Business Wire | Nov 5, 2021 05:10PM EDT

Associated Capital Group, Inc. Reports Third Quarter Results

Nov. 05, 2021

GREENWICH, Conn.--(BUSINESS WIRE)--Nov. 05, 2021--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, 2021.

Financial Highlights - GAAP basis

($'s in 000's except AUM and per share data)

Three months ended Nine months ended

September 30, September 30,

(Unaudited) 2021 2020 2021 2020

AUM - end of period (in $ 1,680 $ 1,251 $ 1,680 $ 1,251 millions)

AUM - average (in 1,651 1,280 1,548 1,437 millions)



Revenues 2,112 1,945 6,926 6,974

Operating Loss (169 ) (3,552 ) (16,945 ) (7,853 )

Investment and other 6,157 14,007 85,454 (33,248 )non-operating income, net

Income/(loss) before 5,988 10,455 68,509 (41,101 )income taxes



Net income/(loss) to shareholders:

Continuing operations, 1,503 5,954 49,774 (31,671 )net of NCI

Discontinued operations, - (139 ) - (632 )net of NCI

Net income/(loss) 1,503 5,815 49,774 (32,303 )

Net income/(loss) per $ 0.07 $ 0.26 $ 2.25 $ (1.44 )share-diluted



Class A shares 3,099 3,370 3,099 3,370 outstanding (thousands)

Class B shares 18,963 18,963 18,963 18,963 outstanding (thousands)

Total shares outstandingat September 30 22,062 22,333 22,062 22,333 (thousands)

Book Value Per Share at $ 42.24 $ 38.25 $ 42.24 $ 38.25 September 30



Giving Back to Society - (Y)our "S" in ESG

On November 5, the Board of Directors of Associated Capital approved a $0.30 per share shareholder designated charitable contribution ("SDCC") for registered shareholders. This is an increase from last year's $0.20 per share contribution. Including the approximate $6.6 million contribution, Associated Capital's SDCC program of corporate giving has resulted in nearly $32 million in donations to over 160 501(c)(3) institutions across the United States since AC was created in 2015.

To be eligible for the 2021 program, shareholders must register their shares by December 1, 2021 in order to participate.

Third Quarter Financial Data

- At September 30, 2021 the book value was $42.24 per share versus $42.21 at June 30, 2021, and $40.36 per share at December 31, 2020.

- Assets under management ended the quarter at $1.68 billion compared to $1.61 billion at June 30, 2021, $1.35 billion at December 31, 2020 and $1.25 billion at September 30, 2020.

Third Quarter Results

Third quarter revenues were $2.1 million, $0.2 million higher than the $1.9 million in revenues for the third quarter of 2020, largely due to higher AUM. Operating expenses were $2.3 million in the third quarter 2021, compared to $5.5 million in the comparable 2020 period primarily due to a $2.4 million one-time credit recorded in the third quarter of 2021. Excluding the one-time item, operating expenses were $4.8 million, $0.7 million lower than 2020, which included start-up costs related to the launch of PMV SPAC.

Net investment and other non-operating income was $6.2 million for the quarter, $7.8 million lower than the $14.0 million generated in the prior year period, driven mainly by lower market performance in Q3 2021.

Our provision for income taxes was $0.5 million for the quarter compared to $3.6 million in the comparable period of 2020.

The increase in book value per share is driven by income during the period, partially offset by the impact of accretion of redeemable non-controlling interest. The discount amount related to the issuance of redeemable noncontrolling interest is being amortized over a period of 18 months through an adjustment to additional paid-in capital and noncontrolling interest (proportionate to our ownership of the SPAC Sponsor) and is also adjusted periodically for income/loss allocated to redeemable noncontrolling interest. Accumulated accretion is expected to reverse upon the consummation of a business combination, which is expected to result in the deconsolidation of PMV SPAC.

Assets Under Management (AUM)

Assets under management at September 30, 2021 were $1.7 billion, up $329 million from year-end 2020 due to net inflows of $268 million and $61 million in market appreciation.



September December September($ in millions) 30, 31, 30,

2021 2020 2020

Merger Arbitrage $ 1,438 $ 1,126 $ 1,091

Event-Driven Value^ 198 180 105 (a)

Other 44 45 55

Total AUM $ 1,680 $ 1,351 $ 1,251

(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 strategies focus on the merger arbitrage strategy which has an absolute return focus of generating returns in excess of short term Treasury Bills, as well as strategies using fundamental, active, event-driven special situations.

Merger Arbitrage

For the third quarter 2021, merger arbitrage generated gross returns of 0.27% (0.02% net of fees), for the year to date period, gross returns were 8.2% (5.9% net of fees), adding to its historical record of positive net returns in 34 of the last 36 years. A summary of our performance by strategy is as follows:

Since Performance^ 3Q YTD 2020 2019 2018 5 Year^ Inception ^(b)(a) '21 '21 (b) (c)Merger Arb Gross 0.27 8.23 9.45 8.55 4.35 7.49 10.38

Net 0.02 5.94 6.70 5.98 2.65 5.14 7.36

(a) All performance is net of fees and expenses, unless otherwise noted. Performance shown for actual fund in this strategy. Other fund performance in this strategy may vary. Performance is no guarantee of future results. (b) Represents annualized returns through September 30, 2021 (c) Inception Date: Merger Arb - Feb-85

Global M&A activity continued its vigorous pace in the third quarter, with deal making reaching $4.4 trillion year to date, an increase of more than 90% compared to 2020. The first nine months of 2021 have already surpassed the full year M&A record set in 2015 at $4.3 trillion. Excluding the $550 billion in SPAC deals in 2021, M&A activity has totaled $3.85 trillion. Acquisitions by private equity funds accounted for 19% of M&A, or about $840 billion, more than double their activity in 2020. Private equity firms are taking advantage of low interest rates, accommodative debt markets, and they are looking to deploy capital from record-breaking fund raises in recent years. The U.S. remains the primary venue for deals, with targets totaling $2 trillion in announced deals, with Technology, Financials and Industrials remaining the most active sectors.

