B Riley Financial, inc (RILY) Q3 2021 Earnings Call Transcript

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B Riley Financial, inc (RILY 7.75%)
Q3 2021 Earnings Call
Oct 28, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to B. Riley Financial's Third Quarter 2021 Earnings Call. Earlier today, B. Riley issued a press release and presentation detailing its financial results for the third quarter. Copies are available in the Investors section of the company's website at ir.brileyfin.com. As a reminder, this call is being recorded. An audio replay will be available on the company's Investor Relations website later today. Joining us today from B. Riley are Bryant Riley, Chairman, Co-Founder and Co-CEO; Tom Kelleher, Co-Founder and Co-CEO and Phillip Ahn, CFO and COO. After management's remarks we will open the line for questions. And before we conclude today's call, I will provide the necessary cautions regarding forward-looking statements. I will now turn the call over to Mr. Bryant Riley. Mr Riley, please proceed.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Thanks operator, and welcome everyone. We are pleased to report another solid quarter for B. Riley Financial. On previous calls, we've discussed our strategy to grow our steady state and recurring businesses and we continue to deliver on that strategy both on a top and bottom line basis. Year-to-date, as of September 30, we generated total revenues and total adjusted EBITDA of $1.3 billion and $624.5 million respectively. This represents a year-over-year revenue increase of 168% and 327% increase in our adjusted EBITDA. In the same period, operating revenues totaled $1 billion for the first 9 months with operating adjusted EBITDA of $315.9 million. This reflects a year-over-year increase of 89% in operating revenues and a 71% increase in operating adjusted EBITDA.

Over the last year, B. Riley Securities has taken major strides in establishing itself as a preferred banking partner for small and mid cap companies. Outside of the bulge bracket firms, there are few banks with the capabilities to lead and participate in equity transactions of more than $100 million and year-to-date, B. Riley Securities has raised nearly $3 billion in that capacity. Our investment banking division continues to gain market share on IPO underwriting, follow on offerings, debt raises, ATMs and spec related transactions. We acknowledge that our diversified business can be difficult to analyze. Our ultimate goal is to continue to utilize our cash flows to enhance our business, make accretive acquisitions and to return capital to our shareholders. To that end, we believe a recurring dividend is an important measuring stick for our shareholders.

In line with our stated commitment, we have increased our regular quarterly dividend to $1 per share and declared a special dividend of $3 per share for total third quarter dividend of $4 per common share. Upon payment of our third quarter dividend, we will have returned a total of $9 per share in common stock dividends to shareholders for the first 3 quarters. The increase in our regular dividend reflects our increasing confidence in our recurring cash flows as well as the continued growth in our episodic businesses. Our balance sheet continues to be very strong and our capital base has continued to increase reflecting the growing cash flows and strong fundamentals of our business. At the same time, we have made meaningful progress reducing our debt expense by recently redeeming two of our higher rated bond series while also issuing debt at a rate that is approximately 200 basis points lower. We will continue to seek ways to reduce our overall cost of capital in the coming quarters. Taken together, we have never been more confident in the power of our combined platform and our ability to capitalize on the opportunities we see ahead.

Earlier today, B. Riley Financials ranked number two on Fortune Magazine's fastest growing companies list for 2021, which ranks the top performing publicly traded companies based on revenue, profits and total returns over the three-year period ending June 30, 2021. It's extremely humbling and gratifying to earn extent -- external recognition of our accomplishments and continued momentum. We appreciate the trust and partnership of our clients and shareholders and are especially grateful for the world-class team of B. Riley and their continued dedication. As always, our focus will remain on delivering for all of our stakeholders.

Finally, before that -- I turn the call over to Phil, I want to take a moment to welcome our new Board member Renee LaBran who currently serves on our audit and governance committees. Renee has been involved in the venture capital industry for over 20 years and has extensive experience advising early stage growth companies on capital raising and M&A initiatives. Among her many accomplishments Renee co-founded a women's founders network, which is dedicated to supporting female entrepreneurs by providing access to mentorship, visibility and capital. She is the terrific addition to our Board and we could not be more pleased to welcome her to B. Riley.

