the company identified a non-material error related to the consolidation of certain Variable Interest Entities (VIEs), resulting in a revision of prior period financial statements and a gross-up of the balance sheet[34](index=34&type=chunk)[209](index=209&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for Q3 and nine months ended September 30, 2021, analyzing revenue and expense drivers across its six segments, liquidity, capital resources, and debt management activities [Overview and Recent Developments](index=56&type=section&id=Overview%20and%20Recent%20Developments) B. Riley Financial operates across six segments, with recent developments including the February 2021 National Holdings acquisition, active debt management through redemptions and new issuances, and ongoing monitoring of the COVID-19 pandemic's impact - The company operates through **six segments**: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Principal Investments – United Online and magicJack, and Brands[220](index=220&type=chunk) - Completed the acquisition of **National Holdings Corporation** on February 25, 2021, expanding wealth management, brokerage, insurance, and advisory services[218](index=218&type=chunk) - Recent debt management includes redeeming **7.25% notes due 2027** and **7.375% notes due 2023**, while issuing **$316.3 million of 5.25% notes due 2028**[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk) [Results of Operations](index=60&type=section&id=Results%20of%20Operations) Q3 2021 total revenues increased 68.6% to $381.5 million, driven by services and fees, while nine-month revenues grew 167.7% to $1.32 billion, with operating expenses rising due to acquisitions and increased activity Revenue by Type - Q3 2021 vs Q3 2020 (in thousands) | Revenue Type | Q3 2021 | Q3 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Services and fees | $301,497 | $144,823 | 108.2% | | Trading income and fair value adjustments | $18,197 | $31,753 | (42.7)% | | Sale of goods | $34,959 | $23,651 | 47.8% | | **Total revenues** | **$381,522** | **$226,253** | **68.6%** | Revenue by Type - Nine Months 2021 vs 2020 (in thousands) | Revenue Type | Nine Months 2021 | Nine Months 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Services and fees | $857,109 | $429,799 | 99.4% | | Trading income (losses) and fair value adjustments | $317,818 | $(36,142) | n/m | | Sale of goods | $54,244 | $26,475 | 104.9% | | **Total revenues** | **$1,318,451** | **$492,515** | **167.7%** | - The increase in services and fees revenue for Q3 2021 was driven by a **$79.0 million increase** in the Capital Markets segment and a **$100.3 million increase** in the Wealth Management segment, primarily due to the National acquisition[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - Selling, general and administrative expenses for Q3 2021 increased **151.4% to $244.2 million**, largely due to the National acquisition adding **$90.3 million** in SG&A for Wealth Management and a **$34.0 million increase** in Capital Markets payroll expenses[250](index=250&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) [Liquidity and Capital Resources](index=75&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2021, the company maintained strong liquidity with $378.2 million in cash and $1.35 billion in securities, funding operations through debt and equity offerings, and maintaining an active dividend policy - As of September 30, 2021, the company held **$378.2 million** in unrestricted cash and cash equivalents and **$1,352.1 million** in securities and other investments owned at fair value[308](index=308&type=chunk) - In June 2021, the company entered into a new credit agreement with Nomura for a four-year **$200 million secured term loan** and an **$80 million secured revolving credit facility**[127](index=127&type=chunk)[317](index=317&type=chunk) - The company has an active dividend policy, declaring a regular dividend of **$1.00 per share** (increased from $0.50) and a special dividend of **$3.00 per share** on October 28, 2021[309](index=309&type=chunk) Financing Activities - Nine Months Ended Sep 30, 2021 (in millions) | Activity | Amount | | :--- | :--- | | Proceeds from issuance of senior notes | $890.6 | | Proceeds from initial public offering of subsidiaries | $345.0 | | Proceeds from term loan | $200.0 | | Redemption of senior notes | $(390.5) | | Common dividends paid | $(236.6) | [Quantitative and Qualitative Disclosures About Market Risk](index=85&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on floating-rate instruments, partially mitigated by fixed-rate notes, with limited foreign currency risk impacting operating income by approximately $0.9 million for a 10% fluctuation - Primary market risk is **interest rate risk**, impacting floating-rate borrowings under credit facilities and floating-rate loans receivable[363](index=363&type=chunk) - Foreign currency risk is limited, with foreign subsidiary revenues of **$48.8 million (3.7% of total)** for the nine months ended Sep 30, 2021, and a **10% currency fluctuation impacting operating income by about $0.9 million**[365](index=365&type=chunk) [Controls and Procedures](index=85&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of September 30, 2021, the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of September 30, 2021, the company's disclosure controls and procedures were **effective at the reasonable assurance level**[367](index=367&type=chunk) - No changes were made to the internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[368](index=368&type=chunk) [PART II. OTHER INFORMATION](index=87&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=87&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a settled class action related to Miller Energy Resources and ongoing FINRA arbitrations against its subsidiary NSC concerning pre-acquisition GPB Capital Holdings investments - The company has agreed to settle the **Gaynor v. Miller et al. class action lawsuit** related to Miller Energy Resources offerings, with an accrual for the settlement included in the financial statements[174](index=174&type=chunk)[373](index=373&type=chunk) - Subsidiary **National Securities Corporation (NSC)** is defending several FINRA arbitration claims from investors related to **GPB Capital Holdings investments**, which predate the acquisition by B. Riley[175](index=175&type=chunk)[374](index=374&type=chunk) [Risk Factors](index=87&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes have occurred to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020[375](index=375&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - None[376](index=376&type=chunk) [Defaults Upon Senior Securities](index=87&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - None[377](index=377&type=chunk) [Mine Safety Disclosures](index=87&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[378](index=378&type=chunk) [Other Information](index=87&type=section&id=Item%205.