GAMCO Investors, Inc. Reports Second Quarter 2017 Results

• AUM of $41.3 billion, up 5.2% year over year
• Pretax profits of $37.4 million
• Second Quarter Earnings of $0.76 per diluted share

RYE, N.Y.--(BUSINESS WIRE)--GAMCO Investors, Inc. (“GAMCO”) (NYSE:GBL) today reported financial results for the second quarter including revenues of $87.6 million, net income of $22.9 million and earnings of $0.76 per diluted share.

Financial Highlights
	Second Quarter								YTD
($'s in 000's except AUM and per share data)	2017				2016				2017				2016
AUM - end of period (in millions)	$	41,310			$	39,273			$	41,310			$	39,273
AUM - average (in millions)		41,489				38,888				41,063				38,143
GAAP
Revenues		87,600				83,944				173,517				165,329
Income before income taxes		37,448				44,184				77,568				86,311
Effective tax rate			38.9	%			37.7	%			38.5	%			37.9	%
Net income		22,894				27,543				47,714				53,568
Net income per fully diluted share	$	0.76			$	0.93			$	1.58			$	1.82
Non-GAAP
Adjusted income before income taxes		33,373				31,138				65,368				60,654
Adjusted effective tax rate			38.1	%			37.7	%			38.1	%			37.9	%
Adjusted net income		20,657				19,413				40,450				37,647
Adjusted net income per fully diluted share	$	0.69			$	0.66			$	1.35			$	1.28
Weighted average diluted shares outstanding		31,100				29,522				31,130				29,510
Shares outstanding at June 30		29,301				29,774				29,301				29,774
See the reconciliation to the comparable U.S. GAAP measures starting on page 10.

Assets Under Management

	June 30,		June 30,
	2017		2016
Equities:
Open-end Funds	$	13,574	$	13,981
Closed-end Funds		7,359		6,917
Institutional & PWM - direct (a)		13,437		13,326
Institutional & PWM - sub-advisory		5,048		3,459
SICAV		50		40
Total Equities		39,468		37,723
Fixed Income:
Money-Market Fund		1,813		1,518
Institutional & PWM		29		32
Total Fixed Income		1,842		1,550
Total Assets Under Management	$	41,310	$	39,273

(a)	Includes $300 million and $307 million of Money Market Fund AUM at June 30, 2017 and June 30, 2016, respectively.

Our second quarter 2017 AUM, while up 5.2% from the prior year was essentially unchanged from the $41.4 billion at March 31, 2017. Net outflows of $0.6 billion and distributions of $0.1 billion were offset by market appreciation of $0.7 billion.

Average AUM were $41.5 billion for the second quarter of 2017 versus $40.6 billion for the first quarter of 2017 and $38.9 billion for the second quarter of 2016.

Revenues

• Total revenues for the second quarter of 2017 were $87.6 million, compared with $83.9 million in the prior year.
• Investment advisory fees were $76.6 million in the second quarter of 2017 versus $72.8 million in the second quarter of 2016. Revenues from our open-end and closed-end funds tracked our average AUM in the funds and were $49.2 million in the second quarter of 2017, an increase from the $47.0 million in the year ago quarter. Institutional and Private Wealth Management accounted for $26.4 million of the revenues in 2017 versus $25.2 million in 2016. SICAV revenues increased to $1.0 million in 2017 from $0.6 million in 2016.
• Distribution fees from our open-end equity funds and other income were $11.0 million for the second quarter 2017, versus the $11.2 million in the prior year quarter.

Operating Income – Second Quarter – Operating margin 45.3% vs. 55.7%

Operating income, which is net of management fee expense, was $39.7 million in the second quarter of 2017 versus $46.7 million in the prior year period. During the second quarter of 2017, we recorded an additional $3.7 million of stock compensation expense relating to the accelerated vesting of all the outstanding RSAs that were issued by Associated Capital Group, Inc. (“AC”) at the time of the spin-off from GAMCO. This expense related to GAMCO teammates who held these AC RSAs. There will be no further expense related to AC RSAs recorded after the second quarter of 2017; however, there will continue to be expense related to the outstanding GBL RSAs.

