Business Wire | Nov 6, 2020 04:39PM EST

GAMCO Investors, Inc. Reports Results for the Third Quarter 2020

Nov. 06, 2020

GREENWICH, Conn.--(BUSINESS WIRE)--Nov. 06, 2020--GAMCO Investors, Inc. ("GAMCO") (NYSE: GBL) today reported its operating results for the 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 GAMCO announced in August that it approved a $0.25 per share shareholder designated charitable contribution ("SDCC"), a 25% increase from last year's $0.20 per share contribution under the program.

This program underscores our commitment to managing socially responsible portfolios since 1987, which has evolved to include integrating ESG (environmental, social, and governance) factors into the analysis of companies and the structuring of portfolios.

Since the inception of GAMCO's SDCC program in 2013, and counting the recently announced estimated $5.4 million contribution, shareholders will have designated contributions of close to $37 million to more than 280 charitable institutions. When combined with our other charitable contributions, this boosts our total contributions to approximately $62 million since our initial public offering in February 1999.

Third Quarter Results

Financial Highlights (Unaudited)

Three Months Ended

(In thousands, except per share data) September 30, September 30, 2020 2019

U.S. GAAP Basis

Revenues $ 61,252 $ 75,345

Operating income 31,842 29,568

Net income 16,435 13,626

Diluted earnings per common share $ 0.62 $ 0.50

Weighted average diluted shares outstanding 26,613 27,093

Shares outstanding 27,485 27,548



Assets Under Management

AUM - average (in millions) $ 30,326 $ 35,997

AUM - end of period (in millions) 29,692 35,692

Revenues

- Total revenues for the third quarter of 2020 were $61.3 million compared with $75.3 million in the third quarter of 2019.

- Investment advisory fees were $54.9 million in the third quarter of 2020 versus $67.0 million in the third quarter of 2019:

- Gabelli Funds' revenues were $38.9 million compared to $43.8 million in the third quarter of 2019.

- Institutional and Private Wealth Management revenues, which are generally billed on portfolio values at the beginning of the quarter, were $14.8 million compared to $21.5 million in the year ago quarter.

- SICAV revenues were $1.2 million versus $1.7 million in last year's third quarter.

- Distribution fees from our equity mutual funds and other income were $6.4 million for the quarter versus $8.3 million in 2019.

Operating Income

For the quarter, operating income was $31.8 million versus $29.6 million in the year ago quarter. Waivers of CEO compensation bolstered operating income in the third quarter of 2020 by $10.0 million and by $4.3 million in the third quarter of 2019. Amortization of deferred compensation, which includes the change in GBL share price, a non-cash charge, increased operating costs by $3.6 million in the third quarter of 2019.

Non-Operating Income

Mark to market investment losses were $3.1 million in the third quarter of 2020 versus losses of $5.7 million in the third quarter of 2019. Interest expense was unchanged at $0.7 million in both the third quarter of 2020 and 2019.

We accrued $5.4 million in the third quarter for the previously discussed SDCC of $0.25 per share compared to an accrual of $4.5 million during the third quarter of 2019 for the $0.20 per share SDCC.

Income Taxes

GAMCO's effective tax rate for the quarter ended September 30, 2020 was 27.4% versus 27.1% for the quarter ended September 30, 2019.

Business Highlights

- The COVID-19 pandemic has had no material impact on our operations, including our financial reporting systems, internal control over financial reporting, and disclosure controls and procedures. There has been no material challenge in implementing our business continuity plan. From July 1st to December 31st, GAMCO is paying all teammate health care premiums.

- On August 10th, we announced that its Board of Directors approved a $0.25 per share shareholder designated charitable contribution.

- On August 24th, we hosted our 26th Annual Aerospace & Defense Symposium via webcast. The timely conference featured presentations by leading companies.

- Subsequently, on October 19th, we announced that the first of nine ETFs, the Love Our Planet & People ("LOPP"), an actively managed fund that focuses on environmental issues, is set to launch in November. This Fund reflects the GAMCO team's belief that "our planet and people" are essential to the future of Planet Earth.

