Associated Capital Group, Inc. Reports Increased First Quarter Book Value
Associated Capital Group, Inc. reported an increased first quarter book value with assets under management at $1.55 billion compared to $1.59 billion at the end of 2023. Book value per share ended the quarter at $42.80 per share, an increase from $42.11 at the end of 2023. The company's financial results for the first quarter of 2024 showed an operating loss before management fee, but positive investment and other non-operating income. Total revenues increased to $3.0 million from $2.5 million in the previous year. AC's alternative investment management strategy focuses on merger arbitrage, with a positive gross return of 1.33% in the first quarter of 2024. Global M&A activity saw a significant increase in the first quarter of 2024, with the US dominating deal making. AC plans to accelerate the use of capital through acquisitions and alliances, including launching a private equity business.
Increased first quarter book value with assets under management at $1.55 billion compared to $1.59 billion at the end of 2023.
Book value per share ended the quarter at $42.80 per share, an increase from $42.11 at the end of 2023.
Total revenues increased to $3.0 million from $2.5 million in the previous year.
Positive gross return of 1.33% in the first quarter of 2024 from the merger arbitrage strategy.
Significant increase in global M&A activity in the first quarter of 2024, with the US dominating deal making.
Operating loss before management fee was reported in the first quarter of 2024.
Net income and net income per share decreased compared to the previous year.
Total operating expenses, excluding management fee, increased from $5.1 million in the first quarter of 2023 to $6.0 million in the first quarter of 2024.
Net investment and other non-operating income decreased from $24.7 million in the first quarter of 2023 to $22.6 million in the first quarter of 2024.
Effective tax rate increased to 21.5% in the first quarter of 2024 from 8.1% in the same period in 2023.
Insights
The recent asset under management (AUM) decrease from $1.59 billion to $1.55 billion at Associated Capital Group could be a point of concern for investors due to the potential implications it might have on revenue streams and management fees. Notably, the outflows are partially mitigated by market appreciation, suggesting some resilience in investment performance. The shift in book value per share from $42.11 to $42.80 is a modest improvement, reflecting a slight enhancement in the firm's intrinsic value.
On the expense front, there is a discernible increase in operating expenses, mainly driven by marketing and compensation, which could be seen as necessary investments for future growth but may also erode profit margins in the short term. The reported decline in net investment income year-over-year could signal a changing market environment that investors should keep an eye on, especially as it pertains to the company's significant holdings in GAMCO assets.
Furthermore, the semi-annual dividend declaration and share repurchases reflect a shareholder-friendly capital allocation policy. However, investors might want to consider whether these actions are sustainable in the long run, particularly if AUM continues to decrease.
Associated Capital Group's performance in the merger arbitrage space, exhibiting a gross return of 1.33%, is notable for its potential to offer absolute returns irrespective of market directions—a feature that might attract risk-averse investors. Moreover, the increase in global M&A activity, particularly in the US, could position the company favorably should they capitalize on this trend through their alternative investment strategy.
However, the growth in private equity's share of M&A activity may also signal increased competition for such deals, which could affect future performance. The strategic plans to pursue acquisitions and alliances to broaden product offerings and distribution channels suggest a forward-thinking approach, but investors would benefit from monitoring how these strategies materialize and impact financials.
The alignment of financial arrangements with services rendered, as AC now covers the marketing expenses previously paid by Gabelli Funds, displays a strategic restructuring that could lead to more efficient operations. Potential investors should evaluate how these changes in internal cost management might impact profitability and the overall financial health of the company.
Furthermore, the firm's approach to alternative investment management, focusing on merger arbitrage, fundamental, active, event-driven and special situations investments, illustrates a diverse product offering. This diversity may serve as a risk management tool, but it is imperative to assess the performance of these strategies relative to industry benchmarks.
- AUM:
$1.55 billion at March 31, 2024 compared to$1.59 billion at December 31, 2023 - Book Value per share ended the quarter at
$42.80 per share vs$42.11 at December 31, 2023
GREENWICH, Conn., May 09, 2024 (GLOBE NEWSWIRE) -- Associated Capital Group, Inc. (“AC” or the “Company”), a diversified financial services company, today reported its financial results for the first quarter ended March 31, 2024.
