• Westwood Holdings Group, Inc. Reports Second Quarter 2022 Results

    ソース: Nasdaq GlobeNewswire / 27 7 2022 16:10:45   America/New_York

    Strategic Acquisition of Salient Partners' Asset Management Business

    Strong Performance Delivered Across Multiple Products

    Many Peer Rankings Benefited from Benchmark-Beating Performances

    DALLAS, July 27, 2022 (GLOBE NEWSWIRE) --  Westwood Holdings Group, Inc. (NYSE: WHG) today reported second quarter 2022 earnings. Significant items for the quarter include:

    • We announced the strategic acquisition of Salient Partners' ("Salient") asset management business, subject to satisfaction of certain revenue retention and growth targets.
    • Revenues totaled $15.6 million vs. the first quarter's $17.2 million and $17.5 million a year ago reflecting the substantial downturn suffered by worldwide markets during the first half of 2022.
    • Numerous strategies beat their primary benchmarks, including LargeCap Value, SmidCap, SmallCap Value, AllCap Value, MidCap Value, Platinum, Select Equity, Dividend Select, SmallCap Growth, Balanced, Enhanced Balanced and Credit Opportunities.
    • Our quarterly peer rankings also reflected our strong performance, as our Alternative Income mutual fund achieved a top percentile ranking, SmallCap Growth obtained a top 10th percentile ranking, Credit Opportunities, SmallCap Value and Select Equity posted top 20th percentile rankings, and AllCap Value and MidCap Value both scored top third rankings.
    • We reported a net loss of $0.4 million vs. net income of $0.1 million in the first quarter and net income of $1.0 million in last year's second quarter.
    • Non-GAAP Economic Earnings of $1.6 million compared with the first quarter's $1.9 million and $2.8 million a year ago.
    • Westwood held $73.6 million in cash and short-term investments as of June 30, 2022, consistent with the first quarter of 2022.
    • Stockholders' equity totaled $115.7 million as of June 30, 2022 and we continue to have no debt.
    • We declared a cash dividend of $0.15 per common share, payable on October 1, 2022 to stockholders of record on September 2, 2022.

    Brian Casey, Westwood’s President and CEO, commented, "The severe market downturn inflicted on investors in the second quarter negatively impacted our assets under management, revenues and earnings.   Despite these near-term challenges, we are pleased to report outperformance across our entire US Value franchise and a first percentile ranking for our Alternative Income strategy led strong competitive performances achieved by other Westwood strategies. Our SmallCap growth product was nearly 600 basis points ahead of its benchmark for the quarter and was over 1000 basis points ahead of its benchmark year to date.  

    We announced the acquisition of Salient Partners’ asset management business in May and we are working hard in a cooperative effort towards closing this highly accretive acquisition before year end.   It has been reassuring to see the Salient assets under management hold up better than the broader market due to its product set of energy, real estate and hedged equity strategies. We look forward to integrating the Salient team into Westwood and building on their success going forward together."

    Revenues were lower than the first quarter and last year's second quarter reflecting lower average assets under management ("AUM") mainly attributable to the downdraft affecting markets worldwide.

    AUM of $12.1 billion decreased from $13.9 billion at March 31, 2022, primarily due to market depreciation across most asset classes and geographies.

    The second quarter net loss of $0.4 million compared to the first quarter's net income of $0.1 million due to lower revenues partially offset by lower expenses, primarily employee compensation and benefits. Diluted earnings (loss) per share ("EPS") of $(0.05) compared with $0.01 for the first quarter. Non-GAAP Economic Earnings of $1.6 million, or $0.20 per share, compared with $1.9 million, or $0.24 per share, in the first quarter.

    The second quarter net loss of $0.4 million declined from last year's second quarter net income of $1.0 million primarily on lower revenues, partially offset by lower expenses, primarily employee compensation and benefits. Diluted EPS was $(0.05) compared with $0.12 per share for the second quarter of 2021. Non-GAAP Economic Earnings were $1.6 million, or $0.20 per share, compared with $2.8 million, or $0.35 per share, in the second quarter of 2021.

