Hello. Thank you for standing by and welcome to Westwood Holdings Group, Inc. Second Quarter 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Julie Gerron, General Counsel. Please go ahead.

Thank you. Hello, everyone and welcome to our second quarter 2022 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, 2022 that is 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. Last quarter, I shared with you the results from our Multi-Asset and distribution teams as well as our successes in expanding our wealth management business. This month, we are celebrating an important milestone, our 20th anniversary as a publicly traded company. While our recent stock performance has been disappointing to us all, we are enormously proud to have delivered over $258 million in dividends to our shareholders over the past two decades. We feel good about our position as a firm and look forward to integrating the Salient team and building our business together in the years ahead. There were several notable items from our investment, distribution and business teams to highlight this quarter. We announced an agreement to acquire Salient Partners’ asset management business, which delivers a unique, complementary product set along with highly accretive earnings to Westwood. Our U.S. Value team outperformed their benchmarks in every product strategy during a difficult down market. Our Multi-Asset Systematic SmallCap Growth product continues to pose strong relative returns, and our Alternative Income strategy ranked first percentile in its Morningstar category for the quarter. The first half of this year witnessed the worst-performing stock and bond market in over 50 years as markets factored in accelerating inflation, rising interest rates and record Fed tightening amid continuing geopolitical tensions. All domestic asset classes declined, and the damage was not confined solely to equities as fixed income securities experienced rising yields and lower prices. Against this backdrop, I am pleased to report that all our U.S. Value strategies outperformed in this very difficult quarter. Our SmallCap strategy bounced back from last quarter’s underperformance, beating the Russell 2000 Value Index by almost 390 basis points. Among its institutional peers, SmallCap Value ranks in the…

Thanks Brian and good afternoon, everyone. Today, we reported total revenues of $15.6 million for the second quarter of 2022 compared to $17.2 million for the first quarter and $17.5 million in the prior year second quarter. Revenues were lower than first quarter and last year’s second quarter, reflecting lower average assets under management mainly attributable to the downdraft affecting markets worldwide. The second quarter net loss of $0.4 million or $0.05 per share compared unfavorably with net income of $0.1 million or $0.01 per share in the first quarter due to lower revenues, partially offset by lower expenses, primarily employee compensation and benefits. Non-GAAP economic earnings were $1.6 million or $0.20 per share in the current quarter versus $1.9 million or $0.24 per share in the first quarter. The second quarter net loss of $0.4 million or $0.05 per share declined from last year’s second quarter net income of $1 million or $0.12 per share, primarily on lower revenues, partially offset by lower expenses, primarily employee compensation and benefits. Economic earnings for the quarter were $1.6 million or $0.20 per share compared with $2.8 million or $0.35 per share in the second quarter of 2021. Firm-wide assets under management totaled $12.1 billion at quarter end and consisted of institutional assets of $5.9 billion or 49% of the total, wealth management assets of $3.7 billion or 30% of the total and mutual fund assets of $2.6 billion or 21% of the total. Over the quarter, we experienced market depreciation of $1.5 billion and net outflows of $183 million. Our financial position continues to be very solid with cash and short-term investments at quarter end totaling $73.6 million and a debt-free balance sheet. I am happy to announce that our Board of Directors approved a regular cash dividend of $0.15 per common share payable on October 1, 2022, to stockholders of record on September 2, 2022. That brings our prepared comments to a close. We encourage you to review our investor presentation 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 will open the line to questions.

[Operator Instructions] Our first question comes from Macrae Sykes with Gabelli. You may proceed with your question.

Good afternoon and congratulations to the firm and on Adrian’s article in Barron’s. Quite impressive.

Thanks Mac.

I have two questions, and I will just ask them so it’s easier, both related to Salient. So, first, maybe you could just provide us some feedback that you have gotten since the announcement in May from, I guess the clients, consultants, perhaps the intermediary channel, just about your acquisition going forward on Salient. And then my second question is, once you close the deal, how should we think about ramping up the timing of realizing some of the revenue synergies from the combination? Thank you.

Great. Okay. Well, first, I will say, Mac, that the Salient products include midstream energy, renewables, real estate and hedged equity with Broadmark in San Francisco. And they are highly complementary to our U.S. Value and Multi-Asset product line. And the feedback we have received so far has been very positive. We think that we can help them immediately in the institutional area, particularly in the midstream product area. They are one of the survivors that has a good long-term track record in a space that is increasingly getting flows. After a couple of rough years, it started to turn the other way with the realization that energy is 4% or 5% of the S&P now, whereas historically, it’s been more than double that. So, people are beginning to take a look and look at the long life return potential for the asset class. In the intermediary channel, we feel like expanding the team is going to help us in both the RIA and the broker-dealer channels. Salient has a really good footprint in the broker-dealer area, and we have a really strong presence in the RIA area. And I think putting the two together will really allow us to further attack the market. And to answer your second question, while we can’t do anything about the stock and bond market decline, which hit all asset managers, our core business performed relatively well from a flow perspective and exceptionally well from a client retention perspective. We have not lost a single institutional client this year, and our client retention rate in the wealth business is 96%. We had some unusual non-operating expenses this quarter, as many of you saw, with BlackRock and some of the other asset managers that have reported recently. The total non-operating expense losses for us were $1.656 million, which consisted of $731,000 of deal expenses, seed money and deferred bonus pool mark-to-market write-downs of $623,000 and a fair value adjustment to our investment in Westwood Private Bank of $302,000. So, absent all of these non-operating expenses, we would have posted a much better quarter. And in the meantime, we continue to prune expenses, buyback stock and prepare for the highly accretive integration of Salient and their subsidiary, Broadmark. And as mentioned previously, Salient is a $30 million-plus run rate revenue business. And we modeled it at industry average margins of 25% to 35%, which would be $7.5 million to $10.5 million in earnings to the bottom line. So, nothing we have seen thus far in our due diligence has changed our view, but we have got more work to do towards closing.

Great. Thank you.

Thanks for your question.

[Operator Instructions] And I am not showing any further questions at this time. I would now like to turn the call back over to Brian Casey for any further remarks.

Well, thank you. We appreciate your interest in Westwood, and please follow-up, visit our website at westwoodgroup.com or call myself or Terry directly if you have any further questions. Thanks for your time.

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