Westwood Holdings Group, Inc. Reports Second Quarter 2019 Results

Expands Sales Team, Delivers Outperformance across Multiple Strategies and Adds Service Offerings

Dallas, Texas, UNITED STATES

DALLAS, July 31, 2019 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE: WHG) today reported second quarter 2019 earnings. Highlights from the quarter include:

  • Revenues of $21.7 million compared with $23.9 million in the first quarter and $32.8 million in last year's second quarter.
  • Net income of $1.9 million compared with $0.4 million in the first quarter and $8.0 million in last year's second quarter. Non-GAAP Economic Earnings of $4.8 million compared with $4.1 million in the first quarter of 2019 and $12.2 million in the second quarter of 2018.
  • All of our U.S. Value teams, our Market Neutral Income, Strategic Global Convertibles and Emerging Markets teams outperformed their primary benchmarks.
  • Top decile performance was achieved by our SmallCap Value and Flexible Income teams, and our other U.S. Value teams, Income Opportunity, Market Neutral Income and Emerging Markets teams posted top quartile performance.
  • Our Intermediary Sales Team added four experienced Tier 1 external wholesalers and one experienced internal wholesaler.
  • At quarter-end, Westwood had $103.9 million in cash and short-term investments, stockholders’ equity of $154 million and no debt.

Revenues of $21.7 million decreased $2.2 million from the first quarter and $11.1 million from last year's second quarter on lower average assets under management ("AUM") resulting from net outflows and lower performance-based fees.

AUM at June 30, 2019 totaled $15.4 billion compared to $16.8 billion at March 31, 2019 and $21.6 billion at June 30, 2018.

Second quarter net income of $1.9 million compared with $0.4 million in the first quarter. The increase was due to higher seasonal payroll tax and benefit matching on bonuses paid in the first quarter. Diluted earnings per share of $0.22 compared to $0.05 for the first quarter. Non-GAAP Economic Earnings of $4.8 million, or $0.56 per share, compared to $4.1 million, or $0.49 per share, in the first quarter.

Second quarter net income of $1.9 million compared with $8.0 million in last year's second quarter. The decrease was due to lower total revenues and a $0.6 million net foreign currency loss, partially offset by lower incentive compensation expense. Non-GAAP Economic Earnings decreased from $12.2 million, or $1.43 per share, in the second quarter of 2018, to $4.8 million, or $0.56 per share, in the current quarter.

Brian Casey, Westwood’s President & CEO, commented, "Our overall product performance was solid during the second quarter, particularly our SMidCap and Income Opportunity portfolios, and SmallCap earned a 5-Star Overall Morningstar Rating™. We continue to see both interest and activity with our SmallCap Value strategy, which has delivered steady performance for the past several quarters. We are very encouraged by robust sales activity supporting a growing pipeline as our Institutional and Intermediary Sales teams reach fully-staffed levels with well-defined coverage and responsibilities. As we continue to implement ways to manage costs and run our business efficiently, we are very pleased with our technology initiative progress as we migrate our systems to InvestCloud. From a business innovation standpoint, our Sensible Fees™ structure has been well received, generating positive industry recognition and thought leadership opportunities. Our product development efforts are focused on growing our multi-asset franchise. Charis Bank, in conjunction with our Wealth Management team, has officially opened Westwood Private Bank (a division of Charis Bank) located adjacent to our Dallas headquarters in the Crescent. We will work closely with Westwood Private Bank to deliver on our commitment to provide clients with a wide spectrum of financial planning, trust and investment services via frictionless interactions, state-of-the-art safeguards and white-glove service for traditional banking products such as cash and lending. With these strategic initiatives, we are well positioned to overcome recent industry disruptions and support the needs of our clients."

Westwood’s Board of Directors declared a quarterly cash dividend of $0.72 per common share, payable on October 1, 2019 to stockholders of record on September 6, 2019.

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 second quarter 2019 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 August 1, 2019 by dialing 855-859-2056 (domestic and Canada) or 404-537-3406 (international) and then entering the passcode 5888804.