%20Other%20Information) No other information was reported for the period - None[379](index=379&type=chunk) [Exhibits](index=89&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report, including CEO and CFO certifications and Inline XBRL data files - The report includes certifications from the Co-Chief Executive Officers and the Chief Financial Officer as required by Rules 13a-14, 15d-14, and Section 906 of the Sarbanes-Oxley Act[383](index=383&type=chunk) - Inline XBRL Instance, Schema, Calculation, Definition, Label, and Presentation documents are filed as exhibits[383](index=383&type=chunk)

Financial Data and Key Metrics Changes - For the year-to-date ending September 30, total revenues reached $1.3 billion, reflecting a year-over-year increase of 168% [5] - Adjusted EBITDA for the same period was $624.5 million, representing a 327% increase year-over-year [5] - In Q3, total revenues were $381.5 million, up 69% from the prior year [14] - Adjusted EBITDA for Q3 was $114.1 million, which was up 21% year-over-year [14] - Net income available to common shareholders was $48.6 million, or $1.69 per diluted share, compared to $47.3 million, or $1.75 per diluted share in the prior year [14] Business Line Data and Key Metrics Changes - The Capital Markets segment reported operating revenues of $161.7 million, a 98% year-over-year increase, with operating income up 129% to $76.1 million [16] - Wealth Management segment revenues increased to $118.8 million, with segment income rising to $6.6 million, primarily due to the acquisition of National Holdings [17] - Auction and Liquidation segment revenues totaled $37.1 million, with segment income of $6.3 million, reflecting the episodic nature of large retail liquidation engagements [17] - Financial Consulting segment revenues were $21.3 million, with segment income of $2.8 million, impacted by market conditions [18] - Principal Investment companies contributed revenues of $19.3 million and segment income of $6.5 million [18] Market Data and Key Metrics Changes - B. Riley Securities has raised nearly $3 billion in equity transactions year-to-date, establishing itself as a preferred banking partner for small and mid-cap companies [6] - The company ranked number two on Fortune Magazine's fastest-growing companies list for 2021, based on revenue, profits, and total returns over a three-year period [11] Company Strategy and Development Direction - The company aims to grow its steady state and recurring businesses while enhancing cash flows to support accretive acquisitions and return capital to shareholders [4][7] - A commitment to increasing regular quarterly dividends to $1 per share and declaring a special dividend of $3 per share reflects confidence in recurring cash flows [8][9] - The company is diversifying its services by adding practices such as cybersecurity advisory and expanding its asset management and fixed-income divisions [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capitalize on opportunities, citing a strong balance sheet and reduced debt expenses [10] - The integration of National Holdings is progressing well, with expectations for increased revenue momentum and potential for significant EBITDA growth [80] - The company remains optimistic about growth in its brand investment business and anticipates continued performance from its Principal Investment companies [31] Other Important Information - The company had $378 million in unrestricted cash and cash equivalents, with total cash and investments of approximately $2.3 billion at quarter-end [20] - Total debt balance was approximately $1.7 billion, with net cash and investments totaling around $593 million [20] Q&A Session Summary Question: What is the company's strategy regarding its valuation and dividend yield? - Management discussed the company's unique position as an investment bank/merchant bank and emphasized the importance of cash returns and a meaningful annual dividend to address valuation concerns [36][37] Question: What are the expectations for the cryptocurrency and asset management businesses? - Management clarified that the focus is on raising capital for miners rather than trading crypto, and expressed confidence in the asset management business potentially generating $20 million to $30 million in income [46][50] Question: How does the company view the volatility of its core investment banking business in relation to dividends? - Management provided detailed calculations showing that recurring businesses and interest income can cover dividends, even in challenging market conditions [55][63] Question: How is the integration of National Holdings progressing and what are the margin expectations? - Management rated the integration process highly and projected potential for significant EBITDA growth, while acknowledging the differences in payout structures between independent and W2 wealth management businesses [75][80] Question: What is the company's approach to brand acquisitions? - Management indicated a focus on opportunistic brand acquisitions, particularly in periods of distress, without setting specific targets [82]

