Westwood (WHG)

Julie Gerron SVP, General Counsel and Chief Compliance Officer
Brian Casey President and CEO
Terry Forbes SVP, CFO and Treasurer
Mac Sykes Gabelli
Call transcript
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Thank you for standing by and welcome to the Third Quarter 2021 Westwood Holdings Group Inc. Earnings Conference Call. At this time all participants are in listen-only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions].

program recorded. today's reminder, a is being As I today's program. like to host for introduce your would now Julie Vice Gerron, Compliance Chief Senior President, General and Counsel Officer. ahead. go Please

Julie Gerron

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

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

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

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

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

Brian Casey

to sales U.S. our of best quarterly Thanks a and our variety on the XXXX. is to performance Good which Last taking our improving SmallCap since highlighted strategies, time performance our afternoon. success our quarter, and soft listen of the for quarterly institutional I strategy, earnings call. value included close fronts,

client new our multi-asset new two along rollout our with an strategies, the launch in mutual continued value pipeline in solid of improving new a to improvements wealth of new clients. pleased with very across our of the performance to year, portal better progress I'm performance our This Westwood and for half mandates business year-to-date wealth, funded one and first good the serve funds, U.S. strategies, quarter, report the

Following regular regular allocation we've capital quarter. increased both quarterly review, and a our dividend dividend board's last regular paying our special dividend after

Our no to us dividend business. to sheet with in history shareholder while continuing along our cash of our maintaining a payouts core with strong and generation returns, growing invest balance enhance allows boost debt,

let's year. value investment performance. third of areas market during of returns March economic while quarter and its indices, since our the stretch some XXX Investor and areas turn growth declines monthly impacted Now were caseloads value data differently. to mixed more oriented fell, September stocks flow returns its crosscurrents of rising continued Smaller Markets last to despite asset all anxiety quarterly positive and as its rose. cap worst U.S. Coronavirus S&P the across led decline, secular and between the defensive while

quarter negative fixed rallied investment in leaving returns the the rates grade and declined over territory. income both On side, many

high-yield securities and erase Combined style the out of gains. relative largest decline growth quarter-to-quarter inflation growth eked peak rates. performance rates its The devalue. one in deficit to year-to-date fears While of small after the with relative nearly in increases caused rising interest

the for Index Several reduce rebalance internal to Value XXXX their quarter. allocations Russell the exposure. cap outperform strategy cap large large Our clients equity

the longer-term institutional fund peers. remains competitive universe. the mutual and fund scored investment a quarter top four-star top landed for funds remain of XX% Morningstar. the in relative to Our of and XX% large in value WHGLX Its rated rankings the It Morningstar on also

points XXXX outperformed inflows Russell net SMidCap index their its enjoyed clients added accounts. basis over to the Value Our XXX strategy as by and

Russell In Index securities and as just in biotechnology XX% quarter, fund WHGMX mutual XXXX top stocks, volatility behind SmallCap, finished among for our our energy Value XX% of Morningstar the ranked quarter the the and the strategy ranked For peers. MEME institutional and top in impacted investment we performance. the

indices, negative Russell price of net SmallCap the our had recent of much category. often performance. flows allocations but high volatility requirements, benchmark the whose relative that reconstitution consists quarterly their quality impacts the the SmallCap of fail as criteria securities With reduced in asset clients

side, to we the earlier is in funded cash with and positive one The improved, have many relative fourth and the in to SmallCap the year new up and this forward closing is SmallCap for show the absolute, performance. good year a now profitability. flow team, mandates On to off out revenues, quarter beginning and start look

allocators by in value. may growth cheap and to securities, the In XXX active XXth quarter. companies Russell between critical will important the buying and value consultants investing growth than the shifting towards points, allocating statistically beat mispriced, management repositioning value basis and be to clearly summary, Finally, undervalued area. simply warrant from is simply continue ranked More Nuances the picking. up among for on the of in all XXXX as percentile stock investment interested Index value in the and nearly cap dynamics are peers team Value institutional market role or bottom

