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AC

Associated Capital Group, Inc. (AC)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 EPS was $1.09 on net income of $23.2M, driven by $37.2M of investment and other non‑operating income (merger arbitrage gains, a $2/share GAMCO special dividend, and interest income); core revenues were $2.4M and the company recorded a non‑GAAP operating loss before management fee of $(3.6)M .
  • AUM ended at $1.34B (avg $1.35B), down from $1.55B at 3/31 and $1.36B at 6/30, reflecting YTD net outflows of $288M; book value per share was $42.02 (ex-$2 special dividend) .
  • Capital return accelerated: AC declared a $2.00 special dividend (payable Nov 4) and a $0.10 semi‑annual dividend (payable Dec 19); Q3 buybacks totaled 107,218 shares ($3.4M at $31.80) .
  • Operational expense pressure persisted (higher SICAV marketing), but merger arb performance strengthened (Q3 net +3.80%) amid improving global M&A, supporting non‑operating income tailwinds .

What Went Well and What Went Wrong

  • What Went Well

    • Strong non‑operating income lifted results: “gains from our merger arbitrage partnerships, a $2 per share special dividend declared on our holdings of GAMCO Investors, Inc. and interest income” drove $37.2M in Q3 non‑operating income .
    • Merger arbitrage strategy performance improved: longest‑running fund gross +4.88% (net +3.80%) in Q3, up from Q2 net −1.40% .
    • Shareholder returns were significant: “Returned $45.9 million to shareholders through dividends declared and share repurchases in the third quarter” .

  • What Went Wrong

    • AUM pressure continued: AUM fell to $1.34B (from $1.59B at 9/30/23) with YTD net outflows of $288M through 9/30/24 .
    • Core operations remain loss‑making: operating loss before management fee (non‑GAAP) widened to $(3.6)M vs $(3.2)M in Q2 and $(3.5)M YoY .
    • Operating expenses rose: Q3 total operating expenses (ex‑mgmt fee) increased to $6.0M from $5.7M YoY, largely due to SICAV marketing costs .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenues ($000)$2,200 $3,011 $2,595 $2,415
Net Income ($000)$(16) $13,821 $2,985 $23,242
Diluted EPS ($)$0.00 $0.64 $0.14 $1.09
Operating Loss Before Management Fee (Non‑GAAP, $000)$(3,533) $(2,988) $(3,232) $(3,604)
Investment & Other Non‑Op Income ($000)$3,794 $22,625 $7,252 $37,239
Income Before Taxes ($000)$273 $17,655 $3,578 $30,323
Effective Tax Rate (%)60.8% 21.5% 19.1% 22.9%
Average AUM ($MM)$1,580 $1,556 $1,446 $1,349
End‑of‑Period AUM ($MM)$1,588 $1,549 $1,362 $1,340
Book Value/Share ($)$41.43 $42.80 $42.87 $42.02 (ex‑$2)

Revenue breakdown

Revenue Component ($000)Q3 2023Q1 2024Q2 2024Q3 2024
Investment Advisory & Incentive Fees$2,098 $2,907 $2,489 $2,310
Other Revenues$102 $104 $106 $105
Total Revenues$2,200 $3,011 $2,595 $2,415

KPIs

KPI3/31/20246/30/20249/30/2024
AUM – Merger Arbitrage ($MM)$1,262 $1,127 $1,095
AUM – Long/Short Value ($MM)$251 $199 $208
AUM – Other ($MM)$36 $36 $37
Total AUM ($MM)$1,549 $1,362 $1,340
Shares Outstanding (Total, MM)21.420 21.355 21.248
Book Value/Share ($)$42.80 $42.87 $42.02 (ex‑$2)

