Westwood Holdings Group, Inc. Reports Second Quarter 2013 Results

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Westwood Holdings Group, Inc. Reports Second Quarter 2013 Results

Assets Under Management Increase to Record of $15.8 Billion

Westwood International Assets Surpass $1.5 Billion


Ireland Domiciled UCITS Fund Launched

DALLAS--(BUSINESS WIRE)-- Westwood Holdings Group, Inc. (NYS: WHG) today reported second quarter 2013 revenues of $23.5 million, a 17% increase compared to revenues of $20.1 million in both the second quarter of 2012 and the first quarter of 2013. Economic Earnings per share ("Economic EPS") were $1.07 compared to $0.72 in the same quarter of the prior year and $0.76 in the first quarter of 2013. Diluted earnings per share were $0.65 compared to $0.30 in the same quarter of 2012 and $0.38 in the first quarter of 2013.

Highlights and significant items impacting our pretax results include:

  • Quarterly revenues increased 17% over the second quarter of 2012.
  • Performance fees recorded for our Master Limited Partnership ("MLP") strategy were $2.5 million compared to $1.2 million in the second quarter of 2012.
  • A gain of $899,000 from the sale of 100,000 shares of Teton Advisors, Inc. was included in other revenues during the second quarter of 2012.
  • 2012's second quarter included $1.4 million of recruiting and other costs related to the hiring of team members at Westwood International Advisors ("WIA").

Westwood International's assets under management ("AUM") exceeded $1.5 billion at June 30, 2013, up 75% from year end. WIA contributed $1.7 million to revenues during the second quarter of 2013 with $2 million of related costs, compared to revenues of $1.5 million in the first quarter of this year with $2.7 million of related costs. Excluding WIA related items, second quarter 2013 Economic EPS and diluted earnings per share would have been $1.09 and $0.68, respectively.

Brian Casey, Westwood's President & CEO, commented, "We are very pleased with our second quarter financial results and the exceptionally strong performance generated by our MLP, SmallCap, and Income Opportunity teams. The Westwood Funds™ had record quarterly net inflows exceeding $190 million, bringing aggregate net inflows this year to $347 million. We have experienced strong demand for WIA's Emerging Markets strategy with assets now exceeding $1.5 billion. We recently obtained authorization from the Central Bank of Ireland for a new Irish UCITS umbrella fund named Westwood Investment Funds PLC. In response to client demand, our first UCITS sub-fund will focus on our Emerging Markets strategy, and we expect this product will receive significant new inflows over the next two months. We look forward to expanding our UCITS offerings in the future."

Aggregate assets under management reached a record $15.8 billion as of June 30, 2013, an increase of 12% compared to $14.2 billion as of year end, and 20% higher than a year ago. Mutual fund assets, now comprising ten Westwood Funds, stood at $2.1 billion as of June 30, 2013, 32% higher than year end 2012 and 44% higher than June 30, 2012.

Westwood's Board of Directors today declared a quarterly cash dividend of $0.40 per common share, payable on October 1, 2013 to stockholders of record on September 13, 2013. At June 30, 2013 Westwood had $57.5 million in cash and investments, with stockholders' equity of $79.4 million and no debt.

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 second quarter 2013 results and other business updates at 4:30 p.m. Eastern time today. To join the conference call, dial 877-303-6235 (domestic) 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 July 25, 2013 by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering passcode 99412344.

About Westwood

Westwood Holdings Group, Inc. provides investment management services to institutional investors, private wealth clients and financial intermediaries. Westwood manages a variety of investment strategies including U.S., Global, and Emerging Markets equities as well as income-oriented portfolios. Access to these strategies is available through separate accounts, commingled funds and the Westwood FundsTM family of mutual funds. Westwood has significant, broad-based employee ownership and trades on the New York Stock Exchange under the symbol "WHG." Based in Dallas, Westwood also has offices in Omaha and Toronto.

For more information on Westwood, please visit www.westwoodgroup.com.

For more information on the Westwood Funds, please visit www.westwoodfunds.com.

