Westwood Holdings Group, Inc. (NYSE: WHG) today reported first
quarter 2021 earnings. Significant items include:
-
Revenues of $18.3 million compared with $17.1 million in the fourth
quarter and $16.7 million a year ago.
- Net
income of $4.1 million rose from $2.8 million in the fourth quarter
and $1.1 million in last year's first quarter.
-
Income Opportunity, Total Return, High Income and Alternative
Income strategies beat their primary benchmarks for the
quarter.
-
Income Opportunity and High Income won top quartile peer rankings
and our SmallCap Value strategy made the top 40% in peer
rankings.
- We
realized a significant gain of $8.3 million on our original
InvestCloud investment, of which $5.6 million was recorded in this
quarter, and we reinvested $4.4 million in the newly-capitalized
InvestCloud entity.
-
Westwood held $86.9 million in cash and short-term investments as
of March 31, 2021, up $4.3 million from year end.
-
Stockholders' equity as of March 31, 2021 was $133.4 million
and we continued to have no debt.
- Non-GAAP economic
earnings of $6.3 million compared with $4.6 million in the fourth
quarter and $4.2 million a year ago.
- We repurchased
92,491 shares of our common stock for an aggregate purchase price
of $1.4 million.
Brian Casey, Westwood’s President and CEO,
commented, "We were very pleased with positive net flows exceeding
$500 million and we anticipate significant additional funding from
new client mandates in the second quarter. Our pipeline for new
business opportunities remains strong and we are seeing larger
searches compared with the past few years. We remain laser-focused
on reducing expenses and made further progress by subleasing a
portion of our excess Dallas office space. Our hard work over the
past few years along with the investments we made in technology and
other strategic initiatives are paying off for our shareholders as
Westwood enters a more reliable path to growth."
Revenues exceeded the fourth quarter and last
year's first quarter principally as a result of higher average
assets under management ("AUM") and higher performance-based
fees.
AUM of $14.5 billion rose from $13.0 billion at
December 31, 2020, reflecting market appreciation and net inflows,
mainly in our SmallCap strategy.
First quarter net income of $4.1 million
exceeded the $2.8 million reported for the fourth quarter primarily
on higher revenues and realized gains from private investments,
partially offset by higher operating expenses and income taxes.
Diluted earnings per share ("EPS") of $0.52 compared with $0.36 for
the fourth quarter. Non-GAAP economic earnings of $6.3 million, or
$0.79 per share, compared with earnings of $4.6 million, or $0.58
per share, in the fourth quarter.
First quarter net income of $4.1 million
outperformed 2020's first quarter net income of $1.1 million
primarily on higher revenues plus realized and unrealized gains on
private investments, partially offset by higher operating expenses
and income taxes. Diluted EPS of $0.52 compared with $0.13 for last
year's first quarter. Non-GAAP economic earnings were $6.3 million,
or $0.79 per share, compared with $4.2 million, or $0.50 per share
for the first quarter of 2020.
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 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 May 5,
2021 by dialing 855-859-2056 (U.S. and Canada) or 404-537-3406
(international) and entering the passcode 9883074.
