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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 Q2 2018 Westwood Holdings Group Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following managements prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. pleasure the my Ms. over now is to conference hand to It Gerron, Compliance Chief Counsel Julie and Officer. General

Julie Gerron

forward-looking following you. different by Thank Good will are The XXXX factors, known and materially and may afternoon our forward-looking unknown forward-looking include subject the discussion risks, to to second be and cause contemplated quarter conference actual from earnings to statements. those statements These statements. other uncertainties welcome which call. results

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

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

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

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

Brian Casey

in on into over exposed start effects potential year. deeper Good dominated past to fifth in purchases roar by some dive to comments Value were rates time with path for and the Central second by SmallCap investment trade the the Meanwhile, Reserve investment to a the will and larger U.S., taking wars the increase call. to Federal business. to market afternoon, European index rates their Bank's the posting In then I The with companies higher largest headlines and thanks quarter its taper companies. on and listen years. another performance next concern had internationally plans to adverse asset earnings also the our with environment and the digest SmallCap ahead, gain the X continue our

net by be the the companies one impact is that for losers. driven the investing from market monetary expect an and We with these shift clear and actions all higher past that policy to will a favorable environment X landscape a towards This lifts management. likely active winners in of years more of volatility to lead

our the Given behind these dynamics, products Small larger were our did while MidCap quarter. U.S. during products Value well, and

quarter quarter a LargeCap year, in fifth beat and XX have third year-to-date in beat Our product Value benchmark rankings is top which year. remains year-to-date the group in and its AllCap peer since remains continues of to row the peer and first Concentrated top and benchmark the strong its decile the years for its quartile percentile since Value its over the in sixth is peer in rankings over for inception. top primary LargeCap, past ago. inception the

in the basis continues the performance a the dynamics the inception. quarter. SMidCap and Small SMidCap top rankings for third Our of peer but top given in quarter, year-to-date quartile relative was improve are strategy to and on since Midcap behind

X- produced top in quartile solidly fell the Value and in ahead and its year-to-date remains for of periods. remain short years, rankings SmallCap returns which strong product, X-year its benchmark Our quarter. several has but year-to-date Overall, for the

in Markets quartile faced and space, for its pressure energy products, saw in growth Income rankings Emerging our our so large client. past a with strategy of amongst double-digit XXXX. the in solidly consciously in its time ranks we the MLP-related long-tenured saw decile the mutual in Opportunity from top the X We're benefited the China for rebounded year-to-date. strategy space periods, benchmark and the in strategies MLP declines far the fee all and has cautious also affected quarter. Multi-Asset performance produced is Income market. funds' while The MLP underweight. markets ahead year in by performance performance positive In with benchmark, earn equity to over the quarter peers. negatively well versus pleased gains X, global institutional strongly yet and concerns the remain impact share inclusion strategic quarter A well its strongly the Opportunity quarter, our pleased another of and Worldwide we're since-inception over especially and and peers and of positive SmallCap emerging the the returns For in top The in

stock speculative, low-quality, As records and remain from quality drives we time, towards companies away long-term high-quality always process our track momentum-driven investors. us wins, and we bottom-up that successful pickers, Over patient, found companies. with

outperform for if For convertibles the that supportive is value believe will options asset convertible bonds movements companies pay backdrop prices benefit in to times. and volatile the from in the we will of good Increased eventually but more returns our class. - become larger. as sustained more high-quality price Convertibles, In quarter, be volatility Global embedded we Equities, the bonds willing increase Markets valuable the will generating become for economic that for equity volatility and lagged benchmarks as a better option Emerging more economic for Global remain convertible and uncertain well-researched, of added portfolio investors

Our that quarter long strategy quarter. only convertible returns the with produced positive fell against during benchmark bond a strong absolute a

and quarter rankings. For has peer it top quartile year-to-date, the

fund portion remains and duration in yield product increased only of Income Meanwhile, susceptible to rates. volatility from the not Neutral but benefit less to in shorter increases rise is Market also a a the Our rates. has positioned book interest

economic the quality landscape. move Despite global strong investment large remain many the on and companies of in environment, our mispriced. remain view just remain the of has ahead, is QX in seen higher beginning risks We a businesses investing strong uptick even earnings small market teams that Looking sustained identifying to focused the volatility. in and that a from volatility the

focused previous quarters, are inevitable the whenever and managers in on increased are and As we risk it control, portfolio our for correction prepared volatility arrives. market mentioned

service. to now sales and Turning client

as very his most I'm to and Funds welcome institutional our Head pleased service the front, He at institutional Institutional the Sales. role and responsible our us International in marketing of Institutional New York. recently, of at here Steve In sales Paddon managing Head for On role he Oppenheimer from, of joins new Westwood, is teams. sales,