Financial Highlights
($ in 000's except AUM and per share data)
| (Unaudited) | Three Months Ended March 31, | |||||||
| 2024 | 2023 | |||||||
| AUM - end of period (in millions) | $ | 1,549 | $ | 1,799 | ||||
| AUM - average (in millions) | 1,556 | 1,841 | ||||||
| Revenues | 3,011 | 2,465 | ||||||
| Operating loss before management fee (Non-GAAP) | (2,988 | ) | (2,590 | ) | ||||
| Investment and other non-operating income/(loss), net | 22,625 | 24,735 | ||||||
| Income/(loss) before income taxes | 17,655 | 19,602 | ||||||
| Net income/(loss) | 13,821 | 17,754 | ||||||
| Net income/(loss) per share-diluted | 0.64 | 0.81 | ||||||
| Class A shares outstanding (000's) | 2,469 | 2,975 | ||||||
| Class B " " | 18,951 | 18,963 | ||||||
| Total " " | 21,420 | 21,938 | ||||||
| Book value per share | $ | 42.80 | $ | 41.30 | ||||
First Quarter Financial Data
- Assets under management ended the quarter at
$1.55 billion versus$1.80 billion at March 31, 2023. - Book value was
$42.80 per share compared to$41.30 per share at March 31, 2023.
First Quarter Results
Total revenues in the first quarter were
Starting in December 2023, the SICAV revenue recognized by the Company for its services increased to
Total operating expenses, excluding management fee, were
Net investment and other non-operating income was
For the quarter ending March 31, 2024, the management fee was
The effective tax rate applied to our pre-tax income for the quarter ended March 31, 2024 was
Assets Under Management (AUM)
Assets under management at March 31, 2024 were
| March 31, | December 31, | March 31, | |||||||||
| ($ in millions) | 2024 | 2023 | 2023 | ||||||||
| Merger Arbitrage(a) | $ | 1,262 | $ | 1,312 | $ | 1,537 | |||||
| Long/Short Value(b) | 251 | 244 | 229 | ||||||||
| Other | 36 | 35 | 33 | ||||||||
| Total AUM | $ | 1,549 | $ | 1,591 | $ | 1,799 | |||||
(a) Includes
(b) Includes
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 first quarter of 2024, the longest continuously offered fund in the merger arbitrage strategy generated gross returns of
| Full Year | |||||||||||||||||||||||||||||||
| Performance%(a) | 1Q '24 | 1Q '23 | 2023 | 2022 | 2021 | 2020 | 5 Year(b) | Since 1985(b)(c) | |||||||||||||||||||||||
| Merger Arbitrage | |||||||||||||||||||||||||||||||
| Gross | 1.33 | -0.23 | 5.49 | 4.47 | 10.81 | 9.45 | 7.42 | 10.05 | |||||||||||||||||||||||
| Net | 0.87 | -0.63 | 3.56 | 2.75 | 7.78 | 6.70 | 5.09 | 7.11 | |||||||||||||||||||||||
(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 March 31, 2024
(c) Inception Date: February 1985
Global M&A activity totaled
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 (an entity organized as an Undertaking for Collective Investment in Transferrable Securities) and a London Stock Exchange listed investment company, Gabelli Merger Plus+ Trust Plc (GMP-LN).
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.
Gabelli Private Equity Partners was created to launch a private equity business, somewhat akin to the success our predecessor PE firm had in the 1980s. We will continue our outreach initiatives with business owners, corporate management, and various financial sponsors. We are activating our program of buying privately owned, family started businesses, controlled and operated by the founding family.
Shareholder Compensation
On May 8, 2024, the Board of Directors declared a semi-annual dividend of
During the first quarter, AC repurchased 117,354 Class A shares, for
Since our spin-off from GAMCO on November 30, 2015, AC has returned
At March 31, 2024, there were 21.420 million shares outstanding, consisting of 2.469 million Class A shares and 18.951 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
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.
