Westwood Holdings Earnings Call Signals Transitional Growth

Westwood Holdings ((WHG)) has held its Q2 earnings call. Read on for the main highlights of the call.

Claim 55% Off TipRanks

• Unlock powerful investing tools with TipRanks Premium to make smarter, more confident investment decisions
• Subscribe to TipRanks Smart Investor Newsletter, and discover new investing opportunities with data-backed stock picks

Westwood Holdings’ latest earnings call struck a cautiously optimistic tone. Management highlighted solid revenue and earnings growth, expanding ETF and private capital platforms, strong long‑term investment performance, and a continued dividend. Yet the discussion also acknowledged sizable net outflows from legacy value strategies and rising expenses and taxes, underscoring the challenge of navigating an industry shift toward passive products.

Revenue Growth

Westwood reported Q2 2026 revenues of $25.3 million, up 9.5% year over year from $23.1 million and 1.2% sequentially from $25.0 million in Q1. The modest but steady growth reflects higher management fees tied to market appreciation and expanding platforms, even as outflows weighed on asset levels.

Net Income and EPS Improvement

Net income rose to $1.5 million, or $0.17 per share, compared with $1.0 million, or $0.12 per share, a year ago, a 50% jump in profits and 41.7% gain in EPS. Versus Q1’s $0.8 million, or $0.09 per share, net income nearly doubled, showing improved operating leverage despite cost pressures.

Non-GAAP Economic Earnings Up

Non-GAAP economic earnings reached $3.0 million, or $0.33 per share, in Q2, up from $2.8 million and roughly $0.31–$0.32 per share in both Q1 2026 and Q2 2025. The mid‑single‑digit increase highlights underlying profitability trends after adjusting for items that make GAAP results more volatile.

ETF Platform and Product Momentum

The ETF platform passed the $400 million asset mark in July, driven largely by Enhanced Midstream and Enhanced Energy Income products topping $370 million combined. The Enhanced Income Opportunity ETF is nearing $35 million, and mutual fund and ETF gross sales of $168 million in the quarter point to growing investor interest in these vehicles.

Private Capital Fundraising Success

Westwood closed about $147 million in new commitments for its energy secondaries and co‑investment private capital platform during the quarter. Total private capital commitments now exceed prior levels, and management believes this momentum can support future mandates from institutional investors seeking alternative income and diversification.

Firm AUM, Asset Mix and Market Appreciation

Firm-wide assets under management and advisement ended the quarter at $17.9 billion, including $17.0 billion in AUM and $1.0 billion in AUA. Market appreciation added roughly $1.2 billion to assets over the quarter, partly offsetting the drag from net outflows and supporting revenue resilience.

Strong Long-Term Strategy Performance

Management emphasized robust long‑term performance in multi‑asset and wealth strategies, with Multi‑Asset Income ranking in the top 12% over 3 and 5 years and top 1% over 7 and 10 years. The MLP separately managed account is in the top decile since inception, while several equity and thematic strategies are in the top third or quartile over extended horizons.

Strategic Initiatives and Talent Additions

Westwood entered a strategic partnership with ETF Capital Markets Advisors to improve ETF trading and execution and announced the upcoming PWRX ETF to list on a new exchange in mid‑September. The firm also bolstered its energy secondaries and private capital operations teams with seven hires and continues to evaluate technology and process upgrades.

Capital Allocation and Balance Sheet

The board approved a regular cash dividend of $0.15 per common share, highlighting confidence in cash generation and capital strength. Cash and investments totaled $56.5 million at quarter end, giving Westwood flexibility to support growth initiatives while continuing shareholder returns.

Large Net Outflows

Despite market gains, the firm faced $1.6 billion in net outflows during the quarter, leaving AUM down about $400 million, or roughly 2.2%. Institutional accounts saw $382 million in gross sales but still posted $1.3 billion in net outflows, showing how redemptions have overshadowed new mandates.

Concentrated Outflows from Legacy Value Strategies

Flows were heavily negative in legacy large cap and small cap value strategies, tied to weaker short‑term performance and a broader industry move toward cheaper passive ETFs. One client consolidated small‑ and mid‑cap allocations, driving June redemptions, though that client later funded a larger SMID cap allocation in July, partially offsetting the impact.

Mutual Fund and ETF Net Outflows

Mutual funds and ETFs generated $168 million in gross sales but still ended the quarter with $165 million in net outflows. The near balance between new subscriptions and redemptions shows that while Westwood’s newer products are gaining traction, they are not yet fully counteracting withdrawals from older strategies.

No Carried Interest Recognized Yet

Management reminded investors that private capital funds carry the potential for performance‑based fees that could materially enhance earnings over time. However, no carried interest is currently recognized in financial results, meaning today’s reported numbers do not yet benefit from this upside.

Rising Expenses and Higher Taxes

Higher compensation and professional services costs, along with increased income taxes, partially offset revenue gains in the quarter. These items contributed to the gap between GAAP net income and economic earnings and were cited as key drivers behind quarter‑to‑quarter expense variability as Westwood invests for growth.

Macro and Market Risks

Management pointed to renewed inflation pressures, largely energy‑related and tied to geopolitical conflict, and higher bond yields as important macro risks. These factors could shift investor risk appetites, affect market leadership, and add volatility, which in turn influences client flows and sentiment toward active strategies.

Forward-Looking Guidance and Growth Ambitions

Looking ahead, Westwood is targeting more than $1.0 billion in assets for each of its three emerging businesses—Managed Investment Solutions, ETFs, and Private Capital—from roughly $500 million apiece today. Management expects average fee rates to rise as ETF and private capital scale, anticipates broader ETF distribution and new listings, and sees continued SMID cap mandates from consultants, supported by an ongoing dividend policy.

Westwood’s earnings call painted a picture of a firm in transition, balancing solid financial progress and strong long‑term investment results against meaningful outflows from legacy strategies. For investors, the story is about whether growth in ETFs, private capital, and managed solutions can outpace industry headwinds and cost pressures, turning today’s cautious optimism into durable, higher‑margin expansion.