About Westwood

Westwood Holdings Group, Inc. provides investment management services to institutional investors, private wealth clients and financial intermediaries. The firm has $15.4 billion in assets under management, of which $2.3 billion are in values-based and socially responsible investment mandates as of June 30, 2019. Westwood offers a range of investment strategies including U.S. equities, Multi-Asset, Emerging Markets equities, Global Convertible securities and Master Limited Partnerships (MLPs) portfolios. Access to these strategies is available through separate accounts, 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 and Houston.

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

©2019 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

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 reputation and relationships with current and potential customers; our ability to attract and retain qualified personnel; our ability to maintain effective cyber security; our ability to perform operational tasks; our ability to identify and execute on our strategic initiatives; our ability to maintain effective information systems; our ability to select and oversee third-party vendors; 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, 2018 and its quarterly reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019. 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.

SOURCE:  Westwood Holdings Group, Inc.

Westwood Holdings Group, Inc.
Terry Forbes
SVP, Chief Financial Officer and Treasurer
(214) 756-6900

(in thousands, except per share and share amounts)

 Three Months Ended
 June 30,
 March 31,
 June 30,
Advisory fees:     
Asset-based$14,695  $16,406  $23,473 
Performance-based120  180  1,649 
Trust fees6,444  6,539  7,465 
Other, net450  737  173 
Total revenues21,709  23,862  32,760 
Employee compensation and benefits11,378  14,610  14,654 
Sales and marketing514  530  409 
Westwood mutual funds661  846  1,002 
Information technology2,282  1,977  2,383 
Professional services1,169  1,149  1,277 
General and administrative2,402  2,434  2,454 
(Gain) loss on foreign currency transactions724  820  (355)
Total expenses19,130  22,366  21,824 
Net operating income2,579  1,496  10,936 
Other income77     
Income before income taxes2,656  1,496  10,936 
Provision for income taxes795  1,104  2,944 
Net income$1,861  $392  $7,992 
Other comprehensive income (loss):     
Foreign currency translation adjustments735  831  (479)
Total comprehensive income$2,596  $1,223  $7,513 
Earnings per share:     
Basic$0.22  $0.05  $0.95 
Diluted$0.22  $0.05  $0.94 
Weighted average shares outstanding:     
Basic8,446,610  8,363,109  8,399,148 
Diluted8,476,777  8,455,386  8,543,353 
Economic Earnings$4,773  $4,116  $12,245 
Economic EPS$0.56  $0.49  $1.43 
Dividends declared per share$0.72  $0.72  $0.68 

(in thousands, except per share and share amounts)

 Six Months Ended June 30,
 2019 2018
Advisory fees:   
Asset-based$31,101  $47,956 
Performance-based300  2,984 
Trust fees12,983  15,074 
Other, net1,187  313 
Total revenues45,571  66,327 
Employee compensation and benefits25,988  32,413 
Sales and marketing1,044  852 
Westwood mutual funds1,507  1,987 
Information technology4,259  4,421 
Professional services2,318  2,305 
General and administrative4,836  4,869 
(Gain) loss on foreign currency transactions1,544  (1,419)
Total expenses41,496  45,428 
Net operating income4,075  20,899 
Gain on sale of operations  524 
Other income77   
Income before income taxes4,152  21,423 
Provision for income taxes1,899  5,453 
Net income$2,253  $15,970 
Other comprehensive income (loss):   
Foreign currency translation adjustments1,566  (1,678)
Total comprehensive income$3,819  $14,292 
Earnings per share:   
Basic$0.27  $1.92 
Diluted$0.27  $1.87 
Weighted average shares outstanding:   
Basic8,406,367  8,336,923 
Diluted8,467,589  8,543,401 
Economic Earnings$8,890  $24,887 
Economic EPS$1.05  $2.91 
Dividends declared per share$1.44  $1.36 

(in thousands, except par value and share amounts)

