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CST: 16/11/2019 17:33:33   

Westwood Holdings Group, Inc. Reports Third Quarter 2019 Results; Maintains Dividend of $0.72 per Share, Equating to 10% Yield as of October 30, 2019

17 Days ago

DALLAS, Oct. 30, 2019 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE: WHG) today reported third quarter 2019 earnings. Highlights from the quarter include:

  • Revenues of $19.9 million compared with $21.7 million in the second quarter and $29.9 million in last year's third quarter.
  • Net income of $1.1 million compared with $1.9 million in the second quarter and $5.4 million in last year's third quarter. Non-GAAP Economic Earnings of $3.9 million compared with $4.8 million in the second quarter of 2019 and $9.5 million in the third quarter of 2018.
  • All of our U.S. Value, Multi-Asset and Emerging Markets teams outperformed their primary benchmarks.
  • Top decile performance was achieved by our Income Opportunity, LargeCap Value and Flexible Income teams, and our LargeCap Select, SMidCap Value and Select Equity teams posted top quartile performance.
  • Repurchased 16,522 shares of our common stock for an aggregate purchase price of $0.5 million.
  • At quarter-end, Westwood had $101.2 million in cash and short-term investments, stockholders’ equity of $150.1 million and no debt.

Revenues of $19.9 million decreased $1.8 million from the second quarter and $10.0 million from last year's third quarter on lower average assets under management ("AUM") resulting from net outflows.

AUM at September 30, 2019 totaled $15.0 billion compared to $15.4 billion at June 30, 2019 and $20.8 billion at September 30, 2018.

Third quarter net income of $1.1 million compared with $1.9 million in the second quarter. The decrease was primarily due to lower total revenues, partially offset by foreign currency transaction gains in the current quarter. Diluted earnings per share of $0.13 compared to $0.22 for the second quarter. Non-GAAP Economic Earnings of $3.9 million, or $0.46 per share, compared to $4.8 million, or $0.56 per share, in the second quarter.

Third quarter net income of $1.1 million compared with $5.4 million in last year's third quarter. The decrease was due to lower total revenues, partially offset by lower incentive compensation expense and foreign currency transaction gains in the current quarter. Non-GAAP Economic Earnings decreased from $9.5 million, or $1.11 per share, in the third quarter of 2018, to $3.9 million, or $0.46 per share, in the current quarter.

Brian Casey, Westwood’s President & CEO, commented, "Our overall investment performance excelled in the third quarter with all of our U.S. Value, Multi-Asset and Emerging Markets teams outperforming their primary benchmarks, and we have been transforming in the face of industry headwinds. We have made a dedicated commitment to building distribution and spent most of the last year implementing systems and infrastructure to support the talented professionals now in the field. Our expanded and reorganized institutional and intermediary sales teams are generating significant meeting activity and growing our new business opportunity pipeline, and we continue to strengthen our relationships with intermediaries, clients and consultants. We have evolved our private wealth model to include private equity and expanded our financial planning, estate planning and private banking services. We have installed transformative technology including a private wealth platform dedicated to connecting digitally with younger generations. We have made significant investments in developing new products, rationalizing legacy products and fortifying our mutual fund product lineup. Our product management and investment teams continue to work closely to ensure our product offerings are properly aligned for commercial success and focused in areas where we can add value and grow assets under management. We believe these efforts position us well to be competitive in the future."

Westwood’s Board of Directors declared a quarterly cash dividend of $0.72 per common share, payable on January 2, 2020 to stockholders of record on December 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 third 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 November 6, 2019 by dialing 855-859-2056 (domestic and Canada) or 404-537-3406 (international) and then entering the passcode 1853697.

About Westwood

Westwood Holdings Group, Inc. provides investment management services to institutional investors, private wealth clients and financial intermediaries. The firm has $15.0 billion in assets under management, of which $2.3 billion are in values-based and socially responsible investment mandates as of September 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.

