WHG Westwood

Julie Gerron General Counsel and Chief Compliance Officer
Brian Casey President and Chief Executive Officer
Terry Forbes Chief Financial Officer
Mac Sykes Gabelli
Call transcript
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Good day, ladies and gentlemen. And welcome to the Fourth Quarter 2018 Westwood Holdings Group Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. reminder call a being As Instructions] this is conference recorded. [Operator your now today like would host to I introduce for Ms. Julie Gerron, Officer. Compliance General Counsel and Chief Ma’am you may begin.

Julie Gerron

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

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

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

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

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

Brian Casey

investing moderating thanks to trade of assets, fears and events, susceptible as for ratifying new an landscape bouts markets. performance that bifurcated including the more China, believe other the these on money investment years. investment year, environment actions XXX punished are identified the like the asset and the well the XX, the outcomes conclusion policy Risk does will invest such managers, and every for listen tensions prevail. investigation, March in a a and XXX deadline shift economic to asset posted dive saw with I’ll comments some data more remain into into been we’ve way disruptive where moved decline. winners fed and mistake, our equities, In USMCA volatility more time our had classes asymmetric afternoon, and report, loss, one potentially as lines for last quarters Good mulling the volatility, a years. worst class up due benefits distraction market the to to to the active all U.S., worst call. S&P which higher of This performance and to with sharply taking a will linger, with XX we to steep XX we the as the fourth the risk quarter in the events expectation years. markets with present Congress net in inevitably the start reward/risk Brexit than landscape earnings continue upcoming business. lower of Mueller losers deeper trade fears a Ultimately, to then and securities finally impact Nearly provides a and and late-cycle towards Equities managed China, and tipped as of posted continued mispriced be across

immune strategies. larger doing Our market our cap our market than better with Value the were to products smaller-cap U.S. pressures not strategies

very benchmark. benchmark XXX five XXX fifth the LargeCap relative time as renamed three of Our a LargeCap rankings the in XXXX year the are year peer of LargeCap LargeCap, points quarter. straight Value primary finished The is the the in Russell LargeCap product periods. Concentrated Value, top It ahead top-quartile among outperformed and XXXX percentile strong strategy as with first over eighth basis inception Select, completed completing Russell for to peers peers. its year top-quartile since with after year since the rankings points outperformance which against year strong result benchmark, year inception with the decile another basis the Value recently its its year. XXXX of Select’s well the strong and last for peer we for

last the marketing prospects development and a quarter, presentation for new about is our mentioned excited new As growth, materials we’re XXXX. in team product business for push big developing and

Our class for year. the SMid SMidCap but continues Value globally. its strategy benchmark the to Russell ahead quarter was be slightly XXXX asset believe for better than We the underowned nicely

of to strong But in very grow X% improvement. and again rankings Our long-term have the the as the the believe strategy at years rankings ahead performance relative this opportunity recognize we peers, since inception need are top we midterm we improves.

produced earlier the and WHGIX, year U.S. four the the subadvise SmallCap periods. Our their SmallCap stars. MorningStar years the SmallCap’s products volatility and was the for It profiles against performance the the was Income over XX% half quarter. fourth our and for Index. increased opportunity to for Fund. and for years, recently lower XXXX Russell over seven-year this their of launched the Westwood Value newly had five downdraft as decile selected our sleeve and program XXXX validated income-oriented positive the long-term and for returns a strategy, record in MorningStar in time market’s quarter year captured quartile mutual The the on in strong to past rating top only several in has behind trailing ranked was fund, which the of since-inception three top top quarter Equity impact

current in December. line a to Multi-Asset and recently to fund was invest value, income We a launched a newest continue Flexible our strategy, asset our and up platform mutual launched to product our fill Multi-Asset stable X% Income. out with targets Flexible in X% Income

fourth strategy strong its Flexible three second percentile has among track in and finished a the the peers in Our Income year the year record percentile.

built of professional risk now judgment. skill years, risk the a tailored array an we Over an is return area spectrum clients value were and profile. the to and series and client’s across have products have of products a specific Multi-Asset

to our against difficult our area collaborative clients fixed Convertibles a is Multi-Asset we’re Flexible importantly, built which group. and record, global and us Adrian vast a has from announce More new worked strategies and having products, includes He for income managers to industry week the strategic and addition competitive among reputation of pleased and launching Income track an with who will all pressures to pitching index on Westwood Opportunity teams growth active and moat important building the Adrian comes Global area from our face in group, an Multi-Asset well provides is lead as last Income it joined impressive developing, us, a funds. Amundi, index experience the to direction, all defining while Helfert, and of as consultants. and lead Multi-Asset investment great strategies.