As previously disclosed, the Company has deferred the cash compensation of the Chief Executive Officer relating to all of 2016 (“2016 DCCA”) and the first half of 2017 (“2017 DCCA”) to provide the Company with flexibility to pay down debt. We have made substantial progress toward this objective, having reduced our debt since the November 2015 spin-off of AC, resulting in Standard & Poor’s recent revision of its outlook to stable from negative and reaffirmation of our debt rating of BBB-.

Absent the cash compensation deferrals, we would have recorded $7.4 million and $13.0 million of additional expenses in the second quarters of 2017 and 2016, respectively. In total, there is $67.5 million of deferred cash compensation that has not been recorded yet but will be in the remainder of 2017, 2018 and 2019 in accordance with GAAP.

Operating income before management fee was $42.0 million in the second quarter 2017 versus $47.9 million in the second quarter 2016. Operating margin before management fee was 48.0% versus 57.0% in the second quarter of 2016.

See supplemental information and notes to non-GAAP measures on pages 8 and 10 for further information regarding non-GAAP measures.

Other expense

We recognized $2.2 million in net other expenses in the 2017 second quarter versus net other expenses of $2.6 million in the second quarter of 2016. Interest expense decreased by $0.5 million year over year reflecting lower debt outstanding of $214.0 million at June 30, 2017 versus $274.1 million at June 30, 2016. Investment income for 2017 was $0.5 million vs. $0.6 million in 2016.

Income Taxes

The Company’s effective tax rate (“ETR”) for the quarter ended June 30, 2017 was 38.9% versus 37.7% for the quarter ended June 30, 2016.

Business and Investment Highlights

• On July 10, 2017, Standard & Poor’s revised its outlook on GAMCO to stable from negative and reaffirmed its BBB- rating.

Balance Sheet

We ended the quarter with cash of $90.4 million and investments of $35.2 million and gross debt of $214.0 million (excluding deferred cash compensation of $105.5 million). We have $500 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 June 30, 2017, we repurchased 33,410 shares at an average price of $28.80 per share for a total investment of $1.0 million and distributed $0.6 million in dividends. Since our IPO in February 1999, we have returned $1.9 billion in total to shareholders comprised of $1.0 billion of spin-offs, $489.8 million in the form of dividends and $443.6 million through stock buybacks of 10,060,160 shares.

On August 3, 2017, GAMCO’s Board of Directors declared a regular quarterly dividend of $0.02 per share payable on September 26, 2017 to its Class A and Class B shareholders of record on September 12, 2017.

About GAMCO Investors, Inc.

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

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

Table I: Fund Flows - 2nd Quarter 2017
								Fund
			Market					distributions,
	March 31,		appreciation/		Net cash			net of			June 30,
	2017		(depreciation)		flows			reinvestments			2017
Equities:
Open-end Funds	$	13,708	$	215	$	(339	)	$	(10	)	$	13,574
Closed-end Funds		7,315		172		(10	)		(118	)		7,359
Institutional & PWM - direct		13,492		234		(289	)		-			13,437
Institutional & PWM - sub-advisory		5,019		80		(51	)		-			5,048
SICAV		49		2		(1	)		-			50
Total Equities		39,583		703		(690	)		(128	)		39,468
Fixed Income:
Money-Market Fund		1,752		4		57			-			1,813
Institutional & PWM		34		-		(5	)		-			29
Total Fixed Income		1,786		4		52			-			1,842
Total Assets Under Management	$	41,369	$	707	$	(638	)	$	(128	)	$	41,310

Table II: Fund Flows - Year to date June 2017
									Fund
			Market						distributions,
	December 31,		appreciation/		Net cash				net of			June 30,
	2016		(depreciation)		flows				reinvestments			2017
Equities:
Open-end Funds	$	13,462	$	837	$	(704	)		$	(21	)	$	13,574
Closed-end Funds		7,150		463		(14	)			(240	)		7,359
Institutional & PWM - direct		13,441		910		(914	)			-			13,437
Institutional & PWM - sub-advisory		3,783		154		1,111		(a)		-			5,048
SICAV		50		4		(4	)			-			50
Total Equities		37,886		2,368		(525	)			(261	)		39,468
Fixed Income:
Money-Market Fund		1,767		5		41				-			1,813
Institutional & PWM		31		-		(2	)			-			29
Total Fixed Income		1,798		5		39				-			1,842
Total Assets Under Management	$	39,684	$	2,373	$	(486	)		$	(261	)	$	41,310

(a)	Includes $1.2 billion from being approved as the sub-advisor on two sub-advisory entities as of February 27, 2017.

