• Westwood Holdings Group, Inc. Reports Third Quarter 2021 Results

    Source: Nasdaq GlobeNewswire / 27 Oct 2021 15:10:00   America/Chicago

    Strong performance delivered across multiple products

    Increased regular quarterly dividend and repurchased stock

    DALLAS, Oct. 27, 2021 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE: WHG) today reported third quarter 2021 earnings. Significant items include:

    • Improved revenues of $17.9 million vs. the second quarter's $17.5 million and $15.5 million a year ago.
    • Higher net income of $1.9 million vs. the second quarter's $1.0 million and vs. a $10.3 million net loss in last year's third quarter.
    • Our LargeCap Value, SmidCap, AllCap Value and Alternative Income strategies all beat their primary benchmarks for the quarter.
    • In peer rankings, Alternative Income and SmidCap achieved top quintile rankings, and AllCap Value achieved a top third ranking.
    • Westwood held $76.6 million in cash and short-term investments as of September 30, 2021, down $15.7 million from the second quarter after a special dividend payment of $2.50 per common share, or $20.8 million, was paid in August.
    • Stockholders' equity was $115.7 million as of September 30, 2021 and we continue to have no debt.
    • Non-GAAP economic earnings of $3.7 million compared favorably with the second quarter's $2.8 million and a loss of $1.7 million a year ago.
    • We declared a cash dividend of $0.15 per common share, payable on January 3, 2022 to stockholders of record on December 3, 2021.

    Brian Casey, Westwood’s President and CEO, commented, "This was a quarter in which we made progress across a variety of fronts. We successfully deployed the terrific mandates won by our institutional team earlier in the year and our solid performance story continued to unfold as US Value and Multi-Asset turned in good performances versus benchmarks and peer universes. As the quarter drew to a close, we launched two new mutual funds and rolled out a new client portal to provide our Wealth clients with world-class access to their investments. I’m pleased to report that our financial performance also reflected the improving business environment and, after a special dividend of $2.50 per share was paid in August, the board decided to increase our regular quarterly dividend to $0.15 per share. That action, together with our stock repurchase program, underscore our commitment to protect and enhance shareowner value while continuing to invest in our people, products and processes to generate healthy organic growth for Westwood in the months and years ahead."

    Revenues were comparable to the second quarter and higher than last year's third quarter reflecting higher average assets under management ("AUM"), partially offset by lower performance fees.

    AUM of $13.8 billion decreased from $14.4 billion at June 30, 2021, primarily due to net outflows and market depreciation.

    Third quarter net income of $1.9 million exceeded the second quarter's $1.0 million due to the combination of somewhat higher revenues and lower operating expenses. Diluted earnings per share ("EPS") of $0.24 compared with $0.12 for the second quarter. Non-GAAP economic earnings of $3.7 million, or $0.47 per share, compared with economic earnings of $2.8 million, or $0.35 per share, in the second quarter.

    Third quarter net income of $1.9 million compared favorably with last year's third quarter net loss of $10.3 million primarily due to higher revenues on higher average AUM and several non-recurring items impacting the prior third quarter. Diluted EPS of $0.24 compared with a loss of $1.31 per share for last year's third quarter. Non-GAAP economic earnings were $3.7 million, or $0.47 per share, compared with economic losses of $1.7 million, or $0.22 per share, for the third quarter of 2020.

    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 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 November 3, 2021 by dialing 855-859-2056 (U.S. and Canada) or 404-537-3406 (international) and entering the passcode 2546858.

    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; our stockholder rights agreement may make it more difficult for others to obtain control over us, even if it would be beneficial to our stockholders; 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; in addition to our stockholder rights agreement, 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 impact 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, 2020 and its quarterly report on Form 10-Q for the quarters ended March 31, 2021, June 30, 2021 and September 30, 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
     September 30, 2021 June 30, 2021 September 30, 2020
    REVENUES:     
    Advisory fees:     
    Asset-based$12,011   $11,385   $8,847  
    Performance-based      713  
    Trust fees5,952   6,216   5,787  
    Trust performance-based fees      37  
    Other, net(103)  (117)  70  
    Total revenues17,860   17,484   15,454  
    EXPENSES:     
    Employee compensation and benefits10,268   10,237   9,515  
    Sales and marketing292   370   215  
    Westwood mutual funds814   368   421  
    Information technology1,937   2,261   2,158  
    Professional services726   1,428   1,033  
    General and administrative1,779   2,042   2,333  
    Impairment expense      3,403  
    Loss on foreign currency transactions      419  
    Total expenses15,816   16,706   19,497  
    Net operating income (loss)2,044   778   (4,043) 
    Realized gains on private investments   46     
    Net change in unrealized appreciation (depreciation) on private investments(13)  215   (73) 
    Investment income131   235   (43) 
    Other income198   142   34  
    Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary      (4,193) 
    Income (loss) before income taxes2,360   1,416   (8,318) 
    Income tax expense481   446   1,971  
    Net income (loss)$1,879   $970   $(10,289) 
    Other comprehensive income (loss):     
    Foreign currency translation adjustments      621  
    Reclassification of cumulative foreign currency translation adjustments to net income upon liquidation of a foreign subsidiary      4,193  
    Total comprehensive income (loss)$1,879   $970   $(5,475) 
          
