B. Riley Financial Profile
B. Riley Financial, Inc. and its subsidiaries provide investment banking and financial services.
The company provides a full suite of investment banking, corporate finance research, sales, and trading, as well as advisory, valuation, and wealth management, services. The company’s major business lines include:
B. Riley Securities, a leading, full service investment bank that provides corporate finance, lending, research, securities lending and sales and trading services to corporate, institutional, and high net worth individual clients. It is nationally recognized for its proprietary small and mid-cap equity research. B. Riley Securities was established from the merger of B. Riley & Co, LLC and FBR Capital Markets & Co. in 2017.
B. Riley Wealth Management, which provides comprehensive wealth management and brokerage services to individuals and families, corporations and non-profit organizations, including qualified retirement plans, trusts, foundations, and endowments. The firm was formerly known as Wunderlich Securities, Inc., which the company acquired in 2017.
National Holdings Corporation (National), which provides wealth management, brokerage, insurance brokerage, tax preparation and advisory services, was acquired in 2021.
B. Riley Capital Management, which is a Securities and Exchange Commission (SEC) registered investment advisor that includes B. Riley Asset Management, an advisor to and/or manager of certain private funds.
B. Riley Advisory Services, which provides expert witness, bankruptcy, financial advisory, forensic accounting, valuation and appraisal, and operations management services to companies, financial institutions, and the legal community. B. Riley Advisory Services consist of the bankruptcy and restructuring, forensic accounting, litigation support, and appraisal and valuation practices.
B. Riley Retail Solutions, which is a leading provider of asset disposition, liquidation, and auction solutions to a wide range of retail and industrial clients.
B. Riley Real Estate, which advises companies, financial institutions, investors, family offices and individuals on real estate projects worldwide. A core focus of B. Riley Real Estate, LLC is the restructuring of lease obligations in both distressed and non-distressed situations, both inside and outside of the bankruptcy process, on behalf of corporate tenants.
B. Riley Principal Investments, which identifies attractive investment opportunities and seeks to control or influence the operations of the company’s portfolio company investments to deliver financial and operational improvements. Representative transactions include recapitalization, direct equity investment, debt investment, active minority investment and buyouts.
Communications consist of United Online, Inc. (UOL or United Online), which was acquired in July 2016; magicJack VocalTec Ltd. (magicJack), which was acquired in November 2018; a 40% equity interest in Lingo Management, LLC (Lingo), which was acquired in November 2020; and a mobile virtual network operator business (Marconi Wireless), which was acquired in October 2021. Upon receipt of certain regulatory approvals, the company has the right to acquire an additional 40% equity interest in Lingo. The following briefly describes each such business:
UOL is a communications company that offers consumer subscription services and products, consisting of Internet access services and devices under the NetZero and Juno brands.
magicJack is a Voice over IP (VoIP) cloud-based technology and services and wireless mobile communications provider.
Lingo is a global cloud/UC and managed service provider.
Marconi Wireless is a mobile virtual network operator business that provides mobile phone voice, text, and data services and devices.
BR Brand Holding (BR Brands or Brands), in which the company owns a majority interest, provides licensing of certain brand trademarks. BR Brands owns the assets and intellectual property related to licenses of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore as well as investments in the Hurley and Justice brands with Bluestar Alliance LLC (Bluestar), a brand management company.
The company has over 44 offices throughout the United States, including New York, Chicago, Boston, Atlanta, Dallas, Memphis, Metro Washington D.C., West Palm Beach, and Boca Raton.
Segments
The company operates through six segments: Capital Markets, Wealth Management, Auction and Liquidation, Financial Consulting, Principal Investments – Communications, and Brands.
Capital Markets
Capital Markets segment provides a full array of investment banking, corporate finance, financial advisory, research, securities lending and sales and trading services to corporate, institutional, and individual clients. The company’s corporate finance and investment banking services include merger and acquisitions, as well as restructuring advisory services to public and private companies, initial and secondary public offerings, and institutional private placements. In addition, the company trades equity securities as a principal for its account, including investments in funds managed by its subsidiaries. The company’s Capital Markets segment also includes its asset management businesses that manage various private and public funds for institutional and individual investors.