diversified the Income taking Markets challenging to space, will quarter and a the provide Opportunity level in to desired XXs; year. and income. now We are history with next a for our to and successful a environment in product Flexible Enhanced on both help franchise, and mature Westwood present for finally, Emerging Trust at launched for the having and a portfolios clients balance outcomes as flag Westwood; continued deliver I the Income believe XXs; investors will display started us Multi-Asset judgment skill ship value. clients building the built in Balanced pioneer Multi-Asset the launching that both

Our benchmarks Market against well high-quality and our to than peers. perform bias helped us Emerging to lose the less

improve longer-term focused to and The constructing team Markets hard year on working are put that together another identifying good our rankings. thoughtfully Emerging process. and portfolios to our high-quality We disciplined is companies adhere

alpha technology of was in XXXX Our benchmark-heavy markets avoidance an important these the of source Chinese heavily crowded companies, trades, were declining. such as when

volatility trade attention slowing our portion attributes surrounding Convertibles, equity compelling, the extremely and We unearthed declines convertible is, the well prospect we attractive a and equities growth strategies. markets of until opportunities, only to market focused cease. been valuations and that and environment Emerging array their expect some will credit by but on some the and domestic concerns on global Markets believe last an years tariffs rough increased the few of Global capturing edge primary potential. The performed superior of indices. growth equity of In they remain on growth of outperformed That are given have has compared volatility China’s

benchmark year universe. behind in rankings the fourth the its enjoyed period its benchmark, half The somewhat half. in the rankings but its top remained convertible solid the of with Our to a global was bond peer quarter long-only during strategy relative top overall, peer

Neutral Our Income peer U.S. was year with strategy Market convertible standout and the asset asset all This relatively flat classes the strongly basis bond long-only outperformed year benchmark down quarter was amongst worst the its over a as year a and the was ranking. class top-decile in performer given century. ranking for only finished points performance in XX performance year. exceptional, last for it a

times securities fund credit now from welcome with the to high-equity should today investment persistent, from will which ahead, its widening strategy a addition value as benefit is and volatility look As Multi-Asset portfolio. we the It a sales. a Shifting diversifying that when to like positions and yield-orient low-correlation, arbitrage risk-averse is highest benefit positioned demonstrates spreads.

history begun more LargeCap in efficient service structure, to and Westwood data continued sales out roll Select. a Intermediary add retail focus and a The who several SmallCap distribution and focus infrastructure pricing recently a have in Under to intermediary sales and sales to are will areas Sales, be We support our sales has analytics utilize and joins recognize Steele, key firms. successful proactive. campaign our to an an Select team institutional and of LargeCap new We hired sales, our new with for also structure Harvey shifting our of at investing distribution innovative we building XXXX. teams. strategies make of Head and process new to

year. of part excited to see the of the We’re in the teams sales latter our impact

were mandate strategy billion have has SmallCap state the launched Fund. the MorningStar worth Equity fund and yet $XXX fund new subadvise Our which Services. portion And SmallCap U.S. selected of terminations volatile and is positioned equity consultant we to the not SMidCap passive have fund, a near-term sleeve see we and as environment has some but won further and cannot were funded a reallocation were of gauge a to previously the to multi-managed Net recently to mentioned, well and quarter anticipated available last a our year. that sale newly reach institutional. complex pleased but $X.X we’re fourth we fund in quarter’s and of pension the primarily optimistic flows in We million, multi-strategy, quarter, next outflows account as we the clients accounts losing fourth fund mentioned improved the years. strategies a to to for our Near-term both $XXX new for large in approximately for disappointed call MorningStar in been EM Investment couple this This large this were funded. performance strategies. yet We we to of could in of already these this sub-advising institutional for flows a few million new strategies, additional The fund with due investment the feel year.

added our the contribution business and Opportunity and to have team, mainly The new, late Peter we’re of in our fund forward last looking We to strategy. sales outflows started who a was our institutional Income mutual the professional sales strong McCarthy, balance year, to institutional effort. in our