    Economic Earnings and 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 2022 results and other business matters at 4:30 p.m. Eastern time today. To join the conference call, please register here:

    https://register.vevent.com/register/BIb477f4780a5b4f05bd2c176b54b63365

    After registering, you will be provided with a dial-in number containing a personalized PIN.

    Webcast Link: https://edge.media-server.com/mmc/p/2324o3fj

    ABOUT WESTWOOD HOLDINGS GROUP

    Westwood Holdings Group, Inc. is an investment management boutique and wealth management firm. Westwood offers high-conviction equity and outcome-oriented solutions to institutional investors, private wealth clients and financial intermediaries. The firm specializes in the following distinct investment capabilities: U.S. Value Equity, Multi-Asset, and Liquid Alternatives, available through separate accounts, the Westwood Funds® family of mutual 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, Westwood also maintains offices in Houston.

    For more information on Westwood, please visit westwoodgroup.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,” “believe,” “expect,” “could,” 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 AUM; our ability to maintain our fee structure in light of competitive fee pressures; our stockholder rights agreement may make it more difficult for others to obtain control over us, even if it would be beneficial to our stockholders; risks associated with actions of activist stockholders; distributions to our common stockholders have included and may in the future include a return of capital; inclusion of foreign company investments in our AUM; regulations adversely affecting the financial services industry; our ability to maintain effective cyber security; litigation risks; our ability to develop and market new investment strategies successfully; our reputation and our relationships with current and potential customers; our ability to attract and retain qualified personnel; our ability to perform operational tasks; our ability to select and oversee third-party vendors; our dependence on the operations and funds of our subsidiaries; our ability to maintain effective information systems; our ability to prevent misuse of assets and information in the possession of our employees and third-party vendors, which could damage our reputation and result in costly litigation and liability for our clients and us; our stock is thinly traded and may be subject to volatility; in addition to our stockholder rights agreement, our organizational documents contain provisions that may prevent or deter another group from paying a premium over the market price to our stockholders to acquire our stock; competition in the investment management industry; our ability to avoid termination of client agreements and the related investment redemptions; the significant concentration of our revenues in a small number of customers; our relationships with investment consulting firms; the impact of the COVID-19 pandemic; our ability to identify and execute on our strategic initiatives; our ability to declare and pay dividends; our ability to fund future capital requirements on favorable terms; 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; and the other risks detailed from time to time in Westwood’s SEC filings, including, but not limited to, its annual report on Form 10-K for the year ended December 31, 2021 and its quarterly reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022. 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
    Chief Financial Officer and Treasurer
    (214) 756-6900

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

     Three Months Ended
     June 30, 2022 March 31, 2022 June 30, 2021
    REVENUES:     
    Advisory fees:     
    Asset-based$10,980  $11,790  $11,385 
    Trust fees 5,365   5,715   6,216 
    Other, net (742)  (289)  (117)
    Total revenues 15,603   17,216   17,484 
    EXPENSES:     
    Employee compensation and benefits 9,133   10,334   10,237 
    Sales and marketing 509   482   370 
    Westwood mutual funds 601   596   368 
    Information technology 1,935   1,829   2,261 
    Professional services 1,475   1,520   1,428 
    General and administrative 2,348   2,040   2,042 
    Total expenses 16,001   16,801   16,706 
    Net operating income (loss) (398)  415   778 
    Realized gains on private investments —   —   46 
    Net change in unrealized appreciation (depreciation) on private investments (299)  37   215 
    Net investment income 5   (16)  235 
    Other income 234   158   142 
    Income (loss) before income taxes (458)  594   1,416 
    Income tax provision (80)  544   446 
    Net income (loss)$(378) $50  $970 
    Total comprehensive income (loss)$(378) $50  $970 
          
