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

    Source: Nasdaq GlobeNewswire / 26 Oct 2022 16:10:00   America/New_York

    Strong Performances Delivered Across Multiple Products

    Peer Rankings Enhanced by Benchmark-Beating Performances

    Integration Planning for Salient Acquisition Remains on Track

    DALLAS, Oct. 26, 2022 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE: WHG) today reported third quarter 2022 earnings. Significant items for the quarter include:

    • Proxy solicitation process to move Salient’s mutual funds to our platform is well underway and we continue to expect the Salient acquisition to close later this year.
    • Nearly all of our strategies beat their primary benchmarks, including LargeCap Value, SmidCap, AllCap Value, MidCap Value, High Alpha, Dividend Select, Income Opportunity, Total Return, High Income, Alternative Income and Enhanced Balanced.
    • Quarterly peer rankings benefited from our strong investment performance as High Alpha achieved a top three ranking, MidCap Value scored a top 10th percentile ranking, and LargeCap Value, Alternative Income, Total Return and Enhanced Balanced all posted top quartile rankings.
    • Reflecting the effects of global market downturns on Assets Under Management ("AUM"), we reported revenues totaling $15.4 million vs. the second quarter's $15.6 million and $17.9 million a year ago and a net loss of $1.2 million vs. $0.4 million in the second quarter and net income of $1.9 million in last year's third quarter.
    • Non-GAAP Economic Earnings of $0.8 million compared with the second quarter's $1.6 million and $3.7 million a year ago.
    • Westwood held $74.0 million in cash and short-term investments as of September 30, 2022, consistent with the second quarter of 2022, stockholders' equity totaled $113.5 million as of September 30, 2022 and we continue to have no debt.
    • We declared a cash dividend of $0.15 per common share, payable on January 3, 2023 to stockholders of record on December 2, 2022.

    Brian Casey, Westwood’s President and CEO, commented, "Markets worldwide were extremely challenging in the third quarter as central banks continued the path of higher rates in an attempt to curb inflation. Despite this backdrop, I am very pleased to report that the vast majority of our strategies beat their benchmarks for the quarter and our relative performance versus eVestment and Morningstar and similar universes positively reflected the efforts of our investment teams. In addition to compiling strong performances across our suite of products, we also devoted a lot of effort to advance the acquisition of Salient Partners, whose complementary products focused on Energy Infrastructure, Real Estate and Tactical Allocation are expected to be important sources of growth in the years ahead. As part of the final steps in this process we have begun soliciting proxies to move Salient’s five mutual funds to our Ultimus platform and the transaction is anticipated to close by the end of this year."

    Revenues were lower than the second quarter and last year's third quarter reflecting lower average AUM mainly attributable to the downdraft affecting global markets.

    AUM of $11.5 billion decreased from $12.1 billion at June 30, 2022, primarily due to market depreciation across most asset classes and geographies.

    The third quarter net loss of $1.2 million compared to the second quarter's $0.4 million due to lower revenues and higher expenses, primarily employee compensation and benefits. Diluted earnings (loss) per share ("EPS") of $(0.15) compared with $(0.05) for the second quarter. Non-GAAP Economic Earnings of $0.8 million, or $0.10 per share, compared with $1.6 million, or $0.20 per share, in the second quarter.

    The third quarter net loss of $1.2 million compared to last year's third quarter net income of $1.9 million due to lower revenues and higher expenses, related to our acquisition of Salient Partners' asset management business. Diluted EPS was $(0.15) compared with $0.24 per share for the third quarter of 2021. Non-GAAP Economic Earnings were $0.8 million, or $0.10 per share, compared with $3.7 million, or $0.47 per share, in the third 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 third 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/BI6142df3bd66e49e38e120ebd62a20610