With that, I'll now turn the call over to Phil Ahn, our CFO and COO, who will provide more context around our quarterly metrics and then Tom Kelleher, our Co-CEO, will discuss some highlights across our operating units. Over to you, Phil.

Phillip Ahn -- Chief Financial Officer and Chief Operating Officer

Thanks, Bryant. As Bryant noted, we reported strong results for our third quarter ending September 30. On a consolidated basis, B. Riley reported total revenues of $381.5 million, up 69% from the prior year period. Total adjusted EBITDA was $114.1 million, which was up 21% year-over-year. Net income available to common shareholders was $48.6 million or $1.69 per diluted share. This compares to net income of $47.3 million or $1.75 per diluted share for the prior year period.

Our third quarter results included operating revenues of $363.3 million, a year-over-year increase of 87% and operating adjusted EBITDA of $101 million, which was up 50% year-over-year. During the quarter, we also saw a modest investment gains of approximately $18 million, which includes both realized and unrealized gains on certain strategic investments that we hold. Overall, our strong quarter was largely driven by momentum in our investment banking division. This was enhanced by contributions from our recently expanded wealth management division and continued cash flow generation from our principal investments companies and our brands businesses.

Turning to our reportable segments. Starting with capital markets, which includes our investments and operating results from investment banking, institutional brokerage and fund management. Excluding investment gains, Capital Markets segment operating revenues totaled $161.7 million which represented an increase of 98% year-over-year. Segment operating income was $76.1 million, which was up 129% year-over-year.

Now turning to our wealth management segment. Segment revenues and segment income increased to $118.8 million and $6.6 million respectively. This increase was primarily related to the addition of National Holdings, which we acquired in February. Our Auction and Liquidation segment revenues and segment income totaled $37.1 million and $6.3 million respectively. As noted on prior calls, results from this segment tend to be variable due to the episodic in nature of large retail liquidation engagements. Financial Consulting segment revenues and segment income totaled $21.3 million and $2.8 million respectively. Results from our legacy GlassRatner Consulting division and our Appraisal division were impacted by the overall market conditions in the restructuring and ABL lending markets. Our Principal Investment companies magicJack and United Online contributed revenues of $19.3 million and segment income of $6.5 million. These companies continue to provide steady cash flow to our platform.

And lastly, our Brands segment continues to make contributions to the overall B. Riley platform, having generated segment revenues of $6.4 million and segment income of $4.7 million related to the licensing of brand trademarks. As a reminder, adjusted EBITDA and our metrics for operating and investment results are non-GAAP financial measures. Please refer to our earnings release for a definition of these terms and for a reconciliation to the nearest GAAP measures. Investors can also find additional details relating to these metrics and related reconciliations in the financial supplement on our Investor Relations website.

Now turning to some highlights from our balance sheet. At September 30, B. Riley Financial had $378 million in unrestricted cash and cash equivalents, $933 million in net securities and other investments owned and $351 million of loans receivable. At quarter end, we had a total cash and investments balance of approximately $2.3 billion, which includes $43 million of other investments reported in prepaid and other assets. At quarter end, our total debt balance was approximately $1.7 billion. And net of our debt, B. Riley Financial's cash and investments totaled approximately $593 million at September 30.

Finally, as Bryant mentioned, we declared a total third quarter dividend of $4 per common share. This includes an increase in our regular quarterly dividend from $0.50 to $1 per share. Additionally, we declared a special onetime dividend of $3 per common share. The $4 in total Q3 dividend payments will be paid on or about November 23 to common shareholders of record as of November 9. That completes my financial summary. Now I'll turn the call over to our Co-CEO, Tom Kelleher. Tom?

Tom Kelleher -- Co-Founder, Co-Chief Executive Officer, Board Member

Thanks, Phil. This quarter we continue to diversify and expand our opportunities, both in terms of new businesses as well as in our ability to attract quality talent. Adding complementary practices, like cyber security advisory, our financial sponsors group and our real estate division, has enabled us to provide superior execution capabilities, while continuing to deliver on the core services we've become known for. While clients are the obvious beneficiary of our expanded capabilities, our investment banks, advisory consultants and wealth managers have also benefited. Every day, we see more and more collaboration and referral activity across our operating groups and there is no greater validation of our platform strategy than from our internal B. Riley stakeholders, our colleagues. We believe our philosophy and diverse platform continue to be our key differentiator. This has enabled us to successfully recruit several experienced and accomplished professionals across our divisions amid this highly competitive market for talent.