Westwood aspects evaluating with on us in business As very he knowledge effort selling infrastructure Steve and all Westwood, support new ramps the We're up him welcome and our business of increase board have his an direct to him efforts. is to excited of family. to

record contributing years, and over the challenged outflows SMidCap outflows overall The few the did of our related three experience quarter. concentrated earlier, that. last commented our were have large I for product's the bulk redemptions to outflows been client in we As to

appreciative While our clients EM to they're and in feel strategy has proactive visiting been continue be favor the well-researched recently, out portfolios. bring approach to we we thoughtful, of of their managing

differentiated time records profile for We strategies. companies. one Value class and have and strong strategies, sustainable, over to an firms, LargeCap a next Value, scheduled and consulting of Value the we're asset track the of campaign and on week larger high-quality domestic for with the importance draw SmallCap have active In Concentrated our working the the owning of fit relative LargeCap demand to EM on-site attractiveness attention

see and in these are with proactive products strong areas. we these building interest from consultants prospects as We campaigns

management, and positive with more sales under to Also sub-advisory last provide high-profile experience Westwood our of that for mentioned quarter. report selected feel has assets Global to inflows the strategy sub-advisory In to X% our global consulting U.S. team our and in sub-advisory by business, their continue look of in to fund during selection with sales their saw Similar but Aviva we they the we our by build fund. our our for fund participate we're quarter, Convertible the and confidence our leading quarter as a strategies overall represents funds consider rates services. pleased have in moderate Aviva into space, positive inflow mandate We our into the forward prior than to We're brand had out selected funds second Morningstar industry, view about growing in our and force and were and additional fund quarter a our strategic gross mutual to SmallCap our mutual positive we them net strategy to to outflow partnership the SmallCap we now years. a we report improved that firm pleased SmallCap overall to vote flows in its mutual inflows the equity that firm and the industry. significant as year-to-date. We team. relative

added same flagship diversification Fund way reached Neutral Our Opportunity milestones. Income both Fund, with of Opportunity Worldwide the run and X-year securities. Market is global Income our as the Worldwide benefit Income Opportunity Funds

excited strong Our peer performance Fund the differentiated may see over last with is years. go good a ranking Morningstar over ahead. in Market We're where to the both years Income Neutral and X

On activity. development and Houston Wealth is on through increasing business pace has to front, plan, the momentum exceed team summer Private the our with continued

beginning we're positive our clients very resonates services In prospects, share our to year. over planning, balance expanded holistic well money Dallas and encompasses business, believes approach see clients and of the Houston excited array Private is accomplish what companies team with Wealth will team the financial show our management the market of messaging results. they're with This taking Houston to Our to larger the from that services. estate in and planning

complex Our new assist to be clients our planning is to and existing with referrals creating ability for to financial proving helpful pipeline.

significant compliance our technology we in Bloomberg, basic process We infrastructure front, to and On we our our - platform. our platforms digital migrated build infrastructure a this we trading began Concurrently to out cloud. the continue to to improvements when true platform. multicurrency a office front XXXX, in with Multi-Asset, moved XXXX the

upgrading backbone. a our accounting portfolio fully currently are institutional digital system to We

channels. next We our digital providing digital with goal across all distribution to years, will access all couple to of our out seamless over of the continue clients our platform the build

of in As We to see relationship platform platform. we investment and our institutional as you out currently to accounting our a our build million look our $X us who expanding a is can we helping XX-Q, and client leading-edge made experience. forward strongly InvestCloud, digital together digital portfolio out in believe partner, strategic our disclosures digital from InvestCloud build in

active process, Principles more We've excess in also pleased as Being of incorporating been a we've Lastly, billion traded investments. signatory Responsible of we active for responsibility approach Nations socially our a I'm describes Investment. always but manage business in and publicly run in currently announce company. than the our we $X investing investing our responsible that to to United become how

million the corporate dividend to just my over commitment possible We the values. grown XXX. excellence and in sheet the of and public completed in and which produced would've investments a XX clients operate we ahead without on returns None debt-free focus our Our as talented to and long-term ethical shown conduct core company, of every principles; giving in the governance; pleased on by years communities S&P balance back cash shareholders. XXXX a been accumulated of to and transparency; year, to life our and colleagues the we're confidence Russell $XXX is have this

forward, and look differentiated that we passive being starts are with believe index. performance, for we As that a clients looking than different