- On November 2nd and 3rd, the 44th Annual Auto Symposium hosted virtual presentations from leading automotive companies underscoring industry dynamics with a focus this year on batteries for hybrid and electric vehicles.

- On November 13th, the 2nd Annual Healthcare Symposium will be hosted by Gabelli Funds and the Columbia Business School to discuss today's pressing healthcare issues, including vaccines and therapeutics to treat COVID-19, health policy and reimbursement trends, and healthcare delivery in a virtual world.

Balance Sheet

GAMCO ended the quarter with cash and investments of $140.3 million and short-term debt of $24.2 million.

Return to Shareholders

GAMCO paid $0.5 million in dividends during the third quarter of 2020 and purchased 133,383 shares at an average price of $12.26 per share, or $1.6 million in total.

On November 6, 2020, GAMCO's board of directors declared a regular quarterly dividend of $0.02 per share, which is payable on December 29, 2020 to class A and class B shareholders of record on December 15, 2020.

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 across Value and Growth Equity, ESG-SRI, 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. In addition to its Value strategies, for over 30 years the firm has managed solutions in Growth Equity, Convertibles, SRI, and Merger Arbitrage.

With the global spread of Coronavirus, investors have sought havens in Gold and opportunities in Growth and Global Growth strategies. Year-to-date through September 30, 2020, The Gabelli Growth Fund, with assets in excess of $900 million, achieved returns of 26.0% versus the Russell 1000 Growth index return of 24.3%; The Gabelli Global Growth Fund, with assets in excess of $160 million, achieved returns of 22.9% versus the MSCI All Country World Index return of 1.4%; The Gabelli Gold Fund, with assets nearing $470 million, achieved returns of 35.7% versus the Philadelphia Gold and Silver Index return of 34.7%; and The Teton Convertible Securities Fund, sub-advised by GAMCO, achieved returns of 9.1% versus S&P 500 returns of 5.6%. Please refer to www.gabelli.com for full disclosures on the Funds and their performance. The performance of The Gabelli Growth Fund, The Gabelli Global Growth Fund, The Gabelli Gold Fund, and the Teton Convertible Securities Fund and relevant indexes for the 1-year, 5-year, and 10-year periods ended September 30, 2020 were the following:

1 Year 5 10 Benchmark Years YearsGabelli Growth Fund (AAA) 37.12% 20.07% 16.07% Russell 1000 Growth IndexGabelli Global Growth Fund (AAA) 32.72% 16.62% 13.16% MSCI AC World Index

Gabelli Gold Fund (AAA) 53.57% 22.31% -0.92% Phil. Gold and Silver

Teton Convertible Securities 15.80% 11.89% 9.94% S&P 500Fund (AAA)Russell 1000 Growth Index 37.53% 20.10% 17.25%

S&P 500 Index 15.15% 14.15% 13.74%

MSCI AC World Index 10.44% 10.30% 8.55%

Philadelphia Gold and Silver 63.00% 26.27% -2.01%IndexTable I: Assets Under Management and Fund Flows - 3rd Quarter 2020 (in millions)Fund

Market

distributions,

June 30,

appreciation/

Net cash

net of

September 30,

2020

(depreciation)

flows

reinvestments

2020

Equities:Mutual Funds$

8,651

$

527

$

(313

)

$

(10

)

$

8,855

Closed-end Funds6,859

423

(142

)

(123

)

7,017

Institutional & PWM (a)10,455

632

(548

)

-

10,539

SICAV451

27

(41

)

-

437

Total Equities26,416

1,609

(1,044

)

(133

)

26,848

100% U.S. Treasury Fund2,921

-

(99

)

-

2,822

Institutional & PWM Fixed Income19

-

3

-

22

Total Treasuries & Fixed Income2,940

-

(96

)

-

2,844

Total Assets Under Management$

29,356

$

1,609

$

(1,140

)

$

(133

)

$

29,692

Table I: Assets Under Management and Fund Flows - 3rd Quarter 2020 (inmillions) Fund