F orward-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, June 30, 2019 and September 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
  September 30,
 2019
  June 30,
 2019
  September 30,
 2018
REVENUES:          
Advisory fees:          
Asset-based $ 13,164     $ 14,695     $ 22,023  
Performance-based 154     120      
Trust fees 6,281     6,444     7,191  
Other, net 293     450     640  
Total revenues 19,892     21,709     29,854  
EXPENSES:          
Employee compensation and benefits 12,072     11,378     14,444  
Sales and marketing 506     514     549  
Westwood mutual funds 916     661     979  
Information technology 2,017     2,282     2,332  
Professional services 940     1,169     1,372  
General and administrative 2,317     2,402     2,431  
(Gain) loss on foreign currency transactions (402 )   724     596  
Total expenses 18,366     19,130     22,703  
Net operating income 1,526     2,579     7,151  
Gain on sale of operations          
Other income 33     77      
Income before income taxes 1,559     2,656     7,151  
Provision for income taxes 442     795     1,783  
Net income $ 1,117     $ 1,861     $ 5,368  
Other comprehensive income (loss):          
Foreign currency translation adjustments (482 )   735     616  
Total comprehensive income $ 635     $ 2,596     $ 5,984  
           
Earnings per share:          
Basic $ 0.13     $ 0.22     $ 0.64  
Diluted $ 0.13     $ 0.22     $ 0.62  
           
Weighted average shares outstanding:          
Basic   8,432,598       8,446,610       8,402,697  
Diluted   8,470,673       8,476,777       8,598,230  
           
Economic Earnings $ 3,871     $ 4,773     $ 9,541  
Economic EPS $ 0.46     $ 0.56     $ 1.11  
           
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)
 
  Nine Months Ended
September 30,
  2019   2018
REVENUES:      
Advisory fees:      
Asset-based $ 44,265     $ 69,979  
Performance-based 454     2,984  
Trust fees 19,264     22,265  
Other, net 1,480     953  
Total revenues 65,463     96,181  
EXPENSES:      
Employee compensation and benefits 38,060     46,857  
Sales and marketing 1,550     1,401  
Westwood mutual funds 2,423     2,966  
Information technology 6,276     6,753  
Professional services 3,258     3,677  
General and administrative 7,153     7,300  
(Gain) loss on foreign currency transactions 1,142     (823 )
Total expenses 59,862     68,131  
Net operating income 5,601     28,050  
Gain on sale of operations     524  
Other income 110      
Income before income taxes 5,711     28,574  
Provision for income taxes 2,341     7,236  
Net income $ 3,370     $ 21,338  
Other comprehensive income (loss):      
Foreign currency translation adjustments 1,084     (1,062 )
Total comprehensive income $ 4,454     $ 20,276  
       
Earnings per share:      
Basic $ 0.40     $ 2.55  
Diluted $ 0.40     $ 2.49  
       
Weighted average shares outstanding:      
Basic 8,414,317     8,359,088  
Diluted 8,467,823     8,561,918  
       
Economic Earnings $ 12,761     $ 34,428  
Economic EPS $ 1.51     $ 4.02  
       
Dividends declared per share $ 2.16     $ 2.04  


WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
(unaudited)
 
  September 30,
2019
  December 31,
2018
ASSETS      
Current Assets:      
Cash and cash equivalents $ 58,372     $ 52,449  
Accounts receivable 12,872     18,429  
Investments, at fair value 42,844     65,781  
Prepaid income taxes 916     349  
Other current assets 2,657     2,731  
Total current assets 117,661     139,739  
Investments 5,425     5,425  
Noncurrent investments at fair value 3,020      
Goodwill 19,804     19,804  
Deferred income taxes 3,540     5,102  
Operating lease right-of-use assets 7,851     8,698  
Intangible assets, net 15,701     15,961  
Property and equipment, net of accumulated depreciation of $7,144 and $6,462 4,311     4,454  
Total assets $ 177,313     $ 199,183  
       
