GBL Gamco Investors Inc

• AUM grew 7.8% to $43.1 billion year-to-year
• Fourth quarter 2017 diluted EPS was $0.46 compared with $1.07 a year ago
• Adjusted EPS was $0.78 compared with $0.78 a year ago

GAMCO Investors, Inc. (“GAMCO”) (NYSE:GBL) today reported fourth quarter 2017 revenues of $98.7 million, net income of $13.5 million, and earnings of $0.46 per diluted share. This compares to fourth quarter 2016 revenues of $100.0 million, net income of $32.7 million, and earnings of $1.07 per diluted share. On an adjusted basis, fourth quarter 2017 net income was $23.1 million, and earnings were $0.78 per diluted share versus fourth quarter 2016 net income of $23.6 million and earnings of $0.78 per diluted share. Adjusted net income and adjusted earnings per share are non-GAAP performance measures and are explained and reconciled with the most comparable GAAP numbers starting on page 11.

Our fourth quarter 2017 AUM was up 7.8% from the prior year and unchanged from $43.1 billion at September 30, 2017. Market appreciation of $1.2 billion was offset by net outflows of $1.1 billion and distributions, net of reinvestments, of $0.1 billion.

Average AUM was $43.0 billion for the fourth quarter of 2017 versus $42.3 billion for the third quarter of 2017 and $39.3 billion for the fourth quarter of 2016.

As previously disclosed, the Company entered into deferred compensation agreements for the Chief Executive Officer for three distinct periods: 2016 (entire year); the first half of 2017 and the fourth quarter of 2017. These agreements provided the Company with increased flexibility to pay down debt related to the spin-off of Associated Capital in November 2015. The deferred compensation expense is recognized ratably over its vesting period, resulting in a $12.7 million increase in compensation expense and management fee year-over-year. The Company also incurred expenses in the fourth quarter of 2017 relating to the revaluation of deferred tax assets and liabilities, net, related to the Tax Cuts and Jobs Act (the “Act”) ($8.2 million), early extinguishment of the $110 million 4.5% convertible note ($3.3 million) and the accelerated vesting of RSAs ($1.3 million).

This contributed to lowering operating income to $39.5 million in the fourth quarter of 2017 from the $52.0 million in the year-ago quarter.

                Financial Highlights Fourth Quarter YTD ($'s in 000's except AUM and per share data) 2017 2016 2017 2016   AUM - end of period (in millions) $ 43,063 $ 39,954 (a) $ 43,063 $ 39,954 (a) AUM - average (in millions) 42,965 39,328 42,016 38,878                                   GAAP Revenues $ 89,613 $ 84,650 $ 351,382 $ 337,579 Incentive fees   9,053   15,300   9,142   15,421 Total revenues $ 98,666 $ 99,950 $ 360,524 $ 353,000   Operating income 39,524 52,031 145,020 191,796   Income before income taxes 34,886 50,569 132,888 182,227 Effective tax rate 61.3 % 35.4 % 41.4 % 35.7 %   Net income 13,495 32,692 77,809 117,121   Net income per fully diluted share       $ 0.46   $ 1.07       $ 2.60       $ 3.92                                       Non-GAAP Operating income $ 42,667 $ 41,455 $ 158,949 $ 153,218   Adjusted income before income taxes 37,197 35,995 136,314 129,285 Adjusted effective tax rate 37.8 % 34.5 % 37.8 % 37.0 %   Adjusted net income 23,147 23,583 84,811 81,399   Adjusted net income per fully diluted share       $ 0.78   $ 0.78       $ 2.82       $ 2.74       Weighted average diluted shares outstanding 30,336 31,241 30,947 30,170   Shares outstanding at December 31 28,974 29,463 28,974 29,463   See the reconciliation to the comparable U.S. GAAP measures starting on page 11. (a) Adjusted to include $270 million of Merger Arbitrage assets at December 31, 2016.  

Revenues

• Total revenues for the fourth quarter of 2017 were $98.7 million compared with $100.0 million in the prior year.
• Investment advisory fees, excluding incentive fees, rose to $78.7 million in the fourth quarter of 2017 from $73.6 million in the fourth quarter of 2016 highlighted by revenues from our open-end and closed-end funds of $51.1 million, an increase from $47.5 million in the year-ago quarter. Institutional and Private Wealth Management accounted for $26.2 million of the revenues in 2017 compared to $25.3 million in 2016. SICAV revenues accelerated to $1.4 million in 2017 from $0.7 million in 2016.
• Incentive fees earned were $9.1 million and $15.3 million during the fourth quarter ended December 31, 2017 and December 31, 2016, respectively.
• Distribution fees from our open-end equity funds and other income were $10.9 million for the fourth quarter of 2017 versus $11.1 million in the prior-year quarter.

