Morgan Group Holding Co.

What they do

Morgan Group Holding Co. operates through its wholly-owned subsidiary, G.research, a registered broker-dealer and FINRA member. The company generates revenue from institutional research and securities brokerage services, including acting as an underwriter. Its clients include institutional investors such as hedge funds and asset managers, as well as affiliated mutual funds and managed accounts. A significant portion of its commission revenue comes from transactions executed on behalf of funds advised by Gabelli Funds, LLC and clients advised by GAMCO Asset Management Inc.

Revenue drivers

• Commissions — Brokerage commissions from securities transactions executed on an agency basis. In 2022, commissions totaled $1.8 million, down 11% from $2.0 million in 2021.
• Hard dollar payments — Direct payments from institutional clients for research. In 2022, hard dollar payments were $142,000, down 37.6% from $227,000 in 2021.
• Underwriting fees — Fees from participating in underwriting syndicates and selling groups. In 2021, underwriting fees were $702,000; no underwriting revenue was earned in 2022.

Recent performance

For the year ended December 31, 2022, total revenues were $1.9 million, down 34.2% from $3.0 million in 2021, driven by lower commissions and no underwriting fees. Net loss for 2022 was $1.0 million, compared to a net loss of $1.6 million in 2021. Operating cash flow used was $0.6 million in 2022, an improvement from $1.7 million used in 2021. In the first three quarters of 2023, quarterly revenues ranged from $468,982 to $497,198. As of September 30, 2023, the company had $1.3 million in cash and equivalents, total assets of $2.0 million, and total liabilities of $766,182.

Strategy

The company's stated strategy is to continue to operate and expand its institutional brokerage business through coverage of additional market sectors and companies. Management focuses on performance and growth in revenues and profitability. G.research continues to pursue expansion of third-party and affiliated activities. The company has streamlined operations, including headcount reductions related to the cessation of certain research services.

Risks

• Customer concentration — Approximately 61% of 2022 commission revenue came from funds advised by Gabelli Funds, LLC and clients advised by GAMCO Asset Management Inc., and there is no assurance these clients will continue using G.research's services.
• Revenue decline — Total revenues have fallen significantly from $8.3 million in 2018 to $1.9 million in 2022, with underwriting fees dropping to zero in 2022.
• Negative cash flow — Operating cash flow has been negative every year from 2018 to 2022, with cash used in operations of $0.6 million in 2022.
• Affiliate dependence — G.research was previously a subsidiary of an affiliate and still relies heavily on business from affiliated entities, which may limit independence and growth prospects.

Outlook

Management has not provided specific forward-looking guidance in the provided filings. The company continues to focus on expanding its institutional brokerage business and pursuing new coverage areas. No underwriting revenue was earned in 2022, and no new underwriting activities are disclosed for 2023. The company maintains a lean balance sheet with cash of $1.3 million as of September 30, 2023.