selection As generated factors and drive more returns quality have idiosyncratic outcomes important. diminished become often fundamentals returns through

years remains Barclays year-to-date. process strategy, Despite for the as benchmark trailing share trailing and our our ranking to for ahead period. XX% percentile category, equity Bond benchmark three S&P this improve with quarter. ranking Aggregate them continue XXth a XXth groups XX-year and and percentile the we a of in year-to-date of the a XXX, team outcomes. excited gain We're Index percentile to income ranking XX% to opportunity its multi-asset five record message The For largest Morningstar strong XX% trailing XXth XX% Bloomberg prospects

trailed income their this flows driven one-year basis. remain a ticker on trailing Our generated strategies mutual quarterly benchmarks positive strong ahead our intermediary by performance opportunity but We're that funds these sales total very pleased and income like return ticker blended quarter, team. primarily by past also WLVIX high WHGHX

category. record arbitrage mutual value strong WMNIX and income for ninth absolute in ticker Morningstar's a positive Our posted its improved quarter track fund performance ranking the alternative solid with relative very percentile

across strategy and it's basis capable enthusiastic years SmallCap team quarter this XXX basis cycles spent asset outperform an nearly of our that ahead it. Russell by Head we're year-to-date. about other growth now systematic has we our market benchmark XXX and outperformance continues from as this developing Growth investment points very process delivering its benefit points consider beating Multi-Asset strategies could Index investment to Lastly, of process XXXX

strategies markets of minimize to past. deploy correlations continue a low the evolve, the allocators As within where lower fixed search to potential ways challenges asset solutions for in spreads today's without created to of and We've continuum Multi-Asset income, tight planning overcome rates return five to star side gain space to institutional intermediary and the sales. four rated. we’re allocation the strategies. institutional a solutions traction In are and on and targeted Shifting of expect the coming intermediary where Multi-Asset year, our reintroduction in

quarter, their resulted noted of in I clients As million several rebalance $XXX during net the earlier, to to equities outflows. exposure reduce which portfolios

total look nice fund normal income, of the a into rebalancing, pace of platform Westwood have income fund. a quarters. pipeline on with discussions a the SmallCap fund. of a The long clients and WSCIX. several high WQAIX represented clients fund AllCap strategy process mutual the the pause been we’re AllCap SmallCap buy mutual Multi-Asset over one a new these record who ways, ticker income by mutual advised pleased flows in flows third and end long-term Growth SMidCap, quarter, prior our we years. expanding the rating record Westwood course as forward At Growth, pleased track including which The new have some of time, SmallCap based were has grows. positive net opportunity, our has funds, We us Beyond to two head appropriate ticker enjoyed the provides which In from we for strategy Systematic team. track the move over many alternative build Fund, and The of past a fund on for that of to have the years to the Consultants us the small around is to a several see strategies return. they Systematic developed quarter Quality with launched the Growth, for

outflows product as of our strategy and the distribution, quarters been Client and been thanks However, net this achieved year this sales institutional from gains in to has sales strong and have strong alignment strong platform strategies retention client rebalancing business execution relationships. focus channels. on consultant client relationships and were intermediary in new leverage overweight to continue we approved an our with equities, away dominated by

Multi-Asset shifted has year team track stage. opportunities to on among Multi-Asset three especially sales with our timelines the a of under well our SmallCap Overall, is team focus platform, Institutional to on close soft approaching record alternative opportunities spread now balanced some has the its opportunity, Intermediary is focused Our late SMidCap from early with the across strategies pipeline exciting team. and income and and horizon. income

aims account ahead Alpha High index in outcomes filed Equity investments underperform its since higher basis the along Index. which for Index points. for management it payments efficient as of strategies outflows the their wealth tax focuses resulted Alpha management, payments larger wealth to wealth this year, last U.S. XXXX a quarter. Russell XXXX year-to-date, These the outperformed of normal performance Select Value lag portfolio its time for in to returns, and inclusion Centric foreign triggering Russell domestic than channel. a clients tax more and produce year. a mixed ADRs domiciled Turning for took extensions same inception some Select well-rounded many our paying which XXX of the over of on with breather to of Index Dividend closures lag index. tax of wealth our March caused High the were this dividend this remains quarter by