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current Liabilities:      
Accounts payable and accrued liabilities $ 2,040     $ 2,518  
Dividends payable 7,290     7,710  
Compensation and benefits payable 6,858     15,102  
Operating lease liabilities 1,554     1,432  
Income taxes payable 254     365  
Total current liabilities 17,996     27,127  
Accrued dividends 1,100     1,576  
Noncurrent operating lease liabilities 8,158     9,331  
Total liabilities 27,254     38,034  
       
Stockholders’ Equity:      
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,314,305 and outstanding 8,906,152 shares at September 30, 2019; issued 10,182,583 and outstanding 8,904,902 shares at December 31, 2018 103     102  
Additional paid-in capital 202,278     194,116  
Treasury stock, at cost - 1,408,152 shares at September 30, 2019; 1,277,681 shares at December 31, 2018 (63,335 )   (58,711 )
Accumulated other comprehensive loss (3,799 )   (4,883 )
Retained earnings 14,812     30,525  
Total stockholders’ equity 150,059     161,149  
Total liabilities and stockholders’ equity $ 177,313     $ 199,183  


WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
  Nine Months Ended
September 30,
  2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net income $ 3,370     $ 21,338  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 662     653  
Amortization of intangible assets 1,281     1,255  
Unrealized (gains) losses on trading investments (501 )   145  
Stock based compensation expense 7,932     11,658  
Deferred income taxes 1,572     (1,693 )
Non-cash lease expense 852     789  
Gain on sale of subsidiary     (524 )
Changes in operating assets and liabilities:      
Net sales (purchases) of investments- trading securities 23,438     (19,824 )
Accounts receivable 5,673     1,537  
Other current assets (361 )   4,185  
Accounts payable and accrued liabilities (482 )   (650 )
Compensation and benefits payable (8,100 )   (6,157 )
Income taxes payable (668 )   3,265  
Other liabilities (1,057 )   (907 )
Net cash provided by operating activities 33,611     15,070  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of property and equipment (516 )   (676 )
Proceeds from Omaha divestiture     10,013  
Additions to internally developed software (584 )    
Purchases of investments (3,020 )   (5,425 )
Net cash provided by (used in) investing activities (4,120 )   3,912  
CASH FLOWS FROM FINANCING ACTIVITIES:      
Purchases of treasury stock (1,258 )    
Purchase of treasury stock under employee stock plans (981 )   (726 )
Restricted stock returned for payment of taxes (2,385 )   (4,701 )
Cash dividends paid (19,979 )   (18,825 )
Net cash used in financing activities (24,603 )   (24,252 )
Effect of currency rate changes on cash 1,035     (893 )
NET CHANGE IN CASH AND CASH EQUIVALENTS 5,923     (6,163 )
Cash and cash equivalents, beginning of period 52,449     54,249  
Cash and cash equivalents, end of period $ 58,372     $ 48,086  
       
Supplemental cash flow information:      
Cash paid during the period for income taxes $ 1,431     $ 5,634  
Accrued dividends $ 8,390     $ 8,644  


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
  September 30,
 2019
  June 30,
 2019
  September 30,
 2018
Net Income $ 1,117     $ 1,861     $ 5,368  
Add: Stock based compensation expense 2,249     2,430     3,695  
Add: Intangible amortization 445     423     419  
Add: Tax benefit from goodwill amortization 60     59     59  
Economic Earnings $ 3,871     $ 4,773     $ 9,541  
           
Diluted weighted average shares 8,470,673     8,476,777     8,598,230  
Economic EPS $ 0.46     $ 0.56     $ 1.11  


  Nine Months Ended
September 30,
  2019   2018
Net Income $ 3,370     $ 21,338  
Add: Stock based compensation expense 7,932     11,658  
Add: Intangible amortization 1,281     1,255  
Add: Tax benefit from goodwill amortization 178     177  
Economic Earnings $ 12,761     $ 34,428  
       
Diluted weighted average shares   8,467,823       8,561,918  
Economic EPS $ 1.51     $ 4.02  
               

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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