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WHG Westwood

Participants
Julie Gerron General Counsel & Chief Compliance Officer
Brian Casey President & CEO
Terry Forbes CFO
Mac Sykes Gabelli
Call transcript
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Operator

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2020 Westwood Holdings Group Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions].

As a reminder, today's program is being recorded.

introduce and for Chief to Gerron, program, like Counsel General Compliance now your today's host Julie I'd Officer. Please go ahead.

Julie Gerron

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

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

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

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

Forbes, On Chief and Chief Terry today, our Financial Casey, President the Officer; and Officer. we call Executive have Brian our

the to call I will now turn Brian Casey. over

Brian Casey

a for what Good difficult these quarterly earnings circumstances unprecedented to all afternoon. call Thank taking in listen for you us. during keeping you’re times. time the to safe our We of hope

cover and impact crisis earnings As the quarterly our we'll the always, discuss I'll our company. on of COVID-XX

equally new returns but though with recovery of about and fixed future, while of in S&P battered. first the clues of across on books. the virus the focused global quarter XXX global were the clear. quarter XXXX felt when COVID-XX past economic record is lower March. path pandemic back, the cases anything may since swept for the much number and globe, liquidity suffered was the The pain The worst Investors peak one the for performance the markets income remain sending Looking equity sharply to

Products, absolute quality unprecedented cap in outperformed passive down Every benefits of Equity evident. In best in the our benchmark, selloff our but Value was higher Value of the were strategies one U.S. large management performers. equities its U.S. relative spectrum active the single were companies as up market the and terms, clearly

multiple about Value LargeCap its the of flagship downside resilience ranking LargeCap Value ahead Our basis showed and posting among Russell index. value strong. over is of the XX% the nearly and only periods, during remains outperformance relative capturing Value selloff, time strategy institutional points to LargeCap XXX XXXX benchmark the of peers

the Value and Through for the the in three seven top in first year trailing quarter, and period periods. our decile the the for top trailing was five LargeCap quartile strategy one, year

ahead benchmark the decile Value peers among strategy LargeCap period. also time trailing Our Russell it year universe in for possesses a ranking XXXX and quarter institutional manager finished the in eVestment three value LargeCap Select now the of the top the

benchmark in beat half and by the the three The the one also periods. trailing five and quartile peers time for were trailing ranks has XXXX most seven XXX over SMidCap ranking index the and years the basis strategy top returns the institutional trailing points also year for Our and now year now among in Russell Rankings above strategy value strong. top periods.

by points. continue finding the to focus managers strong basis growing approximately the the hit XXXX from U.S. sector qualities the improve finished track to Value on our companies strategies, interest are and with strategy Russell institutional and the hard worked fundamental of have the benchmark quarter portfolio managers seeing of channel. hardest SmallCap was in but ahead record our value we portfolio Our XXX

time year inception for the placement peer and strategy decile it maintained since trailing also term seven, top period. periods. trailing record SmallCap's tracker rankings the over longer with a one-third institutional top time quarter XX attractive in one Our places and the

the opportunity centered As quality through actively situation by high we managed will volatility investment for attractive work around created conviction, and market value. economic portfolios an create the COVID-XX,

value While emphasizes priced which levels have options. historically find today, valuation than recession, of coming low has out with best style, cycles many and the companies may at themselves companies debt levels higher a limited past performed in

several is acute already we're filing energy seeing Financial the particularly bankruptcy companies sector and distress protection. for in

rise balance the at sheets, of the laden the pays falter. the market cycle As will and top to the more companies attention cream past debt will

levels. sheet stress. we a sell and Many balance one-third and through fundamental index losers. debt a that funds high to losses the hold this index understanding investment winners and kill profits well and of served has companies a in of in incorporated companies Increasing of who historically opportune in lot clients portfolio more with funds of their Our debt has cannabis navigate our time zero always minefield active process on can of times believe these thoughtfully will managers, an be to for investors and lean and than

our across group, attractive return characteristics to that relative are tailored spectrum largest our risk an equity in array a for the Income to objective. showed the opportunity, our Multi-Asset strategy profile Group, in Multi-Asset specific investment of markets. and product holds Turning and client lineup now the strategies risk aligned