    Earnings (loss) per share:     
    Basic$0.24   $0.12   $(1.31) 
    Diluted$0.24   $0.12   $(1.31) 
          
    Weighted average shares outstanding:     
    Basic7,887,259 7,884,774 7,829,478
    Diluted7,956,081 7,928,106 7,829,478
          
    Economic Earnings (Loss)$3,706   $2,810   $(1,711) 
    Economic EPS$0.47   $0.35   $(0.22) 
          
    Dividends declared per share$2.60   $0.10   $0.00  


    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, 2021 September 30, 2020
    REVENUES:   
    Advisory fees:   
    Asset-based$33,846   $29,277  
    Performance-based1,959   1,408  
    Trust fees18,233   17,395  
    Trust performance-based fees   77  
    Other, net(375)  (159) 
    Total revenues53,663   47,998  
    EXPENSES:   
    Employee compensation and benefits32,053   32,970  
    Sales and marketing892   946  
    Westwood mutual funds1,573   1,370  
    Information technology6,190   6,219  
    Professional services3,471   3,217  
    General and administrative5,893   6,830  
    Impairment expense   3,403  
    Gain on foreign currency transactions   (1,196) 
    Total expenses50,072   53,759  
    Net operating income (loss)3,591   (5,761) 
    Realized gains on private investments8,371     
    Net change in unrealized appreciation (depreciation) on private investments(2,124)  (909) 
    Investment income562   625  
    Other income390   102  
    Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary   (4,193) 
    Income (loss) before income taxes10,790   (10,136) 
    Income tax expense3,840   1,626  
    Net income (loss)$6,950   $(11,762) 
    Other comprehensive income (loss):   
    Foreign currency translation adjustments   (1,250) 
    Reclassification of cumulative foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary   4,193  
    Total comprehensive income (loss)$6,950   $(8,819) 
        
    Earnings (loss) per share:   
    Basic$0.88   $(1.46) 
    Diluted$0.88   $(1.46) 
        
    Weighted average shares outstanding:   
    Basic7,886,359 8,040,417
    Diluted7,933,860 8,040,417
        
    Economic Earnings$12,804   $2,713  
    Economic EPS$1.61   $0.34  
        
    Dividends declared per share$2.70   $0.43  


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

     September 30, 2021 December 31, 2020
    ASSETS   
    Current Assets:   
    Cash and cash equivalents$18,461   $13,016  
    Accounts receivable9,785   9,450  
    Investments, at fair value58,094   69,542  
    Prepaid income taxes79   1,700  
    Other current assets2,451   2,606  
    Total current assets88,870   96,314  
    Investments4,455   8,154  
    Noncurrent investments at fair value4,185   3,527  
    Goodwill16,401   16,401  
    Deferred income taxes991   1,468  
    Operating lease right-of-use assets5,180   6,103  
    Intangible assets, net12,317   13,535  
    Property and equipment, net of accumulated depreciation of $8,456 and $8,0562,229   3,186  
    Other long-term assets634   464  
    Total long-term assets46,392   52,838  
    Total assets$135,262   $149,152  
    LIABILITIES AND STOCKHOLDERS’ EQUITY   
    Current Liabilities:   
    Accounts payable and accrued liabilities$2,775   $1,627  
    Dividends payable1,333   810  
    Compensation and benefits payable6,991   7,448  
    Operating lease liabilities1,410   1,718  
    Accrued stock repurchases36     
    Income taxes payable752   191  
    Total current liabilities13,297   11,794  
    Accrued dividends1,148   526  
    Noncurrent operating lease liabilities5,089   6,121  
    Total long-term liabilities6,237   6,647  
    Total liabilities19,534   18,441  
    Stockholders’ Equity:   
    Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,658,681 and outstanding 8,296,864 shares at September 30, 2021; issued 10,500,549 and outstanding 8,326,948 shares at December 31, 2020108   105  
    Additional paid-in capital193,901   210,268  
    Treasury stock, at cost - 2,361,817 shares at September 30, 2021; 2,173,559 shares at December 31, 2020(81,050)  (77,967) 
    Retained earnings (accumulated deficit)2,769   (1,695) 
    Total stockholders’ equity115,728   130,711  
    Total liabilities and stockholders’ equity$135,262   $149,152  