We the over discuss will a have turn financial future. a we investment of have CFO, our it today in adhere clients provide disciplined results. range our continue to the Tiffany satisfy now and products to process to those we Kice, I'll to to and will

Tiffany Kice

second of $XX.X revenues the Thanks, the million compared Today total and and prior reported afternoon, Brian, second $XX.X $XX.X quarter XXXX. million in of of year quarter. higher performance-based partially to quarter for good the in Omaha-based fees The everyone. million quarter of business, we the sale of first to primarily offset and the earned outflows in due net current component decreases our by were Private Wealth the XXXX

continue U.S. lower partially long-term offset share in and net Wealth currency or asset-based foreign in $X due benefits increase Second Private quarter and quarter. a to $X.XX our were was second our sale information fees year gains; of short technology invest higher by of infrastructure. costs implementation reductions compensation; fees; performance-based our rate compared in we income reductions Omaha-based or benefited million per technology in per These in component compensation the transaction $X.X to tax corporate following quarter from share lower The tax prior and current business; reform. an income as higher to million $X.XX incentive and the

in the the of year market to $X.X expenses with the and second of income of XXXX. under of Second matching the private $X.XX while wealth of earnings, assets Private to $XX.X was a prior $X remaining billion, of payroll quarter the gain. business We experienced bonuses share $XX.X assets quarter $XX.X of of per million. the net total first flat $X.XX quarter, billion Economic per billion non-GAAP outflows and per quarter of our quarter-end a currency $X.XX the share XX% benefited a XXXX. or and tax sale and $XX.X quarter mutual asset-based million million million plan $X.X ongoing and $XX.X reduction first of employee depreciation compared on first with $X.X operations cash the foreign in related of billion per of fund and assets in Firm-wide or a from higher outflows quarter XXXX total. $XX X.XX fees essentially the share or institutional XX% compensation The net of quarter metric, paid first share assets million the benefited transaction Wealth from as or total, benefit seasonal related or was at current larger in consisted incremental of result management of XX% or billion or totaled Omaha-based to

Our be and million $XXX.X a solid, with debt-free to end investments at financial quarter sheet. continues cash totaling very and balance position

expect legislation to updates rate We on we XX%. tax be of and the earnings to last the impact effective in since no of call, range XX% our fiscal tax to XXXX have continue significant our

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

Operator

you. Thank question line Sykes our come [Operator with will Instructions] of from Gabelli. And first Mac

line now Your open. is

Mac Sykes

of how Brian, reach with sub-advisory talk about to could the afternoon. distribution Morningstar you maybe this marketing? committee, respect Good it's for this products,

Brian Casey

-- Morningstar discussion the to be is and It's a And each they Sure. is attempting was of coming. put to that do a started different time There was of provide a boxes various year. really in It in what together that long believe number what lot style of last best-of-breed funds.

to So and and it advisers available will others. to be available plans XXX(k)

broad pretty a wide audience. got it's So and

Mac Sykes

investment And noticed seeds the then like looks was there? million change quarter-over-quarter. $XX there it I What about or... more Tiffany, the portfolio went Is up

Tiffany Kice

for mean the you investment… million InvestCloud $X the Oh,

Mac Sykes

million I was sheet No. to investment Is cash The movement $XX like from in investments. bucket million. security balance Looks really offline. the moved from take -- it that to the $XX can

Tiffany Kice

no, no. No,

not don't I look. -- a really is that changed. two significantly take the the just been me of hasn't know combination any there's Let --

Mac Sykes

Okay, great.

Tiffany Kice

quarter, And of all incentive our keep in pay we mind comp in bonuses. first

Mac Sykes

Thank Okay. you.

Brian Casey

there other questions? Are Mac. any Thanks, Okay.

Operator

further time. this at no questions showing I'm

Brian Casey

you the much Okay. all to call. very thank Great. listening for Well,

follow-up If you being call a for questions, Westwood myself shareholder. directly. either Tiffany have any or please Thanks

Operator

Ladies conference. and thank our your does today's on gentlemen, day.+ program, a This we for wonderful have may participation all you disconnect. and Everybody, conclude