GAMCO Investors, Inc. Reports Results for the Fourth Quarter and Year Ended December 31, 2019

GAMCO Investors, Inc. (“GAMCO”) (NYSE: GBL) today reported its operating results for the quarter ended December 31, 2019.

Past and Future - Giving Back to Society

Since the inception of GAMCO’s shareholder designated charitable contribution (“SDCC”) program in 2013, shareholders have designated contributions of approximately $27 million to over 150 501(c)(3) initiatives. As a result of the board of director’s most recent SDCC approval, $4.5 million was designated by shareholders to 501(c)(3) organizations in November. 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.

Including the current year’s SDCC, approximately $57 million will have been donated to charities by GAMCO, including through our SDCC program, since our initial public offering in February 1999.

Financial Highlights (Unaudited)

Three Months Ended

Year Ended

(In thousands, except per share data)

December 31,
2019

September 30,
2019

December 31,
2018

December 31,
2019

December 31,
2018

U.S. GAAP Basis Revenues

86,280

75,345

80,977

312,368

341,455

Operating income

33,043

29,568

52,458

117,984

186,787

Net income

24,382

13,626

23,337

81,917

117,196

Diluted earnings per common share (a)

0.91

0.50

0.81

2.98

4.07

Weighted average diluted shares outstanding

26,892

27,093

28,636

27,479

28,777

Shares outstanding

27,380

27,548

28,982

27,380

28,982

Assets Under Management AUM - average (in millions)

35,940

35,997

37,405

36,443

40,349

AUM - end of period (in millions)

36,475

35,692

34,354

36,475

34,354

(a) CEO waivers of compensation bolstered earnings by $0.26 per share in the December 31, 2019 quarter, by $0.12 per share in the September 30, 2019 quarter, by $0.40 per share in the December 31, 2018 quarter, by $0.75 per share in 2019, and by $1.49 in 2018.

Revenues

Total revenues for the fourth quarter of 2019 were $86.3 million compared with $81.0 million in the fourth quarter of 2018. Investment advisory fees were $78.2 million in the fourth quarter of 2019 versus $72.0 million in the fourth quarter of 2018: Open-end and closed-end fund revenues were $43.6 million compared to $45.6 million in the fourth quarter of 2018. Institutional and Private Wealth Management revenues, which are generally billed on portfolio values at the beginning of the quarter, were $19.4 million compared to $23.7 million in the year ago quarter. SICAV revenues were $1.5 million versus $1.4 million in last year’s fourth quarter. Incentive fees earned were $13.7 million as compared to $1.3 million in the prior year quarter. Distribution fees from our open-end equity funds and other income were $8.1 million for the quarter versus $9.0 million in 2018. Total revenues for 2019 were $312.4 million compared with $341.5 million in 2018.

Operating Income

For the quarter, operating income was $33.0 million versus $52.5 million in the year ago quarter. Waivers of CEO compensation bolstered operating income in the fourth quarter of 2019 by $9.1 million and by $15.0 million in the fourth quarter of 2018. Amortization of deferred compensation, a non-cash charge reflecting the change in the GBL share price, reduced operating income by $2.7 million in the fourth quarter of 2019 versus increasing the operating income by $8.8 million in the fourth quarter of 2018.

For 2019, operating income was $118.0 million, benefiting from $27.2 million of CEO compensation waivers offset by $19.3 million of deferred compensation amortization, a non-cash charge which includes the impact of the change in GBL share price. Operating income for 2018 was $186.8 million, inclusive of a $56.5 million benefit from CEO compensation waivers and after deferred compensation amortization of $3.6 million.

Non-Operating Income

Mark to market investment losses were $2.0 million in the fourth quarter of 2019 versus $21.8 million in the fourth quarter of 2018. Interest expense remained the same at $0.6 million in each period.

For the year, mark to market investment losses were $9.3 million in 2019 versus $32.1 million in 2018. Interest expense was lower at $2.6 million in 2019 compared to $3.5 million in 2018.