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

    Webcast Link: https://edge.media-server.com/mmc/p/2tq66869

    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; 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; 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 continuing effects 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, June 30, 2022 and September 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
     September 30, 2022 June 30, 2022 September 30, 2021
    REVENUES:     
    Advisory fees:     
    Asset-based$10,474  $10,980  $12,011 
    Trust fees 5,177   5,365   5,952 
    Other, net (245)  (742)  (103)
    Total revenues 15,406   15,603   17,860 
    EXPENSES:     
    Employee compensation and benefits 9,526   9,133   10,268 
    Sales and marketing 335   509   292 
    Westwood mutual funds 615   601   814 
    Information technology 2,170   1,935   1,937 
    Professional services 1,660   1,475   726 
    General and administrative 2,182   2,348   1,779 
    Total expenses 16,488   16,001   15,816 
    Net operating income (loss) (1,082)  (398)  2,044 
    Realized gains on private investments —   —   — 
    Net change in unrealized appreciation (depreciation) on private investments (249)  (299)  (13)
    Net investment income 104   5   131 
    Other income 206   234   198 
    Income (loss) before income taxes (1,021)  (458)  2,360 
    Income tax provision 154   (80)  481 
    Net income (loss)$(1,175) $(378) $1,879 
    Total comprehensive income (loss)$(1,175) $(378) $1,879 
          
    Earnings (loss) per share:     
    Basic$(0.15) $(0.05) $0.24 
    Diluted$(0.15) $(0.05) $0.24 
          
    Weighted average shares outstanding:     
    Basic 7,794,060   7,944,212   7,887,259 
    Diluted 7,794,060   7,944,212   7,956,081 
          
    Economic Earnings$800  $1,608  $3,706 
    Economic EPS$0.10  $0.20  $0.47 
          
    Dividends declared per share$0.15  $0.15  $2.60 


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

     Nine Months Ended
     September 30, 2022 September 30, 2021
    REVENUES:   
    Advisory fees:   
    Asset-based$33,244  $33,846 
    Performance-based —   1,959 
    Trust fees 16,257   18,233 
    Other, net (1,276)  (375)
    Total revenues 48,225   53,663 
    EXPENSES:   
    Employee compensation and benefits 28,993   32,053 
    Sales and marketing 1,326   892 
    Westwood mutual funds 1,812   1,573 
    Information technology 5,934   6,190 
    Professional services 4,655   3,471 
    General and administrative 6,570   5,893 
    Total expenses 49,290   50,072 
    Net operating income (loss) (1,065)  3,591 
    Realized gains on private investments —   8,371 
    Net change in unrealized appreciation (depreciation) on private investments (511)  (2,124)
    Net investment income 93   562 
    Other income 598   390 
    Income (loss) before income taxes (885)  10,790 
    Income tax expense 618   3,840 
    Net income (loss)$(1,503) $6,950 
    Total comprehensive income (loss)$(1,503) $6,950 
        
    Earnings (loss) per share:   
    Basic$(0.19) $0.88 
    Diluted$(0.19) $0.88 
        
    Weighted average shares outstanding:   
    Basic 7,867,555   7,886,359 
    Diluted 7,867,555   7,933,860 
        
    Economic Earnings$4,302  $12,804 
    Economic EPS$0.55  $1.61 
        
    Dividends declared per share$0.45  $2.80 


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

     September 30, 2022 December 31, 2021
    ASSETS   
    Current Assets:   
    Cash and cash equivalents$22,470  $15,206 
    Accounts receivable 9,290   11,152 
    Investments, at fair value 51,564   65,024 
    Prepaid income taxes 569   233 
    Other current assets 2,647   2,246 
    Total current assets 86,540   93,861 
    Investments 4,455   4,455 
    Noncurrent investments at fair value 4,001   4,513 
    Goodwill 16,401   16,401 
    Deferred income taxes 1,097   848 
    Operating lease right-of-use assets 5,286   4,868 
    Intangible assets, net 10,693   11,911 
    Property and equipment, net of accumulated depreciation of $9,096 and $8,637 1,717   2,114 
    Other long-term assets 797   634 
    Total long-term assets 44,447   45,744 
    Total assets$130,987  $139,605 
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current Liabilities:   
    Accounts payable and accrued liabilities$2,876  $2,637 
    Dividends payable 1,726   1,800 
    Compensation and benefits payable 5,900   9,530 
    Operating lease liabilities 1,484   1,409 
    Income taxes payable —   466 
    Total current liabilities 11,986   15,842 
    Accrued dividends 554   1,133 
    Noncurrent operating lease liabilities 4,940   4,724 
    Total long-term liabilities 5,494   5,857 
    Total liabilities 17,480   21,699 
    Stockholders’ Equity:   
    Common stock, $0.01 par value, authorized 25,000,000 shares, issued 11,058,937 and outstanding 8,410,659 shares at September 30, 2022; issued 10,658,644 and outstanding 8,253,491 shares at December 31, 2021 110   107 
    Additional paid-in capital 199,594   195,187 
    Treasury stock, at cost - 2,648,278 shares at September 30, 2022; 2,405,154 shares at December 31, 2021 (85,227)  (81,750)
    Retained earnings (accumulated deficit) (970)  4,362 
    Total stockholders’ equity 113,507   117,906 
    Total liabilities and stockholders’ equity$130,987  $139,605 


