Westwood(WHG) - 2024 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The financial statements detail the company's financial position and performance, showing a net loss in Q2 2024 despite positive operating cash flow for the first six months Condensed Consolidated Balance Sheets Total assets decreased to $147.4 million by June 30, 2024, primarily due to reduced current investments, impacting stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $23,770 | $20,422 | | Total current assets | $63,909 | $72,238 | | Goodwill | $39,501 | $39,501 | | Total assets | $147,374 | $155,167 | | Total current liabilities | $13,434 | $18,647 | | Total liabilities | $26,908 | $32,721 | | Total stockholders' equity | $120,466 | $122,446 | Condensed Consolidated Statements of Comprehensive Income (Loss) The company reported a Q2 2024 net loss of $2.2 million, primarily due to a $4.8 million fair value loss on contingent consideration Q2 and H1 2024 vs 2023 Performance (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $22,688 | $21,945 | $45,420 | $44,672 | | Total expenses | $26,866 | $18,276 | $46,657 | $40,057 | | (Gain) loss from change in fair value of contingent consideration | $4,807 | $(4,078) | $1,858 | $(5,138) | | Net income (loss) | $(2,213) | $2,899 | $(47) | $3,613 | | Diluted EPS | $(0.27) | $0.36 | $0.01 | $0.45 | Condensed Consolidated Statements of Stockholders' Equity Total equity decreased to $120.5 million by June 30, 2024, influenced by net loss, dividends, and treasury stock purchases - Key activities impacting stockholders' equity in the first six months of 2024 included dividend declarations of $0.30 per share, purchases of treasury stock, and stock-based compensation expense[9] Condensed Consolidated Statements of Cash Flows Operating cash flow significantly improved to $11.7 million for H1 2024, increasing cash and equivalents to $23.8 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $11,685 | $(3,902) | | Net cash used in investing activities | $(1,524) | $(838) | | Net cash used in financing activities | $(6,813) | $(3,890) | | Net change in cash and cash equivalents | $3,348 | $(8,630) | | Cash and cash equivalents, end of period | $23,770 | $15,229 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, significant acquisitions, revenue recognition, segment reporting, and subsequent events like dividend declarations - The company operates through two main subsidiaries: Westwood Management (investment advisory) and Westwood Trust (trust and custodial services) Revenue is primarily dependent on Assets Under Management (AUM)[14] - In January 2023, the company acquired an additional 32% interest in Broadmark Asset Management LLC, increasing its ownership to a controlling 80%[14][18] - As part of the 2022 Salient Acquisition, the company paid $1.8 million in contingent consideration in Q2 2024 The remaining contingent consideration liability is revalued quarterly and is a significant factor in earnings volatility[23] - On July 31, 2024, the Board of Directors declared a quarterly cash dividend of $0.15 per share[52] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations AUM increased to $15.8 billion, but Q2 2024 results were impacted by a $4.8 million non-cash loss, while liquidity remains strong Assets Under Management (AUM) by Category (in millions) | Category | June 30, 2024 | June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Institutional | $7,649 | $6,969 | 10% | | Wealth Management | $4,184 | $3,851 | 9% | | Mutual Funds | $3,943 | $4,169 | (5)% | | Total AUM | $15,776 | $14,989 | 5% | - For the six months ended June 30, 2024, the $0.3 billion increase in AUM was due to market appreciation of $0.8 billion, partially offset by net outflows of $0.5 billion, primarily from the LargeCap Value strategy[66] - The company provides a non-GAAP measure, Economic Earnings, which adjusts for non-cash items like stock-based compensation and intangible amortization For Q2 2024, Economic Loss was $0.5 million, compared to Economic Earnings of $4.0 million in Q2 2023[73][75] - The company maintains a solid liquidity position with $44.1 million in cash and short-term investments and no debt as of June 30, 2024 Management believes current cash and cash from operations are sufficient to meet operating and capital requirements for at least the next twelve months[76][77] Item 3. Quantitative and Qualitative Disclosures About Market Risk No significant changes in quantitative and qualitative market risk disclosures were reported since the 2023 Annual Report - There have been no significant changes in market risk disclosures since the 2023 Form 10-K[81] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes in internal controls during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[82] - No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[83] PART II OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings during the period - None[85] Item 1A. Risk Factors No material changes to risk factors were reported from the 2023 Annual Report on Form 10-K - No material changes to risk factors were reported from the Form 10-K for the year ended December 31, 2023[86] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 86,346 shares for $1.1 million in Q2 2024, with $0.8 million remaining for future repurchases Share Repurchases in Q2 2024 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2024 | 20,059 | $12.92 | | May 2024 | 41,710 | $12.37 | | June 2024 | 24,577 | $12.20 | | Total Q2 | 86,346 | $12.45 | - The maximum approximate dollar value of shares that may yet be purchased under the plan is $750,000[87] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and iXBRL financial data - Exhibits filed include certifications from the Chief Executive Officer and Chief Financial Officer pursuant to SEC rules and the Sarbanes-Oxley Act of 2002[90] - Financial information from the Form 10-Q is provided in Inline eXtensible Business Reporting Language (iXBRL) format as Exhibit 101[90] Signatures The report is duly signed and authorized by the CEO and CFO on July 31, 2024