Forward-looking Statements

Statements in this press release that are not purely historical facts, including statements about our expected future financial position, results of operations or cash flows, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "should," "could," "goal," "target," "designed," "on track," "comfortable with," "optimistic" 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: our ability to identify and successfully market services that appeal to our customers; the significant concentration of our revenues among a few customers; our relationships with investment consulting firms; our relationships with current and potential customers; our ability to retain qualified personnel; our ability to successfully develop and market new asset classes; our ability to maintain our fee structure in light of competitive fee pressures; competition in the marketplace; downturns in the financial markets; new legislation adversely affecting the financial services industries; interest rates; changes in our effective tax rate; 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, 2012 and its quarterly reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013. 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.

 
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
 
Three Months Ended

June 30,
2013

 

March 31,
2013

 

June 30,
2012

REVENUES:
Advisory fees:
Asset-based$16,486$15,547$14,102
Performance based2,535-1,182
Trust fees4,5744,2173,757
Other, net (120) 336  1,025 
Total revenues 23,475  20,100  20,066 
 
EXPENSES:
Employee compensation and benefits11,90711,84311,885
Sales and marketing334287261
Westwood mutual funds462404275
Information technology678656629
Professional services1,0771,0022,063
General and administrative 1,284  1,189  1,201 
Total expenses 15,742  15,381  16,314 
Income before income taxes7,7334,7193,752
Provision for income taxes 2,854  1,886  1,554 
Net income$4,879 $2,833 $2,198 
Other comprehensive income:
Available-for-sale investments:
Change in unrealized gain on investment securities--34
Less: reclassification adjustment for net gains included in earnings -  -  (908)
Net change (net of income taxes of $0, $0, and $(476), respectively)--(874)
Foreign currency translation adjustments (158) (77) (18)
Other comprehensive income (158) (77) (892)
Total comprehensive income$4,721 $2,756 $1,306 
 
Earnings per share:
Basic$0.66 $0.39 $0.31 
Diluted$0.65 $0.38 $0.30 
 
Weighted average shares outstanding:
Basic 7,349,868  7,287,161  7,162,540 
Diluted 7,495,523  7,481,668  7,250,707 
 
Economic Earnings$7,993 $5,667 $5,252 
Economic EPS$1.07 $0.76 $0.72 
 
Dividends declared per share$0.40 $0.40 $0.37 

 

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)


(unaudited)

 
Six months ended June 30,
REVENUES: 2013   2012 
Advisory fees:
Asset-based$32,033$28,192
Performance based2,5351,182
Trust fees8,7917,228
Other, net 216  1,328 
Total revenues 43,575  37,930 
 
EXPENSES:
Employee compensation and benefits23,75020,799
Sales and marketing621473
Westwood mutual funds866484
Information technology1,3341,225
Professional services2,0792,942
General and administrative 2,473  2,171 
Total expenses 31,123  28,094 
Income before income taxes12,4529,836
Provision for income taxes 4,740  3,853 
Net income$7,712 $5,983 
Other comprehensive income:
Available-for-sale investments:
Change in unrealized gain on investment securities-(401)
Less: reclassification adjustment for net gains included in earnings -  (908)
Net change (net of income taxes of $0, and $(714), respectively)-(1,309)
Foreign currency translation adjustments (235) (18)
Other comprehensive income (235) (1,327)
Total comprehensive income$7,477 $4,656 
 
Earnings per share:
Basic$1.05 $0.84 
Diluted$1.03 $0.82 
 
Weighted average shares outstanding:
Basic 7,318,688  7,125,158 
Diluted 7,492,392  7,272,690 
 
Economic Earnings$13,660 $11,072 
Economic EPS$1.82 $1.52 
 
Dividends declared per share$.80 $0.74 

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WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of June 30, 2013 and December 31, 2012
(in thousands, except par value and share amounts)
 
June 30,

2013 (unaudited)

December 31,

2012

ASSETS
Current Assets:
Cash and cash equivalents$6,133$3,817
Accounts receivable12,8578,920
Investments, at fair value51,36859,906
Deferred income taxes2,0373,362
Prepaid income taxes1,173-
Other current assets 2,250  1,365 
Total current assets75,81877,370
Goodwill11,25511,255
Deferred income taxes1,9631,696
Intangible assets, net3,9694,149
Property and equipment, net of accumulated depreciation of $1,932 and $1,747 2,190  2,145 
Total assets$95,195 $96,615 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities$1,829$1,636
Dividends payable3,5171,201
Compensation and benefits payable8,36214,537
Income taxes payable-1,438
Other current liabilities 15  14 
Total current liabilities13,72318,826
Accrued dividends824-
Deferred rent 1,214  1,238