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

     Nine Months Ended September 30,
     2021 2020
    CASH FLOWS FROM OPERATING ACTIVITIES:   
    Net income (loss)$6,950   $(11,762) 
    Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:   
    Depreciation571   697  
    Amortization of intangible assets1,218   1,293  
    Net change in unrealized (appreciation) depreciation on investments2,425   1,132  
    Realized gains on private investments(8,371)    
    Stock-based compensation expense4,459   5,409  
    Deferred income taxes477   (191) 
    Non-cash lease expense923   1,253  
    Gain on asset disposition(148)    
    Impairment of goodwill   3,403  
    Currency translation adjustment reclassification   4,193  
    Changes in operating assets and liabilities:   
    Net (purchases) sales of trading securities11,191   (11,891) 
    Accounts receivable(335)  3,634  
    Other current assets(15)  246  
    Accounts payable and accrued liabilities1,149   (47) 
    Compensation and benefits payable(430)  (3,769) 
    Income taxes payable2,191   492  
    Other liabilities(1,195)  (1,174) 
    Net cash (used in) provided by operating activities21,060   (7,082) 
    CASH FLOWS FROM INVESTING ACTIVITIES:   
    Sale of investments9,258     
    Sale of property and equipment501     
    Purchases of property and equipment(114)  (92) 
    Purchases of investments(15)    
    Net cash provided by (used in) investing activities9,630   (92) 
    CASH FLOWS FROM FINANCING ACTIVITIES:   
    Purchases of treasury stock(2,164)  (12,952) 
    Purchases of treasury stock for employee stock plans   (697) 
    Restricted stock returned for payment of taxes(884)  (1,120) 
    Cash dividends(22,125)  (11,043) 
    Net cash used in financing activities(25,173)  (25,812) 
    Effect of currency rate changes on cash(72)  (1,187) 
    NET CHANGE IN CASH AND CASH EQUIVALENTS5,445   (34,173) 
    Cash and cash equivalents, beginning of period13,016   49,766  
    Cash and cash equivalents, end of period$18,461   $15,593  
    SUPPLEMENTAL CASH FLOW INFORMATION:   
    Cash paid during the period for income taxes$506   $1,294  
    Accrued dividends$2,481   $1,448  
    Accrued purchases of treasury stock$36   $  


    WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
    Reconciliation 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, impairment expense, amortization of intangible assets, currency translation adjustment reclassification 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 (Loss) divided by diluted weighted average shares outstanding.

     Three Months Ended
     September 30, 2021 June 30, 2021 September 30, 2020
    Net income (loss)$1,879  $970  $(10,289) 
    Add: Stock-based compensation expense1,362  1,375  488  
    Add: Impairment expense    3,403  
    Add: Intangible amortization406  406  435  
    Add: Currency translation adjustment reclassification    4,193  
    Add: Tax benefit from goodwill amortization59  59  59  
    Economic Earnings (Loss)$3,706  $2,810  $(1,711) 
          
    Diluted weighted average shares7,956,081 7,928,106 7,829,478
    Economic EPS$0.47  $0.35  $(0.22) 
          
       Nine Months Ended
       September 30, 2021 September 30, 2020
    Net income (loss)  $6,950  $(11,762) 
    Add: Stock-based compensation expense  4,459  5,409  
    Add: Impairment expense    3,403  
    Add: Intangible amortization  1,218  1,293  
    Add: Currency translation adjustment reclassification    4,193  
    Add: Tax benefit from goodwill amortization  177  177  
    Economic Earnings  $12,804  $2,713  
          
    Diluted weighted average shares  7,933,860  8,040,417  
    Economic EPS  $1.61  $0.34  

     


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