• Westwood Holdings Group, Inc. Reports Second Quarter 2024 Results

    المصدر: Nasdaq GlobeNewswire / 31 يوليو 2024 15:10:07   America/Chicago

    Founding Investor in the Texas Stock Exchange

    Successful Launch of two Exchange-Traded Funds

    Strong Pipeline of Unfunded and Prospective New Clients

    DALLAS, July 31, 2024 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE: WHG) today reported second quarter 2024 earnings. Significant items included:

    • Investment strategies beating their primary benchmarks included LargeCap Value, AllCap Value, Dividend Select, High Income, Credit Opportunities, Real Estate Income, MLP SMA, MLP High Conviction and MLP & Energy Infrastructure.
    • MLP SMA, MLP High Conviction and MLP & Energy Infrastructure posted top quartile rankings.
    • We launched our first two exchange-traded funds ("ETFs") in the quarter – the Westwood Salient Enhanced Midstream Income Fund (NYSE: MDST) and the Westwood Salient Enhanced Energy Income Fund (NASDAQ: WEEI). The funds’ net assets as of June 30, 2024 were $43 and $13 million, respectively. The funds are generating high distributable monthly income with annualized distribution rates as of June 27, 2024 of 10.7% for MDST and 11.4% for WEEI.
    • Quarterly revenues totaled $22.7 million flat from the first quarter's $22.7 million and up from $21.9 million a year ago. Comprehensive loss of $2.2 million compared with the first quarter's income of $2.3 million and $2.9 million in 2023's second quarter.
    • Our comprehensive loss included a $3.8 million after tax charge following an increase in the fair value of contingent consideration for our 2022 Salient acquisition due to an increased earnout valuation based on revised revenue expectations.
    • Non-GAAP Economic Loss of $0.5 million compared with the first quarter's Economic Earnings of $3.0 million and $4.0 million in the second quarter of 2023, both driven primarily by contingent consideration revaluations.
    • Westwood held $44.1 million in cash and short-term investments as of June 30, 2024, down $2.5 million from the first quarter. Stockholders' equity totaled $118.5 million and we have no debt.
    • We declared a cash dividend of $0.15 per common share, payable on October 1, 2024 to stockholders of record on September 2, 2024.

    Brian Casey, Westwood’s CEO, commented, "We are pleased with our continued progress during the second quarter. Our successful launch of two ETFs and additional wins in the traditional institutional business validate the work that we have been doing for the past several years. In addition, we continue to invest in our new Managed Investment Solutions ("MIS") offering and saw a significant turnaround in revenues from Salient and Broadmark products. While both the investment in MIS and the additional consideration to be paid for the Salient and Broadmark businesses were a drain on earnings in the quarter, they represent good news for our investors. We are proud to be a founding member of the Texas Stock Exchange, the only Texas-based publicly-traded asset management and wealth firm listed as a founder of the Texas Stock Exchange. There are great things happening in Texas and we are excited to be a part of the capital formation that will inspire new businesses in the years ahead.

    We are also eagerly anticipating the coming launch of our MIS capability planned for the third quarter. We have already conducted many meetings with prospects, including several discussions with premier national consultants. The reception has been overwhelmingly positive so far and we are looking forward to securing new clients for MIS by year end."

    Revenues were flat to the first quarter and up from last year's second quarter.

    Firmwide assets under management and advisement totaled $16.8 billion, consisting of assets under management ("AUM") of $15.8 billion and assets under advisement ("AUA") of $1.0 billion.

    Second quarter comprehensive loss of $2.2 million compared to the first quarter's income of $2.3 million due to changes in the fair value of contingent consideration and income taxes. Diluted earnings (loss) per share ("EPS") of $(0.27) compared to $0.27 for the first quarter. Non-GAAP Economic Loss of $0.5 million, or $0.06 per share, compared with Economic Earnings of $3.0 million, or $0.36 per share, in the first quarter.

