Westwood Holdings Group, Inc. Reports Third Quarter 2024 Results

GlobeNewswire Inc.

October 30, 2024 8:11PM GMT

Firmwide Assets Under Management of $17.7 Billion (Highest Level in 6 years)
Continued Innovation with WEBs Partnership to Expand ETF Platform

DALLAS, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE: WHG) today reported third quarter 2024 earnings. Significant items included:

  • Investment strategies beating their primary benchmarks included Platinum, High Alpha, Dividend Select, Income Opportunity, Multi-Asset Income, Alternative Income, Credit Opportunities, Real Estate Income, Tactical Growth SMA, MLP SMA, MLP High Conviction and MLP & Energy Infrastructure.
  • Dividend Select and Income Opportunity posted top third rankings, and Multi-Asset Income, Credit Opportunities and MLP SMA all posted top quartile rankings in their peer universes.
  • Quarterly revenues totaled $23.7 million up from the second quarter's $22.7 million and $21.9 million a year ago. Comprehensive income of $0.1 million compared with the second quarter's loss of $2.2 million and income of $3.4 million in 2023's third quarter.
  • Formed a partnership with Exchange-Traded Fund ("ETF") pioneer Ben Fulton to develop and market new ETF strategies.
  • Our comprehensive income included an after-tax charge of $1.4 million due to an increase in the fair value of contingent consideration from our 2022 Salient acquisition due to an increased earnout valuation based on revised revenue expectations.
  • Non-GAAP Economic Earnings of $1.1 million compared with the second quarter's Economic Loss of $0.5 million and Economic Earnings of $6.5 million in the third quarter of 2023.
  • Westwood held $48.3 million in cash and short-term investments as of September 30, 2024, up $4.2 million from the second quarter. Stockholders' equity totaled $118.4 million and we have no debt.
  • We declared a cash dividend of $0.15 per common share, payable on January 3, 2025 to stockholders of record on December 2, 2024.

Brian Casey, Westwood’s CEO, commented, "We continue to make good progress in our core businesses, delivering higher revenues and earnings as institutional sales grossed over $1.0 billion year to date, assets under management ("AUM") reached $17.7 billion, their highest level in over six years backed by a robust $2 billion pipeline, and most of our strategies performed very well against benchmarks and peers. Continuing our investment in product innovation, we have completed Phase 1 of the Managed Investment Solutions ("MIS") technology build-out and we are in detailed discussions with a prospect for an MIS-managed investment strategy. We recently entered into a partnership with Ben Fulton, a recognized pioneer of the ETF industry who, along with his team, has launched over 200 ETFs and more than 1,000 other investment products accounting for over $150 billion in AUM. Ben advised us earlier this year as we launched our first ETFs, one of which, MDST, has already passed critical AUM and volume thresholds for inclusion on certain intermediary platforms. Ben brought his innovative product ideas to us which led to the creation of Westwood Engineered Beta ("WEBs"). Chris Doran, who joined us in July to lead our ETF distribution efforts, partnered with Ben for over ten years and we believe the combination of their extensive experience in ETF product development and sales can drive meaningful growth in this new venture. To recap, our current business is performing nicely and our new initiatives offer the promise of profitable growth. Confident in Westwood’s current positioning and future potential, we view our stock as undervalued and our accelerated share repurchase program underscores our belief in Westwood."

Revenues increased from the second quarter and last year's third quarter principally due to higher average AUM.

Firmwide assets under management and advisement totaled $17.7 billion, consisting of AUM of $16.8 billion and assets under advisement ("AUA") of $1.0 billion.

Third quarter comprehensive income of $0.1 million compared to the second quarter's loss of $2.2 million on higher revenues and changes in the fair value of contingent consideration, offset by higher income taxes. Diluted earnings (loss) per share ("EPS") of $0.01 compared to $(0.27) for the second quarter. Non-GAAP Economic Earnings of $1.1 million, or $0.13 per share, compared with an Economic Loss of $0.5 million, or $0.06 per share, in the second quarter.

Third quarter comprehensive income of $0.1 million compared to last year's third quarter of $3.4 million due to higher revenues and changes in the fair value of contingent consideration, offset by higher employee compensation and benefits expense and the receipt of life insurance proceeds in 2023. Diluted EPS of $0.01 compared with $0.41 per share for 2023's third quarter. Non-GAAP Economic Earnings were $1.1 million, or $0.13 per share, compared with Economic Earnings of $6.5 million, or $0.80 per share, in the third 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 third quarter 2024 results and other business matters at 4:30 p.m. Eastern time today. To join the conference call, please register here:

https://registrations.events/direct/NTM7419517.

