Westwood Holdings Group, Inc. Reports Third Quarter 2008 Results and Declares Quarterly...

Westwood Holdings Group, Inc. Reports Third Quarter 2008 Results and Declares Quarterly Dividend

Assets Under Management Rise to $8.3 Billion at September 30, 2008
and Third Quarter Revenue Increases 15% Year-over-Year
DALLAS--(Business Wire)--
Westwood Holdings Group, Inc. (Westwood) (NYSE: WHG) today
reported 2008 third quarter revenues of $10.1 million, net income of
$1.7 million and earnings per diluted share of $0.27. This compares to
revenues of $8.7 million, net income of $1.7 million and earnings per
diluted share of $0.27 in the third quarter of 2007. For the nine
months ended September 30, 2008, Westwood reported revenues of $28.9
million and net income of $5.4 million, or $0.84 per diluted share,
compared to revenues of $24.0 million and net income of $4.7 million,
or $0.76 per diluted share, for the same 2007 period.

Cash earnings, which we define as net income plus non-cash
equity-based compensation expense, for the third quarter of 2008 were
$3.5 million, when adding back $1.8 million in non-cash equity-based
compensation expense, compared to cash earnings of $3.2 million for
the third quarter of 2007, when adding back $1.5 million in non-cash
equity-based compensation expense. Cash earnings per share ("Cash
EPS"), which we define as cash earnings divided by diluted weighted
average shares outstanding, for the third quarter of 2008 were $0.54
per diluted share compared to $0.51 per diluted share for the third
quarter of 2007. Cash earnings for the nine months ended September 30,
2008 were $10.3 million compared to $8.5 million for the same period
in 2007, while Cash EPS for the nine months ended September 30, 2008
were $1.61 per diluted share compared to $1.38 per diluted share for
the same period in 2007. (Cash earnings and Cash EPS are non-GAAP
financial measures that are explained and reconciled with the most
comparable GAAP financial measures in the attached tables.)

Revenues for the third quarter of 2008 increased 15% compared to
the third quarter of 2007, primarily as a result of increased average
assets under management. Assets under management were $8.3 billion as
of September 30, 2008, an 8% year-over-year increase as compared to
assets under management of $7.7 billion as of September 30, 2007.
Average assets under management for the third quarter of 2008 were
$8.0 billion, an increase of 10% compared with $7.3 billion for the
third quarter of 2007. The year-over-year increase in period ending
assets under management was primarily due to inflows of assets from
new and existing clients and was partially offset by market
depreciation of assets under management and the withdrawal of assets
by certain clients.

Total expenses for the third quarter of 2008 were $7.3 million
compared to $6.1 million for the third quarter of 2007. Cash expenses
for the third quarter of 2008 were $5.6 million, which excludes $1.8
million in non-cash equity-based compensation expense, compared to
cash expenses of $4.6 million for the third quarter of 2007, which
excludes $1.5 million in non-cash equity-based compensation expense.
(An explanation and reconciliation of cash expenses to total expenses
are included in the attached tables.) The primary driver of the
increase in total expenses was higher employee compensation and
benefits costs, which were due to an increase in headcount, salary
increases for certain individuals and an increase of $238,000 in
non-cash restricted stock expense related to additional employee
restricted stock grants in February 2008 and independent director
grants in July 2008. Beginning in 2008, employee restricted stock
grants were awarded in the first quarter of the year in order to
synchronize the payment of cash incentive bonus awards with employees'
personal tax liabilities resulting from restricted stock vesting. We
had 63 full-time employees as of September 30, 2008 compared to 51
full-time employees as of September 30, 2007.

Westwood Trust contributed revenues of $2.9 million and net income
of $329,000 in the third quarter of 2008, compared to revenues of $2.7
million and net income of $463,000 in the third quarter of 2007.
Westwood Trust's assets under management as of September 30, 2008 were
$1.77 billion, a decrease of 4% compared to $1.85 billion as of
September 30, 2007. Positive net inflows from new and existing clients
over the past twelve months were offset by market depreciation of
assets under management.

The WHG Funds, consisting of WHG LargeCap Value, WHG SMidCap, WHG
SmallCap Value, WHG Income Opportunity and WHG Balanced, have grown to
$322 million in assets under management as of September 30, 2008, an
increase of approximately 41% compared to $228 million in assets under
management as of September 30, 2007. The WHG Funds have received
approximately $114 million of net inflows year-to-date as of September
30, 2008.