well has clients. Houston development flows team to into inflows reach continued attractive that meaningful Our pipelines have efforts in and servicing the result new manage and next and should their to enhance Dallas year. business

and and High free our like quarter. against serving proven the beneficial attentive access we and Our for via new financial out mobile on clients and in Bank relations our with delivering for opportunities, coming with of to attractive strengthening provide as well InvestCloud app in a equity private to obtain funds its iPhone Private began Clients SmallCap friction as that with income planning, securities and planning, quality growth. to Trust, own iPad Westwood a opportunity, ability rolling this state service portfolios high service. families strategies loan their our trustee has as prospects. way assistance client clients clients to investing We as Westwood Alpha The offerings are portal credit such including the

the an years estate offering, for We're holistic digital banking to expanded excited Management partner, wealth investment few and to Houston, with We're in the that the vibrant market a take expansion management alternative grow migration private all opportunities, economic business. Wealth in portal. built planning, where especially have over the ahead. Texas, in past demographics business needed client all Dallas, years and our including to be financial to in population access continued complex suggest We ready tools a new and planning, wealth our we've

we've wherever well and Northern into of On daily as the equity outsourcing to while such expenses the this taken former remaining side, has trading has have Trust pleased We're actions, resource. continued in Chicago, progressed and platform possible decisive of reduce integrated primary expense fully relationship that to last traders report our to year's one our Northern Trust. our

Our new are million the and arrangement per with year. achieving portfolio to in savings Westwood close managers happy $X

with approximately a fund Northern forward, income And expect years develop proxy we this will other savings ahead. XXXX. family administrator Trust and Westwood Multi-Asset and has costs paying shareholders both time mutual mutual Westwood considerable mutual and Also related accrue process our our month, than But a ultimate our we team more fund will completed fund the is and we the move solutions shareholders move we in effort. fixed all November reorganization the that effective trading fund we'll solicitation totaling in to X. last to team current started year fund project products in net shareholders. result. we taken from to leveraging to As our expect as successfully This see $XXX,XXX

ratio, holding have our pipeline expense the per slowed summary, to shareholders We've reductions healthy. pleased million and its year and asset Multi-Asset levels, form fees strong between Westwood funds approximately a star form with and the flows achieve we're cost is ratings. our of Following the In mutual and $X from earned. we improvements. value new strong year-to-date mutual team's with launched reorganization, fund and of split effective second in of institutional higher wealth rankings while quarter in reduced the groups performance And expect

stock shareholders to year this over continue year to excited the Terry exceptional shareholder to call now We to dividend our up We're confidence to I'll reduce for investment performance, service. CFO, how our enhance our with work We've the bought expenses, back grow returns. line top finishes hard and to and and Forbes. see turn improve increased revenue, look our client deliver forward ahead.

Terry Forbes

we $XX.X reflecting and the Thanks, last the million year's quarter million partially of by third quarter. Brian assets performance total third Today, Revenues higher $XX.X Revenues prior third higher offset revenues to the under reported to and afternoon, compared good $XX.X everyone. lower million second average year's management, quarter, in in for are fees. quarter, are quarter. second than comparable the

quarter, $X.X Third expenses. income share of or $X.XX million lower the $X $X.XX versus of per economic $X.XX to of or share $X.XX quarter. the exceeded income or the per were operating quarter or net in second revenues due and million share in second quarter current per somewhat $X.X million $X.X in combination per earnings higher million share Non-GAAP the net

mutual net quarter economic per revenues were $X.XX of million last and the quarter third loss million $X.X Firm assets end XX% quarter average $X.X on $XX.X $X.X per $X.XX quarter. the million billion third $X.X or Wealth prior year totaled year’s higher per $X.XX at consisted institutional the of impacting compared quarter $X.X or with assets share higher billion primarily share due XX% or management total. non-recurring third total, or of of $XX.X management income or $X.XX total. XXXX. Economic per with items or of or for under the of of net $X.X earnings share of assets the of in AUM favorably XX% Third losses million of quarter to compared billion the share, several assets of billion and fund and wide

million of million. outflows of the net Over quarter, $XXX $XXX market depreciation experienced we and

