Westwood Holdings Group, Inc. (NYSE: WHG) today reported first
quarter 2023 earnings. Significant items for the quarter include:
- Integration of
Salient Partners is on track and acquisition of an additional 32%
interest in Broadmark Asset Management was completed, bringing our
equity stake to nearly 80%.
-
Numerous strategies beat their primary benchmarks, including
SMidCap Value, SmallCap Value, AllCap Value, MidCap Value, High
Alpha and Alternative Income.
- 80% of our US Value
Strategies outperformed their benchmarks and our High Income Fund
was named as a Best US Taxable Bond Mutual Fund for 2023 by
Investors Business Daily.
-
Quarterly peer rankings benefited from strong investment
performance as High Alpha achieved a top eVestment ranking and
MidCap Value posted a top quartile eVestment ranking.
-
Revenues totaled $22.7 million compared with the fourth quarter's
$20.5 million and $17.2 million a year ago. Net income of $0.7
million, which included $0.2 million residual transaction costs for
the Salient acquisition, compared with the fourth quarter's net
loss of $3.1 million and net income of $0.1 million in 2022's first
quarter.
-
Non-GAAP Economic Earnings of $3.6 million compared with the fourth
quarter's loss of $0.7 million and earnings of $1.9 million a year
ago.
-
As of March 31, 2023 Westwood held $32.3 million in cash and
short-term investments as of March 31, 2023, down $6.9 million
from year end. Stockholders' equity totaled $110.9 million and we
have no debt.
-
We declared a cash dividend of $0.15 per common share, payable on
July 3, 2023 to stockholders of record on June 2,
2023.
Brian Casey, Westwood’s President and CEO,
commented, "We recently took time out to celebrate the 40th
Anniversary of our founding while continuing to work hard to
integrate the great products, people and complementary distribution
capabilities brought to us by the acquisition of Salient Partners
late last year. We upped our ownership stake in Broadmark Asset
Management whose track record and client base in tactical absolute
return strategies offer strong growth potential. Our investment
teams generally did well in a market environment of continuing
uncertainty, with our US Value team delivering particularly strong
performance versus benchmarks and peers. One of our newest mutual
funds, Quality AllCap, ranked in Morningstar’s 9th percentile for
one year and Quality SmallCap edged that achievement with an 8th
percentile ranking.
We are enthused by our level of engagement with
financial advisors and consultants in the intermediary channel and
several national advisor calls reached top-of-mind for literally
thousands of advisors. Never shy when an opportunity presents
itself, the chaos caused by the demise of Silicon Valley Bank and
the knock-on effect that had on bank stocks led us to launch a
Regional Bank strategy to take advantage of pricing dislocation for
our high-net-worth customers."
Revenues were higher than the fourth quarter and
last year's first quarter reflecting higher average AUM following
our 2022 acquisition of Salient Partners' asset management
business.
Firmwide assets under management and advisement
totaled $16.2 billion at quarter end, consisting of assets under
management ("AUM") of $15.0 billion and assets under advisement
("AUA") of $1.2 billion.
First quarter net income of $0.7 million
compared to the fourth quarter's net loss of $3.1 million due to
higher revenues and lower expenses, primarily related to our 2022
acquisition of Salient Partners' asset management business. Diluted
earnings (loss) per share ("EPS") of $0.09 compared with $(0.40)
for the fourth quarter. Non-GAAP Economic Earnings of $3.6 million,
or $0.45 per share, compared with a loss of $0.7 million, or $0.09
per share, in the fourth quarter.
First quarter net income of $0.7 million
compared to last year's first quarter net income of $0.1 million
due to higher revenues partially offset by higher expenses,
primarily employee compensation and benefits expenses following our
2022 acquisition of Salient Partners' asset management business.
Diluted EPS was $0.09 compared with $0.01 per share for the first
quarter of 2022. Non-GAAP Economic Earnings were $3.6 million, or
$0.45 per share, compared with $1.9 million, or $0.24 per share, in
the first quarter of 2022.