PART I. FINANCIAL INFORMATION This section presents B. Riley Financial, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents B. Riley Financial, Inc.'s unaudited condensed consolidated financial statements for Q2 2021 and year-end 2020, with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202021%20and%20December%2031%2C%202020) Total assets increased to **$4.11 billion** from **$2.66 billion**, and total liabilities rose to **$3.34 billion** from **$2.12 billion**, driven by investments and senior notes Condensed Consolidated Balance Sheets (Amounts in thousands) | Metric | June 30, 2021 (Unaudited) | December 31, 2020 | | :----------------------------------- | :-------------------------- | :------------------ | | Total Assets | $4,106,727 | $2,662,730 | | Total Liabilities | $3,344,980 | $2,123,770 | | Total Equity | $761,747 | $538,960 | - Cash and cash equivalents increased from **$103,602 thousand** at December 31, 2020, to **$297,396 thousand** at June 30, 2021[7](index=7&type=chunk) - Securities and other investments owned, at fair value, increased from **$777,319 thousand** at December 31, 2020, to **$1,278,773 thousand** at June 30, 2021[7](index=7&type=chunk) - Senior notes payable, net, increased from **$870,783 thousand** at December 31, 2020, to **$1,213,105 thousand** at June 30, 2021[7](index=7&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202021%20and%202020) Total revenues surged to **$936.9 million** from **$266.3 million**, and net income attributable to B. Riley Financial, Inc. improved to **$330.3 million** from a **$14.8 million loss**, driven by trading income Condensed Consolidated Statements of Operations (Amounts in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $336,770 | $266,468 | $936,929 | $266,262 | | Operating Income | $110,145 | $131,340 | $483,123 | $10,196 | | Net Income (Loss) Attributable to B. Riley Financial, Inc. | $75,676 | $83,840 | $330,332 | $(14,825) | | Diluted Income (Loss) per Common Share | $2.58 | $3.07 | $11.39 | $(0.66) | - Trading income (losses) and fair value adjustments on loans significantly increased from a loss of **$(67,895) thousand** in the six months ended June 30, 2020, to a gain of **$299,621 thousand** in the same period of 2021[10](index=10&type=chunk) - Services and fees revenue increased from **$284,976 thousand** in the six months ended June 30, 2020, to **$555,612 thousand** in the same period of 2021[10](index=10&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202021%20and%202020) Total comprehensive income attributable to B. Riley Financial, Inc. was **$329.98 million**, a substantial improvement from a **$15.53 million loss** in the prior year, reflecting increased net income Condensed Consolidated Statements of Comprehensive Income (Loss) (Amounts in thousands) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) | $75,100 | $82,529 | $331,698 | $(16,720) | | Total Comprehensive Income (Loss) | $75,381 | $83,044 | $331,343 | $(17,425) | | Comprehensive Income (Loss) Attributable to B. Riley Financial, Inc. | $75,957 | $84,355 | $329,977 | $(15,530) | [Condensed Consolidated Statements of Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202021%20and%202020) Total equity increased to **$761.75 million** from **$538.96 million**, driven by **$330.33 million** net income and stock issuances, partially offset by dividends Condensed Consolidated Statements of Equity (Amounts in thousands) | Metric | Balance, January 1, 2021 | Balance, June 30, 2021 | | :----------------------------------- | :----------------------- | :--------------------- | | Total Equity | $538,960 | $761,747 | | Net Income | — | $330,332 | | Dividends on Common Stock | — | $(191,614) | | Proceeds from Issuance of Common Stock | — | $64,713 | | Proceeds from Issuance of Preferred Stock | — | $8,281 | - Common stock shares outstanding increased from **25,777,796** at January 1, 2021, to **27,580,300** at June 30, 2021[18](index=18&type=chunk) - Retained earnings increased from **$203,080 thousand** at January 1, 2021, to **$338,260 thousand** at June 30, 2021[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202021%20and%202020) Operating cash flow shifted to a **$(147.90) million** outflow from a **$14.23 million** inflow, while financing cash flow increased to **$356.05 million**, resulting in a **$193.89 million** net cash increase Condensed Consolidated Statements of Cash Flows (Amounts in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net Cash (Used in) Provided by Operating Activities | $(147,901) | $14,229 | | Net Cash Used in Investing Activities | $(13,722) | $(83,354) | | Net Cash Provided by Financing Activities | $356,051 | $71,815 | | Net Increase in Cash, Cash Equivalents and Restricted Cash | $193,894 | $1,985 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $298,731 | $106,724 | - Proceeds from issuance of senior notes totaled **$475,698 thousand** in the first six months of 2021, a significant increase from **$171,078 thousand** in the prior year[21](index=21&type=chunk) - Common dividends paid increased substantially from **$17,489 thousand** in the first six months of 2020 to **$181,269 thousand** in 2021[21](index=21&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail financial reporting, including organization, accounting policies, segment reporting, fair value, debt, revenue, and legal contingencies, with updates on the National acquisition and COVID-19 impact [NOTE 1—ORGANIZATION AND NATURE OF BUSINESS OPERATIONS](index=14&type=section&id=NOTE%201%E2%80%94ORGANIZATION%20AND%20NATURE%20OF%20BUSINESS%20OPERATIONS) B. Riley Financial, Inc. offers diverse financial services across six segments, completed the National Holdings Corporation acquisition, and realigned segment reporting, while facing ongoing COVID-19 uncertainty - Acquisition of National Holdings Corporation completed on February 25, 2021, for **$35,314 thousand**, expanding investment banking, wealth management, and financial planning services[25](index=25&type=chunk) - Realigned segment reporting structure in Q1 2021, moving wealth management business from Capital Markets to a new Wealth Management segment[25](index=25&type=chunk) - Operates in six segments: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Principal Investments - United Online and magicJack, and Brands[26](index=26&type=chunk) [NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=15&type=section&id=NOTE%202%E2%80%94SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note details the company's accounting principles, covering consolidation, estimates, interest expense, risk, share-based compensation, income taxes, cash, securities, fair value, derivatives, and recently adopted standards - Adopted new credit loss standard (ASU 2016-13 and ASU 2019-05) effective January 1, 2020, electing the irrevocable fair value option for all outstanding loans receivable[45](index=45&type=chunk) - Fair value measurements categorize assets and liabilities into Level 1, Level 2, and Level 3, with Level 3 financial assets at **$588,793 thousand** (14.3% of total assets) at June 30, 2021[51](index=51&type=chunk)[56](index=56&type=chunk) - Recognized unrealized gains of **$10,046 thousand** on