Board Our debt quarter very a short-term at earnings. end January of and you Directors of we and to financial position totaling cash To continues reflecting a encourage to cash sheet. dividend quarter prepared to presentation posted highlights, we'll term of to dividend in the has our solid XX, balance as increase announce well of discussion per over $XX.X revenues yield a of be approved a of million you XXXX. investments regular in X.X% on XX with stockholders $X.XX XXXX free cash our our represents as an payable We questions. regular December your development This common to on thank close, on longer XX% our a over trends close. previous our line two share brings yesterday's of for record the product comments business, the interest third and have And open and and as review company. website we That investor that


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

question Your please.

Mac Sykes

my Good afternoon, everyone. questions. Thanks taking for

Brian Casey

Mac. Definitely,

Mac Sykes

like did one, I the the some looked buy but that see didn't First you on back release? quarter? in stock press It it,

Brian Casey

shares We or did XX,XXX about so.

Mac Sykes

know much mean, is thesis you strategies us Okay, just the your leveraging I products how but consultant AUM leverages the growth? now. and remind and kind of it I kind of stuff, kind the different a on situation the it traction leverageable his get record? you then mutual imaginary very rely the seems you could kind most you this systematic Can interim track in can just where just on of the fund a of means like that is there? across

Brian Casey

That's great question. Mac. thanks, Well,

got, or was about in to And in the do we points And Adrian who growth really year by inception. database Barnard, paper to human portfolio firm. a And thought, over say over I multi designed started the exceptional. index, about proprietary It's along effectively heads eliminate know, growth with ran is minimize want record And don't Russell channel. ago. or Helfert in asset Scott that So have bias. we've I wealth the for really the developed decade with a prior we a basis database year. Adrian is a XXXX we a Helfert million $XX worked And the something, so index of ahead wealth channel started the XXXX we since

mutual to a just wanted a fund, we which ago. weeks So did start of we couple

deliver there now. channels continue and have institutional we it kinds in gets a all in normal then traction So we we've the of typically more go channel. the got through of to that in if But it success results, the will both the wealth channel, money seed corporate little just channel, these as would intermediary

Mac Sykes

Is a great. Okay, had the then quarter. and little turnover pipeline this you talked update there seems last that just And an pipeline last today? there I of thing, was about on think like kind of the quarter, it bit

Brian Casey

Yes, sure.

we of we quarters, are what And winds and And income, your to of with actually is to lot that late the the see as pipeline. increased really, we flows the bit, of couple our opportunities. consider through net are half more have in revenues, late over you're we those slowed stage, that billion quarters, about over prior early effects seeing that's firms. were increase last little starting you're combine consulting mid a $X So stage the as would we've now the that able and And stage, institutional quarter had than define typical dividend. we a with the still said it channels I closed we during stage of while increase in sort

to the we quarter. see from a really are our And As growth firms. SMid starting to at or long-term three of there. we're good SmallCap product. performance see top excellent rated two product, we really by an flows got closing, we pivot closing in soft we It's this want And had some consulting And our record.

quarter opportunities good lined ahead. In and in for got up the flows in SMid had net positive in quarter year fourth some the the fact, and we've we third

Mac Sykes

Great, thank you.

Brian Casey

Thanks for question, Matt. your


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

Brian Casey

Thanks Westwood to westwoodgroup.com Have taking tab. you any a again great under call. the listen have of further really visit for more myself call Terry or your and support relations feel We for investor afternoon. to if the time to to free or appreciate questions information


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

disconnect. You may Good now day.