Press release·12/16/2025 00:54:39

Overview of the Company

B. Riley Financial Inc. (NASDAQ: RILY), which is changing its name to BRC Group Holdings, Inc. (“BRC”) effective January 1, 2026, is a diversified portfolio of companies operating in financial services, telecom, retail, and investments. The company’s core financial services platform provides customized solutions for small and middle market companies at all stages of the business lifecycle. BRC also opportunistically invests in and acquires companies or assets with attractive risk-adjusted returns, focusing on operational improvements to maximize free cash flow.

BRC operates through five reportable segments: Capital Markets, Wealth Management, Communications, Consumer Products, and E-Commerce. The Capital Markets segment provides investment banking, equity research, institutional brokerage, and direct lending services. The Wealth Management segment offers retail brokerage, investment management, insurance, and tax preparation services. The Communications segment includes telecom businesses providing consumer and business services. The Consumer Products segment comprises the Targus brand of laptop and tablet accessories. The E-Commerce segment operates the Nogin e-commerce platform.

Financial Performance

For the three months ended June 30, 2025, BRC reported total revenues of $225.3 million, up 137.4% from $94.9 million in the prior year period. This was primarily driven by:

• Increases in fair value adjustments on loans of $176.4 million and in the fair value of the securities and investments portfolio of $59.0 million.
• Partially offset by decreases in services and fees revenue of $57.1 million, interest income from securities lending of $22.7 million, and interest income from loans of $14.7 million.

Operating expenses decreased 34.5% to $214.5 million, mainly due to lower direct costs of services, cost of goods sold, and selling, general and administrative expenses across the segments. This resulted in operating income of $10.8 million compared to an operating loss of $232.6 million in the prior year period.

For the six months ended June 30, 2025, total revenues increased 4.8% to $411.4 million. The increase was again driven by higher fair value adjustments on loans of $180.5 million and an improvement in the fair value of investments of $60.5 million, partially offset by decreases in services and fees revenue of $112.4 million, interest income from securities lending of $59.6 million, and interest income from loans of $33.6 million.

Operating expenses decreased 27.9% to $462.0 million, leading to an operating loss of $50.7 million compared to a loss of $248.6 million in the prior year period.

Segment Performance

Capital Markets Revenues in the Capital Markets segment decreased 22.2% to $39.1 million in Q2 2025 and 41.9% to $64.3 million in the first half of 2025. This was primarily due to declines in investment banking, commission, and interest income. Segment operating expenses decreased 11.7% and 17.3% respectively, driven by lower compensation and benefits.

Wealth Management Wealth Management revenues declined 32.6% to $33.4 million in Q2 2025 and 20.5% to $80.1 million in H1 2025. This was mainly attributable to a reduction in assets under management and associated advisory fees, as well as lower brokerage revenues. Segment expenses decreased 18.8% and 13.9% respectively, in line with the revenue declines.

Communications Revenues in the Communications segment decreased 21.9% to $60.7 million in Q2 2025 and 22.0% to $123.9 million in H1 2025, primarily due to declines in subscription revenue across the segment’s businesses. Segment expenses declined 21.9% and 17.8% respectively, driven by lower compensation, depreciation, and occupancy costs.

Consumer Products The Consumer Products segment, comprising Targus, saw revenues decline 15.8% to $43.3 million in Q2 2025 and 17.1% to $85.4 million in H1 2025, due to lower sales volumes. Segment expenses decreased 14.2% and 12.5% respectively, in line with the revenue declines.

E-Commerce The E-Commerce segment, consisting of Nogin, was deconsolidated in Q1 2025. Revenues and expenses for this segment are only included for the first quarter of 2025.

Strengths and Weaknesses

Strengths:

• Diversified business model across financial services, telecom, retail, and investments provides revenue and cash flow stability.
• Strong performance in the Capital Markets segment, with gains in the securities and investments portfolio offsetting declines in services and fees.
• Successful execution of strategic divestitures, including the sale of the Wealth Management and financial consulting businesses, providing liquidity.
• Proactive management of the balance sheet, including the exchange of senior notes to extend maturities and reduce interest expense.

Weaknesses:

• Declines in the Wealth Management and Communications segments due to industry headwinds and loss of key personnel.
• Impairment charges related to the Targus tradename in the Consumer Products segment.
• Continued reliance on fair value adjustments and gains on investments to offset weakness in core operating segments.
• Suspension of preferred stock dividends, indicating financial constraints.

Outlook and Risks

BRC expects to utilize existing cash balances, cash from investments, proceeds from business divestitures, and available credit facilities to fund debt service and operations over the next 12 months. The company may also explore additional debt refinancing, equity raises, or asset sales to provide further liquidity.

Key risks facing the company include:

• Volatility in revenues and operating results across the business segments.
• Continued industry challenges in the Wealth Management and Communications segments leading to further declines.
• Potential for additional impairment charges on goodwill, intangibles, and investments.
• Ability to generate sufficient cash flow from operations to service debt obligations.
• Potential for economic downturn or recession impacting the company’s diversified businesses.
• Regulatory scrutiny and legal proceedings, including the SEC subpoenas received by the company and its CEO.

Overall, BRC has taken steps to strengthen its financial position through strategic divestitures and balance sheet management. However, the company continues to face headwinds in some of its core operating segments that will require ongoing attention and mitigation. Successful execution of the company’s strategic initiatives and management of key risks will be critical to driving sustainable profitability and shareholder value going forward.