- Book Value per share ended the quarter at $41.72 per share vs $41.22 at March 31, 2021
- Record level of AUM: $1.84 billion at March 31, 2022 compared to $1.78 billion at December 31, 2021 and $1.50 billion at March 31, 2021
- Net AUM inflows were $76 million for the quarter
- Company continues to review staffing for a Private Equity Fund
GREENWICH, Conn.--(BUSINESS WIRE )--Associated Capital Group, Inc. (“AC” or the “Company”), a diversified financial services company, today reported its financial results for the first quarter ended March 31, 2022.
($’s in 000’s except AUM and per share data)
AUM – end of period (in millions)
Investment and other non-operating income, net
Income/(loss) before income taxes
Net income/(loss) to shareholders:
Net income/(loss) per share-diluted
Class A shares outstanding (thousands)
Class B shares outstanding (thousands)
First quarter revenues of $2.6 million were $0.3 million higher than the $2.3 million in revenues for the first quarter of 2021, largely due to higher AUM. Total operating expenses, excluding management fee, were $5.9 million in the first quarter 2022 compared to $6.0 million in the comparable 2021 period.
Net investment and other non-operating income/(loss) was $(15.0) million for the first quarter, a swing of $45.7 million from the $30.7 million income generated in the first quarter of 2021. The primary drivers included a $24.4 million decrease related to our holdings of GBL and affiliated mutual funds as well as a decrease of $9.7 million related to various partnership investments. This year over year change was broadly the result of market volatility in Q1 2022 driven by rising interest rates, accelerating inflation and geo-political factors, which led to the S&P 500 dropping 4.6% in the first quarter of 2022 as compared to an increase of 6.2% in the first quarter of 2021.
No management fee expense was incurred in the first quarter of 2022 quarter due to a loss in the period. Management fee expense of $2.7 million was recorded in the first quarter of 2021.
Our provision for income taxes was a benefit of $4.8 million for the quarter compared to expense of $5.6 million in the comparable period of 2021, primarily driven by losses in the 2022 period. The increase in tax rate is driven by the allocation of nontaxable income to redeemable noncontrolling interests in a period of consolidated net losses.
Assets under management at March 31, 2022 reached $1.84 billion, up $58 million from year-end 2021 due to net inflows of $76 million and market appreciation of $2 million, offset by the impact of currency fluctuations of non-US dollar classes of investment funds of $(20) million.
(a) Assets under management represent the assets invested in this strategy that are attributable to Associated Capital Group, Inc.
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 factors.
For the first quarter 2022, merger arbitrage generated gross returns of 0.85% (0.49% net of fees). A summary of our performance is as follows:
(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. Past performance is no guarantee of future results. (b) Represents annualized returns through March 31, 2022 (c) Inception Date: Merger Arb - Feb-85
Merger and acquisition activity remained robust in the first quarter of 2022, with global M&A totaling $1.0 trillion, the seventh consecutive quarter that M&A exceeded $1.0 trillion. Technology was the most active sector for deal making, accounting for 25% of all deal activity in the first quarter for a total of $259 billion. Technology was followed by Financials and Real Estate as the most active sectors, accounting for 13% and 12% of deal activity, respectively. Following years of record fundraising, private equity remained very active announcing $291 billion of acquisitions, an increase of 18% compared to 2021 and accounted for 29% of M&A in the first quarter. The U.S. remained the preferred venue for deal making accounting for 51% of deal activity and totaling $521 billion, although that was a decline of 19% compared to 2021. Large deals were in vogue in the first quarter as deals like Activision Blizzard’s $67 billion acquisition by Microsoft and Allegheny Corp.’s $14 billion acquisition by Berkshire Hathaway propelled deals greater than $10 billion to $254 billion, an increase of 46% compared to 2021.
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).
At its meeting on May 4, 2022, the Board of Directors declared a semi-annual dividend of $0.10 per share payable June 29, 2022 to shareholders of record on June 15, 2022.
During the first quarter, AC repurchased 7,536 Class A shares, for $0.3 million, at an average investment of $38.84 per share.
Since our spin-off from GBL on November 30, 2015, AC has returned $154.0 million to shareholders through share repurchases, and exchange offers, in addition to paying dividends of $27.7 million, including the $4.4 million tax-free distribution of Morgan Group Holdings (MGHL) on August 5, 2020.
At March 31, 2022, 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.
Operating loss before management fee – Non-GAAP
ASSOCIATED CAPITAL GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Amounts in thousands)
Cash, cash equivalents and US Treasury Bills (a)
Investments in securities and partnerships (a)
Investment in GAMCO stock (b)
Investments in marketable securities held in trust (a)
Income taxes payable, including deferred tax liabilities, net
Securities sold short, not yet purchased (a)
Accrued expenses and other liabilities (a)
Deferred underwriting fee payable (a)
Total Associated Capital Group, Inc. equity
(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 March 31, 2022 for more details on the impact of consolidating these entities. (b) 2,417,500, 2,417,500, and 2,756,876 shares, respectively.
ASSOCIATED CAPITAL GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data)
Investment advisory and incentive fees
Operating loss before management fee
Interest and dividend income from GAMCO
Interest and dividend income, net
Investment and other non-operating income/(expense), net
Income/(loss) before management fee expense and income taxes
Income/(loss) before income taxes
Income/(loss) before noncontrolling interests
Income/(loss) attributable to noncontrolling interests
Net income/(loss) attributable to Associated Capital Group, Inc.’s (“AC”) shareholders
Net income/(loss) per share attributable to AC’s shareholders:
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.
Timothy H. Schott Chief Financial Officer (203) 629-9595 Associated-Capital-Group.com
Timothy H. Schott Chief Financial Officer (203) 629-9595 Associated-Capital-Group.com