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

     Nine Months Ended September 30,
      2022   2021 
    CASH FLOWS FROM OPERATING ACTIVITIES:   
    Net income (loss)$(1,503) $6,950 
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
    Depreciation 488   571 
    Amortization of intangible assets 1,218   1,218 
    Net change in unrealized depreciation on investments 1,822   2,425 
    Realized gains on private investments —   (8,371)
    Stock-based compensation expense 4,410   4,459 
    Deferred income taxes (252)  477 
    Non-cash lease expense 800   923 
    Gain on asset disposition —   (148)
    Changes in operating assets and liabilities:   
    Net sales of trading securities 12,149   11,191 
    Accounts receivable 1,862   (335)
    Other current assets (562)  (15)
    Accounts payable and accrued liabilities 246   1,149 
    Compensation and benefits payable (3,622)  (430)
    Income taxes payable (810)  2,191 
    Other liabilities (927)  (1,195)
    Net cash provided by operating activities 15,319   21,060 
    CASH FLOWS FROM INVESTING ACTIVITIES:   
    Sale of investments —   9,258 
    Sale of property and equipment —   501 
    Purchases of property and equipment (123)  (114)
    Purchases of investments —   (15)
    Net cash (used in) provided by investing activities (123)  9,630 
    CASH FLOWS FROM FINANCING ACTIVITIES:   
    Purchases of treasury stock (2,851)  (2,164)
    Restricted stock returned for payment of taxes (626)  (884)
    Cash dividends (4,459)  (22,125)
    Net cash used in financing activities (7,936)  (25,173)
    Effect of currency rate changes on cash 4   (72)
    NET CHANGE IN CASH AND CASH EQUIVALENTS 7,264   5,445 
    Cash and cash equivalents, beginning of period 15,206   13,016 
    Cash and cash equivalents, end of period$22,470  $18,461 
    SUPPLEMENTAL CASH FLOW INFORMATION:   
    Cash paid during the period for income taxes$1,807  $506 
    Accrued dividends$2,280  $2,481 
    Additional operating lease right-of-use assets$1,217  $— 


    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
     September 30, 2022 June 30, 2022 September 30, 2021
    Net income (loss)$(1,175) $(378) $1,879
    Stock-based compensation expense 1,509   1,521   1,362
    Intangible amortization 407   406   406
    Tax benefit from goodwill amortization 59   59   59
    Economic Earnings$800  $1,608  $3,706
          
    Earnings (loss) per share$(0.15) $(0.05) $0.24
    Stock-based compensation expense 0.19   0.19   0.17
    Intangible amortization 0.05   0.05   0.05
    Tax benefit from goodwill amortization 0.01   0.01   0.01
    Economic EPS$0.10  $0.20  $0.47
    Diluted weighted average shares 7,794,060   7,944,212   7,956,081
          
       Nine Months Ended
       September 30, 2022 September 30, 2021
    Net income (loss)  $(1,503) $6,950
    Stock-based compensation expense   4,410   4,459
    Intangible amortization   1,218   1,218
    Tax benefit from goodwill amortization   177   177
    Economic Earnings  $4,302  $12,804
          
    Earnings (loss) per share  $(0.19) $0.88
    Stock-based compensation expense   0.57   0.56
    Intangible amortization   0.15   0.15
    Tax benefit from goodwill amortization   0.02   0.02
    Economic EPS  $0.55  $1.61
    Diluted weighted average shares   7,867,555   7,933,860

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