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WHG Westwood

Participants
Julie Gerron General Counsel
Brian Casey President and CEO
Tiffany Kice CFO
Mac Sykes Gabelli
Call transcript
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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2017 Westwood Holdings Group, Inc Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to turn the call over to Ms. Julie Gerron, General Counsel and Chief Compliance Officer. Ma'am, you may begin.

Julie Gerron

you. Thank welcome Quarter and Call. Earnings our to afternoon XXXX Fourth Conference Good which results following statements those risks, and factors, forward-looking will contemplated uncertainties cause are other The statements. include known by that the discussion different be to materially subject forward-looking to and may from actual unknown

could ended the Exchange Form and forward-looking Securities as We the difference well in a such our with is December issued filed included Additional is information update events any cause release that obligation no today revise concerning result future publicly in for statements, Commission. earlier quarter the XX-Q to XX, otherwise. factors that a information, XXXX, our press undertake as or of or new whether as

forward-looking You are statements. cautioned not to on reliance place undue

rules to earlier the the comparable included accordance financial economic end press In non-GAAP of our of is issued SEC measures, most share and today. reconciliation addition, economic per our at earnings in concerning GAAP measures earnings the with release

we today, the call our our our I turn now call and President will Chief to Financial the Brian Kice, Officer Executive have CEO. over Casey, Tiffany On Chief Officer. and Casey, Brian

Brian Casey

the in XX a year. markets led return which posted cuts markets strong completed leading investment Thanks, were big Julie taking our time earnings by the an and specifically Markets call which our for on quarter The investment rally, tax of and comments all XXX quarter Globally, the measured teams. extraordinary to distinct a quarter the year fourth to year, from listen environment all for of returns also Index, call. up more year, by thanks consisted MSCI XX%. and and fiscal respect the I'll start of as you fourth With closed our of to equity and the fourth the to Emerging year-end fiscal to the and emerging, today months positive year three with S&P with

ongoing year welcome beating a and billion $X the small Domestic fared were for cap below in towards in value peer markets growth one in Westwood the in improvement record ranked two-thirds the universe. Westwood’s as that third of year. peer portfolios group and over XXXX cap third outperformance in in its its the news results XXXX these with track for XXth in performance earnings The for of top in caps group benchmark over a peer strategies our percentile for value those strategies, respective large index. seven finished index, showed Russell and relative finished speed with value the well large was growth strategies over and and and management XXXX. large assets the groups small differentiator and key key caps shift cap value Our their market both under benchmarks versus key calendar the posted strong year. Westwood’s their with saw cap our cap large US continued markets Concentrated posted the of XXXX Russell core and trailing but three the small second large percentile percentile year cap manager years. in value finished investment value small cap universe the equity investment and the equity the ahead large midcap cap of

to pushed have of OPEC's income was on extension tax and low quality opportunity. but and opportunity its cuts most with Select amazing Westwood's we concept The in changes XX.X% clarity only a a strategy, high well-researched MLPs did to well now resonated in its the turnover invested potential return also has year first first million space and beating had income year close year The MLP benchmark production by end. year, strategy with of an clients efficient higher strategy tax X.X%. of strategies in multi-asset XXX taxable for on Our particularly of challenged existence. the of Equity, and worldwide their well,

index. strategy global our rose emerging up our strategy midcap XX%, XX%. Our MLP markets the equity meeting posted and relative strategies benchmark nearly to was XX% rose Alerian emerging Internationally, performance, MLP market over

While the keep impressive, unable were absolute lower the we pace to quality, indices. were momentum driven returns with

with companies However, earnings volatility Thomson reward unjustified multiples high lofty for who've the global index. of the or sensitivity names index’s part ahead beating double positioned and just equity sub-XX% for growth in we number. punish year begin in feel the being the is changes price as higher and finished deliver our of continues to strategy helped only and markets a fund benchmark. US to team’s The their long overweight delta of these we portion the starts have Strong year, securities markets the returns, the quality convertibles, global sensitive index. to that Reuters good finish are year this well capture convertible equity companies and XXXX returns digit to market relative to global Delta those the surging strength In a to market enjoyed benchmark, equity

XXXX for alternative of neutral these our Extremely remained the goals. resilient our low volatility price down slightly in was strategy, fund, market fourth the the quarter, gains, levels strongly line the posted but funds opportunities with absolute limited returns finished but in positive of Our income and and headwinds. in year internal offered for also liquid face

in of due options the convertible and experienced are We benefit to well likely the to embedded positioned we're in continue that an believe low bonds to levels unprecedented that volatility we've mispriced increase volatility. from

to downside high with the expect XXXX. we and increase to selected expected US focus stretched quality an macroeconomic to prospects strong continues remains our of continues peak showing rate be globe, earnings as Looking on valuations. Despite areas volatility a picture in Globally, the constructive growth in protection. across businesses identifying with undervalued backdrop policy the and economic monetary in the tighten are ahead,

processes. and meant volatility for market correction a are controls risk investment have increased throughout managers Our our as prepared portfolio prevalent

and thank service days client client pleased a like we're to and report XX% XXX on I'd investment overall, to the now professionals rate our institutional a service, retention serving the road XXXX for many all in Turning minute over clients. and take to sales to

