- Performance for Merger Arbitrage in the third quarter was
positive, 3.1% return before expenses
- Book Value per share ended the quarter at $39.96 per share vs
$42.24 at September 30, 2021
- AUM: $1.75 billion at September 30, 2022 compared to $1.78
billion at December 31, 2021 and $1.68 billion at September 30,
2021
- Approved over $3 million to charitable causes via shareholder
designated charitable contribution, bringing total since spin to
$34 million
Associated Capital Group, Inc. (“AC” or the “Company”), a
diversified financial services company, today reported its
financial results for the third quarter ended September
30, 2022.
Financial Highlights - GAAP
Basis
($ in 000's except AUM and per share
data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
AUM - end of period (in millions)
$
1,752
$
1,680
$
1,752
$
1,680
AUM - average (in millions)
1,807
1,651
1,820
1,548
Revenues
2,562
2,112
7,690
6,926
Operating loss
(3,129
)
(169
)
(8,646
)
(16,945
)
Investment and other non-operating
income/(loss), net
(17,789
)
6,157
(68,753
)
85,454
Income/(loss) before income taxes
(20,918
)
5,988
(77,399
)
68,509
Net income/(loss) to shareholders:
Net income/(loss)
(16,498
)
1,503
(62,571
)
49,774
Net income/(loss) per share-diluted
$
(0.75
)
$
0.07
$
(2.84
)
$
2.25
Class A shares outstanding (thousands)
3,041
3,099
3,041
3,099
Class B shares outstanding (thousands)
18,963
18,963
18,963
18,963
Shares outstanding at September 30
(thousands)
22,004
22,062
22,004
22,062
Book value per share at September 30
$
39.96
$
42.24
$
39.96
$
42.24
Third Quarter Financial Data
- Assets under management ended the quarter at $1.75 billion
compared to $1.68 billion at September 30, 2021; but slightly lower
than the $1.80 billion at June 30, 2022.
- At September 30, 2022, book value was $39.96 per share versus
$42.24 per share at September 30, 2021.
- Our Arb-related partnerships were up in the third quarter due
to positive performance. AC’s investments, other than investments
in the Arb funds, were impacted mainly on a mark to market basis
due to the market volatility brought on by rising interest rates,
geo-political factors, and accelerating inflation which negatively
impacted book value per share.
Third Quarter Results
Third quarter revenues of $2.6 million were
$0.5 million higher than revenues in the third quarter of
2021 based on higher average AUM in 2022. Total operating expenses,
excluding management fee expense, were $5.7 million in the
third quarter 2022 compared to $2.1 million in the
comparable 2021 period, reflecting lower variable
performance-based compensation expense and the $2.4 million
one-time credit, for a non-cash accounting adjustment, recorded in
the third quarter of 2021.
Net investment and other non-operating loss was $17.8 million
for the third quarter, a swing of $23.9 million from the $6.2
million income generated in the third quarter of 2021.
In the third quarter of 2022, there was no management fee
expense compared to a management fee expense of $0.2 million in the
third quarter of 2021.
Our provision for income taxes was a benefit of $4.9 million for
the quarter compared to expense of $0.5 million in the comparable
period of 2021. Our effective tax rate for the quarter ended
September 30, 2022 was 23.5% compared to 8.1% for the quarter ended
September 30, 2021.
Assets Under Management (AUM)
Assets under management at September 30, 2022 reached $1.75
billion, down $29 million from year-end 2021 due to the impact of
currency fluctuations of non-US dollar classes of investment funds
of $111 million and market depreciation of $56 million, partially
offset by net inflows of $138 million.
September 30,
June 30,
December 31,
September 30,
2022
2022
2021
2021
($ in millions)
Merger Arbitrage
$
1,518
$
1,591
$
1,542
$
1,438
Event-Driven Value(a)
203
174
195
198
Other
31
37
44
44
Total AUM
$
1,752
$
1,802
$
1,781
$
1,680
(a) Assets under management represent the
assets invested in this strategy that are attributable to
Associated Capital Group, Inc.
Alternative Investment Management
The alternative investment strategy offerings center around our
merger arbitrage strategy which has an absolute return focus of
generating returns independent of the broad equity and fixed income
markets. We also offer strategies utilizing fundamental, active,
event-driven and special situations investments.