Last quarter, we stated our intent to build out Asset Management and fixed income. Since then we've welcomed back former colleague Wes Cummins and his team at 272 Capital. He and his team employ a small cap strategy rooted in fundamental research which closely aligns with our own. Wes serves as President of our asset management division and will continue to oversee the funds of 272 Capital, in addition to B. Riley's private funds. And to support the growth of our fixed-income division, we also recently named Tim Sullivan, Head of Fixed Income with B. Riley Securities. Tim's experience complements the firm's established leadership in structuring products, including our market leading senior notes offering franchise and specialization in corporate debt issuances. 'Year-to-date, our team has led over $1.5 billion of corporate debt and preferred stock offerings

In wealth management, we opened a new branch location in Warrenton, Virginia, led by three seasoned financial advisors who joined us from BB&T Truist. And n New York, we recently welcomed the sophisticated advisor from UBS who is focused on serving ultra high net worth individuals. Our ability to attract talented professionals of this caliber speaks to the value of being able to offer a unique array of services under one roof. We continue to actively recruit across all our business lines with particular focus on investment banking to support our growing capital markets business and M&A practice.

As Bryant noticed -- noted at the top of the call, our strong quarter was driven by investment banking, including several significant transactions involving contributions from other B. Riley divisions. Noteworthy banking deals from the quarter include, Greenidge Generation's $2 billion merger with Support.com in which we serve just buy-side advisor; RumbleOn's $575 million business combination with RideNow, in which we lead both a common follow on and debt raise and also served as capital markets and buy-side advisor; Charah Solutions' $135 million senior notes offering, in which we served as lead bookrunner; and Tellurian's $120 million secondary offering if we -- in which we served as sole bookrunner; and DoubleDown Interactive's $113 million August IPO.

Our Spec group also continued its momentum contributing meaningfully to the quarter's results. A key offering of our Equity Research department, our proprietary corporate access events has helped differentiate us in our approach to bringing unique small and mid cap market investment ideas to our clients and partners. During the quarter, we led 50 virtual events as well as an exclusive in-person conference in LA, which featured 35 companies and 50 institutional investors. Looking ahead, this December we are hosting an in-person Crypto Conference in New York. B. Riley Securities has quickly established a leadership position in the emerging cryptocurrency arena, being the first bank to bring a crypto minor public with Stronghold Digital Mining's recent IPO.

In Wealth Management, our legacy business B. Riley Wealth and our recently acquired National Holdings continue to perform steadily with revenue, EBITDA and fee-based assets up both on a year-over-year and sequential basis. Perhaps what is more gratifying however, is the dedication and skill our coworkers are displaying as we work toward combining these businesses. In retail liquidation, despite domestic headwinds, this group has managed to keep active with projects in Europe. As we enter the holiday shopping season, the team has been busy working with returning retail clients the model store closings in preparation for the potential fallout from ongoing supply chain issues.

And in its Advisory services, which includes our legacy GlassRatner Financial Consulting group and legacy Great American Appraisal division, the coordination of these businesses continues to bear fruit in generating referrals across our platform. We recently added senior hires to our restructuring division, valuation services practice into our risk compliance and cyber practice. This group's focus remains on the legal and lender community and corporate compliance markets. Despite a challenging environment for both legacy businesses, they both have found ways to be meaningful contributors for the overall B. Riley enterprise.

Our Principal Investment companies magicJack and United Online continue to perform above our expectations, while providing cash flow to our platform. We are still working to obtain necessary regulatory approval to complete the second tranche of our investment Lingo which should enhance our results in future quarters. Lastly, after a difficult period following the beginning of the pandemic, volumes within our brand investment business have dramatically increased. We remain optimistic about growth in this business in 2022.

