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WHG Westwood

Participants
Julie Gerron General Counsel
Brian Casey President and Chief Executive Officer
Terry Forbes Chief Financial Officer
Mac Sykes Gabelli
Call transcript
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Operator

Good day, ladies and gentlemen and welcome to the Westwood Holdings Group First Quarter 2019 Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. At this time, I would like to turn the call over to your host, Julie Gerron, General Counsel. Please go ahead.

Julie Gerron

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

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

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

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

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

Brian Casey

Good afternoon to earnings to time taking and for quarter first thank the call. our listen you

the of risk the quarter investment one single quarters with always, I’ll remained moderate volatility. start parts similar well. of years on the to best posted But dovish by XXX last inverted, assets bears to continued quarter’s the decline as last which and be It and trade fueled a quarter. the and flattened, still a fourth steep the a The with in moderating GDP first S&P comments on XX was the watching. market to yield the more reversed best growth optimism are quarter, like Fed deal in XX years. susceptible snapback of has with environments to then saw about previous China and As a in risk finish bouts our positive. we curve teams on but comments appears U.S., In equities business. from concerns Volatility and some the market’s fear and

and remember could potential like for to and While events appeared other that important the Mueller to disrupt contained these it moment, Brexit markets. is events the be still market-moving report

identify look tailwinds dispersion the returns managers one will as continue impact towards active we We continue to losers. headwinds in that to clearly allows various individual investing the we and believe differently. and stocks business increasing cycle move for amongst each winners later and business that move Ultimately, more to to landscape

products positive markets SmallCap from cap value equity All larger benefited U.S. rally. posted the Our with outperforming absolute products. returns our

trailing which periods on delivered X-year SmallCap and strategy, since just and its quartile points the ranks over of XXXX in value top SmallCap time over and XXX the inception outperformance completed top in XXth the in the year, against quarter. first periods. Our basis X-year decile Russell X- the

funded monitor opportunities excited are We of to this strategy. remaining XXXX recently quarter about investment the capacity continue the and SmallCap new We a client product. carefully for during in

under-owned Russell have class performance the highly ranks our in the its the inception. benchmark XXXX grow improve. better asset value years quarter. believe since strategy SMidCap to Our than near-term we We The and product opportunity strategy ahead globally part also efficient SMid is market the finished will continues this to in of less is the if

the remains series Russell product, quarters, Its posting beating Value X trailing underperformed top past XXXX a years over benchmark in the after of quartile. X and value. Our rankings LargeCap its

allows LargeCap of across the the strong over industry. percentile the Sensible of and us years first in asset is We our align owners. of and are interest evolve are peers excited asset business with for Sensible investors our a variety our is probability change Fees to about and winning among just X attracting ranked LargeCap consultants the innovate Select channels. across Fees Select structure performance, strategy its owners, to launched traction and recently and With gaining

industry Journal such publications and as The from have others. We Street of Wall FundFire, dozens interest attracted numerous

committed our further product ongoing and the We outflow will investing pricing class look the to expanding in recognize as filling asset alignment are managers we continue and asset for Within need our between and to we multi-asset and future product innovation strategies, for lineup. only and increase will out we are future. owners the

an products high income, tailored return duration objective. the volatility with of client’s flexible risk risk yield, years balanced all built across different opportunity, and array teams low a over profile and specific income neutral including have short equity, We spectrum, income, the market for investment

a product, flexible and to peers. meeting off great income, performance newest institutional in benchmark with ranking got a among start top XXXX decile Our

with We will X-year a mutual a has recently opportunity the the places fund stable it it among Income investors and mutual building are record Flexible excited and in for percentile future about range for X% its product NAV. history with to the earn peers, that begin WFLEX, our fund, income in X% launched well. first that the institutional to as

Clott and a experience, track He in the steam. The with In we multi-asset a will of first group, rebounded in well. credit category. is leading and our have is Opportunity quarter, Helfert. convertibles, impressive the global Adrian last equity strongly markets vast started and year ranking new with managing a which top to opportunity risk attitude equity group the along the XX% records Dave securities fund our quarter announced as our investors XX% gained Income Morningstar and quartile on Multi-Asset have strategy. leader serve with strategies Adrian income As we and David

maintained saw pace, move issuance convertible of out also China. a higher especially valuations good We levels and

