ac20230331_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 001-37387

ASSOCIATED CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		47-3965991
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

191 Mason Street, Greenwich, CT		06830
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (203) 629-9595

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share		AC		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ☐	Accelerated filer ☐
	Non-accelerated filer ☒	Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes ☐ No ☒.

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the latest practical date.

Class		Outstanding at May 3, 2023
Class A Common Stock, .001 par value		2,923,911
Class B Common Stock, .001 par value		18,962,754

As of May 3, 2023, 2,923,911 shares of class A common stock and 18,962,754 shares of class B common stock were outstanding. GGCP, Inc., a private company controlled by the Company’s Executive Chairman, held 77,165 shares of class A common stock and indirectly held 18,423,741 shares of class B common stock. Other executive officers and directors of GGCP, Inc. held 29,866 and 176,758 shares of class A and class B common stock, respectively. In addition, there are 210,910 Phantom Restricted Stock Awards outstanding as of March 31, 2023.

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Unaudited Condensed Consolidated Financial Statements:
	Condensed Consolidated Statements of Financial Condition (Unaudited)	3
	Condensed Consolidated Statements of Income (Unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	5
	Condensed Consolidated Statements of Equity (Unaudited)	6
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to the Condensed Consolidated Financial Statements:
	1. Organization	9
	2. Revenue	10
	3. Investments in Securities	11
	4. Investment Partnerships and Other Entities	11
	5. Fair Value	13
	6. Income Taxes	15
	7. Earnings per Share	15
	8. Equity	15
	9. Goodwill	16
	10. Guarantees, Contingencies and Commitments	17
	11. Subsequent Events	17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	22

PART II.	OTHER INFORMATION *

Item 1.	Legal Proceedings	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 6.	Exhibits	24

	Signature	26

* Items other than those listed above have been omitted because they are not applicable.

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

UNAUDITED

(Dollars in thousands, except per share data)

	*March 31,*			*December 31,*
	*2023*			*2022*
ASSETS
Cash and cash equivalents (includes U.S. Treasury Bills with maturities of less than 3 months)	$	396,828		$	218,462
Investments in U.S. Treasury Bills with greater than 3 month maturities		4,948			186,001
Investments in equity securities (includes GAMCO stock with a fair value of $45.6 million and $36.7 million, respectively)		217,006			195,585
Investments in affiliated registered investment companies		128,484			126,210
Investments in partnerships		150,361			150,498
Receivable from brokers		11,023			12,072
Investment advisory fees receivable		1,327			3,807
Receivable from affiliates		133			2,517
Income taxes receivable, including deferred tax assets, net		8,825			10,320
Goodwill		3,519			3,519
Other assets		20,432			18,699
Total assets	$	942,886		$	927,690

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

Payable to brokers	$	15,208		$	7,784
Income taxes payable, including deferred tax liabilities, net		-			-
Compensation payable		8,894			13,936
Securities sold, not yet purchased		3,569			2,874
Accrued expenses and other liabilities		1,981			2,707
Total liabilities		29,652			27,301

Redeemable noncontrolling interests		7,233			10,193

Commitments and contingencies (Note 10)

Equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued and outstanding		-			-
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized; 6,629,254 shares issued; 2,975,234 and 3,027,541 shares outstanding, respectively		6			6
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized; 19,196,792 shares issued; 18,962,754 outstanding		19			19
Additional paid-in capital		999,047			999,047
Retained earnings		32,880			15,126
Treasury stock, at cost (3,654,184 and 3,601,877 shares, respectively)		(125,951	)		(124,002	)
Total Associated Capital Group, Inc. equity		906,001			890,196
Total liabilities and equity	$	942,886		$	927,690

As of March 31, 2023 and December 31, 2022, certain balances include amounts related to consolidated variable interest entities (“VIEs”) and voting interest entities (“VOEs”). See Note 4.

See accompanying notes.

