- Year-end AUM at $1.7 billion rose 13.4% year over
year
- Book Value per share increased to $39.93 vs. $38.36 at
year-end 2018
- Completed G.research/Morgan Group (MGHL:OTC) merger
on October 31
Associated Capital Group, Inc. (“AC” or the “Company”), a
diversified financial services and investment management company,
today reported its financial results for the fourth quarter and
full year ended December 31, 2019.
- Net income was $10.9 million in the fourth quarter versus a
loss of $40.3 million in the prior year’s quarter. For the year,
net income was $39.0 million versus a loss of $58.1 million.
- Earnings in the quarter were $0.49 per share a positive swing
of $2.26 per share from a loss of $1.77 per share in the prior
year’s quarter. For the year, earnings were $1.73 per share in 2019
versus a loss of $2.52 per share in 2018.
- Book value increased to $39.93 per share at December 31, 2019
from $38.36 per share at December 31, 2018.
- The operating improvement was primarily driven by AC’s merger
arbitrage funds, which continued their investment excellence
beginning with AC’s first arbitrage fund launched in 1985.
Financial Highlights ($000s except per share data or as
noted)
(Unaudited)
Fourth Quarter
Full Year
2019
2018
2019
2018
AUM - end of period (in millions)
$ 1,724
$ 1,520
$ 1,724
$ 1,520
Revenues
16,675
8,614
31,265
22,779
Operating loss
(842)
(2,285)
(14,878)
(13,480)
Investment and other non-operating
income/(expense), net
18,764
(46,014)
70,666
(55,381)
Income/(loss) before income taxes
17,922
(48,299)
55,788
(68,861)
Net income/(loss)
10,924
(40,315)
39,090
(58,099)
Shares outstanding at December 31
(thousands)
22,475
22,585
22,475
22,585
Net income/(loss) per share – diluted
$0.49
$(1.77)
$ 1.73
$ (2.52)
Fourth Quarter Overview
Fourth quarter revenues were $16.7 million, an increase of 94%
($8.1 million) from $8.6 million in the fourth quarter of 2018.
Operating expenses were $17.5 million in the fourth quarter, up 61%
($6.6 million) from the $10.9 million in the year ago quarter,
primarily a result of the higher compensation expense related to
the strong performance of the Company’s merger arbitrage funds. The
2019 results also reflected a management fee of $1.9 million in the
quarter and $5.8 million for the year. Management fees in the prior
year were waived.
Net investment and other non-operating income was $18.8 million
for the quarter, a $64.8 million positive swing from a loss of
$46.0 million reported in the year ago. Of this, a major portion
reflects the mark-to-market impact of our ownership of 2,935,401
and 3,016,501 shares of GBL at December 31, 2019 and 2018,
respectively. For the year, GBL stock price increased 15.4% to
$19.49 per share, resulting in a $7.6 million mark-to-market gain
for the Company versus a mark-to-market loss of $38 million in
2018.
The provision for income taxes was $4.7 million for the fourth
quarter versus a tax benefit of $7.3 million in the comparable
quarter of 2018. AC owns a majority of the shares of the Gabelli
Merger Plus Trust (GMP:LSE). Under Controlled Foreign Corporation
Subpart F, the company must book its share of taxes on the capital
gains, dividend and interest income generated by the Trust.
Assets Under Management (AUM)
Assets under management at December 31, 2019 were $1.7 billion,
an increase of 13.4% or $204.0 million from December 31, 2018.
Strong performance in the merger arbitrage portfolios drove the
increase in addition to net capital inflows of $48 million for the
year.
December 31,
December 31,
2019
2018
(in millions)
Event Merger Arbitrage
$ 1,533
$ 1,342
Event-Driven Value
132
118
Other
59
60
Total AUM
$ 1,724
$ 1,520
Alternative Investment Management
Associated Capital has two major businesses, Event-Driven Asset
Management and Direct Investing, in addition to its over 80%
ownership of the recently merged G.research Institutional Research
operation.
- Event-Driven Asset Management
The alternative investment strategies focus on fundamental,
active, event-driven special situations and merger arbitrage. It is
led by the merger arbitrage portfolios which returned an
unleveraged +8.6%, (+6.0 % return net of fees and expenses) for all
of 2019. This strategy benefits from corporate merger and
acquisitions activity that reached $3.9 trillion globally in 2019.
The U.S. remained a bright spot for deal making with volume
totaling $1.8 trillion in 2019, an increase of 6% compared to 2018
and the strongest year since 2015. The strategy is offered
domestically through partnerships and separately managed accounts.
Internationally, the strategy is offered through corporations and
EU regulated UCITS structures and the London Stock Exchange listed
investment company, Gabelli Merger Plus Trust (GMP-LN).
