TETAA - Teton Advisors Inc. Reports Full Year and Fourth Quarter Results from operations Announces Rights Offering Capital Restructuring and Product and International Expansion
Teton Advisors, Inc. (the “Company”) (OTC PINK: TETAA) announced its fourth quarter and full year 2021 results including cash and marketable securities and updates capital structure with proxy to include increase in authorized shares outstanding, a 5:1 transferrable rights offering to all shareholders, the acquisition of hedge fund Gabelli Global Partners, and establishes a special committee of the board to explore strategic alternatives including M&A. The Company’s Q4 2021 and year end highlights are as follows:
- Full year fully diluted GAAP EPS of $1.85 compared with a loss of ($2.82) a year ago. Fourth quarter fully diluted GAAP EPS of $0.43 compared with a loss of ($2.77) a year ago.
- Full year fully diluted Cash EPS 1 of $2.10 compared with $0.88 a year ago. Fourth quarter fully diluted Cash EPS 1 of $0.50 compared with $0.02 a year ago.
- Full year Revenues of $16.4 million, up 19% year-over-year. Fourth quarter Revenues of $4.1 million, up 23% quarter-over-quarter.
- Full year Average AUM of $2.0 billion, up 16% year-over-year.
- Balance sheet cash and marketable securities total $21.5 million 2 as of December 31, 2021.
- Board approves the increase of authorized shares of the Company’s capital stock from 2,580,000 to 7,500,000.
- Board approves the adoption of the Teton “One Earth” policies to integrate ESG principles into the firm’s risk management, portfolio management, and proxy related processes.
- Rights offering announced to all shareholders. The rights will be transferrable, traded on the OTC markets, and have a record date and exercise price to be determined by the Board. The rights offering is being submitted to the SEC for review under regulation A, for smaller company issuers.
- Acquisition of Gabelli Global Partners marks the Company’s entry into alternative asset management, with an emphasis on its legacy strengths in smaller companies.
- Opening of research and sales offices in London and New Delhi to expand efforts in product development, smaller company research, and asset gathering.
Fourth quarter net income and fully diluted earnings per share were $0.6 million and $0.43, respectively, compared to a net loss ($3.5) million and ($2.77) for the same period a year ago. Excluding certain non-cash items, Cash Earnings 1 and Cash Earnings per fully diluted share were $0.6 million and $0.50, respectively, for the current quarter as compared to $0.03 million and $0.02 for the comparative quarter in 2020.
Revenues were $4.1 million for the quarter versus $3.3 million for the comparative quarter in 2020. Average AUM for the quarter was $2.0 billion versus $1.7 billion for the fourth quarter in 2020.
| FINANCIAL HIGHLIGHTS |
| ($'s in 000's except AUM and per share data) |
| Fourth Quarter |
| Full Year |
|
|
| 2021 |
|
|
|
|
|
|
| 2020 |
|
|
|
|
|
|
| 2021 |
|
|
|
|
|
|
| 2020 |
|
|
| AUM - average (in millions) |
| $ |
| 2,000 |
| $ |
| 1,671 |
|
|
| $ |
| 1,999 |
| $ |
| 1,720 |
|
|
| AUM - end of period (in millions) |
|
|
| 2,000 |
|
|
| 1,829 |
|
|
|
|
| 2,000 |
|
|
| 1,829 |
|
|
| Revenues |
| $ |
| 4,082 |
| $ |
| 3,330 |
|
|
| $ |
| 16,438 |
| $ |
| 13,807 |
|
|
| Income before interest, taxes, depreciation & amortization, and impairment |
|
|
| 894 |
|
|
| 521 |
|
|
|
|
| 3,429 |
|
|
| 1,934 |
|
|
| Net income (loss) |
|
|
| 550 |
|
|
| (3,496 |
| ) |
|
|
| 2,342 |
|
|
| (3,554 |
| ) |
| Net income (loss) per fully diluted share |
| $ |
| 0.43 |
| $ |
| (2.77 |
| ) |
| $ |
| 1.85 |
| $ |
| (2.82 |
| ) |
1 Cash earnings and cash earnings per fully diluted share are non-GAAP performance measures and are explained and reconciled in the Supplemental Financial Information section starting on page 6 of this press release. The quarterly and full year results include amortization of intangible assets. In addition, the Company recognized a non-cash impairment charge of $4,750,000 for the fourth quarter of 2020. For the year ended 2020, total non-cash impairment charges were $5,550,000. There were no impairment charges in 2021.