 June 30,
 December 31,
Current Assets:   
Cash and cash equivalents$56,310  $52,449 
Accounts receivable13,680  18,429 
Investments, at fair value47,602  65,781 
Prepaid income taxes822  349 
Other current assets2,680  2,731 
Total current assets121,094  139,739 
Investments (including investments at fair value of $250 and $0)5,675  5,425 
Goodwill19,804  19,804 
Deferred income taxes4,356  5,102 
Operating lease right-of-use assets8,149  8,698 
Intangible assets, net15,771  15,961 
Property and equipment, net of accumulated depreciation of $6,916 and $6,4624,637  4,454 
Total assets$179,486  $199,183 
Current Liabilities:   
Accounts payable and accrued liabilities$2,122  $2,518 
Dividends payable7,230  7,710 
Compensation and benefits payable4,612  15,102 
Operating lease liabilities1,521  1,432 
Income taxes payable531  365 
Total current liabilities16,016  27,127 
Accrued dividends920  1,576 
Noncurrent operating lease liabilities8,564  9,331 
Total liabilities25,500  38,034 
Stockholders’ Equity:   
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,336,363 and outstanding 8,944,733 shares at June 30, 2019; issued 10,182,583 and outstanding 8,904,902 shares at December 31, 2018104  102 
Additional paid-in capital200,028  194,116 
Treasury stock, at cost - 1,391,630 shares at June 30, 2019; 1,277,681 shares at December 31, 2018(62,883) (58,711)
Accumulated other comprehensive loss(3,317) (4,883)
Retained earnings20,054  30,525 
Total stockholders’ equity153,986  161,149 
Total liabilities and stockholders’ equity$179,486  $199,183 

(in thousands)

 Six Months Ended June 30,
 2019 2018
Net income$2,253  $15,970 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation425  434 
Amortization of intangible assets836  836 
Unrealized (gains) losses on trading investments(600) 256 
Stock based compensation expense5,683  7,963 
Deferred income taxes763  (1,631)
Non-cash lease expense561  525 
Gain on sale of operations  (524)
Changes in operating assets and liabilities:   
Net sales (purchases) of investments- trading securities18,779  (10,445)
Accounts receivable4,891  (1,616)
Other current assets(589) 4,637 
Accounts payable and accrued liabilities(604) (442)
Compensation and benefits payable(10,357) (9,844)
Income taxes payable(288) 2,881 
Other liabilities(692) (599)
Net cash provided by operating activities21,061  8,401 
Purchases of property and equipment(402) (426)
Proceeds from Omaha divestiture  10,013 
Purchases of investments(250) (5,000)
Net cash provided by (used in) investing activities(652) 4,587 
Purchases of treasury stock(806)  
Purchase of treasury stock under employee stock plans(981) (726)
Restricted stock returned for payment of taxes(2,385) (4,687)
Cash dividends paid(13,860) (13,075)
Net cash used in financing activities(18,032) (18,488)
Effect of currency rate changes on cash1,484  (1,448)
Cash and cash equivalents, beginning of period52,449  54,249 
Cash and cash equivalents, end of period$56,310  $47,301 
Supplemental cash flow information:   
Cash paid during the period for income taxes$1,417  $4,169 
Accrued dividends$8,150  $8,260 
Accrued purchase of property and equipment$203  $ 

Reconciliation of Net Income to Economic Earnings
(in thousands, except per share and share amounts)

 Three Months Ended
 June 30,
 March 31,
 June 30,
Net Income$1,861  $392  $7,992 
Add:  Stock based compensation expense2,430  3,252  3,776 
Add:  Intangible amortization423  413  418 
Add:  Tax benefit from goodwill amortization59  59  59 
Economic Earnings$4,773  $4,116  $12,245 
Diluted weighted average shares8,476,777  8,455,386  8,543,353 
Economic EPS$0.56  $0.49  $1.43 


 Six Months Ended June 30,
 2019 2018
Net Income$2,253  $15,970 
Add:  Stock based compensation expense5,683  7,963 
Add:  Intangible amortization836  836 
Add:  Tax benefit from goodwill amortization118  118 
Economic Earnings$8,890  $24,887 
Diluted weighted average shares8,467,589  8,543,401 
Economic EPS$1.05  $2.91 

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.