- AUM of $41.3 billion, up 5.2% year
over year
- Pretax profits of $37.4
million
- Second Quarter Earnings of $0.76 per
diluted share
GAMCO Investors, Inc. (“GAMCO”) (NYSE:GBL) today reported
financial results for the second quarter including revenues of
$87.6 million, net income of $22.9 million and earnings of $0.76
per diluted share.
Financial Highlights Second Quarter
YTD ($'s in 000's except AUM and per
share data)
2017 2016 2017
2016 AUM - end of period (in millions)
$ 41,310 $ 39,273 $ 41,310 $ 39,273 AUM - average (in millions)
41,489 38,888 41,063 38,143
GAAP Revenues 87,600 83,944 173,517
165,329 Income before income taxes 37,448 44,184 77,568
86,311 Effective tax rate 38.9 % 37.7 % 38.5 % 37.9 % Net
income 22,894 27,543 47,714 53,568 Net income per fully
diluted share $ 0.76 $ 0.93
$ 1.58 $ 1.82
Non-GAAP Adjusted income before income taxes 33,373 31,138
65,368 60,654 Adjusted effective tax rate 38.1 % 37.7 % 38.1 % 37.9
% Adjusted net income 20,657 19,413 40,450 37,647
Adjusted net income per fully diluted share $ 0.69
$ 0.66 $ 1.35
$ 1.28 Weighted average diluted shares
outstanding 31,100 29,522 31,130 29,510 Shares outstanding
at June 30 29,301 29,774 29,301 29,774 See the
reconciliation to the comparable U.S. GAAP measures starting on
page 10.
Assets Under Management
June 30, June 30, 2017
2016 Equities: Open-end Funds $ 13,574 $ 13,981 Closed-end
Funds 7,359 6,917 Institutional & PWM - direct (a) 13,437
13,326 Institutional & PWM - sub-advisory 5,048 3,459 SICAV
50 40 Total Equities 39,468 37,723
Fixed Income: Money-Market Fund 1,813 1,518 Institutional & PWM
29 32 Total Fixed Income 1,842 1,550
Total Assets Under Management $ 41,310 $ 39,273 (a) Includes
$300 million and $307 million of Money Market Fund AUM at June 30,
2017 and June 30, 2016, respectively.
Our second quarter 2017 AUM, while up 5.2% from the prior year
was essentially unchanged from the $41.4 billion at March 31, 2017.
Net outflows of $0.6 billion and distributions of $0.1 billion were
offset by market appreciation of $0.7 billion.
Average AUM were $41.5 billion for the second quarter of 2017
versus $40.6 billion for the first quarter of 2017 and $38.9
billion for the second quarter of 2016.
Revenues
- Total revenues for the second quarter
of 2017 were $87.6 million, compared with $83.9 million in the
prior year.
- Investment advisory fees were $76.6
million in the second quarter of 2017 versus $72.8 million in the
second quarter of 2016. Revenues from our open-end and closed-end
funds tracked our average AUM in the funds and were $49.2 million
in the second quarter of 2017, an increase from the $47.0 million
in the year ago quarter. Institutional and Private Wealth
Management accounted for $26.4 million of the revenues in 2017
versus $25.2 million in 2016. SICAV revenues increased to $1.0
million in 2017 from $0.6 million in 2016.
- Distribution fees from our open-end
equity funds and other income were $11.0 million for the second
quarter 2017, versus the $11.2 million in the prior year
quarter.
Operating Income – Second Quarter – Operating margin 45.3%
vs. 55.7%
Operating income, which is net of management fee expense, was
$39.7 million in the second quarter of 2017 versus $46.7 million in
the prior year period. During the second quarter of 2017, we
recorded an additional $3.7 million of stock compensation expense
relating to the accelerated vesting of all the outstanding RSAs
that were issued by Associated Capital Group, Inc. (“AC”) at the
time of the spin-off from GAMCO. This expense related to GAMCO
teammates who held these AC RSAs. There will be no further expense
related to AC RSAs recorded after the second quarter of 2017;
however, there will continue to be expense related to the
outstanding GBL RSAs.
As previously disclosed, the Company has deferred the cash
compensation of the Chief Executive Officer relating to all of 2016
(“2016 DCCA”) and the first half of 2017 (“2017 DCCA”) to provide
the Company with flexibility to pay down debt. We have made
substantial progress toward this objective, having reduced our debt
since the November 2015 spin-off of AC, resulting in Standard &
Poor’s recent revision of its outlook to stable from negative and
reaffirmation of our debt rating of BBB-.