Operating Income

As noted, there were several distinct items in both quarters that impacted our results. Operating income before management fee was $39.5 million in the fourth quarter of 2017 versus $52.0 million in the prior-year period. The cash compensation deferrals raised operating costs by $12.7 million, comprised of the absence of the $14.6 million expense in the fourth quarter of 2016 coupled with a $1.9 million expense reduction in the fourth quarter of 2017. The Company also recorded $1.3 million of compensation expense for the acceleration of most of the RSAs outstanding. Excluding these items adjusted operating income before management fee was $38.5 million in the fourth quarter of 2017 versus $37.5 million in the year-ago quarter.

Other expense

We recognized $4.6 million in net other expenses in the fourth quarter of 2017 versus net other expenses of $1.5 million in the fourth quarter of 2016. During the fourth quarter of 2017, we repurchased the $110 million convertible note at $103, resulting in a $3.3 million loss on extinguishment of debt. In the fourth quarter of 2017, we also made $0.3 million of charitable contributions. Interest expense decreased by $1.0 million year-over-year, reflecting a reduction in outstanding debt to $89.1 million at December 31, 2017 from $234.0 million at December 31, 2016. Investment income for 2017 was $0.8 million vs. $1.5 million in 2016.

Income Taxes

The Company’s effective tax rate (“ETR”) for the quarter ended December 31, 2017 was 61.3% versus 35.4% for the quarter ended December 31, 2016. The Act that was enacted in December 2017 resulted in an $8.2 million, or $0.27 per fully diluted share, write down of net deferred tax assets. Absent this change the effective rate for the quarter would have been 37.8%.

Included in the fourth quarter 2017 income tax expense relating to the Act enacted in the United States in December 2017 were the following:

• $10.7 million tax expense related to the revaluation of certain deferred income tax assets;
• $2.5 million non-cash tax benefit related to the revaluation of certain deferred income tax liabilities

These amounts, which are based on reasonable estimates, may require further adjustments as additional guidance from the U.S. Department of Treasury is provided, as changes in GAMCO’s assumptions occur, and as further information and interpretations become available.

In addition, the fourth quarter income tax expense included a $0.5 million discrete tax expense related to the acceleration of stock-based compensation awards.

We previously disclosed an estimated ETR for 2018 of between 33% and 36%. We now expect the 2018 ETR to be lower than that range, but we continue to evaluate the impact of the Act’s provisions.

Balance Sheet

GAMCO made substantial progress in reducing its debt since the November 2015 spin-off of Associated Capital Group, Inc. from $357 million to $89.1 million as of December 31, 2017. As a result, Standard & Poor’s recently revised its outlook to stable from negative and reaffirmed our debt rating at BBB-.

During the quarter, we fully extinguished the $110 million 4.5% convertible note and prepaid $20 million of the amount outstanding on the 4% PIK note.

Total deferred compensation payable at December 31, 2017 was $120.5 million, of which $61.5 million is included in the GAAP balance sheet and $59.0 million of which will be recorded in 2018 and 2019, ratably over the vesting periods of each of the three deferral agreements, in accordance with GAAP.

We ended the quarter with cash of $17.8 million, investments of $36.8 million, and gross debt of $89.1 million. We have $500 million available on our universal shelf registration. Together with earnings from operations, the shelf provides us with flexibility to pay down debt, do acquisitions, perform lift-outs, seed new investment strategies, and co-invest, as well as to fund shareholder compensation, including share repurchases and dividends.

Deferred Compensation

GAMCO entered into a third agreement with its Chief Executive Officer on September 30, 2017, which deferred his cash compensation for the fourth quarter of 2017 until April 2019 under similar terms to the prior two deferrals.

Total deferred compensation payable at December 31, 2017 was $120.5 million, of which $61.5 million is included in the GAAP balance sheet and $59.0 million of which will be recorded in 2018 and 2019, ratably over the vesting periods of each of the three deferral agreements, in accordance with GAAP.

Returns to Shareholder

During the quarter ended December 31, 2017, we repurchased 194,226 shares at an average price of $29.33 per share for a total investment of $5.7 million. We also distributed $0.6 million in dividends. Since our IPO in February 1999, we have returned $1.9 billion in total to shareholders consisting of $1.0 billion of spin-offs, $491.0 million in the form of dividends, and $453.1 million through stock buybacks of approximately 10.4 million shares.

