WHG Westwood

Julie Gerron General Counsel & Chief Compliance Officer
Brian Casey President & Chief Executive Officer
Terry Forbes Chief Financial Officer
Mac Sykes Gabelli
Call transcript
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Ladies and gentlemen, thank you for standing by and welcome to the Westwood Holdings Group Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a 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. And now I'd like to introduce your host for today's program Julie Gerron, General Counsel and Chief Compliance Officer. ahead. go Please

Julie Gerron

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

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

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

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

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

Brian Casey

time to call afternoon Thanks taking to for Good our quarterly everyone. earnings listen the today.

call just place of three Our days last pandemic took in months global the early the ago.

having During this company. past the economy, on the is asset quarter, experience the industry COVID-XX more we've our gained impact management and regarding

clients. they of for take nearly sure extraordinary gone The remotely. our I beyond of They've day to members above are and quarter, are a everything the top our each the all need. make priority, review want employees making a working families and which safety and them clients with to means day every efforts of the supported to and that I our team moment the Before health thank their all is they're Westwood for recognize

widest by the the with category from in and divergence markets growth set the rally XXXX. slump first strongest quarterly strong challenged gain of we've major earnings. style its is This surged since and the as the quarter S&P one value as again records performance despite was companies XXX, the indices once led The data between rallied posting quarter tech those both seen in weak with The decades. remained economic no The smallest equities, ahead. in

spread. earnings storm the COVID-XX XXX take factor of from home forecast weather affecting That strong index Russell about by working stocks be five and of investors. XX% are and including on S&P as and for XXX's way franchises accounting have stocks to to companies that Infection should in the wave of closures influence the impact murky high-quality lockdown, with recovery work positioned constraints are The Texas, states the remains well index is our S&P in California overall could returns. top we is sheets more decidedly The the the to on they said, through balance the was comprising XX% demand performance. as continues economic key season. Another five advantage performance exerted the of index trends business models about largest a of outsized like an of second and growth even pronounced worsening XXXX Florida path and that

somewhat equity performance. U.S. mix Our turned in products value

XX% the benchmark of and and its the Russell year-to-date non lowest benefited valuation stayed for top is rankings oddly trailing top are third trailing for and that the businesses strategies period quarter's remain expansion, U.S. to and strong. of in the the during quintiles value downturn, lagged XX from it's LargeCap challenged. Value large-cap and earners universe three-year LargeCap percentile trailing the Our small-cap value for pace and the quartile Select large-cap peers outperformed and this multiple top large-cap benchmark XX-year the period. eVestment quarter's structurally strategies its secularly in three-year Russell quarter Among all first XXXX finished and sharp for kept the one-year year, trailing ranking manager upturn. its select which our eVestment the trailing XXXX for ahead the value of and LargeCap and seven-year time due the database a nature commands the SMidCap peer periods period. value and institutional during the ahead

index year-to-date, it's which value the three-year points year, but over SMidCap basis for the and lagged for trailing XXth it percentile for the the XXX percentile percentile XXnd far this XXth one-year the strategy Our Russell trailing ahead period. XXXX so places quarter, in the

see portfolio hard and record growing have institutional SMidCap. we compile worked managers to continue in interest track to Our this

SmallCap and said period the ranking outperformance XXXX earlier, the basis. rankings for its the I trailing to pace the relative with year-to-date, five-year As trailing for attractive adding its quartile Russell market XX a XXth percentile kept a rally top placement three-year period. a maintained peer on SmallCap value percentile against with year-to-date

For XX-year even the longer period for value eighth period. trailing in XXth the seven-year the for in percentile percentile SmallCap periods, time and places the trailing

and opportunities periods prospects unprecedented remain quarter. that time. the the we the of by are clients subsequent both volatility versus first rally over the will grow searches pleased and quarter in to and with While year-to-date during strategies value Protecting negative, is relative Russell provide assets benchmarks client second replacement new appreciate their our U.S. capital value we during appreciated ample sharp sell-off returns performance absolute of the and

return to which group, spectrum. turn aligned risk Let's our now an array strategies manages of Multi-Asset across the and

peer opportunity income Our performance. in ground relative largest strategy Multi-Asset rankings gained and