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 2023 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/BIa4560b1513b8473cbbd7f048e2f55c15
After registering, you will be provided with a
dial-in number containing a personalized PIN.
Webcast Link:
https://edge.media-server.com/mmc/p/z4oj43kg
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, Energy and
Real Assets, Tactical Absolute Return, Income Alternatives and
Systematic Equity. Strategies are made 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 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; 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, 2022 and its quarterly report on Form 10-Q for
the quarter ended March 31, 2023. 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
ForbesChief Financial Officer and Treasurer(214) 756-6900
WESTWOOD HOLDINGS GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)(in thousands, except
per share and share
amounts)(unaudited)
|
Three Months Ended |
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
REVENUES: |
|
|
|
|
|
Advisory fees: |
|
|
|
|
|
Asset-based |
$ |
17,033 |
|
$ |
13,441 |
|
|
$ |
11,790 |
|
Performance-based |
|
555 |
|
|
1,018 |
|
|
|
— |
|
Trust fees |
|
5,031 |
|
|
5,429 |
|
|
|
5,715 |
|
Other, net |
|
108 |
|
|
568 |
|
|
|
(289 |
) |
Total revenues |
|
22,727 |
|
|
20,456 |
|
|
|
17,216 |
|
EXPENSES: |
|
|
|
|
|
Employee compensation and benefits |
|
14,202 |
|
|
11,131 |
|
|
|
10,334 |
|
Sales and marketing |
|
740 |
|
|
677 |
|
|
|
482 |
|
Westwood mutual funds |
|
732 |
|
|
890 |
|
|
|
596 |
|
Information technology |
|
2,383 |
|
|
2,104 |
|
|
|
1,829 |
|
Professional services |
|
1,529 |
|
|
1,661 |
|
|
|
1,520 |
|
General and administrative |
|
1,986 |
|
|
2,531 |
|
|
|
2,040 |
|
Acquisition expenses |
|
209 |
|
|
5,270 |
|
|
|
— |
|
Total expenses |
|
21,781 |
|
|
24,264 |
|
|
|
16,801 |
|
Net operating income (loss) |
|
946 |
|
|
(3,808 |
) |
|
|
415 |
|
Net change in unrealized appreciation (depreciation) on private
investments |
|
— |
|
|
(984 |
) |
|
|
37 |
|
Net investment income |
|
172 |
|
|
173 |
|
|
|
(16 |
) |
Other income |
|
372 |
|
|
309 |
|
|
|
158 |
|
Income (loss) before income taxes |
|
1,490 |
|
|
(4,310 |
) |
|
|
594 |
|
Income tax provision |
|
776 |
|
|
(1,185 |
) |
|
|
544 |
|
Net income (loss) |
$ |
714 |
|
$ |
(3,125 |
) |
|
$ |
50 |
|
Total comprehensive income (loss) |
$ |
714 |
|
$ |
(3,125 |
) |
|
$ |
50 |
|
Less: Comprehensive income attributable to non-controlling
interest |
|
21 |
|
|
— |
|
|
|
— |
|
Comprehensive income attributable to Westwood Holdings
Group, Inc. |
$ |
693 |
|
$ |
(3,125 |
) |
|
$ |
50 |
|
Earnings (loss) per Westwood Holdings Group, Inc.