Absent the cash compensation deferrals, we would have recorded
$7.4 million and $13.0 million of additional expenses in the second
quarters of 2017 and 2016, respectively. In total, there is $67.5
million of deferred cash compensation that has not been recorded
yet but will be in the remainder of 2017, 2018 and 2019 in
accordance with GAAP.
Operating income before management fee was $42.0 million in the
second quarter 2017 versus $47.9 million in the second quarter
2016. Operating margin before management fee was 48.0% versus 57.0%
in the second quarter of 2016.
See supplemental information and notes to non-GAAP measures on
pages 8 and 10 for further information regarding non-GAAP
measures.
Other expense
We recognized $2.2 million in net other expenses in the 2017
second quarter versus net other expenses of $2.6 million in the
second quarter of 2016. Interest expense decreased by $0.5 million
year over year reflecting lower debt outstanding of $214.0 million
at June 30, 2017 versus $274.1 million at June 30, 2016. Investment
income for 2017 was $0.5 million vs. $0.6 million in 2016.
Income Taxes
The Company’s effective tax rate (“ETR”) for the quarter ended
June 30, 2017 was 38.9% versus 37.7% for the quarter ended June 30,
2016.
Business and Investment Highlights
- On July 10, 2017, Standard & Poor’s
revised its outlook on GAMCO to stable from negative and reaffirmed
its BBB- rating.
Balance Sheet
We ended the quarter with cash of $90.4 million and investments
of $35.2 million and gross debt of $214.0 million (excluding
deferred cash compensation of $105.5 million). We have $500 million
available on our universal shelf registration. Together with
earnings from operations, the shelf provides us with flexibility to
do acquisitions, lift-outs, seed new investment strategies, and
co-invest, as well as to fund shareholder compensation, including
share repurchases and dividends.
Shareholder Compensation
During the quarter ended June 30, 2017, we repurchased 33,410
shares at an average price of $28.80 per share for a total
investment of $1.0 million and distributed $0.6 million in
dividends. Since our IPO in February 1999, we have returned $1.9
billion in total to shareholders comprised of $1.0 billion of
spin-offs, $489.8 million in the form of dividends and $443.6
million through stock buybacks of 10,060,160 shares.
On August 3, 2017, GAMCO’s Board of Directors declared a regular
quarterly dividend of $0.02 per share payable on September 26, 2017
to its Class A and Class B shareholders of record on September 12,
2017.
About GAMCO Investors, Inc.
GAMCO Investors, Inc., through its subsidiaries, manages private
advisory accounts (GAMCO Asset Management Inc.) and open-end funds
and closed-end funds (Gabelli Funds, LLC).
The Company reported Assets Under Management as follows (in
millions):
Table I: Fund Flows - 2nd Quarter 2017
Fund Market
distributions, March 31, appreciation/ Net
cash net of June 30, 2017
(depreciation) flows reinvestments 2017
Equities: Open-end Funds $ 13,708 $ 215 $ (339 ) $ (10 ) $ 13,574
Closed-end Funds 7,315 172 (10 ) (118 ) 7,359 Institutional &
PWM - direct 13,492 234 (289 ) - 13,437 Institutional & PWM -
sub-advisory 5,019 80 (51 ) - 5,048 SICAV 49 2
(1 ) - 50 Total Equities 39,583
703 (690 ) (128 ) 39,468 Fixed Income:
Money-Market Fund 1,752 4 57 - 1,813 Institutional & PWM
34 - (5 ) - 29 Total Fixed
Income 1,786 4 52 -
1,842 Total Assets Under Management $ 41,369 $ 707 $ (638 )
$ (128 ) $ 41,310
Table II: Fund Flows - Year to
date June 2017 Fund
Market distributions, December 31,
appreciation/ Net cash net of June 30,
2016 (depreciation) flows reinvestments
2017 Equities: Open-end Funds $ 13,462 $ 837 $ (704 ) $ (21
) $ 13,574 Closed-end Funds 7,150 463 (14 ) (240 ) 7,359
Institutional & PWM - direct 13,441 910 (914 ) - 13,437
Institutional & PWM - sub-advisory 3,783 154 1,111 (a) - 5,048
SICAV 50 4 (4 ) - 50
Total Equities 37,886 2,368 (525 ) (261
) 39,468 Fixed Income: Money-Market Fund 1,767 5 41 - 1,813
Institutional & PWM 31 - (2 ) -
29 Total Fixed Income 1,798 5 39
- 1,842 Total Assets Under Management $
39,684 $ 2,373 $ (486 ) $ (261 ) $ 41,310 (a) Includes $1.2
billion from being approved as the sub-advisor on two sub-advisory
entities as of February 27, 2017.
