Ladies and gentlemen, thank you for standing by and welcome to the Westwood Holdings Group Second Quarter 2020 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] As a reminder, today's program is being 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 second quarter 2020 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 for the quarter ended June 30, 2020 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 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 our CEO, Brian Casey.

Good afternoon everyone. Thanks for taking the time to listen to our quarterly earnings call today. Our last call took place in the early days of the global pandemic just three months ago. During this past quarter, we've gained more experience regarding the impact COVID-19 is having on the economy, the asset management industry and our company. Before I review the quarter, I want to take a moment to recognize and thank all the members of the Westwood team for the extraordinary efforts they're making each day for our clients. The health and safety of our employees and their families is a top priority, which means that nearly all of them are working remotely. They've gone above and beyond every day to make sure our clients are supported with everything they need. This quarter set records once again as the markets rallied from the first quarter slump with the S&P 500, posting its strongest quarterly gain since 1998. The divergence in performance between the major indices is one of the widest we've seen in decades. The strong rally in equities, despite weak economic data was led by the smallest companies and those with no earnings. The value style category remained challenged as both growth and tech surged ahead. Another factor affecting performance is that the S&P 500's five largest stocks comprising about 20% of the overall index have business models that could take advantage of the constraints of the lockdown, including working from home and they exerted an outsized influence on the S&P 500 returns. The impact of the top five stocks on the Russell 1000 growth index was even more pronounced accounting for about 40% of index performance. The path to recovery remains decidedly murky as COVID-19 continues to spread. Infection trends are worsening in key states like Texas,…

Thanks Brian and good afternoon everyone. Today we reported total revenues of $15.9 million for the second quarter of 2020 compared to $16.7 million in the first quarter of 2020 and $21.7 million in the prior year second quarter. The decreases from the first quarter and the prior year second quarter were principally as a result of lower average assets under management. Second quarter net loss was $2.6 million or $0.33 per share compared to net income of $1.1 million or $0.13 per share in the first quarter. The decrease primarily related to lower revenues foreign currency transaction losses and higher income taxes partially offset by lower operating expenses. Economic earnings a non-GAAP metric was $0.2 million or $0.03 per share in the current quarter versus $4.2 million or $0.50 per share in the first quarter. Second quarter net loss of $2.6 million or $0.33 per share compared to net income of $1.9 million or $0.22 per share in the prior year second quarter. The decrease primarily related to lower revenues partially offset by lower operating expenses particularly employee compensation and benefits. Economic earnings for the quarter was $0.2 million or $0.03 per share compared to $4.8 million or $0.56 per share in the second quarter of 2019. Firm-wide assets under management totaled $11.9 billion at quarter end and consisted of institutional assets of $6.2 billion or 52% of the total. Wealth management assets of $4 billion or 34% of the total and mutual fund assets of $1.7 billion or 14% of the total. Over the year, we experienced market depreciation of $1.6 billion and net outflows of $1.8 billion. Our financial position continues to be very solid with cash and short-term investments at quarter end totaling $74.2 million and a debt-free balance sheet. In the second quarter, we repurchased 407,697 shares of our common stock for an aggregate purchase price of $8.1 million. We currently have authority to repurchase an additional 10 million of our outstanding shares. That brings our prepared comments to a close. We encourage you to review our investor presentation we have posted on our website reflecting second 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 from Gabelli. Your question please.

Good afternoon, everyone.

Good afternoon, Mac.

Brian, I want to just get a little more color on the EM operations going forward. Specifically, I assume you'll be running it out of the Dallas offices. How much is in the strategies today? And what do you anticipate as being the cost benefits I guess later in the year 2021 from the change?

Yes. So, as we said in the press release Mac, we are discontinuing our operations in the emerging markets in the third quarter. And the Toronto office will close by the end of the third quarter, and we do not anticipate managing that strategy any further. The office is currently in a loss mode, and we will have more information as to what that potential savings could be on the next call.

Okay. And then in the marketplace today, we've heard a lot about fintech and some of these IPOs coming and the valuations, and you have that investment in InvestCloud. I was just wondering is there the potential for more significant realization in that investment, given the -- or just with the carrying value at around $8 million today?

Well certainly, it's an area that is very hot right now, and fintech multiples are in the world of 10 times revenues or even higher. So certainly, that's a business that continues to grow and one that we have already marked up in value in the past six months. And as long as their business continues to flourish, which it is doing, we could expect that investment would perform in line with how other fintech investments are doing.

Great, thank you.

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 for any further remarks.

Thanks, Jonathan. Well, I'd just like to reiterate in closing that we'll continue to execute on our growth and cost savings initiatives to improve our results. We believe we're on the right path. Our performance is competitive, both short-term and long-term, across both U.S. Equity and Multi-Asset. We've restructured our pricing and expanded available vehicles to include new share classes and model delivery. We've introduced sensible fees in some of our mutual funds. We continue to implement our investments in technology and outsourcing that really just started four years ago to make us more efficient in the years ahead. We are rightsizing the organization to eliminate unprofitable products and reduce costs wherever we can. And in institutional, we now have over $100 million of new wins awaiting funding, and the new opportunity pipeline is significant. We've won a number of consultant approvals over the past year, and we're well positioned to continue to grow new sales, particularly as the demand picture improves for U.S. value strategies. In intermediary, it's been tough during COVID, but we believe that sales growth is well-positioned to resume to the levels that we saw in the first quarter once we're able to return to normal business conditions and see advisers in their offices. We'll also be able to expand our sales footprint in small-cap starting in the fourth quarter, once we've onboarded a new platform approval from the past quarter. And our Private Wealth businesses in Dallas and Houston are healthy. We're rolling out new services and technology over the balance of the year, and we've really made it a priority to make our clients well supported during this unprecedented period. And finally, we remain financially strong with cash and investments of over $85 million, which is $10.23 per share and no debt. So, I want to thank everybody for taking the time to listen to our call, and please reach out to either Terry or me or visit our website at westwoodgroup.com, if you have additional questions.

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