Wealth Management
Wealth Management segment provides wealth management and tax services to corporate and high net worth clients. The company offers comprehensive wealth management services for corporate businesses that include investment strategies, executive services, retirement plans, lending and liquidity resources, and settlement solutions. The company’s wealth management services for individual client services provide investment management, education planning, retirement planning, risk management, trust coordination, lending and liquidity solutions, legacy planning, and wealth transfer. In addition, the company supplies market insights to provide unbiased guidance to make important financial decisions. Wealth management resources include market views from the company’s investment strategists and B. Riley Securities’ proprietary equity research.
Auction and Liquidation
Auction and Liquidation segment utilizes the company’s significant industry experience, a scalable network of independent contractors and industry-specific advisors to tailor its services to the specific needs of a multitude of clients, logistical challenges, and distressed circumstances. The company’s scale and pool of resources allow it to offer its services across North America, as well as parts of Europe, Asia, and Australia. The company’s Auction and Liquidation segment operates through two main divisions, retail store liquidations and wholesale and industrial assets dispositions. The company’s wholesale and industrial assets dispositions division operates through limited liability companies that are controlled by it.
Financial Consulting
Financial Consulting segment provides services to law firms, corporations, financial institutions, lenders, and private equity firms. These services primarily include bankruptcy, financial advisory, forensic accounting, litigation support, operations management consulting, real estate consulting, and valuation and appraisal services. The company’s Financial Consulting segment operates through limited liability companies that are wholly owned or majority owned by it.
Principal Investments – Communications
Principal Investments - Communications segment consists of businesses which have been acquired primarily for attractive investment return characteristics. This segment includes among other investments, UOL, through which the company provides consumer Internet access, magicJack, through which it provides VoIP communication and related product and subscription services, and Marconi Wireless, through which it provides mobile phone services and devices.
Brands
Brands segment consists of the company’s brand investment portfolio that focuses on generating revenue through the licensing of trademarks and is held by BR Brands.
Recent Developments
On January 19, 2022, the company acquired FocalPoint Securities, LLC (FocalPoint), an independent investment bank based in Los Angeles. The acquisition is expected to significantly expand B. Riley Securities’ mergers and acquisitions (M&A) advisory business and enhance its debt capital markets and financial restructuring capabilities. FocalPoint specializes in M&A, private capital advisory, financial restructuring, and special situation transactions. The firm includes approximately 50 investment banking professionals with deep industry specialization in high-growth sectors, such as aerospace and defense, industrials, business services, consumer, healthcare, and technology/media/telecom. The company’s acquisition of FocalPoint builds upon the momentum and proven execution capabilities of both firms and is in line with its stated intent to expand capabilities in M&A advisory and fixed income. This combination provides strategic and financial sponsor clients with access to both firms’ proven execution capabilities and a full suite of end-to-end services from a single platform.
B. Riley Securities
Investment Banking and Corporate Finance
B. Riley Securities’ investment banking professionals provide equity and debt capital raising, merger and acquisition, financial advisory and restructuring advisory services to both private and publicly traded companies. Those services include follow-on public offerings, debt and equity private placements, debt refinancing, corporate debt and equity security repurchases, and buy-side and sell-side representation, divestitures/carveouts, leveraged buyouts, management buyouts, strategic alternatives reviews, fairness opinions, valuations, return-of-capital advisory, hostile/activist advisory, and options trading programs.
Sales, Trading and Corporate Services
The company’s sales and trading professionals distribute B. Riley Securities’ proprietary equity research products to its institutional investor clients and high net worth individuals. B. Riley Securities sales and trading also sells the securities of companies in which B. Riley Securities acts as an underwriter and executes equity trades on behalf of clients. The company maintains active trading relationships with substantially all major institutional money managers. The company’s equity and fixed income traders make markets in over 1,000 securities. B. Riley Securities also conducts securities lending activities, which involves the borrowing and lending of equity and fixed income securities. The company’s corporate services include retail orders, block trades, Rule 144 transactions, cashless exercise of options, and corporate equity repurchase programs.
Equity Research
The company’s equity research is focused on fundamentals-based research. The company’s research focuses on an in-depth analysis of earnings, cash flow trends, balance sheet strength, industry outlook, and strength of management that involves extensive meetings with key management, competitors, channel partners and customers. The company provides research on all sizes of firms; however, its research primarily focuses on small and mid-cap stocks that are under-followed by Wall Street. The company’s analysts regularly communicate their findings through Research Updates and daily Morning Notes.