And finally, a point that cannot be overstated, is how incredibly proud we are to represent and work alongside our colleagues. Our coworkers continue to step up in rights of the occasion, despite the challenges created by the ongoing pandemic. Our people shown dedication on and off the playing field, both in the normal course of business, as well as by participating in any number of B. Riley sponsored programs. We continue to be inspired everyday by the people we work with. Echoing Bryant's sentiment at the top of the call, with a common goal and shared purpose is our commitment to continue to keep our eye on the ball and focused on delivering for our employees and our stakeholders.

With that, we will now open the line for questions, and then will turn the call back to Bryant for closing remarks. Thanks

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Keith Rosenbloom with Cruiser Capital. Please proceed.

Keith Rosenbloom -- Cruiser Capital LLC -- Analyst

Thank you. Guys, what a great quarter and what a great reflection of the business here. I just wanted to...

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Thank you.

Keith Rosenbloom -- Cruiser Capital LLC -- Analyst

You're welcome. I wanted to try and level set here and just make sure I'm on the right page. All right. I'm looking at the business and it seems to trade at a PE of 3. You now raised your dividend yield, so I guess it's got a stated yield of 6%. But it looks like -- obviously with all the specials it's much demonstrably higher. Bryant, you own 20% of the company, you just initiated a buyback. You look at other investment banks they seem -- they all have much higher multiples and pay lower dividend yields. You have no research coverage. There is no sell-side research coverage of you. And I wonder is there some better description of the business in terms of what you're doing, Bryant, that might better describe who you are? Or are these discounts to your comps just so blatant and so unwarranted that perhaps that confuses people?

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Yeah, Keith, we've talked about this a lot internally, and it's part of why we've been pretty aggressive about cash returns and now implementing a more meaningful annual dividend. We're confusing -- I don't think we're confusing. The way that I would describe us is that we are a investment bank/merchant bank that utilizes our balance sheet to create fees, to create investment opportunities and make money for our clients and shareholders. And the simplistic way to look at the business, in my mind, is to take the bucket of recurring EBITDA that we have -- and I include that steady state of interest income, because we'll always have a loan book, and if you take that number you get into a number of somewhere around $180 million to $200 million. And then you have a broker-dealer and you have the liquidation business that can go up and down and we would be fooling ourselves if we said that we're going to always be up into the right. So the way we -- the way that we looked at it, especially we're looking at our dividend as we said, over the last 3 years our broker dealer has done roughly $10 million, $11 million of monthly EBITDA. Over the last year it's centered closer to $21 million. And our retail done about $1 million to $3 million in the last few years per month.

And so we look at our dividend and we said, what is our break-even to pay $4 dividends. About -- it's underwriting the broker deal to $5 million a month, not the $10 million that we've averaged over the last three years of the 20 in the last year, and underwriting the liquidation to $0.5 million. And so we have lots of room to pay a dividend, lots of room to be cautious because markets do sometimes run in cycles. And so I think if you can take that dividend yield and say that provides a level of security, and in the meantime, we're going to take that excess free cash flows that we would expect because we're underwriting to a very low number to make sure that we felt good about our dividend coverage. The last trailing 12 months our operating EBITDA has been $430 million and our total EBITDA has been much more than that, and our free cash flow has been $592 million with investment.

So we've been able to take a lot of money and invest in the business, I think you may have seen we're adding to our fixed income practice. We've made acquisitions, we've added to our research side, and so we've been able to do all of those things. But when you talk about a public company that own the dial up business, businessed like magicJack brands, liquidation and a broker-dealer versus a pure play broker-dealer, there are going to be a lot of people, I think, have funds that -- competitors of yours that are going to say, I want a pure broker dealer. I don't want to be -- mess with that, I don't want to be surprised, I don't know what they are necessarily going to look at. It's a really broad mandate and we want that broadband mandate. We think that's really important. That's why we are pretty adamant about making sure you know what we're doing and what our philosophy is, and and we returned a lot of cash. But I think that's also -- and is a lot of our secret sauce we have the broad mandates. But I think it also creates a discount. And the answer to how you fix that? I don't know. I think we just keep grinding and keep make a lot of money and the rest will take care of itself.

