Thank you for standing by, and welcome to the Westwood Holdings Group Second Quarter 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] I'd 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 second quarter 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 June 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 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 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 spoke of our positive net flows backstopped by a pipeline of new business opportunities at its strongest level in recent years and are awarded but not yet funded pipeline, which grew to more than $800 million including several large institutional wins in SmallCap. This quarter, I'm happy to report more items that highlight the success of our efforts. Among them, improving performance across our US value strategies, a soft close of our SmallCap strategy, driven primarily by institutional wins along with capacity limitations, strength in institutional sales capping our best sales quarter since 2016. And as discussed previously, we made the strategic decision in Q4 2020 to exit the stand-alone convertibles business and most of our global convertible securities team rejoined Aviva Investors. Also, the $1.6 billion in funds that we subavized for Aviva was returned to them on April 1, 2021. Excluding this shift, positive net cash flows totaled nearly $900 million in the second quarter. Our standalone convertibles business did not meet our hurdles and the Aviva transition results in a net positive to our business in terms of revenue generation and profitability levels. The Aviva assets had an average base fee last year of 16 basis points and this quarter's new account fundings will earn a weighted average fee of 45 basis points. Our long-term shareholders will recall the difficult decision we reached in February of 2020, after years of steadily improving dividends to reduce our quarterly dividend from $0.73 to $0.43. We took this action to preserve cash, as we confronted the myriad challenges facing our industry. And as the effects of the pandemic became clear, we suspended our dividend entirely in April of last year. We reinstated a…

Thanks Brian and good afternoon everyone. Today, we reported total revenues of $17.5 million for the second quarter of 2021, compared to $18.3 million in the first quarter and $15.9 million in the prior year second quarter. Revenues were lower than the first quarter mainly due to lower performance-based fees. Revenues were higher than last year's second quarter, reflecting higher average assets under management. Second quarter net income of $1 million, or $0.12 per share was lower than net income of $4.1 million, or $0.52 per share in the first quarter, primarily due to higher realized and unrealized gains on private investments recorded in the first quarter, partially offset by lower income taxes in the second quarter. Non-GAAP economic earnings were $2.8 million, or $0.35 per share in the current quarter versus $6.3 million, or $0.79 per share in the first quarter. Second quarter net income of $1 million, or $0.12 per share outperformed 2020's second quarter net loss of $2.6 million, or $0.33 per share primarily on higher revenues and lower operating expenses particularly foreign currency transaction losses. Economic earnings for the quarter was $2.8 million, or $0.35 per share compared with $0.2 million or $0.03 per share in the second quarter of 2020. Firm-wide assets under management totaled $14.4 billion at quarter end and consisted of institutional assets of $7.1 billion, or 49% of the total, wealth management assets of $4.4 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 appreciation of $636 million and net outflows of $722 million. Our financial position continues to be very solid with cash and short-term investments at quarter end totaling $92.3 million and a debt-free balance sheet. We declared a regular cash dividend of $0.10 per common share payable on October 1, 2021 to stockholders of record on September 3, 2021. In addition, we are pleased to declare a special dividend of $2.50 per common share payable on August 20, 2021 to stockholders of record on August 6, 2021. 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.

Certainly. [Operator Instructions] And we have a question from the line of Mac Sykes from Gabelli. Your question please.

Good afternoon gentlemen. Just two questions. First, on the pipeline, can you just go over the specifics again, what it was at the end of 1Q, what it is today at the end of 2Q and what was funded and replaced? Just I want to get my numbers straight on that.

Okay. And your second question?

And just given strong growth this quarter in terms of those inflows does that create a halo effect for the firm to leverage other things that you may be working on at this point? Do you see that helping with close other sales? Thanks.

Okay. Well, I'll answer that one first, Mac. Thanks for your questions. I do think that positive momentum in the institutional sales side gets more positive momentum in other products. For example, we've had a lot of success recently in SmallCap. And as we are approaching a soft close, we've announced a soft close of SmallCap and approaching capacity, we are hopeful that we are able to draft off of that success with our SMidCap product, which is really next step for growth. We've been approved by two of the major consulting firms and by rated, and we expect to see some good activity in that product drafting off of the success we've had in SmallCap. As far as the pipeline goes, we're trying to look back at what we said last quarter and where we are today, and it looks like the numbers of $1.514 million relative to the ins and outs.

Okay. And then one last question, Brian. How should we think about the expense benefit from the Aviva change in the second half?

Well, the personnel left in early December of last year. And as part of our transition services agreement with Aviva, we agreed to continue to manage the funds until April one of this year. And so all of the office expense associated with the Boston office and all of the expense associated with the Global Convertibles team went back to Aviva. So, you will not see that expense going forward.

Okay. Great. Thanks guys.

Is that helpful? Okay. Thanks, Mac.

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 Brian Casey for any further remarks.

Thank you, Jonathan, and thank everyone for taking time to listen to the call today. If you have any further questions, please visit our website westwoodgroup.com, or call Terry or myself directly. Thank you.

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