Business Wire | Aug 4, 2020 04:06PM EDT

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

Aug. 04, 2020

GREENWICH, Conn.--(BUSINESS WIRE)--Aug. 04, 2020--GAMCO Investors, Inc. ("GAMCO") (NYSE: GBL) today reported its operating results for the quarter ended June 30, 2020.

Over the past several months, 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. 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

Since the inception of GAMCO's shareholder designated charitable contribution ("SDCC") program in 2013, shareholders have designated contributions of over $31 million to over 280 501(c)(3) initiatives, including $4.5 million paid in 2020.

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.

Approximately $57 million has been donated to charities by GAMCO, including through our SDCC program, since our initial public offering in February 1999.

Second Quarter Results

Revenues

Financial Highlights (Unaudited) Three Months Ended(In thousands, except per share data) June 30, June 30, 2020 2019 U.S. GAAP BasisRevenues $ 57,559 $ 76,407

Operating income 18,763 26,760

Net income 11,290 24,017

Diluted earnings per common share $ 0.42 $ 0.88

Weighted average diluted shares outstanding 26,656 27,413

Shares outstanding 27,630 27,743

Assets Under ManagementAUM - average (in millions) $ 29,135 $ 37,011

AUM - end of period (in millions) 29,356 36,924

- Total revenues for the second quarter of 2020 were $57.6 million compared with $76.4 million in the second quarter of 2019.

- Investment advisory fees were $51.5 million in the second quarter of 2020 versus $68.0 million in the second quarter of 2019:

* Gabelli Funds' revenues were $35.8 million compared to $44.2 million in the second quarter of 2019. * Institutional and Private Wealth Management revenues, which are generally billed on portfolio values at the beginning of the quarter, were $14.5 million compared to $22.2 million in the year ago quarter. * SICAV revenues were $1.2 million versus $1.6 million in last year's second quarter.

- Distribution fees from our equity mutual funds and other income were $6.1 million for the quarter versus $8.4 million in 2019.

Operating Income

For the quarter, operating income was $18.8 million versus $26.8 million in the year ago quarter. Amortization of deferred compensation, which includes the change in GBL share price, a non-cash charge, increased operating costs by $0.4 million in the second quarter of 2019.

Non-Operating Income

Mark to market investment gains were $0.4 million in the second quarter of 2020 versus gains of $6.0 million in the second quarter of 2019. Interest expense was $0.6 million in the second quarter of 2020 versus $0.7 million in the second quarter of 2019.

Income Taxes

GAMCO's effective tax rate ("ETR") for the quarter ended June 30, 2020 was 39.1% versus 25.1% for the quarter ended June 30, 2019. The ETR for the second quarter of 2020 was higher by 14.0%, primarily as a result of a 10.6% increase due to the non-deductibility of certain expenses as a result of the 2017 Tax Cuts and Jobs Act.

Business Highlights

- As a result of the COVID-19 pandemic, the majority of our teammates are working remotely. However, there has been no material impact of remote work arrangements on our operations, including our financial reporting systems, internal control over financial reporting, and disclosure controls and procedures, and there has been no material challenge in implementing our business continuity plan.

- On April 2nd, we hosted our 6th Annual Waste & Environmental Services Symposium via webcast. The timely conference featured presentations by leading companies.

- Gabelli Funds filed the registration statement for the Gabelli ActiveShares ETFs in May. These actively managed ETFs will have the same tax and operating cost advantages of mindless ETFs and will be priced intraday.

- On May 15th, we hosted our 35th GAMCO Investor Client Symposium with over 500 clients and prospects attending on a virtual basis.

- On June 4th, the 12th Annual Entertainment & Broadcasting Symposium hosted virtual presentations from more than a dozen companies in media and entertainment.

Balance Sheet

GAMCO ended the quarter with cash and investments of $128.7 million and short-term debt of $24.2 million.

Return to Shareholders

GAMCO paid $0.6 million in dividends during the second quarter of 2020 and purchased 65,704 shares at an average price of $11.74 per share, or $0.8 million in total.

On August 4, 2020, GAMCO's board of directors declared a regular quarterly dividend of $0.02 per share, which is payable on September 29, 2020 to class A and class B shareholders of record on September 15, 2020.

About GAMCO Investors, Inc.

Since inception in 1977, GAMCO has been identified with its research driven approach to equity investing and Private Market Value (PMV) with a CatalystTM investment approach.

GAMCO conducts its investment advisory business principally through two registered investment advisor subsidiaries: Gabelli Funds, LLC (mutual and closed-end funds) and GAMCO Asset Management Inc. (Institutional and Private Wealth Management).

GAMCO provides investment advisory services through 24 mutual funds, 16 closed-end funds, a SICAV and approximately 1,600 institutional and private wealth management accounts, principally in the U.S. The investments are generally in value, growth, gold, utilities, and convertible securities.