| Three months ended March 31, | ||||||||
| ($ in 000's) | 2024 | 2023 | ||||||
| Operating loss - GAAP | $ | (4,970 | ) | $ | (5,133 | ) | ||
| Add: management fee expense (1) | 1,982 | 2,543 | ||||||
| Operating loss before management fee - Non-GAAP | $ | (2,988 | ) | $ | (2,590 | ) | ||
(1) Management fee expense is incentive-based and is equal to
Table I
| ASSOCIATED CAPITAL GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Amounts in thousands) | |||||||||
| March 31, | December 31, | March 31, | |||||||
| 2024 | 2023 | 2023 | |||||||
| ASSETS | |||||||||
| Cash, cash equivalents and US Treasury Bills | $ | 395,386 | $ | 406,642 | $ | 401,776 | |||
| Investments in securities and partnerships | 442,458 | 420,706 | 450,238 | ||||||
| Investment in GAMCO stock | 51,026 | 45,602 | 45,613 | ||||||
| Receivable from brokers | 32,966 | 30,268 | 11,023 | ||||||
| Income taxes receivable, including deferred tax assets, net | 6,444 | 8,474 | 8,825 | ||||||
| Other receivables | 2,126 | 5,587 | 1,460 | ||||||
| Other assets | 23,776 | 26,518 | 23,951 | ||||||
| Total assets | $ | 954,182 | $ | 943,797 | $ | 942,886 | |||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |||||||||
| Payable to brokers | $ | 6,332 | $ | 4,459 | $ | 15,208 | |||
| Income taxes payable | 1,723 | - | - | ||||||
| Compensation payable | 11,545 | 15,169 | 8,894 | ||||||
| Securities sold short, not yet purchased | 9,439 | 5,918 | 3,569 | ||||||
| Accrued expenses and other liabilities | 2,514 | 5,173 | 1,981 | ||||||
| Total liabilities | 31,553 | 30,719 | 29,652 | ||||||
| Redeemable noncontrolling interests | 5,779 | 6,103 | 7,233 | ||||||
| Total equity | 916,850 | 906,975 | 906,001 | ||||||
| Total liabilities, redeemable noncontrolling interests and equity | $ | 954,182 | $ | 943,797 | $ | 942,886 | |||
(1) Certain captions include amounts related to a consolidated variable interest entity ("VIE") and voting interest entity ("VOE"); refer to footnote 4 of the Condensed Consolidated Financial Statements included in the 10-Q report to be filed for the quarter ended March 31, 2024 for more details on the impact of consolidating these entities.
(2) Investment in GAMCO stock: 2,382,170, 2,386,295 and 2,407,000 shares, respectively.
Table II
| ASSOCIATED CAPITAL GROUP, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands, except per share data) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Investment advisory and incentive fees | $ | 2,907 | $ | 2,411 | ||||
| Other revenues | 104 | 54 | ||||||
| Total revenues | 3,011 | 2,465 | ||||||
| Compensation | 3,820 | 3,570 | ||||||
| Other operating expenses | 2,179 | 1,485 | ||||||
| Total expenses | 5,999 | 5,055 | ||||||
| Operating loss before management fee | (2,988 | ) | (2,590 | ) | ||||
| Investment gain/(loss) | 16,794 | 20,511 | ||||||
| Interest and dividend income from GAMCO | 95 | 96 | ||||||
| Interest and dividend income, net | 5,805 | 4,999 | ||||||
| Shareholder-designated contribution | (69 | ) | (871 | ) | ||||
| Investment and other non-operating income/(loss), net | 22,625 | 24,735 | ||||||
| Income/(loss) before management fee and income taxes | 19,637 | 22,145 | ||||||
| Management fee | 1,982 | 2,543 | ||||||
| Income/(loss) before income taxes | 17,655 | 19,602 | ||||||
| Income tax expense/(benefit) | 3,798 | 1,580 | ||||||
| Income/(loss) before noncontrolling interests | 13,857 | 18,022 | ||||||
| Income/(loss) attributable to noncontrolling interests | 36 | 268 | ||||||
| Net income/(loss) attributable to Associated Capital Group, Inc. | $ | 13,821 | $ | 17,754 | ||||
| Net income/(loss) per share attributable to Associated Capital Group, Inc.: | ||||||||
| Basic | $ | 0.64 | $ | 0.81 | ||||
| Diluted | $ | 0.64 | $ | 0.81 | ||||
| Weighted average shares outstanding: | ||||||||
| Basic | 21,500 | 21,970 | ||||||
| Diluted | 21,500 | 21,970 | ||||||
| Actual shares outstanding - end of period | 21,420 | 21,938 | ||||||
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.
Ian J. McAdams
Chief Financial Officer
(914) 921 5078
Associated-Capital-Group.com
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FAQ
What was AC's book value per share at the end of the first quarter of 2024?
What was the total revenue in the first quarter of 2024 compared to the previous year?
What was the gross return from the merger arbitrage strategy in the first quarter of 2024?
What was the global M&A activity like in the first quarter of 2024?
What was the effective tax rate for AC in the first quarter of 2024?
