Overview of the Company’s Financial Performance

B. Riley Financial, Inc. (soon to be renamed BRC Group Holdings, Inc.) is a diversified portfolio of companies operating in five reportable segments: Capital Markets, Wealth Management, Communications, Consumer Products, and E-Commerce. The company reported total revenues of $411.4 million for the six months ended June 30, 2025, an increase of 4.8% compared to the prior year period.

The increase in revenues was primarily driven by a $180.5 million favorable variance in fair value adjustments on loans, as well as a $60.5 million increase in trading gains. However, this was partially offset by decreases in revenues from services and fees ($112.4 million), interest income from securities lending ($59.6 million), and interest income from loans ($33.6 million).

The company reported net income attributable to B. Riley Financial, Inc. of $129.5 million for the six months ended June 30, 2025, compared to a net loss of $482.8 million in the prior year period. This significant improvement was largely due to the favorable changes in fair value adjustments on loans and trading gains, as well as gains on the sale and deconsolidation of businesses and the exchange of senior notes.

Revenue and Profit Trends

Looking at the performance of the individual segments:

• Capital Markets: Revenues decreased $46.3 million, or 41.9%, primarily due to declines in investment banking and trading revenues. Segment profit decreased $18.1 million, or 17.3%, due to lower compensation and other expenses.

• Wealth Management: Revenues decreased $20.7 million, or 20.5%, driven by a reduction in assets under management and associated advisory fees. Segment profit decreased $13.8 million, or 13.9%, due to lower headcount and compensation costs.

• Communications: Revenues decreased $34.9 million, or 22.0%, mainly from declines in subscription revenue across the segment’s various telecom businesses. Segment profit decreased $8.8 million, or 17.8%, due to lower headcount, depreciation, and occupancy costs.

• Consumer Products: Revenues decreased $17.6 million, or 17.1%, primarily from lower sales of computer and peripheral products. Segment profit decreased $4.3 million, or 12.5%, due to reduced headcount and other cost-cutting measures.

• E-Commerce: Revenues increased $1.3 million, or 55.8%, from the Nogin business, which was deconsolidated in the first quarter of 2025. Segment profit increased $2.4 million, or 39.6%, due to the Nogin acquisition.

The company’s overall profitability was boosted by gains on the exchange of senior notes ($54.9 million), the sale and deconsolidation of businesses ($86.2 million), and income from equity investments ($25.1 million). However, the company also incurred losses on the extinguishment of debt ($20.7 million).

Strengths and Weaknesses

Strengths:

• Diversified business model across multiple segments, providing some stability in revenues
• Strong performance in the Capital Markets segment, despite declines in investment banking
• Successful execution of strategic divestitures and debt restructuring, improving liquidity
• Gains from fair value adjustments on loans and trading activities

Weaknesses:

• Declining revenues and profitability in the Wealth Management and Communications segments
• Impairment charges related to the Targus tradename in the Consumer Products segment
• Reliance on fair value adjustments and gains on investments/divestitures to drive profitability
• High debt levels, with $101.6 million due in the next 12 months

Outlook and Future Prospects

The company’s outlook appears mixed. On the positive side, the successful completion of several strategic divestitures and the exchange of senior notes have strengthened the company’s liquidity position, providing more flexibility to manage its debt obligations. The gains from fair value adjustments on loans and trading activities have also boosted profitability in the short term.

However, the company continues to face headwinds in its Wealth Management and Communications segments, with declining revenues and profitability. The Consumer Products segment also experienced an impairment charge related to the Targus tradename, highlighting the challenges in that business. Additionally, the company’s high debt levels, with over $100 million due in the next 12 months, could pose a risk if the company is unable to generate sufficient cash flow or refinance its obligations.

To address these challenges, the company may need to focus on operational improvements and cost-cutting measures in its underperforming segments, while also exploring further strategic divestitures or refinancing options to manage its debt burden. The company’s ability to navigate these issues and maintain a balanced, diversified portfolio will be crucial in determining its future prospects.

Overall, the company’s financial performance in the first half of 2025 was mixed, with some bright spots offset by ongoing challenges in certain business segments. The company’s success in managing its debt, optimizing its portfolio, and driving operational improvements will be key factors in determining its long-term trajectory.