loans receivable at fair value for the six months ended June 30, 2021, compared to losses of **$21,975 thousand** in the prior year[46](index=46&type=chunk) - Recently adopted ASU 2019-12 (Income Taxes), ASU 2020-08 (Receivables), and ASU 2020-10 (Codification Improvements) effective January 1, 2021, with immaterial impact[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) [NOTE 3—RESTRUCTURING CHARGE](index=29&type=section&id=NOTE%203%E2%80%94RESTRUCTURING%20CHARGE) No restructuring charges were recorded for Q2 2021 or 2020, and the accrued balance decreased slightly to **$676 thousand** at June 30, 2021, from **$727 thousand** Restructuring Charge (Amounts in thousands) | Metric | June 30, 2021 | June 30, 2020 | | :-------------------------- | :------------ | :------------ | | Balance, beginning of period | $727 | $1,600 | | Cash paid | $(57) | $(631) | | Non-cash items | $6 | $10 | | Balance, end of period | $676 | $979 | [NOTE 4— SECURITIES LENDING](index=30&type=section&id=NOTE%204%E2%80%94%20SECURITIES%20LENDING) Securities borrowed and loaned balances significantly increased at June 30, 2021, reflecting heightened activity, and are not netted on the balance sheet Securities Lending (Amounts in thousands) | Metric | June 30, 2021 | June 30, 2020 | | :------------------ | :------------ | :------------ | | Securities borrowed | $1,140,023 | $786,363 | | Securities loaned | $1,134,359 | $779,013 | [NOTE 5— ACCOUNTS RECEIVABLE](index=30&type=section&id=NOTE%205%E2%80%94%20ACCOUNTS%20RECEIVABLE) Accounts receivable, net, increased to **$57.85 million** from **$46.52 million**, driven by higher investment banking fees and commissions, with additions to the allowance for doubtful accounts Accounts Receivable (Amounts in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :------------------------------------------ | :------------ | :---------------- | | Accounts receivable, net | $57,853 | $46,518 | | Investment banking fees, commissions and other receivables | $20,817 | $10,316 | | Allowance for doubtful accounts (end of period) | $3,565 | $3,114 | - Additions to the allowance for doubtful accounts were **$755 thousand** for the six months ended June 30, 2021, compared to **$2,081 thousand** in the prior year[95](index=95&type=chunk) [NOTE 6— GOODWILL AND OTHER INTANGIBLE ASSETS](index=31&type=section&id=NOTE%206%E2%80%94%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill increased to **$236.01 million** from **$227.05 million** due to the National acquisition, and total intangible assets rose to **$200.30 million**, with no impairment charges in 2021 Goodwill and Other Intangible Assets (Amounts in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | Goodwill | $236,005 | $227,046 | | Other intangible assets, net | $200,304 | $190,745 | - Goodwill acquired during the period was **$8,959 thousand**, primarily in the Wealth Management segment[97](index=97&type=chunk) - No impairment of tradenames was recognized for the six months ended June 30, 2021, compared to **$12,500 thousand** in the prior year due to COVID-19 impacts[98](index=98&type=chunk) [NOTE 7— NOTES PAYABLE](index=33&type=section&id=NOTE%207%E2%80%94%20NOTES%20PAYABLE) Notes payable significantly decreased to **$357 thousand** from **$37.97 million**, primarily due to **$6.51 million** PPP loan forgiveness and the repayment of a **$37.25 million** note Notes Payable (Amounts in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | Notes payable | $357 | $37,967 | | Gain on extinguishment of loans (PPP) | $6,509 | — | - The full amount of the company's PPP loans and accrued interest (**$6,509 thousand**) were forgiven in June 2021[106](index=106&type=chunk) - A **$37,253 thousand** note payable to Garrison TNCI LLC was paid in full in January 2021[109](index=109&type=chunk) [NOTE 8 — TERM LOANS](index=35&type=section&id=NOTE%208%20%E2%80%94%20TERM%20LOANS) The company secured a new **$200.0 million** term loan and **$80.0 million** revolving facility with Nomura, with the term loan at **$194.22 million** and BRPAC term loan at **$62.89 million** (net) - New **$200,000 thousand** secured term loan facility and **$80,000 thousand** secured revolving loan credit facility entered with Nomura Corporate Funding Americas, LLC on June 23, 2021[110](index=110&type=chunk) - Outstanding balance on Nomura term loan was **$194,218 thousand** (net) at June 30, 2021[115](index=115&type=chunk) - BRPAC Credit Agreement term loan balance was **$62,885 thousand** (net) at June 30, 2021, down from **$74,213 thousand** (net) at December 31, 2020[124](index=124&type=chunk) [NOTE 9—SENIOR NOTES PAYABLE](index=37&type=section&id=NOTE%209%E2%80%94SENIOR%20NOTES%20PAYABLE) Senior notes payable, net, increased to **$1.21 billion** from **$870.78 million** due to new issuances of **$230.0 million** and **$159.5 million**, partially offset by **$128.16 million** in redemptions Senior Notes Payable (Amounts in thousands) | Metric | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | Senior notes payable, net | $1,213,105 | $870,783 | | Weighted average interest rate | 6.49% | 6.95% | - Issued **$230,000 thousand** of 6.0% Senior Notes due 2028 in January 2021[127](index=127&type=chunk) - Issued **$159,493 thousand** of 5.5% Senior Notes due 2026 in March 2021[128](index=128&type=chunk) - Redeemed **$128,156 thousand** of 7.50% Senior Notes due 2027 in March 2021[129](index=129&type=chunk) [NOTE 10—REVENUE FROM CONTRACTS WITH CUSTOMERS](index=39&type=section&id=NOTE%2010%E2%80%94REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Total revenues from customer contracts increased to **$560.04 million** from **$279.84 million**, driven by higher corporate finance, consulting, investment banking, and wealth management fees, largely from the National acquisition Revenue from Contracts with Customers (Amounts in thousands) | Revenue Category | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Total revenues from contracts with customers | $560,043 | $279,841 | | Corporate finance, consulting and investment banking fees | $282,233 | $117,034 | | Wealth and asset management fees | $122,406 | $39,022 | | Commissions, fees and reimbursed expenses | $87,420 | $62,486 | - Deferred revenue at June 30, 2021, was **$68,398 thousand**, with **$37,452 thousand** expected to be recognized in the remaining six months of 2021[139](index=139&type=chunk) - Recognized **$26,649 thousand** of revenue in the first