Westwood announced today that its Board of Directors declared a
quarterly cash dividend of $0.30 per common share payable on January
2, 2009 to stockholders of record on December 15, 2008.

Brian Casey, Westwood's President & CEO commented, "The market
environment was again challenging in the third quarter with most
market indexes posting further losses. Despite the difficult market,
we continue to experience strong momentum in our business as evidenced
by the fact that we increased our assets under management by 8% over
the last twelve months while many broad equity indexes were down more
than 20% over the same period. In addition, our pipeline remains
robust with a number of new account wins that we expect to fund in the
fourth quarter of 2008 and into the first quarter of 2009. We have
also taken the opportunity to capitalize on our recent growth, as well
as the confidence we have in our business, by adding additional talent
and depth to our investment, client service and marketing teams."

Westwood will host a conference call to discuss the 2008 third
quarter results and other business updates at 4:30 p.m. Eastern time
today. To listen to the conference call, dial 866-411-4706 (domestic)
or 904-596-2360 (international). The conference call will also be
available via webcast and can be accessed at Westwood's website,
www.westwoodgroup.com under the Investor Relations tab. The conference
call will be available for replay through October 30 by dialing
888-284-7564 (domestic) or 904-596-3174 (international) and entering
passcode 226698.

About Westwood

Westwood Holdings Group, Inc. manages investment assets and
provides services for its clients through two subsidiaries, Westwood
Management Corp. and Westwood Trust. Westwood Management Corp. is a
registered investment advisor and provides investment advisory
services to corporate pension funds, public retirement plans,
endowments, foundations, the WHG Funds, other mutual funds and clients
of Westwood Trust. Westwood Trust provides trust and custodial
services and participation in common trust funds that it sponsors to
institutions and high net worth individuals. Westwood Holdings Group,
Inc. trades on the New York Stock Exchange under the symbol "WHG."

For more information on Westwood, please visit Westwood's website
at www.westwoodgroup.com.

For more information on the WHG Funds, please visit
www.whgfunds.com.

Note on Forward-looking Statements

Statements in this press release that are not purely historical
facts, including statements about our expected future financial
position, results of operations or cash flows, as well as other
statements including words such as "anticipate," "believe," "plan,"
"estimate," "expect," "intend," "should," "could," "goal," "target,"
"designed," "on track," "comfortable with," "optimistic" and other
similar expressions, constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Actual
results and the timing of some events could differ materially from
those projected in or contemplated by the forward-looking statements
due to a number of factors, including, without limitation: our ability
to identify and successfully market services that appeal to our
customers; the significant concentration of our revenues in four of
our customers; our relationships with investment consulting firms; our
relationships with current and potential customers; our ability to
retain qualified personnel; our ability to successfully develop and
market new asset classes; our ability to maintain our fee structure in
light of competitive fee pressures; competition in the marketplace;
downturn in the financial markets; the passage of legislation
adversely affecting the financial services industries; interest rates;
changes in our effective tax rate; our ability to maintain an
effective system of internal controls; our ability to capitalize on
the performance of our marketing efforts; the acceptance of our new
products with our existing and new clients; changes in our dividend
policy and uses of our cash; and the other risks detailed from time to
time in Westwood's SEC filings, including but not limited to, its
annual report on Form 10-K for the year ended December 31, 2007 and
its quarterly report on Form 10-Q for the quarters ended March 31,
2008, June 30, 2008 and September 30, 2008. You are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date of this press release. Except as required by law,
Westwood is not obligated to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after
the date of this press release or to reflect the occurrence of
unanticipated events.

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*T
WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

Three months Nine months
ended ended
September 30, September 30,
--------------- ---------------
2008 2007 2008 2007
-------- ------ ------- -------
REVENUES:
Advisory fees
Asset-based $ 7,381 $5,782 $20,377 $15,368
Performance-based - - 80
Trust fees 2,845 2,666 8,270 7,558
Other revenues, net (134) 291 143 1,123
-------- ------ ------- -------
Total revenues 10,092 8,739 28,870 24,049
-------- ------ ------- -------

