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Associated Capital Group, Inc. Reports Third Quarter Results

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AC - Associated Capital Group, Inc. reports Q3 2023 financial results with AUM at $1.59 billion, book value per share at $41.43, and $38 million in charitable contributions. The company's alternative investment management strategy, merger arbitrage performance, and plans for acquisitions and shareholder dividends are also highlighted.
Positive
  • AC reported a decrease in AUM from $1.75 billion to $1.59 billion, reflecting net outflows and currency fluctuations.
  • The company's book value per share increased to $41.43 from $39.96, indicating positive financial growth.
  • Investment and other non-operating income improved significantly, with a $105.9 million positive change year-to-date.
  • The merger arbitrage strategy generated gross returns of 2.88% for the third quarter, showcasing strong performance in the alternative investment sector.
  • AC declared a semi-annual dividend of $0.10 per share and repurchased 103,169 Class A shares, demonstrating a commitment to shareholder returns.
Negative
  • None.

– Book Value per share ended the quarter at $41.43 per share vs $39.96 at September 30, 2022

– AUM: $1.59 billion at September 30, 2023 compared to $1.75 billion at September 30, 2022

– Approved $4.3 million shareholder designated charitable contribution for registered shareholders, bringing total to $38 million since our spin-off in 2015

GREENWICH, Conn., Nov. 08, 2023 (GLOBE NEWSWIRE) -- 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, 2023.

Financial Highlights - GAAP Basis
($ in 000's except AUM and per share data)

(Unaudited)Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 2023  2022  2023  2022 
AUM - end of period (in millions)$1,588  $1,752  $1,588  $1,752 
AUM - average (in millions) 1,580   1,807   1,686   1,820 
                
Revenues 2,200   2,562   7,047   7,690 
Operating loss before management fee (Non-GAAP) (3,533)  (3,129)  (9,050)  (8,646)
Investment and other non-operating income/(loss), net 3,794   (17,789)  37,140   (68,753)
Income/(loss) before income taxes 273   (20,918)  25,015   (77,399)
                
Net income/(loss) (16)  (16,498)  21,109   (62,571)
Net income/(loss) per share-diluted 0.00   (0.75)  0.97   (2.84)
                
Class A shares outstanding (000's) 2,672   3,041   2,672   3,041 
Class B "                  " 18,951   18,963   18,951   18,963 
Total     "                  " 21,623   22,004   21,623   22,004 
Book Value per share$41.43  $39.96  $41.43  $39.96 
                

Giving Back to Society – (Y)our “S” in ESG

AC seeks to be a good corporate citizen by supporting our community through sponsoring local organizations. On August 9, 2023, the Board of Directors approved a $0.20 per share shareholder designated charitable contribution ("SDCC") for registered shareholders as of October 16, 2023. Based on the program created by Warren Buffett at Berkshire Hathaway, our corporate charitable giving is unique in that the recipients of AC's charitable contributions are chosen directly by our shareholders, rather than by our corporate officers. Since our spin off as a public company, the shareholders of AC have donated approximately $38 million, including the most recent SDCC, to over 190 501(c)(3) organizations that address a broad range of local, national and international concerns.

Third Quarter Financial Data

– Assets under management ended the quarter at $1.59 billion versus $1.75 billion at September 30, 2022. 

– Book value was $41.43 per share compared to $39.96 per share at September 30, 2022. 

– For the first nine months, Investment and other non-operating income was $37.1 million versus a loss of $68.8 million in the year-ago period. The $105.9 million year to date positive change reflects market appreciation in the current period versus a decline in the first nine months of 2022.

Third Quarter Results

Third quarter revenues were $2.2 million compared to $2.6 million in the third quarter of 2022. Total operating expenses, excluding management fee, were $5.7 million in the third quarter 2023 and $5.7 million in the third quarter 2022.  

Net investment and other non-operating income was $3.8 million for the third quarter, a $21.6 million change from the $17.8 million loss in the third quarter of 2022. The primary drivers of this quarter's results included gains from our GAMCO holdings and merger arbitrage partnerships. Interest income reflected higher interest rates in the 2023 quarter as compared to 2022. 

There was no management fee in the third quarter of 2023 or 2022. Year to date management fee was $3.1 million versus none in the prior year.

Our income tax expense of $0.2 million for the quarter compares to a benefit of $4.9 million in the year ago quarter. The income tax expense in the 2023 quarter is primarily driven by a deferred tax expense from a foreign investment.

Assets Under Management (AUM)

Assets under management at September 30, 2023 were $1.59 billion, $254 million lower than year-end 2022 reflecting net outflows of $259 million, the impact of currency fluctuations in non-US dollar denominated classes of investment funds ($11 million), offset partially by market appreciation of $16 million

 September 30,  December 31,  September 30,
 
 2023  2022  2022
 
($ in millions)           
Merger Arbitrage(a)$1,322  $1,588  $1,518 
Long/Short Value(b) 233   222   203 
Other 33   32   31 
Total AUM$1,588  $1,842  $1,752 

(a) Includes $613, $856, and $775 of sub-advisory AUM related to GAMCO International SICAV - GAMCO Merger Arbitrage, and $148, $206 and $74 of 100% U.S. Treasury Fund managed by GAMCO at September 30, 2023, December 31, 2022 and September 30, 2022, respectively.