Table III
GAMCO INVESTORS, INC. UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands,
except per share data) For the Quarter
Ended June 30, 2017 2016
Investment advisory and incentive fees $ 76,625 $ 72,794
Distribution fees and other income 10,975
11,150 Total revenues 87,600 83,944 Compensation
costs 29,437 20,623 Distribution costs 10,795 10,501 Other
operating expenses 5,352 4,940 Total
expenses 45,584 36,064 Operating income before management
fee 42,016 47,880 Investment income 537 605 Interest expense
(2,749 ) (3,168 ) Other expense, net (2,212 )
(2,563 ) Income before management fee and income
taxes 39,804 45,317 Management fee expense 2,356
1,133 Income before income taxes 37,448 44,184 Income
tax expense 14,554 16,641 Net income
attributable to GAMCO Investors, Inc. $ 22,894 $ 27,543
Net income per share attributable to GAMCO Investors,
Inc.: Basic $ 0.79 $ 0.94 Diluted $ 0.76
$ 0.93 Weighted average shares outstanding:
Basic 28,896 29,234 Diluted
31,100 29,522 Actual shares
outstanding (a) 29,301 29,774 Notes:
(a) Includes 420,240 and 549,700 of RSAs, respectively. See
GAAP to non-GAAP reconciliation on page 8.
Table
IV GAMCO INVESTORS, INC. UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands,
except per share data) For the Six Months
Ended June 30, 2017 2016
Investment advisory and incentive fees $ 151,614 $ 143,642
Distribution fees and other income 21,903
21,687 Total revenues 173,517 165,329 Compensation
costs 54,715 40,897 Distribution costs 21,708 21,218 Other
operating expenses 10,471 9,312 Total
expenses 86,894 71,427 Operating income before management
fee 86,623 93,902 Investment income 1,046 1,196 Interest
expense (5,581 ) (6,574 ) Other expense, net
(4,535 ) (5,378 ) Income before management fee and
income taxes 82,088 88,524 Management fee expense 4,520
2,213 Income before income taxes 77,568 86,311
Income tax expense 29,854 32,743 Net
income attributable to GAMCO Investors, Inc. $ 47,714 $
53,568 Net income per share attributable to GAMCO
Investors, Inc.: Basic $ 1.65 $ 1.83 Diluted $
1.58 $ 1.82 Weighted average shares
outstanding: Basic 28,933 29,241
Diluted 31,130 29,510 Actual
shares outstanding (a) 29,301 29,774
Notes: (a) Includes 420,240 and 549,700 of RSAs,
respectively. See GAAP to non-GAAP reconciliation on page 8.
Table V GAMCO INVESTORS, INC. UNAUDITED
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
2017 2016 1st 2nd
1st 2nd 3rd 4th
Quarter Quarter Full Year
Quarter Quarter Quarter Quarter Full
Year Income Statement Data: Revenues $ 85,917 $ 87,600 $
173,517 $ 81,385 $ 83,944 $ 87,721 $ 99,950 $ 353,000
Expenses 41,310 45,584 86,894
35,363 36,064 38,482
44,777 154,686 Operating
income before management fee 44,607 42,016 86,623 46,022 47,880
49,239 55,173 198,314 Investment income 509 537 1,046 591
605 426 1,483 3,105 Interest expense (2,832 ) (2,749
) (5,581 ) (3,406 ) (3,168 ) (3,155 )
(2,945 ) (12,674 ) Other expense, net (2,323 ) (2,212
) (4,535 ) (2,815 ) (2,563 ) (2,729 ) (1,462 ) (9,569 )
Income before management fee and income taxes 42,284 39,804 82,088
43,207 45,317 46,510 53,711 188,745 Management fee expense
2,164 2,356 4,520 1,080
1,133 1,163 3,142
6,518 Income before income taxes 40,120 37,448 77,568
42,127 44,184 45,347 50,569 182,227 Income tax expense
15,300 14,554 29,854
16,102 16,641 14,486
17,877 65,106 Net income attributable to GAMCO
Investors, Inc. $ 24,820 $ 22,894 $ 47,714 $
26,025 $ 27,543 $ 30,861 $ 32,692 $
117,121 Net income per share attributable to GAMCO
Investors, Inc.: Basic $ 0.86 $ 0.79 $ 1.65 $
0.89 $ 0.94 $ 1.06 $ 1.12 $ 4.01
Diluted $ 0.82 $ 0.76 $ 1.58 $ 0.88
$ 0.93 $ 1.03 $ 1.07 $ 3.92
Weighted average shares outstanding: Basic 28,970
28,896 28,933 29,247
29,234 29,185 29,062
29,182 Diluted 31,160
31,100 31,130 29,684
29,522 30,406 31,241
30,170
Reconciliation of non-GAAP
financial measures to GAAP: Operating income before
management fee 44,607 42,016 86,623 46,022 47,880 49,239 55,173
198,314 Deduct: management fee expense 2,164
2,356 4,520 1,080 1,133
1,163 3,142 6,518
Operating income $ 42,443 $ 39,660 $ 82,103 $
44,942 $ 46,747 $ 48,076 $ 52,031 $
191,796 Operating margin before management fee
51.9 % 48.0 % 49.9 % 56.5 % 57.0 %
56.1 % 55.2 % 56.2 % Operating margin after
management fee 49.4 % 45.3 % 47.3 %
55.2 % 55.7 % 54.8 % 52.1 % 54.3 %
Notes on Non-GAAP Financial Measures:
Operating income before management fee is
used by management to evaluate its business operations. We believe
this measure is useful in illustrating the operating results of
GAMCO Investors, Inc. (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.