    Earnings (loss) per share:     
    Basic$(0.05) $0.01  $0.12 
    Diluted$(0.05) $0.01  $0.12 
          
    Weighted average shares outstanding:     
    Basic 7,944,212   7,865,174   7,884,771 
    Diluted 7,944,212   7,931,453   7,928,106 
          
    Economic Earnings$1,608  $1,894  $2,810 
    Economic EPS$0.20  $0.24  $0.35 
          
    Dividends declared per share$0.15  $0.15  $0.10 

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

     Six Months Ended
     June 30, 2022 June 30, 2021
    REVENUES:   
    Advisory fees:   
    Asset-based$22,770  $21,835 
    Performance-based —   1,959 
    Trust fees 11,080   12,281 
    Other, net (1,031)  (272)
    Total revenues 32,819   35,803 
    EXPENSES:   
    Employee compensation and benefits 19,467   21,785 
    Sales and marketing 991   600 
    Westwood mutual funds 1,197   759 
    Information technology 3,764   4,253 
    Professional services 2,995   2,745 
    General and administrative 4,388   4,114 
    Total expenses 32,802   34,256 
    Net operating income (loss) 17   1,547 
    Realized gains on private investments —   8,371 
    Net change in unrealized appreciation (depreciation) on private investments (262)  (2,111)
    Net investment income (11)  431 
    Other income 392   192 
    Income (loss) before income taxes 136   8,430 
    Income tax expense 464   3,359 
    Net income (loss)$(328) $5,071 
    Total comprehensive income (loss)$(328) $5,071 
        
    Earnings (loss) per share:   
    Basic$(0.04) $0.64 
    Diluted$(0.04) $0.64 
        
    Weighted average shares outstanding:   
    Basic 7,904,911   7,885,901 
    Diluted 7,904,911   7,922,742 
        
    Economic Earnings$3,502  $9,098 
    Economic EPS$0.44  $1.15 
        
    Dividends declared per share$0.30  $0.20 

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

     June 30, 2022 December 31, 2021
    ASSETS   
    Current Assets:   
    Cash and cash equivalents$21,975  $15,206 
    Accounts receivable 9,290   11,152 
    Investments, at fair value 51,606   65,024 
    Prepaid income taxes 587   233 
    Other current assets 1,917   2,246 
    Total current assets 85,375   93,861 
    Investments 4,455   4,455 
    Noncurrent investments at fair value 4,249   4,513 
    Goodwill 16,401   16,401 
    Deferred income taxes 1,350   848 
    Operating lease right-of-use assets 4,379   4,868 
    Intangible assets, net 11,100   11,911 
    Property and equipment, net of accumulated depreciation of $8,976 and $8,637 1,844   2,114 
    Other long-term assets 772   634 
    Total long-term assets 44,550   45,744 
    Total assets$129,925  $139,605 
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current Liabilities:   
    Accounts payable and accrued liabilities$2,513  $2,637 
    Dividends payable 1,737   1,800 
    Compensation and benefits payable 3,933   9,530 
    Operating lease liabilities 1,499   1,409 
    Income taxes payable —   466 
    Total current liabilities 9,682   15,842 
    Accrued dividends 477   1,133 
    Noncurrent operating lease liabilities 4,048   4,724 
    Total long-term liabilities 4,525   5,857 
    Total liabilities 14,207   21,699 
    Stockholders’ Equity:   
    Common stock, $0.01 par value, authorized 25,000,000 shares, issued 11,059,848 and outstanding 8,511,014 shares at June 30, 2022; issued 10,658,644 and outstanding 8,253,491 shares at December 31, 2021 111   107 
    Additional paid-in capital 198,084   195,187 
    Treasury stock, at cost - 2,548,834 shares at June 30, 2022; 2,405,154 shares at December 31, 2021 (83,970)  (81,750)
    Retained earnings 1,493   4,362 
    Total stockholders’ equity 115,718   117,906 
    Total liabilities and stockholders’ equity$129,925  $139,605 

