- September Quarter-end Book Value per share was $38.25 vs.
$38.13 at June 30, 2020
- Quarter-end AUM at $1.25 billion
- All Morgan Group Shares Distributed to AC Shareholders on
August 5, 2020
- PMV Consumer Acquisition (PMVC) Launched in
September
Associated Capital Group, Inc. (“AC” or the “Company”), a
diversified financial services and investment management company,
today reported its financial results for the third quarter ended
September 30, 2020.
Since March, our business contingency plans have functioned
well, allowing teammates to stay close to the companies we invest
in and, at the same time, to focus on our clients. In July, we
welcomed our team to return to the offices on a voluntary basis. In
September, we asked teammates to return to the office on a full
time basis with alternating schedules to keep within government
mandates and to maintain social distancing and team safety. Our
investment in technology has enabled the majority of our teammates
to work-from-home to ensure their safety and health while allowing
us to meet our clients’ needs.
Giving Back to Society
The Board of Directors of Associated Capital announced on August
4th that it approved a nearly $4.5 million - $0.20 per share
shareholder designated charitable contribution (“SDCC”), in line
with last year’s $0.20 per share contribution under the
program.
Since our spin off from GAMCO (NYSE: GBL) in 2015, we have
offered this program of corporate giving through our
shareholder-designated charitable contribution (SDCC) program.
Including the recently announced $4.5 million contribution, we have
donated nearly $25.0 million to over 160 charities across the
United States from the inception of this program in 2015. Only
shareholders who register their shares by February 28, 2021 will be
eligible to participate.
Second Quarter Results
- The net income for the quarter was $0.26 per share, the same as
in the prior year’s third quarter.
- Book value per share ended the quarter at $38.25, after
adjusting for the $0.24 per share spin off of Morgan Group. Stated
another way, had we not done the spinoff, the book value at
September 30, 2020 would have been $38.49 versus $38.13 at June 30,
2020 and $39.93 at December 31, 2019.
- Our investment portfolio generated a gain of $15.6 million in
the third quarter versus a $7.6 million gain in the year ago
quarter, reflecting the mark-to-market impact of our investment
portfolio.
- Assets under management ended the quarter at $1.25 billion
compared to $1.65 billion at September 30, 2019, largely reflecting
the redemption by a client that merged with a company with a
different investment philosophy.
Financial Highlights ($000s except per share data or as
noted)
(Unaudited)
Third Quarter
First Nine Months
2020
2019
2020
2019
AUM - end of period (in millions)
$
1,251
$
1,651
$
1,251
$
1,651
Average AUM (in millions
1,280
1,644
1,437
1,599
Revenues
1,945
2,754
6,974
8,211
Operating loss
(3,552
)
(2,593
)
(7,853
)
(11,148
)
Investment and other non-operating
income/(expense), net
14,007
10,124
(33,248
)
51,751
Income/(loss) before income taxes
10,455
7,531
(41,101
)
40,603
Income/(loss) from continuing
operations
Income/(loss) from discontinued
operations
Net income/(loss)
5,954
(139
5,815
)
6,252
(301
5,951
)
(31,671
(632
(32,303
)
)
)
30,307
(2,141
28,166
)
Net income/(loss) per share – diluted
$
0.26
$
0.26
$
(1.44
)
$
1.25
Shares outstanding at Sept 30
(thousands)
22,333
22,496
22,333
22,496
Third Quarter Overview
Investment advisory fees were $1.9 million for the quarter as
compared to $2.8 million in the third quarter 2019, reflecting a
drop in AUM.
Income/(loss) from discontinued operations includes the results
of G.research, our affiliated institutional research services
business, following the distribution of all of AC’s shares of
Morgan Group on August 5, 2020. All current and prior period
results have been restated to reflect G.research operations as
discontinued.
Net investment and other non-operating gains were $14.0 million
for the quarter versus a gain of $10.1 million a year ago. This
reflects the mark-to-market impact of our ownership of 2.9 million
shares of GBL as well as the mark-to-market gains on our entire
investment portfolio, including the investments in the Gabelli
Merger Plus+ Trust (GMP:LSE) which is consolidated by us.
AC’s effective tax rate in the third quarter ended September 30,
2020 was 34.1% versus 21.8% for the quarter ended September 30,
2019, reflecting primarily two factors: the tax treatment of
charitable contributions and, the rate differential on the
carryback of a net operating loss.
Assets Under Management (AUM)
Assets under management at September 30, 2020 were $1.25
billion, down $465 million from year-end 2019, largely reflecting
redemption primarily due to the merger of a client. Net redemptions
of $456 million plus a $9 million drop in market values accounted
for the change.
