WESTWOOD HOLDINGS GROUP INC Q3 FY2024 earnings call

• Total assets under management reached $17.7 billion, up 5% from the prior quarter.
• Executed share repurchase program, returning approximately $273,000 to shareholders by buying back 21,879 shares.
• Sales teams achieved strong institutional gross flows over $1 billion year-to-date, with current pipeline near $2 billion.
• Successfully launched two energy ETFs, with MDST crossing $50 million in AUM.
• Formed joint venture partnership Westwood Engineered Beta to expand ETF platform with defined volatility ETFs.
• Institutional channel had net inflows of $197 million, with robust pipeline including new mandates like $200 million for SMid CIT and $100 million for SMid SMA.
• Intermediary channel had quarterly net outflows of $325 million, but MDST ETF crossed $50 million AUM and saw growth in certain funds.
• Wealth management division had net outflows of $44 million, but onboarded new $10 million+ relationship and Leah Bennett stepping down as Wealth Management President, with Brian Casey assuming responsibility.
• Launched Managed Investment Solutions, with Phase 1 of technology build complete and aim to secure first client soon.
• First energy secondaries private fund launched in Nov 2023 began distributing to investors, with positive metrics.
• Formed joint venture with Ben Ful to expand ETF platform with two new defined volatility ETFs, led by Chris Doran.

Total assets under management reached $17.7 billion, up 5% from the prior quarter, marking the highest level in six years. Revenues for the third quarter of 2024 were $23.7 million, compared to $22.7 million in the second quarter and $21.9 million in the prior year's third quarter. Assets under management consisted of institutional assets of $8.5 billion (51% of the total), wealth management assets of $4.4 billion (26% of the total), and mutual fund assets of $3.9 billion (23% of the total). Over the quarter, assets under management experienced market appreciation of $1.1 billion and net outflows of $0.1 billion, while assets under advisement experienced market appreciation of $39 million and net outflows of $66 million.

• Total assets under management at $17.7 billion, expecting continued uncertainty but well-positioned with focus on high-quality businesses.
• Board approved regular cash dividend of $0.15 per common share payable on January 3, 2025 to stockholders of record on December 2, 2024.

• Macro-level risks, including political concerns domestically and abroad.
• Uncertainty in market dynamics that could impact fund flows and performance.

Q: Good afternoon, gentlemen. Thanks for taking my question. I was wondering if you could just unpack the organic pipeline a little bit. You have a number of moving pieces there, whether it's MIS, the new ETF initiative on the $2 billion pipeline. Just if you could just give us a little more color on maybe over the next 6 months, how you see some of those elements materializing in terms of the organic flows and what number would be kind of good for your expectations in terms of some of the things you have in place now to grow?

A: Mac, thanks for your question. I would say that primarily the pipeline consists of U.S. value opportunities in the mid- and small-cap space. And while I'd love to guess as to what levels of that will come in, I think that's pretty tough to do. I would just say that the marketplace has really embraced the CITs that we created a few years ago. They have embraced separate accounts and we have a lot of good opportunities in the pipeline. We have been top rated by one of the consulting firms recently that we've been trying to get in for a long time. So that's great news. And then we are on the preferred list of a couple of other consultants. So we continue to see a really good pipeline of opportunities from a number of the top-tier consultants.

Q: Great. Just 1 follow-up. You have about $50 million on your balance sheet. And you obviously see the value of growing your ETF franchise in terms of having enough assets in there to reach certain levels. I was just curious with this new initiative with Mr. Fulton, is that going to require some more substantial seeding capital? And do you feel like you have enough to manage that?

A: Yes. We have -- we're in touch with a lot of good opportunities for seed capital from some of the people that Ben has worked with for a long time. So at this point, it's not a concern. Anything else, Mac.