strategy the quarter sell-off the provided neutral Impressively, able U.S. strategy convertible benchmarks, has strategy long-only quarter yield both and This were both global the Our protection downside year. market and respective been their start superior outcome-oriented long-only during performed an positive well and in the strategies while enjoyed our excellent advantage although to low returns steady arbitrage with during segments. behind of It resulting the category other the dislocations that positioned hallmark well up one to Market in are quarter. market-neutral some versus the neutral fourth and strategy. take is stack of income to its alternative XXXX volatility during was the first of deliver top and offerings. of this to continue continues to strategies uncorrelated,

and pioneer Our Pakistan, multi-asset the believe now experienced, stable provide Furthermore, sentiments of one history also difficult levels. more a momentary asset best We for an Mexico’s the and Chinese of is the developments political that team helped brush on focused fears elections is appreciate. outcomes Boston trade tone. peer to our space. a are These benchmark for integral group average fee stimulus, and the our markets foundation more basis multi-asset Emerging assets, a that record government a completed part of our points to rising capitalize as together to multi-asset for Overall, on its displace seem risk areas to in a managers active with top and judgment emerging more dovish multi-asset market inversion U.S. and markets owners experienced Emerging quartile skill a passively deliver and off nearly as working benchmark U.S. India XXX strategy, outperformed Markets. XXXX, and potential emerging including expectations our yield X-year between Thailand’s ranking. and its by brief deal Fed’s MidCap all escalation markets curve, in positive outperformed our a a which strategy for

crowded continues of Our did philosophy owning when that companies avoidance the stand trades sources XXXX outflow. our challenging execution on periods of of they to out investment important of team focus in high-quality our in will as were

initial our sales the known of innovative fee our decade. team we consultants, added service quarter. sales, and we a are a the Sensible Morningstar significantly professional teams. and react that really as institutional regional and manner to in solution this be opportunities. have high-quality industry, history structure began add expect move We we our later we continue Sensible We have emerging in largest to Fees swiftly we now developments, one continued experienced volatile, on intermediary two This intermediary from the global committed and that three expand simple trajectory. our in we with better infrastructure ever edge business professionals past sales among market internationally flows allocating our sales, reception is turning institutional the investors Shifting will markets our reorganize will to be with been veteran pleased to new strategies to proven, alignment will to portfolios opt and more financial intermediary pricing asset over our Fees create XX-year highly rollout new the on press. to as focus and classes to and will professionals and around and pass had the and have well-diversified are and prone We efficient and path and

risk-adjusted to performance returns or using respect information either fees. ratio by with is alpha industry on Focusing first an

this We LargeCap fee initially our will offer product. Select for construct

While of allocation one slices asset been in the asset the of largest considered is and still that source LargeCap pie. has an most class a models passively, allocation more funds it of asset is

years current quarter, the SmallCap believe highly was aligned strategies. RFPs of are for Westwood the ahead. long we and active presentations. to fees as huge potential two will to more strategies, SmallCap’s SmallCap Select quarter years approach us quarter high-quality positive prefer funding is sales client with as have as present becomes this the during And of and alpha finals flows and As well increased from due flows invited XXXX. as a the objectives. some ahead, areas in various in for precious in on LargeCap new properly in return risk are the for focus and we other with the scalable in in that key net participated liquid total owners additional X asset Select in Interest clients. LargeCap a

message that our believe with strategies, research current the also team. We opportunity see parties communicating profile working income return for managers can of opportunity for that on risk opportunity clearly income sales a forward we significantly income improve focus the the to and continue will multi-asset prospects but portfolios. dedicated understand efforts are transition with We professionals. horizon of service we class exciting the ensure clients surrounding and markets product, and efforts our interested intense their a clear experienced and representatives portfolio team path the Similarly, our all that and we emerging have EM to our for to outlook on

have net embraced outflows emerging income to were our which consultants opportunity multi-asset had expanded Some markets centered in and institutional We billion have primarily $X.X while approach our strategies. others of not. and

the but We outflows second feel in quarter that to income half in further will year. improve in stabilize flows our second the see and opportunity the expect strategy of

on teams targeting XXXX. client activity, focused higher Our service are strategic in and sales and engagement

product offerings where our investment focused Our that and value longer add grow teams in can product to management and areas are term. working closely also together are ensure we

line we the add are We and potential with reviewing entire grow. limited can provide products poor product believe we rationalize those where alpha and performance and sales or we’ll

On the by inflows retention over our year-over-year. team private front, off while XX% start. wealth another to They growing great rate achieved of a also client XXX% is Houston