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; the impact of the COVID-19
pandemic; the significant concentration of our revenues in a small
number of customers; our ability to avoid termination of client
agreements and the related investment redemptions; regulations
adversely affecting the financial services industry; competition in
the investment management industry; our ability to develop and
market new investment strategies successfully; our AUM include
investments in foreign companies; our reputation and our
relationships with current and potential customers; our ability to
attract and retain qualified personnel; our ability to maintain
effective cyber security; our ability to perform operational tasks;
our ability to identify and execute on our strategic initiatives;
our ability to maintain effective information systems; our ability
to select and oversee third-party vendors; litigation risks; 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; 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; we are a
holding company dependent on the operations and funds of our
subsidiaries; our relationships with investment consulting firms;
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 quarter ended March 31, 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
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, 2021 |
|
December 31, 2020 |
|
March 31, 2020 |
REVENUES: |
|
|
|
|
|
Advisory fees: |
|
|
|
|
|
Asset-based |
$ |
10,450 |
|
|
|
$ |
8,751 |
|
|
|
$ |
11,102 |
|
|
Performance-based |
1,959 |
|
|
|
1,400 |
|
|
|
— |
|
|
Trust fees |
6,065 |
|
|
|
6,168 |
|
|
|
5,951 |
|
|
Trust performance-based fees |
— |
|
|
|
289 |
|
|
|
— |
|
|
Other, net |
(155 |
) |
|
|
505 |
|
|
|
(384 |
) |
|
Total revenues |
18,319 |
|
|
|
17,113 |
|
|
|
16,669 |
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
Employee compensation and benefits |
11,548 |
|
|
|
9,171 |
|
|
|
12,668 |
|
|
Sales and marketing |
230 |
|
|
|
248 |
|
|
|
478 |
|
|
Westwood mutual funds |
391 |
|
|
|
311 |
|
|
|
515 |
|
|
Information technology |
1,992 |
|
|
|
1,892 |
|
|
|
2,031 |
|
|
Professional services |
1,317 |
|
|
|
1,054 |
|
|
|
1,193 |
|
|
General and administrative |
2,072 |
|
|
|
2,111 |
|
|
|
2,306 |
|
|
(Gain) loss on foreign currency transactions |
— |
|
|
|
12 |
|
|
|
(2,938 |
) |
|
Total expenses |
17,550 |
|
|
|
14,799 |
|
|
|
16,253 |
|
|
Net operating income |
769 |
|
|
|
2,314 |
|
|
|
416 |
|
|
Realized gains on private investments |
8,325 |
|
|
|
— |
|
|
|
— |
|
|
Net change in unrealized appreciation (depreciation) on private
investments |
(2,326 |
) |
|
|
198 |
|
|
|
(995 |
) |
|
Investment income |
196 |
|
|
|
(21 |
) |
|
|
544 |
|
|
Other income |
50 |
|
|
|
33 |
|
|
|
34 |
|
|
Foreign currency translation adjustments to net income (loss) upon
liquidation of a foreign subsidiary |
— |
|
|
|
24 |
|
|
|
— |
|
|
Income (loss) before income taxes |
7,014 |
|
|
|
2,548 |
|
|
|
(1 |
) |
|
Income tax expense (benefit) |
2,913 |
|
|
|
(267 |
) |
|
|
(1,103 |
) |
|
Net income |
$ |
4,101 |
|
|
|
$ |
2,815 |
|
|
|
$ |
1,102 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
Foreign currency translation adjustments |
— |
|
|
|
24 |
|
|
|
(3,242 |
) |
|
Reclassification of cumulative foreign currency translation
adjustments to net income upon liquidation of a foreign
subsidiary |
— |
|
|
|
(24 |
) |
|
|
— |
|
|
