Westwood Holdings Group, Inc. Reports Third Quarter 2016 Results

Assets Under Management of $21.3 Billion; Assets Under Advisement Increase to $1.1 Billion

Quarterly Dividend Increased 9%, Representing the 14th Consecutive Year of Increases

DALLAS, Oct. 26, 2016 (GLOBE NEWSWIRE) -- Westwood Holdings Group, Inc. (NYSE:WHG) today reported third quarter 2016 revenues of $31.8 million compared to revenues of $32.5 million in the third quarter of 2015. Asset-based advisory fees decreased $1.5 million due to lower average assets under management ("AUM") as a result of net outflows, partially offset by market appreciation, over the last twelve months. While average AUM was lower in the current year quarter, end of period AUM grew 4% to $21.3 billion at September 30, 2016 compared to $20.4 billion at September 30, 2015. Additionally, assets under advisement ("AUA") totaled $1.1 billion at September 30, 2016, including approximately $800 million related to the Aviva Investors Global Convertibles Fund, a Luxembourg-domiciled long-only convertibles fund, for which Westwood was appointed as subadvisor in September 2016.

Third quarter net income totaled $5.9 million compared with $7.0 million in the third quarter of 2015, primarily due to the decrease in asset-based advisory fees noted above. Diluted earnings per share of $0.72 compared to $0.87 for the third quarter of 2015. Non-GAAP Economic Earnings for the quarter of $10.6 million compared with $12.4 million in the prior year's third quarter. Non-GAAP Economic Earnings per share ("Economic EPS") of $1.30 compared with $1.55 in the third quarter of 2015.

Highlights from the third quarter 2016 include:
  • Continued strong performance of our Emerging Markets and Multi-Asset strategies.
  • Appointed to sub-advise approximately $800 million in the Aviva Investors Global Convertibles Fund.
  • Authorized an additional $5 million of repurchases of our outstanding common stock under our share repurchase program, bringing total authorized repurchases up to $15 million ($9.4 million available for repurchases at September 30, 2016).
  • Repurchased 24,199 shares of our common stock at an aggregate purchase price of $1.2 million.

Brian Casey, Westwood's President & CEO, commented, "We believe that many of the decisions we have made in recent years allow us to look forward to the future with confidence. We have increased our dividend for the 14th consecutive year, remain debt free and continue to generate strong cash flows. We are committed to further expand and diversify our global client base and were pleased to be appointed as a sub-advisor to the Aviva Global Convertibles Fund, which extends our long-term strategic partnership with Aviva Investors in the global convertibles asset class space. Approximately $800 million in assets under advisement will transition to assets under management upon approval by the Luxembourg fund regulator."

Westwood's Board of Directors declared a quarterly cash dividend of $0.62 per common share, an increase of 9% from the previous quarterly dividend rate, payable on January 3, 2017 to stockholders of record on December 9, 2016.  At quarter-end, Westwood had $80.5 million in cash and investments, stockholders' equity of $140.9 million, and no debt.

Economic Earnings and Economic EPS are non-GAAP performance measures and are explained and reconciled with the most comparable GAAP numbers in the attached tables.

Westwood will host a conference call to discuss third quarter 2016 results and other business matters at 4:30 p.m. Eastern time today.  To join the conference call, dial 877-303-6235 (domestic and Canada) or 631-291-4837 (international).  The conference call can also be accessed via our Investor Relations page at westwoodgroup.com and will be available for replay through November 2, 2016 by dialing 855-859-2056 (domestic and Canada) or 404-537-3406 (international) and then entering the passcode 76961886.

About Westwood

Westwood Holdings Group, Inc. provides investment management services to institutional investors, private wealth clients and financial intermediaries. With $21.3 billion in assets under management *, our firm offers a range of investment strategies including U.S. equities, Master Limited Partnerships (MLPs), Multi-Asset, Global and Emerging Markets equities, and Global Convertible securities portfolios. Access to our strategies is available through separate accounts, commingled funds, the Westwood Funds® family of mutual funds, and UCITS funds. Westwood benefits from significant, broad-based employee ownership and trades on the New York Stock Exchange under the symbol "WHG." Based in Dallas, Texas, Westwood also maintains offices in Toronto, Boston, Omaha and Houston.

 For more information on Westwood, please visit www.westwoodgroup.com.

 For more information on the Westwood Funds®, please visit www.westwoodfunds.com.