six months of 2021 that was deferred at the beginning of the year, compared to **$24,074 thousand** in the prior year[140](index=140&type=chunk) [NOTE 11— INCOME TAXES](index=42&type=section&id=NOTE%2011%E2%80%94%20INCOME%20TAXES) An income tax provision of **$117.42 million** (26.1% effective rate) was recorded, a shift from a **$5.33 million** benefit, with **$60.42 million** federal NOLs and a **$61.32 million** valuation allowance Income Taxes (Amounts in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :----------------------------- | :----------------------------- | | (Provision) benefit for income taxes | $(117,420) | $5,331 | | Effective income tax rate | 26.1% (provision) | 24.2% (benefit) | - Federal net operating loss carryforwards of **$60,422 thousand** and state NOLs of **$72,058 thousand** as of June 30, 2021[146](index=146&type=chunk) - Provided a valuation allowance of **$61,315 thousand** against deferred tax assets related to capital loss carryforwards[147](index=147&type=chunk) [NOTE 12— EARNINGS PER SHARE](index=42&type=section&id=NOTE%2012%E2%80%94%20EARNINGS%20PER%20SHARE) Diluted EPS significantly increased to **$11.39** from a **$(0.66) loss**, reflecting substantial improvement in net income attributable to B. Riley Financial, Inc. and increased diluted shares outstanding Earnings Per Share (Amounts in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) Applicable to Common Shareholders | $73,887 | $82,753 | $326,794 | $(16,967) | | Basic Income (Loss) per Common Share | $2.70 | $3.23 | $12.03 | $(0.66) | | Diluted Income (Loss) per Common Share | $2.58 | $3.07 | $11.39 | $(0.66) | | Weighted Average Diluted Common Shares Outstanding | 28,668,465 | 26,992,823 | 28,690,444 | 25,827,849 | [NOTE 13 — COMMITMENTS AND CONTINGENCIES](index=43&type=section&id=NOTE%2013%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) The company faces legal proceedings without expected material financial impact, and has significant commitments including a **$110.0 million** guaranty for B&W and a **$77.48 million** loan purchase commitment funded in July 2021 - Agreed to guaranty up to **$110,000 thousand** of B&W's obligations related to debt financing as of June 30, 2021[156](index=156&type=chunk) - Paid a **$3,000 thousand** fine to the New York Department of Financial Services in April 2021 for cybersecurity regulation violations by NSC[154](index=154&type=chunk) - Outstanding commitment to purchase a loan of **$77,477 thousand**, funded on July 2, 2021, with a principal payment of **$27,477 thousand** received simultaneously[160](index=160&type=chunk) [NOTE 14— SHARE-BASED PAYMENTS](index=45&type=section&id=NOTE%2014%E2%80%94%20SHARE-BASED%20PAYMENTS) Share-based compensation expense for restricted stock units increased to **$13.79 million** from **$9.27 million**, with **1,413,045** common shares issued for **$64.71 million** and additional preferred stock issuances Share-Based Payments (Amounts in thousands) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Share-based compensation expense (restricted stock units) | $13,792 | $9,265 | | Share-based compensation (Purchase Plan) | $342 | $224 | - Issued **1,413,045** shares of common stock in January 2021 for net proceeds of approximately **$64,713 thousand**[165](index=165&type=chunk) - Issued **76,417** depository shares of Series A Preferred Stock and **228,477** depository shares of Series B Preferred Stock during the six months ended June 30, 2021[166](index=166&type=chunk)[167](index=167&type=chunk) [NOTE 15— NET CAPITAL REQUIREMENTS](index=46&type=section&id=NOTE%2015%E2%80%94%20NET%20CAPITAL%20REQUIREMENTS) The company's broker-dealer subsidiaries (BRS, BRWM, NSC, WEC) complied with SEC Rule 15c3-1, maintaining net capital significantly exceeding minimum requirements as of June 30, 2021 Net Capital Requirements (Amounts in thousands) | Broker-Dealer Subsidiary | Net Capital (June 30, 2021) | Required Minimum Net Capital | | :----------------------- | :-------------------------- | :--------------------------- | | B. Riley Securities (BRS) | $329,063 | $4,962 | | B. Riley Wealth Management (BRWM) | $10,073 | $745 | | National Securities Corporation (NSC) | $7,162 | $1,000 | | Winslow, Evans & Crocker, Inc (WEC) | $2,599 | $139 | [NOTE 16— RELATED PARTY TRANSACTIONS](index=46&type=section&id=NOTE%2016%E2%80%94%20RELATED%20PARTY%20TRANSACTIONS) The company engages in various related party transactions, including loan participations, investment advisory fees, and underwriting fees from B. Riley Principal Merger Corps, with significant loans receivable from Maven and Lingo Management LLC - Sold loan participations of **$1,975 thousand** to BRC Partners Opportunity Fund, LP (BRCPOF) at June 30, 2021, where executive officers and board members have a **65.6%** financial interest[171](index=171&type=chunk) - Earned **$3,366 thousand** and **$3,337 thousand** in underwriting fees from the IPOs of B. Riley Principal 150 Merger Corp. and B. Riley Principal 250 Merger Corp., respectively[173](index=173&type=chunk)[174](index=174&type=chunk) - Loans receivable from Maven, Inc. were **$60,491 thousand** at June 30, 2021, and from Lingo Management LLC were **$56,335 thousand**[183](index=183&type=chunk)[186](index=186&type=chunk) - Earned **$12,348 thousand** in underwriting and financial advisory fees from B&W for the six months ended June 30, 2021[180](index=180&type=chunk) [NOTE 17— BUSINESS SEGMENTS](index=49&type=section&id=NOTE%2017%E2%80%94%20BUSINESS%20SEGMENTS) The company operates in six segments, including the new Wealth Management segment, with total revenues of **$936.93 million** for the six months ended June 30, 2021, and Capital Markets as the largest contributor at **$653.79 million** - Realigned segment reporting structure in Q1 2021, creating a new Wealth Management segment[191](index=191&type=chunk) Business Segments (Amounts in thousands) | Segment | Total Revenues (Six Months Ended June 30, 2021) | Segment Income (Six Months Ended June 30, 2021) | | :------------------------------------------ | :---------------------------------------------- | :-------------------------------------------- | | Capital Markets | $653,787 | $470,990 | | Wealth Management | $158,207 | $3,294 | | Auction and Liquidation | $30,727 | $4,462 | | Financial Consulting | $45,144 | $7,497 | | Principal Investments - United Online and magicJack | $40,175 | $14,806 | | Brands | $8,889 | $6,094 | - North America generated **$923.65 million** in total revenues for the six months ended June 30, 2021, representing the vast majority of geographical revenues[195](index=195&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial condition and results, highlighting changes in revenues, expenses, and profitability for Q2 2021, along with liquidity, capital resources, and COVID-19 impacts [Overview](index=53&type=section&id=Overview) B. Riley Financial, Inc. is a diversified financial services company offering investment banking, wealth management, and advisory services through six segments, following the National Holdings Corporation acquisition and segment realignment - B. Riley Financial, Inc. provides collaborative financial services and solutions through subsidiaries like B. Riley Securities, B. Riley Wealth Management, and B. Riley Advisory Services[202](index=202&type=chunk)[203](index=203&type=chunk) - Completed the acquisition of National Holdings Corporation on February 25, 2021, expanding wealth management and financial planning offerings[203](index=203&type=chunk) - Realigned segment reporting structure in Q4 2020 and Q1 2021, resulting in six operating segments: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Principal Investments – United Online and magicJack, and Brands[205](index=205&type=chunk)[206](index=206&type=chunk) [Recent Developments](index=55&type=section&id=Recent%20Developments) The company secured new **$200.0 million** term loan and **$80.0 million** revolving credit facilities in June 2021, redeemed **$122.8 million** in senior notes, and faces ongoing COVID-19 uncertainty - Entered into a **$200.0 million** secured term loan credit facility and an **$80.0 million** secured revolving loan credit facility on June 23, 2021, with Nomura Corporate Funding Americas, LLC[213](index=213&type=chunk) - Subsequent to June 30, 2021, the company borrowed the full **$80.0 million** available under the Revolving Credit Facility[214](index=214&type=chunk) - Redeemed **$122.8 million** aggregate principal amount of 7.25% Senior Notes due 2027 on July 26, 2021, including **$2.1 million** in accrued interest[215](index=215&type=chunk) [Results of Operations](index=57&type=section&id=Results%20of%20Operations) Total revenues increased by **$670.7 million** to **$936.9 million**, and net income attributable to B. Riley Financial, Inc. surged to **$330.3 million** from a **$14.8 million loss**, driven by trading gains and the National acquisition [Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020](index=57&type=section&id=Three%20Months%20Ended%20June%2030%2C%202021%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202020) Total revenues increased by **$70.3 million** to **$336.8 million**, driven by services and fees, while net income decreased by **$8.2 million** to **$75.7 million** due to higher expenses and lower trading income Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 (Amounts in thousands) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change % | | :------------------------------------------ | :------------ | :------------ | :------------ | :------- | | Total Revenues | $336,770 | $266,468 | $70,302 | 26.4% | | Services and fees | $266,143 | $125,595 | $140,548 | 111.9% | | Trading income and fair value adjustments on loans | $32,679 | $114,547 | $(81,868) | (71.5%) | | Net Income Attributable to B. Riley Financial, Inc. | $75,676 | $83,840 | $(8,164) | (9.7%) | - Wealth Management segment services and fees revenue increased by **$72.1 million**, primarily due to the acquisition of National[224](index=224&type=chunk) - Operating income decreased by **$21.2 million** to **$110.1 million**[219](index=219&type=chunk) - Recognized a **$6.5 million** gain on extinguishment of loans due to National PPP loans forgiveness[244](index=244&type=chunk) [Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020](index=64&type=section&id=Six%20Months%20Ended%20June%2030%2C%202021%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202020) Total revenues soared by **$670.7 million** to **$936.9 million**, driven by trading income, and net income improved by **$345.2 million** to **$330.3 million**, despite a **$197.0 million** increase in SG&A expenses Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 (Amounts in thousands) | Metric | June 30, 2021 | June 30, 2020 | Change Amount | Change % | | :------------------------------------------ | :------------ | :------------ | :------------ | :------- | | Total Revenues | $936,929 | $266,262 | $670,667 | n/m | | Trading income (losses) and fair value adjustments on loans | $299,621 | $(67,895) | $367,516 | n/m | | Net Income (Loss) Attributable to B. Riley Financial, Inc. | $330,332 | $(14,825) | $345,157 | n/m | | Selling, general and administrative expenses | $391,266 | $194,306 | $196,960 | 101.4% | - Capital Markets segment services and fees revenue increased by **$163.0 million**, and Wealth Management segment services and fees revenue increased by **$118.8 million**, largely due to the National acquisition[258](index=258&type=chunk)[259](index=259&type=chunk) - Operating income increased by **$472.9 million** to **$483.1 million**[253](index=253&type=chunk) - Provision for income taxes was **$117.4 million**, compared to a benefit of **$5.3 million** in the prior year[281](index=281&type=chunk) [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$297.4 million** cash and **$1.28 billion** securities, generating **$331.7 million** net income, with financing activities providing **$356.1 million** cash from senior notes and term loans - As of June 30, 2021, had **$297.4 million** of unrestricted cash and cash equivalents, **$1,278.8 million** of securities and other investments owned, and **$270.3 million** of loans receivable[290](index=290&type=chunk) - Borrowings outstanding totaled **$1,475.0 million** at June 30, 2021, including **$1,213.1 million** in senior notes and **$257.1 million** in term loans[290](index=290&type=chunk) - Declared a regular dividend of **$0.50 per share** and a special dividend of **$1.50 per share** on July 29, 2021, to be paid in August 2021[292](index=292&type=chunk) [Cash Flow Summary](index=72&type=section&id=Cash%20Flow%20Summary) Operating cash flow shifted to **$(147.9) million** used from **$14.2 million** provided, while financing cash flow increased to **$356.1 million**, resulting in a **$193.9 million** net