Our the taxable managed year-end. the strategy assets markets Select from with and of XX% rebounded Houston office Equity nearly out grew

events will several robust business new for in filling pipeline. have planned We Houston XXXX large be continue that expect with a families healthy several to and

a flexible and team service exceeding firms high-touch trustee are their we banks continues expectation. service, from our benefit smaller, is towards trend also Our that more big away the seeing model to from with

with as also expanded rate. they well Private off Dallas and a available retention business their inflows continues strategic client also net to of pipeline started Wealth array solutions. Our have grow positive year posted Their has XX% the

debit to will capabilities and able complete and quarter partnership We clients. cards expect offer the in our our accounts, to checking be existing future and lending second to bank

the opens already to benefiting We are when new increase which bank space our headquarters. should existing from a in cross-referrals, adjacent branch

have platform offering unexpected next will a clients truly lives holistic value As we that through helps us constantly engagement. financial our digital to organize complete we their and deliver allows digital year,

Westwood. Wealth Private that influence most source Clients enjoyable events of well growth client personalized of them. and them we new our asset in constantly interesting come our our ahead. the and Our in referrals, centers most the to existing clients frictionless our enjoy as clients on-boarding center greatest that cultivate our council proactive as thinking of remind advisory years interactions will as of of ambassadors for area reliable creating are clients are utilize from we universe, will third-party Since and the efficient, brand

We are have we recent standing by outflows, not where we’re disappointed good still, feel and been but going. about we

platform. and practices been journey performance models. head firms Our redundant we industry which started complacent using a our started towards than now we’ve replace decades. inefficient that X is with XXXX, later have and data our Advent created goal of while our Axys of in InvestCloud bull and true network more both with journey XXXX, been that legacy anytime-anywhere, We reconciliation investment the all meeting two of to infrastructure copies secure ago institutional best central sales intellectual a technology this A a we compliance our order trade technology, Microsoft processes for portfolio golden and and years for we cloud-based, the far. and for In changed purchases. developing for a of platform a been We to teams and have operations We environment. Many Simultaneously, the teams, developing Private with access so out employees decade-long multicurrency XXXX to with and our roll becoming platform on operating moved warehouse system quick fully Azure so our accounting a halfway software repository review digital hardware Markit and management and systems. marketing state-of-the-art market, a are our eliminating EDM entire clients by now multi-asset, now We year. is operations, our our all need challenges for expect property. also trade on. plagued workflows have upgraded the Beginning Wealth we’ve investment over our in future all our have new data

give of that us develop new to view a consortium trust will our allows across a which, with all platform will companies year, Next InvestCloud, accounting implemented, trust join us a unique when our assets we [indiscernible]. platform to

deeper superior has drive expensive and engagement reporting to regulatory efficiency with an one. vision operational, Our been

the the form We better and on whatever our it few have disruption take in than positioned over years. much we invested more next are to peers, heavily industry takes

will in the and More be future. better our support importantly, we to able now needs client’s

in quarter, Westwood If you the investing in the stock. wrong are you’re next for just

confident buildup patient few you’re sales the feel service the initiatives in believe to In execute we If that to deliver through we and exceptional returns, aggressive you and flows we and market-leading our positive infrastructure. new client next return the can in years the are building, over sales who meantime, the deliver for the current the call have Terry above-market you intend with competitive I’ll with We dividend us over a of will ahead. CFO. stuck and enjoy an years, Forbes, over yield. in highly years those turn we to to appreciate you now you our

Terry Forbes

assets was lower resulting quarter was outflows. average fourth prior average year’s prior lower from million good first resulting decrease XXXX, afternoon, $XX.X we under from revenues management the net The Today, Thanks, fees. under in of primarily XXXX outflows Brian, to million management everyone. to first and decrease due the reported of in year’s total from prior fourth quarter the and lower performance-based net due quarter. assets $XX.X quarter compared from and quarter of million the year’s the which first to for $XX.X The primarily

foreign income or compared fourth quarter $X.X $X.XX the prior share million benefited to of year’s fees transaction from year non-GAAP current in $X.XX metric, or $X.X prior million Economic fourth gains. and in a share versus per per currency earnings, $X.X the $X.XX quarter quarter. share million fourth $X.XX $X.X in or asset-based million per quarter higher net quarter share XXXX. was of per or the First The

a share per XX% management of lower and billion per of fund to the $X.X assets Economic per or the net assets revenues share or and XX% share current compensation Firm-wide billion $X.XX $X.X $XX.X end compared $XX.X partially First offset and mutual $X.XX total total. primarily for compared of consisted million currency the quarter $X.XX prior quarter of to of year’s of to in billion assets of institutional quarter $X.X of earnings or total, compensation. foreign wealth total XXXX. million quarter lower quarter. loss of XX% under reductions in the or per the share related or by tax, million assets for decrease expenses or the income The million $X.X $X.X of incentive totaled billion first or first million net $X.XX $X.X and $X of at management

of we billion outflows year, $X.X market $X.X the billion. appreciation experienced Over and net of