We to that flows increased stars four recent result are stabilization this year. will in hopeful the of

team a a the increasing retention decade. XX%. by also job rate great for Wealth to did Houston service our in client new had Private On client over year the business of the front, best They

down performed during well respectable Select of just Our strategy office the posted and out quarter. Equity Houston sell-off ratio fourth XX% a managed the the capture of of

strategy account Assets taxable are a nearly the finding and base. be million $XXX we our now to reached strategy popular in have across it

to the have rights have of events secured We talk this exclusive which planned Westwood naming Talk series. and Performing year the be several called series, Art Arts in will Houston Society

ever have in Dallas exceed their build prospective is coming big banks, the at hire feel business our January. array been. service relationships Houston into new new new and In potential that several relationship is the the and model high-end high-touch strong size. year increasing pipeline Most has we Private The We expanded of continue are have expectations. and with our of of both customers Wealth will we to our volume higher than business, office we pipeline is opportunistically the started our momentum and optimistic in like services, to good expense it and of

trusted of interest. attract do the experience, to continue posted variety focus be events to personalizing our a Westwood client focus clients’ to must a align viewed on aspects new and area and their younger We all across of that, of an that holistic we financial advisor primary we life. as base, with A indispensable, and is

partner We private portion simple will all Clients our are services, applications. platform, planning, asset through will a provide or help building a digital ultimate our capabilities goal, banking a friction-free and adding digital We of that equity and a services platform financial focusing include management, use these which client create easy-to-use truly estate partner, wrapped that and in to or unique state-of-the-art experience complex solutions using can planning life. on from us InvestCloud. Westwood for technology a reach our a believe bank,

disappointed been are we we’ve and good our standing While with last year, about going. where feel outflows still are we we not

managed We are our diligently as to maintain hold our best they meeting actively and head-on working performance across their and the investment are challenges ensure improve ideas teams strategies.

new institutional hires thoughtfully in intermediary We both sales. are building teams our and distribution out with

Select pricing more out LargeCap in to capital years the management. human difficult It firms investments disrupted technology, is to more call high-quality our many to innovative the to will be make to in now efficient and likely and Terry Forbes, using will introducing world our have to of and firms and I We’re more us meet help ahead. smaller data the CFO. for opportunities infrastructure over compliance, asset we’re top-performing We we be the turn with we helpful roll prospecting, product. our and compete analytics become partner, in believe a to can

Terry Forbes

earnings, $X.X fourth lower for quarter of current-quarter recorded the fourth Private prior share with share depreciation costs business. of prior $X.XX quarter Fourth with in our the and $X.X sale fourth transaction from fourth for or a share transaction of benefited the quarter quarter incurred million $X.XX The non-GAAP The as $X.X million to tax lower in federal afternoon, quarter under net per the and Economic current assets was due Fourth from to $X.XX share income quarter third XXXX. Thanks, of to $X.X offset year resulting net decrease or good million a Economic third also due was employee quarter Brian, the share million per XXXX to $X.XX $X.X result per foreign management. a in of prior reform in in assets year currency compared or rate. third flat was and the lower million metric, per the management, revenues. quarter compensation Today, quarter, currency in $XX.X primarily quarter $X.X reported compared $X.X increase million to lower of quarter. total decrease $X.XX and $XX.X foreign decrease prior gains, incremental average was $XX.X gains or everyone. of or the of lower the the expense total earnings flat outflows, a the we of per revenues of in coupled expense year’s The million at component million tax income the compared million the quarter to Wealth by million under from current from The net current the tax Omaha-based the and versus in $X.XX quarter. XXXX. compensation year’s per related quarter share fourth XXXX. average prior was market

of compensation benefited tax income $X.XX of currency decrease transaction year. partially current to share fiscal advisory offset decrease under $XX.X well legal the million a gains, million that per expense as the assets or year. million earnings, management billion and of under incurred year, XX% and of per or or the was rate billion a Firm-wide, million quarter-end $XX.X lower management non-GAAP the from due fees private of current foreign in million XXXX $XXX.X onetime $X.X settlement $X.XX total, assets in as For or in or Wealth of share at The increase $X.XX Economic not lower The federal by the billion and compared was $X.X current of $X.XX compared per a to assets $XXX.X $XX.X of compared $XX.X XXXX. totaled million $XX to share during Net in assets revenues the $X.X employee XXXX, was institutional in fund expense per the XXXX. consisted million to in mutual $X average a XX% or of performance-based assets in XX% total XXXX. in share metric, earned prior billion total. year total or