On February 6, 2018, GAMCO’s Board of Directors declared a regular quarterly dividend of $0.02 per share payable on March 27, 2018 to its Class A and Class B shareholders of record on March 13, 2018.

Business Highlights

• On October 26, 2017, the GAMCO Natural Resources, Gold & Income Trust completed its offering of $30 million of 5.2% Series A Cumulative Preferred Stock. The preferred stock is perpetual, non-callable for five years, and was issued at $25 per share.
• During December 2017, the Company completed two rights offerings for two of its closed-end funds, The Gabelli Equity Trust Inc. and The Gabelli Global Small and Mid Cap Value Trust, which raised a combined $203 million. Both offerings were heavily oversubscribed.
• We will be launching our third exchange traded managed fund, the Gabelli RBITM NextSharesTM Trust (the “Fund”). The Fund will invest primarily in equity securities, such as common stock of domestic and foreign services and equipment companies focused on physical asset development, including roads, bridges, and infrastructure (“RBI”).

Subsequent Event

As previously disclosed, on February 1, 2018, our affiliate, Associated Capital Group, Inc. (“AC”), commenced an exchange offer for up to one million shares of its Class A shares. Tendering shareholders will receive 1.35 GAMCO Class A shares that AC holds in exchange for each share of AC tendered. The exchange offer is scheduled to expire at 5:00 p.m., New York City time, on March 5, 2018, unless earlier extended or terminated. This AC exchange offer has no impact on the number of issued and outstanding GAMCO shares.

About GAMCO Investors, Inc.

GAMCO Investors, Inc., through its subsidiaries, manages open-end funds and closed-end funds (Gabelli Funds, LLC) and private advisory accounts (GAMCO Asset Management Inc.).

        December 31, December 31, 2017 2016 Equities: Open-end Funds $ 13,747 $ 13,462 Closed-end Funds 8,053 7,150 Institutional & PWM - direct (a) 13,420 13,441 Institutional & PWM - sub-advisory 5,432 3,783 SICAV   510   320 (b) Total Equities   41,162   38,156 Fixed Income: Money-Market Fund 1,870 1,767 Institutional & PWM   31   31 Total Fixed Income   1,901   1,798 Total Assets Under Management $ 43,063 $ 39,954

(a)

 

Includes $261 million and $290 million of Money Market Fund AUM at December 31, 2017 and December 31, 2016, respectively.

(b)

Adjusted to include $270 million of Merger Arbitrage assets.

 

The Company reported Assets Under Management as follows (in millions):

      Table I: Fund Flows - 4th Quarter 2017       Fund Market distributions, September 30, appreciation/ Net cash net of December 31, 2017 (depreciation)   flows reinvestments 2017 Equities: Open-end Funds $ 13,762 $ 278 $ (255 ) $ (38 ) $ 13,747 Closed-end Funds 7,668 282 230 (127 ) 8,053 Institutional & PWM - direct 13,893 523 (996 ) - 13,420 Institutional & PWM - sub-advisory 5,346 139 (53 ) - 5,432 SICAV (a)   504   12   (6 )   -     510 Total Equities   41,173   1,234   (1,080 )   (165 )   41,162 Fixed Income: Money-Market Fund 1,890 5 (25 ) - 1,870 Institutional & PWM   26   -   5     -     31 Total Fixed Income   1,916   5   (20 )   -     1,901 Total Assets Under Management $ 43,089 $ 1,239 $ (1,100 ) $ (165 ) $ 43,063     Table II: Fund Flows - Full Year 2017 Fund Market distributions, December 31, appreciation/ Net cash net of December 31, 2016 (depreciation)   flows reinvestments 2017 Equities: Open-end Funds $ 13,462 $ 1,632 $ (1,264 ) $ (83 ) $ 13,747 Closed-end Funds 7,150 994 392 (483 ) 8,053 Institutional & PWM - direct 13,441 2,046 (2,067 ) - 13,420 Institutional & PWM - sub-advisory 3,783 661 988 (b) - 5,432 SICAV (a)   320   41   149     -     510 Total Equities   38,156   5,374   (1,802 )   (566 )   41,162 Fixed Income: Money-Market Fund 1,767 14 89 - 1,870 Institutional & PWM   31   -   -     -     31 Total Fixed Income   1,798   14   89     -     1,901 Total Assets Under Management $ 39,954 $ 5,388 $ (1,713 ) $ (566 ) $ 43,063

(a)

 

Adjusted to include $270 million of Merger Arbitrage assets at December 31, 2016.