We best your business in work people sincerely and the of appreciated. have the is some

finished grow busy, expand members through awareness long-only kept mandate continues with now the XXXX, return billion, In year end our the fund. the around subdelegation funds other for had manage Aviva Small absolute and year world. largest as and to recently team to and between fourth and force X.X our institutional we clients. Our the over sales Aviva X.X years very raising flows inflows continues have their strategies, of into and cap global under small split strong performance our the team several a of $XXX as in well in billion has we nearly million Small quarter management. cap funded the experienced existing with assets large positive cap. from cap mandate

strategy assets large cap the client over inflows cap the saw grew Westwood at XX% large strategy a as and Our its during subadvisory large funds into their business, year. the in of primarily by the reallocated additional course

emerging mutual the related, to outflows did rebalancing some our several improve performance to Our redemption of emerging business, fund the were strategy again respect outflows of and our were after market to third while peers. outflows positive due rates its of year new strong and of our Five XX quarters fund experience positive some emerging while With saw continue funds flows. year-over-year our remain year had returns. our of flows, our straight fund and industry flows well of experienced straight of positive small markets ahead net cap its net market

January call, business this last closed strategic our The XX.X year. during on fourth wealth we to related million transaction price sale in our immaterial noted Omaha. XXXX. Bridges gain which in final we located of Omaha the in to and recognized purchase the XX Management, Investment front, quarter made XXX million resulted is an a approximated in Outflows officially As the book sell to private on of the decision

Our Omaha small business X% our represented and revenue. less overall of than was

of sub-advice clients allows more many preferred career partner to expects and years and for client for to good to provide be Bridges expect take all should existing transaction greater in continue end we result assets. which Westwood friendly. is will Omaha good than Bridges with Bridges staff The care to be organization, a larger Joining local part a the of opportunities our their The growth. X.X come. billion for is parties to

our the the Omaha, sale wealth Excluding the slightly positive. net of in flows were related outflows area private to

in Our both pick Houston Houston office see is activity Dallas. flooding the new third quarter returning following to to and and normal, development up business in begun we've a

digitize our impact Fabian has ahead. who lead the than yesterday has expanding we're excited business to entire tremendous array prospects our I with private support the offer three years. and for how the our firm are continue media. us promoted in for to will would westwoodgroup.com, us as shape the like of redesigned on to a which years, goals clients we visit we In We shareholders made our has and all Operating also take to congratulate to wealth to encourage Chief to closing, totally Officer. I'd was our Gomez been to see and forward, those customers better years next over few social less and support Fabian been services but

entirely fourth I best is for one recognized consecutive P&I to our our places to for and the the support be now other remarks. each we were as like CFO work would amazing over This in Kice, colleagues turn Finally, of my I'll to questions after note best and who do single due her that by industry our I’ll clients call their day. for Tiffany to very every the available year.

Tiffany Kice

in fourth was and current or everyone. revenues per we or to quarter per compared fourth compared $X.XX quarter. good million Fourth is the XXXX, fourth for in quarter. total The of afternoon, to we and X.X recorded related driven million impacting higher quarter by share due XX.X X.X the share. to X.X average that EPS incremental Brian by increase the XXXX. third year’s primarily tax XX.X XX.X income net primarily in prior assets $X.XX Thanks, management the year’s $X.XX quarter in million Today, decrease tax million under quarter diluted of a reported to expense the share prior was per negatively million The reform of million

legal prior in million or year's or third per earnings, X.X fourth $X.XX the was XX or in $X.XX XXXX. by offset million mentioned, metric, $X.XX of that compared per quarter share the share X.X driven per per to by a X the third share we the increase Fourth share and the expense quarter of an offset by total by impacted decrease third quarter or XXXX. higher was primarily $X.XX the partially income or costs, net compensation The of share in X.X Additionally, tax $X.XX incremental net million in was per previously million income million non-GAAP settlement recorded quarter. revenues. to quarter compared Economic in

to and the For Net expense in partially total settlement per and related was incremental per under XXXX. share, was $X.XX based XX.X X.X million or This million $X.XX tax and fiscal X.X metric, $X.XX deemed XXXX, XX.X of offset to subsidiary fiscal income million XXX.X current compared to resulted or a revenues million the XX% tax federal or income the XXXX. XXXX, compared an in compared impacting share earnings, to of XXX decrease the in management rate due revaluation non-GAAP of a income performance incremental million earnings third average share to advisory related of in in in for prior increase million fees. taxes recorded in assets tax both in the The Economic diluted total increases higher repatriation year the of as an primarily the XX was share corporate by result per EPS quarter million per XX% per year. our negatively of million tax or to share $X.XX mandatory $X.XX the revenues. primarily This expense XX.X legal charge deferred by in Canadian quarter effective rate. our for the from and the

