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GAMCO Investors, Inc. Reports Record Third Quarter Earnings

November 6, 2018

RYE, N.Y.--(BUSINESS WIRE)--Nov 6, 2018--GAMCO Investors, Inc. (“GAMCO”) (NYSE:GBL) today reported third quarter 2018 revenues of $85.8 million, net income of $35.0 million, and earnings of $1.22 per diluted share. This compares to third quarter 2017 revenues of $88.3 million, net income of $16.6 million, and earnings of $0.55 per diluted share.

In July 2018, GAMCO’s investment grade rating was reaffirmed by Standard and Poor’s with a stable outlook. This reflects our strong financial condition.

Average AUM was $41.0 billion for the third quarter of 2018 versus $42.3 billion for the third quarter of 2017 and $40.6 billion for the second quarter of 2018.

Commitment to Community

Our firm has long held the belief that generating returns for our stakeholders, while important, is not the only factor in measuring our corporate success. The importance of the way we and others conduct business is a key facet of our principles. As evidence of this, we have been involved in the field of responsible investing since 1987. In our program of corporate giving, our shareholder designated charitable contribution program, GAMCO shareholders select which organizations will be recipients of charitable grants. This year, the majority of our shareholders registered their shares and were eligible to designate a 501(c)(3) organization. With this year’s $4.9 million distribution, we have donated more than $22 million to over 150 charities across the United States since the inception of this program in 2013 which brings the total charitable contributions since our IPO to $47 million. On November 6, 2018, the Board declared an additional $0.20 per share shareholder designated charitable contribution to registered shareholders of record as of December 31, 2018.

Revenues

Total revenues for the third quarter of 2018 were $85.8 million compared to $88.3 million in the prior year. Investment advisory fees were $75.9 million in the third quarter versus $77.3 million in the third quarter of 2017. Open-end and closed-end fund revenues were unchanged at $50.0 million in the third quarter. Institutional and Private Wealth Management revenues were $24.3 million compared to $26.0 million in 2017. SICAV revenues increased to $1.6 million from $1.3 million in the prior year quarter. Distribution fees from our open-end equity funds and other income were $9.9 million for the third quarter of 2018 versus $11.0 million in the prior-year quarter.

Operating Income

Operating income was $51.7 million in the third quarter of 2018 versus $23.4 million in the prior-year period. Lower amortization of deferred compensation, a non-cash charge, impacted operating costs by $9.6 million. The previously announced waiver of CEO compensation beginning March 1, 2018 boosted third quarter operating income by $17.8 million. Excluding GAAP treatment of the deferral, but reflecting the lower compensation expense due to the waiver, adjusted operating income was $51.9 million in the third quarter of 2018 versus $33.2 million in the year-ago quarter. See pages 10 and 11 for a reconciliation of GAAP operating income to this adjusted operating income.

Other income/(expense), net

Mark to market investment losses were $3.8 million in the third quarter of 2018 versus gains of $3.6 million in the prior year quarter. Interest expense for the three months was $1.9 million lower at $0.8 million versus $2.7 million in the year ago quarter. This reflects the lower balance and repayment of the 4% PIK note.

Income Taxes

The Company’s effective tax rate (“ETR”) for the quarter ended September 30, 2018 was 24.6% versus 18.8% for the quarter ended September 30, 2017. The prior year quarter’s ETR benefited from the reversal of certain tax accruals totaling $3.6 million. Absent this reversal the ETR was 36.2%.

Business Highlights

On August 21, 2018, we announced that Ian Lapey joined us as portfolio manager for the newly registered Gabelli Global Financial Services Fund. The Fund launched on October 1, 2018. Ian was a Partner, Research Analyst, and Portfolio Manager at Third Avenue Management, after which he joined Moerus Capital Management LLC. In 2009 he was appointed Co-Manager of the firm’s flagship Third Avenue Value Fund, and was subsequently named sole Portfolio Manager of that fund in 2012. We also launched the Gabelli Global Mini Mites Fund. The fund will invest on a global basis in equity securities that have a market capitalization of $250 million or less. On August 27, 2018, Trevor, Stewart, Burton & Jacobson (“TSB&J”), an RIA firm, agreed to assign their private wealth clients to GAMCO Asset Management. Carl Kempner, Jr. and Melody Bryant joined GAMCO to manage the portfolios for the former TSB&J clients. On September 28, 2018, Fitch Ratings gave the Gabelli U.S. Treasury Fund its highest rating, AAAmmf.