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

To view the webcast, please register here:

https://edge.media-server.com/mmc/p/vjn47uq6

Once registered, an email will be sent with important details for this conference call, as well as a unique Registrant ID.

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, June 30, 2024 and September 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

 

September 30,
2024

 

June 30,
2024

 

September 30,
2023

REVENUES:

 

 

 

 

 

Advisory fees:

 

 

 

 

 

Asset-based

$

17,774

 

 

$

17,139

 

 

$

16,902

 

Trust fees

 

5,447

 

 

 

5,227

 

 

 

5,063

 

Other, net

 

498

 

 

 

322

 

 

 

(85

)

Total revenues

 

23,719

 

 

 

22,688

 

 

 

21,880

 

EXPENSES:

 

 

 

 

 

Employee compensation and benefits

 

13,572

 

 

 

13,638

 

 

 

12,661

 

Sales and marketing

 

644

 

 

 

755

 

 

 

676

 

Westwood mutual funds

 

798

 

 

 

855

 

 

 

872

 

Information technology

 

2,572

 

 

 

2,350

 

 

 

2,334

 

Professional services

 

1,812

 

 

 

1,450

 

 

 

1,009

 

General and administrative

 

2,991

 

 

 

3,011

 

 

 

3,298

 

(Gain) loss from change in fair value of contingent consideration

 

1,824

 

 

 

4,807

 

 

 

2,483

 

Total expenses

 

24,213

 

 

 

26,866

 

 

 

23,333

 

Net operating income (loss)

 

(494

)

 

 

(4,178

)

 

 

(1,453

)

Net investment income

 

587

 

 

 

548

 

 

 

247

 

Other income

 

374

 

 

 

224

 

 

 

5,265

 

Income (loss) before income taxes

 

467

 

 

 

(3,406

)

 

 

4,059

 

Income tax provision

 

308

 

 

 

(1,193

)

 

 

(316

)

Net income (loss)

$

159

 

 

$

(2,213

)

 

$

4,375

 

Total comprehensive income (loss)

$

159

 

 

$

(2,213

)

 

$

4,375

 

Less: Comprehensive income (loss) attributable to noncontrolling interest

 

54

 

 

 

30

 

 

 

1,019

 

Comprehensive income (loss) attributable to Westwood Holdings Group, Inc.

$

105

 

 

$

(2,243

)

 

$

3,356

 

Earnings (loss) per Westwood Holdings Group, Inc. share:

 

 

 

 

 

Basic

$

0.01

 

 

$

(0.27

)

 

$

0.42

 

Diluted

$

0.01

 

 

$

(0.27

)

 

$

0.41

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

8,123,714

 

 

 

8,218,596

 

 

 

8,002,537

 

Diluted

 

8,488,372

 

 

 

8,218,596

 

 

 

8,116,747

 

Economic Earnings (Loss)

$

1,084

 

 

$

(508

)

 

$

6,480

 

Economic EPS

$

0.13

 

 

$

(0.06

)

 

$

0.80

 

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)

 

Nine Months Ended

 

September 30, 2024

 

September 30, 2023

REVENUES:

 

 

 

Advisory fees:

 

 

 

Asset-based

$

51,730

 

 

$

50,734

 

Performance-based

 

 

 

 

555

 

Trust fees

 

15,787

 

 

 

15,118

 

Other, net

 

1,622

 

 

 

145

 

Total revenues

 

69,139

 

 

 

66,552

 

EXPENSES:

 

 

 

Employee compensation and benefits

 

41,921

 

 

 

40,551

 

Sales and marketing

 

2,027

 

 

 

2,180

 

Westwood mutual funds

 

2,374

 

 

 

2,350

 

Information technology

 

7,212

 

 

 

7,283

 

Professional services

 

4,751

 

 

 

3,893

 

General and administrative

 

8,903

 

 

 

9,579

 

(Gain) loss from change in fair value of contingent consideration

 

3,682

 

 

 

(2,655

)

Acquisition expenses

 

 

 

 

209

 

Total expenses

 

70,870

 

 

 

63,390

 

Net operating income (loss)

 

(1,731

)

 

 

3,162

 

Net change in unrealized appreciation (depreciation) on private investments

 

 

 

 

24

 

Net investment income

 

1,590

 

 

 

630

 

Other income

 

783

 

 

 

5,876

 

Income before income taxes

 

642

 

 

 

9,692

 

Income tax provision

 

530

 

 

 

1,704

 

Net income

$

112

 

 

$

7,988

 

Total comprehensive income

$

112

 

 

$

7,988

 

Less: Comprehensive income (loss) attributable to noncontrolling interest

 

(46

)

 

 

1,044

 

Comprehensive income attributable to Westwood Holdings Group, Inc.

