Business Wire | Feb 2, 2021 02:00PM EST

GAMCO Investors, Inc. Reports Results for the Fourth Quarter 2020 and Year Ended December 31, 2020

Feb. 02, 2021

GREENWICH, Conn.--(BUSINESS WIRE)--Feb. 02, 2021--GAMCO Investors, Inc. ("GAMCO") (NYSE: GBL) today reported its operating results for the quarter ended December 31, 2020.

Fourth Quarter Results

Financial Highlights (Unaudited) Three Months Ended Year Ended(In thousands, except December September December December Decemberper share data) 31, 2020 30, 2020 31, 2019 31, 2020 31, 2019 U.S. GAAP BasisRevenues $ 71,348 $ 61,252 $ 86,280 $ 259,726 $ 312,368

Operating income 23,684 31,842 33,043 99,609 117,984

Net income 19,723 16,435 24,382 58,693 81,917

Diluted earnings per $ 0.74 $ 0.62 $ 0.91 $ 2.20 $ 2.98common shareWeighted average 26,680 26,613 26,892 26,680 27,479diluted sharesoutstandingShares outstanding 27,503 27,485 27,380 27,503 27,380

Assets UnderManagementAUM - end of period $ 32,561 $ 29,692 $ 36,475 $ 32,561 $ 36,475(in millions)AUM - average (in 30,928 30,326 35,940 30,992 36,443millions) Giving Back to Society - (Y)our "S" in ESG

The Board of Directors approved in August 2020 a $0.25 per share shareholder designated charitable contribution ("SDCC"), a 25% increase from the prior year's $0.20 per share designation under the program. We estimate this will total approximately $5.4 million. Since the inception of GAMCO's SDCC program in 2013, and counting this current amount, shareholders will have designated charitable gifts of close to $37 million to more than 280 501(c)(3) institutions. When combined with our other charitable donations, this boosts our total contributions to approximately $62 million since our initial public offering in February 1999.

SHAREHOLDERS HAVE UNTIL THE RECORD DATE OF FEBRUARY 28, 2021 TO REGISTER THEIR SHARES WITH OUR TRANSFER AGENT IN ORDER TO PARTICIPATE IN THE CURRENT SDCC.

This charitable program underscores our giving back to society as part of our commitment to managing socially responsible portfolios since 1987, which has evolved to include integrating ESG (environmental, social, and governance) factors.

Actively managed non-transparent ETFs

On February 1, 2021, we launched our first actively managed non-transparent ETF, the Love our Planet & People (LOPP) ETF. In an effort to encourage investment, and to acknowledge our appreciation for our private wealth and mutual fund clients, we will offer a loyalty program under which the first $100 million invested in LOPP will incur no fees or expenses for at least one year. The advisor is absorbing these costs underscoring our emphasis on the environment, and to incentivize our clients' investment in the future of planet and our people.

Revenues - Sequential Growth

- Total revenues for the fourth quarter of 2020 were $71.3 million compared with $61.3 million in the third quarter of 2020. This increase includes incentive fees of $8.5 million in the fourth quarter and none in the third quarter.

- Investment advisory fees were $65.0 million in the fourth quarter of 2020 versus $54.9 million in the third quarter of 2020:

- Gabelli Funds' revenues were $40.3 million compared to $38.9 million in the third quarter of 2020.

- Institutional and Private Wealth Management revenues, which are generally billed on portfolio values at the beginning of the quarter, were $15.0 million compared to $14.8 million in the third quarter of 2020.

- SICAV revenues were $1.2 million for each quarter.

- Distribution fees from our equity mutual funds and other income were $6.4 million for both quarters.

Operating Income

For the fourth quarter of 2020, operating income was $23.7 million versus $31.8 million in the third quarter. Waivers of CEO compensation bolstered operating income in the fourth quarter of 2020 by $4.7 million and by $10.0 million in the third quarter of 2020.

Non-Operating Income

Mark-to-market investment gains were $3.9 million in the fourth quarter of 2020 versus losses of $3.1 million in the third quarter of 2020. Interest expense was $0.6 million in the fourth quarter of 2020 and $0.7 million in the third quarter of 2020.

Income Taxes

GAMCO's effective tax rate for the quarter ended December 31, 2020 was 28.4% versus 27.4% for the quarter ended September 30, 2020.

Year over Year

Total revenues for 2020 were $259.7 million compared with $312.4 million in 2019.