Income Taxes

GAMCO’s effective tax rate for the quarter ended December 31, 2019 was 21.6% versus 23.8% for the quarter ended December 31, 2018 due to timing differences of reversals in the periods.

GAMCO’s effective tax rate for 2019 was 24.6% versus 24.2% for 2018.

Business Highlights

As of the November 15, 2019 record date for the SDCC Program, approximately 82% of all shares were registered and eligible to designate a total of $4.5 million in contributions ($0.20 per share) to be paid in 2020. Our 43rd Annual Automotive Symposium took place on November 4 in Las Vegas, Nevada. The meeting featured presentations by senior management of several leading automotive companies with an emphasis on industry dynamics, technical innovation, EV, and macroeconomic trends. The Gabelli Dividend & Income Trust (NYSE: GDV) successfully completed its first transferable rights offering on November 18. GDV issued 8.2 million common shares for gross proceeds of $165 million. Gabelli Funds and Columbia Business School’s Healthcare and Pharmaceutical Management Program co-hosted a symposium at the Paley Center for Media entitled Healthcare at a Crossroads: What’s the Path Forward? on November 22. The symposium topics included the potential impact of the 2020 election on healthcare access and coverage, drug pricing, and leveraging data and technology to transform care. The Gabelli Equity Trust Inc. (NYSE: GAB) completed a $100 million offering of 5.00% Series K Cumulative Preferred Stock on December 16. The Series K Preferred is perpetual, non-callable for five years, and was issued with a liquidation preference of $25 per share. The Gabelli Multimedia Trust Inc. (NYSE: GGT) successfully completed the issuance of $50 million of Series G Cumulative Preferred Stock on December 20. The Series G Preferred is perpetual, non-callable for five years, and was issued with a liquidation preference of $25 per share.

Balance Sheet

GAMCO ended the quarter with cash and investments of $120.4 million, debt of $24.2 million, and $34.0 million of deferred compensation payable, net of tax.

Returns to Shareholders

GAMCO paid $0.5 million in dividends during the fourth quarter of 2019 and purchased 154,176 shares at an average price of $17.80 per share, or $2.7 million in total. Since our initial public offering in February 1999, we have returned $2.0 billion to shareholders consisting of $1.0 billion of spin-offs (valued at the time of the spin-offs), $495.6 million in the form of dividends, and $501.1 million through stock buybacks of approximately 12.6 million shares.

On February 4, 2020, GAMCO’s board of directors declared a regular quarterly dividend of $0.02 per share, which is payable on March 31, 2020 to class A and class B shareholders of record on March 17, 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 Catalyst™ investment approach.

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

GAMCO provides investment advisory services through 24 open-end funds, 16 closed-end funds, a SICAV and approximately 1,700 institutional and private wealth management accounts, principally in the U.S. The investments are generally in value, growth, non-market correlated, and convertible securities.

Table I: Assets Under Management and Fund Flows - 4th Quarter 2019 (in millions)

Fund

Market

distributions,

September 30,

appreciation/

Net cash

net of

December 31,

2019

(depreciation)

flows

reinvestments

2019

Equities: Open-end Funds

10,568

559

(588

)

(58

)

10,481

Closed-end Funds

7,476

437

227

(135

)

8,005

Institutional & PWM (a)

14,159

872

(466

)

14,565

SICAV

550

594

Total Equities

32,753

1,893

(808

)

(193

)

33,645

Fixed Income: 100% U.S. Treasury Fund

2,921

(124

)

2,810

Institutional & PWM

Total Fixed Income

2,939

(122

)

2,830

Total Assets Under Management

35,692

1,906

(930

)

(193

)

36,475

(a) Includes $237 and $215 of 100% U.S. Treasury Fund AUM at September 30, 2019 and December 31, 2019, respectively. Table II GAMCO INVESTORS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)