$

158

 

 

$

6,944

 

Earnings per share:

 

 

 

Basic

$

0.02

 

 

$

0.87

 

Diluted

$

0.02

 

 

$

0.86

 

Weighted average shares outstanding:

 

 

 

Basic

 

8,140,664

 

 

 

7,949,773

 

Diluted

 

8,448,629

 

 

 

8,072,739

 

Economic Earnings

$

3,588

 

 

$

12,178

 

Economic EPS

$

0.42

 

 

$

1.51

 

Dividends declared per share

$

0.45

 

 

$

0.45

 


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

 

September 30, 2024

 

December 31, 2023

ASSETS

 

 

 

Current Assets:

 

 

 

Cash and cash equivalents

$

22,790

 

 

$

20,422

 

Accounts receivable

 

14,596

 

 

 

14,394

 

Investments, at fair value

 

25,522

 

 

 

32,674

 

Prepaid income taxes

 

639

 

 

 

205

 

Other current assets

 

5,075

 

 

 

4,543

 

Total current assets

 

68,622

 

 

 

72,238

 

Investments

 

8,944

 

 

 

7,247

 

Equity method investments

 

4,211

 

 

 

4,284

 

Noncurrent investments at fair value

 

1,919

 

 

 

241

 

Goodwill

 

39,501

 

 

 

39,501

 

Deferred income taxes

 

1,590

 

 

 

726

 

Operating lease right-of-use assets

 

2,842

 

 

 

3,673

 

Intangible assets, net

 

21,718

 

 

 

24,803

 

Property and equipment, net of accumulated depreciation of $8,326 and $10,078

 

1,014

 

 

 

1,444

 

Other long-term assets

 

1,140

 

 

 

1,010

 

Total long-term assets

 

82,879

 

 

 

82,929

 

Total assets

$

151,501

 

 

$

155,167

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current Liabilities:

 

 

 

Accounts payable and accrued liabilities

$

4,934

 

 

$

6,130

 

Dividends payable

 

1,431

 

 

 

1,692

 

Compensation and benefits payable

 

8,283

 

 

 

9,539

 

Operating lease liabilities

 

1,523

 

 

 

1,286

 

Total current liabilities

 

16,171

 

 

 

18,647

 

Accrued dividends

 

905

 

 

 

675

 

Contingent consideration

 

12,000

 

 

 

10,133

 

Noncurrent operating lease liabilities

 

2,041

 

 

 

3,266

 

Total long-term liabilities

 

14,946

 

 

 

14,074

 

Total liabilities

 

31,117

 

 

 

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 9,271,568 and 9,140,760, respectively

 

123

 

 

 

119

 

Additional paid-in capital

 

202,247

 

 

 

201,622

 

Treasury stock, at cost – 2,902,505 and 2,715,977, respectively

 

(88,278

)

 

 

(85,990

)

Retained earnings

 

4,293

 

 

 

4,650

 

Total Westwood Holdings Group, Inc. stockholders’ equity

 

118,385

 

 

 

120,401

 

Noncontrolling interest in consolidated subsidiary

 

1,999

 

 

 

2,045

 

Total liabilities and stockholders’ equity

$

151,501

 

 

$

155,167

 


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

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income

$

112

 

 

$

7,988

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

Depreciation

 

464

 

 

 

511

 

Amortization of intangible assets

 

3,085

 

 

 

3,106

 

Net change in unrealized (appreciation) depreciation on investments

 

(917

)

 

 

(499

)

Stock-based compensation expense

 

4,321

 

 

 

5,111

 

Deferred income taxes

 

(864

)

 

 

652

 

Non-cash lease expense

 

831

 

 

 

844

 

Loss on asset disposition

 

 

 

 

69

 

Gain on remeasurement of lease liabilities

 

 

 

 

(119

)

Fair value change of contingent consideration

 

3,682

 

 

 

(2,655

)

Gain on insurance settlement

 