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

UNAUDITED

(In thousands, except per share data)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Revenues
Investment advisory and incentive fees	$	2,411		$	2,486
Other revenues		54			96
Total revenues		2,465			2,582
Expenses
Compensation		3,570			3,933
Management fee		2,543			-
Other operating expenses		1,485			1,955
Total expenses		7,598			5,888
Operating loss		(5,133	)		(3,306	)
Other income/(expense)
Net gain/(loss) from investments		20,511			(15,610	)
Interest and dividend income		5,193			804
Interest expense		(98	)		(33	)
Shareholder-designated contribution		(871	)		(208	)
Total other income/(expense), net		24,735			(15,047	)
Income/(loss) before income taxes		19,602			(18,353	)
Income tax expense/(benefit)		1,580			(4,848	)
Income/(loss) before noncontrolling interests		18,022			(13,505	)
Income attributable to noncontrolling interests		268			2,681
Net income/(loss) attributable to Associated Capital Group, Inc.'s shareholders	$	17,754		$	(16,186	)

Net income/(loss) per share attributable to Associated Capital Group, Inc.'s shareholders:
Basic	$	0.81		$	(0.73	)
Diluted	$	0.81		$	(0.73	)

Weighted average shares outstanding (in thousands):
Basic		21,970			22,054
Diluted		21,970			22,054

Actual shares outstanding (in thousands)		21,938			22,051

See accompanying notes.

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

UNAUDITED

(Dollars in thousands)

	*Three Months Ended*
	*March 31,*
	*2023*		*2022*

Net income/(loss) before noncontrolling interests	$	18,022	$	(13,505	)
Less: Comprehensive income attributable to noncontrolling interests		268		2,681
Comprehensive income/(loss) attributable to Associated Capital Group, Inc.	$	17,754	$	(16,186	)

See accompanying notes.

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

UNAUDITED

(Dollars in thousands)

For the three months ended March 31, 2023

					Additional								Redeemable
	Common		Retained		Paid-in		Treasury			Total			Noncontrolling
	Stock		Earnings		Capital		Stock			Equity			Interests
Balance at December 31, 2022	$	25	$	15,126	$	999,047	$	(124,002	)	$	890,196		$	10,193
Redemptions of noncontrolling interests		-		-		-		-			-			(3,228	)
Net income/(loss)		-		17,754		-		-			17,754			268
Purchases of treasury stock		-		-		-		(1,949	)		(1,949	)		-
Balance at March 31, 2023	$	25	$	32,880	$	999,047	$	(125,951	)	$	906,001		$	7,233

See accompanying notes.

For the three months ended March 31, 2022

	Associated Capital Group, Inc. shareholders
						Additional															Redeemable
	Common		Retained			Paid-in			Treasury						Noncontrolling			Total			Noncontrolling
	Stock		Earnings			Capital			Stock			Total			Interests			Equity			Interests
Balance at December 31, 2021	$	25	$	68,435		$	990,069		$	(121,427	)	$	937,102		$	(1,756	)	$	935,346		$	202,456
Redemptions of noncontrolling interests		-		-			-			-			-			-			-			(486	)
Net income/(loss)		-		(16,186	)		-			-			(16,186	)		197			(15,989	)		2,484
Purchases of treasury stock		-		-			-			(293	)		(293	)		-			(293	)		-
Accretion of redeemable noncontrolling interest		-		-			(584	)		-			(584	)		(292	)		(876	)		876
Other changes to redeemable noncontrolling interests		-		-			-			-			-			-			-			(10	)
Balance at March 31, 2022	$	25	$	52,249		$	989,485		$	(121,720	)	$	920,039		$	(1,851	)	$	918,188		$	205,320

See accompanying notes.