of remaining Over ongoing billion. Omaha-based the depreciation with of billion, related outflows $X.X net sale the year, to $X.X net of Wealth the we experienced and operations our related to Private business our outflows market

totaling product be a solid that quarter-end approved short-term and That Our payable Board cash price represents X. we million an open a interest prepared encourage and XXXX, annualized trends of as at website highlights to investor of financial Directors to fourth continues I’m dividend you presentation a of company, discussion well quarterly very with our debt-free revenues, X.X% XXXX on your on have business, on review XXXX. to sheet. cash to you on $XXX announce April questions. fiscal our reflecting of development to and brings in a investments February lines $X.XX posted dividend and position We to longer-term earnings balance X, for close. comments stockholders our per thank yield of of X, March This share our dividends. as the and as our quarter We up we’ll closing and our record and the happy


Gabelli. Our comes first from Instructions] Sykes question Mac with [Operator

now line open. is Your

Mac Sykes

afternoon Good everyone.

back of just Can currently about as questions do which on to you’re the next expand I channels And the then performance, mainly most around which traction? have two see you channels product? that the So you with hope product. Select in talk your year you distribution

Brian Casey

have – we could products. there’s name confusing be actually the Select Well, because two Okay.

Select a our that a our Houston tax-efficient of the designed portfolio. and And and low-turnover, of individuals, office. product out that’s taxable product, is one is is for products So managed high-quality, is it it

is of known version formerly Concentrated Select second our products. The as LargeCap

had the top time, it The garage have product. results the there that that in roll LargeCap spectacular period in have the we’re alongside out. to years, last percentile traditional incubating We for and excited five-year of our five been over

structure currently. sensible type a will in is we’ll intend be and call will do is to not Where channels out, roll So foremost, it shortly. first announce any of be it we will we with which what – able really here pricing, that that we performance-based-fee

you’ll more next on during information a weeks. website working white and paper, see We’re our on the few

intend managed the also that group We his starts introduce building into to to get effort. rolling and intermediary our channel accounts Harvey sales as and

Mac Sykes

scale, you you Okay. And in to mean, enhanced may further performance, on get to that on I terms aspect, in bring that order delivery, table that we of to terms other how turn technology, about should the helpful. to then aspects certainly color So any intermediary would penetration model of be channel satisfy think etcetera? but marketing, maybe in need

Brian Casey

that country a I somebody they up prospecting effort. help intermediary using efficient analytics Harvey grand but been of with to effort. think, has a sales around to bring intends only connections been the of more here more you places add data new, in previously. have He out be tend vision to four our really, you anytime he couple help build wholesalers months, has the have us not at and to And to

able a have is see year, what broader going the to products. over build much marketing he should in our to So terms effort of and we to be we’re excited next

Mac Sykes

Or quarter. just it in the balance some of of back may being think that the And consistent quarter-over-quarter. employees? Okay. grants on cash you that the out coming that saw balance And last allocation. potential as like capital the I kind of new looks the some bought we to shares stayed to be question opportunistic? Should then

Brian Casey

the when Well, questions. criticized And fourth always background. always debt, debt I straight ticking guess, the penny standpoint. cash, very times Yes. historically never it’s the to have in roaring think the conservative it’s I been we’ve like our market a two clock had so not I conservative. been is over nice would years ahead. been view quarter, at we’ve a And that We’ve of

far back amount, As in comp did quarter’s will accrued as year of accrual pull that quarter of meaningful February throughout the we’ve – a out what���s earnings. couple that’s so weeks. our comp by a We fourth this in and here part comp, in the pay our in

Mac Sykes

Thank much. very Great. you

Brian Casey

any line? Thanks questions for Mac. other Are question, there on


questions to And am Instructions] showing any I not for the like this further Brian at would now any time. Casey turn further remarks. to over [Operator I back call

Brian Casey

great. Okay, for your – listening today. thank for Well, call to you the

with further or website any at have Terry or to questions, feel you follow free please so me visit much. up our If Thanks


today’s gentlemen, Everyone, today’s and in program, conference. This for Ladies day. you may all concludes and disconnect. a participating thank wonderful you have