- Book Value was $40.48 per share at year-end
2022
- Year-end AUM: $1.84 billion at December 31, 2022 vs. $1.78
billion at December 31, 2021
- Net Inflows were $100 million for the year
- Full year Merger Arbitrage performance1: +4.47% gross,
+2.75% net
Associated Capital Group, Inc. (“AC” or the “Company”), a
diversified financial services company, today reported its
financial results for the fourth quarter and full year-ended
December 31, 2022.
Financial Highlights – GAAP
basis
($’s in 000’s except AUM and per share
data)
Fourth Quarter
Full Year
(Unaudited)
2022
2021
2022
2021
AUM – end of period (in millions)
$
1,842
$
1,781
$
1,842
$
1,781
AUM – average (in millions)
1,811
1,735
1,817
1,595
Revenues
7,538
13,998
15,228
20,924
Operating Loss
(2,616
)
(2,131
)
(11,262
)
(19,076
)
Investment and other non-operating income,
net
19,550
14,961
(49,203
)
100,415
Income/(loss) before income taxes
16,934
12,830
(60,465
)
81,339
Net income/(loss) to shareholders:
Net income/(loss)
13,664
9,429
(48,907
)
59,203
Net income/(loss) per share-diluted
$
0.62
$
0.43
$
(2.22
)
$
2.68
Class A shares outstanding (thousands)
3,027
3,095
3,027
3,095
Class B shares outstanding (thousands)
18,963
18,963
18,963
18,963
Total shares outstanding (thousands)
21,990
22,058
21,990
22,058
Book Value Per Share
$
40.48
$
42.48
$
40.48
$
42.48
Giving Back to Society – (Y)our “S” in ESG
On November 11, 2022, the Board of Directors of AC approved a
$0.15 per share shareholder designated charitable contribution
(“SDCC”) for registered shareholders as of January 18, 2023. Based
on the program created by Warren Buffett at Berkshire Hathaway, our
corporate charitable giving is somewhat unique in that the
recipients of AC’s charitable contributions are chosen directly by
the shareholders, rather than our corporate officers. Since our
spin off as a public company, the shareholders of AC have donated
approximately $34 million, including $3.0 million for the most
recent SDCC, to over 160 different charities that address a broad
range of local, national, and international concerns.
Fourth Quarter Financial Data
- Assets under management ended the quarter at $1.84 billion
compared to $1.75 billion at September 30, 2022 and $1.78 billion
at December 31, 2021.
- At December 31, 2022, book value per share was $40.48 per share
versus $39.96 per share at September 30, 2022 and $42.48 per share
at December 31, 2021.
Fourth Quarter Results
Fourth quarter revenues of $7.5 million were $6.5 million lower
than the $14.0 million for the fourth quarter of 2021. This was
primarily the result of lower performance-based incentive fees
partially offset by higher management fees based on higher average
AUM.
Total operating expenses, excluding management fee, were $10.2
million in the fourth quarter 2022 compared to $14.9 million in the
comparable 2021 period reflecting lower variable performance-based
compensation expense in 2022.
Net investment and other non-operating income was $19.6 million
for the fourth quarter, an increase of $4.6 million from the $15.0
million recorded in the year ago quarter. This was primarily the
result of the appreciation of our internal portfolios in the last
quarter of 2022.
There was no management fee expense in the fourth quarter due to
losses in 2022 compared to a management fee expense of $1.2 million
in the fourth quarter of 2021. Our provision for income taxes was
$2.9 million for the quarter compared to $2.6 million in the
comparable period of 2021.
Full Year Results
Revenues for the year-ended 2022 were $15.2 million compared to
$20.9 million in 2021, largely the result of lower
performance-based incentive fees offset in part by higher
management fees based on higher average AUM in 2022.
For 2022, the operating loss before management fee was $11.3
million compared to $10.7 million in 2021, a combination of lower
revenues and incrementally higher insurance premiums in 2022.
The net investment and other non-operating loss was $49.2
million versus income of $100.4 million generated in 2021. In 2022,
market volatility brought on by rising interest rates,
geo-political factors, and accelerating inflation impacted AC’s
investments, other than investments in merger arbitrage funds, on a
mark-to-market basis.
In 2022, there was no management fee expense due to losses in
the period compared to a management fee expense of $8.4 million in
2021.
Our income tax rate for the year was 24.7% compared to 21.8% for
the prior year primarily driven by foreign investments and foreign
income which reduced the prior year rate.
Assets Under Management (AUM)
Assets under management at December 31, 2022 reached a record of
$1.84 billion, up $61 million from year-end 2021 due to annual net
inflows of $100 million and market appreciation of $34 million,
partially offset by the impact of currency fluctuations of $73
million from non-US dollar classes of investment funds.
AUM since spin-off:
December 31,
($ in millions)
2022
2021
2020
2019
2018
2017
2016
2015
Merger Arbitrage
$ 1,588
$ 1,542
$ 1,126
$ 1,525
$ 1,342
$ 1,384
$ 1,076
$ 869
Event-Driven Value(a)
222
195
180
132
118
91
133
145
Other
32
44
45
59
60
66
63
66
Total AUM
$ 1,842
$ 1,781
$ 1,351
$ 1,716
$ 1,520
$ 1,541
$ 1,272
$ 1,080
(a)
Assets under management represent the
assets invested in this strategy that are attributable to AC.
