Westwood Holdings Group, Inc. Reports First Quarter 2017 Results

Non-U.S. Clients Reach Record 20% of AUM

Dallas, Texas, UNITED STATES

DALLAS, April 26, 2017 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE:WHG) today reported first quarter 2017 revenues of $32.6 million compared to $29.1 million in the first quarter of 2016 and $31.1 million in the fourth quarter of 2016, primarily related to higher average assets under management ("AUM") due to market appreciation and performance-based fees of $0.4 million earned in the first quarter of 2017.

AUM as of March 31, 2017 totaled $22.1 billion, up from $21.1 billion and $21.2 billion at March 31, 2016 and December 31, 2016, respectively. Assets under advisement ("AUA") totaled $1.1 billion compared to $325 million and $1.0 billion at March 31, 2016 and December 31, 2016, respectively.

Compared to the first quarter of 2016, net income increased from $3.5 million to $6.1 million. The increase primarily related to higher revenues as noted above, partially offset by a $1.2 million increase in employee compensation and benefits related to higher compensation and additional headcount. Diluted earnings per share of $0.73 compared to $0.44 for the first quarter of 2016. Non-GAAP Economic Earnings for the quarter increased from $8.1 million, or $1.01 per share, in 2016's first quarter, to $10.6 million, or $1.28 per share, in the first quarter of 2017.

First quarter net income totaled $6.1 million compared with $7.6 million in the fourth quarter of 2016. The decrease related primarily to seasonal incremental payroll tax and benefit plan matching expenses on cash bonuses paid during the first quarter and, to a lesser extent, provisions for higher incentive compensation and merit salary increases for 2017, partially offset by higher revenues as discussed above. Diluted earnings per share of $0.73 compared to $0.92 for the fourth quarter of 2016. Non-GAAP Economic Earnings for the quarter of $10.6 million, or $1.28 per share, compared to $12.0 million, or $1.45 per share, in the immediately preceding quarter.

Highlights from the first quarter 2017 include:

  • Non-U.S. clients reached a record 20% of our AUM.
  • Revenues of $32.6 million increased $3.5 million from the first quarter of 2016 and $1.5 million from the fourth quarter of 2016.
  • Emerging Markets strategies outperformed their benchmarks with double-digit returns in the quarter.
  • New tax-efficient, high conviction Select Equity strategy is off to a solid start, outperforming its benchmark for the quarter.

Brian Casey, Westwood’s President & CEO, commented, "Looking to the remainder of 2017, Westwood strategies are well-positioned in an environment where active management can deliver excess returns and specific outcomes for our clients.  Our focus remains, as it has for more than 30 years, on controlling downside protection and absolute risk. We believe that our high active share equity strategies, which provide varying levels of volatility exposure and return profiles, will attract investors looking for differentiated results."

Westwood’s Board of Directors declared a quarterly cash dividend of $0.62 per common share, payable on July 3, 2017 to stockholders of record on June 9, 2017.  At quarter-end, Westwood had $75.4 million in cash and investments, stockholders’ equity of $144.8 million, and no debt.

Economic Earnings and Economic Earnings per Share ("Economic EPS") are non-GAAP performance measures and are explained and reconciled with the most comparable GAAP numbers in the attached tables.

Westwood will host a conference call to discuss first quarter 2017 results and other business matters at 4:30 p.m. Eastern time today.  To join the conference call, dial 877-303-6235 (domestic and Canada) or 631-291-4837 (international).  The conference call can also be accessed via our Investor Relations page at westwoodgroup.com and will be available for replay through May 3, 2017 by dialing 855-859-2056 (domestic and Canada) or 404-537-3406 (international) and then entering the passcode 2165728.