Market distributions,

June 30, appreciation/ Net cash net of September 30,

2020 (depreciation) flows reinvestments 2020

Equities:Mutual Funds $ 8,651 $ 527 $ (313 ) $ (10 ) $ 8,855

Closed-end 6,859 423 (142 ) (123 ) 7,017 FundsInstitutional 10,455 632 (548 ) - 10,539 & PWM (a)SICAV 451 27 (41 ) - 437

Total 26,416 1,609 (1,044 ) (133 ) 26,848 Equities 100% U.S. 2,921 - (99 ) - 2,822 Treasury FundInstitutional 19 - 3 - 22 & PWM FixedIncomeTotal 2,940 - (96 ) - 2,844 Treasuries &Fixed IncomeTotal Assets $ 29,356 $ 1,609 $ (1,140 ) $ (133 ) $ 29,692 UnderManagement(a)

Includes $252 and $196 of 100% U.S. Treasury Fund AUM at June 30, 2020 and September 30, 2020, respectively.

(a) Includes $252 and $196 of 100% U.S. Treasury Fund AUM at June 30, 2020 and September 30, 2020, respectively.

Table IIGAMCO INVESTORS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30

September 30

2020

2019

2020

2019

Investment advisory and incentive fees$

54,894

$

67,015

$

168,637

$

200,893

Distribution fees and other income6,358

8,330

19,741

25,195

Total revenues61,252

75,345

188,378

226,088

Compensation costs (a)17,722

29,800

72,488

90,363

Management fee expense (a)-

2,144

3,725

8,302

Distribution costs6,994

8,271

21,258

25,546

Other operating expenses4,694

5,562

14,982

16,936

Total expenses29,410

45,777

112,453

141,147

Operating income31,842

29,568

75,925

84,941

Investment loss(3,092

)

(5,718

)

(12,361

)

(910

)

Interest expense(691

)

(652

)

(1,985

)

(1,962

)

Shareholder-designated contribution(5,436

)

(4,500

)

(5,436

)

(4,500

)

Non-operating loss(9,219

)

(10,870

)

(19,782

)

(7,372

)

Income before income taxes22,623

18,698

56,143

77,569

Provision for income taxes6,188

5,072

17,173

20,034

Net income$

16,435

$

13,626

$

38,970

$

57,535

Net income:Basic$

0.62

$

0.50

$

1.46

$

2.08

Diluted$

0.62

$

0.50

$

1.46

$

2.08

Weighted average shares outstanding:Basic26,531

26,987

26,615

27,612

Diluted26,613

27,093

26,679

27,676

Actual shares outstanding (b)27,485

27,548

27,485

27,548

Table IIGAMCO INVESTORS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

Three Months Ended Nine Months Ended

September 30 September 30

2020 2019 2020 2019

Investment advisory and $ 54,894 $ 67,015 $ 168,637 $ 200,893 incentive feesDistribution fees and other 6,358 8,330 19,741 25,195 incomeTotal revenues 61,252 75,345 188,378 226,088

Compensation costs (a) 17,722 29,800 72,488 90,363

Management fee expense (a) - 2,144 3,725 8,302

Distribution costs 6,994 8,271 21,258 25,546

Other operating expenses 4,694 5,562 14,982 16,936

Total expenses 29,410 45,777 112,453 141,147

Operating income 31,842 29,568 75,925 84,941

Investment loss (3,092 ) (5,718 ) (12,361 ) (910 )

Interest expense (691 ) (652 ) (1,985 ) (1,962 )

Shareholder-designated (5,436 ) (4,500 ) (5,436 ) (4,500 )contributionNon-operating loss (9,219 ) (10,870 ) (19,782 ) (7,372 )

Income before income taxes 22,623 18,698 56,143 77,569

Provision for income taxes 6,188 5,072 17,173 20,034

Net income $ 16,435 $ 13,626 $ 38,970 $ 57,535

Net income:Basic $ 0.62 $ 0.50 $ 1.46 $ 2.08

Diluted $ 0.62 $ 0.50 $ 1.46 $ 2.08

Weighted average sharesoutstanding:Basic 26,531 26,987 26,615 27,612

Diluted 26,613 27,093 26,679 27,676

Actual shares outstanding (b) 27,485 27,548 27,485 27,548

(a)

The CEO waiver reduced compensation costs by $8,546, $3,678, $8,546, and $15,856, respectively and management fee expense by $1,408, $602, $1,408, and $2,291, respectively.