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(Dollars in thousands)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Operating activities
Net income/(loss)	$	18,022		$	(13,505	)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Equity in net (gains)/losses from partnerships		(1,773	)		1,202
Depreciation and amortization		90			90
Deferred income taxes		(199	)		(4,954	)
Donated securities		700			127
Unrealized (gains)/losses on securities		(14,214	)		21,166
Realized gains on sales of securities		(2,246	)		(6,753	)
(Increase)/decrease in assets:
Investments in trading securities		174,385			46,153
Investments in partnerships:
Contributions to partnerships		(1,790	)		(2,702	)
Distributions from partnerships		3,700			1,563
Receivable from affiliates		2,384			4,786
Receivable from brokers		526			(137,995	)
Investment advisory fees receivable		2,480			6,961
Income taxes receivable		1,694			-
Other assets		(1,823	)		2,087
Increase/(decrease) in liabilities:
Payable to brokers		7,424			124,528
Income taxes payable		-			82
Compensation payable		(5,042	)		(13,092	)
Accrued expenses and other liabilities		(726	)		(1,186	)
Total adjustments		165,570			42,063
Net cash provided by operating activities		183,592			28,558

Investing activities
Purchases of securities		(1,027	)		(2,601	)
Return of capital on securities		455			828
Net cash used in investing activities	$	(572	)	$	(1,773	)

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED (continued)

(Dollars in thousands)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Financing activities
Purchases of treasury stock	$	(1,949	)	$	(293	)
Redemptions of redeemable noncontrolling interests		(3,228	)		(486	)
Net cash used in financing activities		(5,177	)		(779	)
Net increase in cash, cash equivalents and restricted cash		177,843			26,006
Cash, cash equivalents and restricted cash at beginning of period		221,269			328,594
Cash, cash equivalents and restricted cash at end of period	$	399,112		$	354,600

Supplemental disclosures of cash flow information:
Cash paid for interest	$	98		$	33
Cash paid for taxes	$	74		$	23

Reconciliation of Cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	396,828		$	348,629
Restricted cash included in receivable from broker		2,284			5,971
Cash, cash equivalents and restricted cash	$	399,112		$	354,600

See accompanying notes.

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ASSOCIATED CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

(UNAUDITED)

1. Organization

Unless we have indicated otherwise, or the context otherwise requires, references in this report to “Associated Capital Group, Inc.”, "Associated Capital", “AC Group”, “the Company”, “AC”, “we”, “us” and “our” or similar terms are to Associated Capital Group, Inc., its predecessors and its subsidiaries.

We are a Delaware corporation that provides alternative investment management, and we derive investment income/(loss) from proprietary investment of cash and other assets in our operating business.

Gabelli & Company Investment Advisors, Inc. (“GCIA”), a wholly-owned subsidiary of AC, and its wholly-owned subsidiary, Gabelli & Partners, LLC (“Gabelli & Partners”), collectively serve as general partners or investment managers to investment funds including limited partnerships and offshore companies (collectively, “Investment Partnerships”), and separate accounts. We primarily manage assets across a range of risk and event arbitrage portfolios and in equity event-driven value strategies. The businesses earn management and incentive fees from their advisory activities. Management fees are largely based on a percentage of assets under management. Incentive fees are based on the percentage of the investment returns of certain clients’ portfolios. GCIA is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

PMV Consumer Acquisition Corp.

PMV Consumer Acquisition Corp. ("PMV"), a special purpose acquisition corporation, and its sponsor, PMV Consumer Acquisition Holding Company, LLC (“Sponsor”, collectively "Consolidated PMV") were previously consolidated in the financial statements of AC because AC had a controlling financial interest in these entities. Commencing in August 2022, as a result of management and organization restructuring negotiations at the Sponsor to extend the life of PMV, AC no longer controlled Consolidated PMV. As a result, Consolidated PMV was deconsolidated from the financial statements in August 2022.

AC Spin-off

On November 30, 2015, GAMCO Investors, Inc. (“GAMCO” or “GAMI”) distributed all the outstanding shares of each class of AC common stock on a pro rata one-for-one basis to the holders of each class of GAMCO’s common stock (the “Spin-off”).