the asset as first objectives income and volatility that achieve based selection using lower to and stock Our quarter the process of on twin changes analysis allocation stabilized. team's returns the helped attractive fundamental market allocation tactical is opportunity

in and XXX the as and S&P period quartile period. Among placed the and rotated for year-to-date the XX XX% XXth Income classes longer-term Barclay's of corporate managers XX% securities opportunity agency blended asset income the XXth Bloomberg benchmark and by from basis XX% quarter Our XX-year bonds valuations XXX peers, Its for as in period. into such between percentile one-year mortgage-backed percentile its XX% Morningstar's points strong, and aggregate portfolio shifted, switching of percentile is equities. outperformed XXrd and top equity trailing its trailing the opportunity for to now percentile remain five-year managers. universe rankings institutional for trailing over

by its peers, our Our posting high basis over investors build return gain the other products points by income records. to XXX institutional year-to-date benchmark with XXX and basis points. outperformed strategy benchmark Total second ranks solid and while continue track traction Multi-Asset solid by outperformed among records in track over percentile its

income global Strategic convertible strategy basis long-only and the alternative global performed by strategies outperformed global Our index well. exceptionally points. XXX convertibles focus over convertibles Reuters Thomson

alternative in absolute points quarter. income, XXX strategy, our While this absolute terms basis rose nearly return

mutual quartile and has WMNIX is global for year institutional Among percentile Our for for year-to-date three-year fund, a one XXth decile convertibles the percentile one top time and periods. five-year peers, the XXth trailing neutral top in and market is trailing group Morningstar strategic period. trailing ranking

Kong The less one-third world of abundant heavily are pace As the an has new impact uncertainty is with and but lid asset a which Hong markets, as U.S. apparent year-to-date. EM influenced in In to the emerging area largest of in the returns high positive emerging accounted prevailed the class, driven quarter's post levels it the performance holdings dispersion China, COVID-XX. a for equities while on convertible markets, valuations, managers. securities by on kept remain for wrestles and volatility returns for was of our the as region opportunities index providing attractively issues by year returns record valued supply about only

Our Wealth through emerging underweight Management, over-weights Shifting have market regions Houston region our actively and this is periods quarter and not other keep did clients trailing market's as teams relative in to the been assist contacting and performance for to strategy the them most pace. lagged uncertainty. Dallas in

as series colleagues goals-based approach strategies providing to clients, interacting the anticipate will of Despite build are to year. holistic assets economic a achieve online the half new our sticky. are clients stable from excellent on social advantage out remain By webcasts business we on with their We which an the our embracing increasingly and to second of referrals Client and a portal which quarter of integrating take engage current work new the and aiming rise next-generation target market on long-term in remained uncertainties, retention new clients ability are and Client way distancing in to was the we them have an capture events to created home environment. translate out we rolled focused needs. the to our to this keep team, dislocation. a virtual of unusual approach launched wealth. during We to with trust the current

deliver a to downside equity Our tax-efficient was with controls. low taxable created thoughtful risk portfolio select strategy high-quality, turnover,

even than first sharp the during and the well of XX% we benchmark less capture are downside year-to-date second ahead rise. after Our quarter's was quarter the

equity We both It's taxes and past lot customers Financial also but belief the have We've is capital tax wealth out attempt our prospects rounding management, resonates our devoted of core state banking, our to serve in strategy solution gains this whom losses with appeal share ones. an existing better clients. with years to and of years a clients, year management expertise, for portfolio not bills will the a a to ahead. a foundation planning and with well few minimize energy private the new create to private a only over capability harvested stronger and that many rise set. that planning in tax-efficient our

these emerging of years group, team platform primarily which in where of had better our SmallCap of new outflows in offset pandemic sales inflows which to connect new markets flows withdrew Inflows SMidCap, some COVID-XX big of secured about during growth As strategy impersonality intermediary brokerage quarter million people million tired platform a from clients we and came the meetings in funds. positive us channels approval the the $XXX net were added sales prevented enable new advisers strategies. with advisers. to the from across on add Wealth prior increased the by AllCap. billion large services the a successful ways board as the prospective the and funds. nearly and $X.X and was sales in Intermediary complete new Despite and with most face-to-face equity we in flows new mostly million $XXX positive our Gross in will future to markets this finding institutional digital business existing our institutional emerging banks are quarter. large SmallCap, meeting the to prospects ahead. year, should quarter clients prospects. and SmallCap from we in excited $XXX offset generating fourth with our suffered with environment clients clients outflows, by for and and of We're intermediary resonate key for challenges our firms. on institutional The call sales the In