(b)

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 December 31, 2017 2016   Investment advisory and incentive fees $ 87,763 $ 88,865 Distribution fees and other income   10,903     11,085   Total revenues 98,666 99,950   Compensation costs 36,536 24,442 Distribution costs 11,074 11,403 Other operating expenses   7,321     8,932   Total expenses 54,931 44,777   Operating income before management fee 43,735 55,173   Investment income 833 1,483 Loss on extinguishment of debt (3,300 ) - Interest expense (1,891 ) (2,945 ) Shareholder-designated contribution   (280 )   -   Other expense, net   (4,638 )   (1,462 )   Income before management fee and income taxes 39,097 53,711 Management fee expense   4,211     3,142   Income before income taxes 34,886 50,569 Income tax expense   21,391     17,877   Net income attributable to GAMCO Investors, Inc. $ 13,495   $ 32,692     Net income per share attributable to GAMCO Investors, Inc.: Basic $ 0.46   $ 1.12     Diluted $ 0.46   $ 1.07     Weighted average shares outstanding: Basic   29,103     29,062     Diluted   30,336     31,241     Actual shares outstanding (a)   28,974     29,463     Notes: (a) Includes 19,400 and 424,340 of RSAs, respectively.   See GAAP to non-GAAP reconciliation on page 9.           Table IV   GAMCO INVESTORS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)   For the Year Ended December 31, 2017 2016   Investment advisory and incentive fees $ 316,705 $ 308,459 Distribution fees and other income   43,819     44,541   Total revenues 360,524 353,000   Compensation costs 134,170 86,572 Distribution costs 44,447 44,189 Other operating expenses   23,221     23,925   Total expenses 201,838 154,686   Operating income before management fee 158,686 198,314   Investment income 5,465 3,105 Loss on extinguishment of debt (3,300 ) - Interest expense (10,160 ) (12,674 ) Shareholder-designated contribution   (4,137 )   -   Other expense, net   (12,132 )   (9,569 )   Income before management fee and income taxes 146,554 188,745 Management fee expense   13,666     6,518   Income before income taxes 132,888 182,227 Income tax expense   55,079     65,106   Net income attributable to GAMCO Investors, Inc. $ 77,809   $ 117,121     Net income per share attributable to GAMCO Investors, Inc.: Basic $ 2.68   $ 4.01     Diluted $ 2.60   $ 3.92     Weighted average shares outstanding: Basic   28,980     29,182     Diluted   30,947     30,170     Actual shares outstanding (a)   28,974     29,463     Notes: (a) Includes 19,400 and 424,340 of RSAs, respectively. See GAAP to non-GAAP reconciliation on page 9.                           Table V GAMCO INVESTORS, INC. UNAUDITED QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)   2017 2016 1st 2nd 3rd 4th 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Full Year Quarter Quarter Quarter Quarter Full Year Income Statement Data:   Revenues $ 85,917 $ 87,600 $ 88,341 $ 98,666 $ 360,524 $ 81,385 $ 83,944 $ 87,721 $ 99,950 $ 353,000   Expenses   41,310     45,584     60,013     54,931     201,838     35,363     36,064     38,482     44,777     154,686     Operating income before management fee 44,607 42,016 28,328 43,735 158,686 46,022 47,880 49,239 55,173 198,314   Investment income 509 537 (271 ) (2,747 ) (1,972 ) 591 605 426 1,483 3,105 Interest expense   (2,832 )   (2,749 )   (2,688 )   (1,891 )   (10,160 )   (3,406 )   (3,168 )   (3,155 )   (2,945 )   (12,674 ) Other expense, net (2,323 ) (2,212 ) (2,959 ) (4,638 ) (12,132 ) (2,815 ) (2,563 ) (2,729 ) (1,462 ) (9,569 )   Income before management fee and income taxes 42,284 39,804 25,369 39,097 146,554 43,207 45,317 46,510 53,711 188,745 Management fee expense   2,164     2,356     4,935     4,211     13,666     1,080     1,133     1,163     3,142     6,518   Income before income taxes 40,120 37,448 20,434 34,886 132,888 42,127 44,184 45,347 50,569 182,227 Income tax expense   15,300     14,554     3,834     21,391     55,079     16,102     16,641     14,486     17,877     65,106   Net income attributable to GAMCO Investors, Inc. $ 24,820   $ 22,894   $ 16,600   $ 13,495   $ 77,809   $ 26,025   $ 27,543   $ 30,861   $ 32,692   $ 117,121     Net income per share attributable to GAMCO Investors, Inc.: Basic $ 0.86   $ 0.79   $ 0.57   $ 0.46   $ 2.68   $ 0.89   $ 0.94   $ 1.06   $ 1.12   $ 4.01     Diluted $ 0.82   $ 0.76   $ 0.55   $ 0.46   $ 2.60   $ 0.88   $ 0.93   $ 1.03   $ 1.07   $ 3.92     Weighted average shares outstanding: Basic   28,970     28,896     28,926     29,103     28,980     29,247     29,234     29,185     29,062     29,182     Diluted   31,160     31,100     31,173     30,336     30,947     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 28,328 43,735 158,686 46,022 47,880 49,239 55,173 198,314 Deduct: management fee expense   2,164     2,356     4,935     4,211     13,666     1,080     1,133     1,163     3,142     6,518   Operating income $ 42,443   $ 39,660   $ 23,393   $ 39,524   $ 145,020   $ 44,942   $ 46,747   $ 48,076   $ 52,031   $ 191,796     Operating margin before management fee   51.9 %   48.0 %   32.1 %   44.3 %   44.0 %   56.5 %   57.0 %   56.1 %   55.2 %   56.2 % Operating margin after management fee   49.4 %   45.3 %   26.5 %   40.1 %   40.2 %   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)   December 31, December 31, 2017 2016   ASSETS   Cash and cash equivalents $ 17,821 $ 39,812 Investments 36,790 37,285 Receivable from brokers 1,578 453 Other receivables 45,621 50,756 Income tax receivable and deferred tax asset 15,615 9,349 Other assets   10,861     11,574     Total assets $ 128,286   $ 149,229     LIABILITIES AND EQUITY   Payable to brokers $ 14,926 $ 66 Income taxes payable and deferred tax liabilities 3,128 3,815 Compensation payable (a) 82,907 42,384 Accrued expenses and other liabilities   34,454     35,656   Sub-total 135,415 81,921   5.875% Senior notes (due June 1, 2021) 24,144 24,120 4.5% Convertible note (due August 15, 2021) - 109,835 4% PIK note (due November 30, 2020) 50,000 100,000 1.6% AC Note (due February 28, 2018)   15,000     -   Total debt   89,144     233,955   Total liabilities 224,559 315,876   GAMCO Investors, Inc.'s stockholders' deficit   (96,273 )   (166,647 )   Total liabilities and equity $ 128,286   $ 149,229     (a)   Excludes $59.0 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 Deferred Cash Compensation Agreement (“DCCA”), First Half 2017 DCCA, and the Fourth Quarter 2017 DCCA that were put in place to enable the Company to more quickly pay down its debt, the acceleration of outstanding RSAs, charitable contributions, closed-end fund launch expenses, extinguishment of debt, and the recently enacted Tax Cuts and Jobs Act.