Merger Arbitrage
For the third quarter 2022, our longest continuously
offered fund in the merger arbitrage strategy generated gross
returns of 3.07% (2.10% net of fees). A summary of the performance
is as follows:
Since
Performance%(a)
3Q '22
YTD '22
2021
2020
2019
5 Year(b)
Inception(b)(c)
Merger Arb
Gross
3.07
0.07
10.81
9.45
8.55
6.74
10.16
Net
2.10
-0.68
7.78
6.70
5.98
4.53
7.19
(a) Net performance is net of fees and
expenses, unless otherwise noted. Performance shown for an actual
fund in this strategy. The performance of other funds in this
strategy may vary. Past performance is no guarantee of future
results.
(b) Represents annualized returns through
September 30, 2022
(c) Inception Date: Merger Arb -
Feb-1985
Worldwide M&A activity totaled $2.8 trillion for the first
nine months of 2022. The third quarter of 2022 marked the first
quarter since Q2 2020 for deal activity to fall below $1 trillion
against a backdrop of equity market volatility, rising interest
rates, geopolitical instability, and inflationary and recessionary
pressures. However, the third quarter M&A activity is still in
line with pre-pandemic levels. Cross-border M&A is also aligned
with the past few years as the strengthening of the U.S. dollar
provides U.S. acquirers a significant advantage when considering
European targets, for example. It is important to note that
rising nominal interest rates help to bolster merger arbitrage
returns in the near term, because deal spreads widen to compensate
arbitrageurs for the opportunity cost of a “riskless” investment
(i.e. U.S. treasury bills) and for the time value of money.
The Merger Arbitrage strategy is offered by mandate and client
type through partnerships and offshore corporations serving
accredited as well as institutional investors. The strategy is also
offered in separately managed accounts, a Luxembourg UCITS and a
London Stock Exchange listed investment company, Gabelli Merger
Plus + Trust Plc (GMP-LN).
Acquisitions
Associated Capital Group's plan is to accelerate the use of its
capital. We intend to leverage our research and investment
capabilities by pursuing acquisitions and alliances that will
broaden our product offerings and add new sources of distribution.
In addition, we may make direct investments in operating businesses
using a variety of techniques and structures to accomplish our
objectives.
Charitable Contributions, Shareholder Dividends and
Buybacks
AC seeks to be a good corporate citizen by supporting our
community through sponsoring local organizations. On November 11,
2022, the Board of Directors approved up to $3.3 million, approx.
$0.15 per share, for shareholder designated charitable
contributions ("SDCC") by registered shareholders. Including this
contribution, Associated Capital's SDCC program has resulted
in nearly $34 million in donations on behalf of shareholders who
have designated over 160 501(c)(3) organizations across the United
States.
On November 11, 2022, the Board of Directors declared a
semi-annual dividend of $0.10 per share, which is payable
on December 15, 2022 to shareholders of record on December 1,
2022.
During the third quarter, AC repurchased 11,752 Class A shares,
for $0.4 million, at an average price of $37.52 per share.
Since our spin-off from GBL on November 30, 2015, AC has
returned $155.8 million to shareholders through share repurchases,
exchange offers, and dividends of $29.9 million.
At September 30, 2022, there were 3.0 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.). We have also earmarked proprietary capital for
our direct investment business that invests in new and existing
businesses. The direct investment business is developing along
several core pillars including Gabelli Private Equity Partners, LLC
(“GPEP”), formed in August 2017 with $150 million of authorized
capital as a “fund-less” sponsor, and Gabelli Principal Strategies
Group, LLC (“GPS”), created to pursue strategic operating
initiatives.
Operating Loss Before Management Fee
Operating loss before management fee expense represents a
non-GAAP financial measure used by management to evaluate its
business operations. We believe this measure is useful in
illustrating the operating results of the Company as management fee
expense is based on pre-tax income before management fee expense,
which includes non-operating items including investment gains and
losses from the Company’s proprietary investment portfolio and
interest expense.
