Associated Capital Group(AC) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company reported a net loss in Q1 2022, a significant downturn from prior-year net income, primarily driven by investment losses Condensed Consolidated Statements of Financial Condition Total assets increased to $1.28 billion as of March 31, 2022, while total liabilities significantly rose and total equity slightly declined Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1,284,192 | $1,203,336 | | Cash and cash equivalents | $348,629 | $319,048 | | Total Investments | $553,874 | $562,101 | | Total Liabilities | $160,684 | $65,534 | | Total Equity | $918,188 | $935,346 | Condensed Consolidated Statements of Income The company reported a $16.2 million net loss in Q1 2022, a sharp reversal from prior-year net income, primarily due to investment losses Q1 2022 vs Q1 2021 Income Statement (in thousands, except EPS) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total Revenues | $2,582 | $2,325 | | Operating Loss | $(3,306) | $(6,365) | | Net gain/(loss) from investments | $(15,610) | $31,321 | | Net income/(loss) attributable to ACG | $(16,186) | $18,555 | | Diluted EPS | $(0.73) | $0.83 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly declined in Q1 2022, while overall cash and equivalents increased during the quarter Q1 2022 vs Q1 2021 Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $28,558 | $243,568 | | Net cash provided by/(used in) investing activities | $(1,773) | $710 | | Net cash provided by/(used in) financing activities | $(779) | $(4,062) | | Net increase in cash | $26,006 | $240,216 | Notes to the Condensed Consolidated Financial Statements The notes detail the company's business as an alternative investment manager and proprietary investor, including SPAC consolidation and dividend declaration - The company's business consists of providing alternative investment management services and generating investment income from its own proprietary investments[20] - The company consolidates its special purpose acquisition corporation, PMV Consumer Acquisition Corp. (PMV), which resulted in the consolidation of $162.6 million of assets and $8.3 million of liabilities as of March 31, 2022[24] - Subsequent to the quarter's end, on May 4, 2022, the board of directors declared a semi-annual dividend of $0.10 per share[75] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q1 2022 net loss to investment portfolio mark-to-market losses, while operating loss narrowed and AUM grew Overview The company operates in alternative investment management and direct investment, with the latter structured across three core pillars - The company's business is divided into Alternative Investment Management and a direct investment business utilizing proprietary capital[78][79][83] - The direct investment business operates through three core pillars: Gabelli Private Equity Partners, LLC (GPEP), Gabelli Special Purpose Acquisition Vehicles (SPAC), and Gabelli Principal Strategies Group, LLC (GPS)[83] Results of Operations The Q1 2022 net loss was primarily due to investment losses, while the operating loss improved due to the absence of a management fee expense - The decrease in operating loss from $6.4 million in Q1 2021 to $3.3 million in Q1 2022 was primarily due to the absence of management fee expense and higher revenue[99] - Investment losses were $(15.6) million in Q1 2022 versus gains of $31.3 million in Q1 2021, a decrease attributed to market uncertainty, rising interest rates, high inflation, and geo-political conflict[104] - No management fee expense was recorded for Q1 2022 due to a pre-tax loss, compared to a $2.7 million expense in Q1 2021[103] Assets Under Management Assets Under Management (AUM) increased to $1.839 billion as of March 31, 2022, driven by net inflows despite negative currency impact Assets Under Management by Strategy (in millions) | Strategy | March 31, 2022 | Dec 31, 2021 | March 31, 2021 | | :--- | :--- | :--- | :--- | | Merger Arbitrage | $1,606 | $1,542 | $1,253 | | Event-Driven Value | $191 | $195 | $196 | | Other | $42 | $44 | $46 | | Total AUM | $1,839 | $1,781 | $1,495 | - The increase in AUM during Q1 2022 was driven by net inflows of $76 million and market appreciation of $2 million, offset by a negative currency impact of $(20) million[109][110] Liquidity and Capital Resources The company maintained a strong liquidity position with $348.6 million in cash, despite a significant decrease in operating cash flow Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Operating activities | $28,558 | $243,568 | | Investing activities | $(1,773) | $710 | | Financing activities | $(779) | $(4,062) | - As of March 31, 2022, the company had cash and cash equivalents of $348.6 million and $260.4 million of investments net of securities sold short[114] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from providing quantitative and qualitative market risk disclosures - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[118] Item 4. Controls and Procedures Management, including CEO and CFO, concluded that disclosure controls were effective with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[118] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[119] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not subject to legal proceedings with claims exceeding 10% of consolidated assets, deeming existing matters immaterial - As of March 31, 2022, the company is not involved in any legal proceedings with claims exceeding 10% of its consolidated assets[124] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 7,536 Class A shares for $0.3 million in Q1 2022, with 669,608 shares remaining for repurchase Q1 2022 Share Repurchase Activity | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2022 | - | $- | | Feb 2022 | 7,136 | $38.76 | | Mar 2022 | 400 | $40.41 | | Total | 7,536 | $38.84 | - As of March 31, 2022, the maximum number of shares that may yet be purchased under the plan is 669,608[126] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, material agreements, and required certifications - The report includes a list of filed exhibits, such as the Separation and Distribution Agreement, Amended Certificate of Incorporation, Employment Agreement with Mario J. Gabelli, and CEO/CFO certifications[127][128]