The company’s research department includes research analysts maintaining coverage on a variety of companies in a variety of industry sectors. The company’s research department annually organizes non-deal road shows for issuers in its targeted industries.
Proprietary Trading
The company engages in trading activities for strategic investment purposes (i.e. proprietary trading) utilizing the firm’s capital. Proprietary trading activities include investments in public and private stock and debt securities.
B. Riley Securities is reported in the company’s Capital Markets segment for financial reporting purposes.
B. Riley Capital Management
The company provides investment management services under B. Riley Capital Management, LLC, which is a registered investment advisor that manages private investment funds, including a fund of funds. All of the funds managed typically invest in both public and private equity and debt. Investors in the various funds include institutional, high net worth, and individual investors. GACP is the general partner of GACP I, L.P. and GACP II, L.P., direct lending funds managed by WhiteHawk Capital Partners, L.P. pursuant to an investment advisory services agreement that provide senior secured loans and second lien secured loan facilities to middle market public and private the U.S. companies.
B. Riley Capital Management is reported in the company’s Capital Markets segment for financial reporting purposes.
B. Riley Wealth Management and National
Wealth Management
B. Riley Wealth Management and National provide comprehensive wealth management and brokerage services to individuals and families, corporations and non-profit organizations, including qualified retirement plans, trusts, foundations and endowments. The company’s financial advisors provide a broad range of investments and services to its clients, including financial planning services, insurance brokerage, and tax preparation.
B. Riley Wealth Management and National are reported in the company’s Wealth Management segment for financial reporting purposes.
B. Riley Advisory Services
Financial Advisory Services
B. Riley Advisory Services provides consulting services to shareholders, creditors and companies, which includes expert witness, bankruptcy, due diligence, financial advisory, forensic accounting, litigation support, and crisis management. These services are primarily composed of the former Glass Ratner business.
The financial advisory services business of B. Riley Advisory Services compliments the restructuring services provided by B. Riley Securities.
The financial advisory services business of B. Riley Advisory Services is reported in its Financial Consulting segment for financial reporting purposes.
Valuation and Appraisal
The company’s appraisal teams provide independent appraisals to financial institutions, lenders, private equity firms and other providers of capital for estimated liquidation values of assets. These teams include experts specializing in particular industry niches and asset classes. The company provides valuation and appraisal services across four general categories:
Consumer and Retail Inventory: Representative types of appraisals and valuations include inventory of specialty apparel retailers, department stores, jewelry retailers, sporting goods retailers, mass and discount merchants, home furnishing retailers and footwear retailers.
Wholesale and Industrial Inventory: Representative types of appraisals and valuations include inventory held by manufacturers or distributors of automotive parts, chemicals, food and beverage products, wine and spirits, building and construction products, industrial products, metals, paper and packaging.
Machinery and Equipment: Representative types of asset appraisals and valuations include a broad range of equipment utilized in manufacturing, construction, transportation and healthcare.
Intangible Assets: Representative types of asset appraisals and valuations include intellectual property, goodwill, brands, logos, trademarks and customer lists.
The company provides valuation and appraisal services on a pre-negotiated flat fee basis.
The valuation and appraisal services business of B. Riley Advisory Services described above is reported in the company’s Financial Consulting segment for financial reporting purposes.
Operations Management Services
The company’s Operations Management Services teams work with companies to fix troubled operations by improving their profitability, cash flow and enterprise value. Focus areas include due diligence, acquisitions, executive management, launch coordination, lean six sigma design and implementation, purchasing and inventory management, and quality systems. These services are reported in the company’s Financial Consulting segment for financial reporting purposes.
B. Riley Retail Solutions
Retail Store Liquidations and Wholesale and Industrial Liquidations
The company enables its clients to quickly and efficiently dispose of under-performing assets and generate cash from excess inventory by conducting or assisting in retail store closings, going out of business sales, bankruptcy sales and fixture sales. Financial institution and other capital providers rely on the company’s to maximize recovery rates in distressed asset sales and in retail bankruptcy situations. Additionally, healthy, mature retailers utilize the company’s proven inventory management and strategic disposition solutions, relying on its extensive network of retail professionals, to close unproductive stores and dispose of surplus inventory and fixtures as existing stores are updated.