pushing safe, relative holding However, our as up back perceived rush performance. to treasury and assets returns investors

strategies classes The backed historically financial solid Alternative results. the look crisis. strategies delivered opportunities since Asset time as convertible Income securities have Convertible as such provided that risk seen it's our declines convertible securities bonds And and has experienced investors drop during opportune created in global to not quarter. preferreds, at the Global adjusted such mortgage an large for and

and and volatility Our seen during acted went financial to mix difficult to across Global allocation X Correlations Income as capital performed expected a time. up Alternative and as with asset global volatile and strategies an diversifiers levels Convertible shot very during the markets crisis. last

to ranked was XX% top trailing X in the for X and WMNIX decile to Alternative peers, raised ticker stars in by symbol valuation Income asset the institutional years. and the Among classes’ to the and strategy, primarily our periods. Income Hong Kong. top remains behind developed due China XX one In Alternative our In recent relative the fell particularly case Westwood positive, X, Markets, in Morningstar. underweights The strategies, year of underperformance performance trailing following strategy our year Emerging markets time

Indonesia, Markets had countries emerging liquidity in this and selloffs. impacted Emerging also to to Globally, was larger safety. particularly and which reaction COVID-XX see of flight any were Brazil, and kind we to Chile invest, reaction Investors and reached these by liquidity market in unprecedented volatility for markets the several This indiscriminate. and currencies caused Mexico, swift including

Outside this reactions shockwaves We some largest The believe are is yet. to and are vary depth are volatility be and do over markets emerging duration in across the government not middle evolving. geographies. of will still the economic of and of China, the lockdowns determined

have solid other these in opportunities balance in markets with our sheets. dislocations invest in As companies teams, strategies, flow management created strong to cash and strong

emphasis for Our to will manage conviction past gives has quality the be run. well us us and through crisises positioned long that companies enabled on our holdings

recovery. high to and time position themselves their market's and in uncertainty. our actively Many our net are take Management, eventual this to larger for Houston advantage worth clients accounts an add contacting teams been Wealth to them the clients choosing assist the during have selloff to Dallas through to of Shifting of

is our net retain planning, well broadened clients, ecosystem. ability our with Bank resonating service clients offerings Westwood Private have of at services branded The in We high worth Westwood's and improving investment combination for integrated trust financial services Westwood clients. with the to our banking existing

to portal As will new we engage us begin clients. better move Westwood forward, out digital with allow trust our to rolling

their quarter, protection. versions controls The benchmark. due benchmark. their this both posting At efficient Select lows this out our of metrics Equity counterpart Select of ahead against risk Equity its global designed control recently for turnover with companies provide of Trust record strategy portfolio high strategy up its Houston management in quality, office track in in its the managed risk well as sheets. with downside balance quality work emphasis is outperformance to on are Both Westwood low expected a quarter, saw three held and tax the high investments completed to year market’s risk

until loss over annualized clients’ alpha XXX tax year over provided and waiting additional of years. harvest last the helps points we has which basis lower throughout bills the our Additionally, instead of tax year-end, three

our Emerging were clients new and Income fund. their was with net we in of XXX In inflows in Intermediary nearly outflows Group, Sales earned Alternative net Converts, SmallCap relationships had LargeCap funds most the as XXX existing in and the XXX successful outflows clients in million our outflows mutual million. accounts Most and quarter to of again inflows Institutional Value, our sub-advisor and million for total Markets. our of added into Global strategy were

to the sales in teams the alignment U.S. that pricing, well have risk teams, With to we're guidelines capture of strong in product and made vehicles, performance we infrastructure we've current that success. positions The relative messaging cohesive investments our us create a definitions, environment. strategies, sales for investment in message our allowed and feel distribution positioned

work adding consultant approvals; Our intermediary across and on remains overall, pipeline our teams strategies. investment spread healthy institutional continue different to several and and

and throughout in the SmallCap and in we to and the the during mid hopeful of Opportunity were pipeline opportunities year. a portion New decisions of quarter Income are added is our late-stage large

the at for well have zone of on it We approvals made largest within fund red wirehouses. the our SmallCap several