The Merger Arbitrage strategy is offered domestically through partnerships as well as 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 Plc (GMP-LN).

Shareholder Dividends and Buybacks

On November 5, 2021, AC's board of directors declared a semi-annual dividend of $0.10 per share, which is payable on December 15, 2021 to class A and class B shareholders of record on December 1, 2021.

During the third quarter, AC repurchased approximately 38,577 Class A shares, for $1.4 million, at an average investment of $36.19 per share.

Since our spin-off from GBL on November 30, 2015, AC has returned $153.6 million to shareholders through share repurchases, exchange offers, and dividends of $25 million, including the $4.4 million tax-free distribution of Morgan Group Holdings (MGHL) on August 5, 2020.

At September 30, 2021, there were 3.1 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 long term plan has 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.

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) 2021 2020

Operating loss - GAAP $ (16,945 ) $ (7,853 )

Add: management fee expense 7,209 -

Operating loss before management fee - Non-GAAP $ (9,736 ) $ (7,853 )

Table I

ASSOCIATED CAPITAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Amounts in thousands)

September December September 30, 31, 30,

2021 2020 2020

ASSETS



Cash, cash equivalents and US $ 619,772 $ 383,962 $ 47,331 Treasury Bills (a)

Investments in securities and 500,367 495,579 784,963 partnerships (a)

Investment in GAMCO stock (b) 65,578 48,907 33,921

Receivable from brokers (a) 43,481 24,677 21,065

Deferred tax assets - 2,207 10,059

Other receivables 7,071 15,273 7,227

Other assets (a) 22,879 28,900 21,043

Investments in marketable 175,085 175,040 175,002 securities held in trust (a)



Total assets $ 1,434,233 $ 1,174,545 $ 1,100,611



LIABILITIES AND EQUITY



Payable to brokers $ 243,282 $ 6,496 $ 8,443

Income taxes payable, including 12,406 9,746 897 deferred tax liabilities, net

Compensation payable 17,307 18,567 7,445

Securities sold short, not yet 13,603 17,571 12,827 purchased (a)

Accrued expenses and other 4,939 7,823 12,668 liabilities (a)

Deferred underwriting fee payable 6,125 6,125 - (a)

PMV warrant liability 5,590 -

Sub-total $ 303,252 $ 66,328 $ 42,280



Redeemable noncontrolling 199,793 206,828 204,164 interests (a)



Total equity 931,188 901,389 854,167



Total liabilities and equity $ 1,434,233 $ 1,174,545 $ 1,100,611



(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, 2021 for more details on the impact of consolidating these entities. (b) 2,485,900, 2,756,876 and 2,931,791 shares, respectively.

Table II

ASSOCIATED CAPITAL GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

Three Months Ended Nine Months Ended September 30, September 30,

2021 2020 2021 2020

Revenues

Investment advisory and $ 2,014 $ 1,865 $ 6,627 $ 6,424 incentive fees

Other 98 80 299 550

Total revenues 2,112 1,945 6,926 6,974



Compensation costs 2,819 3,026 11,710 8,405

Other operating expenses (764 ) 2,471 4,952 6,422

Total expenses 2,055 5,497 16,662 14,827



Operating income/(loss) 57 (3,552 ) (9,736 ) (7,853 )before management fee



Investment gain/(loss) 5,676 15,603 79,303 (34,770 )

Interest and dividend 107 59 5,288 177income from GAMCO

Interest and dividend 915 1,127 3,580 4,352 income, net

Shareholder-designated (541 ) (2,782 ) (2,717 ) (3,007 )contribution

Investment and othernon-operating income/ 6,157 14,007 85,454 (33,248 )(expense), net



Income/(loss) beforemanagement fee and income 6,214 10,455 75,718 (41,101 )taxes

Management fee 226 - 7,209 -

Income/(loss) before 5,988 10,455 68,509 (41,101 )income taxes

Income tax expense/ 484 3,564 15,094 (8,858 )(benefit)

Income/(loss) fromcontinuing operations, net 5,504 6,891 53,415 (32,243 )of taxes

Income/(loss) fromdiscontinued operations, - (139 ) - (632 )net of taxes

Income/(loss) before 5,504 6,752 53,415 (32,875 )noncontrolling interests

Income/(loss) attributableto noncontrolling 4,001 937 3,641 (572 )interests

Net income/(loss)attributable to Associated $ 1,503 $ 5,815 $ 49,774 $ (32,303 )Capital Group, Inc.'sshareholders



Net income/(loss) pershare attributable to Associated Capital Group,Inc.'s shareholders:

Basic - Continuing $ 0.07 $ 0.27 $ 2.25 $ (1.41 )operations

Basic - Discontinued - (0.01 ) - (0.03 )operations

Basic - Total $ 0.07 $ 0.26 $ 2.25 $ (1.44 )



Diluted - Continuing $ 0.07 $ 0.27 $ 2.25 $ (1.41 )operations

Diluted - Discontinued - (0.01 ) - (0.03 )operations

Diluted - Total $ 0.07 $ 0.26 $ 2.25 $ (1.44 )



Weighted average shares outstanding:

Basic 22,084 22,354 22,141 22,391

Diluted 22,084 22,354 22,141 22,391



Actual shares outstanding 22,062 22,333 22,062 22,333 - end of period

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/20211105005843/en/

CONTACT: Timothy H. Schott Chief Financial Officer (914) 921 8351 Associated-Capital-Group.com