    Second quarter comprehensive loss of $2.2 million compared to last year's second quarter income of $2.9 million due to changes in the fair value of contingent consideration and income taxes. Diluted EPS of $(0.27) compared with $0.36 per share for 2023's second quarter. Non-GAAP Economic Losses were $0.5 million, or $0.06 per share, compared with Economic Earnings of $4.0 million, or $0.49 per share, in the second quarter of 2023.

    Economic Earnings (Loss) 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 2024 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/BI686aa6f159f6411798a220c88cb93b08

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

    Webcast Link: https://edge.media-server.com/mmc/p/8v6a2uhs

    ABOUT WESTWOOD HOLDINGS GROUP

    Westwood Holdings Group, Inc. is a focused investment management boutique and wealth management firm.

    Founded in 1983, Westwood offers a broad array of investment solutions to institutional investors, private wealth clients and financial intermediaries. The firm specializes in several distinct investment capabilities: U.S. Value Equity, Multi-Asset, Energy & Real Assets, Income Alternatives, Tactical Absolute Return and Managed Investment Solutions, which are available through separate accounts, the Westwood Funds® family of mutual funds, exchange-traded funds ("ETFs") 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 Chicago, Houston and San Francisco.

    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 and AUA; 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; 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; we have made and may continue to make business combinations as a part of our business strategy, which may present certain risks and uncertainties; our relationships with investment consulting firms; 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, 2023 and its quarterly report on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024. 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, 2024 March 31, 2024 June 30, 2023
    REVENUES:     
    Advisory fees:     
    Asset-based$17,139  $16,817  $16,799 
    Trust fees 5,227   5,113   5,024 
    Other, net 322   802   122 
    Total revenues 22,688   22,732   21,945 
    EXPENSES:     
    Employee compensation and benefits 13,638   14,711   13,688 
    Sales and marketing 755   628   764 
    Westwood mutual funds 855   721   746 
    Information technology 2,350   2,290   2,566 
    Professional services 1,450   1,489   1,355 
    General and administrative 3,011   2,901   3,235 
    (Gain) loss from change in fair value of contingent consideration 4,807   (2,949)  (4,078)
    Total expenses 26,866   19,791   18,276 
    Net operating income (loss) (4,178)  2,941   3,669 
    Net change in unrealized appreciation (depreciation) on private investments —   —   24 
    Net investment income 548   455   211 
    Other income 224   185   239 
    Income (loss) before income taxes (3,406)  3,581   4,143 
    Income tax provision (1,193)  1,415   1,244 
    Net income (loss)$(2,213) $2,166  $2,899 
    Total comprehensive income (loss)$(2,213) $2,166  $2,899 
    Less: Comprehensive income (loss) attributable to noncontrolling interest 30   (130)  4 
    Comprehensive income (loss) attributable to Westwood Holdings Group, Inc.$(2,243) $2,296  $2,895 
    Earnings (loss) per Westwood Holdings Group, Inc. share:     
    Basic$(0.27) $0.28  $0.36 
    Diluted$(0.27) $0.27  $0.36 
    Weighted average shares outstanding:     
    Basic 8,218,596   8,099,028   7,991,228 
    Diluted 8,218,596   8,392,496   8,131,333 
    Economic Earnings$(508) $3,012  $3,980 
    Economic EPS$(0.06) $0.36  $0.49 
    Dividends declared per share$0.15  $0.15  $0.15 