Balance Sheet

We ended the quarter with cash and investments of $60.0 million and debt of $24.2 million. We note that there is $50.0 million, net of a $16.7 million tax benefit, still payable in deferred compensation.

Returns to Shareholder

We distributed $0.6 million in dividends during the quarter ended September 30, 2018 and we purchased 86,333 shares at an average price of $25.99 per share for a total investment of $2.2 million. Since our IPO in February 1999, we have returned $2.0 billion to shareholders consisting of $1.0 billion of spin-offs, $492.8 million in the form of dividends, and $462.2 million through stock buybacks of approximately 10.7 million shares.

On November 6, 2018, GAMCO’s Board of Directors declared a regular quarterly dividend of $0.02 per share payable on January 15, 2019 to its Class A and Class B shareholders of record on January 2, 2019.

About GAMCO Investors, Inc.

GAMCO Investors, Inc., through its subsidiaries, manages open-end funds and closed-end funds (Gabelli Funds, LLC) and private advisory accounts (GAMCO Asset Management Inc.).

The Company reported Assets Under Management as follows (in millions):

Non-GAAP information and reconciliation:

GAMCO’s non-GAAP measures include adjusted operating income, adjusted income before taxes, adjusted effective tax rate, adjusted net income and adjusted net income per fully diluted share. GAMCO’s calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result, the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or a substitute for, related U.S. GAAP measures.

These non-GAAP measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods to understand operating performance without regard to items that we do not consider to be a component of our core operating performance. Management uses these measures in its financial, investment and operational decision-making processes, for internal reporting and as part of its forecasting and budgeting processes. For these reasons we believe these non-GAAP measures are useful for our investors.

Adjusted operating income, adjusted income before taxes, adjusted effective tax rate, adjusted net income and adjusted net income per fully diluted share can be used by investors to review our results on a consistent basis. Examples of adjustments to these measures include the GAAP impact of the 2016 Deferred Cash Compensation Agreement (“DCCA”), First Half 2017 DCCA, and the Fourth Quarter 2017 DCCA that were put in place to enable the Company to more quickly pay down its debt.

The following tables reconcile adjusted income before taxes, adjusted effective tax rate, adjusted net income and adjusted net income per share to their closest GAAP equivalent:

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

The financial results set forth in this press release are preliminary. Our disclosure and analysis in this press release, which do not present historical information, contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements convey our current expectations or forecasts of future events. You can identify these statements because they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. They also appear in any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance of our products, expenses, the outcome of any legal proceedings, and financial results. Although we believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, the economy, the effects of the Tax Cuts and Jobs Act, and other conditions, there can be no assurance that our actual results will not differ materially from what we expect or believe. Therefore, you should proceed with caution in relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.

Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors, some of which are listed below, that are difficult to predict and could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. Some of the factors that could cause our actual results to differ from our expectations or beliefs include a decline in the securities markets that adversely affect our assets under management, negative performance of our products, the failure to perform as required under our investment management agreements, a general downturn in the economy that negatively impacts our operations, and the ongoing impacts of the Tax Cuts and Jobs Act with respect to tax rates and the non-deductibility of certain portions of NEO compensation. We also direct your attention to the more specific discussions of these and other risks, uncertainties and other important factors contained in our Form 10-K and other public filings. Other factors that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations whether as a result of new information, future developments or otherwise, except as may be required by law.

View source version on businesswire.com:https://www.businesswire.com/news/home/20181106005961/en/

CONTACT: GAMCO Investors, Inc.

Kieran Caterina or Diane M. LaPointe

SVPs and Co-Chief Accounting Officers

(914) 921-5149 or 7763

or

For further information please visit

www.gabelli.com

KEYWORD: UNITED STATES NORTH AMERICA NEW YORK

INDUSTRY KEYWORD: PROFESSIONAL SERVICES BANKING FINANCE

SOURCE: GAMCO Investors, Inc.

Copyright Business Wire 2018.

PUB: 11/06/2018 04:05 PM/DISC: 11/06/2018 04:05 PM

http://www.businesswire.com/news/home/20181106005961/en

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