Westwood Holdings Group Inc · NYSE:WHG
Westwood — Investor Presentation (March 2008)
35 slides from Westwood's investor presentation, Mar 11, 2008
Slide 1: WHG Update
Exhibit 99.1 WHG Update March 11, 2008 Brian O. Casey William R. Hardcastle, Jr., CFA President, Vice President, Chief Executive Officer Chief Financial Officer
Slide 2: Forward-Looking Statements
Forward – Looking Statements Statements in this presentation that are not purely historical facts, including statements about our expected future financial position, results of operations or cash flows, as well as other statements including words such as “anticipate,” “believe,” “plan,” “estimate,”
Slide 3: Agenda
Agenda I. Firm Overview II. Investment Process & Products III. Financial Highlights IV. Summary Page 2
Slide 4: Firm Overview
Firm Overview • Well-established asset management firm • Clear focus on investment management and client service since 1983 • Strong long-term performance • Strict adherence to our process has resulted in strong risk-adjusted returns for our clients • Growing asset base • $7.9 billion in assets unde
Slide 5: Westwood History
Westwood History Westwood • Registered Investment Advisor Management Corp. 1983 • Institutional focus SWS Provided: Acquired by • Capital Southwest 1993 • Autonomy Securities (SWS) • Technology • Distribution Westwood Funds 1994 • Distributed by Gabelli • Sub-advised by Westwood Westwood Trust 1996
Slide 6: Strategic Focus
Strategic Focus • Value and Income investing • Multiple products spanning the capitalization range • Disciplined, time-tested investment process across all products • Proprietary, in-depth fundamental research • Team-based research and portfolio management process • Focus on downside risk protection
Slide 7: Our Mission
Our Mission • Our mission: “Exceeding client expectations through exceptional performance and ethical conduct” • We strive to: • Deliver superior risk-adjusted returns • Serve our clients attentively • Provide a challenging and rewarding environment for our employees • Make a positive contribution t
Slide 8: Westwood Value Proposition
Westwood Value Proposition • At our spin-off in 2002 we said we would: • Build out our research team • Expand our product offerings • Deliver excellent performance for our clients • Operate the firm in a stockholder-friendly manner • Energize our employees • Since that time we have: • Developed a ta
Slide 9: Product Distribution
Product Distribution Westwood Management Corp. • Separately managed portfolios – large institutions • Subadvisory • Collective funds – large defined contribution marketplace • Managed accounts (“SMA”) – select platforms • Institutional consultants Account minimum – $25,000,000 Westwood Trust • Commi
Slide 10: Overview of Investment Process
Overview of Investment Process • Idea generation Research • Proprietary fundamental research Analysts • Make buy & sell recommendations • Led by senior analysts 4 Research • Weekly due diligence meetings to review analyst recommendations Groups • Approved securities move to the “On Deck Circle” • At
Slide 11: Peer Group Product Comparisons Trailing 3-Years as of 12/31/07
Peer Group Product Comparisons Trailing 3-Years as of 12/31/07 LargeCap SMidCap SmallCap AllCap Median Portfolio $49 Billion $3 Billion $1 Billion $24 Billion Capitalization Past performance is not a guarantee of future results. Performanceresults are calculated gross of fees . Please see full perfo
Slide 12: Peer Group Performance Comparison
Peer Group Performance Comparison Percentile Ranking as of December 31, 2007 Returns for Returns for Returns for Returns for 1 Year 3 Years 5 Years 10 Years Trailing Trailing Trailing Trailing LargeCap 1 1 11 12 SMidCap 9 3 2 8 SmallCap 18 9 N/A N/A AllCap 9 4 19 N/A Balanced 23 6 27 15 Source: eVes