    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, 2024 June 30, 2023
    REVENUES:   
    Advisory fees:   
    Asset-based$33,956  $33,832 
    Performance-based —   555 
    Trust fees 10,340   10,055 
    Other, net 1,124   230 
    Total revenues 45,420   44,672 
    EXPENSES:   
    Employee compensation and benefits 28,349   27,890 
    Sales and marketing 1,383   1,504 
    Westwood mutual funds 1,576   1,478 
    Information technology 4,640   4,949 
    Professional services 2,939   2,884 
    General and administrative 5,912   6,281 
    (Gain) loss from change in fair value of contingent consideration 1,858   (5,138)
    Acquisition expenses —   209 
    Total expenses 46,657   40,057 
    Net operating income (loss) (1,237)  4,615 
    Net change in unrealized appreciation (depreciation) on private investments —   24 
    Net investment income 1,003   383 
    Other income 409   611 
    Income before income taxes 175   5,633 
    Income tax provision 222   2,020 
    Net income (loss)$(47) $3,613 
    Total comprehensive income (loss)$(47) $3,613 
    Less: Comprehensive income (loss) attributable to noncontrolling interest (100)  25 
    Comprehensive income attributable to Westwood Holdings Group, Inc.$53  $3,588 
    Earnings per share:   
    Basic$0.01  $0.45 
    Diluted$0.01  $0.45 
    Weighted average shares outstanding:   
    Basic 8,158,812   7,922,954 
    Diluted 8,438,431   8,050,298 
    Economic Earnings$2,504  $5,698 
    Economic EPS$0.30  $0.71 
    Dividends declared per share$0.30  $0.30 


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

     June 30, 2024 December 31, 2023
    ASSETS   
    Current Assets:   
    Cash and cash equivalents$23,770  $20,422 
    Accounts receivable 14,324   14,394 
    Investments, at fair value 20,364   32,674 
    Prepaid income taxes 945   205 
    Other current assets 4,506   4,543 
    Total current assets 63,909   72,238 
    Investments 8,747   7,247 
    Equity method investments 4,578   4,284 
    Noncurrent investments at fair value 1,825   241 
    Goodwill 39,501   39,501 
    Deferred income taxes 773   726 
    Operating lease right-of-use assets 3,127   3,673 
    Intangible assets, net 22,729   24,803 
    Property and equipment, net of accumulated depreciation of $8,180 and $10,078 1,144   1,444 
    Other long-term assets 1,041   1,010 
    Total long-term assets 83,465   82,929 
    Total assets$147,374  $155,167 
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current Liabilities:   
    Accounts payable and accrued liabilities$5,312  $6,130 
    Dividends payable 1,394   1,692 
    Compensation and benefits payable 5,322   9,539 
    Operating lease liabilities 1,406   1,286 
    Total current liabilities 13,434   18,647 
    Accrued dividends 782   675 
    Contingent consideration 10,176   10,133 
    Noncurrent operating lease liabilities 2,516   3,266 
    Total long-term liabilities 13,474   14,074 
    Total liabilities 26,908   32,721 
    Stockholders’ Equity:   
    Common stock, $0.01 par value, authorized 25,000,000 shares, issued 12,174,073 and 11,856,737, respectively and outstanding 9,293,447 and 9,140,760, respectively 123   119 
    Additional paid-in capital 202,064   201,622 
    Treasury stock, at cost – 2,880,626 and 2,715,977, respectively (88,005)  (85,990)
    Retained earnings 4,339   4,650 
    Total Westwood Holdings Group, Inc. stockholders’ equity 118,521   120,401 
    Noncontrolling interest in consolidated subsidiary 1,945   2,045 
    Total liabilities and stockholders’ equity$147,374  $155,167 