Total comprehensive income (loss) |
$ |
4,101 |
|
|
|
$ |
2,815 |
|
|
|
$ |
(2,140 |
) |
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
Basic |
$ |
0.52 |
|
|
|
$ |
0.36 |
|
|
|
$ |
0.13 |
|
|
Diluted |
$ |
0.52 |
|
|
|
$ |
0.36 |
|
|
|
$ |
0.13 |
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
Basic |
7,887,044 |
|
|
|
7,830,115 |
|
|
|
8,414,393 |
|
|
Diluted |
7,917,390 |
|
|
|
7,838,504 |
|
|
|
8,458,473 |
|
|
|
|
|
|
|
|
Economic Earnings |
$ |
6,288 |
|
|
|
$ |
4,571 |
|
|
|
$ |
4,200 |
|
|
Economic EPS |
$ |
0.79 |
|
|
|
$ |
0.58 |
|
|
|
$ |
0.50 |
|
|
|
|
|
|
|
|
Dividends declared per share |
$ |
0.10 |
|
|
|
$ |
0.00 |
|
|
|
$ |
0.43 |
|
|
WESTWOOD HOLDINGS GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(in thousands, except par value and share
amounts)(unaudited)
|
March 31, 2021 |
|
December 31, 2020 |
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
12,989 |
|
|
|
$ |
13,016 |
|
|
Accounts receivable |
11,744 |
|
|
|
9,450 |
|
|
Investments, at fair value |
73,880 |
|
|
|
69,542 |
|
|
Prepaid income taxes |
336 |
|
|
|
1,700 |
|
|
Other current assets |
2,588 |
|
|
|
2,606 |
|
|
Total current assets |
101,537 |
|
|
|
96,314 |
|
|
Investments |
4,455 |
|
|
|
8,154 |
|
|
Noncurrent investments at fair value |
3,981 |
|
|
|
3,527 |
|
|
Goodwill |
16,401 |
|
|
|
16,401 |
|
|
Deferred income taxes |
1,418 |
|
|
|
1,468 |
|
|
Operating lease right-of-use assets |
5,796 |
|
|
|
6,103 |
|
|
Intangible assets, net |
13,129 |
|
|
|
13,535 |
|
|
Property and equipment, net of accumulated depreciation of $8,099
and $8,056 |
2,488 |
|
|
|
3,186 |
|
|
Other long-term assets |
459 |
|
|
|
464 |
|
|
Total long-term assets |
48,127 |
|
|
|
52,838 |
|
|
Total assets |
$ |
149,664 |
|
|
|
$ |
149,152 |
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current Liabilities: |
|
|
|
Accounts payable and accrued liabilities |
$ |
2,431 |
|
|
|
$ |
1,627 |
|
|
Dividends payable |
1,109 |
|
|
|
810 |
|
|
Compensation and benefits payable |
2,426 |
|
|
|
7,448 |
|
|
Operating lease liabilities |
1,420 |
|
|
|
1,718 |
|
|
Accrued stock repurchases |
359 |
|
|
|
— |
|
|
Income taxes payable |
2,450 |
|
|
|
191 |
|
|
Total current liabilities |
10,195 |
|
|
|
11,794 |
|
|
Accrued dividends |
230 |
|
|
|
526 |
|
|
Noncurrent operating lease liabilities |
5,794 |
|
|
|
6,121 |
|
|
Total long-term liabilities |
6,024 |
|
|
|
6,647 |
|
|
Total liabilities |
16,219 |
|
|
|
18,441 |
|
|
Stockholders’ Equity: |
|
|
|
Common stock, $0.01 par value, authorized 25,000,000 shares, issued
10,630,452 and outstanding 8,313,003 shares at March 31, 2021;
issued 10,500,549 and outstanding 8,326,948 shares at December 31,
2020 |
107 |
|
|
|
105 |
|
|
Additional paid-in capital |
211,988 |
|
|
|
210,268 |
|
|
Treasury stock, at cost - 2,317,449 shares at March 31, 2021;
2,173,559 shares at December 31, 2020 |
(80,255 |
) |
|
|
(77,967 |
) |
|
Retained earnings (accumulated deficit) |
1,605 |
|
|
|
(1,695 |
) |
|
Total stockholders’ equity |
133,445 |
|
|
|
130,711 |
|
|
Total liabilities and stockholders’ equity |
$ |
149,664 |
|
|
|
$ |
149,152 |
|
|
WESTWOOD HOLDINGS GROUP, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS(in
thousands)(unaudited)
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
Net income |
$ |
4,101 |
|
|
|
$ |
1,102 |
|
|
Adjustments to reconcile net income to net cash (used in) provided
by operating activities: |
|
|
|
