WESTWOOD HOLDINGS GROUP INC (WHG)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $23.3M, down 9.1% QoQ on lower performance-based fees and up 2.3% YoY on higher average AUM; diluted EPS was $0.05 vs $0.24 in Q4 and $0.27 YoY .
• Firmwide AUM/AUA ended at $18.0B (AUM $17.0B, AUA $1.0B); channels delivered strong flows: Institutional gross sales $960.5M with net inflows $758.8M; Intermediary gross sales $233.1M with net inflows $4.5M; Wealth inflows $56M with net flows -$157M .
• Strategic initiatives: launch of BFRE global equity ETF; MDST reached 1-year anniversary with a 10.5% annualized distribution rate; WEEI anniversary marked with 11.9% annualized distribution rate; combined ETF assets exceeded $100M, with MDST now eligible for more platforms—potential catalyst for distribution scale .
• Dividend maintained at $0.15 per share (payable July 1, 2025); balance sheet remains debt-free with $26.9M cash and liquid investments at March 31, 2025 .
• No formal quantitative guidance; management emphasized a robust pipeline (> $1B), ETF platform approvals, and seasonal Q1 expense headwinds (taxes, vesting, no performance fees) as key narratives likely to drive near-term sentiment .

What Went Well and What Went Wrong

• What Went Well

  • Won a nearly $1B sub-advisory mandate in Small Cap Value; Institutional gross sales $960.5M and net inflows $758.8M, marking a strong start to the year .
  • ETF platform momentum: MDST 1-year anniversary at 10.5% annualized distribution rate; WEEI 11.9%; combined ETF AUM > $100M, with MDST surpassing thresholds needed for national platforms .
  • CEO tone confident: “We are extremely pleased with our strong start to 2025… with our diverse product lineup, robust pipeline… well-positioned to navigate market uncertainties” .

• What Went Wrong

  • Revenue down QoQ to $23.3M due to lower performance-based fees; net operating loss of $68K drove operating margin to -0.3% vs 10.0% in Q4 .
  • GAAP diluted EPS fell to $0.05 (vs $0.24 Q4; $0.27 YoY) as higher operating expenses and absence of performance fees pressured earnings .
  • Wealth Management net outflows (-$157M) despite $56M inflows; market volatility and small-cap drawdowns cited as macro headwinds .

Financial Results

Notes and drivers:

• QoQ revenue decline driven by lower performance-based fees; YoY increase on higher average AUM .
• Seasonal Q1 expense headwinds (taxes on vesting, bonuses, 401(k)/HSA matches) and lack of performance fees vs Q4 contributed to lower EPS and margins .

Segment/Channel KPIs (Q1 2025):

AUM Trend (Totals):

Non-GAAP Performance:

Guidance Changes

Narrative: Management did not issue formal quantitative revenue/EPS/margin guidance; commentary emphasized pipeline strength, ETF platform expansion eligibility, and seasonal expense dynamics .

Earnings Call Themes & Trends

Management Commentary

• CEO: “We are extremely pleased with our strong start to 2025… Our Institutional channel achieved remarkable success, highlighted by winning a significant nearly $1 billion sub-advisory mandate… Our ETF business continues to gain momentum… we successfully launched our innovative Westwood LBRTY Global Equity ETF.”
• CFO: “Total revenues of $23.3 million… decreased from the fourth quarter due to lower performance-based fees… first quarter income of $0.5 million or $0.05 per share… Firm-wide AUM/AUA totaled $18 billion… debt-free balance sheet… dividend of $0.15 per share.”
• CEO strategic pathways: pipeline > $1B (SMid growth), ETF platform approvals (MDST on several platforms), MIS prospects, private equity expansion, wealth tech/process upgrades; noted Q1 seasonal expense headwinds and absence of performance fees vs Q4 .

Q&A Highlights

• Sub-advisory mandate leverage: Management expects the nearly $1B win to support broader marketing and mandate velocity; pipeline remains > $1B with growth in SMid .
• MDST platform expansion: On 4–5 platforms; pursuing larger national platforms including a wirehouse—could unlock exponential growth if approved .
• Seasonality and fees: Reminder that Q1 expenses are seasonally higher and performance fees are typically absent versus Q4, contributing to margin/EPS pressure .

Estimates Context

• S&P Global consensus EPS and revenue for Q1 2025 were unavailable; therefore, no estimate comparison could be made. Actuals used are from company-reported materials .
• Implication: Absent consensus, sell-side revisions will likely hinge on sustained institutional inflows and ETF distribution scale; watch for performance-fee cadence into year-end and intermediary platform approvals .

Key Takeaways for Investors

• Strong flow dynamics are a positive near-term catalyst: Institutional net inflows of $758.8M and sub-advisory win signal continued AUM growth potential despite Q1 seasonal margin pressure .
• ETF distribution scale is the swing factor: MDST/WEEI income profiles and platform eligibility can accelerate AUM capture; BFRE adds differentiated global equity exposure with geopolitical risk mitigation .
• Expect margin recovery potential into later quarters: Absence of performance fees and seasonal expenses weighed on Q1; operating leverage should improve with flows and potential performance-fee accruals in H2 .
• Dividend stability and debt-free balance sheet underpin capital return capacity: $0.15 dividend maintained; $26.9M cash/liquid investments; no debt .
• Watch Wealth Management turnaround: Despite $56M inflows, net flows were -$157M; CRM/portal upgrades and intermediary traction may gradually support mix and fee rate .
• Monitor macro/tariff rhetoric and small-cap/value style tailwinds: Management positioning favors quality/value amid uncertainty; could benefit WHG’s strategy mix .
• TXSE exposure provides optionality: SEC Form 1 release advances exchange application; while not a near-term P&L driver, it adds strategic value .