Sept 30,
June 30,
December 31,
Sept 30,
2020
2020
2019
2019
(in millions)
Event Merger Arbitrage
$
1,091
$
1,147
$
1,525
$
1,466
Event-Driven Value
105
104
132
128
Other
55
54
59
57
Total AUM
$
1,251
$
1,305
$
1,716
$
1,651
Alternative Investment Management
Associated Capital has two businesses, Event-Driven Asset
Management and Direct Investing.
- Event-Driven Asset Management
The alternative investment strategies focus on fundamental,
active, event-driven special situations and merger arbitrage.
Merger activity in the third quarter topped $1 trillion, an
increase of 94% compared to the second quarter and the strongest
quarter for deal making since the second quarter of 2018. Returns
for the quarter were driven by completed deals, as well as
continued progress on deals in the pipeline.
For third quarter, our gross return was 3.2%, (2.6% net of
fees). The strategy is offered domestically through partnerships
and to institutional investors. Internationally, the strategy is
offered through a number of vehicles, including 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. They are developing along three core
pillars; the first is Gabelli Private Equity Partners, LLC
(“GPEP”), with $150 million of authorized capital as a “fund-less”
sponsor. Secondly we added Gabelli Special Purpose Acquisition
Vehicles (“SPAC”) in 2018. Finally, Gabelli Principal Strategies
Group, LLC. (“GPS”) is in place to pursue strategic operating
initiatives broadly. Our Direct Investing efforts are organized to
invest in various ways, including growth capital, leveraged buyouts
and restructurings, with an emphasis on small and mid-sized
companies in the United States. Our investment sourcing is across a
variety channels including direct owners, private equity funds,
classic agents, and corporate carve outs, (which are positioned for
accelerated growth, as businesses seek to enhance shareholder value
through financial engineering.) The Company’s direct investing
vehicles allow us to acquire companies and create long-term value
with no pre-determined exit timetable. The SPAC vehicles leverage
our capital markets expertise and act to expand deal flow in target
industries. The Company is introducing additional SPACs in the near
term to extend our direct investing efforts.
In Europe, the Gabelli Value for Italy (VALU) Special Purpose
Acquisition, approached its second anniversary in April at the apex
of the Corona virus in Italy. The VALU effort successfully
canvassed private company opportunities in Italy, and generated
deal flow from throughout Europe. We believe the platform is in
place to further expand our direct investment efforts across the
European continent.
On September 22, 2020, AC completed the $175 million initial
public offering of its special purpose acquisition corporation, PMV
Consumer Acquisition Corp. (NYSE:PMVC).
PMV Consumer Acquisition Corp. (“PMV”) was created to pursue an
initial business combination following the consumer globally with
companies having an enterprise valuation in the range of $200
million to $3.5 billion.
AC has a controlling financial interest in PMV that has been
included in the consolidated statement of financial condition of AC
resulting in total assets of $1.1 billion at September 30, 2020,
inclusive of $162 million of assets relating to the consolidation
of PMV. In addition to PMV, there are several other entities that
are consolidated within the financial statements due to AC having a
controlling financial interest.
Acquisitions
A major driver behind creating Associated Capital Group and
spinning it out, was to use our capital to focus on private equity
and late stage venture capital. AC plans remain to focus on
pursuing acquisitions in a variety of markets, with a broad range
of targets including private companies, subsidiaries of public
companies, using an array of structures to accomplish our
objectives, including SPAC’s.
G.research – Spin-off
On October 31, 2019, we consummated the merger between
G.research, LLC (“G.research”) and Morgan Group Holding Co.
(“Morgan Group”) whereby G.research became a wholly owned
subsidiary of Morgan Group (MGHL:OTC).
On March 16, 2020, our board of directors approved the
distribution of AC’s holdings of Morgan Group shares to
shareholders.
On June 9, 2020, Morgan Group amended its certificate of
incorporation to effect a 1-for-100 reverse split which took place
on June 10, 2020.
On August 5, 2020 the distribution of all of AC’s Morgan Group
shares to shareholders of record as of July 30, 2020 was completed.
Associated Capital held 83.3% of the outstanding shares of Morgan
Group. G.research (Morgan Group) is accounted for as a discontinued
operation from August 5.
Shareholder Dividends and Buybacks
During the third quarter, AC repurchased approximately 30,000
Class A shares at an average investment of $37.03 per share for a
total outlay of $1.1 million.
Since our spin-off from GBL on November 30, 2015, AC has
returned $116.1 million to shareholders through share repurchases
and exchange offers, reducing its outstanding shares by 3.3 million
shares, in addition to paying dividends of $21 million.
On November 9, 2020, AC’s board of directors declared a
semi-annual dividend of $0.10 per share, which is payable on
December 15, 2020 to class A and class B shareholders of record on
December 1, 2020.