AUM drivers vs. Dec 31, 2023

PeriodChange vs. YE 2023 ($MM)Net FlowsMarket ImpactFX Impact
6/30/2024−$229 −$195 −$19 −$15
9/30/2024−$251 −$288 +$41 −$4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Special DividendAnnounced 9/19/2024; payable 11/4/2024N/A$2.00 per share (approx. $42.4M) New/Declared
Semi‑Annual DividendPayable 12/19/2024 (declared 11/8/2024)Prior semi‑annual $0.10 paid 6/27/2024 $0.10 per share Maintained
Share RepurchaseOngoingAuthorization increased by 200,000 to 439,487 on 8/7/2024 Q3 repurchases: 107,218 shares for $3.4M at $31.80 Executed under program
SDCC (Charitable)2024 ProgramN/A$0.20/share SDCC (approx. $4.3M) Announced/Set registration

Note: AC does not issue revenue/EPS/OpEx/tax guidance in these materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2024)Current Period (Q3 2024)Trend
Global M&A BackdropQ1: $798B in Q1; US 61% share . Q2: $1.5T H1; US 53% .$2.3T first 9 months; US $1.1T (48%); PE buyouts $548B (24%); Tech $375B .Improving activity; supportive for merger arb
Merger Arb PerformanceQ1 net +0.87% ; Q2 net −1.40% .Q3 net +3.80% (gross +4.88%) .Rebounded in Q3
AUM/FlowsQ1: AUM down $42M vs YE on net outflows $43M, FX −$11M, partially offset by +$12M markets . Q2: −$229M vs YE (flows −$195M, market −$19M, FX −$15M) .−$251M vs YE (flows −$288M, market +$41M, FX −$4M) .Continued outflows; markets offset in Q3
Capital ReturnsQ1: $3.9M buybacks . Q2: $2.2M buybacks; $0.10 dividend; buyback authorization +200k shares .$2.00 special dividend; $0.10 dividend; $3.4M buybacks .Accelerated in Q3
Capital Deployment/AcquisitionsStated intent to pursue acquisitions/alliances; PE initiatives (GPEP) .Continued emphasis on acquisitions/alliance strategy; outreach to owners/sponsors .Ongoing strategic focus

Management Commentary

  • “Associated Capital Group's plan is to accelerate the use of its capital. We intend to leverage our research and investment capabilities by pursuing acquisitions and alliances that will broaden our product offerings and add new sources of distribution.” (Q3 press release) .
  • “For the third quarter of 2024, the longest continuously offered fund in the merger arbitrage strategy generated gross returns of 4.88% (3.80% net of fees).” .
  • “Global M&A activity totaled $2.3 trillion in the first nine months of 2024… Private Equity‑backed buyouts represented 24%… Technology sector led with $375 billion.” .
  • “During the third quarter, AC repurchased 107,218 Class A shares, totaling $3.4 million, at an average price of $31.80 per share.” .

Q&A Highlights

  • Not applicable; no analyst Q&A content was provided in the company’s Q3 materials .

Estimates Context

  • Wall Street consensus (EPS and revenue) via S&P Global was unavailable for AC’s Q3 2024 at the time of retrieval (limited coverage). Therefore, no vs‑estimate comparisons are presented here.

Key Takeaways for Investors

  • Earnings quality: Q3 profitability was predominantly driven by non‑operating items (merger arb gains, GAMCO special dividend, interest income), while core advisory revenues remain small and operating results pre‑fee remain negative .
  • AUM trajectory: Continued net outflows (−$288M YTD) pressured end‑period AUM to $1.34B, though market appreciation in Q3 partly offset flows .
  • Capital returns as a near‑term catalyst: The $2.00 special dividend (payable Nov 4) and incremental buybacks represent tangible shareholder returns; semi‑annual dividend maintained .
  • Expense dynamics: Operating expenses increased YoY due to SICAV marketing costs; operating loss before management fee widened to $(3.6)M .
  • Strategy and pipeline: Management reiterates plans to deploy capital via acquisitions/alliances and to build out private equity initiatives, positioning for new revenue streams longer‑term .
  • Book value resilience: BVPS was $42.02 (ex‑$2 special dividend), modestly above $41.43 a year ago, despite AUM declines .
  • M&A environment supportive: Improving global M&A volumes and PE activity underpin the merger arbitrage strategy’s opportunity set, which correlated with stronger Q3 fund performance .