team and top is our the focused it approved increasing Several sales the prospects large is and years. overseas. adding recently and and at of equities On has is is been consulting U.S. multi-asset search have strategies on horizon primarily than performance our our firms in activity in strategies are strengthened on relative been where we our strong. opportunity our have Several pipeline searches stronger exciting an side,

exerts our SMidCap better and Class now meet even before and impact organizations XXX(k) change. evolve pandemic's for Class These the including this have lasting in Share the COVID-XX compete in to struck, will asset and to us channels more dramatic Finally, tested future events pressure challenge. to launched foreseeable was to will on Well, Y Share ours including be disruptions result the institutional significant companies experiencing and Ultra SmallCap newly new plans. management soon allow industry launched

Westwood reduce preparing for major Fortunately technology time us, costs has and efficiencies. some in for to making gain itself been investments

we management decided Northern last in represents partner. outsource with performance. Trust trading seek outsourced to trend and the within maximize as asset operational July, a As I And our efficiencies industry mentioned to as trading. growing quarter, Outsourced live trading early we went firms

with flexible office efficiencies as we better detailed million middle cost more solutions invest We'll restructure get as benefit year business to costs transaction scalable Accordingly, have in long-term growth costs. more from of environment. and our execution will to to Board operating to a full we Many us current plan reduce support expenses our internal and a front and save well clients internal analysis. challenges confront more areas and the while continuing certain initiatives. expect competitive over in Our in crafted strategic $X transaction the

us manage viable units call. growth will other As as lead that deemed already well is the our our are believe will challenges, to in to strong business part covered the International an this the Advisors of will environment news and sheet the business execute strengthen likely array of the this future profitable in good plan in of initiatives to as We Reviews additional towards enable continue be end plan, Westwood business third third this us better long in the quarter office quarter. to balance cease not Toronto commercially that products to of Despite to actions operations our our underway pursue near-term initiatives. foundation. on numerous enables run

never to outcome-oriented actively Our and delivering style. upside are environment. in capturing the seems high asymmetric investors appreciate will solutions, greater conviction in out U.S. in multi-asset benefits looking believe demand strategies for products are for managed magnitude downside of this value and go of we alpha Multi-Asset market efficient economic the more than solutions

growing, of is thanks professionals. sales pipeline dedicated product good the to performance our and efforts institutional Our

approaches launched strategies our remain quarter, the last deliver launched income opportunities older and alongside return strategies to new This our we positioned new model fund, total quarter to perform credit high and alpha. well we implementation and

productive with offerings remains aligning by the Our to advantage placed option challenges Market reinvent fresh management disruptions platform only fees lately us firms the that they the vein, that outcomes. sensible firmly to an much provides steps fees We pricing in Today to this taken building position business. a but been positive with survive strong for that we of certainty a enhances of we've larger disruption innovative present them. we've we've client have for with industry-wide and support and infrastructure attractiveness continue. uncertainty the had to expect sure, discussions ourselves our directly those believe to able grow. In admire presents take opportunities also that's clients

As their Westwood firms we contemplate on their great explore will be place that work. are high list. futures, confident We're a their options to wish and

a and high quality improve impact seeing. are which they and years meaningful on ahead. the the we in in the the business can are time opportunities place direct have systems acquire technology models excited perfect and to have We stock public to their a is This businesses about and we

first well, company's repeat let that our of and their business families the employees is that health priority. safety and work are We our remotely understand we our Finally, completing me working All those clients employees a CFO. efficiently. the and needs we're their as employees of turn hard to working Forbes to those very will well and balance to run the call I over now our investors. our Terry with and as of our have