the to sales execute prospects, strong and continue Although service broader, cycle sustainable has to market continue business our to distribution COVID-XX client slowed our more with to on disruptions and teams plan services build teams a clients. created provide our distribution our

are weeks did views. portfolio thrilled online over continue face-to-face usual. see meetings, as we're and XX,XXX conduct RFPs to we were our campaign to functioning not teams few We a advisors to calls, While Conference quite updates, able XX,XXX normally. questionnaires ago and an

decisions on pandemic affecting cognizant they're to need business know clients our are fact and portfolio the how continuity of relevant that consultants need functioning and our communication timely interested how portfolios We communication. the plan and is and investment They changing. and is

point our is the to Our how we've of understand also business this of in protected clients key working remotely success environment. as work inquiry a integrity

management COVID-XX, disruption to margin fronts, and was industry technology rising already compression, several data, asset and on other experiencing including fee erosion the Prior costs.

in reduce efficiencies, our prepare disruptions business I've the operational Westwood costs, our agility. to made technology investments for gain increase and As in noted past, major

not have have disruption. remote operational, able working we to investment with only recent be move wise a to increased proven events, these as fully little to we're Given environment but efficiency, a no to

cost continue meaningful our steps We and our take to evaluate to will reduce structure. business

of and six forward move To-date, with recently that for implemented made We've past reductions the trading balance we've in project. or identified been of of over the year. outsourcing the to months researching decision over the this XXX,XXX process cost the are being

year per to in summer and beginning million move will to We model an over this later save trading outsourced XXXX. expect $X

technology efficient We will be wherever utilize state possible. more to our continue to future to define

unviable or will We the our close eliminate people best commercially put only field. products funds on and and

over been performance initiatives our the numerous has the to future. continue financial on disappointing, we execute foundation Although, year to for last strengthen

continues we have Our strategies credit InvestCloud U.S. that partnership Value weeks and commitments to fund a clients from operational are and a with ago. opportunities for benefits. new Multi-Asset alpha few we wealth reap delivering launched The private

to We taken ourselves to and disruption we've expect industry-wide a survive position in placed to grow. steps have us the continue and reinvent

well, the and run want employees’ We families is time. at efficient and to and employees really work we safety I balance employees an their how with manner. of everyone everyone during yet company's completing proud first a we're working are health our apart, Westwood remotely needs. working I'm to personal well needs this priority. understand hard to have emphasize our and difficult And All that Finally, and is business of the the together, that in our their working

service and of Our have best priorities customers to ability. the continue we still our them will to goals and

turn I'll Forbes, over Terry the call to CFO. our now

Terry Forbes

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

The $X.X private taxes. partially income per related $X.XX XXXX. net by unrealized lower revenues income of was quarter and primarily losses First operating in total million decrease fourth or $X.XX and million on per lower expenses share offset compared to or investments, to share $X.X the quarter

or non-GAAP $X.XX a million $X.XX quarter in or was the XXXX. earnings, million versus current per share the in share Economic of quarter $X.X metric, $X.X per fourth

expenses, increase losses to quarter. quarter transaction taxes, lower income benefits, particularly The $X.X by in or First employee $X.XX partially primarily revenues foreign of $X.XX share lower investments. first on year's and or private offset per net million and the compensation unrealized per prior currency $X.X to compared operating related share gains income million and

consisted Economic million totaled the compared to at of $X.X earnings Firm-wide for or billion per $X.X quarter of or $XX.X and share of the fund or $X.XX total management and per of of or of share the $X.X billion XX% in under total. the $X.X or of the end XX% billion total, institutional quarter was management $X.X assets assets $X.XX assets quarter of wealth million XXXX. assets billion first mutual XX%

Over outflows we of $X experienced of the billion quarter, net market depreciation $X.X billion. and

balance for continues repurchased very short-term April, approximately debt a purchase million repurchased and This program. XXX,XXX and quarter the completed $X.X shares of cash investments of million. an first share be to stock million. we approximately In additional an under $X.X repurchase end for with common quarter, aggregate Our our totaling purchase price solid an financial amount of XXX,XXX position free In shares price at $XX.X aggregate our sheet. we the authorized

as prepared longer term as That have our product you our quarter reflecting posted our in to revenues on presentation and highlights a first well website a and brings of trends investor close. discussion review comments development we our business, earnings. We to encourage

for you open your questions. and our We the thank to interest company in we'll line