2 $8 million of this amount relates to a U.S. treasury bill purchase which had not settled as of year-end and is thereby offset by a Due to broker liability balance of the same amount.
Business Expansion and Realignment
The Company announced the acquisition of its first alternative offering, a global event driven value fund Gabelli Global Partners, Ltd., a Cayman Islands master feeder structure previously advised by Gabelli & Company Investment Advisors, LLC, a division of Associated Capital Group which is a Teton affiliated company under the common control of GGCP., Inc. (the “Gabelli Group”). “Our expectation is to expand into alternatives under a variety of new and existing brands.” said Tiffany Hayden, Vice President and officer of the Company.
Special Committee of the Board of Directors
A special committee of the Board has been formed to explore strategic initiatives that include mergers, acquisitions, divestitures, and new business development. “We are active in buy and sell side discussions across the board and are considering all options as we build the franchise. Our strength investing in smaller companies, utilizing fundamental value methods to uncover opportunities in less efficient segments of the market, sets a basis for our expansion.” said Patrick Huvane, the Company’s CFO.
The Company also announces the nomination of Mr. Herve Francois to the Board of Directors, to become effective subject to vote at the annual general meeting. Mr. Francois brings over 30 years of capital markets and alternative asset management experience.
Capital Structure Adjustments and the Rights Offering Designed to Align Growth
The Company announced today that the Board of Directors has voted to approve increase of its authorized shares outstanding and a rights offering to raise additional capital.
Mr. Huvane continued, “We see a terrific opportunity for expansion in new products that include alternatives, European mutual funds known as UCITS, and lift outs and acquisitions of asset managers with less than $2 billion of assets under management. Our initiatives are setting the stage for strategic flexibility at a time of rising interest rates.”
The increase of authorized shares will be proposed to shareholders in the proxy and subject to their approval.
The proposed rights offering is subject to SEC and shareholder approval. Teton stockholders will receive transferable rights to purchase additional shares of the Company’s Class A common stock, par value $0.001 per share, and Class B common stock, par value $0.001 per share, at a price and record date to be determined, all stockholders will receive one subscription right for each share of Class A common stock and/or Class B common stock then owned. Each subscription right will entitle the holder to purchase one-fifth of a share of Class A common stock and/or Class B common stock at a subscription price still to be determined. Assuming the rights offering is fully subscribed, the Company expects the gross proceeds of the offering to be approximately $4 million. The net proceeds of the offering will be used as working capital for general corporate purposes and for acquisitions, although the Company has not identified any specific acquisitions at this time.
The proposed rights offering will include an over-subscription right, which will provide a stockholder, who exercises all of his or her basic subscription rights in full, the right to purchase additional shares of common stock that remain unsubscribed at the expiration of the rights offering, subject to the availability and pro rata allocation of shares among persons exercising this over-subscription right.
The rights offering is expected to commence in the second quarter of 2022. The Class A common stock and Class B common stock issued in connection with the rights offering will be listed on the over-the-counter market (OTC). The subscription rights are also expected to trade on the OTC until the day before the expiration of the offering period. The offering period has not yet been determined.