Terry Forbes

management. total quarter prior of decreases under Thanks XXXX prior Brian reported second second and from average as and revenues good The assets quarter in $XX.X Today quarter of the for first second of $XX.X afternoon first in the the year quarter of everyone. year a quarter. $XX.X million million XXXX to were and the principally result million the we compared lower

taxes $X.XX lower first per quarter. transaction The currency million income quarter Second primarily was to compared in loss metric per or revenues partially in million net $X.XX the per was share offset Economic losses related earnings foreign net or operating million decrease per million $X.X current first $X.X quarter to or share $X.X $X.X of non-GAAP the and share $X.XX quarter. the by $X.XX versus income or expenses. higher share in lower a

or billion billion million the the totaled per second Firm-wide XXXX. share Wealth for of of the decrease Economic assets of $X.XX consisted of or and $X.X compared or of partially was The $X.XX $X.X revenues million Second to per loss particularly assets or assets compared of total. management of quarter billion or $X.X compensation the of fund of quarter related or $X.XX end net $X second XX% $XX.X mutual quarter. in assets total $X.XX of $X.X billion expenses under institutional or offset quarter million and operating share $X.X employee $X.X the at benefits. share income XX% to the to XX% year management total. prior by in share lower quarter per earnings and lower net per primarily million

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

as solid XXX,XXX cash quarter, our short-term shares on interest revenues at brings stock our We an of have longer-term company line the our as We currently for product we development common That purchase repurchase thank sheet. be have to additional Our reflecting very review your to and to with prepared shares. of million posted highlights balance open we'll and comments questions. financial our second and our totaling the you in to discussion $X.X quarter a price aggregate encourage a of In our in and investments an trends for million quarter end position second debt-free and close. of presentation you investor a earnings. authority to repurchased well $XX.X We continues million. we website our XX business, outstanding


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

please. question Your

Mac Sykes

afternoon, Good everyone.

Brian Casey

Good afternoon, Mac.

Mac Sykes

Brian, I more get want forward. little color just on the EM going to operations a

is out do offices. Specifically, later XXXX the today? cost you you'll guess the year I in be the running benefits being what I of the Dallas How as it in the strategies from much And assume change? anticipate

Brian Casey


as is we markets next quarter. in are press savings close managing potential office So, call. what that do not more quarter, in Mac, strategy office the the a the will further. said mode, third discontinuing currently anticipate any be that in to by operations of the we And we information the as the we have could and release end and loss The on will third emerging Toronto in the our

Mac Sykes

in realization at -- investment in around today? for InvestCloud. a is in about just potential with more $X the we've and IPOs have given investment, and there significant million the or carrying value of the wondering and the that these today, heard just I marketplace Okay. coming the fintech that And some then you lot valuations, was

Brian Casey

it's very the area certainly, are that multiples and Well hot or revenues higher. even an world right of now, is in times XX fintech

to that months. which investment perform one line So business and marked it as other their have a investments we with up certainly, to grow expect are business in as long fintech past already in would is continues flourish, that's And six that value could that in how we the continues doing, doing.

Mac Sykes

you. thank Great,


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

Brian Casey

we'll our on that right we're believe on just in Thanks, I'd execute to and to Jonathan. results. the like improve initiatives cost Well, our We closing reiterate to continue path. savings growth

long-term, competitive, Equity some of Multi-Asset. We've introduced funds. performance mutual our is Our to share new expanded restructured sensible in both fees short-term and vehicles available U.S. both and across delivery. pricing and We've our model include and classes

implement continue ago us to in to really We the efficient in years four started and our technology more investments ahead. just outsourcing years that make

$XXX priority finally, new strategies. once the levels value sales is cash improves picture this we new to In We well-positioned during made per eliminate and to with really clients of make sales are advisers in well rolling of wins intermediary, starting million remain growth past and new small-cap in services reduce Wealth to their onboarded and to Houston able funding, investments the it business we year, demand saw return share We're unprecedented now over the normal million, resume fourth new quarter. And $XX.XX have healthy. opportunity debt. pipeline is the in and businesses quarter, also year, in a but balance is a products rightsizing platform that And for footprint institutional, wherever and new of our continue are U.S. number to over Dallas we're to organization we our the And and $XX out from unprofitable We'll to approvals the and tough we positioned able past consultant can. to sales, the COVID, once strong and the we've offices. expand We've period. we've in of in technology over that significant. particularly as and which financially the quarter supported grow well over see awaiting Private a our it's we're first we approval conditions the costs during won believe no to be been

if So, please Terry everybody to to thank call, I our to at or our out want taking either reach listen and, website me questions. you have visit for or to additional the time


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

You now day. Good may disconnect.