Associated Capital Group(AC) - 2022 Q4 - Annual Report

Part I Business Associated Capital Group, Inc. (AC) manages $1.84 billion in assets, focusing on alternative investment management and direct investments - The company operates through two main business lines: Alternative Investment Management, which provides advisory services for fees, and a direct investment business that utilizes the company's proprietary capital[15][16][21] Assets Under Management (AUM) Trend (2018-2022) | Strategy | 2022 (in millions) | 2021 (in millions) | 2020 (in millions) | 2019 (in millions) | 2018 (in millions) | | :--- | :--- | :--- | :--- | :--- | :--- | | Merger Arbitrage | $1,588 million | $1,542 million | $1,126 million | $1,525 million | $1,342 million | | Event-Driven Value | $222 million | $195 million | $180 million | $132 million | $118 million | | Other | $32 million | $44 million | $45 million | $59 million | $60 million | | Total AUM | $1,842 million | $1,781 million | $1,351 million | $1,716 million | $1,520 million | - The company's business strategy includes: - Continuing an active fundamental investment approach using the proprietary "Private Market Value (PMV) with a Catalyst" methodology - Growing the Investment Partnerships advisory business, including international expansion - Leveraging research capabilities to pursue acquisitions, alliances, and direct investments in operating businesses - Launching a private equity business to capitalize on market opportunities[25][26][27] - The company's operations are subject to extensive regulation in the U.S. by the SEC under the Advisers Act and ERISA, as well as European regulations such as AIFMD and MiFID II[33][35][42] - As of March 3, 2023, the company had 24 full-time employees[51] Risk Factors As a smaller reporting company, Associated Capital Group is not required to provide the information for this item - The company is a "smaller reporting company" and is exempt from providing Risk Factors disclosure[55] Unresolved Staff Comments The company reports no unresolved staff comments - There are no unresolved staff comments[55] Properties The company owns office properties in Greenwich, CT, and London, UK, leasing to affiliates, and subleases space in Rye, NY Lease Income and Expense with Affiliates (2021-2022) | Transaction Type | 2022 | 2021 | | :--- | :--- | :--- | | Income from Affiliates | | | | Greenwich, CT Lease | $116.4 thousand | $118.1 thousand | | London, UK Lease | $309.8 thousand | $275.4 thousand | | Expense to Affiliates | | | | Rye, NY Sublease | $72.1 thousand | $73.7 thousand | Legal Proceedings As of December 31, 2022, the company is not subject to any material legal proceedings exceeding 10% of its consolidated assets - The company is not currently subject to any legal proceedings with claims exceeding 10% of its consolidated assets[58] Part II Market For The Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities The company's Class A common stock trades on the NYSE under 'AC', supported by an active stock repurchase program - Class A common stock trades on the NYSE under the ticker symbol AC[61] Class A Common Stock Repurchases (Q4 2022) | Period | Total Shares Repurchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | Oct 1 - Oct 31, 2022 | 1,305 | $39.16 | | Nov 1 - Nov 30, 2022 | 9,326 | $39.39 | | Dec 1 - Dec 31, 2022 | 2,581 | $40.87 | | Total | 13,212 | $39.66 | - As of the end of Q4 2022, the maximum number of shares that may yet be purchased under the company's plans or programs was 609,352[63] Management's Discussion and Analysis ('MD&A') of Financial Condition and Results of Operations In 2022, the company reported a net loss of $48.9 million primarily due to investment losses, despite AUM growing to $1.84 billion Key Financial Performance Indicators (2021 vs 2022) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | AUM - end of period | $1,842 million | $1,781 million | | Net income/(loss) per share-diluted | $(2.22) | $2.68 | | Book value per share | $40.48 | $42.48 | - Total AUM increased by $61 million (3.4%) in 2022, driven by net investor inflows of $100 million and market appreciation of $34 million, which was partially offset by a negative currency impact of $73 million[78][81][82] Revenue Breakdown (in thousands) | Revenue Type | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Investment advisory and incentive fees | $14,801 | $20,530 | (27.9)% | | Other revenues | $427 | $394 | 8.4% | | Total revenues | $15,228 | $20,924 | (27.2)% | - The net loss in 2022 was primarily due to a net loss from investments of $56.5 million, compared to a net gain of $93.4 million in 2021, attributed to market volatility from rising interest rates, geo-political factors, and inflation[87][90] - The company identifies revenue recognition, valuation of