The Company reserves the right to modify, postpone or cancel the rights offering at any time prior to the closing of the issuance of the Class A common stock and Class B common stock in the rights offering.
| Table I |
| TETON ADVISORS, INC. |
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) |
| For the Three Months Ended December 31, |
|
|
| 2021 |
|
|
|
|
| 2020 |
|
|
| Revenues |
| Investment advisory fees - mutual funds |
| $ |
| 3,266,082 |
| $ |
| 2,754,954 |
|
|
| Investment advisory fees - separate accounts |
|
|
| 806,615 |
|
|
| 563,712 |
|
|
| Distribution fees and other income |
|
|
| 9,479 |
|
|
| 11,183 |
|
|
| Total revenues |
|
|
| 4,082,176 |
|
|
| 3,329,849 |
|
|
| Expenses |
| Compensation |
|
|
| 1,305,221 |
|
|
| 1,065,739 |
|
|
| Marketing and administrative fees |
|
|
| 357,972 |
|
|
| 321,236 |
|
|
| Distribution costs |
|
|
| 410,745 |
|
|
| 403,752 |
|
|
| Advanced commissions |
|
|
| 7,911 |
|
|
| 7,470 |
|
|
| Sub-advisory fees |
|
|
| 687,642 |
|
|
| 603,491 |
|
|
| Other operating expenses |
|
|
| 418,980 |
|
|
| 406,753 |
|
|
| Total operating expenses |
|
|
| 3,188,471 |
|
|
| 2,808,441 |
|
|
| Operating profit before depreciation & amortization & impairment |
|
|
| 893,705 |
|
|
| 521,408 |
|
|
| Depreciation & amortization |
|
|
| 100,009 |
|
|
| 198,087 |
|
|
| Impairment of intangible assets |
|
|
| - |
|
|
| 4,750,000 |
|
|
| Loss before income taxes |
|
|
| 793,696 |
|
|
| (4,426,679 |
| ) |
| Provision (benefit) for income taxes |
|
|
| 243,528 |
|
|
| (931,109 |
| ) |
| Net loss |
| $ |
| 550,168 |
| $ |
| (3,495,570 |
| ) |
| Net loss per share: |
| Basic |
| $ |
| 0.44 |
| $ |
| (2.77 |
| ) |
| Fully diluted |
| $ |
| 0.43 |
| $ |
| (2.77 |
| ) |
| Weighted average shares outstanding: |
| Basic |
|
|
| 1,260,987 |
|
|
| 1,260,988 |
|
|
| Fully diluted |
|
|
| 1,265,923 |
|
|
| 1,260,988 |
|
|
| Table II |
| TETON ADVISORS, INC. |
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) |
| For the Years Ended December 31, |
|
|
| 2021 |
|
|
|
|
| 2020 |
|
|
| Revenues |
| Investment advisory fees - mutual funds |
| $ |
| 13,301,511 |
| $ |
| 11,451,375 |
|
|
| Investment advisory fees - separate accounts |
|
|
| 3,102,959 |
|
|
| 2,253,386 |
|
|
| Distribution fees and other income |
|
|
| 33,547 |
|
|
| 102,352 |
|
|
| Total revenues |
|
|
| 16,438,017 |
|
|
| 13,807,113 |
|
|
| Expenses |
| Compensation |
|
|
| 5,501,495 |
|
|
| 4,575,357 |
|
|
| Marketing and administrative fees |
|
|
| 1,436,309 |
|
|
| 1,324,788 |
|
|
| Distribution costs |
|
|
| 1,704,012 |
|
|
| 1,718,386 |
|
|
| Advanced commissions |
|
|
| 18,296 |
|
|
| 47,398 |
|
|
| Sub-advisory fees |
|
|
| 2,780,853 |
|
|
| 2,555,063 |
|
|
| Other operating expenses |
|
|
| 1,567,796 |
|
|
| 1,652,141 |
|
|
| Total operating expenses |
|
|
| 13,008,761 |
|
|
| 11,873,133 |
|
|
| Operating profit before depreciation & amortization & impairment |
|
|
| 3,429,256 |
|
|
| 1,933,980 |
|
|
| Depreciation & amortization |
|
|
| 358,077 |
|
|
| 792,350 |
|
|
| Impairment of intangible assets |
|
|
| - |
|
|
| 5,550,000 |
|
|
| Income (loss) before income taxes |
|
|
| 3,071,179 |
|
|
| (4,408,370 |
| ) |
| Provision (benefit) for income taxes |
|
|