Table VI GAMCO INVESTORS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION (Dollars in thousands, except per share data)
June 30, December 31, June
30, 2017 2016 2016 ASSETS
Cash and cash equivalents $ 90,405 $ 39,812 $ 24,224
Investments 35,225 37,285 32,079 Receivable from brokers 843 453
230 Other receivables 33,707 50,756 31,811 Income tax receivable
and deferred tax asset 19,361 9,349 11,905 Other assets
11,390 11,574 13,665
Total assets $ 190,931 $ 149,229 $ 113,914
LIABILITIES AND EQUITY Payable to brokers $
4,670 $ 66 $ 45 Income taxes payable and deferred tax liabilities
3,486 3,815 822 Compensation payable (a) 53,642 42,384 25,592
Accrued expenses and other liabilities 36,186
35,656 36,829 Sub-total 97,984 81,921 63,288
5.875% Senior notes (due June 1, 2021) 24,132 24,120 24,109
4.5% Convertible note (due August 15, 2021) 109,853 109,835 - 4%
PIK note (due November 30, 2020) 80,000
100,000 250,000 Total debt 213,985
233,955 274,109 Total
liabilities 311,969 315,876 337,397 GAMCO Investors, Inc.'s
stockholders' deficit (121,038 ) (166,647 )
(223,483 ) Total liabilities and equity $ 190,931 $
149,229 $ 113,914 (a) Excludes $67.5 million
of DCCA expense that is not yet recorded under GAAP.
Non-GAAP information and reconciliation:
GAMCO’s non-GAAP measures include adjusted income before taxes,
adjusted effective tax rate, adjusted net income and adjusted net
income per fully diluted share. GAMCO’s calculation of these
non-GAAP measures may not be comparable to similarly titled
measures of other companies due to potential differences between
companies in the method of calculation. As a result, the use of
these non-GAAP measures has limitations and should not be
considered superior to, in isolation from, or a substitute for,
related U.S. GAAP measures.
These non-GAAP measures allow management and investors to view
operating trends, perform analytical comparisons and benchmark
performance between periods to understand operating performance
without regard to items that we do not consider to be a component
of our core operating performance. Management uses these measures
in its financial, investment and operational decision-making
processes, for internal reporting and as part of its forecasting
and budgeting processes. For these reasons we believe these
non-GAAP measures are useful for our investors.
Adjusted income before taxes, adjusted effective tax rate,
adjusted net income and adjusted net income per fully diluted share
can be used by investors to review our results on a consistent
basis. Examples of adjustments to these measures include the GAAP
impact of the 2016 DCCA and 2017 DCCA that were put in place to
enable the Company to more quickly pay down its debt as well as the
acceleration of outstanding RSAs by AC.