investments, consolidation of entities, and income tax accounting as its critical accounting policies requiring significant management judgment[97] Financial Statements and Supplementary Data This section provides the company's audited consolidated financial statements for 2022 and 2021, along with the independent auditor's report Report of Independent Registered Public Accounting Firm Deloitte & Touche, LLP issued an unqualified audit opinion, highlighting the deconsolidation of PMV Consumer Acquisition Corp. as a Critical Audit Matter - The auditor, Deloitte & Touche, LLP, issued an unqualified opinion, stating the financial statements are presented fairly in all material respects[119] - A Critical Audit Matter was identified concerning the deconsolidation of PMV Consumer Acquisition Corp. This was due to the significant judgment involved in determining whether the company continued to have substantive control over the entity[123][125] Consolidated Financial Statements The consolidated financial statements detail the company's financial performance and position for 2022 and 2021, showing a $48.9 million net loss in 2022 Consolidated Statement of Income Highlights (in thousands) | Line Item | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $15,228 | $20,924 | | Operating Loss | $(11,262) | $(19,076) | | Net gain/(loss) from investments | $(56,513) | $93,405 | | Net income/(loss) attributable to AC shareholders | $(48,907) | $59,203 | | Diluted EPS | $(2.22) | $2.68 | Consolidated Statement of Financial Condition Highlights (in thousands) | Line Item | Dec 31, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $218,462 | $319,048 | | Total Investments (various) | $658,294 | $623,091 | | Total Assets | $927,690 | $1,203,336 | | Total Liabilities | $27,301 | $65,534 | | Total Associated Capital Group, Inc. equity | $890,196 | $937,102 | Consolidated Statement of Cash Flows Highlights (in thousands) | Line Item | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | $(70,552) | $238,194 | | Net cash provided by investing activities | $402 | $65,285 | | Net cash used in financing activities | $(37,175) | $(14,394) | Notes to Consolidated Financial Statements The notes detail the deconsolidation of PMV Consumer Acquisition Corp., revenue recognition, related-party transactions, and stock repurchases - In August 2022, the company deconsolidated PMV Consumer Acquisition Corp. (PMV SPAC) and its sponsor because it no longer had a controlling financial interest, resulting in a recognized loss of $3.6 million[151][217] - Performance-based advisory fees, typically 15%-20% of investment performance, are recognized at the end of the measurement period (usually calendar year) or upon investor redemption[178] - The company has significant related-party transactions with its former parent, GAMCO, including holding $36.7 million in GAMCO stock, receiving $7.1 million in sub-advisory fees, and engaging in property lease agreements[252][256][259] Stock Repurchase Activity | Period | Shares Repurchased | Average Price/Share ($) | Total Cost ($) | | :--- | :--- | :--- | :--- | | 2022 | 67,792 | $37.98 | $2.6 million | | 2021 | 215,958 | $35.40 | $7.6 million | Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - The CEO and Co-CFOs concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[279] - Management concluded that the company maintained effective internal control over financial reporting as of December 31, 2022, based on the COSO framework[280][281] - No changes in internal control over financial reporting occurred during the fourth quarter of 2022 that materially affected, or are reasonably likely to materially affect, these controls[282] Part III Directors, Executive Officers, Corporate Governance, Compensation, and Related Party Transactions Information for Items 10-14, including governance, compensation, and related party transactions, is incorporated by reference from the 2023 Proxy Statement - Information regarding Directors, Executive Officers, Corporate Governance (Item 10), Executive Compensation (Item 11), Security Ownership (Item 12), Certain Relationships and Related Transactions (Item 13), and Principal Accountant Fees (Item 14) is incorporated by reference from the Company's 2023 Proxy Statement[284][287] Part IV Exhibits, Financial Statement Schedules This section lists documents filed as part of the Form 10-K, including financial statements, notes, and a detailed list of exhibits - A list of all exhibits filed with the Form 10-K is provided, including the Separation and Distribution Agreement with GAMCO, the company's Certificate of Incorporation and Bylaws, and various executive certifications required by the Sarbanes-Oxley Act[292][293] Form 10-K Summary No Form 10-K summary is provided - No Form 10-K summary is provided[294]