Associated Capital Group(AC) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Overview Key Financial Highlights Associated Capital Group reported second-quarter 2024 results with Assets Under Management (AUM) at $1.36 billion, down from $1.55 billion at the end of Q1 2024 | Metric | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | AUM (end of period) | $1.36 billion | $1.55 billion | $1.55 billion | | Book Value per share | $42.87 | $42.80 | $41.41 | | Net Income | $3.0 million | - | $3.4 million | | Diluted EPS | $0.14 | - | $0.15 | - The company returned a total of $4.4 million to shareholders during the second quarter through a combination of dividends and share repurchases[2] - The Board of Directors approved a Shareholder Designated Charitable Contribution (SDCC) of $0.20 per share[2] Detailed Financial Performance Second Quarter Results Analysis Total revenues for Q2 2024 increased to $2.6 million from $2.4 million year-over-year, primarily due to a change in revenue recognition for the GAMCO International SICAV - A change in the financial arrangement for the GAMCO International SICAV, effective December 2023, led to the company recognizing 100% of its revenues and paying its marketing expenses, with no material impact on operating results[5] | Financial Item | Q2 2024 | Q2 2023 | Change Driver | | :--- | :--- | :--- | :--- | | Total Revenues | $2.6M | $2.4M | Increased SICAV revenue | | Operating Expenses (ex-mgmt fee) | $5.8M | $5.3M | Higher marketing & stock comp | | Net Investment & Other Income | $7.3M | $8.6M | Lower mark-to-market gains | | Effective Tax Rate | 19.1% | 35.8% | Prior year had deferred tax expense | Assets Under Management (AUM) Assets Under Management (AUM) stood at $1.36 billion as of June 30, 2024, a decrease of $229 million from year-end 2023 - The $229 million decrease in AUM since year-end 2023 was driven by three main factors: net outflows ($195 million), market depreciation ($19 million), and currency fluctuations ($15 million)[8] | AUM by Strategy ($ in millions) | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Merger Arbitrage | $1,127 | $1,312 | $1,286 | | Long/Short Value | $199 | $244 | $230 | | Other | $36 | $35 | $33 | | Total AUM | $1,362 | $1,591 | $1,549 | Business Operations and Strategy Alternative Investment Management The company's alternative investment strategies are centered on its merger arbitrage approach, which seeks to generate absolute returns that are independent of the broader equity and fixed income markets - The core of the alternative investment strategy is merger arbitrage, which has an absolute return focus aimed at generating returns independent of broad market movements[11] Merger Arbitrage Strategy & Performance In Q2 2024, the longest continuously offered fund in the merger arbitrage strategy delivered a gross return of -1.37% (-1.40% net) | Performance % (Gross) | 2Q '24 | YTD '24 (July) | Full Year 2023 | | :--- | :--- | :--- | :--- | | Merger Arbitrage | -1.37% | 3.48% | 5.49% | - Global M&A activity totaled $1.5 trillion in the first half of 2024, an 18% increase compared to the same period in 2023[12] Acquisition Strategy Associated Capital Group intends to accelerate the use of its capital by pursuing acquisitions and alliances to expand its product offerings and distribution channels - The company plans to leverage its research and investment capabilities to pursue acquisitions and alliances, broadening its product offerings and distribution[15] - Through Gabelli Private Equity Partners, the company is actively seeking to acquire privately owned, family-started businesses controlled by their founding families[15] Capital Allocation and Shareholder Returns Shareholder Compensation In Q2 2024, the company paid a semi-annual dividend of $0.10 per share and repurchased 65,469 Class A shares for $2.2 million | Action | Details | | :--- | :--- | | Dividend | $0.10 per share semi-annual dividend paid on June 27, 2024 | | Share Repurchases | 65,469 Class A shares for $2.2 million at an average price of $33.88/share | | Buyback Authorization | Increased by 200,000 shares to a total of 439,487 shares | - Since its inception in 2015, the company has returned a total of $178.5 million to shareholders through share repurchases, exchange offers, and dividends[17] Charitable Contributions The Board of Directors approved a $4.3 million, or $0.20 per share, shareholder designated charitable contribution (SDCC) - A new shareholder designated charitable contribution (SDCC) of $4.3 million ($0.20 per share) was approved on August 7, 2024[16] - Including the current contribution, the SDCC program has donated a cumulative total of approximately $42 million on behalf of shareholders[16] Non-GAAP Financial Measures Reconciliation of Operating Loss Before Management Fee The company presents Operating Loss Before Management Fee, a non-GAAP measure, to better illustrate its core operating results by excluding the incentive-based management fee - Management uses the non-GAAP measure "Operating loss before management fee expense" to evaluate business operations, as the management fee is based on pre-tax income which includes non-operating items like investment gains/losses[21] | Reconciliation ($ in 000's) | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Operating loss - GAAP | $(8,644) | $(8,604) | | Add: management fee expense | $2,424 | $3,087 | | Operating loss before management fee - Non-GAAP | $(6,220) | $(5,517) | Unaudited Condensed Consolidated Financial Statements Statements of Financial Condition (Balance Sheet) As of June 30, 2024, the company's total assets were $949.0 million, with total liabilities of $27.8 million and total equity of $915.5 million | Key Balance Sheet Items ($ in thousands) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and US Treasury Bills | $387,377 | $406,642 | | Investments in securities and partnerships | $442,294 | $420,706 | | Total Assets | $949,016 | $943,797 | | Total Liabilities | $27,848 | $30,719 | | Total Equity | $915,479 | $906,975 | Statements of Income For the second quarter of 2024, Associated Capital Group reported total revenues of $2.6 million and a net income of $3.0 million, resulting in a diluted EPS of $0.14 | Key Income Statement Items ($ in thousands) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total revenues | $2,595 | $2,382 | | Operating loss before management fee | $(3,232) | $(2,927) | | Income before income taxes | $3,578 | $5,140 | | Net income attributable to AC | $2,985 | $3,371 | | Diluted Net income per share | $0.14 | $0.15 | Forward-Looking Statements This section provides a standard safe harbor statement, cautioning that the press release contains forward-looking statements based on current expectations - The report contains forward-looking statements regarding future events and financial performance, which are not guarantees of future results and are based on current expectations[29] - Key risks that could cause actual results to differ include securities market declines affecting AUM, negative product performance, and general economic downturns[30]