The company often conducts large retail liquidations that entail significant capital requirements through collaborative arrangements with other liquidators. The company acts as the lead partner in many of the collaborative arrangements that it enters into, meaning that it has primary responsibility for the due diligence, contract negotiation and execution of the engagement.
The company designs and implements customized disposition programs for its clients seeking to convert excess wholesale and industrial inventory and operational assets into capital. The company disposes of a wide array of assets, including among others, equipment related to transportation, heavy mobile construction, energy exploration and services, metal fabrication, food processing, semiconductor fabrication, and distribution services. The company manages projects of all sizes and scopes across a variety of asset categories. The company’s databases of information regarding potential buyers that it has collected from past transactions and engagements, its nationwide name recognition and experience with alternative distribution channels allow it to provide superior wholesale and industrial disposition services.
B. Riley Retail Solutions provides the foregoing services to clients on a guarantee, fee or outright purchase basis.
Guarantee: When providing services on a guarantee basis, the company guarantees the client a specific recovery often expressed as a percentage of retail inventory value. This guarantee is often required to be supported by a letter of credit, a cash deposit or a combination thereof. Cash deposits are typically funded in part with available cash together with short term borrowings under the company’s credit facilities. Often when the company provides auction or liquidation services on a guarantee basis, it does so through a collaborative arrangement with other service providers. In this situation, each collaborator agrees to provide a certain percentage of the guaranteed amount to the client through a combination of letters of credit, cash and financing.
Outright Purchase: When providing services on an outright purchase basis, the company purchases the assets from the client and typically sell them at auction, orderly liquidation, through a third-party broker or, less frequently, as augmented inventory in conjunction with another liquidation that it is conducting. In an outright purchase, the company takes, together with any collaboration partners, title to the assets and absorb the profit or loss associated with the asset disposition.
The retail store liquidations and wholesale and industrial asset dispositions business of B. Riley Retail Solutions described above is reported in the company’s Auction and Liquidation segment for financial reporting purposes.
B. Riley Real Estate
The company works with real estate owners and tenants through all stages of the real estate life cycle. The company’s real estate advisors advise companies, financial institutions, investors, family offices and individuals on real estate projects worldwide.
Acquisitions and Sales
The company engages in a variety of acquisition strategies, including purchasing real estate and mortgages. The company provides equity and rescue capital and participate in joint ventures.
Auctions
As bankruptcy auction professionals, the company represents debtors in lease restructuring and renegotiations and the sale of real property.
Financial Advisory Services
The company represents stakeholders in out-of-court restructurings, loan sales, lease renegotiation and restructuring, strategic investing and managing difficult refinancing transactions.
Liquidations and Loan Sales
The company executes real estate liquidations and loan sale transactions in various market segments on both the buy side and the sell side.
Principal Investments and Financing
The company maintains strategic relationships with institutional investors and high net worth clients that are seeking real estate investments that are opportunistic, value-added and traditional. The company’s strategic partners look to it to identify, underwrite, structure and close these principal investment transactions.
B. Riley Real Estate services described above is reported in the company’s Financial Consulting segment for financial reporting purposes.
B. Riley Principal Investments
Principal Investments
B. Riley Principal Investments identifies attractive investment opportunities and seeks to control or influence the operations of the company’s investments to deliver financial and operational improvements to its portfolio companies in order to maximize the company’s free cash flow, and therefore, shareholder returns. The company’s team concentrates on opportunities presented by distressed companies or divisions that exhibit challenging market dynamics. Representative transactions include recapitalization, direct equity investment, debt investment, active minority investment and buyouts.
Venture Capital
B. Riley Venture Capital invests in late-stage private growth companies with a path towards public markets.
Communications
As part of the company’s principal investment communications strategy, it acquired UOL in 2016; it acquired magicJack in 2018; it acquired a 40% equity interest in Lingo in 2020; and it acquired Marconi Wireless in October 2021. Upon receipt of certain regulatory approvals, the company has the right with the ability to acquire an additional 40% equity interest in Lingo. UOL’s primary pay service is Internet access, offered under the NetZero and Juno brands. Internet access includes dial-up service, mobile broadband and DSL. magicJack is a VoIP cloud-based technology and services and wireless mobile communications provider and the inventor of the magicJack devices. Lingo is a global cloud/UC and managed service provider. Marconi Wireless is a mobile virtual network operator that provides mobile phone voice, text, and data services and devices.
