Good day, ladies and gentlemen, and welcome to the Q2 2018 Westwood Holdings Group Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. It is now my pleasure to hand the conference over to Ms. Julie Gerron, General Counsel and Chief Compliance Officer.

Thank you. Good afternoon and welcome to our second quarter 2018 earnings conference call. The following discussion will include forward-looking statements. These forward-looking statements 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 June 30, 2018, 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 President and Chief Executive Officer; and Tiffany Kice, our Chief Financial Officer. I will now turn the call over to our CEO, Brian Casey.

Good afternoon, and thanks for taking time to listen to our second quarter earnings call. I will start with some comments on the investment environment and then dive deeper into our investment performance and business. In the U.S., the headlines were dominated by concern over trade wars and the potential adverse effects on the larger internationally exposed companies. Meanwhile, SmallCap companies continue to roar ahead, with the SmallCap Value index posting its fifth largest gain in the past 5 years. The market also had to digest another increase in rates by the Federal Reserve and the European Central Bank's plans to taper their asset purchases with a path to higher rates next year. We expect the net impact of these actions to be a shift in the investing landscape of the past 8 years from a market driven by monetary policy that lifts all companies towards one with clear winners and losers. This will likely lead to higher volatility and an environment that is more favorable for active management. Given these dynamics, our larger U.S. Value products did well, while our Small and MidCap products were behind during the quarter. Our LargeCap Value product beat its primary benchmark for the sixth quarter in a row and remains in the top decile peer group since its inception over 30 years ago. Concentrated LargeCap, which is in its fifth year, continues to have strong peer rankings and remains in the top quartile year-to-date and first percentile since inception. AllCap Value beat its benchmark for the quarter and year-to-date is in the top third of peer rankings over the past year. Our SMidCap strategy continues to improve on a relative basis but was behind for the quarter, given the dynamics of Small and Midcap performance in the quarter. SMidCap peer rankings are in…

Thanks, Brian, and good afternoon, everyone. Today we reported total revenues of $32.8 million for the second quarter of 2018 compared to $33.8 million in the prior year second quarter and $33.6 million in the first quarter of 2018. The decreases were primarily due to net outflows and the sale of the Omaha-based component of our Private Wealth business, partially offset by higher performance-based fees earned in the current quarter. Second quarter net income was $8 million or $0.94 per share compared to $6.9 million or $0.83 per share in the prior year second quarter. The current quarter benefited from higher performance-based fees; reductions in compensation following the sale of our Omaha-based component of our Private Wealth business; and reductions in short and long-term incentive compensation; higher foreign currency transaction gains; and a lower U.S. corporate income tax rate due to tax reform. These benefits were partially offset by lower asset-based fees and an increase in information technology implementation costs as we continue to invest in our technology infrastructure. Second quarter net income of $8 million or $0.94 per share was essentially flat with the first quarter of 2018. The current quarter benefited from a reduction in employee compensation as a result of seasonal incremental payroll tax and benefit plan matching expenses on cash bonuses paid in the first quarter, while the first quarter of 2018 benefited from higher asset-based fees and a larger foreign currency transaction gain. Economic earnings, a non-GAAP metric, was $12.2 million or $1.43 per share compared to $11.7 million or 1.41 per share in the prior year second quarter and $12.6 million or $1.48 per share in the first quarter of 2018. Firm-wide assets under management totaled $21.6 billion at quarter-end and consisted of institutional assets of $12.5 billion or 58% of the total, private…

Thank you. [Operator Instructions] And our first question will come from line of Mac Sykes with Gabelli. Your line is now open.

Good afternoon. Brian, with respect to this Morningstar sub-advisory committee, could you talk about the reach of distribution for this products, maybe how it's marketing?

Sure. It's -- It was a long time coming. There was a lot of discussion that started last year. And what Morningstar is attempting to do is really provide what they believe to be best-of-breed in each of the various style boxes and put that together in a number of different funds. So it will be available to advisers and available to 401(k) plans and others. So it's got a pretty broad and wide audience.

And then Tiffany, I noticed the investment portfolio looks like it went up about $12 million quarter-over-quarter. What was the change there? Is there more seeds or...

Oh, you mean the $5 million for the InvestCloud investment…

No. The movement in the balance sheet from cash to investments. Looks like the investment security bucket was moved from $48 million to $61 million. Is that really -- I can take it offline.

No, no, no. Let me just take a look. I don't know that there's any -- the combination of the two really hasn't been -- is not significantly changed.

Okay, great.

And keep in mind in first quarter, we pay all of our incentive comp bonuses.

Okay. Thank you.

Okay. Thanks, Mac. Are there any other questions?

I'm showing no further questions at this time.

Okay. Great. Well, thank you all very much for listening to the call. If you have any follow-up questions, please call either Tiffany or myself directly. Thanks for being a Westwood shareholder.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program, and we may all disconnect. Everybody, have a wonderful day.+