GAMCO Investors, Inc. Reports Results for the Fourth Quarter 2020 and Year Ended December 31, 2020
GAMCO Investors, Inc. (“GAMCO”) (NYSE: GBL) today reported its operating results for the quarter ended December 31, 2020.
Fourth Quarter Results
Financial Highlights (Unaudited) Three Months Ended Year Ended (In thousands, except per share data) December 31, 2020 September 30, 2020 December 31, 2019 December 31, 2020 December 31, 2019 U.S. GAAP Basis Revenues$
71,348
$
61,252
$
86,280
$
259,726
$
312,368
Operating income
23,684
31,842
33,043
99,609
117,984
Net income
19,723
16,435
24,382
58,693
81,917
Diluted earnings per common share$
0.74
$
0.62
$
0.91
$
2.20
$
2.98
Weighted average diluted shares outstanding
26,680
26,613
26,892
26,680
27,479
Shares outstanding
27,503
27,485
27,380
27,503
27,380
Assets Under Management AUM - end of period (in millions)$
32,561
$
29,692
$
36,475
$
32,561
$
36,475
AUM - average (in millions)
30,928
30,326
35,940
30,992
36,443
Giving Back to Society – (Y)our “S” in ESG
The Board of Directors approved in August 2020 a $0.25 per share shareholder designated charitable contribution (“SDCC”), a 25% increase from the prior year’s $0.20 per share designation under the program. We estimate this will total approximately $5.4 million. Since the inception of GAMCO’s SDCC program in 2013, and counting this current amount, shareholders will have designated charitable gifts of close to $37 million to more than 280 501(c)(3) institutions. When combined with our other charitable donations, this boosts our total contributions to approximately $62 million since our initial public offering in February 1999.
SHAREHOLDERS HAVE UNTIL THE RECORD DATE OF FEBRUARY 28, 2021 TO REGISTER THEIR SHARES WITH OUR TRANSFER AGENT IN ORDER TO PARTICIPATE IN THE CURRENT SDCC.
This charitable program underscores our giving back to society as part of our commitment to managing socially responsible portfolios since 1987, which has evolved to include integrating ESG (environmental, social, and governance) factors.
Actively managed non-transparent ETFs
On February 1, 2021, we launched our first actively managed non-transparent ETF, the Love our Planet & People (LOPP) ETF. In an effort to encourage investment, and to acknowledge our appreciation for our private wealth and mutual fund clients, we will offer a loyalty program under which the first $100 million invested in LOPP will incur no fees or expenses for at least one year. The advisor is absorbing these costs underscoring our emphasis on the environment, and to incentivize our clients’ investment in the future of planet and our people.
Revenues – Sequential Growth
- Total revenues for the fourth quarter of 2020 were $71.3 million compared with $61.3 million in the third quarter of 2020. This increase includes incentive fees of $8.5 million in the fourth quarter and none in the third quarter.
- Investment advisory fees were $65.0 million in the fourth quarter of 2020 versus $54.9 million in the third quarter of 2020:
- Gabelli Funds’ revenues were $40.3 million compared to $38.9 million in the third quarter of 2020.
- Institutional and Private Wealth Management revenues, which are generally billed on portfolio values at the beginning of the quarter, were $15.0 million compared to $14.8 million in the third quarter of 2020.
- SICAV revenues were $1.2 million for each quarter.
- Distribution fees from our equity mutual funds and other income were $6.4 million for both quarters.
Operating Income
For the fourth quarter of 2020, operating income was $23.7 million versus $31.8 million in the third quarter. Waivers of CEO compensation bolstered operating income in the fourth quarter of 2020 by $4.7 million and by $10.0 million in the third quarter of 2020.
Non-Operating Income
Mark-to-market investment gains were $3.9 million in the fourth quarter of 2020 versus losses of $3.1 million in the third quarter of 2020. Interest expense was $0.6 million in the fourth quarter of 2020 and $0.7 million in the third quarter of 2020.
Income Taxes
GAMCO’s effective tax rate for the quarter ended December 31, 2020 was 28.4% versus 27.4% for the quarter ended September 30, 2020.
Year over Year
Total revenues for 2020 were $259.7 million compared with $312.4 million in 2019.