Keith Rosenbloom -- Cruiser Capital LLC -- Analyst

Can I just get two quick follow-ups in?

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Sure.

Keith Rosenbloom -- Cruiser Capital LLC -- Analyst

So, Tom just talked about the cryptocurrency business in terms of crypto trading. Maybe you could just give a little perspective on what that could mean to you in terms of contribution on the trading crypto side? And then also -- I know you guys have put in effort into building the asset management business. Can you speak to where you think that contribution, those management fees might look like in a year from now, from your asset management side of the business?

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Let me, let me start about the management side, because I think maybe, Tom -- I don't know Tom is going to [Indecipherable] We're not trading crypto, we are -- we have been very active in raising capital for miners, as you know, I know you participate in some of those.

Keith Rosenbloom -- Cruiser Capital LLC -- Analyst

Yeah.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

So that's become one of the big effort. And the most important part of that is, every one of those deals that we've done is meaningfully higher, we've made a lot of people a lot of money and created a lot of capital for miners to build their business. But -- and we're having a conference specifically for that vertical. As it relates to asset management, if you look at our competitors, we are the only group that really does not have a meaningful asset management business. And we have a retail wealth management component with over $30 billion and we think that an asset management business and -- run by Wes Cummins who we've known for a long time. We are very confident he's going to put up really good numbers and we're going to give great products to our in-house wealth managers, but also to other institutions. So we're making sure that Wes is very much institutionalized and has his own infrastructure. But we recognize that we -- that is a greenfield spot for us that we can really go after. I'd be disappointed in here if we weren't managing over $1 billion. And I guess it depends on how your returns are, but if that can be meaningful that could be $20 million, $30 million of kind of income.

Keith Rosenbloom -- Cruiser Capital LLC -- Analyst

Thank you.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

All right. Thanks, Keith.

Operator

[Operator Instructions] Our next question comes from Brian Rohman with Boston Partners. Please go ahead.

Brian Rohman -- Boston Partners -- Analyst

I want to repeat Keith's comment of, heck of a quarter. I have a question about the dividend. I don't associate broker dealers as yield type stocks and yet that's sort of how you're positioning this. And the reason I don't associate yield and broker-dealers is because the core Investment banking business can over time, be very volatile. What sort of scenario -- how bad do things have to be for you to think that the dividend could be compromised? Your new dividend.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

So I'm going to do the math again that I did before because...

Brian Rohman -- Boston Partners -- Analyst

Yeah, yeah. And you did a great job for going over that. I'd like to hear that again.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Okay. So we're not a typical -- I think we're not -- we have -- we're different from our competitors by having the operating business that we buy in. Whether that's a careful business like magicJack, United Online, or it's the brands we own or -- and if you just bucket those things and some of our more recurring business, we get to a kind of a annual EBITDA number of in and around $140 million $150 million. Okay? If you take our interest income, because we're always going to have a loan book. I mean one of the...

Brian Rohman -- Boston Partners -- Analyst

I'm sorry, Bryant, I'm sorry to disturb you -- interrupt you. The $140 million, $150 million which number you just said, that is everything together? All the businesses?

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

That is everything together except for the broker dealer.

Brian Rohman -- Boston Partners -- Analyst

Okay.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Because as you said, they're volatile businesses. Our two volatile businesses are the broker dealer, which is obviously volatile and very strong right now. Right? And then the liquidation business, which is really low. The liquidation business two years ago was doing $30 million in EBITDA and now it's doing closer to $10 million to $15 million because a lot of liquidation. These are -- this is our business that helps when a company goes bank -- we tell this bank will buy the inventory and will take over the shareholders. And so that business right now as you can imagine the economy we're in is much slower. But we call those our episodic businesses, OK? Everything else we bucket and we look at as more of a recurring business. That could include a business we bought like GlassRatner which is an hourly advisory business that is going to do $10 million to $12 million of EBITDA. We do appraisals. That business is very recurring, we do $10 million to $12 million there.

