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Westwood Holdings Group, Inc. Reports First Quarter 2021 Results
Source: Nasdaq GlobeNewswire / 28 Apr 2021 16:10:00 America/New_York
Positive net flows exceed $500 million
Sales momentum continues in second quarter
Dividend of $0.10 per share declared
DALLAS, April 28, 2021 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE: WHG) today reported first quarter 2021 earnings. Significant items include:
- Revenues of $18.3 million compared with $17.1 million in the fourth quarter and $16.7 million a year ago.
- Net income of $4.1 million rose from $2.8 million in the fourth quarter and $1.1 million in last year's first quarter.
- Income Opportunity, Total Return, High Income and Alternative Income strategies beat their primary benchmarks for the quarter.
- Income Opportunity and High Income won top quartile peer rankings and our SmallCap Value strategy made the top 40% in peer rankings.
- We realized a significant gain of $8.3 million on our original InvestCloud investment, of which $5.6 million was recorded in this quarter, and we reinvested $4.4 million in the newly-capitalized InvestCloud entity.
- Westwood held $86.9 million in cash and short-term investments as of March 31, 2021, up $4.3 million from year end.
- Stockholders' equity as of March 31, 2021 was $133.4 million and we continued to have no debt.
- Non-GAAP economic earnings of $6.3 million compared with $4.6 million in the fourth quarter and $4.2 million a year ago.
- We repurchased 92,491 shares of our common stock for an aggregate purchase price of $1.4 million.
Brian Casey, Westwood’s President and CEO, commented, "We were very pleased with positive net flows exceeding $500 million and we anticipate significant additional funding from new client mandates in the second quarter. Our pipeline for new business opportunities remains strong and we are seeing larger searches compared with the past few years. We remain laser-focused on reducing expenses and made further progress by subleasing a portion of our excess Dallas office space. Our hard work over the past few years along with the investments we made in technology and other strategic initiatives are paying off for our shareholders as Westwood enters a more reliable path to growth."
Revenues exceeded the fourth quarter and last year's first quarter principally as a result of higher average assets under management ("AUM") and higher performance-based fees.
AUM of $14.5 billion rose from $13.0 billion at December 31, 2020, reflecting market appreciation and net inflows, mainly in our SmallCap strategy.
First quarter net income of $4.1 million exceeded the $2.8 million reported for the fourth quarter primarily on higher revenues and realized gains from private investments, partially offset by higher operating expenses and income taxes. Diluted earnings per share ("EPS") of $0.52 compared with $0.36 for the fourth quarter. Non-GAAP economic earnings of $6.3 million, or $0.79 per share, compared with earnings of $4.6 million, or $0.58 per share, in the fourth quarter.
First quarter net income of $4.1 million outperformed 2020's first quarter net income of $1.1 million primarily on higher revenues plus realized and unrealized gains on private investments, partially offset by higher operating expenses and income taxes. Diluted EPS of $0.52 compared with $0.13 for last year's first quarter. Non-GAAP economic earnings were $6.3 million, or $0.79 per share, compared with $4.2 million, or $0.50 per share for the first quarter of 2020.
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 first quarter 2021 results and other business matters at 4:30 p.m. Eastern time today. To join the conference call, dial 877-303-6235 (U.S. 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 5, 2021 by dialing 855-859-2056 (U.S. and Canada) or 404-537-3406 (international) and entering the passcode 9883074.
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; the impact of the COVID-19 pandemic; the significant concentration of our revenues in a small number of customers; our ability to avoid termination of client agreements and the related investment redemptions; regulations adversely affecting the financial services industry; competition in the investment management industry; our ability to develop and market new investment strategies successfully; our AUM include investments in foreign companies; our reputation and our 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 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; our stock is thinly traded and may be subject to volatility; 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; we are a holding company dependent on the operations and funds of our subsidiaries; our relationships with investment consulting firms; 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, 2020 and its quarterly report on Form 10-Q for the quarter ended March 31, 2021. 