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

     Six Months Ended June 30,
      2024   2023 
    CASH FLOWS FROM OPERATING ACTIVITIES:   
    Net income (loss)$(47) $3,613 
    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:   
    Depreciation 326   346 
    Amortization of intangible assets 2,074   2,063 
    Net change in unrealized (appreciation) depreciation on investments (1,004)  (499)
    Stock-based compensation expense 2,912   3,372 
    Deferred income taxes (47)  228 
    Non-cash lease expense 546   630 
    Loss on asset disposition —   69 
    Gain on remeasurement of lease liabilities —   (119)
    Fair value change of contingent consideration 1,858   (5,138)
    Net (purchases) sales of trading securities 11,430   (7,083)
    Accounts receivable 70   919 
    Other current assets 2   1,141 
    Accounts payable and accrued liabilities (814)  (796)
    Compensation and benefits payable (4,217)  (3,345)
    Income taxes payable (740)  1,490 
    Other liabilities (664)  (793)
    Net cash provided by (used in) operating activities 11,685   (3,902)
    CASH FLOWS FROM INVESTING ACTIVITIES:   
    Acquisition, net of cash acquired —   (741)
    Purchases of property and equipment (24)  (97)
    Purchases of investments (1,500)  — 
    Net cash used in investing activities (1,524)  (838)
    CASH FLOWS FROM FINANCING ACTIVITIES:   
    Purchases of treasury stock (1,075)  — 
    Restricted stock returned for payment of taxes (940)  (837)
    Payment of contingent consideration in acquisition (1,815)  — 
    Cash dividends (2,983)  (3,053)
    Net cash used in financing activities (6,813)  (3,890)
    NET CHANGE IN CASH AND CASH EQUIVALENTS 3,348   (8,630)
    Cash and cash equivalents, beginning of period 20,422   23,859 
    Cash and cash equivalents, end of period$23,770  $15,229 
    SUPPLEMENTAL CASH FLOW INFORMATION:   
    Cash paid during the period for income taxes$1,008  $300 
    Accrued dividends$2,176  $2,065 


    WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
    Reconciliation of Comprehensive Income (Loss) Attributable to Westwood Holdings Group, Inc. to Economic Earnings (Loss)
    (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 (Loss) and Economic EPS. We provide these measures in addition to, not as a substitute for, Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. and earnings (loss) per share, which are reported on a GAAP basis. Our management and Board of Directors review Economic Earnings (Loss) 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 Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. 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 (Loss) as Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. 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 (Loss) because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement. Although gains and losses from changes in the fair value of contingent consideration are non-cash, we do not add or subtract those back when calculating Economic Earnings (Loss) because gains and losses on changes in the fair value of contingent consideration are considered regular following an acquisition. In addition, we do not adjust Economic Earnings (Loss) for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings (Loss) divided by diluted weighted average shares outstanding.

     Three Months Ended
     June 30, 2024 March 31, 2024 June 30, 2023
    Comprehensive income (loss) attributable to Westwood Holdings Group, Inc.$(2,243) $2,296  $2,895 
    Stock-based compensation expense 1,397   1,515   1,624 
    Intangible amortization 1,032   1,042   1,042 
    Tax benefit from goodwill amortization 156   125   125 
    Tax impact of adjustments to GAAP comprehensive income (loss) (850)  (1,966)  (1,706)
    Economic Earnings (Loss)$(508) $3,012  $3,980 
    Earnings (loss) per share$(0.27) $0.27  $0.36 
    Stock-based compensation expense 0.17   0.18   0.19 
    Intangible amortization 0.12   0.13   0.13 
    Tax benefit from goodwill amortization 0.02   0.01   0.02 
    Tax impact of adjustments to GAAP comprehensive income (loss) (0.10)  (0.23)  (0.21)
    Economic EPS$(0.06) $0.36  $0.49 
    Diluted weighted average shares 8,218,596   8,392,496   8,131,333 
          
       Six Months Ended
       June 30, 2024 June 30, 2023
    Comprehensive income attributable to Westwood Holdings Group, Inc.  $53  $3,588 
    Stock-based compensation expense   2,912   3,372 
    Intangible amortization   2,074   2,063 
    Tax benefit from goodwill amortization   281   250 
    Tax impact of adjustments to GAAP comprehensive income   (2,816)  (3,575)
    Economic Earnings  $2,504  $5,698 
    Earnings per share  $0.01  $0.45 
    Stock-based compensation expense   0.35   0.41 
    Intangible amortization   0.24   0.26 
    Tax benefit from goodwill amortization   0.03   0.03 
    Tax impact of adjustments to GAAP comprehensive income   (0.33)  (0.44)
    Economic EPS  $0.30  $0.71 
    Diluted weighted average shares   8,438,431   8,050,298 

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