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 December 31, 2017             Reported Fourth Quarter First Half RSA GAAP 2017 DCCA 2017 DCCA 2016 DCCA Acceleration Other Adjusted   Total revenues $ 98,666 $ - $ - $ - $ - $ - $ 98,666   Compensation costs 36,536 10,318 (4,771 ) (3,148 ) (1,331 ) - 37,604 Distribution costs 11,074 - - - - 11,074 Other operating expenses   7,321     -     -     -     -     -     7,321   Total expenses 54,931 10,318 (4,771 ) (3,148 ) (1,331 ) - 55,999   Operating income before management fee 43,735 (10,318 ) 4,771 3,148 1,331 - 42,667   Other expense, net (4,638 ) - - - - 3,300 (1,338 )   Income before management fee and income taxes 39,097 (10,318 ) 4,771 3,148 1,331 3,300 41,329 Management fee expense   4,211     1,064     (891 )   (715 )   133     330     4,132   Income before income taxes 34,886 (11,382 ) 5,662 3,863 1,198 2,970 37,197 Income tax expense   21,391     (4,325 )   2,152     1,468     455     (7,091 )   14,050   Net income attributable to GAMCO Investors, Inc. $ 13,495   $ (7,057 ) $ 3,510   $ 2,395   $ 743   $ 10,061   $ 23,147     Net income per share attributable to GAMCO Investors, Inc.: Basic $ 0.46   $ (0.24 ) $ 0.12   $ 0.08   $ 0.03   $ 0.35   $ 0.80   Diluted $ 0.46   $ (0.23 ) $ 0.12   $ 0.08   $ 0.02   $ 0.33   $ 0.78           For the three months ended December 31, 2016 Reported     GAAP 2016 DCCA Adjusted   Total revenues $ 99,950 $ - $ 99,950   Compensation costs 24,442 13,718 38,160 Distribution costs 11,403 - 11,403 Other operating expenses   8,932     -     8,932   Total expenses 44,777 13,718 58,495   Operating income before management fee 55,173 (13,718 ) 41,455   Other expense, net (1,462 ) - (1,462 )   Income before management fee and income taxes 53,711 (13,718 ) 39,993 Management fee expense   3,142     856     3,998   Income before income taxes 50,569 (14,574 ) 35,995 Income tax expense   17,877     (5,465 )   12,412   Net income attributable to GAMCO Investors, Inc. $ 32,692   $ (9,109 ) $ 23,583     Net income per share attributable to GAMCO Investors, Inc.: Basic $ 1.12   $ (0.31 ) $ 0.81   Diluted $ 1.07   $ (0.27 ) $ 0.78                       For the year ended December 31, 2017   Reported Fourth Quarter First Half RSA GAAP 2017 DCCA 2017 DCCA 2016 DCCA Acceleration Other Adjusted   Total revenues $ 360,524 $ - $ - $ - $ - $ - $ 360,524   Compensation costs 134,170 10,318 9,619 (12,322 ) (6,810 ) - 134,975 Distribution costs 44,447 - - - - (1,068 ) 43,379 Other operating expenses   23,221     -     -     -     -     -     23,221   Total expenses 201,838 10,318 9,619 (12,322 ) (6,810 ) (1,068 ) 201,575   Operating income before management fee 158,686 (10,318 ) (9,619 ) 12,322 6,810 1,068 158,949   Other expense, net (12,132 ) - - - - 4,336 (7,796 )   Income before management fee and income taxes 146,554 (10,318 ) (9,619 ) 12,322 6,810 5,404 151,153 Management fee expense   13,666     1,064     1,775     (2,887 )   681     540     14,839   Income before income taxes 132,888 (11,382 ) (11,394 ) 15,209 6,129 4,864 136,314 Income tax expense   55,079     (4,325 )   (4,442 )   5,818     1,376     (2,003 )   51,503   Net income attributable to GAMCO Investors, Inc. $ 77,809   $ (7,057 ) $ (6,952 ) $ 9,391   $ 4,753   $ 6,867   $ 84,811     Net income per share attributable to GAMCO Investors, Inc.: Basic $ 2.68   $ (0.24 ) $ (0.24 ) $ 0.32   $ 0.16   $ 0.24   $ 2.93   Diluted $ 2.60   $ (0.23 ) $ (0.22 ) $ 0.30   $ 0.15   $ 0.22   $ 2.82           For the year ended December 31, 2016 Reported       GAAP 2016 DCCA Other Adjusted   Total revenues $ 353,000 $ - $ - $ 353,000   Compensation costs 86,572 45,734 - 132,306 Distribution costs 44,189 - (638 ) 43,551 Other operating expenses   23,925     -     -     23,925   Total expenses 154,686 45,734 (638 ) 199,782   Operating income before management fee 198,314 (45,734 ) 638 153,218   Other expense, net (9,569 ) - - (9,569 )   Income before management fee and income taxes 188,745 (45,734 ) 638 143,649 Management fee expense   6,518     7,782     64     14,364   Income before income taxes 182,227 (53,516 ) 574 129,285 Income tax expense   65,106     (20,069 )   2,849     47,886   Net income attributable to GAMCO Investors, Inc. $ 117,121   $ (33,447 ) $ (2,275 ) $ 81,399     Net income per share attributable to GAMCO Investors, Inc.: Basic $ 4.01   $ (1.15 ) $ (0.08 ) $ 2.79   Diluted $ 3.92   $ (1.07 ) $ (0.08 ) $ 2.74    

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, the effects of the Tax Cuts and Jobs Act, 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, and the ongoing impacts of the Tax Cuts and Jobs Act with respect to tax rates and the non-deductibility of certain portions of NEO compensation. 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.

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GAMCO Investors, Inc.Kieran Caterina or Diane M. LaPointe(914) 921-5149 or 7763SVPs and Co-Chief Accounting OfficersorFor further information please visitwww.gabelli.com