increase in cash Cash Flow Summary (Amounts in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash (used in) provided by Operating activities | $(147,901) | $14,229 | | Net cash used in Investing activities | $(13,722) | $(83,354) | | Net cash provided by Financing activities | $356,051 | $71,815 | | Net increase in cash, cash equivalents and restricted cash | $193,894 | $1,985 | - Proceeds from issuance of senior notes were **$475.7 million**, and proceeds from the Nomura term loan were **$200.0 million** in the first six months of 2021[300](index=300&type=chunk) - Cash used for common dividends paid was **$181.3 million**, and for senior notes repurchase was **$128.2 million**[300](index=300&type=chunk) [Credit Agreements](index=74&type=section&id=Credit%20Agreements) New **$200.0 million** Nomura term loan and **$80.0 million** revolving facility were secured, with the term loan at **$194.2 million** (net) and BRPAC term loan at **$62.9 million** (net) - Nomura Credit Agreement: **$200.0 million** secured Term Loan Facility and **$80.0 million** secured Revolving Credit Facility, maturing June 23, 2025[301](index=301&type=chunk) - Nomura Term Loan outstanding balance was **$194.2 million** (net) at June 30, 2021, with an interest rate of **4.64%**[307](index=307&type=chunk) - BRPAC Credit Agreement term loan outstanding balance was **$62.9 million** (net) at June 30, 2021, with an interest rate of **3.36%**[315](index=315&type=chunk) - Wells Fargo Credit Agreement: **$200.0 million** asset-based credit facility, with no outstanding balance at June 30, 2021[311](index=311&type=chunk) [Senior Note Offerings](index=77&type=section&id=Senior%20Note%20Offerings) The company issued **$230.0 million** and **$159.5 million** in new senior notes, redeemed **$128.2 million** of existing notes, with total outstanding senior notes at **$1.21 billion** (net) at June 30, 2021 - Issued **$230.0 million** of 6.0% Senior Notes due 2028 in January 2021, with net proceeds of **$225.7 million**[318](index=318&type=chunk) - Issued **$159.5 million** of 5.5% Senior Notes due 2026 in March 2021, with net proceeds of **$156.3 million**[319](index=319&type=chunk) - Exercised early redemption option for **$128.2 million** of 7.50% Senior Notes due 2027 in March 2021[320](index=320&type=chunk) - Total senior notes outstanding were **$1,213.1 million** (net) at June 30, 2021, with a weighted average interest rate of **6.49%**[322](index=322&type=chunk) [Off Balance Sheet Arrangements](index=78&type=section&id=Off%20Balance%20Sheet%20Arrangements) Off-balance sheet arrangements include a **$110.0 million** guaranty for B&W's debt and a **$77.5 million** loan purchase commitment funded in July 2021, plus **€26.4 million** in unused loan commitments - Agreed to guaranty up to **$110.0 million** of B&W's obligations related to new debt financing[326](index=326&type=chunk) - Outstanding commitment to purchase a loan of **$77.5 million**, funded on July 2, 2021[329](index=329&type=chunk) - Unused future commitments of up to **26.4 million EUROS** for a loan facility to a European retailer[328](index=328&type=chunk) [Contractual Obligations](index=78&type=section&id=Contractual%20Obligations) Total contractual obligations increased to **$1.86 billion**, primarily due to new senior notes and term loans, with senior notes payable (including interest) rising to **$1.497 billion** - Total contractual obligations increased to **$1,860.1 million** at June 30, 2021[336](index=336&type=chunk) - Total senior notes payable (including interest) increased to **$1,497.4 million** as of June 30, 2021[336](index=336&type=chunk) - Senior notes payable due in one year or less increased by **$137.1 million**, and those due in 1-3 years increased by **$128.5 million**[336](index=336&type=chunk) [Recent Accounting Standards](index=79&type=section&id=Recent%20Accounting%20Standards) Refer to Note 2(u) for details on recent accounting pronouncements, including not-yet-adopted ASUs on Reference Rate Reform and Convertible Instruments, and recently adopted ASUs with immaterial impact - Refer to Note 2(u) for details on recent accounting pronouncements[338](index=338&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are interest rate and foreign currency fluctuations, managed through investments and a limited foreign revenue exposure of **1.4%** of total revenues - Primary market risk exposure is to changes in interest rates, with borrowings under senior notes at fixed rates and credit facilities at floating rates[339](index=339&type=chunk)[340](index=340&type=chunk) - Revenues from foreign subsidiaries totaled **$13.3 million** for the six months ended June 30, 2021, representing **1.4%** of total revenues, indicating limited foreign currency risk exposure[343](index=343&type=chunk) - A **10%** appreciation or depreciation of the U.S. dollar relative to local currency exchange rates would result in less than **$0.1 million** change in operating income for the six months ended June 30, 2021[343](index=343&type=chunk) [Interest Rate Risk](index=79&type=section&id=Interest%20Rate%20Risk) The company's main market risk is interest rate fluctuations, impacting fixed-rate senior notes and floating-rate credit facilities, managed through floating-rate loans and short-term investments - Primary exposure to market risk is related to changes in interest rates[339](index=339&type=chunk) - Utilizes borrowings under senior notes (fixed rates) and credit facilities (floating rates) to fund operations and acquisitions[340](index=340&type=chunk) - Invests in loans receivable that primarily bear interest at floating rates[340](index=340&type=chunk) [Foreign Currency Risk](index=80&type=section&id=Foreign%20Currency%20Risk) Most operations are in U.S. dollars, with foreign revenues at **$13.3 million** (**1.4%** of total), and a **10%** USD fluctuation would result in less than **$0.1 million** change in operating income, indicating limited risk - Majority of operating activities are conducted in U.S. dollars[343](index=343&type=chunk) - Revenues from foreign subsidiaries totaled **$13.3 million** for the six months ended June 30, 2021, representing **1.4%** of total revenues[343](index=343&type=chunk) - A **10%** appreciation or depreciation of the U.S. dollar would result in less than **$0.1 million** change in operating income[343](index=343&type=chunk) [Item 4. Controls and