Q4 2024 Westwood Holdings Group Inc Earnings Call
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Today, Brian Casey C E O.
Yeah.
Thank you and welcome to our fourth quarter 2024 earnings Conference call. The following discussion will include forward looking statements that are subject to known and unknown risks uncertainties and other factors, which may cause actual results to be materially different from those contemplated by the forward looking statements.
Information concerning the factors that could cause such a difference is included in our press release issued earlier today as well as in our Form 10-K for the year ended December 31, 2024 that will be filed with the Securities and Exchange Commission, we undertake no obligation to publicly update or revise any forward looking statement.
Whether as a result of new information future events or otherwise you are cautioned not to place undue reliance on forward looking statements. In addition in accordance with SEC rules concerning non-GAAP financial measures. The reconciliation of our economic earnings and economic earnings per share to the most comparable GAAP measures.
Is included at the end of our press release issued earlier today.
Speaker Change: On the call today, we have Brian Casey, our Chief Executive Officer, and Terry Forbes, Our Chief Financial Officer, I will now turn the call over to Brian Casey.
Speaker Change: Good afternoon, and thank you for joining us for Westwood fourth quarter 2024 earnings call.
Speaker Change: We are pleased to share our results and key developments from the past quarter and I will also comment about our outlook for the year ahead today, you'll hear about our distribution channel progress.
Speaker Change: Our institutional team won and funded eight mandates totaling over $600 million last year, a 100% increase over the prior year.
Speaker Change: Spite some headwinds we were able to take advantage of some positive trends across several channels. Our Smith cap strategies dominated with new institutional flows and we also enjoyed growth in our smid cit's vehicle.
Speaker Change: ETF success, one of our greatest strategic successes in 2024 was our entry into the fast growing ETF market with the launch of two active etfs leveraging our expertise in the midstream and broad energy space.
Speaker Change: As part of the launch of these first two funds, we built out a world class ETF ecosystem, developing new strategic relationships for Westwood that will support additional ETF launches in the future as we continue to pursue innovation in white spaces in our ETF marketplace.
Speaker Change: Our innovative ETF initiatives continued their initial momentum with Westwood salient enhanced midstream income ETF ticker MD SP, reaching $73 million in assets by year end, Amit strong trading volumes we.
Speaker Change: We also expanded our ETF platform late last year with two new products offered through our Westwood engineered beta known as webs partnership with Ben Folta, a well known pioneer of the ETF industry.
Speaker Change: Strategic growth initiatives, we've completed the build out for our managed investment solutions platform and promising client conversations are underway.
Speaker Change: Our energy Secondaries fund is performing as expected and we continue to seek opportunities to meet investor demand for these types of investments.
Speaker Change: A few comments on the market's performance on our investment results.
Speaker Change: The stock market closed out a truly historic year with the S&P 500, gaining 25%.
Speaker Change: When paired with the prior year's return these two consecutive years Mark the best performances by the index since $19 97 1998 period.
Speaker Change: The Federal reserve began cutting rates in the third quarter and reduce the fed funds rate by 100 basis points through year end.
Speaker Change: Market interest rates moved higher I'm, continuing inflation concerns however, with the 10 year treasury yield rising from 374% to $4 five 8% during the last quarter.
Speaker Change: With heightened risk appetite gross stock significantly outperformed value stocks across all market caps.
Speaker Change: The Russell 1000 growth index gained more than 33% for the year, while the Russell 1000 value only rose about 14%.
The magnificent seven stocks, consisting mostly of Mega cap tech stocks dominated accounting for 50% of the S&P five hundred's 2020 for stellar performance.
Speaker Change: As for our investment performance, we were behind the benchmark for most of the our U S value products, but 80% of our value strategies are ahead of their benchmarks over trailing three year periods and three quarters of them with track records extending into five years are leading their benchmarks.
Speaker Change: Income opportunity our flagship multi asset strategy executed a terrific turnaround and finished ranked in the top quartile for trailing 157, and 10 year and since inception periods in its Morningstar category.
Speaker Change: Its sister strategy multi asset income also performed strongly last year, earning a five star Morningstar rating and it is conservative allocation category.
Speaker Change: Our real estate income strategy gained ground after a slow start.
Speaker Change: Finishing ahead of its benchmark and now ranks in the 29th percentile of its Morningstar universe over trailing three years.
Speaker Change: Within the energy sector are MLP separately managed account strategy remains ahead of the <unk> midstream index across all trailing period.
Speaker Change: Looking ahead, we subscribe to a cautiously optimistic outlook with benign credit conditions patches of attractive equity valuations and are accommodated federal policy. We believe our strategies will continue to perform well as the post Covid Bull market ages investors may begin to shift focus from the risk off.