So if you add up that whole bucket, you get to roughly $140 million $150 million in EBITDA. Okay? Then If you take our balance sheet, which has got about $2.2 billion of investable capital. If you take about $0.5 billion of that, that's in loans to clients, to interesting opportunities, we get a lot of proprietary books. Just assume that somewhere in around that number -- it might be more might be less, but for the purposes of this conversation, that's generating roughly $50 million of interest income. So you take those two pieces and you have $200 million of EBITDA. Okay? The broker dealer -- so first we'll go with the broker dealer. Over the last year, monthly EBITDA for the broker dealer has been approximately $21 million a month. Over the last three years, looking back when -- and it's obviously been growing a lot. Over the last three years, the broker deal EBITDA monthly has been about $5 million a month -- excuse me, $10 million a month. Right? So $120 million, call it $240 annual. When we looked at our dividend and said exactly what you did, and so where would we be-where would it have to go for us to be more nervous about it? We underwrote a monthly EBITDA in the broker dealer $5 million a month. So if it went to $5 million a month, we would be generating about the right amount of cash to equally match the dividends. So $20 million now, $10 million over 3 years, we underwrote the $5 million.

On the liquidation business, we did the same analysis. Last 3 years that was $2 million a month, last year it was at $1 million a month. We underwrote that to about some $10 million a year. So in our -- and then we've got a $1.5 billion investment book. We believe that we're able to put that money to work at -- our returns investment capital has been very strong. But from a pure operating point of view, those are the numbers. Those -- that's the wiggle we have and we don't have -- I don't think we have any month-to-month debt. The vast majority of -- but we just the two nearest term debt to us, so we don't have anything to do I think these are 25 fill in with the vast majority in 27. So let's say we missed by $2 million a month. We're not -- it's not the end of the world, we'll just -- we know we have a good business and we have -- we'll catch up. So that was the rough math. And if we get to a spot where we feel like that number is $350, we will adjust. I mean, I think -- we have a philosophy that we are -- part of our job is to share in the returns that we make with our shareholders, and that's what we've -- that's really one of our philosophies and that's what you're seeing with this dividend.

Brian Rohman -- Boston Partners -- Analyst

So, let me ask the question differently. I'm looking at Bloomberg right now, you have about 28 million shares outstanding. 28 million shares times $4 a share is about $100 million, a little bit more of cash flow that goes out the door for paying the dividend. Are you looking -- and you've been paying all these special dividends. Are you going forward looking at the recurring businesses as ostensibly covering the dividends and absent a large investment, the episodic businesses producing special dividends over time?

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

You're close. You're not quite there yet.

Brian Rohman -- Boston Partners -- Analyst

Yeah.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

But you're close enough to think of it that way.

Brian Rohman -- Boston Partners -- Analyst

Okay, fine. That's good, that's helpful. Thank you.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

You're welcome.

Operator

The next question comes from Sean Haydon with Charles Lane Capital. Please go ahead.

Sean Haydon -- Charles Lane Capital -- Analyst

Hey, guys. I would like to say congratulations on the quarter as well. And thanks for the dividends. Question on the wealth management unit. How far along are you in the integration process of National? And what should we think about as far as the operating margin there -- the income margin, how ever you refer to it. So, right now, you're about mid-single digits. Do you see any lift in there for that margin going forward once everything is steady state and no longer being integrated?

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

So I would say -- let me just comment on that transaction. I would say -- and you've known us for a long time, I think we would say we're somewhat understated. I would say on a scale of 1 to 10, the way that integration has taken place and the way the business leaders have worked with each other, is a ten. And so, you think that in -- just put in perspective, the thinking to 2 months, we're doing $9 million of EBITDA, $36 million run rate. I think for is amazing. And I think that we've had total buy in. Not total, but a lot of buy-in from the wealth managers. We've we spent a lot of time with them introducing us to our products, they've participated in a lot of our deals. And so from the perspective of revenue momentum, I think we're in really good shape. Is there more work to done -- to do on the operating side. Yeah, I mean that's going to -- you've got leases, you've got a lot of things that when you have to wealth managers merge, you've got negotiations with vendors, you've got -- that you will be able to carve out more expense savings.