For 2020, operating income of $99.6 million was bolstered by a $14.7 million benefit from CEO compensation waivers. Operating income for 2019 was $118.0 million, enhanced by the $27.2 million benefit from CEO compensation waivers but reduced by $19.3 million of deferred compensation amortization, a non-cash charge which includes the impact of the change in GBL share price.

For the year, mark-to-market investment losses were $6.6 million higher at $15.9 million in 2020 versus losses of $9.3 million in 2019. Interest expense was unchanged at $2.6 million for the full years 2020 and 2019.

GAMCO's effective tax rate for 2020 was 29.9% versus 24.6% for 2019. This increase is primarily as a result of non-deductibility of certain expenses as a result of the 2017 Tax Cuts and Jobs Act.

Business Highlights

- The COVID-19 pandemic has had no material impact on our operations, including our financial reporting systems, internal controls over financial reporting, and disclosure controls and procedures. From July 1st to December 31st, GAMCO paid the premiums for all teammates enrolled in our healthcare plans.

- On November 2nd and 3rd, Gabelli Funds hosted the 44th Annual Auto Symposium with virtual presentations from leading automotive companies with a particular focus on the EV ecosystem.

- On November 13th, Gabelli Funds and the Columbia Business School hosted the 2nd Annual Healthcare Symposium which included panels that discussed vaccines and therapeutics to treat COVID-19, health policy and reimbursement trends, and healthcare delivery in a virtual world.

- On January 4th, GAMCO International SICAV launched GAMCO Convertible Securities. The fund, managed by our Dinsmore team, leverages the firm's history of investing in dedicated convertible security portfolios since 1979. Multiple share classes were available at launch and are tailored for global institutional investors as well as select non-U.S. retail investors.

- On January 7th, we received regulatory approval for our actively managed non-transparent ETFs. We launched the first fund, Love our Planet & People, on February 1, 2021, and the second one, Gabelli Growth Innovators, is expected to launch later in February.

Balance Sheet

GAMCO ended the year with cash and investments of $124.2 million and short-term debt of $24.2 million. Also of note was the reduction in payables of over $36 million.

Return to Shareholders

During the quarter, GAMCO paid an extra $0.90 per share dividend in addition to the regular $0.02 per share for a total of $25.2 million. The Company purchased 42,116 shares for $0.5 million, at an average price of $12.98 per share.

On February 2, 2021, GAMCO's board of directors declared a regular quarterly dividend of $0.02 per share, which is payable on March 30, 2021 to class A and class B shareholders of record on March 16, 2021.

About GAMCO Investors, Inc.

GAMCO is known for its research-driven approach to equity investing. GAMCO conducts its investment advisory business principally through two subsidiaries: GAMCO Asset Management Inc. (approximately 1,500 institutional and private wealth separate accounts, principally in the U.S.) and Gabelli Funds, LLC (24 open-end funds, a SICAV, and 16 closed-end funds). GAMCO serves a broad client base including institutions, intermediaries, offshore investors, private wealth, and direct retail investors.

GAMCO offers a wide range of solutions for clients across Value and Growth Equity, ESG, Convertibles, sector-focused strategies including Gold and Utilities, Merger Arbitrage, and Fixed Income. In 1977, GAMCO launched its flagship All Cap Value strategy, Gabelli Value, and in 1986 launched its mutual fund business.

Table I: Assets Under Management and Fund Flows - 4th Quarter 2020 (inmillions) Fund

Market distributions,

September Client Client appreciation/ net of December 30, 31,

2020 Inflows Outflows (depreciation) reinvestments 2020

Equities:Mutual Funds $ 8,855 $ 305 $ (726) $ 1,147 $ (40) $ 9,541

Closed-end 7,017 40 (57) 900 (127) 7,773FundsInstitutional 10,539 155 (544) 2,221 - 12,371& PWM (a)SICAV 437 90 (91) 38 - 474

Total 26,848 590 (1,418) 4,306 (167) 30,159Equities 100% U.S. 2,822 700 (1,153) 1 - 2,370Treasury FundInstitutional 22 10 - - - 32& PWM FixedIncomeTotal 2,844 710 (1,153) 1 - 2,402Treasuries &Fixed IncomeTotal Assets $ 29,692 $ 1,300 $ (2,571) $ 4,307 $ (167) $ 32,561UnderManagement (a) Includes $196 and $166 of 100% U.S. Treasury Fund AUM at September 30, 2020and December 31, 2020, respectively.Table IIGAMCO INVESTORS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share data)Three Months Ended