For 2020, operating income of $99.6 million was bolstered by a $14.7 million benefit from CEO compensation waivers. Operating income for 2019 was $118.0 million, enhanced by the $27.2 million benefit from CEO compensation waivers but reduced by $19.3 million of deferred compensation amortization, a non-cash charge which includes the impact of the change in GBL share price.
For the year, mark-to-market investment losses were $6.6 million higher at $15.9 million in 2020 versus losses of $9.3 million in 2019. Interest expense was unchanged at $2.6 million for the full years 2020 and 2019.
GAMCO’s effective tax rate for 2020 was 29.9% versus 24.6% for 2019. This increase is primarily as a result of non-deductibility of certain expenses as a result of the 2017 Tax Cuts and Jobs Act.
Business Highlights
- The COVID-19 pandemic has had no material impact on our operations, including our financial reporting systems, internal controls over financial reporting, and disclosure controls and procedures. From July 1st to December 31st, GAMCO paid the premiums for all teammates enrolled in our healthcare plans.
- On November 2nd and 3rd, Gabelli Funds hosted the 44th Annual Auto Symposium with virtual presentations from leading automotive companies with a particular focus on the EV ecosystem.
- On November 13th, Gabelli Funds and the Columbia Business School hosted the 2nd Annual Healthcare Symposium which included panels that discussed vaccines and therapeutics to treat COVID-19, health policy and reimbursement trends, and healthcare delivery in a virtual world.
- On January 4th, GAMCO International SICAV launched GAMCO Convertible Securities. The fund, managed by our Dinsmore team, leverages the firm’s history of investing in dedicated convertible security portfolios since 1979. Multiple share classes were available at launch and are tailored for global institutional investors as well as select non-U.S. retail investors.
- On January 7th, we received regulatory approval for our actively managed non-transparent ETFs. We launched the first fund, Love our Planet & People, on February 1, 2021, and the second one, Gabelli Growth Innovators, is expected to launch later in February.
Balance Sheet
GAMCO ended the year with cash and investments of $124.2 million and short-term debt of $24.2 million. Also of note was the reduction in payables of over $36 million.
Return to Shareholders
During the quarter, GAMCO paid an extra $0.90 per share dividend in addition to the regular $0.02 per share for a total of $25.2 million. The Company purchased 42,116 shares for $0.5 million, at an average price of $12.98 per share.
On February 2, 2021, GAMCO’s board of directors declared a regular quarterly dividend of $0.02 per share, which is payable on March 30, 2021 to class A and class B shareholders of record on March 16, 2021.
About GAMCO Investors, Inc.
GAMCO is known for its research-driven approach to equity investing. GAMCO conducts its investment advisory business principally through two subsidiaries: GAMCO Asset Management Inc. (approximately 1,500 institutional and private wealth separate accounts, principally in the U.S.) and Gabelli Funds, LLC (24 open-end funds, a SICAV, and 16 closed-end funds). GAMCO serves a broad client base including institutions, intermediaries, offshore investors, private wealth, and direct retail investors.
GAMCO offers a wide range of solutions for clients across Value and Growth Equity, ESG, Convertibles, sector-focused strategies including Gold and Utilities, Merger Arbitrage, and Fixed Income. In 1977, GAMCO launched its flagship All Cap Value strategy, Gabelli Value, and in 1986 launched its mutual fund business.
