Westwood Holdings Group, Inc. :WHG-US: Earnings Analysis: Q1, 2017 By the Numbers : June 21, 2017

Westwood Holdings Group, Inc. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Westwood Holdings Group, Inc. – Affiliated Managers Group, Inc., Franklin Resources, Inc., GAMCO Investors, Inc. Class A, Diamond Hill Investment Group, Inc., U.S. Global Investors, Inc. Class A and Silvercrest Asset Management Group, Inc. Class A (AMG-US, BEN-US, GBL-US, DHIL-US, GROW-US and SAMG-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 32.62 million, Net Earnings of USD 6.06 million.
  • Gross margins widened from 89.39% to 90.53% compared to the same period last year, operating (EBITDA) margins now 26.06% from 21.95%.
  • Year-on-year change in operating cash flow of 80.53% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 32.62 31.09 31.78 31.02 29.13
Revenue Growth (%YOY) 11.99 -1.5 -2.08 -16.85 -1.62
Earnings (mil) 6.06 7.58 5.89 5.66 3.52
Earnings Growth (%YOY) 72.17 61.66 -16.06 -42.21 -37.22
Net Margin (%) 18.59 24.37 18.53 18.25 12.09
EPS 0.73 0.92 0.72 0.69 0.44
Return on Equity (%) 16.68 21.13 16.91 16.99 10.71
Return on Assets (%) 14.03 17.35 14.2 13.87 8.15

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Market Share Versus Profits

Revenues History
Earnings History

WHG-US‘s change in revenue this period compared to the same period last year of 11.99% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that WHG-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.92% and earnings by -19.97% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 89.39% to 90.53% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 21.95% to 26.06% compared to the same period last year. For comparison, gross margins were 92.67% and EBITDA margins were 37.07% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

WHG-US‘s change in operating cash flow of 80.53% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 19.38% to 23.82% and (2) one-time items. The company’s pretax margins are now 23.82% compared to 19.38% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Westwood Holdings Group, Inc.

Company Profile

Westwood Holdings Group, Inc. manages investment assets and provides services for its clients through its subsidiaries, Westwood Management Corp., Westwood Trust Co. and Westwood International Advisors, Inc. The company operates its business through two segments: Advisory and Trust. The Advisory segment provides investment advisory services to corporate retirement plans, public retirement plans, endowments, foundations, individuals and the Westwood Funds, as well as investment sub advisory services to mutual funds and its trust segment. The Trust segment provides trust and custodial services to its clients and to its advisory segment and sponsors common trust funds to institutions and high net worth individuals. Westwood Holdings Group was founded by Susan Montgomery Byrne on December 12, 2001 and is headquartered in Dallas, TX.

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