Westwood Holdings Group, Inc. Reports Second Quarter 2013 Results Assets Under Management Increase to Record of $15.8 Billion Westwood International Assets Surpass $1.5 Billion Ireland Domiciled UCITS Fund Launched Business Wire DALLAS -- July 18, 2013 Westwood Holdings Group, Inc. (NYSE: WHG) today reported second quarter 2013 revenues of $23.5 million, a 17% increase compared to revenues of $20.1 million in both the second quarter of 2012 and the first quarter of 2013. Economic Earnings per share (“Economic EPS”) were $1.07 compared to $0.72 in the same quarter of the prior year and $0.76 in the first quarter of 2013. Diluted earnings per share were $0.65 compared to $0.30 in the same quarter of 2012 and $0.38 in the first quarter of 2013. Highlights and significant items impacting our pretax results include: *Quarterly revenues increased 17% over the second quarter of 2012. *Performance fees recorded for our Master Limited Partnership (“MLP”) strategy were $2.5 million compared to $1.2 million in the second quarter of 2012. *A gain of $899,000 from the sale of 100,000 shares of Teton Advisors, Inc. was included in other revenues during the second quarter of 2012. *2012’s second quarter included $1.4 million of recruiting and other costs related to the hiring of team members at Westwood International Advisors (“WIA”). Westwood International’s assets under management (“AUM”) exceeded $1.5 billion at June 30, 2013, up 75% from year end. WIA contributed $1.7 million to revenues during the second quarter of 2013 with $2 million of related costs, compared to revenues of $1.5 million in the first quarter of this year with $2.7 million of related costs. Excluding WIA related items, second quarter 2013 Economic EPS and diluted earnings per share would have been $1.09 and $0.68, respectively. Brian Casey, Westwood’s President & CEO, commented, “We are very pleased with our second quarter financial results and the exceptionally strong performance generated by our MLP, SmallCap, and Income Opportunity teams. The Westwood Funds™ had record quarterly net inflows exceeding $190 million, bringing aggregate net inflows this year to $347 million. We have experienced strong demand for WIA’s Emerging Markets strategy with assets now exceeding $1.5 billion. We recently obtained authorization from the Central Bank of Ireland for a new Irish UCITS umbrella fund named Westwood Investment Funds PLC. In response to client demand, our first UCITS sub-fund will focus on our Emerging Markets strategy, and we expect this product will receive significant new inflows over the next two months. We look forward to expanding our UCITS offerings in the future.” Aggregate assets under management reached a record $15.8 billion as of June 30, 2013, an increase of 12% compared to $14.2 billion as of year end, and 20% higher than a year ago. Mutual fund assets, now comprising ten Westwood Funds, stood at $2.1 billion as of June 30, 2013, 32% higher than year end 2012 and 44% higher than June 30, 2012. Westwood’s Board of Directors today declared a quarterly cash dividend of $0.40 per common share, payable on October 1, 2013 to stockholders of record on September 13, 2013. At June 30, 2013 Westwood had $57.5 million in cash and investments, with stockholders’ equity of $79.4 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 second quarter 2013 results and other business updates 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 July 25, 2013 by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering passcode 99412344. 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. Access to these strategies is available through separate accounts, commingled funds and the Westwood Funds^TM family of mutual funds. Westwood has significant, 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, 2012 and its quarterly reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013. 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 June 30, March 31, June 30, REVENUES: 2013 2013 2012 Advisory fees: Asset-based $ 16,486 $ 15,547 $ 14,102 Performance based 2,535 - 1,182 Trust fees 4,574 4,217 3,757 Other, net (120 ) 336 1,025 Total revenues 23,475 20,100 20,066 EXPENSES: Employee compensation and 11,907 11,843 11,885 benefits Sales and marketing 334 287 261 Westwood mutual funds 462 404 275 Information technology 678 656 629 Professional services 1,077 1,002 2,063 General and administrative 1,284 1,189 1,201 Total expenses 15,742 15,381 16,314 Income before income taxes 7,733 4,719 3,752 Provision for income taxes 2,854 1,886 1,554 Net income $ 4,879 $ 2,833 $ 2,198 Other comprehensive income: Available-for-sale investments: Change in unrealized gain on - - 34 investment securities Less: reclassification adjustment for net gains - - (908 ) included in earnings Net change (net of income taxes of $0, $0, and $(476), - - (874 ) respectively) Foreign currency translation (158 ) (77 ) (18 ) adjustments Other comprehensive income (158 ) (77 ) (892 ) Total comprehensive income $ 4,721 $ 2,756 $ 1,306 Earnings per share: Basic $ 0.66 $ 0.39 $ 0.31 Diluted $ 0.65 $ 0.38 $ 0.30 Weighted average shares outstanding: Basic 7,349,868 7,287,161 7,162,540 Diluted 7,495,523 7,481,668 7,250,707 Economic Earnings $ 7,993 $ 5,667 $ 5,252 Economic EPS $ 1.07 $ 0.76 $ 0.72 Dividends declared per share $ 0.40 $ 0.40 $ 0.37 WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands, except per share data) (unaudited) Six months ended June 30, REVENUES: 2013 2012 Advisory fees: Asset-based $ 32,033 $ 28,192 