About Westwood

Westwood Holdings Group, Inc. provides investment management services to institutional investors, private wealth clients and financial intermediaries. With $22.1 billion in assets under management (as of March 31, 2017), our firm offers a range of investment strategies including U.S. equities, Master Limited Partnerships (MLPs), Multi-Asset, Global and Emerging Markets equities, and Global Convertible securities portfolios. Access to our strategies is available through separate accounts, commingled funds, the Westwood Funds® family of mutual funds, UCITS funds and other pooled vehicles. Westwood benefits from significant, broad-based employee ownership and trades on the New York Stock Exchange under the symbol “WHG.” Based in Dallas, Texas, Westwood also maintains offices in Toronto, Boston, Omaha and Houston.

For more information on Westwood, please visit www.westwoodgroup.com.

For more information on the Westwood Funds®, please visit www.westwoodfunds.com.

Forward-looking Statements

Statements in this press release that are not purely historical facts, including, without limitation, statements about our expected future financial position, results of operations or cash flows, as well as other statements including without limitation, words such as “anticipate,” “forecast,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “could,” “goal,” “may,” “target,” “designed,” “on track,” “comfortable with,” “optimistic” and other similar expressions, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results and the timing of some events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation: the composition and market value of our assets under management; regulations adversely affecting the financial services industry; competition in the investment management industry; our assets under management includes investments in foreign companies; our ability to develop and market new investment strategies successfully; our relationships with current and potential customers; our ability to retain qualified personnel; our ability to maintain effective cyber security; our ability to maintain effective information systems; our ability to pursue and properly integrate acquired businesses; litigation risks; our ability to properly address conflicts of interest; our ability to maintain adequate insurance coverage; our ability to maintain an effective system of internal controls; our ability to maintain our fee structure in light of competitive fee pressures; our relationships with investment consulting firms; the significant concentration of our revenues in a small number of customers; and the other risks detailed from time to time in Westwood’s Securities and Exchange Commission filings, including, but not limited to, its annual report on Form 10-K for the year ended December 31, 2016 and its quarterly report on Form 10-Q for the quarter ended March 31, 2017. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, Westwood is not obligated to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.


(in thousands, except per share and share amounts)
 Three Months Ended
 March 31,
 December 31,
 March 31,
Advisory fees:     
Asset-based$23,789  $23,564  $21,815 
Trust fees7,795  7,515  7,465 
Other, net653  13  (151)
Total revenues32,623  31,092  29,129 
Employee compensation and benefits$17,717  $14,270  $16,494 
Sales and marketing477  496  328 
Westwood mutual funds863  873  696 
Information technology1,756  1,696  1,964 
Professional services1,496  915  1,646 
General and administrative2,544  2,043  2,355 
Total expenses24,853  20,293  23,483 
Income before income taxes7,770  10,799  5,646 
Provision for income taxes(1)1,706  3,222  2,124 
Net income$6,064  $7,577  $3,522 
Other comprehensive income (loss):     
Foreign currency translation adjustments207  (606) 1,303 
Total comprehensive income$6,271  $6,971  $4,825 
Earnings per share:     
Basic$0.75  $0.95  $0.45 
Diluted$0.73  $0.92  $0.44 
Weighted average shares outstanding:     
Basic8,065,825  7,988,558  7,862,449 
Diluted8,311,382  8,261,274  8,047,084 
Economic Earnings$10,607  $12,014  $8,093 
Economic EPS$1.28  $1.45  $1.01 
Dividends declared per share$0.62  $0.62  $0.57 

(1)  Our as adjusted tax rate for the first quarter of 22.0% included a $1.0 million discrete tax benefit associated with the adoption of new accounting guidance related to stock–based compensation awards that vested during the quarter.