*As of September 30, 2016

Forward-looking Statements

Statements in this press release that are not purely historical facts, including, without limitation, statements about our expected future financial position, results of operations or cash flows, as well as other statements including without limitation, words such as "anticipate," "forecast," "believe," "plan," "estimate," "expect," "intend," "should," "could," "goal," "may," "target," "designed," "on track," "comfortable with," "optimistic" and other similar expressions, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results and the timing of some events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation: regulations adversely affecting the financial services industry; the composition and market value of our assets under management; competition in the investment management industry; our investments in foreign companies; our ability to develop and market new investment strategies successfully; our ability to pursue and properly integrate acquired businesses; litigation risks; our ability to retain qualified personnel; our relationships with current and potential customers; our ability to properly address conflicts of interest; our ability to maintain adequate insurance coverage; our ability to maintain effective information systems; our ability to maintain effective cyber security; our ability to maintain an effective system of internal controls; our ability to maintain our fee structure in light of competitive fee pressures; our relationships with investment consulting firms; the significant concentration of our revenues in a small number of customers; and the other risks detailed from time to time in Westwood's Securities and Exchange Commission filings, including, but not limited to, its annual report on Form 10-K for the year ended December 31, 2015 and its quarterly reports on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, Westwood is not obligated to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

(WHG-G)

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share and share amounts)
(unaudited)
 
    Three Months Ended
    September 30,  2016   June 30,  2016   September 30,  2015
REVENUES:            
Advisory fees:            
Asset-based   $ 23,447     $ 22,666     $ 24,940  
Performance-based   226     409      
Trust fees   7,690     7,643     7,973  
Other, net   414     305     (462 )
Total revenues   31,777     31,023     32,451  
             
EXPENSES:            
Employee compensation and benefits   $ 15,637     $ 15,108     $ 15,686  
Sales and marketing   408     687     419  
Westwood mutual funds   755     831     865  
Information technology   1,874     2,201     1,626  
Professional services   1,903     1,158     1,178  
General and administrative   2,147     2,526     2,175  
Total expenses   22,724     22,511     21,949  
Income before income taxes   9,053     8,512     10,502  
Provision for income taxes   3,166     2,851     3,489  
Net income   $ 5,887     $ 5,661     $ 7,013  
Other comprehensive income (loss):            
Foreign currency translation adjustments   (453 )   157     (1,386 )
Total comprehensive income   $ 5,434     $ 5,818     $ 5,627  
             
Earnings per share:            
Basic   $ 0.74     $ 0.71     $ 0.90  
Diluted   $ 0.72     $ 0.69     $ 0.87  
             
Weighted average shares outstanding:            
Basic   7,995,680   8,000,214   7,808,239
Diluted   8,179,956   8,172,923   8,037,080
             
Economic Earnings   $ 10,615     $ 10,387     $ 12,434  
Economic EPS   $ 1.30     $ 1.27     $ 1.55  
             
Dividends declared per share   $ 0.57     $ 0.57     $ 0.50  
                         

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share and share amounts)
(unaudited)
 
    Nine Months Ended September 30,
    2016   2015
REVENUES:        
Advisory fees:        
Asset-based   $ 67,928     $ 76,327  
Performance-based   635     2,206  
Trust fees   22,798     21,044  
Other, net   568     (207 )
Total revenues   91,929     99,370  
         
EXPENSES:        
Employee compensation and benefits   $ 47,239     $ 47,507  
Sales and marketing   1,423     1,310  
Westwood mutual funds   2,282     2,593  
Information technology   6,039     4,085  
Professional services   4,707     4,281  
General and administrative   7,028     5,962  
Total expenses   68,718     65,738  
Income before income taxes   23,211     33,632  
Provision for income taxes   8,141     11,214  
Net income   $ 15,070     $ 22,418  
Other comprehensive income (loss):        
Foreign currency translation adjustments   1,007     (2,541 )
Total comprehensive income   $ 16,077     $ 19,877  
         
Earnings per share:        
Basic   $ 1.89     $ 2.90  
Diluted   $ 1.84     $ 2.78  
         
Weighted average shares outstanding:        
Basic   7,952,938   7,737,608
Diluted   8,212,468   8,076,055
         
Economic Earnings   $ 29,094     $ 36,201  
Economic EPS   $ 3.54     $ 4.48  
         
Dividends declared per share   $ 1.71     $ 1.50  
                 

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and share amounts)
(unaudited)
 
    September 30,  2016   December 31, 2015
ASSETS        
Current Assets:        
Cash and cash equivalents   $ 30,692     $ 22,740  
Accounts receivable   22,810     19,618  
Investments, at fair value   49,849     72,320  
Other current assets   2,355     2,926  
Total current assets   105,706     117,604  
Goodwill   27,144     27,144  
Deferred income taxes   10,950     11,042  
Intangible assets, net   21,884     23,354  
Property and equipment, net of accumulated depreciation of $4,365 and $3,687   4,014     2,192  
Total assets   $ 169,698     $ 181,336  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current Liabilities:        
Accounts payable and accrued liabilities   $ 3,498     $ 3,549  
Dividends payable   6,146     5,749  
Compensation and benefits payable   13,357     20,264  
Contingent consideration       9,023  
Income taxes payable   2,482     6,268  
Total current liabilities   25,483     44,853  
Accrued dividends   1,536     1,699  
Deferred rent   1,827     817  
Total liabilities   28,846     47,369  
         