Table I: Assets Under Management and Fund Flows - 2nd Quarter 2020 (inmillions) Fund Market distributions, March appreciation/ Net cash net of June 30, 31, 2020 (depreciation) flows reinvestments 2020

Equities:Mutual Funds $ 7,798 $ 1,171 $ (310 ) $ (8 ) $ 8,651

Closed-end 6,084 1,005 (97 ) (133 ) 6,859FundsInstitutional & 10,185 1,518 (1,248 ) - 10,455PWM (a)SICAV 480 37 (66 ) - 451

Total Equities 24,547 3,731 (1,721 ) (141 ) 26,416

Fixed Income:100% U.S. 2,938 4 (21 ) - 2,921Treasury FundInstitutional & 20 - (1 ) - 19PWMTotal Fixed 2,958 4 (22 ) - 2,940IncomeTotal Assets $ 27,505 $ 3,735 $ (1,743 ) $ (141 ) $ 29,356Under Management (a) Includes $263 and $252 of 100% U.S. Treasury Fund AUM at March 31,2020 and June 30, 2020, respectively.

Table IIGAMCO INVESTORS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In thousands, except per share data) Three Months Ended Six Months Ended June 30 June 30 2020 2019 2020 2019

Investment advisory and $ 51,470 $ 67,990 $ 113,743 $ 133,878 incentive feesDistribution fees and other 6,089 8,417 13,383 16,865 incomeTotal revenues 57,559 76,407 127,126 150,743

Compensation costs (a) (b) 25,516 30,216 54,766 60,563

Management fee expense (a) 2,060 4,709 3,725 6,158

Distribution costs 6,634 8,605 14,264 17,275

Other operating expenses 4,586 6,117 10,288 11,374

Total expenses 38,796 49,647 83,043 95,370

Operating income 18,763 26,760 44,083 55,373

Investment income / (loss) 424 5,979 (9,269 ) 4,808

Interest expense (647 ) (655 ) (1,294 ) (1,310 )

Non-operating income / (223 ) 5,324 (10,563 ) 3,498 (loss) Income before income taxes 18,540 32,084 33,520 58,871

Provision for income taxes 7,250 8,067 10,985 14,962

Net income $ 11,290 $ 24,017 $ 22,535 $ 43,909

Net income:Basic $ 0.42 $ 0.88 $ 0.85 $ 1.57

Diluted $ 0.42 $ 0.88 $ 0.84 $ 1.57

Weighted average shares outstanding:Basic 26,629 27,357 26,658 27,929

Diluted 26,656 27,413 26,713 27,973

Actual shares outstanding 27,630 27,743 27,630 27,743 (c)

(a) For the six months ended June 30, 2019, the CEO waiver reducedcompensation costs and managementfee expense by $12,178 and $1,689, respectively.(b) For the six months ended June 30, 2020, compensation costs were reducedby $1,409 due to indexingof deferred compensation to the GBL stock price.(c) Includes 1,031 RSA shares at June 30, 2020 and 668 RSA shares at June30, 2019.

Table IIIGAMCO INVESTORS, INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(In thousands, except per share data) June 30, December June 30, 31, 2020 2019 2019

ASSETSCash and cash equivalents $ 58,117 $ 86,136 $ 52,008

Investments in U.S. Treasury Bills 49,963 - -

Investments in securities 20,669 34,273 36,811

Receivable from brokers 4,677 989 4,188

Other receivables 22,501 41,557 28,176

Deferred tax asset and income tax receivable 9,032 16,389 18,250

Other assets 9,353 10,542 10,923

Total assets $ 174,312 $ 189,886 $ 150,356

LIABILITIES AND STOCKHOLDERS' EQUITYPayable to brokers $ - $ - $ 99

Income taxes payable and deferred tax 4,740 757 1,935liabilitiesCompensation payable 30,947 64,279 65,335

Accrued expenses and other liabilities 37,978 45,942 36,189

Sub-total 73,665 110,978 103,558

Senior Notes (due June 1, 2021) 24,203 24,191 24,180

Total liabilities 97,868 135,169 127,738

Stockholders' equity (a) 76,444 54,717 22,618

Total liabilities and stockholders' equity $ 174,312 $ 189,886 $ 150,356

(a) Shares outstanding of 27,630, 27,380, and 27,743, 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) June 30, 2019(In thousands, except per share data)

Net income, U.S. GAAP basis $ 24,017

Impact of DCCAs on expenses and taxes (a):Compensation costs (603 )

Management fee expense 1,030

Provision for income taxes (102 )

Total impact of DCCAs on expenses and taxes 325

Net income, as adjusted $ 24,342

Per fully diluted share:Net income, U.S. GAAP basis $ 0.88

Impact of DCCAs $ 0.01

Net income, as adjusted $ 0.89

(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.

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CONTACT: Howard Green SVP of Corporate Development (914) 921-7729 www.gabelli.com