Slide 13: Product Tenure
Product Tenure 30 25 25 23 21 20 15 11 10 6 5 5 4 0 LargeCap Fixed Income Balanced SMidCap AllCap Income SmallCap Value Value Value Opportunity / Value MLP Inception Date 1983 1985 1987 1997 2002 2003 2004 Page 12
Slide 14: Unseasoned (R&D) Products
Unseasoned (R&D) Products • MidCap Value • Invests in securities in the $4 billion to $20 billion market capitalization range • Product extension beyond the capacity constrained SMidCap product • Initially introduced to Westwood Trust Enhanced Balanced™ clients • LargeCap Enhanced (130/30) • Extensi
Slide 15: Recent Performance Accolades
Recent Performance Accolades • Smart Money Susan Byrne, our Founder and Chief Investment Officer, was named one of five of “The World’s Greatest Investors” by Smart Money in their August 2007 issue. • Morningstar The WHG LargeCap Value Fund (WHGLX) was named an Analyst Pick by Morningstar in the fou
Slide 16: Significant Product Capacity Remains
Significant Product Capacity Remains Seasoned Products Assets Under Estimated (>3 year track record & Management Maximum Capacity Asset Growth >$100 Million in assets) As of 12/31/07 AUM Potential LargeCap Value $4.1 billion $20 billion $15.9 billion SMidCap Value $1.5 billion $3 billion $1.5 billio
Slide 17: Increased Search / RFP Activity
Increased Search / RFP Activity • Search activity has increased with continued strong performance and new product marketing efforts • Finals win ratio remains strong 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2002 2003 2004 2005 2006 2007 Page 16
Slide 18: Westwood Trust
Westwood Trust • Consistent asset growth – Over 23% compound annual growth rate of assets over the last five years • Enhanced Balanced™ – Asset allocation model – 7 asset classes managed by Westwood Management 5 asset classes managed by subadvisors – Consultative approach – Low cost, efficient solut
Slide 19: Mutual Funds
Mutual Funds • WHG Funds • 5 funds advised by Westwood Management • WHG LargeCap Value (WHGLX) • WHG SMidCap (WHGMX) • WHG SmallCap Value (WHGSX) • WHG Income Opportunity (WHGBX) • WHG Balanced (WHGBX) • Not yet rated by Morningstar; SMidCap & Income Opportunity will reach 3 year track record in Dec
Slide 20: WHG Funds Launch Has Exceeded Expectations
WHG Funds Launch Has Exceeded Expectations The WHG Funds have been able to achieve reasonable asset growth prior to achieving a three-year track record and Morningstar rating $250 $225 $200 April 2007 SmallCap Value launched $175 $150 Sept 2006 $125 Balanced launched $100 June 2006 LargeCap Value $7
Slide 21: How We Manage Our Company
How We Manage Our Company We strive to manage our company to reflect the qualities we look for in selecting securities for client portfolios NYSE: WHG Peer Group High Dividend Yield 3.4% 1.5% Ongoing Quarterly Dividends Low/Declining Debt to Equity 0% 38% Insider Ownership >10% 35% Rare Solid corpor
Slide 22: Compensation
Compensation • People are our most important asset • Equity-based compensation is a significant component of our compensation program • Effectively aligns incentives with all stakeholders • Restricted stock in lieu of increased cash compensation provides the opportunity to earn a multiple on that de
Slide 23: Financial Highlights
Financial Highlights • Record assets under management and financial results in 2007: Year-over-year Metric 2007 Result Increase • Assets under management $7.9 billion 33% • Revenue $36.3 million 33% • GAAP net income $7.9 million 76% • Cash earnings $13.3 million 46% • GAAP earnings per share $1.28
Slide 24: AUM Growth