Performance based 2,535 1,182 Trust fees 8,791 7,228 Other, net 216 1,328 Total revenues 43,575 37,930 EXPENSES: Employee compensation and benefits 23,750 20,799 Sales and marketing 621 473 Westwood mutual funds 866 484 Information technology 1,334 1,225 Professional services 2,079 2,942 General and administrative 2,473 2,171 Total expenses 31,123 28,094 Income before income taxes 12,452 9,836 Provision for income taxes 4,740 3,853 Net income $ 7,712 $ 5,983 Other comprehensive income: Available-for-sale investments: Change in unrealized gain on investment - (401 ) securities Less: reclassification adjustment for net - (908 ) gains included in earnings Net change (net of income taxes of $0, and - (1,309 ) $(714), respectively) Foreign currency translation adjustments (235 ) (18 ) Other comprehensive income (235 ) (1,327 ) Total comprehensive income $ 7,477 $ 4,656 Earnings per share: Basic $ 1.05 $ 0.84 Diluted $ 1.03 $ 0.82 Weighted average shares outstanding: Basic 7,318,688 7,125,158 Diluted 7,492,392 7,272,690 Economic Earnings $ 13,660 $ 11,072 Economic EPS $ 1.82 $ 1.52 Dividends declared per share $ .80 $ 0.74 WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of June 30, 2013 and December 31, 2012 (in thousands, except par value and share amounts) June 30, December 31, 2013 (unaudited) 2012 ASSETS Current Assets: Cash and cash equivalents $ 6,133 $ 3,817 Accounts receivable 12,857 8,920 Investments, at fair value 51,368 59,906 Deferred income taxes 2,037 3,362 Prepaid income taxes 1,173 - Other current assets 2,250 1,365 Total current assets 75,818 77,370 Goodwill 11,255 11,255 Deferred income taxes 1,963 1,696 Intangible assets, net 3,969 4,149 Property and equipment, net of accumulated 2,190 2,145 depreciation of $1,932 and $1,747 Total assets $ 95,195 $ 96,615 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 1,829 $ 1,636 Dividends payable 3,517 1,201 Compensation and benefits payable 8,362 14,537 Income taxes payable - 1,438 Other current liabilities 15 14 Total current liabilities 13,723 18,826 Accrued dividends 824 - Deferred rent 1,214 1,238 Total long-term liabilities 2,038 1,238 Total liabilities 15,761 20,064 Stockholders’ Equity: Common stock, $0.01 par value, authorized 25,000,000 shares, issued 8,790,875 and outstanding 8,189,308 shares at June 30, 2013; issued 8,526,598 and outstanding 88 85 8,031,045 shares at December 31, 2012 Additional paid-in capital 95,013 88,483 Treasury stock, at cost – 601,567 shares at June 30, 2013; 495,553 shares at December (23,139 ) (18,502 ) 31, 2012 Accumulated other comprehensive income (205 ) 30 (loss) Retained earnings 7,677 6,455 Total stockholders’ equity 79,434 76,551 Total liabilities and stockholders’ equity $ 95,195 $ 96,615 WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six months ended June 30, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 7,712 $ 5,983 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 187 166 Amortization of intangible assets 180 244 Fair value adjustment of liabilities - (96 ) (Gain) on sale of available for sale investment - (803 ) Unrealized losses on trading investments 639 170 Loss on disposal of property - 1 Restricted stock amortization 5,692 4,750 Deferred income taxes 937 1,857 Excess tax benefits from stock based compensation (684 ) (676 ) Net purchases of investments – trading securities 7,880 8,166 Changes in operating assets and liabilities: Accounts receivable (4,003 ) (905 ) Other current assets (864 ) (2,362 ) Accounts payable and accrued liabilities (71 ) (2,459 ) Compensation and benefits payable (5,931 ) (5,171 ) Income taxes payable and prepaid income taxes (1,991 ) (1,814 ) Other liabilities 18 (62 ) Net cash provided by operating activities 9,701 6,989 CASH FLOWS FROM INVESTING ACTIVITIES: Sale of available for sale investment - 950 Purchases of property and equipment (313 ) (194 ) Net cash (used in) provided by investing (313 ) 756 activities CASH FLOWS FROM FINANCING ACTIVITIES: Purchases of treasury stock (4,637 ) (3,796 ) Excess tax benefits from stock based compensation 684 676 Proceeds from exercise of stock options - 210 Cash dividends (2,988 ) (2,943 ) Net cash used in financing activities (6,941 ) (5,853 ) Effect of currency rate changes on cash (131 ) (18 ) NET INCREASE IN CASH AND CASH EQUIVALENTS 2,316 1,874 Cash and cash equivalents, beginning of period 3,817 5,264 Cash and cash equivalents, end of period $ 6,133 $ 7,138 Supplemental cash flow information: Cash paid during the period for income taxes $ 5,723 $ 3,785 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 June 30, March 31, June 30, 2013 2013 2012 Net Income $ 4,879 $ 2,833 $ 2,198 Add: Restricted stock expense 2,986 2,706 2,885 Add: Intangible amortization 90 90 122 Add: Tax benefit from goodwill 38 38 47 amortization Economic earnings $ 7,993 $ 5,667 $ 5,252 Diluted weighted average shares 7,495,523 7,481,668 7,250,707 Economic EPS $ 1.07 $ 0.76 $ 0.72 Six Months Ended June 30, June 30, 2013 2012 Net Income $ 7,712 $ 5,983 Add: Restricted stock expense 5,692 4,750 Add: Intangible amortization 180 244 Add: Tax benefit from goodwill 76 95 amortization Economic earnings $ 13,660 $ 11,072 Diluted weighted average shares 7,492,392 7,272,690 Economic EPS $ 1.82 $ 1.52 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) Contact: Westwood Holdings Group, Inc. Mark A. Wallace, 214-756-6900 Chief Financial Officer
Westwood Holdings Group, Inc. Reports Second Quarter 2013 Results
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