Westwood Holdings Group, Inc. (NYSE: WHG) today reported first quarter 2014 revenues of $25.9 million, a 29% increase compared to revenues of $20.1 million in the first quarter of 2013. Non-GAAP Economic Earnings per share (“Economic EPS”) increased 54% to $1.17 compared to $0.76 in the first quarter of 2013. Diluted earnings per share increased 97% to $0.75 compared to $0.38 in the first quarter of 2013.
Highlights and significant items related to our first quarter 2014 results include:
- Revenues increased 29% to $25.9 million compared to the same period last year.
- Assets under management (“AUM”) reached a record level of $19.1 billion.
- Westwood International Advisors (“WIA”) net inflows aggregated $148 million bringing WIA’s AUM to $2.7 billion.
- AUM in our Emerging Markets UCITS fund now exceed $740 million.
- The Westwood Funds™ achieved net inflows of $138 million, reaching record AUM of $3.0 billion.
Brian Casey, Westwood’s President & CEO, commented, “We are very pleased with our strong start to 2014. We benefited from strength in the U.S. equity markets, as well as the excellent performance delivered by our MLP, SMidCap, and Emerging Markets teams. Our Westwood Funds™ achieved another significant milestone, surpassing $3 billion in AUM while achieving $138 million of net inflows, representing annualized quarterly organic growth of 20%. WIA’s AUM reached $2.7 billion at March 31, 2014, an 8% increase from December 31, 2013, and Westwood International continues to attract new client prospects.”
Firmwide AUM reached $19.1 billion at March 31, 2014 compared to $18.9 billion at December 31, 2013. Mutual fund assets, comprising ten Westwood Funds™, grew to $3.0 billion, institutional assets stood at $12.1 billion and private wealth assets aggregated $4.0 billion at March 31, 2014.
Westwood’s Board of Directors today declared a quarterly cash dividend of $0.44 per common share, payable on July 1, 2014 to stockholders of record on June 13, 2014. At quarter-end, Westwood had $63 million in cash and investments, stockholders’ equity of $90 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 first quarter 2014 results and other business matters at 4:30 p.m. Eastern time today. To join the conference call, dial 877-303-6235 (domestic) 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 April 24, 2014 by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering passcode 19536312.
About Westwood
Westwood Holdings Group, Inc. provides investment management services to institutional investors, private wealth clients and financial intermediaries. Westwood manages a variety of investment strategies including U.S., Global, and Emerging Markets equities as well as income-oriented portfolios. These strategies are made available through separate accounts, commingled funds, the Westwood FundsTM family of U.S. mutual funds, and UCITS funds. Westwood has broad-based employee ownership and trades on the New York Stock Exchange under the symbol "WHG." Based in Dallas, Westwood also has offices in Omaha and Toronto.
For more information on Westwood, please visit www.westwoodgroup.com.
For more information on the Westwood Funds™, please visit www.westwoodfunds.com.
Forward-looking Statements
Statements in this press release that are not purely historical facts, including statements about our expected future financial position, results of operations or cash flows, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “could,” “goal,” “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: our ability to identify and successfully market services that appeal to our customers; the significant concentration of our revenues among a few customers; our relationships with investment consulting firms; our relationships with current and potential customers; our ability to retain qualified personnel; our ability to successfully develop and market new asset classes; our ability to maintain our fee structure in light of competitive fee pressures; competition in the marketplace; downturns in the financial markets; new legislation adversely affecting the financial services industries; interest rates; changes in our effective tax rate; our ability to maintain an effective system of internal controls; and the other risks detailed from time to time in Westwood’s SEC filings, including, but not limited to, its annual report on Form 10-K for the year ended December 31, 2013 and its quarterly report on Form 10-Q for the quarter ended March 31, 2014. 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.
| WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||||||
| (in thousands, except per share data) | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| March 31, 2014 | December 31, 2013 | March 31, | ||||||||||
| REVENUES: | ||||||||||||
| Advisory fees: | ||||||||||||
| Asset based | $ | 20,389 | $ | 20,038 | $ | 15,547 | ||||||
| Performance based | 363 | - | - | |||||||||
| Trust fees | 5,028 | 4,904 | 4,217 | |||||||||
| Other, net | 169 | 310 | 336 | |||||||||
| Total revenues | 25,949 | 25,252 | 20,100 | |||||||||
| EXPENSES: | ||||||||||||
| Employee compensation and benefits | 12,543 | 11,550 | 11,843 | |||||||||
| Sales and marketing | 287 | 305 | 287 | |||||||||
| Westwood mutual funds | 652 | 688 | 404 | |||||||||
| Information technology | 715 | 858 | 656 | |||||||||
| Professional services | 1,382 | 1,257 | 1,002 | |||||||||
| General and administrative | 1,448 | 1,543 | 1,189 | |||||||||
| Total expenses | 17,027 | 16,201 | 15,381 | |||||||||
| Income before income taxes | 8,922 | 9,051 | 4,719 | |||||||||
| Provision for income taxes | 3,163 | 3,191 | 1,886 | |||||||||
| Net income | $ | 5,759 | $ | 5,860 | $ | 2,833 | ||||||
| Other comprehensive income: | ||||||||||||
| Foreign currency translation adjustments | (354 | ) | (156 | ) | (77 | ) | ||||||
| Total comprehensive income | $ | 5,405 | $ | 5,704 | $ | 2,756 | ||||||
| Earnings per share: | ||||||||||||
| Basic | $ | 0.77 | $ | 0.80 | $ | 0.39 | ||||||
| Diluted | $ | 0.75 | $ | 0.76 | $ | 0.38 | ||||||
| Weighted average shares outstanding: | ||||||||||||
| Basic | 7,474,415 | 7,345,357 | 7,287,161 | |||||||||
| Diluted | 7,724,715 | 7,684,619 | 7,481,668 | |||||||||
| Economic Earnings | $ | 9,057 | $ | 9,004 | $ | 5,667 | ||||||
| Economic EPS | $ | 1.17 | $ | 1.17 | $ | 0.76 | ||||||
| Dividends declared per share | $ | 0.44 | $ | 0.44 | $ | 0.40 | ||||||
| WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| As of March 31, 2014 and December 31, 2013 | ||||||||
| (in thousands, except par value and share amounts) | ||||||||
| March 31, 2014 (unaudited) | December 31, 2013 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 17,374 | $ | 10,864 | ||||
| Accounts receivable | 14,754 | 14,468 | ||||||
| Investments, at fair value | 45,419 | 64,554 | ||||||
| Deferred income taxes | 1,308 | 3,782 | ||||||
| Prepaid income taxes | 2,371 | - | ||||||
| Other current assets | 2,207 | 2,521 | ||||||
| Total current assets | 83,433 | 96,189 | ||||||
| Goodwill | 11,255 | 11,255 | ||||||
| Deferred income taxes | 365 | 2,041 | ||||||
| Intangible assets, net | 3,699 | 3,789 | ||||||
| Property and equipment, net of accumulated depreciation of $2,297 and $2,155 | 2,693 | 2,746 | ||||||
| Total assets | $ | 101,445 | $ | 116,020 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 1,879 | $ | 2,082 | ||||
| Dividends payable | 4,252 | 3,935 | ||||||
| Compensation and benefits payable | 3,666 | 17,805 | ||||||
| Income taxes payable | - | 1,031 | ||||||
| Total current liabilities | 9,797 | 24,853 | ||||||
| Accrued dividends | 652 | 1,266 | ||||||
| Deferred rent | 1,228 | 1,268 | ||||||
| Total long-term liabilities | 1,880 | 2,534 | ||||||
| Total liabilities | 11,677 | 27,387 | ||||||
| Stockholders’ Equity: | ||||||||
| Common stock, $0.01 par value, authorized 25,000,000 shares, issued 8,952,417 and outstanding 8,250,954 shares at March 31, 2014; issued 8,778,613 and outstanding 8,176,417 shares at December 31, 2013 | 89 | 88 | ||||||
| Additional paid-in capital | 106,162 | 100,955 | ||||||