The Principal Investment and Venture Capital businesses described above are reported in the company’s Capital Markets segment. The company’s Communications businesses are reported in its Principal Investments – Communications segment for financial reporting purposes.
Brands
The company’s brand investment portfolio focuses on generating revenue through the licensing of trademarks. The company holds a majority ownership interest in BR Brands, which owns the assets and intellectual property related to licenses of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore, as well as investments in the Hurley and Justice brands with Bluestar. The company intends to grow licensing revenue from the brand holdings in partnership with Bluestar by leveraging its extensive relationships and strategic partnerships in the retail sector. The company intends to pursue future acquisitions of consumer brands, intellectual property, trademarks and licenses, and participate in select transactions as an equity owner. The brand businesses described above are reported in the company’s Brands segment for financial reporting purposes.
Customers
The company serves retail, corporate, capital provider and individual customers across its services lines.
B. Riley Securities
The company engages by corporate customers, including publicly held and privately owned companies, to provide investment banking, corporate finance, restructuring advisory, research and sales and trading services. The company also provides corporate finance, research, wealth management, and sales and trading services to high net worth individuals. The company maintains client relationships with companies in the consumer goods, industrials, energy, financial services, healthcare, real estate, strategy, and technology industries.
B. Riley Capital Management
Investors in the various funds of B. Riley Capital Management include institutional, high net worth, and individual investors.
B. Riley Wealth Management and National
The company acts as financial wealth management advisors to individuals, families, small businesses, non-profit organizations, and qualified retirement plans. The company’s investment services are primarily consist of asset management services to meet the financial plans, financial goals and needs of its customers. The company services its customers through a network of 42 branch offices located in 14 states primarily located in the Mid-west and Southern section of the United States.
B. Riley Advisory Services
The company provides specialty financial advisory services to companies, shareholders, creditors and investors on complex business problems and critical board level agenda items, including transaction advisory and due diligence, fraud investigations, corporate litigation, business valuations, crisis management and bankruptcy. The company provides bankruptcy and restructuring services, forensic accounting and litigation support, valuation services, and real estate consulting. Additionally, the company was engaged by financial institutions, lenders, private equity firms and other capital providers, as well as professional service providers, to provide valuation and appraisal services. The company has extensive experience in the appraisal and valuation of retail and consumer inventories, wholesale and industrial inventories, machinery and equipment, intellectual property and real estate.
B. Riley Retail Solutions
The company’s retail Auction and Liquidation clients include financially healthy retailers, as well as distressed retailers, bankruptcy professionals, financial institution workout groups and a wide range of professional service providers. Some retail segments in which the company specializes include apparel, arts and crafts, department stores, discount stores, drug/health and beauty, electronics, footwear, grocery stores, hardware/home improvement, home goods and linens, jewelry, office/party supplies, specialty stores, and sporting goods. The company also provides wholesale and industrial auction services and customized disposition programs to a wide range of clients.
B. Riley Real Estate
The company’s Real Estate clients include real property owners and tenants in a wide variety of sectors and include both healthy and distressed businesses.
B. Riley Principal Investments
B. Riley Principal Investments serves businesses seeking capital investment, including debt or equity financing.
United Online
The company’s Internet access services are available to customers, which are primarily comprised of individuals, in more than 12,000 cities across the U.S. and Canada. Generally, the company’s Internet access customers also subscribe to value-added features that include antivirus software and enhanced email storage. The company’s advertising customers primarily include business customers that market products and services over the Internet.
magicJack
magicJack provides complete phone service for home, enterprise and while traveling for retailers, wholesalers or directly to customer over the period associated with the access right period. The company provides customers with an ability to make and receive telephone calls through their smart phones, add a second phone number to their smart phone and purchase prepaid minutes to place telephone calls through the magicJack device or mobile apps to locations outside of the U.S. and Canada.
Marconi Wireless
The company’s mobile phone services and products are available to customers, which are primarily comprised of individuals, located throughout the U.S. The company obtains the mobile services it provides to customers from a major mobile carrier.