| 729,180 |
|
|
| (854,557 |
| ) |
| Net income (loss) |
| $ |
| 2,341,999 |
| $ |
| (3,553,813 |
| ) |
| Net income (loss) per share: |
| Basic |
| $ |
| 1.86 |
| $ |
| (2.82 |
| ) |
| Fully diluted |
| $ |
| 1.85 |
| $ |
| (2.82 |
| ) |
| Weighted average shares outstanding: |
| Basic |
|
|
| 1,260,988 |
|
|
| 1,261,293 |
|
|
| Fully diluted |
|
|
| 1,268,828 |
|
|
| 1,261,293 |
|
|
| Table III |
| TETON ADVISORS, INC. |
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION |
| December 31, |
| December 31, |
| 2021 |
| 2020 |
| ASSETS |
| Cash and cash equivalents |
| $ |
| 21,506,861 |
| $ |
| 9,556,418 |
| Investment advisory fees receivable |
|
|
| 1,374,135 |
|
|
| 1,156,033 |
| Intangible assets, net |
|
|
| 3,699,909 |
|
|
| 4,025,807 |
| Other assets |
|
|
| 4,188,017 |
|
|
| 5,335,986 |
| Total assets |
| $ |
| 30,768,922 |
| $ |
| 20,074,244 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |
| Due to broker |
| $ |
| 7,999,316 |
| $ |
| - |
| Payable to affiliates |
|
|
| 395,746 |
|
|
| 434,416 |
| Compensation payable |
|
|
| 707,926 |
|
|
| 131,779 |
| Distribution costs payable |
|
|
| 233,409 |
|
|
| 209,793 |
| Accrued expenses and other liabilities |
|
|
| 1,676,417 |
|
|
| 2,390,165 |
| Total liabilities |
|
|
| 11,012,814 |
|
|
| 3,166,153 |
| Teton Advisors, Inc's stockholders' equity |
|
|
| 19,756,108 |
|
|
| 16,908,091 |
| Total liabilities and stockholders' equity |
| $ |
| 30,768,922 |
| $ |
| 20,074,244 |
Supplemental Financial Information
As supplemental information, we provide a non-U.S. generally accepted accounting principles (“non-GAAP”) performance measure that we refer to as Cash Earnings. We provide this measure in addition to, but not as a substitute for, net income reported on a U.S. generally accepted accounting principles (“GAAP”) basis. Our management and the Board of Directors review Cash Earnings to evaluate our ongoing performance, allocate resources and review our dividend policy. We believe that this non-GAAP performance measure, while not a substitute for GAAP net income, is useful for management and investors when evaluating our underlying operating and financial performance and our available resources. We do not advocate that investors consider this non-GAAP measure without considering financial information prepared in accordance with GAAP.
In calculating quarterly Cash Earnings, we add back to net income (loss) the non-cash expense associated with amortization of intangible amortization expense. In addition, as a result of an assessment of the carrying value of the intangible assets acquired in the Keeley acquisition, the Company recognized a non-cash impairment charge of $4,750,000 in the fourth quarter of 2020. For purposes of calculating Cash Earnings, the Company added back the after-tax amounts associated with this impairment charge of $3,327,375 in 2020. There was no non-cash impairment charge in the fourth quarter of 2021. Although depreciation on property & equipment and amortization of leaseholds are also non-cash expenses, we do not add it back when calculating Cash Earnings because those charges represent a decline in the value of the related assets that will ultimately require replacement.