(b)

Includes 1,020 RSA shares at September 30, 2020 and 674 RSA shares at September 30, 2019.

The CEO waiver reduced compensation costs by $8,546, $3,678, $8,546, and(a) $15,856, respectively and management fee expense by $1,408, $602, $1,408, and $2,291, respectively.

(b) Includes 1,020 RSA shares at September 30, 2020 and 674 RSA shares at September 30, 2019.

Table IIIGAMCO INVESTORS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except per share data)

September 30,

December 31,

September 30,

2020

2019

2019

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

125,242

$

86,136

$

86,179

Investments in securities15,071

34,273

32,322

Receivable from brokers5,688

989

4,574

Other receivables23,232

41,557

28,896

Deferred tax asset and income tax receivable10,608

16,389

17,305

Other assets11,318

10,542

10,219

Total assets$

191,159

$

189,886

$

179,495

LIABILITIES AND STOCKHOLDERS' EQUITYPayable to brokers$

-

$

-

$

3

Income taxes payable and deferred tax liabilities360

757

2,314

Compensation payable32,094

64,279

79,841

Accrued expenses and other liabilities42,766

45,942

40,433

Sub-total75,220

110,978

122,591

5.875% Senior Notes (due June 1, 2021)24,209

24,191

24,186

Total liabilities99,429

135,169

146,777

Stockholders' equity (a)91,730

54,717

32,718

Total liabilities and stockholders' equity$

191,159

$

189,886

$

179,495

Table IIIGAMCO INVESTORS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(In thousands, except per share data)

September December September 30, 31, 30,

2020 2019 2019

ASSETSCash, cash equivalents, and U.S. $ 125,242 $ 86,136 $ 86,179Treasury BillsInvestments in securities 15,071 34,273 32,322

Receivable from brokers 5,688 989 4,574

Other receivables 23,232 41,557 28,896

Deferred tax asset and income tax 10,608 16,389 17,305 receivableOther assets 11,318 10,542 10,219

Total assets $ 191,159 $ 189,886 $ 179,495

LIABILITIES AND STOCKHOLDERS' EQUITYPayable to brokers $ - $ - $ 3

Income taxes payable and deferred tax 360 757 2,314 liabilitiesCompensation payable 32,094 64,279 79,841

Accrued expenses and other liabilities 42,766 45,942 40,433

Sub-total 75,220 110,978 122,591

5.875% Senior Notes (due June 1, 2021) 24,209 24,191 24,186

Total liabilities 99,429 135,169 146,777

Stockholders' equity (a) 91,730 54,717 32,718

Total liabilities and stockholders' $ 191,159 $ 189,886 $ 179,495 equity(a)

Shares outstanding of 27,485, 27,380, and 27,548, 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:

(a) Shares outstanding of 27,485, 27,380, and 27,548, 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(Unaudited) September 30, 2019(In thousands, except per share data) Net income, U.S. GAAP basis $ 13,626

Impact of DCCAs on expenses and taxes (a):Compensation costs 2,568

Management fee expense 1,030

Provision for income taxes (864 )

Total impact of DCCAs on expenses and taxes 2,734

Net income, as adjusted $ 16,360

Per fully diluted share:Net income, U.S. GAAP basis $ 0.50

Impact of DCCAs $ 0.10

Net income, as adjusted $ 0.60

(a) The non-GAAP adjustments relate to multiple 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.

Returns represent past performance and do not guarantee future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so, upon redemption, shares may be worth more or less than their original cost. To obtain the most recent month end performance information and 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