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CST: 17/10/2019 10:52:43   

Westwood Holdings Group, Inc. Reports Second Quarter 2019 Results

77 Days ago

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

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.

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

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share and share amounts)
(unaudited)

  Three Months Ended
  June 30,
 2019
  March 31,
 2019
  June 30,
 2018
REVENUES:          
Advisory fees:          
Asset-based $ 14,695     $ 16,406     $ 23,473  
Performance-based 120     180     1,649  
Trust fees 6,444     6,539     7,465  
Other, net 450     737     173  
Total revenues 21,709     23,862     32,760  
EXPENSES:          
Employee compensation and benefits 11,378     14,610     14,654  
Sales and marketing 514     530     409  
Westwood mutual funds 661     846     1,002  
Information technology 2,282     1,977     2,383  
Professional services 1,169     1,149     1,277  
General and administrative 2,402     2,434     2,454  
(Gain) loss on foreign currency transactions 724     820     (355 )
Total expenses 19,130     22,366     21,824  
Net operating income 2,579     1,496     10,936  
Other income 77          
Income before income taxes 2,656     1,496     10,936  
Provision for income taxes 795     1,104     2,944  
Net income $ 1,861     $ 392     $ 7,992  
Other comprehensive income (loss):          
Foreign currency translation adjustments 735     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:          
Basic 8,446,610     8,363,109     8,399,148  
Diluted 8,476,777     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  

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share and share amounts)
(unaudited)

  Six Months Ended June 30,
  2019   2018
REVENUES:      
Advisory fees:      
Asset-based $ 31,101     $ 47,956  
Performance-based 300     2,984  
Trust fees 12,983     15,074  
Other, net 1,187     313  
Total revenues 45,571     66,327  
EXPENSES:      
Employee compensation and benefits 25,988     32,413  
Sales and marketing 1,044     852  
Westwood mutual funds 1,507     1,987  
Information technology 4,259     4,421  
Professional services 2,318     2,305  
General and administrative 4,836     4,869  
(Gain) loss on foreign currency transactions 1,544     (1,419 )
Total expenses 41,496     45,428  
Net operating income 4,075     20,899  
Gain on sale of operations     524  
Other income 77      
Income before income taxes 4,152     21,423  
Provision for income taxes 1,899     5,453  
Net income $ 2,253     $ 15,970  
Other comprehensive income (loss):      
Foreign currency translation adjustments 1,566     (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:      
Basic 8,406,367     8,336,923  
Diluted 8,467,589     8,543,401  
       
Economic Earnings $ 8,890     $ 24,887  
Economic EPS $ 1.05     $ 2.91  
       
Dividends declared per share $ 1.44     $ 1.36  

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
(unaudited)

  June 30,
 2019
  December 31,
2018
ASSETS      
Current Assets:      
Cash and cash equivalents $ 56,310     $ 52,449  
Accounts receivable 13,680     18,429  
Investments, at fair value 47,602     65,781  
Prepaid income taxes 822     349  
Other current assets 2,680     2,731  
Total current assets 121,094     139,739  
Investments (including investments at fair value of $250 and $0) 5,675     5,425  
Goodwill 19,804     19,804  
Deferred income taxes 4,356     5,102  
Operating lease right-of-use assets 8,149     8,698  
Intangible assets, net 15,771     15,961  
Property and equipment, net of accumulated depreciation of $6,916 and $6,462 4,637     4,454  
Total assets $ 179,486     $ 199,183  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current Liabilities:      
Accounts payable and accrued liabilities $ 2,122     $ 2,518  
Dividends payable 7,230     7,710  
Compensation and benefits payable 4,612     15,102  
Operating lease liabilities 1,521     1,432  
Income taxes payable 531     365  
Total current liabilities 16,016     27,127  
Accrued dividends 920     1,576  
Noncurrent operating lease liabilities 8,564     9,331  
Total liabilities 25,500     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, 2018 104     102  
Additional paid-in capital 200,028     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 earnings 20,054     30,525  
Total stockholders’ equity 153,986     161,149  
Total liabilities and stockholders’ equity $ 179,486     $ 199,183  

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

  Six Months Ended June 30,
  2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 2,253     $ 15,970  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 425     434  
Amortization of intangible assets 836     836  
Unrealized (gains) losses on trading investments (600 )   256  
Stock based compensation expense 5,683     7,963  
Deferred income taxes 763     (1,631 )
Non-cash lease expense 561     525  
Gain on sale of operations     (524 )
Changes in operating assets and liabilities:      
Net sales (purchases) of investments- trading securities 18,779     (10,445 )
Accounts receivable 4,891     (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 activities 21,061     8,401  
CASH FLOWS FROM INVESTING ACTIVITIES:      
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  
CASH FLOWS FROM FINANCING ACTIVITIES:      
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 cash 1,484     (1,448 )
NET CHANGE IN CASH AND CASH EQUIVALENTS 3,861     (6,948 )
Cash and cash equivalents, beginning of period 52,449     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     $  

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
Reconciliation of Net Income to Economic Earnings
(in thousands, except per share and share amounts)
(unaudited)

  Three Months Ended
  June 30,
 2019
  March 31,
 2019
  June 30,
 2018
Net Income $ 1,861     $ 392     $ 7,992  
Add:  Stock based compensation expense 2,430     3,252     3,776  
Add:  Intangible amortization 423     413     418  
Add:  Tax benefit from goodwill amortization 59     59     59  
Economic Earnings $ 4,773     $ 4,116     $ 12,245  
           
Diluted weighted average shares 8,476,777     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 expense 5,683     7,963  
Add:  Intangible amortization 836     836  
Add:  Tax benefit from goodwill amortization 118     118  
Economic Earnings $ 8,890     $ 24,887  
       
Diluted weighted average shares 8,467,589     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.

 

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