Associated Capital Group(AC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements detail the company's financial position, operations, equity changes, and cash flows for the period ended June 30, 2025, showing increased assets and net income driven by investment gains Condensed Consolidated Statements of Financial Condition Total assets increased to $959.1 million by June 30, 2025, from $935.3 million at year-end 2024, primarily due to U.S. Treasury Bill investments, with total equity also rising Condensed Consolidated Statements of Financial Condition (Unaudited, in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $249,360 | $299,551 | | Investments in U.S. Treasury Bills (>3 months) | $143,140 | $68,299 | | Investments in equity securities | $194,736 | $199,040 | | Total assets | $959,126 | $935,289 | | Liabilities and Equity | | | | Total liabilities | $38,702 | $36,991 | | Total equity | $914,654 | $892,706 | | Total liabilities, redeemable noncontrolling interests and equity | $959,126 | $935,289 | Condensed Consolidated Statements of Income Net income for Q2 2025 surged to $18.6 million from $3.0 million in Q2 2024, driven by a $27.1 million net gain from investments, despite an operating loss Key Income Statement Data (Unaudited, in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $2,207 | $2,595 | $4,336 | $5,606 | | Operating loss | $(7,977) | $(3,674) | $(13,265) | $(8,644) | | Net gain/(loss) from investments | $27,081 | $(159) | $37,973 | $16,635 | | Net income attributable to ACG | $18,584 | $2,985 | $26,253 | $16,806 | | Basic and diluted EPS | $0.88 | $0.14 | $1.24 | $0.78 | Condensed Consolidated Statements of Equity and Redeemable Noncontrolling Interests Total equity increased to $914.7 million by June 30, 2025, from $892.7 million at year-end 2024, primarily due to $26.3 million in net income, partially offset by dividends and stock repurchases Changes in Equity - Six Months Ended June 30, 2025 (in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2024 | $892,706 | | Net income | $26,253 | | Dividends declared | $(2,112) | | Purchases of treasury stock | $(2,193) | | Balance at June 30, 2025 | $914,654 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $49.3 million for the six months ended June 30, 2025, a shift from $28.6 million provided in 2024, leading to a $51.5 million overall decrease in cash Summary of Cash Flows - Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | $(49,267) | $28,623 | | Net cash provided by/(used in) investing activities | $2,109 | $(640) | | Net cash used in financing activities | $(4,315) | $(8,662) | | Net (decrease)/increase in cash | $(51,473) | $19,321 | Notes to the Condensed Consolidated Financial Statements Notes detail the company's organization, revenue recognition, investment composition, fair value measurements, equity structure, and accounting policies, operating as a single segment in alternative investment management - The company's primary business is providing alternative investment management services and deriving investment income from proprietary investments[23][24] Revenue Breakdown - Six Months Ended June 30 (in thousands) | Revenue Source | 2025 | 2024 | | :--- | :--- | :--- | | Asset-based advisory fees | $2,120 | $2,444 | | Sub-advisory fees | $1,934 | $2,951 | | Performance-based advisory fees | $31 | $1 | | Total investment advisory and incentive fees | $4,085 | $5,396 | - As of June 30, 2025, the company had 293,289 shares remaining under its stock repurchase authorization. For the six months ended June 30, 2025, repurchases totaled $2.2 million[66] - Subsequent to the quarter end, from July 1 to August 7, 2025, the company repurchased an additional 31,640 shares and increased its buyback authorization by 150,000 shares[73] Item 2. Management's Discussion and Analysis ('MD&A') of Financial Condition and Results of Operations Management attributes the Q2 2025 net income increase to strong proprietary investment performance, particularly $27.1 million in merger arbitrage gains, offsetting lower advisory fees, with AUM rising to $1.34 billion Results of Operations Q2 2025 total revenues decreased to $2.2 million, but a $27.1 million net investment gain significantly boosted net income to $18.6 million, despite increased compensation and management fees - Q2 2025 investment gains were $27.1 million compared to losses of $0.2 million in Q2 2024, primarily driven by the performance of merger arbitrage funds[97] - Q2 2025 compensation expense increased to $5.3 million from $3.9 million in Q2 2024, mainly due to higher variable compensation of $1.6 million[94] - Unrecognized incentive fees amounted to $9.5 million for the quarter ended June 30, 2025, typically crystallized on December 31[93] Assets Under Management Assets Under Management (AUM) reached $1.342 billion by June 30, 2025, a 7.5% increase from year-end 2024, primarily driven by $49 million in market appreciation and $23 million from currency fluctuations Assets Under Management by Strategy (in millions) | Strategy | June 30, 2025 | Dec 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Merger Arbitrage | $1,078 | $1,003 | 7.5% | | Long/Short Value | $228 | $209 | 9.1% | | Other | $36 | $36 | 0.0% | | Total AUM | $1,342 | $1,248 | 7.5% | Q2 2025 Fund Flows (in millions) | Description | Amount | | :--- | :--- | | AUM at March 31, 2025 | $1,269 | | Market Appreciation/(Depreciation) | $49 | | Foreign Currency | $23 | | Net Inflows/(Outflows) | $1 | | AUM at June 30, 2025 | $1,342 | Liquidity and Capital Resources The company maintains strong liquidity with $274.2 million in cash and equivalents, despite a $51.5 million net cash outflow for the first six months of 2025, primarily from operating and financing activities - At June 30, 2025, the company held $249.4 million in cash and cash equivalents and $143.1 million in U.S. Treasury Bills[114] Six-Month Cash Flow Summary (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | $(49,267) | $28,623 | | Investing activities | $2,109 | $(640) | | Financing activities | $(4,315) | $(8,662) | | Net Change in Cash | $(51,473) | $19,321 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Associated Capital Group, Inc. is exempt from providing quantitative and qualitative disclosures about market risk - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[118] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective[119] - No material changes to internal control over financial reporting occurred during the quarter[120] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not subject to any legal proceedings expected to materially impact its financial condition, operations, or cash flows, with management deeming all matters immaterial - The company is not subject to any legal proceedings involving claims exceeding 10% of its consolidated assets[124] Item 1A. Risk Factors As a smaller reporting company, Associated Capital Group, Inc. is exempt from providing risk factor disclosures - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[125] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, the company repurchased 21,241 shares of Class A Stock at an average price of $36.53 per share under its stock repurchase program Share Repurchases for the Quarter Ended June 30, 2025 | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 7,796 | $34.48 | | May 2025 | 5,211 | $37.04 | | June 2025 | 8,234 | $38.14 | | Total | 21,241 | $36.53 | Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the first half of 2025 - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements in the first half of 2025[127] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q report, including agreements, CEO and CFO certifications, and interactive data files (XBRL) - Exhibits filed with the report include CEO and CFO certifications pursuant to Sarbanes-Oxley Act rules[128]