Twelve Months Ended

December 31

December 31

2020

2019

2020

2019

Investment advisory and incentive fees$

64,991

$

78,197

$

233,628

$

279,090

Distribution fees and other income6,357

8,083

26,098

33,278

Total revenues71,348

86,280

259,726

312,368

Compensation costs (a)29,859

33,165

102,347

123,528

Management fee expense (a)1,651

1,661

5,376

9,963

Distribution costs7,216

8,680

28,474

34,226

Other operating expenses8,938

9,731

23,920

26,667

Total expenses47,664

53,237

160,117

194,384

Operating income23,684

33,043

99,609

117,984

Investment gain/(loss)4,492

(1,307)

(7,869)

(2,217)

Interest expense(635)

(647)

(2,620)

(2,609)

Shareholder-designated contribution-

-

(5,436)

(4,500)

Non-operating loss3,857

(1,954)

(15,925)

(9,326)

Income before income taxes27,541

31,089

83,684

108,658

Provision for income taxes7,818

6,707

24,991

26,741

Net income$

19,723

$

24,382

$

58,693

$

81,917

Net income:Basic$

0.75

$

0.91

$

2.21

$

2.99

Diluted$

0.74

$

0.91

$

2.20

$

2.98

Weighted average shares outstanding:Basic26,439

26,801

26,571

27,407

Diluted26,680

26,892

26,680

27,479

Actual shares outstanding (b)27,503

27,380

27,503

27,380

Table IIGAMCO INVESTORS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share data) Three Months Ended Twelve Months Ended

December 31 December 31

2020 2019 2020 2019

Investment advisory and incentive $ 64,991 $ 78,197 $ 233,628 $ 279,090feesDistribution fees and other 6,357 8,083 26,098 33,278incomeTotal revenues 71,348 86,280 259,726 312,368

Compensation costs (a) 29,859 33,165 102,347 123,528

Management fee expense (a) 1,651 1,661 5,376 9,963

Distribution costs 7,216 8,680 28,474 34,226

Other operating expenses 8,938 9,731 23,920 26,667

Total expenses 47,664 53,237 160,117 194,384

Operating income 23,684 33,043 99,609 117,984

Investment gain/(loss) 4,492 (1,307) (7,869) (2,217)

Interest expense (635) (647) (2,620) (2,609)

Shareholder-designated - - (5,436) (4,500)contributionNon-operating loss 3,857 (1,954) (15,925) (9,326)

Income before income taxes 27,541 31,089 83,684 108,658

Provision for income taxes 7,818 6,707 24,991 26,741

Net income $ 19,723 $ 24,382 $ 58,693 $ 81,917

Net income:Basic $ 0.75 $ 0.91 $ 2.21 $ 2.99

Diluted $ 0.74 $ 0.91 $ 2.20 $ 2.98

Weighted average sharesoutstanding:Basic 26,439 26,801 26,571 27,407

Diluted 26,680 26,892 26,680 27,479

Actual shares outstanding (b) 27,503 27,380 27,503 27,380

(a)The CEO waiver reduced compensation costs by $3,821, $7,154, $12,367, and $23,010, respectively and management fee expense by $885, $1,928, $2,293, and $4,219, respectively.(b)Includes 1,080 RSA shares at December 31, 2020 and 661 RSA shares at December 31, 2019. The CEO waiver reduced compensation costs by $3,821, $7,154, $12,367, and(a) $23,010, respectively and management fee expense by $885, $1,928, $2,293, and $4,219, respectively.(b) Includes 1,080 RSA shares at December 31, 2020 and 661 RSA shares at December 31, 2019.Table IIIGAMCO INVESTORS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(In thousands, except per share data)December 31,

December 31,

2020

2019

ASSETSCash, cash equivalents, and U.S. Treasury Bills$

98,313

$

86,136

Investments in securities25,845

34,273

Receivable from brokers5,833

989

Other receivables32,524

41,557

Deferred tax asset and income tax receivable9,462

16,389

Other assets11,896

10,542

Total assets$

183,873

$

189,886

LIABILITIES AND STOCKHOLDERS' EQUITYPayable to brokers$

1

$

-

Securities sold, not yet purchased799

-

Income taxes payable and deferred tax liabilities2,381

757

Compensation payable21,543

64,279

Accrued expenses and other liabilities48,023

45,942

Sub-total72,747

110,978

5.875% Senior Notes (due June 1, 2021)24,215

24,191

Total liabilities96,962

135,169

Stockholders' equity (a)86,911

54,717

Total liabilities and stockholders' equity$

183,873

$

189,886

(a) Shares outstanding of 27,503, and 27,380, respectively. Non-GAAP information and reconciliation:

Management believes the use of non-GAAP measures provides relevant information to allow investors to view operating trends, perform analytical comparisons and benchmark performance between periods for its core operating results. Management uses non-GAAP measures in its financial, investing and operational decision-making process, for internal reporting and as part of its forecasting and budgeting processes. GAMCO's calculation of non-GAAP measures may not be comparable to other companies due to potential differences between companies in the method of calculation. Non-GAAP measures should not be considered a substitute for related U.S. GAAP measures.

The following table reconciles the U.S. GAAP basis amounts, as reported, to the non-GAAP measures:

Table IIIGAMCO INVESTORS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(In thousands, except per share data) December 31, December 31,

2020 2019

ASSETSCash, cash equivalents, and U.S. Treasury Bills $ 98,313 $ 86,136

Investments in securities 25,845 34,273

Receivable from brokers 5,833 989

Other receivables 32,524 41,557

Deferred tax asset and income tax receivable 9,462 16,389

Other assets 11,896 10,542

Total assets $ 183,873 $ 189,886

LIABILITIES AND STOCKHOLDERS' EQUITYPayable to brokers $ 1 $ -

Securities sold, not yet purchased 799 -

Income taxes payable and deferred tax liabilities 2,381 757

Compensation payable 21,543 64,279

Accrued expenses and other liabilities 48,023 45,942

Sub-total 72,747 110,978

5.875% Senior Notes (due June 1, 2021) 24,215 24,191

Total liabilities 96,962 135,169

Stockholders' equity (a) 86,911 54,717

Total liabilities and stockholders' equity $ 183,873 $ 189,886

(a) Shares outstanding of 27,503, and 27,380, respectively. Non-GAAP information and reconciliation:

Management believes the use of non-GAAP measures provides relevant information to allow investors to view operating trends, perform analytical comparisons and benchmark performance between periods for its core operating results. Management uses non-GAAP measures in its financial, investing and operational decision-making process, for internal reporting and as part of its forecasting and budgeting processes. GAMCO's calculation of non-GAAP measures may not be comparable to other companies due to potential differences between companies in the method of calculation. Non-GAAP measures should not be considered a substitute for related U.S. GAAP measures.

The following table reconciles the U.S. GAAP basis amounts, as reported, to the non-GAAP measures:

Three Months Ended Year Ended(Unaudited) December December December December(In thousands, except per share 31, 31, 31, 31,data) 2020 2019 2020 2019 Net income, U.S. GAAP basis $ 19,723 $ 24,382 $ 58,693 $ 81,917

Impact of DCCAs on expenses andtaxes (a):Compensation costs - 1,660 (1,409) 14,791

Management fee expense - 1,030 - 4,538

Provision for income taxes - (646) 349 (4,639)

Total impact of DCCAs on expenses - 2,044 (1,060) 14,690and taxesNet income, as adjusted $ 19,723 $ 26,426 $ 57,633 $ 96,607

Per fully diluted share:Net income, U.S. GAAP basis $ 0.74 $ 0.91 $ 2.20 $ 2.98

Impact of DCCAs $ - $ 0.08 $ (0.04) $ 0.54

Net income, as adjusted $ 0.74 $ 0.99 $ 2.16 $ 3.52

(a) The non-GAAP adjustments relate to multiple deferred cash compensationagreements ("DCCAs"). CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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 may cause our actual results to differ from our expectations include risks associated with the duration and scope of the ongoing coronavirus pandemic resulting in volatile market conditions, 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 named executive officer compensation. We also direct your attention to the more specific discussions of these and other risks, uncertainties and other important factors contained in our Annual Report on 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.

Gabelli Funds, LLC is a registered investment adviser with the Securities and Exchange Commission and is a wholly owned subsidiary of GAMCO Investors, Inc. (NYSE: GBL).

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. The prospectus, which contains more complete information about this and other matters, should be read carefully before investing. To obtain a prospectus, please call 800 GABELLI or visit www.gabelli.com

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CONTACT: Howard Green SVP of Corporate Development (914) 921-7729

CONTACT: For further information please visit www.gabelli.com