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 March 31, 2021 December 31, 2020 March 31, 2020 REVENUES: Advisory fees: Asset-based $ 10,450 $ 8,751 $ 11,102 Performance-based 1,959 1,400 — Trust fees 6,065 6,168 5,951 Trust performance-based fees — 289 — Other, net (155 ) 505 (384 ) Total revenues 18,319 17,113 16,669 EXPENSES: Employee compensation and benefits 11,548 9,171 12,668 Sales and marketing 230 248 478 Westwood mutual funds 391 311 515 Information technology 1,992 1,892 2,031 Professional services 1,317 1,054 1,193 General and administrative 2,072 2,111 2,306 (Gain) loss on foreign currency transactions — 12 (2,938 ) Total expenses 17,550 14,799 16,253 Net operating income 769 2,314 416 Realized gains on private investments 8,325 — — Net change in unrealized appreciation (depreciation) on private investments (2,326 ) 198 (995 ) Investment income 196 (21 ) 544 Other income 50 33 34 Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary — 24 — Income (loss) before income taxes 7,014 2,548 (1 ) Income tax expense (benefit) 2,913 (267 ) (1,103 ) Net income $ 4,101 $ 2,815 $ 1,102 Other comprehensive income (loss): Foreign currency translation adjustments — 24 (3,242 ) Reclassification of cumulative foreign currency translation adjustments to net income upon liquidation of a foreign subsidiary — (24 ) — Total comprehensive income (loss) $ 4,101 $ 2,815 $ (2,140 ) Earnings per share: Basic $ 0.52 $ 0.36 $ 0.13 Diluted $ 0.52 $ 0.36 $ 0.13 Weighted average shares outstanding: Basic 7,887,044 7,830,115 8,414,393 Diluted 7,917,390 7,838,504 8,458,473 Economic Earnings $ 6,288 $ 4,571 $ 4,200 Economic EPS $ 0.79 $ 0.58 $ 0.50 Dividends declared per share $ 0.10 $ 0.00 $ 0.43 WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
(unaudited)March 31, 2021 December 31, 2020 ASSETS Current Assets: Cash and cash equivalents $ 12,989 $ 13,016 Accounts receivable 11,744 9,450 Investments, at fair value 73,880 69,542 Prepaid income taxes 336 1,700 Other current assets 2,588 2,606 Total current assets 101,537 96,314 Investments 4,455 8,154 Noncurrent investments at fair value 3,981 3,527 Goodwill 16,401 16,401 Deferred income taxes 1,418 1,468 Operating lease right-of-use assets 5,796 6,103 Intangible assets, net 13,129 13,535 Property and equipment, net of accumulated depreciation of $8,099 and $8,056 2,488 3,186 Other long-term assets 459 464 Total long-term assets 48,127 52,838 Total assets $ 149,664 $ 149,152 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 2,431 $ 1,627 Dividends payable 1,109 810 Compensation and benefits payable 2,426 7,448 Operating lease liabilities 1,420 1,718 Accrued stock repurchases 359 — Income taxes payable 2,450 191 Total current liabilities 10,195 11,794 Accrued dividends 230 526 Noncurrent operating lease liabilities 5,794 6,121 Total long-term liabilities 6,024 6,647 Total liabilities 16,219 18,441 Stockholders’ Equity: Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,630,452 and outstanding 8,313,003 shares at March 31, 2021; issued 10,500,549 and outstanding 8,326,948 shares at December 31, 2020 107 105 Additional paid-in capital 211,988 210,268 Treasury stock, at cost - 2,317,449 shares at March 31, 2021; 2,173,559 shares at December 31, 2020 (80,255 ) (77,967 ) Retained earnings (accumulated deficit) 1,605 (1,695 ) Total stockholders’ equity 133,445 130,711 Total liabilities and stockholders’ equity $ 149,664 $ 149,152 WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)Three Months Ended March 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,101 $ 1,102 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 207 233 Amortization of intangible assets 406 423 Net change in unrealized (appreciation) depreciation on investments 2,432 1,133 Realized gains on private investments (8,325 ) — Stock-based compensation expense 1,722 2,616 Deferred income taxes 40 (1,643 ) Non-cash lease expense 307 305 Gain on asset disposition (148 ) — Changes in operating assets and liabilities: Net (purchases) sales of trading securities (4,444 ) 12,916 Accounts receivable (2,295 ) 1,844 Other current assets 23 326 Accounts payable and accrued liabilities 803 (469 ) Compensation and benefits payable (5,026 ) (7,356 ) Income taxes payable 3,630 475 Other liabilities (478 ) (383 ) Net cash (used in) provided by operating activities (7,045 ) 11,522 CASH FLOWS FROM INVESTING ACTIVITIES: Sale of investments 9,258 — Sale of property and equipment 501 — Purchases of property and equipment (9 ) (16 ) Purchases of investments (15 ) — Net cash provided by (used in) investing activities 9,735 (16 ) CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of treasury stock (1,045 ) (3,947 ) Purchases of treasury stock for employee stock plans — (697 ) Restricted stock returned for payment of taxes (884 ) (1,120 ) Cash dividends (801 ) (7,324 ) Net cash used in financing activities (2,730 ) (13,088 ) Effect of currency rate changes on cash 13 (3,068 ) NET CHANGE IN CASH AND CASH EQUIVALENTS (27 ) (4,650 ) Cash and cash equivalents, beginning of period 13,016 49,766 Cash and cash equivalents, end of period $ 12,989 $ 45,116 Supplemental cash flow information: Cash paid during the period for income taxes $ 769 $ 64 Accrued dividends $ 1,339 $ 5,245 Accrued purchases of treasury stock $ 359 $ 920 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 March 31, 2021 December 31, 2020 March 31, 2020 Net income $ 4,101 $ 2,815 $ 1,102 Add: Stock-based compensation expense 1,722 1,292 2,616 Add: Intangible amortization 406 428 423 Add: Currency translation adjustment reclassification — (24 ) — Add: Tax benefit from goodwill amortization 59 60 59 Economic Earnings $ 6,288 $ 4,571 $ 4,200 Diluted weighted average shares 7,917,390 7,838,504 8,458,473 Economic EPS $ 0.79 $ 0.58 $ 0.50
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. 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 or earnings 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 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.