Table I: Assets Under Management and Fund Flows - 4th Quarter 2020 (in millions)
Fund
Market
distributions,
September 30,
Client
Client
appreciation/
net of
December 31,
2020
Inflows
Outflows
(depreciation)
reinvestments
2020
Equities: Mutual Funds$
8,855
$
305
$
(726)
$
1,147
$
(40)
$
9,541
Closed-end Funds
7,017
40
(57)
900
(127)
7,773
Institutional & PWM (a)
10,539
155
(544)
2,221
-
12,371
SICAV
437
90
(91)
38
-
474
Total Equities
26,848
590
(1,418)
4,306
(167)
30,159
100% U.S. Treasury Fund
2,822
700
(1,153)
1
-
2,370
Institutional & PWM Fixed Income
22
10
-
-
-
32
Total Treasuries & Fixed Income
2,844
710
(1,153)
1
-
2,402
Total Assets Under Management$
29,692
$
1,300
$
(2,571)
$
4,307
$
(167)
$
32,561
(a) Includes $196 and $166 of 100% U.S. Treasury Fund AUM at September 30, 2020 and December 31, 2020, respectively. Table II GAMCO INVESTORS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)Three Months Ended
Twelve Months Ended
December 31
December 31
2020
2019
2020
2019
Investment advisory and incentive fees$
64,991
$
78,197
$
233,628
$
279,090
Distribution fees and other income
6,357
8,083
26,098
33,278
Total revenues
71,348
86,280
259,726
312,368
Compensation costs (a)
29,859
33,165
102,347
123,528
Management fee expense (a)
1,651
1,661
5,376
9,963
Distribution costs
7,216
8,680
28,474
34,226
Other operating expenses
8,938
9,731
23,920
26,667
Total expenses
47,664
53,237
160,117
194,384
Operating income
23,684
33,043
99,609
117,984
Investment gain/(loss)
4,492
(1,307)
(7,869)
(2,217)
Interest expense
(635)
(647)
(2,620)
(2,609)
Shareholder-designated contribution
-
-
(5,436)
(4,500)
Non-operating loss
3,857
(1,954)
(15,925)
(9,326)
Income before income taxes
27,541
31,089
83,684
108,658
Provision for income taxes
7,818
6,707
24,991
26,741
Net income$
19,723
$
24,382
$
58,693
$
81,917
Net income: Basic$
0.75
$
0.91
$
2.21
$
2.99
Diluted$
0.74
$
0.91
$
2.20
$
2.98
Weighted average shares outstanding: Basic
26,439
26,801
26,571
27,407
Diluted
26,680
26,892
26,680
27,479
Actual shares outstanding (b)
27,503
27,380
27,503
27,380
(a) The CEO waiver reduced compensation costs by $3,821, $7,154, $12,367, and $23,010, respectively and management fee expense by $885, $1,928, $2,293, and $4,219, respectively. (b) Includes 1,080 RSA shares at December 31, 2020 and 661 RSA shares at December 31, 2019. Table III GAMCO INVESTORS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands, except per share data)December 31,
December 31,
2020
2019
ASSETS Cash, cash equivalents, and U.S. Treasury Bills$
98,313
$
86,136
Investments in securities
25,845
34,273
Receivable from brokers
5,833
989
Other receivables
32,524
41,557
Deferred tax asset and income tax receivable
9,462
16,389
Other assets
11,896
10,542
Total assets$
183,873
$
189,886
LIABILITIES AND STOCKHOLDERS' EQUITY Payable to brokers$
1
$
-
Securities sold, not yet purchased
799
-
Income taxes payable and deferred tax liabilities
2,381
757
Compensation payable
21,543
64,279
Accrued expenses and other liabilities
48,023
45,942
Sub-total
72,747
110,978
5.875% Senior Notes (due June 1, 2021)
24,215
24,191
Total liabilities
96,962
135,169
Stockholders' equity (a)
86,911
54,717
Total liabilities and stockholders' equity$
183,873
$
189,886
(a) Shares outstanding of 27,503, and 27,380, 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 Year Ended (Unaudited)(In thousands, except per share data) December 31,
2020 December 31,
2019 December 31,
2020 December 31,
2019 Net income, U.S. GAAP basis
$
19,723
$
24,382
$
58,693
$
81,917
Impact of DCCAs on expenses and taxes (a): Compensation costs
-
1,660
(1,409)
14,791
Management fee expense
-
1,030
-
4,538
Provision for income taxes
-
(646)
349
(4,639)
Total impact of DCCAs on expenses and taxes
-
2,044
(1,060)
14,690
Net income, as adjusted$
19,723
$
26,426
$
57,633
$
96,607
Per fully diluted share: Net income, U.S. GAAP basis$
0.74
$
0.91
$
2.20
$
2.98
Impact of DCCAs$
-
$
0.08
$
(0.04)
$
0.54
Net income, as adjusted$
0.74
$
0.99
$
2.16
$
3.52
(a) The non-GAAP adjustments relate to multiple deferred cash compensation agreements ("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.
Gabelli Funds, LLC is a registered investment adviser with the Securities and Exchange Commission and is a wholly owned subsidiary of GAMCO Investors, Inc. (NYSE: GBL).
Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund before investing. The prospectus, which contains more complete information about this and other matters, should be read carefully before investing. To obtain a prospectus, please call 800 GABELLI or visit www.gabelli.com
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