Westwood Holdings ((WHG)) has held its Q3 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The recent earnings call for Westwood Holdings painted a largely positive picture, emphasizing significant growth in ETFs and strong financial performance. While challenges such as net outflows and market concentration risks were acknowledged, the overall sentiment was optimistic, with positive aspects outweighing the negatives.
ETF Success and Strategic Growth
Westwood Holdings reported impressive achievements in its ETF segment, particularly with the enhanced midstream income ETF, MDST, which surpassed $150 million in assets under management (AUM). This ETF accounted for approximately 30% of midstream product ETF flows. The company also launched 11 new sector ETFs and is on the brink of accessing one of the largest wirehouse platforms, marking a strategic growth in their ETF offerings.
Strong Financial Performance
The third quarter saw Westwood Holdings’ revenues rise to $24.3 million, up from $23.1 million in the second quarter and $23.7 million in the same quarter last year. Non-GAAP economic earnings also showed a significant increase, reaching $5.7 million compared to $2.8 million in the previous quarter, highlighting the company’s robust financial health.
Positive Net Sales and Fund Performance
Year-to-date net sales improved by 17% compared to the previous year and by 57% compared to 2023. The Income Opportunity Fund received a boost in credibility with a Morningstar Ratings upgrade to four stars, reflecting strong fund performance and positive sales trends.
Strong Pipeline and New Business Prospects
Westwood Holdings reported a strong pipeline for new business, valued at $1.6 billion, with a near-term mandate of $450 million for the SMidCap product. This indicates promising prospects for future growth and expansion in new business ventures.
Net Outflows and Institutional Channel Challenges
Despite the positive trends, the company faced net outflows of $0.7 billion in assets under management during the quarter. The institutional channel experienced negative net flows, primarily due to sub-advisory business rebalancing, highlighting areas that require strategic attention.
Concentration of Market Gains
The earnings call also highlighted potential risks associated with market concentration, as large cap gains remain highly concentrated in a few mega-cap stocks. This concentration poses a risk that the company will need to navigate carefully.
Forward-Looking Guidance
Looking ahead, Westwood Holdings is optimistic about its growth trajectory. The firm’s enhanced midstream income ETF, MDST, achieved over $150 million in AUM, and private fundraising exceeded the annual goal by 1.5 times. The launch of 11 new sector ETFs under the WEBs brand and the Morningstar Ratings upgrade for WHGIX are expected to bolster future performance. With assets under management totaling $17.3 billion, the company is poised for continued success, particularly as it anticipates securing a significant position on a major wirehouse platform.
In summary, Westwood Holdings’ earnings call reflected a positive outlook, driven by strong ETF growth, robust financial performance, and promising new business prospects. While challenges such as net outflows and market concentration risks remain, the company’s strategic initiatives and forward-looking guidance suggest a bright future ahead.