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

Operator

sir. you, first question I Instructions] Mac comes from show Thank from Sykes [Operator Gabelli. our

Mac Sykes

afternoon Good gentlemen.

term of and product. I franchise? mean you it like goals the it terms curious, longer? about on evolving news Fees the congratulations Brian, the the was off intermediate maybe years agencies. So, both really over you flagship your I for the do around aspect in of being see of see it Or different how this took and Sensible long X eventually press. seems do kind in

Brian Casey

where been outperform in been you us first all congrats. kind Well, been the and by between folks amazing Morningstar, if It humbling, construct We’ve for to of the last thank by refreshing. a consultants, interesting, XX asset the perfect owners for all, major has We’ve is pay you managers, been embraced said only this we and by asset of have publications. alignment fee month. really it’s really that that

be As building my meetings. And far good We’ve had mentioned enormous And as out have a little for of We’ve an comments, think force. too institutional folks We’ve sales and positive it I’ve over we more us. money a opener robust throughout time have it’s XX had where meetings. a meetings. it early door amount to as is out we a of had XX found to headed, lot tell. I spent intermediary selling. very We over

by infrastructure we’ve before, thought are had we backed on are never that basis. a weekly an pieces We and out leadership putting

So, I’m that very think and real too a could game it’s us. a early term But goals. excited or something what scalable are about it. little It’s to say just highly intermediate longer I the changer be for

Mac Sykes

year color Okay. appreciate seem IT’s It on being XXXX made. about does a a to your the the this like think of little versus bit expense expenses previous as you investments fell Should I when that all we the off taper start quarter. pace your years?

Terry Forbes

in expenses systems as the some on as in mentioned, ready the will still to investing have Brian we we overlapping well be as running have think digital other XXXX we live to are because we’re go somewhat because I sure consistent systems. platform that make

see drop-off don’t So, a think you’re there. going I to significant

Brian Casey

technology. have when And And one which rather done there’s called we different stable of for we’re that management, remarkable, various a going pieces we’re see what billion and and what a have But you assets of in with pieces platform they do roughly most dozen gets to under I more literally have is this, of XX $XX a do. very to think firm is out that’s when we technology. stat efficient or will there,

it of wrapped also include offers to InvestCloud services and number together. license in fee wrapped all our have that the We annual a

a get system. we’ll state-of-the-art CRM things So, like

some the planning We financial will done work for benefit area. get from will clients we that they’ve other of the in

so. phase So, green, we’re month the products. should really like use in excited their have through they or of talk what are We to through colors is we when that see should which be platform should we the be next about We when they first our looks finished.

running currently. are parallel We

paying So have we’re mentioned, do we paying that what see. that as we’re with the InvestCloud we doing. to what time, but at of excited we’re means same accuracy Advent But Terry the ensure and to we’re

and find which summer next thing a All folks Wealth with of of beta more our our will be meaningful online that we early then we’ll in will with their is digital really much makes that amazing, for refine in the as version that really we and technology jobs easier fourth X.X, then The family, Coach be out work the way this operations or the clients that smaller-tier roll be efficient. will new to a able out third will friends roll and to offering we more will quarter. and see

also not next our with real We digital rollout but the beta fully be well. that a And high game first our clients in likely will year as more later only of have will changer quarter the our year. clients of platform for a institutional worth this net

more good the on lot other of again, a things daylight spent we really spend, bridge, and to highly a going a and functional see money side, we platform. little the see So a efficient of do on, lot but under

Mac Sykes

taking Great. Thanks my for questions.

Brian Casey

Thanks, Appreciate it. Mac.

Operator

I Executive Casey, like Officer, ahead. President for the Thank show over Brian further to this Please and in at time. go questions I’d call Chief closing to the no Instructions] turn you. queue remarks. [Operator

Brian Casey

to Well, our the thanks much call. listen time very taking to Great. for

if you a we to afternoon. grow being the Terry We future said, like Have I a great like you. disappointed. shareholder. for bright. and you’ve questions. to any our your appreciate website recently, us I to it have side or future do investments flows we’ve we further a and other made As myself but feel the know really disappointed is We’ve visit And please Thank for and with been the thrive feel or make the our call been us give really in

Operator

concludes and the ladies you, for attending conference. Thank This today’s gentlemen, program.

may You disconnect. all Good day.