(in thousands, except par value and share amounts)
 March 31,
 December 31,
Current Assets:   
Cash and cash equivalents$30,626  $33,679 
Accounts receivable25,208  23,429 
Investments, at fair value44,786  56,485 
Other current assets2,386  2,364 
Total current assets103,006  115,957 
Goodwill27,144  27,144 
Deferred income taxes10,860  10,903 
Intangible assets, net20,904  21,394 
Property and equipment, net of accumulated depreciation of $4,834 and $4,5904,190  4,280 
Total assets$166,104  $179,678 
Current Liabilities:   
Accounts payable and accrued liabilities$2,482  $2,641 
Dividends payable6,328  6,679 
Compensation and benefits payable5,260  17,200 
Income taxes payable4,007  3,148 
Total current liabilities18,077  29,668 
Accrued dividends1,030  1,767 
Deferred rent2,161  2,174 
Total liabilities21,268  33,609 
Stockholders’ Equity:   
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 9,989,598 and outstanding 8,888,656 shares at March 31, 2017; issued 9,801,938 and outstanding 8,810,375 shares at December 31, 2016100  98 
Additional paid-in capital167,928  162,730 
Treasury stock, at cost - 1,100,942 shares at March 31, 2017; 991,563 shares at December 31, 2016(50,868) (44,353)
Accumulated other comprehensive loss(4,080) (4,287)
Retained earnings31,756  31,881 
Total stockholders’ equity144,836  146,069 
Total liabilities and stockholders’ equity$166,104  $179,678 

(in thousands)
 Three Months Ended March 31,
 2017 2016
Net income$6,064  $3,522 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation240  258 
Amortization of intangible assets490  490 
Unrealized gains on trading investments(303) (248)
Stock based compensation expense3,897  4,003 
Deferred income taxes26  (109)
Excess tax benefits from stock based compensation  (165)
Other non-cash, net(7) 288 
Changes in operating assets and liabilities:   
Net sales of investments - trading securities12,002  27,813 
Accounts receivable(1,721) (5,675)
Other current assets(18) 675 
Accounts payable and accrued liabilities(161) 374 
Compensation and benefits payable(11,394) (15,749)
Income taxes payable859  1,666 
Other liabilities(33) 82 
Net cash provided by operating activities9,941  17,225 
Purchases of property and equipment(150) (378)
Net cash used in investing activities(150) (378)
Purchases of treasury stock  (4,411)
Purchase of treasury stock under employee stock plans(1,326) (614)
Restricted stock returned for payment of taxes(5,189) (3,696)
Excess tax benefits from stock based compensation  165 
Cash dividends(6,564) (5,724)
Net cash used in financing activities(13,079) (14,280)
Effect of currency rate changes on cash235  1,118 
Cash and cash equivalents, beginning of period33,679  22,740 
Cash and cash equivalents, end of period$30,626  $26,425 
Supplemental cash flow information:   
Cash paid during the period for income taxes$828  $541 
Accrued dividends$7,358  $6,714 
Accrued purchase of property and equipment$  $832 
Tenant allowance included in Property and equipment$  $1,128 

Reconciliation of Net Income to Economic Earnings
(in thousands, except per share and share amounts)
 Three Months Ended
 March 31,
 December 31,
 March 31,
Net Income$6,064  $7,577  $3,522 
Add:  Stock based compensation expense3,897  3,790  4,003 
Add:  Intangible amortization490  490  490 
Add:  Tax benefit from goodwill amortization156  157  78 
Economic Earnings$10,607  $12,014  $8,093 
Diluted weighted average shares8,311,382  8,261,274  8,047,084 
Economic EPS$1.28  $1.45  $1.01 

As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic EPS. We provide these measures in addition to, not as a substitute for, net income and earnings per share, which are reported on a GAAP basis. Management reviews Economic Earnings and Economic EPS to evaluate Westwood’s ongoing performance, allocate resources, and review our dividend policy. We believe that these non-GAAP performance measures, while not substitutes for GAAP net income or earnings per share, are useful for management and investors when evaluating Westwood’s underlying operating and financial performance and its available resources. We do not advocate that investors consider these non-GAAP measures without also considering financial information prepared in accordance with GAAP.

We define Economic Earnings as net income plus non-cash equity-based compensation expense, amortization of intangible assets and deferred taxes related to goodwill. Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement. In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding.


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