Alternative Investment Management
The alternative investment strategy offerings center around our
merger arbitrage strategy which has an absolute return focus of
generating returns independent of the broad equity and fixed income
markets. We also offer strategies utilizing fundamental, active,
event-driven and special situations investments.
Merger Arbitrage
For the fourth quarter 2022, the longest continuously offered
fund in the merger arbitrage strategy generated gross returns of
4.40% (3.45% net of fees). For the full year, gross returns were
4.47% (2.75% net of fees), adding to its historical record of
positive net returns in 36 of the last 38 years. A summary of the
performance is as follows:
Performance%(a)
4Q ‘22
2022
2021
2020
2019
5 Year(b)
Since 1985
(b)(c)
Merger Arb
Gross
4.40
4.47
10.81
9.45
8.55
7.49
10.22
Net
3.45
2.75
7.78
6.70
5.98
5.15
7.24
(a)
Net performance is net of fees and
expenses, unless otherwise noted. Performance shown for an actual
fund in this strategy. The performance of other funds in this
strategy may vary. Past performance is no guarantee of future
results.
(b)
Represents annualized returns through
December 31, 2022
(c)
Inception Date: February 1985
Worldwide M&A activity totaled $3.6 trillion for 2022 with
Technology accounting for a record 20% of deal making. Although
M&A activity was down 37% in 2022 compared to the prior year,
M&A activity is still in line with pre-pandemic levels. It is
important to note that rising nominal interest rates may help to
bolster merger arbitrage returns in the near term, because deal
spreads widen to compensate arbitrageurs for the opportunity cost
of a “riskless” investment (i.e. U.S. treasury bills) and for the
time value of money.
The Merger Arbitrage strategy is offered by mandate and client
type through partnerships and offshore corporations serving
accredited as well as institutional investors. The strategy is also
offered in separately managed accounts, a Luxembourg UCITS and a
London Stock Exchange listed investment company, Gabelli Merger
Plus + Trust Plc (GMP-LN).
Merger Arbitrage (1)
Percent Return (%)
Year
Gross Return
Net Return
90 Day
T-Bills
2022
4.47
2.75
1.50
2021
10.81
7.78
0.05
2020
9.45
6.70
0.58
2019
8.55
5.98
2.25
2018
4.35
2.65
1.86
2017
4.69
2.92
0.84
2016
9.13
6.44
0.27
2015
5.33
3.43
0.03
2014
3.89
2.29
0.03
2013
5.33
3.43
0.05
2012
4.32
2.63
0.07
2011
4.89
3.07
0.08
2010
9.07
6.35
0.13
2009
12.40
9.15
0.16
2008
0.06
-0.94
1.80
2007
6.39
4.26
4.74
2006
12.39
8.96
4.76
2005
9.40
6.63
3.00
2004
5.49
3.69
1.24
2003
8.90
6.26
1.07
2002
4.56
2.45
1.70
2001
7.11
4.56
4.09
2000
18.10
13.57
5.96
1999
16.61
12.31
4.74
1998
10.10
7.21
5.06
1997
12.69
9.21
5.25
1996
12.14
8.84
5.25
1995
14.06
10.27
5.75
1994
7.90
5.53
4.24
1993
12.29
8.91
3.09
1992
7.05
4.78
3.62
1991
12.00
8.76
5.75
1990
9.43
6.67
7.92
1989
23.00
17.55
8.63
1988
45.84
35.66
6.76
1987
-13.67
-14.54
5.90
1986
33.40
26.14
6.24
1985
30.47
22.64
7.82
Average
10.59
7.50
3.22
(1)
The performance above refers to our
longest continuously offered fund in the merger arbitrage
strategy (net and gross returns). Net returns are net of
management and incentive fees. Individual investment returns may
differ due to timing of investment and other factors. Past
performance is not indicative of future results.
Acquisitions
Associated Capital Group's plan is to accelerate the use of its
capital. We intend to leverage our research and investment
capabilities by pursuing acquisitions and alliances that will
broaden our product offerings and add new sources of distribution.
In addition, we may make direct investments in operating businesses
using a variety of techniques and structures to accomplish our
objectives.
Shareholder Dividends and Buybacks
At its meeting on November 11, 2022, the Board of Directors
declared a semi-annual dividend of $0.10 per share which was paid
on December 15, 2022 to shareholders of record on December 1,
2022.
During the fourth quarter, AC repurchased 13,212 Class A shares,
for $0.5 million, at an average investment of $39.66 per share.
Since our spin-off from GAMCO on November 30, 2015, AC has
returned $156.3 million to shareholders through share repurchases
and exchange offers, and paid dividends of $32.1 million.
At December 31, 2022, there were 3.027 million Class A shares
and 18.963 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”). We have also
earmarked proprietary capital for our direct investment business
that invests in new and existing businesses. The direct investment
business is developing along several core pillars including Gabelli
Private Equity Partners, LLC (“GPEP”), formed in August 2017 with
$150 million of authorized capital as a “fund-less” sponsor, and
Gabelli Principal Strategies Group, LLC (“GPS”), created to pursue
strategic operating initiatives.
