Associated Capital Group(AC) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements Unaudited interim financial statements for Associated Capital Group, Inc. as of June 30, 2023, are presented with detailed notes Condensed Consolidated Statements of Financial Condition As of June 30, 2023, total assets increased slightly to $933.5 million, driven by higher cash, with total equity rising to $899.6 million Condensed Consolidated Statements of Financial Condition (Unaudited) | (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $381,387 | $218,462 | | Investments in equity securities | $214,270 | $195,585 | | Investments in partnerships | $149,080 | $150,498 | | Total assets | $933,513 | $927,690 | | Liabilities and Equity | | | | Total liabilities | $26,860 | $27,301 | | Total Associated Capital Group, Inc. equity | $899,567 | $890,196 | | Total liabilities and equity | $933,513 | $927,690 | Condensed Consolidated Statements of Income In Q2 2023, net income was $3.4 million ($0.15 per share), a turnaround from a $29.9 million net loss in Q2 2022, driven by investment gains Condensed Consolidated Statements of Income (Unaudited) | (in thousands, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $2,382 | $2,546 | $4,847 | $5,128 | | Operating loss | $(3,471) | $(2,211) | $(8,604) | $(5,517) | | Net gain/(loss) from investments | $3,297 | $(37,803) | $23,808 | $(53,413) | | Net income/(loss) attributable to ACG | $3,371 | $(29,887) | $21,125 | $(46,073) | | Diluted EPS | $0.15 | $(1.36) | $0.96 | $(2.09) | Condensed Consolidated Statements of Equity Total equity increased to $899.6 million at June 30, 2023, from $890.2 million at year-end 2022, driven by net income - For the six months ended June 30, 2023, total equity increased by $9.4 million, reflecting $21.1 million in net income, offset by $2.2 million in dividends and $9.6 million in treasury stock purchases[19][13] Condensed Consolidated Statements of Cash Flows Net cash from operating activities for H1 2023 significantly increased to $179.4 million, while financing activities used $15.1 million Summary of Cash Flows (Unaudited) | (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $179,403 | $29,272 | | Net cash provided by/(used in) investing activities | $676 | $(2,865) | | Net cash used in financing activities | $(15,058) | $(5,010) | | Net increase in cash, cash equivalents and restricted cash | $165,021 | $21,397 | Notes to the Condensed Consolidated Financial Statements These notes detail the company's organization, revenue, investments, consolidation, fair value, income tax, EPS, equity, goodwill, and subsequent events Revenue Breakdown (in thousands) | Revenue Source | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Asset-based advisory fees | $1,291 | $2,606 | | Sub-advisory fees | $989 | $2,084 | | Total Inv. advisory & incentive fees | $2,280 | $4,691 | - The company holds investments in equity securities with a fair value of $214.3 million and affiliated registered investment companies valued at $128.3 million as of June 30, 2023[40] - During Q2 2023, 97,000 Phantom Restricted Stock Awards (PRSAs) were granted, with 307,910 PRSAs outstanding as of June 30, 2023[74] - Subsequent to quarter-end, from July 1 to August 10, 2023, the company repurchased 48,764 shares at an average price of $36.92 per share, and on August 9, 2023, the Board approved a $0.20 per share shareholder designated charitable contribution[82] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operations, highlighting a Q2 2023 net income turnaround and a decrease in Assets Under Management to $1.5 billion - The company operates two main segments: Alternative Investment Management, which earns fees from managing assets, and a Proprietary Capital business that makes direct investments[87][90] Key Financial Highlights | (in thousands, except per share data or as noted) | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | AUM - end of period (in millions) | $1,549 | $1,802 | | Net income/(loss) per share-diluted | $0.15 | $(1.36) | | Book value per share at June 30 | $41.41 | $40.30 | Results of Operations Q2 2023 operating loss widened to $3.5 million, but investment performance led to a $3.4 million net income, reversing prior year's loss - The increase in Q2 2023 operating loss was primarily driven by $0.5 million in management fee expense (absent in 2022 due to pre-tax losses) and a $0.4 million increase in stock-based compensation[102] - Net investment gains were $3.3 million in Q2 2023 versus losses of $37.8 million in Q2 2022, attributed to market appreciation in the current period compared to market volatility in the prior year[106] - For the six months ended June 30, 2023, net investment gains were $23.8 million compared to losses of $53.4 million in the same period of 2022[111] Assets Under Management Total AUM decreased to $1.55 billion as of June 30, 2023, a 15.9% decrease from year-end 2022, primarily due to net investor outflows Assets Under Management by Strategy (in millions) | Strategy | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | :--- | | Merger Arbitrage | $1,286 | $1,588 | $1,591 | | Long/Short Value | $230 | $222 | $174 | | Other | $33 | $32 | $37 | | Total AUM | $1,549 | $1,842 | $1,802 | - In Q2 2023, AUM decreased by $250 million, resulting from $232 million in net outflows, $13 million in market depreciation, and a $5 million negative impact from currency fluctuations[117] Liquidity and Capital Resources The company maintains a strong liquidity position with $381.4 million in cash and $211.3 million in net investments, and H1 2023 net cash from operations at $179.4 million - As of June 30, 2023, the company had cash and cash equivalents of $381.4 million and investments (net of securities sold short) of $210.3 million[120] - For the six months ended June 30, 2023, cash used in financing activities totaled $15.1 million, including $9.6 million for stock buybacks, $3.3 million for redemptions of noncontrolling interests, and $2.2 million for dividends[121] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Associated Capital Group, Inc. is not required to provide quantitative and qualitative disclosures about market risk[124] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of period end, with no material changes to internal control over financial reporting - Based on an evaluation, the Chief Executive Officer and Co-Chief Financial Officers concluded that the company's disclosure controls and procedures were effective[125] - No changes occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[126] PART II. OTHER INFORMATION Legal Proceedings The company is not currently subject to any legal proceedings expected to have a material impact on its financial condition or operations - The company is not subject to any legal proceedings involving claims exceeding 10% of its consolidated assets, and management believes any existing matters are not material to the company's financial condition as of June 30, 2023[129] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's repurchase of 211,870 Class A shares at $35.95 per share in Q2 2023, with 345,175 shares remaining authorized Class A Stock Repurchases (Q2 2023) | Period | Total Shares Repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2023 | 49,105 | $36.67 | | May 2023 | 17,142 | $37.36 | | June 2023 | 145,623 | $35.54 | | Total | 211,870 | $35.95 | - As of June 30, 2023, the company had authorization to repurchase an additional 345,175 shares under its publicly announced plan[132] Exhibits This section lists exhibits filed with the Form 10-Q, including various agreements, corporate governance documents, and required certifications