| Treasury stock, at cost – 701,463 shares at March 31, 2014; 602,196 shares at December 31, 2013 | (29,008 | ) | (23,169 | ) | ||||
| Accumulated other comprehensive loss | (611 | ) | (257 | ) | ||||
| Retained earnings | 13,136 | 11,016 | ||||||
| Total stockholders’ equity | 89,768 | 88,633 | ||||||
| Total liabilities and stockholders’ equity | $ | 101,445 | $ | 116,020 | ||||
| WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2014 | 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income | $ | 5,759 | $ | 2,833 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 144 | 90 | ||||||
| Amortization of intangible assets | 90 | 90 | ||||||
| Unrealized (gains) losses on trading investments | (57 | ) | 373 | |||||
| Restricted stock amortization | 3,170 | 2,706 | ||||||
| Deferred income taxes | 4,036 | 2,079 | ||||||
| Excess tax benefits from stock based compensation | (1,863 | ) | (672 | ) | ||||
| Net purchases of investments – trading securities | 19,206 | 11,546 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (450 | ) | (1,164 | ) | ||||
| Other assets | 338 | (1,313 | ) | |||||
| Accounts payable and accrued liabilities | (189 | ) | (198 | ) | ||||
| Compensation and benefits payable | (13,963 | ) | (9,906 | ) | ||||
| Income taxes payable and prepaid income taxes | (1,557 | ) | (1,166 | ) | ||||
| Other liabilities | (37 | ) | (6 | ) | ||||
| Net cash provided by operating activities | 14,627 | 5,292 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | (121 | ) | (247 | ) | ||||
| Net cash used in investing activities | (121 | ) | (247 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Purchases of treasury stock | (5,839 | ) | (3,721 | ) | ||||
| Excess tax benefits from stock based compensation | 1,863 | 672 | ||||||
| Cash dividends | (3,942 | ) | - | |||||
| Net cash used in financing activities | (7,918 | ) | (3,049 | ) | ||||
| Effect of currency rate changes on cash | (78 | ) | (39 | ) | ||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 6,510 | 1,957 | ||||||
| Cash and cash equivalents, beginning of period | 10,864 | 3,817 | ||||||
| Cash and cash equivalents, end of period | $ | 17,374 | $ | 5,774 | ||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the period for income taxes | $ | 761 | $ | 1,064 | ||||
| WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES | |||||||||
| Reconciliation of Net Income to Economic Earnings | |||||||||
| (in thousands, except per share data and share amounts) | |||||||||
| (unaudited) | |||||||||
| Three Months Ended | |||||||||
March 31, | December 31, | March 31, | |||||||
| Net Income | $ | 5,759 | $ | 5,860 | $ | 2,833 | |||
| Add: Restricted stock expense | 3,170 | 3,016 | 2,706 | ||||||
| Add: Intangible amortization | 90 | 90 | 90 | ||||||
| Add: Tax benefit from goodwill amortization | 38 | 38 | 38 | ||||||
| Economic earnings | $ | 9,057 | $ | 9,004 | $ | 5,667 | |||
| Diluted weighted average shares | 7,724,715 | 7,684,619 | 7,481,668 | ||||||
| Economic EPS | $ | 1.17 | $ | 1.17 | $ | 0.76 | |||
As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic Earnings per share (or 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 dividend policy. We believe that these non-GAAP performance measures, while not substitutes for GAAP net income or earnings per share, are useful for both 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 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.
(WHG-G)
Contacts:
Mark A. Wallace, 214-756-6900
Chief
Financial Officer
