Westwood Holdings Group, Inc. :WHG-US: Earnings Analysis: Q2, 2017 By the Numbers : September 29, 2017

Westwood Holdings Group, Inc. reports financial results for the quarter ended June 30, 2017.

Highlights

  • Summary numbers: Revenues of USD 33.76 million, Net Earnings of USD 6.90 million.
  • Gross margins narrowed from 91.25% to 91.24% compared to the same period last year, operating (EBITDA) margins now 33.51% from 29.78%.
  • Change in operating cash flow of 33.44% compared to same period last year is about the same as 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):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 33.76 32.62 31.09 31.78 31.02
Revenue Growth (%YOY) 8.81 11.99 -1.5 -2.08 -16.85
Earnings (mil) 6.9 6.06 7.58 5.89 5.66
Earnings Growth (%YOY) 21.82 72.17 61.66 -16.06 -42.21
Net Margin (%) 20.43 18.59 24.37 18.53 18.25
EPS 0.83 0.73 0.92 0.72 0.69
Return on Equity (%) 4.66 4.17 5.28 4.23 4.25
Return on Assets (%) 16.13 14.03 17.35 14.2 13.87

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

Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, WHG-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if WHG-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 3.47% and earnings by 13.72% compared to the previous period.

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from 29.78% to 33.51%. For comparison, gross margins were 90.53% and EBITDA margins were 26.06% in the last period.

Cash Versus Earnings – Sustainable Performance?

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

WHG-US’s year-on-year change in operating cash flow of 33.44% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 27.44% to 31.35% and (2) one-time items. The company’s pretax margins are now 31.35% compared to 27.44% for the same period last year.

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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