We launched our direct private equity and merchant banking
activities in August 2017. Direct Investing is developing along
three core pillars; Gabelli Private Equity Partners, LLC (“GPEP”),
with $150 million of authorized capital as a “fund-less” sponsor;
the Gabelli Special Purpose Acquisition Vehicles (“SPAC”), with the
initial vehicle launched and listed on the Italian Borsa; and, the
formation of Gabelli Principal Strategies Group, LLC. (“GPS”) to
pursue strategic operating initiatives. These businesses are
organized to invest directly in various ways, with a focus on
leveraged buyouts and restructurings of small and mid-sized
companies. These vehicles allow us to acquire companies and create
long-term value with no pre-determined exit timetable, leveraging
our capital markets expertise through direct investing
vehicles.
Institutional Research Services
On October 31, 2019, we consummated the merger between
G.research, LLC (“G.research”) and Morgan Group Holding Co.
(“Morgan Group”). As a result of the transaction, G.research became
a wholly owned subsidiary of Morgan Group (MGHL:OTC). Associated
Capital holds 83.3% of the outstanding shares of Morgan Group.
G.research provides institutional research services and
underwriting activities. G.research’s revenues are derived
primarily from revenue generating institutional research services,
sales manager fees, underwriting fees and selling concessions.
During the fourth quarter, G.research marketed the 43rd Annual Auto
Aftermarket Symposium on November 4th - 5th in Las Vegas which was
hosted by Gabelli Funds.
G.research’s net loss of $1.8 million for the year ending
December 31, 2019 compared to a $20.2 million net loss for the same
period a year ago. The majority of the 2018 loss is the
mark-to-market impact of the 2.2 million shares of GBL held by
G.research that were transferred to AC in December 2018.
Shareholder Dividends and Buybacks
At its meeting on November 8, 2019, the Board of Directors
declared a semi-annual dividend of $0.10 per share payable January
9, 2020 to shareholders of record on December 26, 2019.
During the fourth quarter, AC repurchased 21,000 Class A shares
at an average investment of $36.81 per share for a total outlay of
$0.8 million.
Since our spin-off from GBL on November 30, 2015, AC has
returned $106 million to shareholders through share repurchases and
exchange offers, reducing its outstanding shares by 3.1 million
shares, in addition to paying dividends of $16 million.
At December 31, 2019, there were 3.5 million Class A shares and
19.0 million Class B shares outstanding.
Commitment to Community
Our firm has long held the belief that generating returns for
our stakeholders, while important, is not the only factor in
measuring our corporate success. One key facet of our principles is
how we conduct our business. Since our spin off in 2015, we have
offered a program of corporate giving through our
shareholder-designated charitable contribution (SDCC) program.
Through the SDCC program, AC shareholders select organizations to
receive charitable grants from Associated Capital. This year, the
majority of our shareholders participated by designating their
preferred 501(c)(3) organizations for our corporate giving. We
contributed $4.5 million to such charities in 2019. Since the
inception of this program in 2015, we have donated more than $15.5
million to over 160 charities across the United States.
About Associated Capital Group, Inc.
Associated Capital Group, Inc. (NYSE:AC), based in Greenwich
Connecticut, is a diversified global financial services company
that provides alternative investment management through Gabelli
& Company Investment Advisers, Inc. (“GCIA” f/k/a Gabelli
Securities, Inc.). The proprietary capital is earmarked for our
direct investment business that invests in new and existing
businesses. The direct investment business is developing along
three core pillars; Gabelli Private Equity Partners, LLC (“GPEP”),
formed in August 2017 with $150 million of authorized capital as a
“fund-less” sponsor; the SPAC business (Gabelli special purpose
acquisition vehicles), launched in April 2018; and, Gabelli
Principal Strategies Group, LLC (“GPS”) created to pursue strategic
operating initiatives.
NOTES ON NON-GAAP FINANCIAL MEASURES
Operating Loss Before Management Fee
Operating loss before management fee expense represents a
non-GAAP financial measure used by management to evaluate its
business operations. We believe this measure is useful in
illustrating the operating results of the Company as management fee
expense is based on pre-tax income before management fee expense,
which includes non-operating items including investment gains and
losses from the Company’s proprietary investment portfolio and
interest expense. The management fee is calculated based on the
year to date income before management fee and income taxes. For the
year ending December 2018, the losses generated were not recaptured
during the year then ended and therefore, no management fee is
recognized.
The reconciliation of operating loss to operating loss before
management fee expense (non-GAAP) is provided below.