(b) AUM represents 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

NANANANA

For the third quarter 2023, the longest continuously offered fund in the merger arbitrage strategy generated gross returns of 2.88% (2.33% net of fees). A summary of the performance is as follows:

                 Full Year         
Performance%(a)3Q '23  3Q '22  YTD '23  YTD '22  2022  2021  2020  2019  5 Year(b)  Since
1985
(b)(c)
 
Merger Arb                                       
Gross 2.88   3.07   2.23   0.07   4.47   10.81   9.45   8.55   7.20   10.07 
Net 2.33   2.10   1.17   -0.68   2.75   7.78   6.70   5.98   4.92   7.12 

(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, 2023
(c) Inception Date: February 1985

Merger and acquisitions activity increased 16% from the second quarter's levels, reaching $2 trillion for the year, a decline of 27% compared to 2022 levels but continuing a trend of higher M&A activity in recent quarters. The U.S. remained the dominant geography for deal making as U.S. targets accounted for 44% of deals, an increase compared to 42% in 2022. Deal making has been most vibrant in the Energy & Power industry totaling $290 billion, and accounting for 14.5% overall, followed by Technology and Healthcare, which accounted for 14.4% and 13.4%, respectively. We believe that despite recent mark-to-market volatility, we remain well positioned to earn absolute returns for our clients. 

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.

Shareholder Dividends and Buybacks

On November 8, 2023, the Board of Directors declared a semi-annual dividend of $0.10 per share which is payable on December 14, 2023 to shareholders of record on December 1, 2023.         

During the third quarter, AC repurchased 103,169 Class A shares, for $3.8 million, at an average price of $36.98 per share.

Since our spin-off from GAMCO on November 30, 2015, AC has returned $169.5 million to shareholders through share repurchases, exchange offers and dividends of $34.3 million.

At September 30, 2023, there were 2.672 million Class A shares and 18.951 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”). 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. We also created Gabelli Principal Strategies Group, LLC (“GPS”) in December 2015 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)2023  2022 
        
Operating loss - GAAP$(12,125) $(8,646)
        
Add: management fee expense(1) 3,075   - 
        
Operating loss before management fee - Non-GAAP$(9,050) $(8,646)

(1) Management fee expense is incentive-based and is equal to 10% of Income before management fee and income taxes and excludes the impact of consolidating entities. For the nine months ended September 30, 2023 and 2022, Income before management fee, income taxes and excluding consolidated entities was income of $30,747 and loss of $80,369, respectively. As a result, $3,075 was accrued for the 10% management fee expense in 2023. There was no management fee accrual in 2022 due to the loss in that period. 

Table I

ASSOCIATED CAPITAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Amounts in thousands)
         
 September 30,  December 31,  September 30, 
 2023  2022  2022 
ASSETS           
            
Cash, cash equivalents and US Treasury Bills$384,214  $404,463  $421,933 
Investments in securities and partnerships 433,480   435,610   468,702 
Investment in GAMCO stock 48,031   36,683   41,218 
Receivable from brokers 16,295   12,072   18,163 
Receivable from brokers (cash held for real estate purchase) 13,059   -   - 
Income taxes receivable, including deferred tax assets, net 7,804   10,320   13,170 
Other receivables 1,616   6,324   1,428 
Other assets 21,883   22,218   22,147 
Total assets$926,382  $927,690  $986,761 
            
LIABILITIES AND EQUITY           
            
Payable to brokers$5,618  $ { "@context": "https://schema.org", "@type": "FAQPage", "name": "Associated Capital Group, Inc. Reports Third Quarter Results FAQs", "mainEntity": [ { "@type": "Question", "name": "What are Associated Capital Group's AUM for Q3 2023?", "acceptedAnswer": { "@type": "Answer", "text": "Associated Capital Group's AUM for Q3 2023 was $1.59 billion, reflecting a decrease from the previous year." } }, { "@type": "Question", "name": "What is the book value per share for Associated Capital Group?", "acceptedAnswer": { "@type": "Answer", "text": "The book value per share for Associated Capital Group was $41.43, showing growth from the previous period." } }, { "@type": "Question", "name": "What is the performance of the merger arbitrage strategy for the third quarter?", "acceptedAnswer": { "@type": "Answer", "text": "The merger arbitrage strategy generated gross returns of 2.88% for the third quarter, highlighting strong performance." } }, { "@type": "Question", "name": "What dividends did Associated Capital Group declare?", "acceptedAnswer": { "@type": "Answer", "text": "Associated Capital Group declared a semi-annual dividend of $0.10 per share." } }, { "@type": "Question", "name": "How many Class A shares did Associated Capital Group repurchase during the third quarter?", "acceptedAnswer": { "@type": "Answer", "text": "Associated Capital Group repurchased 103,169 Class A shares during the third quarter." } } ] }

FAQ

What are Associated Capital Group's AUM for Q3 2023?

Associated Capital Group's AUM for Q3 2023 was $1.59 billion, reflecting a decrease from the previous year.

What is the book value per share for Associated Capital Group?

The book value per share for Associated Capital Group was $41.43, showing growth from the previous period.

What is the performance of the merger arbitrage strategy for the third quarter?

The merger arbitrage strategy generated gross returns of 2.88% for the third quarter, highlighting strong performance.

What dividends did Associated Capital Group declare?

Associated Capital Group declared a semi-annual dividend of $0.10 per share.

How many Class A shares did Associated Capital Group repurchase during the third quarter?

Associated Capital Group repurchased 103,169 Class A shares during the third quarter.

Associated Capital Group, Inc.

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