Procedures](index=80&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021, with no material changes to internal control over financial reporting, acknowledging inherent limitations of control systems - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2021[345](index=345&type=chunk) - No material changes to internal control over financial reporting during the fiscal quarter[346](index=346&type=chunk) - Management acknowledges inherent limitations of control systems, providing reasonable, not absolute, assurance[347](index=347&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=80&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Co-CEOs and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021, ensuring timely and accurate Exchange Act reporting - Disclosure controls and procedures were evaluated and concluded to be effective at the reasonable assurance level as of June 30, 2021[345](index=345&type=chunk) [Changes in Internal Control over Financial Reporting](index=80&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes to the company's internal control over financial reporting occurred during the fiscal quarter ended June 30, 2021 - No material changes to internal control over financial reporting during the fiscal quarter[346](index=346&type=chunk) [Inherent Limitation on Effectiveness of Controls](index=80&type=section&id=Inherent%20Limitation%20on%20Effectiveness%20of%20Controls) Management acknowledges that control systems provide only reasonable, not absolute, assurance against errors and fraud due to inherent limitations and potential deterioration over time - Control systems provide only reasonable, not absolute, assurance that objectives will be met[347](index=347&type=chunk) - Effectiveness of controls can be impacted by resource constraints, inherent limitations, and changes in conditions or compliance over time[347](index=347&type=chunk) PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=81&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal and regulatory proceedings, including class actions and FINRA arbitrations, but does not expect a material financial impact, with notable settlements and a **$3.0 million** fine paid by NSC - Company is subject to various legal and other claims, including lawsuits, arbitration claims, class actions, and regulatory matters, arising from securities business activities[348](index=348&type=chunk) - Agreed to settle the Gaynor v. Miller et al. class action lawsuit in July 2020, with court approval expected in 2021[349](index=349&type=chunk) - National Securities Corporation (NSC) paid a **$3.0 million** fine to the New York Department of Financial Services in April 2021 for violating cybersecurity regulations[351](index=351&type=chunk) - The Kay Johnson v. National Securities Corporation lawsuit was settled and all claims dismissed in March 2021[350](index=350&type=chunk) [Item 1A. Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, are reported, advising careful review - No material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2020[353](index=353&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period [Item 3. Defaults Upon Senior Securities](index=83&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period [Item 4. Mine Safety Disclosures](index=83&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations [Item 5. Other Information](index=83&type=section&id=Item%205.%20Other%20Information) The Compensation Committee approved a discretionary annual incentive cash compensation program for named executive officers, allowing for tailored compensation based on individual and company performance - Compensation Committee approved a discretionary annual incentive cash compensation program for named executive officers, replacing the previous Management Bonus Plan based on EBITDA thresholds[357](index=357&type=chunk) - The new program allows for compensation to be tailored to individual performance, long-term vs. short-term goals, overall financial performance, and other company objectives[357](index=357&type=chunk) [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report, including the Credit Agreement, Restricted Stock Unit Award Agreement, and required certifications from Co-CEOs and CFO - Includes Credit Agreement dated June 23, 2021, and Form of Restricted Stock Unit Award Agreement[360](index=360&type=chunk) - Contains certifications from Co-Chief Executive Officers and Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 and 18 U.S.C. Section 1350[360](index=360&type=chunk) [SIGNATURES](index=85&type=section&id=SIGNATURES) The report is signed by Phillip J. Ahn, Chief Financial Officer and Chief Operating Officer, on behalf of B. Riley Financial, Inc. as of July 30, 2021 - Report signed by Phillip J. Ahn, Chief Financial Officer and Chief Operating Officer, on July 30, 2021[366](index=366&type=chunk)

B. Riley Financial, Inc. (NASDAQ:RILY) Q2 2021 Earnings Conference Call July 29, 2021 4:30 PM ET Company Participants Bryant Riley - Chairman and Co-Founder and Co-CEO Phillip Ahn - CFO and COO Tom Kelleher - Co-Founder and Co-CEO Conference Call Participants Sean Haydon - Charles Lane Capital Brian Rohman - Boston Partners Paul Dwyer - Punch & Associates Operator Good afternoon and welcome to B. Riley Financial's Second Quarter 2021 Earnings Call. Earlier today, B. Riley issued a press release and present ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-37503 B. RILEY FINANCIAL, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 27-0223495 (State or Other Jurisd ...

B | R I L E Y `Financial | --- | --- | |-----------------------------|-------| | | | | First Quarter 2021 | | | Supplemental Financial Data | | | May 3, 2021 | | 1 NASDAQ: RILY Reconciliation of U.S. GAAP to Non-GAAP Measures | --- | --- | --- | --- | --- | --- | |--------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------------------------------------|------------------|-------------------|------ ...

B. Riley Financial, Inc. (NASDAQ:RILY) Q1 2021 Earnings Conference Call May 3, 2021 4:30 PM ET Company Participants Bryant Riley – Chairman and Co-Founder and Co-Chief Executive Officer Phillip Ahn – Chief Financial Officer and Chief Operating Officer Tom Kelleher – Co-Founder and Co-Chief Executive Officer Conference Call Participants Operator Good afternoon, and welcome to B. Riley Financial's First Quarter 2021 Earnings Call. Earlier today, the company reported its first quarter results in a press releas ...