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Press Release

Aug 4, 2020 20:05 UTC

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

GREENWICH, Conn.--(Business Wire)--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,
2020
June 30,
2019
 
U.S. GAAP Basis
Revenues

$

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 Management
AUM - 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 (in millions)
Fund
Market distributions,
March 31, appreciation/ Net cash net of June 30,

2020

(depreciation) flows reinvestments

2020

Equities:
Mutual Funds

$

7,798

$

1,171

$

(310

)

$

(8

)

$

8,651

Closed-end Funds

 

6,084

 

1,005

 

(97

)

 

(133

)

 

6,859

Institutional & PWM (a)

 

10,185

 

1,518

 

(1,248

)

 

-

 

 

10,455

SICAV

 

480

 

37

 

(66

)

 

-

 

 

451

Total Equities

 

24,547

 

3,731

 

(1,721

)

 

(141

)

 

26,416

Fixed Income:
100% U.S. Treasury Fund

 

2,938

 

4

 

(21

)

 

-

 

 

2,921

Institutional & PWM

 

20

 

-

 

(1

)

 

-

 

 

19

Total Fixed Income

 

2,958

 

4

 

(22

)

 

-

 

 

2,940

Total Assets Under Management

$

27,505

$

3,735

$

(1,743

)

$

(141

)

$

29,356

 

(a) Includes $263 and $252 of 100% U.S. Treasury Fund AUM at March 31, 2020 and June 30, 2020, respectively.

Table II
GAMCO 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 incentive fees

$

51,470

 

$

67,990

 

$

113,743

 

$

133,878

 

Distribution fees and other income

 

6,089

 

 

8,417

 

 

13,383

 

 

16,865

 

Total 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 / (loss)

 

(223

)

 

5,324

 

 

(10,563

)

 

3,498

 

 
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 (c)

 

27,630

 

 

27,743

 

 

27,630

 

 

27,743

 

(a) For the six months ended June 30, 2019, the CEO waiver reduced compensation costs and management
fee expense by $12,178 and $1,689, respectively.
(b) For the six months ended June 30, 2020, compensation costs were reduced by $1,409 due to indexing
of deferred compensation to the GBL stock price.
(c) Includes 1,031 RSA shares at June 30, 2020 and 668 RSA shares at June 30, 2019.
Table III
GAMCO INVESTORS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except per share data)
 
June 30, December 31, June 30,

2020

2019

2019

 
ASSETS
Cash 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' EQUITY
Payable to brokers

$

-

$

-

$

99

Income taxes payable and deferred tax liabilities

 

4,740

 

757

 

1,935

Compensation 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)

(In thousands, except per share data)

June 30, 2019
 
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.

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

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