Year-to-date
($ in 000's)
2022
2021
Operating loss - GAAP
$
(8,646
)
$
(16,945
)
Add: management fee expense
-
7,209
Operating loss before management fee -
Non-GAAP
$
(8,646
)
$
(9,736
)
Table I
ASSOCIATED CAPITAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Amounts in thousands)
September 30,
December 31,
September 30,
2022
2021
2021
ASSETS
Cash, cash equivalents and US Treasury
Bills (a)
$
421,933
$
380,044
$
619,772
Investments in securities and partnerships
(a)(c)
468,702
501,706
500,367
Investment in GAMCO stock (b)
41,218
60,389
65,578
Receivable from brokers (a)
18,163
42,478
43,481
Income taxes receivable, including
deferred tax assets, net
13,170
-
-
Other receivables (a)
1,428
18,409
7,071
Other assets (a)(c)
22,147
25,201
22,879
Investments in marketable securities held
in trust (a)(c)
-
175,109
175,085
Total assets
$
986,761
$
1,203,336
$
1,434,233
LIABILITIES AND EQUITY
Payable to brokers (a)
$
56,356
$
9,339
$
243,282
Income taxes payable, including deferred
tax liabilities, net
-
8,575
12,406
Compensation payable
7,662
19,730
17,307
Securities sold short, not yet purchased
(a)
3,181
12,905
13,603
Accrued expenses and other liabilities
(a)(c)
1,528
3,580
4,939
Tendered shares payable (a)
29,001
-
-
Deferred underwriting fee payable
(a)(c)
-
6,125
6,125
PMV warrant liability (a)(c)
-
5,280
5,590
Total liabilities
$
97,728
$
65,534
$
303,252
Redeemable noncontrolling interests
(a)(c)
9,778
202,456
199,793
Total Associated Capital Group, Inc.
equity
879,255
937,102
931,985
Noncontrolling interests (a)(c)
-
(1,756
)
(797
)
Total equity
879,255
935,346
931,188
Total liabilities and equity
$
986,761
$
1,203,336
$
1,434,233
(a) Includes amounts related to
consolidated variable interest entities ("VIEs") and voting
interest entities ("VOEs"), refer to footnote D of the Condensed
Consolidated Financial Statements included in the 10-Q report to be
filed for the quarter ended September 30, 2022 for more details on
the impact of consolidating these entities.
(b) 2,417,500, 2,417,500 and 2,485,900 shares, respectively. (c)
Reflects the deconsolidation of PMV Sponsor and SPAC during the
quarter ended September 30, 2022.
Table II
ASSOCIATED CAPITAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except
per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Investment advisory and incentive fees
$
2,472
$
2,014
$
7,409
$
6,627
Other revenues
90
98
281
299
Total revenues
2,562
2,112
7,690
6,926
Compensation
3,591
2,819
10,531
11,710
Other operating expenses
2,100
(764
)
5,805
4,952
Total expenses
5,691
2,055
16,336
16,662
Operating loss before management fee
(3,129
)
57
(8,646
)
(9,736
)
Investment gain/(loss)
(19,314
)
5,676
(72,727
)
79,303
Interest and dividend income from
GAMCO
96
107
369
5,288
Interest and dividend income, net
2,635
915
5,019
3,580
Shareholder-designated contribution
(1,206
)
(541
)
(1,414
)
(2,717
)
Investment and other non-operating
income/(loss), net
(17,789
)
6,157
(68,753
)
85,454
Income/(loss) before management fee and
income taxes
(20,918
)
6,214
(77,399
)
75,718
Management fee
-
226
-
7,209
Income/(loss) before income taxes
(20,918
)
5,988
(77,399
)
68,509
Income tax expense/(benefit)
(4,914
)
484
(17,798
)
15,094
Income/(loss) before noncontrolling
interests
(16,004
)
5,504
(59,601
)
53,415
Income/(loss) attributable to
noncontrolling interests
494
4,001
2,970
3,641
Net income/(loss) attributable to
Associated Capital Group, Inc.
$
(16,498
)
$
1,503
$
(62,571
)
$
49,774
Net income/(loss) per share attributable
to Associated Capital Group, Inc.:
Basic
$
(0.75
)
$
0.07
$
(2.84
)
$
2.25
Diluted
$
(0.75
)
$
0.07
$
(2.84
)
$
2.25
Weighted average shares outstanding:
Basic
22,010
22,084
22,033
22,141
Diluted
22,010
22,084
22,033
22,141
Actual shares outstanding - end of
period
22,004
22,062
22,004
22,062
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/20221110006187/en/
Douglas R. Jamieson Chief Executive Officer (203) 629 9595
Associated-Capital-Group.com
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