Operating Loss Before Management Fee
Operating loss before management fee expense represents a
non-GAAP financial measure used by management to evaluate its
business operations. We believe this measure is useful in
illustrating the operating results of the Company as management fee
expense is based on pre-tax income before management fee expense,
which includes non-operating items including investment gains and
losses from the Company’s proprietary investment portfolio and
interest expense.
Year-to-date
($ in 000’s)
2022
2021
Operating loss – GAAP
$
(11,262
)
$
(19,076
)
Add: management fee expense
-
8,426
Operating loss before management fee –
Non-GAAP
$
(11,262
)
$
(10,650
)
Table I
ASSOCIATED CAPITAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Amounts in thousands)
December 31, 2022
December 31, 2021
ASSETS
Cash, cash equivalents and US Treasury
Bills (a)(c)
$
404,463
$
380,044
Investments in securities and partnerships
(a)(c)
435,610
501,706
Investment in GAMCO stock (b)
36,683
60,389
Receivable from brokers (a)
12,072
42,478
Income taxes receivable, including
deferred tax assets, net
10,320
-
Other receivables (a)
6,324
18,409
Other assets (a)(c)
22,218
25,201
Investments in marketable securities held
in trust (a)(c)
-
175,109
Total assets
$
927,690
$
1,203,336
LIABILITIES AND EQUITY
Payable to brokers (a)
$
7,784
$
9,339
Income taxes payable, including deferred
tax liabilities, net
-
8,575
Compensation payable
13,936
19,730
Securities sold short, not yet purchased
(a)
2,874
12,905
Accrued expenses and other liabilities
(a)(c)
2,707
3,580
Deferred underwriting fee payable
(a)(c)
-
6,125
PMV warrant liability (a)(c)
-
5,280
Sub-total
$
27,301
$
65,534
Redeemable noncontrolling interests
(a)(c)
10,193
202,456
Total Associated Capital Group, Inc.
equity
890,196
937,102
Noncontrolling interests (a)(c)
-
(1,756
)
Total equity
890,196
935,346
Total liabilities and equity
$
927,690
$
1,203,336
(a)
Includes amounts related to consolidated
variable interest entities ("VIEs") and voting interest entities
("VOEs"), refer to the Consolidated Financial Statements included
in the 10-K report to be filed for the year ended December 31, 2022
for more details on the impact of consolidating these entities.
(b)
2,407,000, and 2,417,500 shares,
respectively.
(c)
Reflects the deconsolidation of PMV
Sponsor and SPAC during 2022.
Table II
ASSOCIATED CAPITAL GROUP,
INC.
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except
per share data)
Three Months Ended
December 31,
Year Ended
December 31,
2022
2021
2022
2021
Revenues
Investment advisory and incentive fees
$
7,392
$
13,903
$
14,801
$
20,530
Other
146
95
427
394
Total revenues
7,538
13,998
15,228
20,924
Compensation costs
8,352
12,747
18,883
24,457
Other operating expenses
1,802
2,165
7,607
7,117
Total expenses
10,154
14,912
26,490
31,574
Operating income/(loss) before management
fee
(2,616
)
(914
)
(11,262
)
(10,650
)
Investment gain/(loss)
16,214
14,102
(56,513
)
93,405
Interest and dividend income from
GAMCO
97
154
446
5,442
Interest and dividend income, net
4,952
2,777
9,971
6,357
Shareholder-designated contribution
(1,713
)
(2,072
)
(3,127
)
(4,789
)
Investment and other non-operating
income/(expense), net
19,550
14,961
(49,203
)
100,415
Income/(loss) before management fee and
income taxes
16,934
14,047
(60,465
)
89,765
Management fee
-
1,217
-
8,426
Income/(loss) before income taxes
16,934
12,830
(60,465
)
81,339
Income tax expense/(benefit)
2,855
2,611
(14,943
)
17,705
Income/(loss) before noncontrolling
interests
14,079
10,219
(45,522
)
63,634
Income/(loss) attributable to
noncontrolling interests
415
790
3,385
4,431
Net income/(loss) attributable to
Associated Capital Group, Inc.’s shareholders
$
13,664
$
9,429
$
(48,907
)
$
59,203
Net income/(loss) per share attributable
to Associated Capital Group, Inc.’s shareholders:
Basic
$
0.62
$
0.43
$
(2.22
)
$
2.68
Diluted
$
0.62
$
0.43
$
(2.22
)
$
2.68
Weighted average shares outstanding:
Basic
21,998
22,059
22,024
22,120
Diluted
21,998
22,059
22,024
22,120
Actual shares outstanding – end of
period
21,990
22,058
21,990
22,058
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.
____________________________________________ 1 Performance is
shown in US dollars and does not include the impact of currency
hedging programs related to non-US dollar classes of certain
investment funds.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230207006216/en/
Douglas R. Jamieson Chief Executive Officer (203) 629-9595
Associated-Capital-Group.com
Associated Capital (NYSE:AC)
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