Good day and thank you for standing by. Welcome to the Westwood Holdings Group First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand conference over to your speaker today Jill Meyer, SVP, Director of Fiduciary Services, Legal, and Comp. You may begin.

Thank you and welcome to our first quarter 2023 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-Q for the quarter ended March 31st, 2023 that will be 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 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 Chief Executive Officer; and Terry Forbes, our Chief Financial Officer. I will now turn the call over to Brian Casey.

Good afternoon and thanks for listening to our quarterly earnings call. April 1st marked Westwood's 40th anniversary, which we celebrated with our founder Susan Byrne, many of our employees, and long-term clients. Westwood was founded four decades ago with a bedrock of disciplined investing principles, designed to generate alpha, without taking excessive risk. This approach has consistently allowed our clients to withstand the vagaries of market cycles as we help them achieve their long-term financial goals. Our principles have withstood the test of time and have proven their value year-after-year. We're very proud to have enabled clients to navigate some of the most challenging markets in history and we stand ready to help them confront and overcome market obstacles in these uncertain times. We completed the acquisition of Salient Partners last November and this is the very first full quarter for our combined business including Salient's energy infrastructure, tactical absolute return, real estate, and private investment capabilities. Salient also brought great people and synergistic distribution to Westwood. Included in our first quarter results were expenses of $280,000 representing the remaining Salient transaction costs. As part of the Salient transaction, we acquired a 47% ownership stake in Broadmark Asset Management. Those taxable absolute return strategies were key to the acquisition. We really like Broadmark's track record, solid client base, and growth potential. We're pleased to report that during the quarter, we purchased a majority interest in Broadmark and now own nearly 80%. We're excited to partner with management to grow the business together over the next several years. US equities rallied early in the quarter, but the market soon ran into difficulties; choppy corporate earnings, mixed economic data, and a banking crisis slowed market momentum. Sticky inflation and a tight labor market kept the Fed on the path of additional interest…

Thanks Brian and good afternoon everyone. Today we reported total revenues of $22.7 million for the first quarter of 2023, compared to $20.5 million in the fourth quarter and $17.2 million in the prior year's first quarter. Revenues were higher than the fourth quarter and last year's first quarter, reflecting higher average assets under management following our 2022 acquisition of Salient Partners asset management business. First quarter net income of $0.7 million, or $0.09 per share, compared favorably with a net loss of $3.1 million, or $0.40 per share in the fourth quarter due to higher revenues and lower expenses, primarily related to our 2022 acquisition of Salient Partners asset management business, including approximately $5.3 million of acquisition-related expenses in the prior year quarter. Non-GAAP economic earnings were $3.6 million, or $0.45 per share in the current quarter versus a loss of $0.7 million, or $0.09 per share in the fourth quarter. First quarter net income of $0.7 million, or $0.09 per share compared favorably with last year's first quarter net income of $0.1 million, or $0.01 per share primarily on higher revenues partially offset by higher expenses primarily employee compensation and benefits expenses following our 2022 acquisition of Salient Partners asset Management business. Economic earnings for the quarter were $3.6 million or $0.45 per share compared with $1.9 million or $0.24 per share in the first quarter of 2022. Firm-wide assets under management and advisement totaled $16.2 billion at quarter end, consisting of assets under management of $15 billion and assets under advisement of $1.2 billion. Assets under management consisted of institutional assets of $7 billion or 47% of the total, wealth management assets of $3.8 billion or 25% of the total and mutual fund assets of $4.1 billion or 28% of the total. Over the quarter, we experienced market appreciation of $0.3 billion and net outflows of $145 million. Assets under advisement remained relatively flat at $1.2 billion quarter-over-quarter. Our financial position continues to be very solid with cash and short-term investments at quarter end totaling $32.3 million and a debt-free balance sheet. Pleased to announce that, our Board of Directors approved a quarterly cash dividend of $0.15 per share payable on July 3, 2023 to stockholders of record on June 2, 2023. That brings our prepared comments to a close. We encourage you to review our investor presentation we have posted on our website reflecting quarterly 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.

Thank you. [Operator Instructions] Our first question comes from Mac Sykes with Gabelli. You may proceed.

Hi, Brian. Good afternoon, everyone.

Hi, Mac.

I just -- if I were to think about the progression of margins this year, could you maybe talk about it from perhaps if AUM just stays flat for the rest of the year? And then that's one scenario and then maybe perhaps another scenario organic growth and the markets are a little more favorable. How do you see the margins progressing kind of a better top line environment? Thank you.

Yeah. So Mac, I would say with AUM staying where it is I would expect that we would see some margin expansion as we focus on costs especially in the compensation and benefits line item. And organic growth, again, I would expect to see some margin expansion as we're able to take advantage of the scale that our platform offers in addition to what we acquired with Salient, which was again expected to leverage off of our existing platform.

Thank you.

And I would just follow on with that Mac and point out that in the first quarter we had nearly $1 million of non-recurring items that impacted our earnings namely the aforementioned $280,000 of deal cost, legal expenses of $421,000 a headcount reduction and force expense of $205,000 and then a small loss on a seed money investment of $91,000. I'd also like to report that we held our Annual Shareholders Meeting today and all items were approved. I would like to thank our loyal long-term shareholders for your support and we'll endeavor to deliver results for you in the year ahead. And finally, I want to close with a few comments on performance sales and sales technology. Performance for our US value has been excellent. They've really delivered especially in the growth areas of SmallCap and SMidCap. Not only did both of these products have great quarters, but their trailing one year performance is over 1,100 basis points ahead for SmallCap and over 600 basis points ahead for SMidCap. So this sets us up really well for increased search activity in both products, and we do hope to see more flows from the OCIO channel for our SMid product. And with respect to sales most CIOs and strategists out there are calling for a recession and lower equity market levels from here and buyers of equities have retreated from buying equities in favor of brokered CDs, high-yield cash management, fixed income. And most of our products are equity-oriented so sales have been slower in this equity risk off environment. But our internal work suggests a shallow recession and our sales team is outlaying the great groundwork for when flows and buyer preferences shift back towards equities. So our prospect and adviser engagement is higher than it's ever been. And…

No more in the queue for questions.

Okay, very good. Well thank you all for your time. And please call myself or Terry if you have any further questions or visit westwoodgroup.com. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.