GAMCO Investors, Inc. Reports Fourth Quarter & Full Year Results

GAMCO Investors, Inc. (“GAMCO”) (NYSE: GBL) today reported its 2014 fourth quarter results including revenues of $116.8 million, net income of $28.8 million and earnings of $1.13 per diluted share. On a comparable basis, revenues were $122.7 million, net income was $33.3 million, and earnings were $1.29 per diluted share in the fourth quarter of 2013.

Assets Under Management (“AUM”) were $47.5 billion at December 31, 2014, up 1.2% from $46.9 billion at September 30, 2014 and a 1.0% increase versus the $47.0 billion at December 31, 2013.

For the full year 2014, the Company generated revenues of $440.4 million, net income of $109.4 million and earnings of $4.28 per diluted share, a decrease of 5.7% from earnings of $4.54 per diluted share in the full year 2013.

Assets Under Management

Our fourth quarter 2014 increase in AUM was due to market appreciation of $1.8 billion, partially offset by net outflows of $1.1 billion and open- and closed-end fund net distributions of $205 million.

Revenues

• Total revenues for the fourth quarter of 2014 were $116.8 million, down 4.9% from $122.7 million in the prior year reflecting lower incentive fees offset by increases in fees earned in each of investment advisory, distribution and institutional research services.
• Investment advisory fees increased 4.7% to $88.9 million in the fourth quarter of 2014 from $84.9 million in the comparable 2013 quarter. The increase in revenues was driven by growth in average AUM in our open- and closed-end funds and higher billable assets in our institutional and private wealth management accounts.
• Incentive fees earned were $10.7 million during the 2014 quarter, down from $21.3 million in the fourth quarter of 2013.
• Distribution fees from our open-end equity mutual funds and other income were $14.9 million for the fourth quarter 2014, an increase of $0.4 million, or 2.2%, from $14.5 million in the prior year quarter. Driving this increase was a 7.9% rise in average AUM in the open-end equity mutual funds.
• Our institutional research services revenues were $2.4 million in the fourth quarter 2014, up 22.0% from $2.0 million in the prior year period.

Operating Income – Fourth Quarter

For the fourth quarter 2014, incentive fees were $10.7 million versus $21.3 million in the year ago quarter. Operating income, which is net of management fee expense, reflecting lower incentive fees, and higher non-cash expense related to RSAs of $0.7 million, decreased 11.2%, or $5.3 million, to $41.9 million in the fourth quarter of 2014 versus $47.2 million in the prior year period. Management fee expense, which is entirely variable, is based on pre-tax income and is impacted by changes in both operating and non-operating income.

Operating income before incentive fees and management fee was $41.2 million in the fourth quarter 2014 versus $40.4 million in the fourth quarter 2013. Operating margin before management fee slipped to 40.2% versus 42.0% in the fourth quarter of 2013 due to lower incentive fee revenues. Management believes evaluating operating income before management fee is an important measure in analyzing the Company’s operating results. Further information regarding Non-GAAP measures is included in Notes on Non-GAAP Financial Measures and Table V included elsewhere herein.

Other income (expense)

We recognized other income of $3.1 million in the 2014 quarter versus $6.1 million in the fourth quarter of 2013. Investment gains were $3.2 million in the 2014 quarter versus $11.4 million in the fourth quarter of 2013. Dividend and interest income nearly matched last year’s $2.1 million. In addition, the fourth quarter of 2013 was impacted by a $5.3 million charge, or $0.12 per diluted share, for our 2014 Shareholder Designated Charitable Contribution program.

Income Taxes

The reported full year 2014 effective tax rate (“ETR”) was 37.3% compared to 36.1% in 2013. Excluding net income (loss) attributable to noncontrolling interests the ETR was 36.4% and 36.2% for 2014 and 2013, respectively.

Business and Investment Highlights

• In October 2014, The Gabelli Equity Trust (NYSE: GAB) in an over-subscribed rights offering raised $157 million. The Gabelli Equity Trust is a non-diversified, closed-end management investment company with $1.8 billion in total net assets.
• On January 13, 2015 we announced the launch of The Gabelli Value Plus+ Trust (the “Trust”), a UK listed closed-end fund, which will invest in U.S. equities.

Balance Sheet

We ended the quarter with cash and investments, excluding noncontrolling interests, of $633.9 million, debt of $112.2 million ($113.1 million face value) and equity attributable to GAMCO shareholders of $525.1 million. We have $400 million available on our universal shelf registration. Together with earnings from operations, the shelf provides us with flexibility to do acquisitions, lift-outs, seed new investment strategies, and co-invest, as well as to fund shareholder compensation including, share repurchases and dividends.

Shareholder Compensation

During the quarter ended December 31, 2014, we returned $15.9 million of our earnings to shareholders through dividends and stock repurchases. We repurchased 94,770 shares at an average price of $80.87 per share, for a total investment of $7.7 million and distributed $8.2 million in dividends. For the full year 2014, we returned $45.6 million of our earnings to shareholders through dividends and stock repurchases. We repurchased 414,432 shares at an average price of $78.99 per share, for a total investment of $32.7 million and distributed $12.9 million through dividends. Since our IPO, in February 1999, we have returned nearly $880 million to shareholders.

On February 2, 2015, GAMCO’s Board of Directors declared a regular quarterly dividend of $0.07 per share payable on March 31, 2015 to its Class A and Class B shareholders of record on March 17, 2015.

About GAMCO Investors, Inc.

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

NOTES ON NON-GAAP FINANCIAL MEASURES

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 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. 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.