BRC Group Holdings, Inc. (RILY) Earnings

Management highlights

### Core Platform Strategy & Culture - The firm focuses on serving the underserved small and mid-cap market, with a core differentiator of willingness to deploy its own balance sheet alongside clients to solve complex financing needs. - The firm's value-focused operating ethos permeates all business segments, with a long-term focus on disciplined capital allocation and maximizing shareholder value. - Talent retention and recruitment are core priorities: the firm added five senior producers in Q2, including returning alumni, which provides immediate expanded capacity and sector coverage with pre-existing client relationships. ### Capital Markets & Investment Banking - Several key previously inactive institutional accounts were reactivated in Q2, with positive engagement continuing into July, driving higher secondary commission revenues and strengthening the firm's market franchise. - Q2 participated in transactions with $21 billion aggregate deal value, supported $8.5 billion in combined equity and debt issuances, and served as agent on new ATM filings with over $12 billion aggregate value. ATM fees more than doubled sequentially, with improved follow-on deal conversion rates. - The restructuring practice is seeing strong growth in both in-court and out-of-court opportunities, and the direct lending specialty finance group continues to expand its footprint to serve clients across the full capital lifecycle. - Substantial, growing deal pipeline exists in AI data center infrastructure, power, and BDC capital raising, following successful recent execution in the AI infrastructure space. ### Wealth Management - Completed structural cost reset and back-office integration between B. Riley Securities and B. Riley Wealth, including consolidation of support teams and firm-wide vendor rationalization, permanently lowering the cost base and positioning recurring fee business for profitable growth. - Firm-wide AI tool integration is underway across production teams and back-office operations to boost producer productivity and streamline workflows. ### Communications Business Group - The portfolio of mature communications companies continues to deliver predictable, stable cash flows, coming in ahead of budget in Q2 2026 despite expected natural customer attrition. Since 2018, the group has generated over $1.5 billion in total revenue and ~$300 million in operating income on a total acquisition enterprise value of under $280 million. - Management continues to search for complementary acquisitions with similar characteristics (predictable revenue, strong gross margins, high cash flow potential) to add to the platform, leveraging existing scale and operational efficiency capabilities. ### Consumer Products (Targus) - Targeted distribution channel improvements have narrowed first-half losses, and management is implementing additional cost-streamlining measures to reduce structural expenses and optimize long-term asset value.

Guidance

Management did not provide formal quantitative full-year guidance, but confirmed the following forward-looking statements: - The Communications Business Group is on track to finish full year 2026 ahead of its original operating budget, driven by ongoing operational efficiencies across segment units. - Management expects the firm to be better positioned each quarter relative to prior periods, as operational improvements and talent additions normalize operations and expand market reach. If market conditions remain stable, management expects sequential revenue growth in the second half of 2026, though it notes that capital markets activity is highly sensitive to unpredictable macro conditions. - The firm has sufficient liquidity and capital options to address all scheduled 2026 debt maturities while continuing to fund core business growth and market opportunities.

Segment performance

1. Capital Markets (B. Riley Securities): Q2 2026 revenues of $54 million, segment income of $13 million. First half 2026 revenues of $226 million, segment income of $150 million. First half results were driven by a $22 million increase in capital markets service and fee income and $136 million in trading gains primarily from the Babcock and Wilcox investment. This segment contributed 22.6% of total Q2 2026 revenues. 2. Wealth Management: Q2 2026 revenues of $58 million, segment income of $18 million. First half 2026 revenues of $110 million, segment income of $34 million. First half growth was driven by a $26.4 million increase in the fair value of carried interest in a fund that owns SpaceX and an $18 million increase in trading income. The segment ended Q2 with $12 billion in assets under management. This segment contributed 24.3% of total Q2 2026 revenues. 3. Communications Business Group: Aggregate Q2 2026 revenues of $58 million, segment income of $14 million. First half 2026 revenues of $118 million, segment income of $27 million. First half income increased $4.6 million year-over-year despite a $9 million revenue decline, driven by operational efficiencies. This segment contributed 24.3% of total Q2 2026 revenues. 4. Targus (Consumer Product Segment): Q2 2026 revenues of $44 million, segment loss of $6 million. First half 2026 revenues of $88 million, segment loss of $8 million. First half revenues were $2 million higher year-over-year, with narrowed losses driven by targeted distribution improvements. This segment contributed 18.4% of total Q2 2026 revenues.

Risks & headwinds

- Capital markets activity and deal flow are highly dependent on volatile macroeconomic and market conditions, which can shift rapidly and are outside of management's control, creating uncertainty for second half performance. - The firm has $306 million in aggregate senior note principal maturing in Q4 2026, requiring active capital management and asset allocation to fund redemptions while supporting core business growth. - The firm is behind on preferred share dividends, and prioritization of internal capital deployment for growth delays any restoration of preferred dividends at present. - Unrealized valuation volatility in the firm's principal investment portfolio impacts quarterly trading gains and net income results, as seen with the Babcock and Wilcox investment fair value decline in Q2 2026.

Analyst Q&A

• Q: How does BRC plan to address its $300+ million in 2026 senior debt maturities? What funding levers will be used, and are exchanges or equity offerings on the table? /

  A: Management confirms the firm has enough cash and existing investments to fully fund the maturities through the end of the year. It is evaluating multiple options including cash from operations, investment liquidations, asset sales, debt exchanges, and potential capital raises, but has not committed to a specific tactic mix. Management notes that current net leverage is very healthy at $285 million net debt against $180 million trailing 12-month EBITDA, and there is no issue meeting maturity obligations.

• Q: How does the current capital markets deal pipeline compare to prior periods, and what is the mix of activity? Can we expect sequential momentum to continue into the second half? /

  A: Qualitatively, the pipeline is far stronger than it was one year ago, when multiple key institutional accounts were inactive and the firm was working through operational challenges. The firm has regained lost market share with its long-standing loyal client base and is seeing growing activity, boosted by returning experienced talent. If market conditions remain stable, sequential growth is expected in the second half, but management acknowledges that capital markets activity is highly unpredictable and can shift very quickly due to macro factors outside of the firm's control.

• Q: When does management expect to restore cash dividends on the firm's preferred shares? /

  A: Management confirms it is aware that preferred dividends are currently in arrears, but at this stage it believes deploying available capital for core business growth and investment opportunities generates higher returns for overall stakeholders. Dividend restoration will not happen in the near term as capital is prioritized for other uses.

• Q: Have any hedges been put in place to offset recent third-to-date declines in the value of the firm's principal investment portfolio? /

  A: The firm does not hold hedges against valuation changes in its principal investments.