Table III
GAMCO INVESTORS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
	For the Quarter Ended
	June 30,
	2017			2016
Investment advisory and incentive fees	$	76,625		$	72,794
Distribution fees and other income		10,975			11,150
Total revenues		87,600			83,944
Compensation costs		29,437			20,623
Distribution costs		10,795			10,501
Other operating expenses		5,352			4,940
Total expenses		45,584			36,064
Operating income before management fee		42,016			47,880
Investment income		537			605
Interest expense		(2,749	)		(3,168	)
Other expense, net		(2,212	)		(2,563	)
Income before management fee and income taxes		39,804			45,317
Management fee expense		2,356			1,133
Income before income taxes		37,448			44,184
Income tax expense		14,554			16,641
Net income attributable to GAMCO Investors, Inc.	$	22,894		$	27,543
Net income per share attributable to GAMCO Investors, Inc.:
Basic	$	0.79		$	0.94
Diluted	$	0.76		$	0.93
Weighted average shares outstanding:
Basic		28,896			29,234
Diluted		31,100			29,522
Actual shares outstanding (a)		29,301			29,774

Notes:
(a)	Includes 420,240 and 549,700 of RSAs, respectively.
See GAAP to non-GAAP reconciliation on page 8.

Table IV
GAMCO INVESTORS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
	For the Six Months Ended
	June 30,
	2017			2016
Investment advisory and incentive fees	$	151,614		$	143,642
Distribution fees and other income		21,903			21,687
Total revenues		173,517			165,329
Compensation costs		54,715			40,897
Distribution costs		21,708			21,218
Other operating expenses		10,471			9,312
Total expenses		86,894			71,427
Operating income before management fee		86,623			93,902
Investment income		1,046			1,196
Interest expense		(5,581	)		(6,574	)
Other expense, net		(4,535	)		(5,378	)
Income before management fee and income taxes		82,088			88,524
Management fee expense		4,520			2,213
Income before income taxes		77,568			86,311
Income tax expense		29,854			32,743
Net income attributable to GAMCO Investors, Inc.	$	47,714		$	53,568
Net income per share attributable to GAMCO Investors, Inc.:
Basic	$	1.65		$	1.83
Diluted	$	1.58		$	1.82
Weighted average shares outstanding:
Basic		28,933			29,241
Diluted		31,130			29,510
Actual shares outstanding (a)		29,301			29,774

Notes:
(a)	Includes 420,240 and 549,700 of RSAs, respectively.
See GAAP to non-GAAP reconciliation on page 8.

