Ladies and gentlemen, thank you for standing by and welcome to the Westwood Holdings Group Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today’s program maybe recorded. And now, I’d like to introduce your host for today’s program, Julie Gerron, General Counsel and Chief Compliance Officer. Please go ahead.

Thank you and good afternoon. Welcome to our fourth quarter 2019 earnings conference call. The following discussion will include forward-looking statements that are subject to known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those contemplated by the forward-looking statements. Additional information concerning the factors that could cause such a difference is included in our press release issued earlier today as well as in our Form 10-K for the year ended December 31, 2019 that is filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on forward-looking statements. In addition, in accordance with the SEC rules concerning non-GAAP financial measures, the reconciliation of our economic earnings and economic earnings per share to the most comparable GAAP measures is included at the end of our press release issued earlier today. On the call today, we have Brian Casey, our President and Chief Executive Officer and Terry Forbes, our Chief Financial Officer. I will now turn the call over to Brian Casey.

Good afternoon and thank you for taking the time to listen to our quarterly earnings call. As always, I will start with comments on the market environment and investment teams and finish with comments on our business. Volatility continued in the third quarter as markets worldwide fell in August only to rally once more in September. Small caps outpaced large caps and growth stocks rallied over value stocks as market sentiment changed and we saw strong risk on rally beginning in October. Markets were buoyed by rising optimism on economic and trade developments and finished with a string of new all-time highs for most major equity indices. Similarly, fixed income markets also finished the year in positive territory. The Federal Reserve again supported markets with a third rate cut and comments from Chairman Powell suggest this level is likely to persist in 2020. Interest rates recovered much of their decline from the prior quarter and the yield curve returned to normal. An initial Phase 1 trade deal was struck between the U.S. and China which helped fuel confidence in an improving 2020 economic environment both here and abroad. GDP growth remained steadily positive supported by strong trends in consumer spending, low unemployment and low inflation. Sentiment indicators such as the ISM’s PMI for manufacturing also continued to improve building on recent positive readings. Trends outside the U.S. began to show some potential early signs of stabilization and improvement as well. With 2020 Presidential election rhetoric heating up and rising geopolitical tensions, investors will continue to grapple with high levels of uncertainty around the world. As we look into 2020, Wall Street analysts are estimating another year of corporate earnings growth, though questions remain regarding trade and other geopolitical risks. The tight labor market remains supportive of consumer spending which should…

Thanks, Brian and good afternoon everyone. Today, we reported total revenues of $18.6 million for the fourth quarter of 2019 compared to $26.1 million in the prior year’s fourth quarter and $19.9 million in the third quarter of 2019. The decrease from the prior year was due to lower average assets under management due to net outflows partially offset by market appreciation. The decrease from the prior quarter was due to lower other revenues. Fourth quarter net income of $2.5 million or $0.30 per share compared to $5.4 million or $0.64 per share in the prior year’s fourth quarter. The decrease primarily related to lower revenues and higher foreign currency transaction losses partially offset by lower incentive compensation cost and unrealized gains on private investments. Economic earnings a non-GAAP metric, was $5.4 million for the current quarter or $0.64 per share compared to $9.5 million or $1.12 per share in the fourth quarter of 2018. Fourth quarter net income of $2.5 million was higher than the third quarter of 2019 net income of $1.1 million. The current quarter benefited from unrealized gains on private investments partially offset by higher foreign currency transaction losses. Economic earnings of $5.4 million, was also higher than $3.9 million in the third quarter. For fiscal 2019, total revenues of $84.1 million compared to $122.3 million in 2018. The decrease was due to a $32.3 million decrease in asset-based advisory fees, a $3.5 million decrease in trust fees reflecting lower average AUM and a $2.2 million decrease in performance-based advisory fees earned in 2019. Fiscal 2019 net income was $5.9 million or $0.70 per share compared to $26.8 million or $3.13 per share in the prior year. The current year decreased primarily due to lower revenues and foreign currency transaction losses partially offset by lower incentive…

Certainly. [Operator Instructions] Our first question comes from the line of Mac Sykes from Gabelli. Your question please. You might have your phone on mute.

I apologize. Good afternoon, everyone. My first question is for Terry and then two for Brian. On the InvestCloud investment, is that – how is that carried out in the balance sheet, is that a cost and will that be adjusted as you start to take your revenue there?

Yes. The initial investment was at cost and then the accounting treatment is cost plus or minus observable market transactions. So in the fourth quarter, there was another transaction with another party which is why we had an increase in the value of our investment which was part of the private investment write-up that we have discussed

Okay. And then Brian, you had mentioned in the release that you are seeing attractive M&A opportunities, I wonder if you could expand on sort of the businesses that you might be targeting or opportunities there of what you are seeing?

Sure. Well, we are seeing a lot of opportunities out there. We have always had a strong interest in private wealth businesses. We find that private wealth businesses are attractive on many fronts, particularly because the assets are very sticky and it dovetails well with what we have been doing around here for 2.5 decades at our trust company. So, we have seen a lot in that area and we have seen a lot of teams that are stranded, that are looking for home. And for us, we would be particularly interested in a firm that has private wealth and has some of the capabilities that we don’t currently have such as fixed income.

Okay. And my last question is on the SMA strategy maybe you could just give us an update on the strategy there, what firm strategies are leading in terms of sales and interest and what kind of platforms you are targeting?

Sure. Well one of the benefits of SMAs, which is something that we have not done a lot of historically, is that you are not – you don’t inherit the tax liability like you do in a mutual fund. And unfortunately for us last year on our income opportunity fund, the fund shrank in size, but had a really good year in performance and so the folks in December that own the fund on a taxable basis got hit with a large capital gain. In the case of SMAs, you build the portfolio one security at a time, so that the tax treatment goes with the individual over the life that they have it. We have made a really conscious decision to build our intermediary distribution force over the last year when we hired Harvey Steel to run that area for us. He hired 6 wholesalers that all started in July and we have covered the country and divided it into six different territories. We have added three internal wholesalers and we have focused on all of the major platforms and had probably our most success with Raymond James so far. We got great news last week that we got approved at RBC, so we will be selling into RBC and we have got two other wires now, where we are first in goal for approval that we are really excited about and will expand the opportunity set for our wholesalers. December and January were the best months for intermediary sales that we have had in 3 years. The pipeline on the institutional side has nearly tripled. We have got 11 new consultant approvals and 16 in process. Our direct calls on institutions, is up 155% year-over-year and we feel like we are in really good shape. We have spent a lot of time building the foundation and I think this is going to be a year where we have some good success. Because as I mentioned at the top, our performance in U.S. value and multi-asset has really been exceptional, that was one of the better years we have ever had.

Great. And glad I asked the question and congratulations on the outlook.

Thanks, Mac. We appreciate the question.

Thank you. [Operator Instructions] And I am not showing any further questions in the queue at this time. I would like to hand the program back to management for any further remarks.

Thank you, Jonathan. Thanks to everyone for your time. If you have any further questions, please feel free to call me or Terry and visit westwoodgroup.com for more information. Thanks again.

Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.