share: |
|
|
|
|
|
Basic |
$ |
0.09 |
|
$ |
(0.40 |
) |
|
$ |
0.01 |
|
Diluted |
$ |
0.09 |
|
$ |
(0.40 |
) |
|
$ |
0.01 |
|
Weighted average shares outstanding: |
|
|
|
|
|
Basic |
|
7,853,921 |
|
|
7,775,545 |
|
|
|
7,865,174 |
|
Diluted |
|
7,968,504 |
|
|
7,775,545 |
|
|
|
7,931,453 |
|
Economic Earnings (Loss) |
$ |
3,587 |
|
$ |
(738 |
) |
|
$ |
1,894 |
|
Economic EPS |
$ |
0.45 |
|
$ |
(0.09 |
) |
|
$ |
0.24 |
|
Dividends declared per share |
$ |
0.15 |
|
$ |
0.15 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
WESTWOOD HOLDINGS GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(in thousands, except par value and share
amounts)(unaudited)
|
March 31, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
16,751 |
|
|
$ |
23,859 |
|
Accounts receivable |
|
15,185 |
|
|
|
13,900 |
|
Investments, at fair value |
|
15,594 |
|
|
|
15,342 |
|
Prepaid income taxes |
|
— |
|
|
|
446 |
|
Other current assets |
|
5,272 |
|
|
|
4,645 |
|
Total current assets |
|
52,802 |
|
|
|
58,192 |
|
Investments |
|
4,455 |
|
|
|
4,455 |
|
Equity method investments |
|
4,228 |
|
|
|
6,574 |
|
Noncurrent investments at fair value |
|
3,044 |
|
|
|
3,027 |
|
Goodwill |
|
39,929 |
|
|
|
35,732 |
|
Deferred income taxes |
|
1,898 |
|
|
|
1,762 |
|
Operating lease right-of-use assets |
|
4,679 |
|
|
|
4,976 |
|
Intangible assets, net |
|
27,931 |
|
|
|
28,952 |
|
Property and equipment, net of accumulated depreciation of $9,578
and $9,277 |
|
1,876 |
|
|
|
1,828 |
|
Other long-term assets |
|
957 |
|
|
|
929 |
|
Total long-term assets |
|
88,997 |
|
|
|
88,235 |
|
Total assets |
$ |
141,799 |
|
|
$ |
146,427 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current Liabilities: |
|
|
|
Accounts payable and accrued liabilities |
$ |
6,715 |
|
|
$ |
5,678 |
|
Dividends payable |
|
1,457 |
|
|
|
1,745 |
|
Compensation and benefits payable |
|
3,073 |
|
|
|
8,689 |
|
Operating lease liabilities |
|
1,519 |
|
|
|
1,502 |
|
Income taxes payable |
|
435 |
|
|
|
— |
|
Total current liabilities |
|
13,199 |
|
|
|
17,614 |
|
Accrued dividends |
|
515 |
|
|
|
701 |
|
Contingent consideration |
|
11,841 |
|
|
|
12,901 |
|
Noncurrent operating lease liabilities |
|
4,374 |
|
|
|
4,563 |
|
Total long-term liabilities |
|
16,730 |
|
|
|
18,165 |
|
Total liabilities |
|
29,929 |
|
|
|
35,779 |
|
Stockholders’ Equity: |
|
|
|
Common stock, $0.01 par value, authorized 25,000,000 shares, issued
11,925,846 and outstanding 9,212,390 shares at March 31, 2023;
issued 11,527,544 and outstanding 8,881,831 shares at December 31,
2022 |
|
119 |
|
|
|
115 |
|
Additional paid-in capital |
|
200,453 |
|
|
|
199,914 |
|
Treasury stock, at cost - 2,713,456 shares at March 31, 2023;
2,645,713 shares at December 31, 2022 |
|
(85,965 |
) |
|
|
(85,128 |
) |
Retained earnings (accumulated deficit) |
|
(3,752 |
) |
|
|
(4,253 |
) |
Total Westwood Holdings Group, Inc. stockholders’
equity |
|
110,855 |
|
|
|
110,648 |
|
Non-controlling interest in consolidated
subsidiary |
|
1,015 |
|
|
|
— |
|
Total liabilities and stockholders’ equity |
$ |
141,799 |
|
|
$ |
146,427 |
|
|
|
|
|
|
|
|
|
WESTWOOD HOLDINGS GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(in
thousands)(unaudited)
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
693 |
|
|
$ |
50 |