I couldn't tell you that we have an EBITDA target because we're just -- our target is to be as profitable as we can at all times. But realize they are two very different businesses. The National business is a independent management business. Now, you're still working with them and you're still distributing product to them, you make them part of the team, but that's a different payout structure than a W2 wealth manager. They are 100% employees and you're paying for all the insurance and all that stuff. So they're a little bit different. So the margin you're going to get on a independent wealth based management business is going to be less than a W2, but there is less risk obviously because we're paying for a lot of things they're doing.

So that's a long-winded answer of saying I'm thrilled that we did $9 million. I think that we're just at the start of it. I think we're going to get a lot of recruits. I think we're a really exciting place to to come to, and we've got great leadership that are out there recruiting, all the time. Can that business be a $50 million, $60 million EBITDA business in a year? I think we could. I mean this is not a challenge of the market over, this is, me kind of putting my finger in the air and looking at where the numbers are, but I could see that.

Sean Haydon -- Charles Lane Capital -- Analyst

Okay. Yeah, that's helpful, thanks. And then on brands. I mean it looks like that's really taking shape there. Do you guys have any targets in mind, or are you just trying to be opportunistic when it comes to the brands portfolio?

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Yeah. Yeah, sorry. So one of the things that over time that I have found valuable is, you meet a lot of great people in this business and if you can partner with people you've known or you've seen in action maybe short a long time, that's how you can, I think, really leverage your business. And so you will see that people are Kenny Young, who is the CEO of another company became our President, or Brian Kahn and Vintage group, we've done a ton of deals with Franchise Group, because we've known forever. And that list goes on and on, and I would say the brand side, we got to know the founders of BlueStar over a long period of time. And we have -- we think they're amazing at what they do and we are committed to partnering with them if they see opportunities. We don't have to, but we've committed.

And so, we are there for them as a capital provider and partner, and it's really up to them. I would say that you are going to find more brand opportunities in periods of distress than you would in a really good economy. So when a lot of the apparel companies -- like for example Justice, right, brick and mortar business went bankrupt. It's an unbelievable brand. It is now in -- it's going to be in 2800 Walmart. The commercials of Walmart often lead with the Justice brand. So, we own 40 some percent of that. That's our partners. So there is -- we don't have a number we want to get to, we don't have a desire to buy five more. We're just going to be really opportunistic.

Sean Haydon -- Charles Lane Capital -- Analyst

Alright, great. Well again, congrats on the quarter.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Thanks. Thanks, Sean, appreciate all your support.

Operator

This concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Bryant Riley for his closing remarks.

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Well, thank you, operator, and thanks everyone for participating. Really exciting day being able to return the kind of capital we are to our shareholders and our partners at our firm and being recognized by Fortune as a number two growing firm. Super humbled and really thankful for all the people that have helped us get there. So look forward to next quarter's call. Thank you, everyone.

Operator

Thank you. Before we conclude today's call, I will provide B. Riley Financial's safe harbor statement which includes important cautions regarding forward-looking statements made during this call. Statements made during this call about B. Riley Financial's future expectations, plans and prospects and any other statements regarding matters that are not historical facts, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors should be aware of any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors include the unpredictable and ongoing impact of the COVID-19 pandemic as well as the other risk factors explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of each statements. All forward-looking statements are made as of today, and except as required by law the company undertakes no obligation to publicly update or revise any forward-looking statements whether because of new information, future events or otherwise. Thank you for joining us today for B. Riley Financial's third quarter 2021 results earnings conference call. [Operator Instructions]

Duration: 37 minutes

Call participants:

Bryant Riley -- Co-Founder, Co-Chief Executive officer, Chairman of the Board

Phillip Ahn -- Chief Financial Officer and Chief Operating Officer

Tom Kelleher -- Co-Founder, Co-Chief Executive Officer, Board Member

Keith Rosenbloom -- Cruiser Capital LLC -- Analyst

Brian Rohman -- Boston Partners -- Analyst

Sean Haydon -- Charles Lane Capital -- Analyst

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