Speaker Change: Trade towards quality companies and environment in which our investment style historically excels.
Speaker Change: Moving to distribution I am extremely pleased to report that our institutional team exceeded its ambitious 1 billion annual gross sales goal for 2024 meeting and beating a 100% year over year challenge.
Speaker Change: One in funded eight mandates primarily in smid cap with new clients totaling over $600 million last year.
Speaker Change: The remaining flows were gain from existing clients.
Speaker Change: In the intermediary channel despite net outflows of $229 million. There were some notable bright spots our Westwood salient enhanced midstream income ETF ticker symbol Mds T was launched late last may and quickly became a market leader in reaching $73 million in assets by year end <unk>.
Speaker Change: Saving our first year target.
Speaker Change: In addition, several strategies to achieve positive net flows for the year, including our MLP and energy infrastructure mutual fund and small cap <unk> offerings.
Speaker Change: In wealth management, we experienced an uptick in net flows during the fourth quarter and this positive momentum continued into December.
Speaker Change: As you know I have reassumed executive level responsibility for this division.
Leveraging my direct experience in managing Westwood wealth from $19 96 to 2013.
Speaker Change: We strengthened our team with key hires in the latter half of the year, which have been very well received by our clients.
Speaker Change: It is nice to see new advisors already showing positive results with several new significant client relationships.
Speaker Change: Looking ahead, we are focused on strengthening our core infrastructure, while pursuing strategic growth on the technology front, we successfully launched on time, our new client portal at year end. This new platform offers a streamlined intuitive interface for clients to access investment information and we'll be rolling out.
Speaker Change: Further enhancements this quarter.
To further enhance our client service capabilities, we implemented a comprehensive client relationship management system last quarter. This system will provide our advisors and client service teams with enhanced tools to maintain detailed client information and deliver even more personalized service we.
Speaker Change: Flip to complete this rollout this quarter.
Speaker Change: And while technology is important we're also committed to maintaining the personal relationships that distinguish westwood's client service and we will continue to invest in our talented team of professionals to enhance our client facing capabilities.
Speaker Change: We remain committed to providing unique insights for our clients by hosting exclusive events, including intimate gatherings held last year in Houston, and Dallas, featuring expert analysis of the election and markets.
Speaker Change: We were very pleased with the turnout at these events, which reinforces the value of providing our clients with direct access to distinguished market experts.
Speaker Change: To wrap up here a few of Westwood significant highlights from last year.
Speaker Change: We marked the two year anniversary of our acquisition of salient partners asset management business and this strategic combination continues to exceed expectations.
Speaker Change: Our enhanced capabilities in energy and real estate income strategies, both particularly relevant in today's market environment have extended our product reach and improved our average fee by 17%.
Speaker Change: Clear shift in Investor sentiment last year led to positive net flows into our energy strategies.
Speaker Change: Building on this success, we launched two new Etfs Westwood salient enhanced midstream income ETF Mds and.
Speaker Change: Westwood's failures enhanced energy income ETF W. EI.
Speaker Change: Leveraging the deep expertise of our combined teams.
Speaker Change: <unk> fundamentals in the energy sector underpinned our positive outlook for these strategies.
Speaker Change: Our Westwood Energy Secondaries fund one is performing in line with expectations and we are exploring additional investment vehicles to launch in this space.
Speaker Change: Also the real estate income strategy acquired from failure has proven to be an excellent complement to our platform.
Speaker Change: Offering our clients alternative sources of income inflation protection through real asset exposure and portfolio diversification benefits through low correlations to traditional asset classes.
Speaker Change: The success of the salient acquisition demonstrates our ability to identify and integrate complementary businesses that enhance our value proposition to clients, while driving growth for our shareholders.
Speaker Change: The managed investment solutions initiative has completed its initial portfolio management system build out and we have hosted a national consulting firm for an on site review.
Speaker Change: We have several promising conversations underway that should result in onboarding, our first mris clients during the first half of this year.
Speaker Change: Finally, we have just announced a partnership with ETF veteran Ben Fulton to scale Westwood's ETF platform.
Speaker Change: Offering investors and advisors, new highly innovative strategies.
Speaker Change: Westwood formed the partnership by investing in the New company Web investments incorporated words, which stands for Westwood engineered beta just launched its first two etfs utilizing its proprietary defined volatility strategy.
Speaker Change: The words defined volatility S. P Y ETF ticker symbol Dv SP and the words define volatility triple Q ETF ticker symbol Dv QQ are designed to provide a more stable investment experience across market conditions using a dynamic rules.
Speaker Change: Based strategy to adjust exposure to equity markets based on real time volatility.
Speaker Change: The formation of <unk> and the launch of these two Etfs have received considerable coverage in ETF trade publication.