The following tables provide a reconciliation of net income (loss) to Cash Earnings and Cash Earnings Per Share for the quarterly periods presented:
| (Unaudited) |
| For the Quarter Ended, |
| December 31, 2021 |
| December 31, 2020 |
| Net loss |
| $ |
| 550,168 |
| $ |
| (3,495,570 |
| ) |
| Add: Intangible amortization & impairment |
|
|
| 81,475 |
|
|
| 193,539 |
|
|
| Add: Intangible impairment (net of tax impact) |
|
|
| - |
|
|
| 3,327,375 |
|
|
| Cash earnings |
| $ |
| 631,643 |
| $ |
| 25,344 |
|
|
| Cash earnings per fully diluted share |
| $ |
| 0.50 |
| $ |
| 0.02 |
|
|
In calculating full year Cash Earnings, we add back to net income (loss) the non-cash expense associated with the amortization of intangible amortization expense. In addition, as a result of an assessment of the carrying value of the intangible assets acquired in the Keeley acquisition, the Company recognized a noncash impairment charge of $5,550,000 for 2020. For purposes of calculating Cash Earnings, the Company added back the after-tax amounts associated with this impairment charge of $3,887,775 in 2020. There was no non-cash impairment charge in 2021. Although depreciation on property & equipment and amortization of leaseholds are also non-cash expenses, we do not add it back when calculating Cash Earnings because those charges represent a decline in the value of the related assets that will ultimately require replacement. The following tables provide a reconciliation of net income (loss) to Cash Earnings and Cash Earnings Per Share for the full year periods presented:
| (Unaudited) |
| For the Year Ended, |
| December 31, 2021 |
| December 31, 2020 |
| Net income (loss) |
| $ |
| 2,341,999 |
| $ |
| (3,553,813 |
| ) |
| Add: Intangible amortization & impairment |
|
|
| 325,898 |
|
|
| 774,156 |
|
|
| Add: Intangible impairment (net of tax impact) |
|
|
| - |
|
|
| 3,887,775 |
|
|
| Cash earnings |
| $ |
| 2,667,897 |
| $ |
| 1,108,118 |
|
|
| Cash earnings per fully diluted share |
| $ |
| 2.10 |
| $ |
| 0.88 |
|
|
ABOUT TETON
Teton Advisors, Inc. (OTC Pink: TETAA) is a specialist in smaller company investing, serving a diverse client base of institutional, high net worth and mutual fund investors under brands including Teton Westwood, Gabelli and Keeley. The company was founded on a commitment to uncover value by focusing on companies that are misunderstood or ignored by the market utilizing methodologies developed by investment pioneers Mario Gabelli and John L. Keeley, Jr. As active, fundamental investors, the Teton portfolio teams think independently and focus on identifying short-term market inefficiencies to generate long-term alpha. Teton’s investment professionals share in the belief that being different is the cornerstone to discovering hidden value in equities. The Teton time tested investment approaches can help set apart your client portfolios, delivering differentiated attributes to round out a broader portfolio. From modest beginnings over 40 years ago, to today, The Disciplined Discovery of Value™ shapes the cornerstone for our clients' long-term success.
Notification to all Teton Advisors, Inc. Class B Shareholders
Class B shares are convertible on a one-for-one basis into Class A shares that trade through multiple market makers on OTC PINK: TETAA. Teton shareholders may convert their Class B Shares into Class A Shares, which traded recently at $22.00 per share. For those Class B shareholders interested in conversion, please see the Investor Relations page on Teton’s website to complete a Conversion Notice Request Form - ( http://tetonadv.com/documents/ConversionNotice.pdf ).
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Our disclosure and analysis in this press release contain some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. Such statements are subject to contingencies and uncertainties, some or all of which may be material. We direct your attention to the cautionary statements regarding forward-looking information set forth in documents on Teton’s website. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations or if we receive any additional information relating to the subject matters of our forward-looking statements
View source version on businesswire.com: https://www.businesswire.com/news/home/20220406006096/en/
Patrick Huvane, CPA, CFA
Chief Financial Officer
(914) 457-1074
www.tetonadv.com