As part of the Spin-off, AC received 4,393,055 shares of GAMCO Class A common stock for $150 million. The Company held 2,407,000 shares as of March 31, 2023 and December 31, 2022, respectively.

Basis of Presentation

The unaudited interim condensed consolidated financial statements of AC Group included herein have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP in the United States for complete financial statements. The unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position, results of operations and cash flows of the Company for the interim periods presented and are not necessarily indicative of a full year’s results.

The interim condensed consolidated financial statements include the accounts of AC Group and its subsidiaries. All material intercompany transactions and balances have been eliminated. The details on the impact of consolidating certain partnership entities on the condensed consolidated financial statements can be seen in Note 4. Investment Partnerships and Other Entities.

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Recent Accounting Developments

In June 2016, the FASB issued ASU 2016-13, Accounting for Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), which requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Currently, U.S. GAAP requires an “incurred loss” methodology that delays recognition until it is probable a loss has been incurred. Under ASU 2016-13, the allowance for credit losses must be deducted from the amortized cost of the financial asset to present the net amount expected to be collected. The condensed consolidated statements of income will reflect the measurement of credit losses for newly recognized financial assets as well as the expected increases or decreases of expected credit losses that have taken place during the period. In November 2019, the FASB issued ASU 2019-10, which deferred the effective date of this guidance for smaller reporting companies for three years. This guidance is effective for the Company on January 1, 2023. We adopted this standard on January 1, 2023 and the adoption of this standard did not have a material impact on our financial condition or results of operations.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other, to simplify the process used to test for impairment of goodwill. Under the new standard, an impairment loss must be recognized in an amount equal to the excess of the carrying amount of a reporting unit over its fair value, limited to the total amount of goodwill allocated to that reporting unit. As a smaller reporting company pursuant to ASU 2019-10, the ASU is effective for the Company on January 1, 2023. We adopted this standard on January 1, 2023 and the adoption of this standard did not have a material impact on our financial condition or results of operations.

2. Revenue

Refer to the Company’s audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 for the Company’s revenue recognition policy.

The Company’s major revenue sources are as follows for the three months ended March 31, 2023 and 2022 (in thousands):

	*Three Months Ended March 31,*
	*2023*		*2022*
Investment advisory and incentive fees
Asset-based advisory fees	$	1,315	$	1,304
Performance-based advisory fees		1		44
Sub-advisory fees		1,095		1,138
Sub-total		2,411		2,486

Other
Miscellaneous		54		96

Total	$	2,465	$	2,582

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3. Investments in Securities

Investments in securities at March 31, 2023 and December 31, 2022, consisted of the following (in thousands):


	*March 31, 2023*				*December 31, 2022*
	*Cost*		*Fair Value*		*Cost*		*Fair Value*
Debt - Trading Securities:
U.S. Treasury Bills	$	4,948	$	4,948	$	184,636	$	186,001
Equity Securities:
Common stocks		229,635		211,712		221,794		189,977
Mutual funds		543		1,018		539		906
Other investments		5,540		4,276		6,364		4,702
Total investments in equity securities		235,718		217,006		228,697		195,585
Total investments in securities	$	240,666	$	221,954	$	413,333	$	381,586

Securities sold, not yet purchased at March 31, 2023 and December 31, 2022, consisted of the following (in thousands):


	*March 31, 2023*				*December 31, 2022*
	*Cost*		*Fair Value*		*Cost*		*Fair Value*
Equity securities:
Common stocks	$	3,520	$	3,302	$	2,918	$	2,509
Other investments		68		267		499		365
Total securities sold, not yet purchased	$	3,588	$	3,569	$	3,417	$	2,874

Investments in affiliated registered investment companies at March 31, 2023 and December 31, 2022, consisted of the following (in thousands):

SEC Form 10-Q filed by Associated Capital Group Inc.