Thank you for standing by and welcome to the Third Quarter 2021 Westwood Holdings Group Inc. 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 is being recorded. I would now like to introduce your host for today's program. Julie Gerron, Senior Vice President, General Counsel and Chief Compliance Officer. Please go ahead.

Thank you, and welcome to our third quarter 2021 earnings conference call. The following discussion will include forward-looking statements which 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-Q filed with the Securities and Exchange Commission for the quarter ended September 30, 2021. 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're 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. Thanks for taking the time to listen to our quarterly earnings call. Last quarter, I highlighted our success is on a variety of fronts, which included improving performance and our U.S. value strategies, the soft close of our SmallCap strategy, and our best quarterly institutional sales performance since 2016. This quarter, I'm very pleased to report good progress with our new mandates one and funded in the first half of the year, continued performance improvements across our U.S. value strategies, solid year-to-date performance in our multi-asset strategies, the launch of two new mutual funds, and an improving new business pipeline for Westwood wealth, along with the rollout of a new client portal to better serve our wealth clients. Following our board's regular capital allocation review, we've increased our regular quarterly dividend after paying both a regular dividend and special dividend last quarter. Our history of maintaining a strong balance sheet with no debt, along with growing cash generation allows us to boost our dividend payouts and enhance shareholder returns, while continuing to invest in our core business. Now let's turn to our investment and asset flow performance. Markets were mixed during the third quarter as crosscurrents between economic data and rising Coronavirus caseloads impacted areas of the market differently. Investor anxiety led to declines across all U.S. value indices, while the S&P 500 continued its stretch of quarterly positive returns despite its September decline, its worst monthly returns since March of last year. Smaller cap and value oriented stocks fell, while some more defensive and secular growth areas rose. On the fixed income side, rates both declined and rallied over the quarter leaving many investment grade returns in negative territory. While high-yield securities eked out small gains. The decline in interest rates after one of the largest quarter-to-quarter…

Thanks, Brian and good afternoon, everyone. Today, we reported total revenues of $17.9 million for the third quarter, compared to $17.5 million in the second quarter, and $15.5 million in the prior year's third quarter. Revenues are comparable to the second quarter. Revenues are higher than last year's third quarter reflecting higher average assets under management, partially offset by lower performance fees. Third quarter net income of $1.9 million or $0.24 per share exceeded net income of $1 million or $0.12 per share in the second quarter due to the combination of somewhat higher revenues and lower operating expenses. Non-GAAP economic earnings were $3.7 million or $0.47 per share in the current quarter, versus $2.8 million or $0.35 per share in the second quarter. Third quarter net income of $1.9 million or $0.24 per share compared favorably with last year’s third quarter net loss of $10.3 million or $1.31 per share, primarily due to higher revenues on higher average AUM and several non-recurring items impacting the prior year third quarter. Economic earnings for the quarter were $3.7 million or $0.47 per share compared with economic losses of $1.7 million or $0.22 per share in the third quarter of 2020. Firm wide assets under management totaled $13.8 billion at quarter end and consisted of institutional assets of $6.7 billion or 49% of the total. Wealth management assets of $4.2 billion or 31% of the total, and mutual fund assets of $2.9 billion or 20% of the total. Over the quarter, we experienced market depreciation of $184 million and net outflows of $423 million. Our financial position continues to be very solid with cash and short-term investments at quarter end totaling $76.6 million and a debt free balance sheet. To announce that the Board of Directors has approved a regular cash dividend of $0.15 per common share payable on January 03 2020 to two stockholders of record on December 03, 2021. This represents an increase of over 50% over the previous regular cash dividend and a yield of 3.3% as of yesterday's close. That brings our prepared comments to a close, we encourage you to review our investor presentation we have posted on our website reflecting third quarter highlights, as well as a discussion of our business, product development and longer term trends in revenues and earnings. We thank you for your interest in our company. And we'll open the line to questions.

[Operator Instructions] And our first question comes from the line of Mac Sykes farm Gabelli. Your question please.

Good afternoon, everyone. Thanks for taking my questions.

Definitely, Mac.

First one, did you buy back some stock on the quarter? It looked like it, but I didn't see that in the press release?

We did about 25,000 shares or so.

Okay, and could you just rely on the systematic growth? I mean, it seems like a very leverageable situation now. Can you just remind us how much AUM is across the strategies and then you just kind of your thesis on kind of leveraging the different products there? I know the mutual fund stuff, but it means this kind of a consultant imaginary where is the most traction you can get kind of in the interim that leverages his track record?

Well, thanks, Mac. That's great question. So we have developed a proprietary database that really was started by Adrian Helfert do heads multi asset along with Scott Barnard, who worked with Adrian Helfert over a decade in the prior firm. And the database really is designed to minimize or effectively eliminate human bias. And we ran a paper portfolio for about a year. And we started in the wealth channel about a year ago. And we've got, I don't know, something, I want to say $10 million or so in the wealth channel. And we thought, the record is exceptional. It's over 1000 basis points ahead of the Russell growth index, 2000 growth index since inception. So we wanted to start a mutual fund, which we just did a couple of weeks ago. So we've just got corporate seed money in there now. But if we continue to deliver these kinds of results, it will go through all of the normal channels that we would typically have success in both the wealth channel, the institutional channel, and then as it gets a little more traction in the intermediary channel.

Okay, great. And then just the last thing, I think you had talked about the pipeline last quarter, and it seems like there was a little bit of turnover this quarter. Is there an update on kind of that pipeline today?

Yes, sure. So you're starting to see the effects of the winds that we had over the last couple of quarters, you're seeing increased revenues, increase net income, we were able to increase our dividend. And we are now while the flows that actually closed during the quarter slowed a little bit, we still have a lot in the pipeline. And we really, as we've said in prior quarters, we define it as sort of early stage, mid stage and late stage, and combine that's over $1 billion with about more than half of that is what I would consider late stage opportunities. And those are through your typical institutional channels with consulting firms. As we pivot from a closing, soft closing our SmallCap product, we really want to see growth in our SMid product. And we had really good performance this quarter. It's got an excellent long-term record. And we are by rated at two or three of the top consulting firms. And we're starting to see some flows there. In fact, we had positive net flows in SMid in the third quarter and we've got some good opportunities lined up in the fourth quarter and for the year ahead.

Great, thank you.

Thanks for your question, Matt.

Thank you. [Operator Instructions] And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to you Brian Casey for any further remarks.

Thanks again for taking time to listen to the call. We really appreciate your support of Westwood and feel free to call myself or Terry if you have any further questions or to visit westwoodgroup.com for more information under the investor relations tab. Have a great afternoon.

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