Stockholders' Equity:        
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 9,830,612 and outstanding 8,830,021 shares at September 30, 2016; issued 9,425,309 and outstanding 8,630,687 shares at December 31, 2015   99     94  
Additional paid-in capital   159,615     143,797  
Treasury stock, at cost - 1,000,591 shares at September 30, 2016; 794,622 shares at December 31, 2015   (44,863 )   (34,910 )
Accumulated other comprehensive loss   (3,681 )   (4,688 )
Retained earnings   29,682     29,674  
Total stockholders' equity   140,852     133,967  
Total liabilities and stockholders' equity   $ 169,698     $ 181,336  
                 

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
    Nine Months Ended September 30,
    2016   2015
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net income   $ 15,070     $ 22,418  
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation   732     606  
Amortization of intangible assets   1,470     951  
Unrealized losses (gains) on trading investments   (676 )   484  
Stock based compensation expense   12,164     12,560  
Deferred income taxes   114     (1,923 )
Excess tax benefits from stock based compensation   (165 )   (1,432 )
Net sales (purchases) of investments - trading securities   23,147     22,679  
Other non-cash, net   275     (3 )
Changes in operating assets and liabilities:        
Accounts receivable   (2,711 )   (5,332 )
Other current assets   900     236  
Accounts payable and accrued liabilities   (82 )   537  
Compensation and benefits payable   (6,758 )   (2,052 )
Income taxes payable   (4,637 )   1,899  
Other liabilities   154     (28 )
Net cash provided by operating activities   38,997     51,600  
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchases of property and equipment   (1,680 )   (704 )
Acquisition of Woodway, net of cash acquired       (24,133 )
Net cash used in investing activities   (1,680 )   (24,837 )
CASH FLOWS FROM FINANCING ACTIVITIES:        
Purchases of treasury stock   (5,629 )    
Purchase of treasury stock under employee stock plans   (614 )   (1,327 )
Restricted stock returned for payment of taxes   (3,710 )   (5,621 )
Excess tax benefits from stock based compensation   165     1,432  
Payment of contingent consideration in acquisition   (5,562 )    
Cash dividends   (14,827 )   (13,065 )
Net cash used in financing activities   (30,177 )   (18,581 )
Effect of currency rate changes on cash   812     (2,430 )
NET INCREASE IN CASH AND CASH EQUIVALENTS   7,952     5,752  
Cash and cash equivalents, beginning of period   22,740     18,131  
Cash and cash equivalents, end of period   $ 30,692     $ 23,883  
         
Supplemental cash flow information:        
Cash paid during the period for income taxes   $ 12,632     $ 11,664  
Common stock issued for acquisition   $ 3,734     $ 5,292  
Non-cash accrued contingent consideration   $     $ 9,102  
Accrued dividends   $ 7,682     $ 6,452  
Tenant allowance included in Property and equipment   $ 1,128     $  
                 

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES
Reconciliation of Net Income to Economic Earnings
(in thousands, except per share and share amounts)
(unaudited)
 
    Three Months Ended
    September 30,  2016   June 30,  2016   September 30,  2015
Net Income   $ 5,887     $ 5,661     $ 7,013  
Add:  Stock based compensation expense   4,082     4,080     4,865  
Add:  Intangible amortization   490     490     400  
Add:  Tax benefit from goodwill amortization   156     156     156  
Economic Earnings   $ 10,615     $ 10,387     $ 12,434  
             
Diluted weighted average shares   8,179,956   8,172,923   8,037,080
Economic EPS   $ 1.30     $ 1.27     $ 1.55  

    Nine Months Ended September 30,
    2016   2015
Net Income   $ 15,070     $ 22,418  
Add:  Stock based compensation expense   12,164     12,560  
Add:  Intangible amortization   1,470     951  
Add:  Tax benefit from goodwill amortization   390     272  
Economic Earnings   $ 29,094     $ 36,201  
         
Diluted weighted average shares   8,212,468   8,076,055
Economic EPS   $ 3.54     $ 4.48  
                 

As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic Earnings per share ("Economic EPS"). We provide these measures in addition to, not as a substitute for, net income and earnings per share, which are reported on a GAAP basis. Management reviews Economic Earnings and Economic EPS to evaluate Westwood's ongoing performance, allocate resources and review the dividend policy. We believe that these non-GAAP performance measures, while not substitutes for GAAP net income or earnings per share, are useful for management and investors when evaluating Westwood's underlying operating and financial performance and its available resources. We do not advocate that investors consider these non-GAAP measures without also considering financial information prepared in accordance with GAAP.

We define Economic Earnings as net income plus non-cash equity-based compensation expense, amortization of intangible assets and deferred taxes related to goodwill. Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement. In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding.

 
CONTACT:Westwood Holdings Group, Inc.Tiffany B. KiceChief Financial Officer and Treasurer(214) 756-6900

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