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

     Six Months Ended June 30,
      2022   2021 
    CASH FLOWS FROM OPERATING ACTIVITIES:   
    Net income (loss)$(328) $5,071 
    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:   
    Depreciation 352   397 
    Amortization of intangible assets 811   812 
    Net change in unrealized depreciation on investments 1,312   2,273 
    Realized gains on private investments —   (8,371)
    Stock-based compensation expense 2,901   3,097 
    Deferred income taxes (502)  13 
    Non-cash lease expense 490   614 
    Gain on asset disposition —   (148)
    Changes in operating assets and liabilities:   
    Net (purchases) sales of trading securities 12,370   (5,642)
    Accounts receivable 1,862   (431)
    Other current assets 192   376 
    Accounts payable and accrued liabilities (314)  1,585 
    Compensation and benefits payable (5,597)  (2,942)
    Income taxes payable (823)  2,899 
    Other liabilities (585)  (833)
    Net cash provided by (used in) operating activities 12,141   (1,230)
    CASH FLOWS FROM INVESTING ACTIVITIES:   
    Sale of investments —   9,258 
    Sale of property and equipment —   501 
    Purchases of property and equipment (82)  (93)
    Purchases of investments —   (15)
    Net cash (used in) provided by investing activities (82)  9,651 
    CASH FLOWS FROM FINANCING ACTIVITIES:   
    Purchases of treasury stock (1,404)  (1,700)
    Restricted stock returned for payment of taxes (626)  (884)
    Cash dividends (3,264)  (1,619)
    Net cash used in financing activities (5,294)  (4,203)
    Effect of currency rate changes on cash 4   13 
    NET CHANGE IN CASH AND CASH EQUIVALENTS 6,769   4,231 
    Cash and cash equivalents, beginning of period 15,206   13,016 
    Cash and cash equivalents, end of period$21,975  $17,247 
    SUPPLEMENTAL CASH FLOW INFORMATION:   
    Cash paid during the period for income taxes$1,791  $447 
    Accrued dividends$2,214  $1,364 
    Accrued purchases of treasury stock$190  $— 

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

    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 (loss) and earnings (loss) per share, which are reported on a GAAP basis. Our management and Board of Directors review Economic Earnings and Economic EPS to evaluate our ongoing performance, allocate resources, and review our dividend policy. We believe that these non-GAAP performance measures, while not substitutes for GAAP net income (loss) or earnings (loss) per share, are useful for management and investors when evaluating our underlying operating and financial performance and our 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 (loss) 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.

     Three Months Ended
     June 30, 2022 March 31, 2022 June 30, 2021
    Net income (loss)$(378) $50  $970
    Stock-based compensation expense 1,521   1,380   1,375
    Intangible amortization 406   405   406
    Tax benefit from goodwill amortization 59   59   59
    Economic Earnings$1,608  $1,894  $2,810
          
    Earnings (loss) per share$(0.05) $0.01  $0.12
    Stock-based compensation expense 0.19   0.17   0.17
    Intangible amortization 0.05   0.05   0.05
    Tax benefit from goodwill amortization 0.01   0.01   0.01
    Economic EPS$0.20  $0.24  $0.35
    Diluted weighted average shares 7,944,212   7,931,453   7,928,106
          
       Six Months Ended
       June 30, 2022 June 30, 2021
    Net income (loss)  $(328) $5,071
    Stock-based compensation expense   2,901   3,097
    Intangible amortization   811   812
    Tax benefit from goodwill amortization   118   118
    Economic Earnings  $3,502  $9,098
          
    Earnings (loss) per share  $(0.04) $0.64
    Stock-based compensation expense   0.37   0.40
    Intangible amortization   0.10   0.10
    Tax benefit from goodwill amortization   0.01   0.01
    Economic EPS  $0.44  $1.15
    Diluted weighted average shares   7,904,911   7,922,742


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