Speaker Change: Westwood's intermediary sales team is leading a collaborative effort with words to educate financial advisors and ETF strategies about these new highly innovative etfs.
Speaker Change: We are very excited about the potential of this new partnership that could provide a truly scaled ETF platform for Westwood.
Speaker Change: We're very excited about our expanded ETF initiative and look forward to providing you with further updates on our words progress going forward.
We've also continued our commitment to return capital to shareholders buying back 108225 shares for approximately $134 million during the past year. I'm also proud to note that Westwood was named a pensions and investments best places to work in money management for the 10th year, reflecting our ongoing.
Speaker Change: <unk> commitment to culture values and investment discipline.
Speaker Change: Summing up we see significant opportunities across our business our traditional strategies are improving our institutional pipeline remains robust and we are particularly excited about the potential of our expanded ETF platform and our new managed investment solutions capabilities.
Speaker Change: Energy space continues to present attractive opportunities and we are well positioned with our full suite of products across various vehicles.
Speaker Change: Thank you for your continued interest in Westwood I will now turn the call over to Terry Forbes our CFO.
Terry Forbes: Thanks, Brian and good afternoon, everyone. Today, we reported total revenues of $25 6 million for the fourth quarter of 2024.
Terry Forbes: Paired to $23 7 million in the third quarter and $23 2 million in the prior year's fourth quarter revenues increased from the third quarter and 2023 fourth quarter, primarily due to higher average assets under management and higher performance fees for.
Terry Forbes: For fiscal 2020 for total revenues of $94 7 million compared to $89 8 million in 2023.
Terry Forbes: Also driven by higher average assets under management.
Terry Forbes: Our fourth quarter comprehensive income of $2 1 million or <unk> 24 per share compared to the third quarter's $1 million or <unk> <unk> per share, reflecting higher revenues in changes in the fair value of contingent consideration, partially offset by higher income taxes.
Terry Forbes: non-GAAP economic earnings were $3 4 million or 39 cents per share in the current quarter versus $1 1 million or <unk> 13 per share in the third quarter.
Terry Forbes: Our fourth quarter comprehensive income of $2 1 million or 24 per share compared to the prior year's fourth quarter net loss of $2 6 million or <unk> 32 per share due to higher revenues offset by changes in the fair value of contingent consideration and higher employee expenses driven by performed.
Terry Forbes: <unk> related incentive compensation.
Terry Forbes: Economic earnings were $3 4 million or 39 cents per share compared with $2 8 million or <unk> 34 per share in the fourth quarter of 2023.
Terry Forbes: Our 2020 for comprehensive income of $2 2 million compared to 2020 395 million on higher revenues and lower income taxes offset by changes in the fair value of contingent consideration higher employee expenses, driven by higher performance related incentive compensation and life insurance proceeds.
Terry Forbes: Received in 2023.
Terry Forbes: Economic earnings for the year were $7 million or <unk> 82 per share compared with $18 3 million or $2 26 per share in 2023.
Terry Forbes: Firm wide assets under management, and advisement totaled $17 6 billion at quarter end, consisting of assets under management of $16 6 billion in assets under advisement of $1 billion.
Terry Forbes: Assets under management consisted of institutional assets of $8 3 billion or 50% of the total wealth management assets of $4 4 billion or 26% of the total and.
Terry Forbes: And mutual fund assets of $3 9 billion or 24% of the total.
Terry Forbes: Over the year, our assets under management experienced net outflows of $8 billion and market appreciation of $1 9 billion and our App.
Terry Forbes: Assets under advisement experienced net outflows of $211 million and market appreciation of $92 million.
Terry Forbes: Our financial position continues to be very solid with cash and liquid investments at quarter end totaling $44 6 million and a debt free balance sheet.
Terry Forbes: I'm happy to announce that our board of directors approved a regular cash dividend of <unk> 15 per common share payable on April one 2025 to stockholders of record on March three 2025.
Terry Forbes: Brings our prepared comments to a close we encourage you to review our Investor presentation, we have posted on our website, reflecting quarterly highlights as well as the discussion of our business product development and longer term trends in revenues and earnings. We thank you for your interest in our company and we will open the line for questions.
Terry Forbes: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Terry Forbes: One moment for questions.
Terry Forbes: And im not showing any questions at this time I would now like to turn the call back over to Brian Casey for any closing remarks.
Brian Casey: Well, great well, thanks for taking time with US today, we're excited about our new business pipeline and our growing ETF platform.
Brian Casey: And really landing our first client for our managed investment solutions team.
Brian Casey: Please let us know if you have further questions you can reach out to me or Terry at anytime or visit our website at Westwood group Dot com have a great afternoon.
Brian Casey: Yes.
Brian Casey: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.