business. billion XX.X and tax or footprint, significantly reform and expect assets of of assets billion change year management consisted the our of Firm-wide Given geographic to capital limited our do wealth XX.X we not at flexibility under assets strategy. of total, X.X assets and the billion institutional private of which XX% to end totaled outflows financial or billion is We the or XX% XX% X quarter million, primarily our fund billion of Omaha of the market of and the sale wealth mutual experienced X.X of net of for appreciation XXX related total. private total

quarter assets appreciation experienced of the million, XXXX. of For under XXXX, assets offset million we X.X inflows in third management by of advisement that billion, to net including partially market under XXX transitioned XXX from of outflows

continue Our us a million grow We XXX.X some at free investment which balance solid the expect foreign investments taxes. be to financial and with position continues cash approximately to debt be to and subject and cash in access do withholding our totaling sheet. very of [indiscernible] gives and cash, million to changes year-end in tax may XX local to

to continue opportunities evaluate will to shareholder We increase value.

the have XXXX by rate currently on evaluating partially fiscal the preliminarily executive corporate on tax results, The the fiscal XX%. offset to is rate, we but are limitations impact XX% compensation. We in XXXX tax positively deduction legislation based of understanding, effective range our in to on current a by our be calculated impacted of the reduction rate

may on at guidance may a estimates arise later additional change based Our interpretations in changes that date. regulatory or

record your on a questions XXXX annualized dividend our term This quarter XXXX up of close. approved of review are payable dividend a product our pleased March and at announce X, thank now. longer earnings April open revenue, an yesterday's that encourage our dividends. and to per quarterly of yield in presentation fiscal X.X% on cash X, you our in price. trends the We and to $X.XX closing our That fourth lines stockholders for reflecting as Board prepared brings as share, We and business, on XXXX. we've to of comments to highlights well company discussion to represents of Directors our the We website, investor we’ll development posted interest you

Operator

Gabelli. of our first And Mac with Instructions] comes the Sykes from line [Operator question

Mac Sykes

an provide of positive may offerings off your year as you you of in then areas may a looking investment ’XX? signs ’XX? follow-up, to distribution looking where update any you be And on expand could to specific some accelerate be Brian, next in that

Brian Casey

Sure.

hired to a about is I'm flexible fund as have. at comingled seasoned fund has bit little a ducks called we that rolling So very a that five is is portfolio income we excited his generate that and who somebody a to product X. a a this this new We started as In he out we'll experienced person at who our talk and and you the product later It's was designed more to manager the trust get company in firm January we product, income. that on year life, prior his predecessor row. a be star all a

about excited that. we're So

go private a advice have really from sale here we and of that, planner distribution, need side that and that as time. of will Texas enhance thinking to that one continue lot people Houston growth couple hired a as There's economic in about and of financial lots recently have great our but we planning think we evolve that to lot we far of As increased model I in we a more in state of is have help. Dallas can the lots ways with more over spent model the our and there's time on wealth and a product nuances shift of that a

it's beyond the tackling. grow. normal and So expect to And to that just that, continue blocking we

We great goal institutional does their to job that have have after this to go a and last a an try exceeded that year. goal We're it. sales year group higher going

Mac Sykes

efforts high what might as then mentioned -- if the some was initiative digitize you clients on more well on mean maybe provide point, and the And could as this the just maybe at just I level shareholders. to curious, you detail

Brian Casey

Sure.

of phone. look the the able an millennials and world XX% of to want service. of giving access want or in and the statement years workforce different level email. be say used to out most But today when that the would the what world at a they by platforms in seven going be and to are use as all we've a their demand I woefully really in So, for been don't things of old to much that under They we to we They wait mail them. we realize are are are platforms industry, and of technology invested we clients through

so in statement it customize people will, have our and I we're where that environment, delivered systems where platform So the to can that only all our way a is are our to able that very to to reporting, user and that of change a profound in our value, are really another create, a a all trust to one information performance diligently and ultimately a able be data digital but working really get not operations, investment in it. we fact think, is point the will customize speaking

So that's what digitization. by I'm talking about

our If we've you website, our look redone completely at website.

are media. the better of a think look now able feel, importantly, and guts but social much to has I it it support more

So pieces social out able to think the that paper white various a is or through of either valuable, people thought as the leadership something we outlets. we that media put out hands put we're in

Operator

would And Casey call I'm questions no turn this showing at [Operator the Instructions] Mr. for now remarks. further I closing time. back to to Brian like

Brian Casey

everybody thanks the a it I buying day to in good but market a to looks a challenging say for listen. Well, today, it's had, like We minute taking opportunity. as everyone,

a here. Thanks We have for being afternoon. you being a appreciate shareholder. great So

Operator

great Ladies program and conference. all disconnect. gentlemen, you have day. conclude does a Everyone, may the participating today's thank in you This and for