At September 30, 2020, there were 3.4 million Class A shares and
19.0 million Class B shares outstanding.
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.
The reconciliation of operating loss to operating loss before
management fee expense (non-GAAP) is provided below.
Year-to-date
(In thousands)
2020
2019
Operating loss
($7,853
)
$(11,148
)
Add: management fee expense
-
3,959
Operating loss before management fee
($7,853
)
($7,189
)
Table I ASSOCIATED CAPITAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION (Dollars in thousands)
September 30, December 31, September 30,
2020
2019
2019
ASSETS Cash and cash equivalents
$
47,331
$
342,001
$
345,539
Investments in government securities (less than one year maturity)
330,942
29,037
29,335
Investments in equity securities
454,021
518,792
511,822
Investment in GAMCO stock (2,931,791, 2,935,401 and 3,016,501
shares, respectively)
33,921
57,211
58,973
Receivable from brokers
21,065
23,141
23,502
Deferred tax assets (including taxes receivable of $2,132 in 2020)
10,059
1,820
4,316
Other receivables
7,227
17,439
1,901
Other assets
21,043
13,328
11,513
Investments in government securities held in Trust Account
175,002
-
-
Assets of discontinued operations
-
8,137
6,224
Total assets
$
1,100,611
$
1,010,906
$
993,125
LIABILITIES AND EQUITY Payable to brokers
$
8,443
$
14,889
$
10,277
Income taxes payable
897
3,622
3,881
Compensation payable
7,445
19,536
10,672
Securities sold short, not yet purchased
12,827
16,419
25,474
Accrued expenses and other liabilities
12,668
6,520
2,841
Liabilities of discontinued operations
-
2,100
1,484
Sub-total
42,280
63,086
54,629
Redeemable noncontrolling interests (a)
204,164
50,385
49,699
Total equity
854,167
897,435
888,797
Total liabilities and equity
$
1,100,611
$
1,010,906
$
993,125
(a) Represents third-party capital balances in consolidated
investments funds.
Table II ASSOCIATED CAPITAL
GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Amounts in thousands, except per share data)
Three months ended Sept 30, Nine months ended Sept
30,
2020
2019
2020
2019
Investment advisory and incentive fees
$
1,865
$
2,753
$
6,424
$
8,199
Other revenues
80
1
550
12
Total revenues
1,945
2,754
6,974
8,211
Compensation costs
3,026
3,071
8,405
10,287
Other operating expenses
2,471
1,443
6,422
5,113
Total expenses
5,497
4,514
14,827
15,400
Operating loss before management fee
(3,552
)
(1,760
)
(7,853
)
(7,189
)
Investment gain/(loss)
15,603
7,613
(34,770
)
42,358
Interest and dividend income from GAMCO
59
60
177
180
Interest and dividend income, net
1,127
2,451
4,352
9,213
Shareholder-designed contribution
(2,782
)
-
(3,007
)
-
Investment and other non-operating income/(expense), net
14,007
10,124
(33,248
)
51,751
Income/(loss) before management fee and income taxes
10,455
8,364
(41,101
)
44,562
Management fee
-
833
-
3,959
Income/(loss) before income taxes
10,455
7,531
(41,101
)
40,603
Income tax expense/(benefit)
3,564
1,638
(8,858
)
8,064
Income/(loss) before noncontrolling interests
6,891
5,893
(32,243
)
32,539
Net income attributable to noncontrolling interests
937
(359
)
(572
)
2,232
Income/(loss) from continuing operations
5,954
6,252
(31,671
)
30,307
Loss from discontinued operations, net of taxes
(139
)
(301
)
(632
)
(2,141
)
Net income/(loss) attributable to Associated Capital Group, Inc.
$
5,815
$
5,951
$
(32,303
)
$
28,166
Net income/(loss) per share attributable to Associated
Capital Group, Inc.: Basic- Continuing operations
$
0.27
$
0.27
$
(1.41
)
$
1.34
Basic- Discontinued operations
(0.01
)
(0.01
)
(0.03
)
(0.09
)
Basic - Total
$
0.26
$
0.26
$
(1.44
)
$
1.25
Diluted- Continuing operations
$
0.27
$
0.27
$
(1.41
)
$
1.34
Diluted - Discontinued operations
(0.01
)
(0.01
)
(0.03
)
(0.09
)
Diluted - Total
$
0.26
$
0.26
$
(1.44
)
$
1.25
Weighted average shares outstanding: Basic
22,354
22,514
22,391
22,550
Diluted
22,354
22,514
22,391
22,550
Actual shares outstanding - end of period
22,333
22,496
22,333
22,496
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/20201110006209/en/
Kenneth D. Masiello Chief Accounting Officer (203) 629-2726
Associated-Capital-Group.com
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