The following tables reconcile adjusted income before taxes,
adjusted effective tax rate, adjusted net income and adjusted net
income per share to their closest GAAP equivalent:
For the three months ended June 30, 2017
Impact of Reported
Impact of Impact of AC RSA GAAP 2017
DCCA 2016 DCCA Acceleration Non-GAAP
Total revenues $ 87,600 $ - $ - $ - $ 87,600
Compensation costs 29,437 9,666 (3,260 ) (3,683 ) 32,160
Distribution costs 10,795 - - - 10,795 Other operating expenses
5,352 - - -
5,352 Total expenses 45,584 9,666 (3,260 ) (3,683 )
48,307 Operating income before management fee 42,016 (9,666
) 3,260 3,683 39,293 Other expense, net (2,212 ) - - -
(2,212 ) Income before management fee and income taxes
39,804 (9,666 ) 3,260 3,683 37,081 Management fee expense
2,356 1,688 (704 ) 368
3,708 Income before income taxes 37,448 (11,354 )
3,964 3,315 33,373 Income tax expense 14,554
(4,413 ) 1,541 1,034 12,716
Net income attributable to GAMCO Investors, Inc. $ 22,894
$ (6,941 ) $ 2,423 $ 2,281 $ 20,657
Net income per share attributable to GAMCO Investors, Inc.:
Basic $ 0.79 $ (0.24 ) $ 0.08 $ 0.08 $ 0.71
Diluted $ 0.76 $ (0.22 ) $ 0.08 $ 0.07
$ 0.69
For the three months ended
June 30, 2016 Reported Impact of
GAAP 2016 DCCA Non-GAAP Total revenues
$ 83,944 $ - $ 83,944 Compensation costs 20,623 10,719
31,342 Distribution costs 10,501 - 10,501 Other operating expenses
4,940 - 4,940 Total
expenses 36,064 10,719 46,783 Operating income before
management fee 47,880 (10,719 ) 37,161 Other expense, net
(2,563 ) - (2,563 ) Income before management fee and income
taxes 45,317 (10,719 ) 34,598 Management fee expense 1,133
2,327 3,460 Income before income
taxes 44,184 (13,046 ) 31,138 Income tax expense 16,641
(4,916 ) 11,725 Net income attributable
to GAMCO Investors, Inc. $ 27,543 $ (8,130 ) $ 19,413
Net income per share attributable to GAMCO Investors, Inc.:
Basic $ 0.94 $ (0.28 ) $ 0.66 Diluted $ 0.93 $
(0.28 ) $ 0.66
For the six months
ended June 30, 2017 Impact
of Reported Impact of Impact of AC
RSA GAAP 2017 DCCA 2016 DCCA
Acceleration Non-GAAP Total revenues $ 173,517
$ - $ - $ - $ 173,517 Compensation costs 54,715 19,206
(5,759 ) (3,683 ) 64,479 Distribution costs 21,708 - - - 21,708
Other operating expenses 10,471 -
- - 10,471 Total expenses
86,894 19,206 (5,759 ) (3,683 ) 96,658 Operating income
before management fee 86,623 (19,206 ) 5,759 3,683 76,859
Other expense, net (4,535 ) - - - (4,535 ) Income before
management fee and income taxes 82,088 (19,206 ) 5,759 3,683 72,324
Management fee expense 4,520 3,552
(1,484 ) 368 6,956 Income before
income taxes 77,568 (22,758 ) 7,243 3,315 65,368 Income tax expense
29,854 (8,761 ) 2,791
1,034 24,918 Net income attributable to GAMCO
Investors, Inc. $ 47,714 $ (13,997 ) $ 4,452 $ 2,281
$ 40,450 Net income per share attributable to
GAMCO Investors, Inc.: Basic $ 1.65 $ (0.48 ) $ 0.15
$ 0.08 $ 1.40 Diluted $ 1.58 $ (0.45 ) $ 0.14
$ 0.07 $ 1.35
For the
six months ended June 30, 2016 Reported Impact
of GAAP 2016 DCCA Non-GAAP
Total revenues $ 165,329 $ - $ 165,329 Compensation costs
40,897 21,131 62,028 Distribution costs 21,218 - 21,218 Other
operating expenses 9,312 - 9,312
Total expenses 71,427 21,131 92,558 Operating income
before management fee 93,902 (21,131 ) 72,771 Other expense,
net (5,378 ) - (5,378 ) Income before management fee and
income taxes 88,524 (21,131 ) 67,393 Management fee expense
2,213 4,526 6,739 Income before
income taxes 86,311 (25,657 ) 60,654 Income tax expense
32,743 (9,736 ) 23,007 Net income
attributable to GAMCO Investors, Inc. $ 53,568 $ (15,921 ) $
37,647 Net income per share attributable to GAMCO
Investors, Inc.: Basic $ 1.83 $ (0.54 ) $ 1.29
Diluted $ 1.82 $ (0.54 ) $ 1.28
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, 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-K 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: http://www.businesswire.com/news/home/20170803006453/en/
GAMCO Investors, Inc.Kieran Caterina or Diane M.
LaPointe914-921-5149 or 7763SVPs and Co-Chief Accounting
OfficersorFor further information please
visitwww.gabelli.com
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