AUM Growth • Growth in assets under management driven by new account wins as well as strong performance in client portfolios $9.0 25% Compound Annual Growth Rate from 2004 - 2007 (Cumulative increase of 97%) $8.0 $7.9 $7.0 $5.9 $6.0 $4.9 $5.0 $4.0 $4.0 $3.0 $2.0 $1.0 $0.0 2004 2005 2006 2007 Page 23
Slide 25: Revenue Growth
Revenue Growth • Revenue growth has followed strong asset growth • New performance-based fee earned in 2007 $40.0 22% Compound Annual Growth Rate from 2004 - 2007 $36.3 (Cumulative increase of 82%) $35.0 $30.0 $27.4 $25.0 $21.9 $20.0 $20.0 $15.0 $10.0 $5.0 $0.0 2004 2005 2006 2007 2007 includes $3 m
Slide 26: Cash & GAAP EPS Growth
Cash & GAAP EPS Growth • EPS growth reflects positive impacts of operational leverage in our business $2.50 Growth Rate from 2004 - 2007: Cumulative CAGR Increase $2.14 GAAP EPS 24% 88% $2.00 Cash EPS 31% 125% $1.60 $1.50 $1.28 $1.08 $0.95 $1.00 $0.79 $0.68 $0.66 $0.50 $0.00 2004 2005 2006 2007 GAAP
Slide 27: Dividend Growth
Dividend Growth • Transition from smaller quarterly dividends supplemented by annual special dividends in our building phase to larger quarterly dividends • Annual quarterly dividend rate of $1.20 per share –3.4% yield as of February 29, 2008 $1.40 Represents annual dividend rate based on $0.30 quar
Slide 28: WHG Stock Price Performance
WHG Stock Price Performance • WHG stock provided a 69.9% total return including reinvested dividends in 2007 • Outperformed SNL Asset Manager Index by over 56% • Ranked in the 5th percentile for total return performance among NYSE-listed securities Total Return Performance 400 350 300 250 200 150 10
Slide 29: Near-term Objectives
Near-term Objectives • Repeat our successes: • Generate solid investment performance • Continue to develop research teams • Serve clients attentively • Cultivate consultant relationships • Leverage referral sources at Westwood Trust – approximately75% of new assets from referrals • Leverage manufact
Slide 30: Summary
Summary • Established firm with recognized institutional presence • Seasoned competitive products • Attractive product pipeline with strong performance; gaining traction in institutional marketplace • Private client growth opportunities • Employees are stakeholders • Opportunity to realize operation
Slide 31: Cash to GAAP Reconciliations
Cash to GAAP Reconciliations Cash EPS Reconciliation (in thousands, except share and per share amounts) 2004 2005 2006 2007 GAAP net income $ 3,686 $ 3,636 $ 4,508 $ 7,944 Add: Restricted stock expense 1,250 2,114 4,500 5,316 Add: Stock option expense 249 250 126 - Less: Cumulative effect of change
Slide 32: Disclosure Information
Disclosure Information Westwood Management Corp. (Westwood) has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS ®). GIPS ® has not been involved with the preparation or review of this report. Past performance is no guarantee of future results.
Slide 33: Disclosure Information
Disclosure Information PERFORMANCE RESULTS: SMIDCAP COMPOSITE Farnuey 1 *99% Lheoagh Dee anbe 31 2o0e PERFORMANCE RESULTS: SMALLCAP VALUE COMPOSITE Jar sary 1, 2904 trough Lecam er 31, £30/ Prrranieaye: Gross Total Assets Percemage of NenTee ofFaee Russell 2500 Number of atEnd of of Finn Paying Valu
Slide 34: Disclosure Information
Disclosure Information PERFORMANCE RESULTS: ALLCAP VALUE COMPOSITE duly 1, 2092 tiraugh Deserve 31, 2907 Porcontage Grows low! Assets Percentaye ol Non! ee — Tetul otlees liussell Number ot orensot = ctiirm = Paying irm Yeor Rewrn 300) Value Pertfolles Dispersion Perlod asses. = Portfolles Assets 20
Slide 35: www.westwoodgroup.com 200 Crescent Court Suite 1200
www.westwoodgroup.com 200 Crescent Court Suite 1200 Dallas, Texas 75201 (214)756-6900
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