Table V
GAMCO INVESTORS, INC.
UNAUDITED QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
	2017									2016
	1st			2nd						1st			2nd			3rd			4th
	Quarter			Quarter			Full Year			Quarter			Quarter			Quarter			Quarter			Full Year
Income Statement Data:
Revenues	$	85,917		$	87,600		$	173,517		$	81,385		$	83,944		$	87,721		$	99,950		$	353,000
Expenses		41,310			45,584			86,894			35,363			36,064			38,482			44,777			154,686
Operating income before
management fee		44,607			42,016			86,623			46,022			47,880			49,239			55,173			198,314
Investment income		509			537			1,046			591			605			426			1,483			3,105
Interest expense		(2,832	)		(2,749	)		(5,581	)		(3,406	)		(3,168	)		(3,155	)		(2,945	)		(12,674	)
Other expense, net		(2,323	)		(2,212	)		(4,535	)		(2,815	)		(2,563	)		(2,729	)		(1,462	)		(9,569	)
Income before management
fee and income taxes		42,284			39,804			82,088			43,207			45,317			46,510			53,711			188,745
Management fee expense		2,164			2,356			4,520			1,080			1,133			1,163			3,142			6,518
Income before income taxes		40,120			37,448			77,568			42,127			44,184			45,347			50,569			182,227
Income tax expense		15,300			14,554			29,854			16,102			16,641			14,486			17,877			65,106
Net income attributable to
GAMCO Investors, Inc.	$	24,820		$	22,894		$	47,714		$	26,025		$	27,543		$	30,861		$	32,692		$	117,121
Net income per share
attributable to GAMCO
Investors, Inc.:
Basic	$	0.86		$	0.79		$	1.65		$	0.89		$	0.94		$	1.06		$	1.12		$	4.01
Diluted	$	0.82		$	0.76		$	1.58		$	0.88		$	0.93		$	1.03		$	1.07		$	3.92
Weighted average shares outstanding:
Basic		28,970			28,896			28,933			29,247			29,234			29,185			29,062			29,182
Diluted		31,160			31,100			31,130			29,684			29,522			30,406			31,241			30,170
Reconciliation of non-GAAP
financial measures to GAAP:
Operating income before
management fee		44,607			42,016			86,623			46,022			47,880			49,239			55,173			198,314
Deduct: management fee expense		2,164			2,356			4,520			1,080			1,133			1,163			3,142			6,518
Operating income	$	42,443		$	39,660		$	82,103		$	44,942		$	46,747		$	48,076		$	52,031		$	191,796
Operating margin before
management fee		51.9	%		48.0	%		49.9	%		56.5	%		57.0	%		56.1	%		55.2	%		56.2	%
Operating margin after
management fee		49.4	%		45.3	%		47.3	%		55.2	%		55.7	%		54.8	%		52.1	%		54.3	%

Notes on Non-GAAP Financial Measures:

Operating income before management fee is used by management to evaluate its business operations. We believe this measure is useful in illustrating the operating results of GAMCO Investors, Inc. (the "Company") as management fee expense is based on pre-tax income before management fee expense, which includes non-operating items including investment gains and losses from the Company's proprietary investment portfolio and interest expense.

Table VI
GAMCO INVESTORS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share data)
	June 30,			December 31,			June 30,
	2017			2016			2016
ASSETS
Cash and cash equivalents	$	90,405		$	39,812		$	24,224
Investments		35,225			37,285			32,079
Receivable from brokers		843			453			230
Other receivables		33,707			50,756			31,811
Income tax receivable and deferred tax asset		19,361			9,349			11,905
Other assets		11,390			11,574			13,665
Total assets	$	190,931		$	149,229		$	113,914
LIABILITIES AND EQUITY
Payable to brokers	$	4,670		$	66		$	45
Income taxes payable and deferred tax liabilities		3,486			3,815			822
Compensation payable (a)		53,642			42,384			25,592
Accrued expenses and other liabilities		36,186			35,656			36,829
Sub-total		97,984			81,921			63,288
5.875% Senior notes (due June 1, 2021)		24,132			24,120			24,109
4.5% Convertible note (due August 15, 2021)		109,853			109,835			-
4% PIK note (due November 30, 2020)		80,000			100,000			250,000
Total debt		213,985			233,955			274,109
Total liabilities		311,969			315,876			337,397
GAMCO Investors, Inc.'s stockholders' deficit		(121,038	)		(166,647	)		(223,483	)
Total liabilities and equity	$	190,931		$	149,229		$	113,914

(a)	Excludes $67.5 million of DCCA expense that is not yet recorded under GAAP.

Non-GAAP information and reconciliation:

GAMCO’s non-GAAP measures include 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 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 DCCA and 2017 DCCA that were put in place to enable the Company to more quickly pay down its debt as well as the acceleration of outstanding RSAs by AC.