Operator

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

Your please. question

Mac Sykes

operational trading about is if diligence worked could of wondering was that a I How the you viewed questionnaires? how little has in talk terms bit institutional, outsourced it and aspect. due

Brian Casey

of ankles more and efficient New Exchange, as a of it my I ago over series about we've you researching was reminded and computers always allows It paper I'm first the journey X as is lot years. spent X.X, about my which and And in the was being few visit to had your their spending years was a went, much possible. completely to years. something day a screaming. interested a continuation is been of are always technology you over quiet, XXXX and -- family our few was become to to and York this. it described last the took journey. This it different spent we’ve and energy So church. of people very in calls, being we've And time Stock was everyone has Technology six efficient up like there as we've be that really in Trading and on that last automated months simply visit their experience. a was yelling on

simply has ladder world it's trading technologically missed technologically, connected our the more So cutting the in become is a edge done firm. to and becoming us efficient in and of technological evolution for rung the terms

Mac Sykes

client engaging put conversations and with the place of a the line, I and making And of technologies your you've have you've of there stress to some been some in in I just forth? that would terms improve and that the along been did seen newer in applications clients. that that the markets what terms and wealth mean you the terms technology in-roads with see we've engagement, given engagement in management, guess

Brian Casey

been it's Well, amazing. really

able the team. as on have at really pandemic every come beat you plan, think flood test, things communicating everything not And I if forefront and You work. earthquake able anticipate And minds. nonetheless, you you're don't was think that, not to or I to to you But been come to guess you to an mean I worldwide of a when a bounced of have might missed we’ve think what can about you we or work. management we been day Westwood. like do a try anybody's happen to

a times problems. issues deal our any We have a or to on week team with management crisis of communicated couple

anything, reaching here, way clients, we to But them to out as we fashioned of do of question a different care that here I good that we the And ways technology, than And you But I to preferred just think answer is wants learn of the far with think to through them as remind are the clients advantage money way pick certainly mean is of calling customer and communicate multiple a and we're to clients the existing -- about some ways. a good your to accounts have phone had terms is number in of our old their ability we we're up communicate that able it help. and the way to remind to a just take add what number in volatility. what I that you. more to

and meeting the on time the And in people face Zoom with that or people a some get that's you just things phone, some with some do that's all it's people all on person, or of been without up warmed I office. drive, doing. having that to clients get done park their to can come the But think car an us still idea lot and a have really we have into a

Mac Sykes

question. Just last one

presence, of states the the see the do well? bank in you in management terms on basis physical as kind In the with open on how wealth getting how and office engagement up, you evolving, a as see of the clients that do physical management touch

Brian Casey

Well, it's interesting.

Gen is and technology, money. through visit to the think And the groups, shifting has two but catered about the I all at the now X, in because we to management millennials. they're the Westwood, office. their Y, an that to to have communicate different the say, would the is the only pandemic, ones all forget had not in that industry. preference industry And not generation boom baby Historically, wealth Gen come I client along,

them as office will really to I boomers to like -- feel of baby it come where don't to come. think need often it as the the evolve like may So, some to they

see. up Dallas in in be fastest window and going when percent days cities to interesting think it'll world. were to going my looking and out a we of I It’s going back the be and interesting XX to up. change, close America, that unemployment at for the buildings how ago to it's of of zero to be office changes we lots cranes of growing do I'm So profound one open see

Operator

this session Casey to to today's like hand for [Operator back Instructions]. further any of the program. Brian question-and-answer And does remarks. conclude the program I'd

Brian Casey

go need like again want to would while to closing, And thanks loans, we I'd those add we government money who qualify that well, in really for Okay, most. the call. to listening to for it the that

have loans. apply I intend nor we stays for, visit and everybody so have government a hope we and interest to give for westwoodgroup.com. not your us do So you Westwood. if questions or any appreciate we call much. Thanks applied Please healthy safe, in directly. any

Operator

Thank for in does and you, program. your participation conference. This the ladies gentlemen, today's conclude

now day. can disconnect. You Good