Year-to-date
(In thousands)
2019
2018
Operating loss
$(14,878)
$(13,480)
Add: management fee expense
5,811
-
Operating loss before management fee
$(9,067)
$(13,480)
Table I ASSOCIATED CAPITAL
GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION (Dollars in thousands)
December 31, December 31,
2019
2018
ASSETS
Cash and cash
equivalents
$ 348,588
$ 409,564
Investments
547,829
439,875
Investment in GAMCO stock (2,935,401 and 3,016,501 shares,
respectively)
57,211
50,949
Receivable from brokers
24,150
24,629
Income taxes receivable and deferred tax assets
9,541
9,422
Other receivables
20,507
5,703
Other assets
10,617
14,291
Total assets
$ 1,018,443
$ 954,433
LIABILITIES AND EQUITY
Payable to brokers
$
14,889
$
5,511
Income taxes payable and deferred tax liabilities
11,212
3,577
Compensation payable
19,367
11,388
Securities sold short, not yet purchased
16,419
9,574
Accrued expenses and other liabilities
7,856
8,335
Sub-total
69,743
38,385
Redeemable noncontrolling
interests
51,363
49,800
Total equity
897,337
866,248
Total liabilities and equity
$ 1,018,443
$ 954,433
Table II
ASSOCIATED CAPITAL GROUP, INC. UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in
thousands, except per share data)
For the quarter
ended December 31, For the year ended December
31,
2019
2018
2019
2018
Investment advisory and incentive fees
$
13,949
$
6,460
$
22,148
$
14,409
Institutional research services
2,604
2,105
8,947
8,284
Other revenues
122
49
170
86
Total revenues
16,675
8,614
31,265
22,779
Compensation costs
13,522
8,125
29,810
25,937
Stock-based compensation
441
309
1,396
670
Other operating expenses
1,702
2,465
9,126
9,652
Total expenses
15,665
10,899
40,332
36,259
Operating income/(loss) before management fee
1,010
(2,285)
(9,067)
(13,480)
Investment gain/(loss)
18,408
(46,640)
60,757
(65,203)
Interest and dividend income from GAMCO
60
60
241
1,171
Interest and dividend income, net
3,577
3,866
12,949
11,951
Shareholder-designated contribution
(3,281)
(3,300)
(3,281)
(3,300)
Investment and other non-operating income/(expense), net
18,764
(46,014)
70,666
(55,381)
Income/(loss) before management fee and income taxes
19,774
(48,299)
61,599
(68,861)
Management fee
1,852
-
5,811
-
Income/(loss) before income taxes
17,922
(48,299)
55,788
(68,861)
Income tax expense/(benefit)
4,658
(7,274)
12,126
(11,478)
Net income/(loss)
13,264
(41,025)
43,662
(57,383)
Net income/(loss) attributable to noncontrolling interests
2,340
(710)
4,572
716
Net income/(loss) attributable to Associated Capital Group, Inc.
$
10,924
$
(40,315)
$
39,090
$
(58,099)
Net
income/(loss) per share attributable to Associated Capital Group,
Inc.: Basic
$
0.49
$
(1.77)
$
1.73
$
(2.52)
Diluted
0.49
(1.77)
1.73
(2.52)
Weighted average shares outstanding:
Basic
22,487
22,721
22,534
23,070
Diluted
22,487
22,721
22,534
23,070
Actual shares outstanding - end of period
22,475
22,585
22,475
22,585
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
The financial results set forth in this press release are
preliminary. Our disclosure and analysis in this press release,
which do not present historical information, contain
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements convey our current expectations or forecasts of future
events. You can identify these statements because they do not
relate strictly to historical or current facts. They use words such
as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,”
“believe,” and other words and terms of similar meaning. They also
appear in any discussion of future operating or financial
performance. In particular, these include statements relating to
future actions, future performance of our products, expenses, the
outcome of any legal proceedings, and financial results. Although
we believe that we are basing our expectations and beliefs on
reasonable assumptions within the bounds of what we currently know
about our business and operations, the economy and other
conditions, there can be no assurance that our actual results will
not differ materially from what we expect or believe. Therefore,
you should proceed with caution in relying on any of these
forward-looking statements. They are neither statements of
historical fact nor guarantees or assurances of future
performance.
Forward-looking statements involve a number of known and unknown
risks, uncertainties and other important factors, some of which are
listed below, that are difficult to predict and could cause actual
results and outcomes to differ materially from any future results
or outcomes expressed or implied by such forward-looking
statements. Some of the factors that could cause our actual results
to differ from our expectations or beliefs include a decline in the
securities markets that adversely affect our assets under
management, negative performance of our products, the failure to
perform as required under our investment management agreements, and
a general downturn in the economy that negatively impacts our
operations. We also direct your attention to the more specific
discussions of these and other risks, uncertainties and other
important factors contained in our Form 10 and other public
filings. Other factors that could cause our actual results to
differ may emerge from time to time, and it is not possible for us
to predict all of them. We do not undertake to update publicly any
forward-looking statements if we subsequently learn that we are
unlikely to achieve our expectations whether as a result of new
information, future developments or otherwise, except as may be
required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200227006025/en/
Kenneth D. Masiello Chief Accounting Officer (203) 629-2726
Associated-Capital-Group.com
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