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:

	For the three months ended June 30, 2017
										Impact of
	Reported			Impact of			Impact of			AC RSA
	GAAP			2017 DCCA			2016 DCCA			Acceleration			Non-GAAP
Total revenues	$	87,600		$	-		$	-		$	-		$	87,600
Compensation costs		29,437			9,666			(3,260	)		(3,683	)		32,160
Distribution costs		10,795			-			-			-			10,795
Other operating expenses		5,352			-			-			-			5,352
Total expenses		45,584			9,666			(3,260	)		(3,683	)		48,307
Operating income before management fee		42,016			(9,666	)		3,260			3,683			39,293
Other expense, net		(2,212	)		-			-			-			(2,212	)
Income before management fee and income taxes		39,804			(9,666	)		3,260			3,683			37,081
Management fee expense		2,356			1,688			(704	)		368			3,708
Income before income taxes		37,448			(11,354	)		3,964			3,315			33,373
Income tax expense		14,554			(4,413	)		1,541			1,034			12,716
Net income attributable to GAMCO Investors, Inc.	$	22,894		$	(6,941	)	$	2,423		$	2,281		$	20,657
Net income per share attributable to GAMCO Investors, Inc.:
Basic	$	0.79		$	(0.24	)	$	0.08		$	0.08		$	0.71
Diluted	$	0.76		$	(0.22	)	$	0.08		$	0.07		$	0.69

	For the three months ended June 30, 2016
	Reported			Impact of
	GAAP			2016 DCCA			Non-GAAP
Total revenues	$	83,944		$	-		$	83,944
Compensation costs		20,623			10,719			31,342
Distribution costs		10,501			-			10,501
Other operating expenses		4,940			-			4,940
Total expenses		36,064			10,719			46,783
Operating income before management fee		47,880			(10,719	)		37,161
Other expense, net		(2,563	)		-			(2,563	)
Income before management fee and income taxes		45,317			(10,719	)		34,598
Management fee expense		1,133			2,327			3,460
Income before income taxes		44,184			(13,046	)		31,138
Income tax expense		16,641			(4,916	)		11,725
Net income attributable to GAMCO Investors, Inc.	$	27,543		$	(8,130	)	$	19,413
Net income per share attributable to GAMCO Investors, Inc.:
Basic	$	0.94		$	(0.28	)	$	0.66
Diluted	$	0.93		$	(0.28	)	$	0.66

	For the six months ended June 30, 2017
										Impact of
	Reported			Impact of			Impact of			AC RSA
	GAAP			2017 DCCA			2016 DCCA			Acceleration			Non-GAAP
Total revenues	$	173,517		$	-		$	-		$	-		$	173,517
Compensation costs		54,715			19,206			(5,759	)		(3,683	)		64,479
Distribution costs		21,708			-			-			-			21,708
Other operating expenses		10,471			-			-			-			10,471
Total expenses		86,894			19,206			(5,759	)		(3,683	)		96,658
Operating income before management fee		86,623			(19,206	)		5,759			3,683			76,859
Other expense, net		(4,535	)		-			-			-			(4,535	)
Income before management fee and income taxes		82,088			(19,206	)		5,759			3,683			72,324
Management fee expense		4,520			3,552			(1,484	)		368			6,956
Income before income taxes		77,568			(22,758	)		7,243			3,315			65,368
Income tax expense		29,854			(8,761	)		2,791			1,034			24,918
Net income attributable to GAMCO Investors, Inc.	$	47,714		$	(13,997	)	$	4,452		$	2,281		$	40,450
Net income per share attributable to GAMCO Investors, Inc.:
Basic	$	1.65		$	(0.48	)	$	0.15		$	0.08		$	1.40
Diluted	$	1.58		$	(0.45	)	$	0.14		$	0.07		$	1.35

	For the six months ended June 30, 2016
	Reported			Impact of
	GAAP			2016 DCCA			Non-GAAP
Total revenues	$	165,329		$	-		$	165,329
Compensation costs		40,897			21,131			62,028
Distribution costs		21,218			-			21,218
Other operating expenses		9,312			-			9,312
Total expenses		71,427			21,131			92,558
Operating income before management fee		93,902			(21,131	)		72,771
Other expense, net		(5,378	)		-			(5,378	)
Income before management fee and income taxes		88,524			(21,131	)		67,393
Management fee expense		2,213			4,526			6,739
Income before income taxes		86,311			(25,657	)		60,654
Income tax expense		32,743			(9,736	)		23,007
Net income attributable to GAMCO Investors, Inc.	$	53,568		$	(15,921	)	$	37,647
Net income per share attributable to GAMCO Investors, Inc.:
Basic	$	1.83		$	(0.54	)	$	1.29
Diluted	$	1.82		$	(0.54	)	$	1.28

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.