Three Months Ended

Twelve Months Ended

December 31,

2019

2018

2019

2018

Investment advisory and incentive fees

78,197

72,035

279,090

302,651

Distribution fees and other income

8,083

8,942

33,278

38,804

Total revenues

86,280

80,977

312,368

341,455

Compensation costs (a)

33,165

11,304

123,528

83,768

Management fee expense (a)

1,661

1,449

9,963

9,014

Distribution costs

8,680

9,319

34,226

39,194

Other operating expenses

9,731

6,447

26,667

22,692

Total expenses

53,237

28,519

194,384

154,668

Operating income

33,043

52,458

117,984

186,787

Investment income / (loss)

(1,307

)

(16,391

)

(2,217

)

(22,932

)

Interest expense

(647

)

(644

)

(2,609

)

(3,525

)

Shareholder-designated contribution

(4,787

)

(4,500

)

(5,671

)

Non-operating income / (loss)

(1,954

)

(21,822

)

(9,326

)

(32,128

)

Income before income taxes

31,089

30,636

108,658

154,659

Provision for income taxes

6,707

7,299

26,741

37,463

Net income

24,382

23,337

81,917

117,196

Net income: Basic

0.91

0.82

2.99

4.08

Diluted

0.91

0.81

2.98

4.07

Weighted average shares outstanding: Basic

26,801

28,611

27,407

28,744

Diluted

26,892

28,636

27,479

28,777

Actual shares outstanding (b)

27,380

28,982

27,380

28,982

(a) CEO waiver reduced compensation costs by $7,154, $13,063, $23,010, and $46,607, respectively and management fee expense by $1,928, $1,902, $4,219, and $9,889, respectively. (b) Includes 661, 428, 661, and 428 of RSAs, respectively. Table III GAMCO INVESTORS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except per share data)

December 31,

2019

2018

ASSETS Cash and cash equivalents

86,136

41,202

Investments in securities

34,273

33,789

Receivable from brokers

989

3,423

Other receivables

41,557

31,135

Deferred tax asset and income tax receivable

16,574

15,001

Other assets

10,542

10,062

Total assets

190,071

134,612

LIABILITIES AND STOCKHOLDERS' EQUITY Payable to brokers

112

Income taxes payable and deferred tax liabilities

942

2,388

Compensation payable (a)

64,279

60,408

Accrued expenses and other liabilities

45,942

37,926

Sub-total

111,163

100,834

5.875% Senior Notes (due June 1, 2021)

24,191

24,168

Total liabilities

135,354

125,002

Stockholders' equity

54,717

9,610

Total liabilities and stockholders' equity

190,071

134,612

(a) Excludes $11.3 million of Deferred Cash Compensation Agreements ("DCCAs") expense that was not yet recorded under GAAP as of December 31, 2018.

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 tables reconcile the U.S. GAAP basis amounts, as reported, to the non-GAAP measures:

Three Months Ended Year Ended (Unaudited)
(In thousands, except per share data)

December 31,
2019

September 30,
2019

December 31,
2018

December 31,
2019

December 31,
2018

Net income, U.S. GAAP basis

24,382

13,626

23,337

81,917

117,196

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

1,660

2,568

(10,214

)

14,791

(3,567

)

Management fee expense

1,030

1,449

4,538

7,197

Provision for income taxes

(646

)

(864

)

2,191

(4,639

)

(907

)

Total impact of DCCAs on expenses and taxes

2,044

2,734

(6,574

)

14,690

2,723

Net income, as adjusted

26,426

16,360

16,763

96,607

119,919

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

0.91

0.50

0.81

2.98

4.07

Impact of DCCAs

0.08

0.10

(0.22

)

0.54

0.10

Net income, as adjusted

0.99

0.60

0.59

3.52

4.17

(a) The non-GAAP adjustments relate to multiple DCCAs.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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, 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 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, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200204005991/en/