 

 

 

(5,000

)

Changes in operating assets and liabilities:

 

 

 

Net (purchases) sales of trading securities

 

6,267

 

 

 

(15,626

)

Accounts receivable

 

(202

)

 

 

1,355

 

Other current assets

 

(644

)

 

 

1,101

 

Accounts payable and accrued liabilities

 

(1,192

)

 

 

(55

)

Compensation and benefits payable

 

(1,254

)

 

 

(1,428

)

Income taxes payable

 

(434

)

 

 

25

 

Other liabilities

 

(1,041

)

 

 

(1,064

)

Net cash provided by (used in) operating activities

 

12,214

 

 

 

(5,684

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Acquisition, net of cash acquired

 

 

 

 

(741

)

Purchases of property and equipment

 

(34

)

 

 

(119

)

Purchases of investments

 

(1,500

)

 

 

 

Insurance settlement proceeds

 

 

 

 

5,000

 

Net cash provided by (used in) investing activities

 

(1,534

)

 

 

4,140

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Purchases of treasury stock

 

(1,348

)

 

 

 

Restricted stock returned for payment of taxes

 

(940

)

 

 

(863

)

Payment of contingent consideration in acquisition

 

(1,815

)

 

 

 

Cash dividends

 

(4,209

)

 

 

(4,274

)

Net cash used in financing activities

 

(8,312

)

 

 

(5,137

)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

2,368

 

 

 

(6,681

)

Cash and cash equivalents, beginning of period

 

20,422

 

 

 

23,859

 

Cash and cash equivalents, end of period

$

22,790

 

 

$

17,178

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

Cash paid during the period for income taxes

$

1,817

 

 

$

1,024

 

Accrued dividends

$

2,336

 

 

$

2,220

 


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

 

September 30,
2024

 

June 30,
2024

 

September 30,
2023

Comprehensive income (loss) attributable to Westwood Holdings Group, Inc.

$

105

 

 

$

(2,243

)

 

$

3,356

 

Stock-based compensation expense

 

1,409

 

 

 

1,397

 

 

 

1,739

 

Intangible amortization

 

1,011

 

 

 

1,032

 

 

 

1,043

 

Tax benefit from goodwill amortization

 

156

 

 

 

156

 

 

 

125

 

Tax impact of adjustments to GAAP comprehensive income (loss)

 

(1,597

)

 

 

(850

)

 

 

217

 

Economic Earnings (Loss)

$

1,084

 

 

$

(508

)

 

$

6,480

 

Earnings (loss) per share

$

0.01

 

 

$

(0.27

)

 

$

0.41

 

Stock-based compensation expense

 

0.17

 

 

 

0.17

 

 

 

0.21

 

Intangible amortization

 

0.12

 

 

 

0.12

 

 

 

0.13

 

Tax benefit from goodwill amortization

 

0.02

 

 

 

0.02

 

 

 

0.02

 

Tax impact of adjustments to GAAP comprehensive income (loss)

 

(0.19

)

 

 

(0.10

)

 

 

0.03

 

Economic EPS

$

0.13

 

 

$

(0.06

)

 

$

0.80

 

Diluted weighted average shares

 

8,488,372

 

 

 

8,218,596

 

 

 

8,116,747

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,
2024

 

September 30,
2023

Comprehensive income attributable to Westwood Holdings Group, Inc.

 

 

$

158

 

 

$

6,944

 

Stock-based compensation expense

 

 

 

4,321

 

 

 

5,111

 

Intangible amortization

 

 

 

3,085

 

 

 

3,106

 

Tax benefit from goodwill amortization

 

 

 

437

 

 

 

375

 

Tax impact of adjustments to GAAP comprehensive income

 

 

 

(4,413

)

 

 

(3,358

)

Economic Earnings

 

 

$

3,588

 

 

$

12,178

 

Earnings per share

 

 

$

0.02

 

 

$

0.86

 

Stock-based compensation expense

 

 

 

0.50

 

 

 

0.63

 

Intangible amortization

 

 

 

0.37

 

 

 

0.38

 

Tax benefit from goodwill amortization

 

 

 

0.05

 

 

 

0.05

 

Tax impact of adjustments to GAAP comprehensive income

 

 

 

(0.52

)

 

 

(0.41

)

Economic EPS

 

 

$

0.42

 

 

$

1.51

 

Diluted weighted average shares

 

 

 

8,448,629

 

 

 

8,072,739