Brands
The company’s brand investment portfolio focuses on generating revenue through the licensing of trademarks. The company holds a majority ownership interest in BR Brand, which owns the assets and intellectual property related to licenses of six brands: Catherine Malandrino, English Laundry, Joan Vass, Kensie Girl, Limited Too and Nanette Lepore, as well as an investment in the Hurley and Justice Brands with Bluestar Alliance LLC (Bluestar). The company intends to grow licensing revenue from the brand holdings in partnership with Bluestar by leveraging its extensive relationships and strategic partnerships in the retail sector. The company intends to pursue future acquisitions of consumer brands, intellectual property, trademarks and licenses, and participate in select transactions as an equity owner.
Competition
Other Business Lines: The company faces competition for its retail services from traditional liquidators, as well as Internet-based liquidators, such as overstock.com and eBay.
Competitors for the company’s products and services include telecommunications carriers, such as AT&T, Inc., Lumen and Verizon, which provide telephone service using the public switched telephone network, as well as broadband telephone services.
United Online: The company’s principal competitors for broadband services include among others, local exchange carriers, wireless and satellite service providers, cable service providers, and broadband resellers. These competitors include established providers, such as AT&T, Verizon, Sprint Corporation and T-Mobile USA Inc. The company’s principal dial-up Internet access competitors include established online service and content providers, such as AOL and MSN, and independent national Internet service providers, such as EarthLink and its PeoplePC subsidiary.
magicJack and Marconi Wireless: The principal competitors for the company’s products and services include the traditional telephone service providers, such as AT&T, Inc.; CenturyLink, Inc.; and Verizon Communications Inc., which provide telephone service using the public switched telephone network. The company also faces, or expects to face, competition from cable companies, such as Cablevision Systems Corp.; Charter Communications, Inc.; Comcast Corporation; Cox Communications, Inc.; and Time Warner Cable (a division of Time Warner Inc.), which offer broadband telephone services to their existing cable television and broadband offerings.
The company faces competition on magicJack device sales from Apple, Samsung, Motorola and other manufacturers of smart phones, tablets and other handheld wireless devices. Also, the company competes against established alternative voice communication providers, such as Vonage, Google Voice, Ooma, and Skype.
Regulation
The company’s broker-dealer subsidiaries are registered with the Securities and Exchange Commission (SEC) and are members of Financial Industry Regulatory Authority, Inc (FINRA). FINRA is a self-regulatory body composed of members, such as the company’s broker-dealer subsidiaries that have agreed to abide by the rules and regulations of FINRA. The company is registered with Nasdaq Global Market (NASDAQ) and must comply with its applicable rules. The company’s broker-dealer subsidiaries are licensed as broker-dealers in all 50 states in the U.S., requiring it to comply with the laws, rules and regulations of each such state.
The company’s broker-dealer subsidiaries are also subject to the SEC’s Uniform Net Capital Rule, Rule 15c3-1, which may limit its ability to make withdrawals of capital from its broker-dealer subsidiaries. The company is subject to the USA PATRIOT Act of 2001 (the Patriot Act), which imposes obligations regarding the prevention and detection of money-laundering activities, including the establishment of customer due diligence and customer verification, and other compliance policies and procedures. The conduct of research analysts is also the subject of rule-making by the SEC, FINRA and the federal government through the Sarbanes-Oxley Act.
The company’s asset management subsidiaries, B. Riley Capital Management, LLC and B. Riley Wealth Management, are SEC-registered investment advisers, and accordingly subject to regulation by the SEC. Requirements under the Investment Advisors Act of 1940 include record-keeping, advertising and operating requirements, and prohibitions on fraudulent activities.
magicJack provides broadband telephone services using VoIP technology, as well as resells mobile services. In the United States, the Federal Communications Commission (FCC or the Commission) has asserted limited statutory jurisdiction and regulatory authority over the operations and offerings of providers of broadband telephone services, such as magicJack that offer non-interconnected VoIP services. The scope of the FCC regulations applicable to magicJack’s broadband telephone operations and resold mobile services may change.
History
The company was founded in 1973. The company was incorporated in Delaware in 2009. The company was formerly known as Great American Group, Inc. and changed its name to B. Riley Financial, Inc. in 2014.