Depreciation |
207 |
|
|
|
233 |
|
|
Amortization of intangible assets |
406 |
|
|
|
423 |
|
|
Net change in unrealized (appreciation) depreciation on
investments |
2,432 |
|
|
|
1,133 |
|
|
Realized gains on private investments |
(8,325 |
) |
|
|
— |
|
|
Stock-based compensation expense |
1,722 |
|
|
|
2,616 |
|
|
Deferred income taxes |
40 |
|
|
|
(1,643 |
) |
|
Non-cash lease expense |
307 |
|
|
|
305 |
|
|
Gain on asset disposition |
(148 |
) |
|
|
— |
|
|
Changes in operating assets and liabilities: |
|
|
|
Net (purchases) sales of trading securities |
(4,444 |
) |
|
|
12,916 |
|
|
Accounts receivable |
(2,295 |
) |
|
|
1,844 |
|
|
Other current assets |
23 |
|
|
|
326 |
|
|
Accounts payable and accrued liabilities |
803 |
|
|
|
(469 |
) |
|
Compensation and benefits payable |
(5,026 |
) |
|
|
(7,356 |
) |
|
Income taxes payable |
3,630 |
|
|
|
475 |
|
|
Other liabilities |
(478 |
) |
|
|
(383 |
) |
|
Net cash (used in) provided by operating
activities |
(7,045 |
) |
|
|
11,522 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
Sale of investments |
9,258 |
|
|
|
— |
|
|
Sale of property and equipment |
501 |
|
|
|
— |
|
|
Purchases of property and equipment |
(9 |
) |
|
|
(16 |
) |
|
Purchases of investments |
(15 |
) |
|
|
— |
|
|
Net cash provided by (used in) investing
activities |
9,735 |
|
|
|
(16 |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
Purchases of treasury stock |
(1,045 |
) |
|
|
(3,947 |
) |
|
Purchases of treasury stock for employee stock plans |
— |
|
|
|
(697 |
) |
|
Restricted stock returned for payment of taxes |
(884 |
) |
|
|
(1,120 |
) |
|
Cash dividends |
(801 |
) |
|
|
(7,324 |
) |
|
Net cash used in financing activities |
(2,730 |
) |
|
|
(13,088 |
) |
|
Effect of currency rate changes on cash |
13 |
|
|
|
(3,068 |
) |
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
(27 |
) |
|
|
(4,650 |
) |
|
Cash and cash equivalents, beginning of period |
13,016 |
|
|
|
49,766 |
|
|
Cash and cash equivalents, end of period |
$ |
12,989 |
|
|
|
$ |
45,116 |
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
Cash paid during the period for income taxes |
$ |
769 |
|
|
|
$ |
64 |
|
|
Accrued dividends |
$ |
1,339 |
|
|
|
$ |
5,245 |
|
|
Accrued purchases of treasury stock |
$ |
359 |
|
|
|
$ |
920 |
|
|
WESTWOOD HOLDINGS GROUP, INC. AND
SUBSIDIARIESReconciliation of Net Income to
Economic Earnings(in thousands, except per share
and share amounts)(unaudited)
|
Three Months Ended |
|
March 31, 2021 |
|
December 31, 2020 |
|
March 31, 2020 |
Net income |
$ |
4,101 |
|
|
$ |
2,815 |
|
|
|
$ |
1,102 |
|
Add: Stock-based compensation expense |
1,722 |
|
|
1,292 |
|
|
|
2,616 |
|
Add: Intangible amortization |
406 |
|
|
428 |
|
|
|
423 |
|
Add: Currency translation adjustment reclassification |
— |
|
|
(24 |
) |
|
|
— |
|
Add: Tax benefit from goodwill amortization |
59 |
|
|
60 |
|
|
|
59 |
|
Economic Earnings |
$ |
6,288 |
|
|
$ |
4,571 |
|
|
|
$ |
4,200 |
|
|
|
|
|
|
|
Diluted weighted average shares |
7,917,390 |
|
|
7,838,504 |
|
|
|
8,458,473 |
|
Economic EPS |
$ |
0.79 |
|
|
$ |
0.58 |
|
|
|
$ |
0.50 |
|
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 and earnings 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 or earnings 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 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.
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