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
Depreciation |
|
176 |
|
|
|
177 |
|
Amortization of intangible assets |
|
1,021 |
|
|
|
405 |
|
Net change in unrealized depreciation on investments |
|
(369 |
) |
|
|
239 |
|
Stock-based compensation expense |
|
1,748 |
|
|
|
1,380 |
|
Deferred income taxes |
|
(136 |
) |
|
|
21 |
|
Non-cash lease expense |
|
320 |
|
|
|
185 |
|
Gain on asset disposition |
|
69 |
|
|
|
— |
|
Fair value change of contingent consideration |
|
(1,061 |
) |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
Net sales of trading securities |
|
47 |
|
|
|
12,406 |
|
Accounts receivable |
|
(657 |
) |
|
|
1,414 |
|
Other current assets |
|
(17 |
) |
|
|
(283 |
) |
Accounts payable and accrued liabilities |
|
141 |
|
|
|
(301 |
) |
Compensation and benefits payable |
|
(5,612 |
) |
|
|
(7,221 |
) |
Income taxes payable |
|
881 |
|
|
|
524 |
|
Other liabilities |
|
(423 |
) |
|
|
(226 |
) |
Net cash (used in) provided by operating activities |
|
(3,179 |
) |
|
|
8,770 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Acquisition, net of cash acquired |
|
(1,168 |
) |
|
|
— |
|
Purchases of property and equipment |
|
(84 |
) |
|
|
(30 |
) |
Net cash used in investing activities |
|
(1,252 |
) |
|
|
(30 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
Purchases of treasury stock |
|
— |
|
|
|
(200 |
) |
Restricted stock returned for payment of taxes |
|
(837 |
) |
|
|
(626 |
) |
Cash dividends |
|
(1,840 |
) |
|
|
(1,972 |
) |
Net cash used in financing activities |
|
(2,677 |
) |
|
|
(2,798 |
) |
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
(7,108 |
) |
|
|
5,942 |
|
Cash and cash equivalents, beginning of period |
|
23,859 |
|
|
|
15,206 |
|
Cash and cash equivalents, end of period |
$ |
16,751 |
|
|
$ |
21,148 |
|
SUPPLEMENTAL CASH FLOW INFORMATION: |
|
|
|
Cash paid during the period for income taxes |
$ |
32 |
|
|
$ |
— |
|
Accrued dividends |
$ |
1,972 |
|
|
$ |
2,216 |
|
|
|
|
|
|
|
|
|
WESTWOOD HOLDINGS GROUP, INC. AND
SUBSIDIARIESReconciliation of Net Income (Loss) 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, net income (loss) 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 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 (Loss) 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
(Loss) 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 (Loss) 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 |
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
Net income (loss) |
$ |
693 |
|
$ |
(3,125 |
) |
|
$ |
50 |
Stock-based compensation expense |
|
1,748 |
|
|
1,591 |
|
|
|
1,380 |
Intangible amortization |
|
1,021 |
|
|
671 |
|
|
|
405 |
Tax benefit from goodwill amortization |
|
125 |
|
|
125 |
|
|
|
59 |
Economic Earnings (Loss) |
$ |
3,587 |
|
$ |
(738 |
) |
|
$ |
1,894 |
|
|
|
|
|
|
Earnings (loss) per share |
$ |
0.09 |
|
$ |
(0.40 |
) |
|
$ |
0.01 |
Stock-based compensation expense |
|
0.21 |
|
|
0.19 |
|
|
|
0.17 |
Intangible amortization |
|
0.13 |
|
|
0.09 |
|
|
|
0.05 |
Tax benefit from goodwill amortization |
|
0.02 |
|
|
0.02 |
|
|
|
0.01 |
Economic EPS |
$ |
0.45 |
|
$ |
(0.09 |
) |
|
$ |
0.24 |
Diluted weighted average shares |
|
7,968,504 |
|
|
7,775,545 |
|
|
|
7,931,453 |
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