EXPENSES:
Employee compensation and benefits 5,498 4,669 15,512 12,644
Sales and marketing 263 164 595 432
WHG mutual funds 94 43 235 144
Information technology 296 239 823 721
Professional services 450 420 1,337 1,199
General and administrative 727 565 1,993 1,690
-------- ------ ------- -------
Total expenses 7,328 6,100 20,495 16,830
-------- ------ ------- -------
Income before income taxes 2,764 2,639 8,375 7,219
Provision for income taxes 1,028 957 2,953 2,557
-------- ------ ------- -------
Net income $ 1,736 $1,682 $ 5,422 $ 4,662
======== ====== ======= =======

Earnings per share:
Basic $ 0.28 $ 0.28 $ 0.89 $ 0.80
Diluted $ 0.27 $ 0.27 $ 0.84 $ 0.76
*T

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WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
As of September 30, 2008 and December 31, 2007
(in thousands, except par value and share amounts)

September 30, December
2008 31,
(unaudited) 2007
------------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 2,941 $ 4,560
Accounts receivable 4,780 6,599
Investments, at market value 25,537 22,144
Deferred income taxes 1,110 1,512
Prepaid taxes 2,295 -
Other current assets 412 651
------------- ----------
Total current assets 37,075 35,466
Goodwill 2,302 2,302
Deferred income taxes 472 225
Property and equipment, net of accumulated
depreciation of $1,175 and $1,002 899 1,031
------------- ----------
Total assets $ 40,748 $ 39,024
============= ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 1,194 $ 1,024
Dividends payable 2,087 1,702
Compensation and benefits payable 3,342 4,848
Income taxes payable - 1,505
Other current liabilities 11 11
------------- ----------
Total current liabilities 6,634 9,090
Deferred rent 480 588
------------- ----------
Total liabilities 7,114 9,678
------------- ----------
Stockholders' Equity:
Common stock, $0.01 par value, authorized
25,000,000 shares, issued 7,048,977 and
outstanding 6,954,488 shares at September
30, 2008; authorized 10,000,000 shares,
issued 6,840,327 and outstanding 6,807,408
shares at December 31, 2007 70 68
Additional paid-in capital 35,332 27,770
Treasury stock, at cost - 94,489 shares at
September 30, 2008; 32,919 shares at
December 31, 2007 (3,500) (1,070)
Retained earnings 1,732 2,578
------------- ----------
Total stockholders' equity 33,634 29,346
------------- ----------
Total liabilities and stockholders' equity $ 40,748 $ 39,024
============= ==========
*T

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WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

For the nine
months ended
September 30,
------------------
2008 2007
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,422 $ 4,662
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 173 176
Unrealized (gains) and losses on investments 505 (52)
Restricted stock amortization 4,927 3,797
Deferred income taxes 155 439
Excess tax benefits from stock-based
compensation (2,188) (1,226)
Net purchases of investments - trading
securities (13,510) (1,089)
Change in operating assets and liabilities:
Accounts receivable 1,819 (569)
Other current assets 242 (82)
Accounts payable and accrued liabilities 170 (3)
Compensation and benefits payable (1,506) (235)
Income taxes payable (1,370) 361
Other liabilities (27) (10)
--------- --------
Net cash (used in) provided by operating
activities (5,188) 6,169
--------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of money market funds - available for
sale (20,098) (5,320)
Sales of money market funds - available for sale 29,710 4,909
Purchase of property and equipment (125) (45)
--------- --------
Net cash provided by (used in) investing
activities 9,487 (456)
--------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (2,430) (1,042)
Excess tax benefits from stock-based compensation 2,188 1,226
Proceeds from exercise of stock options 208 533
Cash dividends (5,884) (3,654)
--------- --------
Net cash used in financing activities (5,918) (2,937)
--------- --------

NET (DECREASE) INCREASE IN CASH (1,619) 2,776
Cash and cash equivalents, beginning of period 4,560 2,177
--------- --------
Cash and cash equivalents, end of period $ 2,941 $ 4,953
========= ========

Supplemental cash flow information:
Cash paid during the period for income taxes $ 4,170 $ 1,756
Issuance of restricted stock 7,032 5,330
Tax benefit allocated directly to equity 2,430 1,475
*T

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Reconciliation of Net Income to Cash Earnings and Total Expenses to
Cash Expenses
(in thousands, except share and per share amounts)

Three Months Ended
September 30, %
-----------------------
2008 2007 Change
----------- ----------- ------
Net Income $ 1,736 $ 1,682 3%
Add: Restricted stock expense 1,775 1,537 15
----------- ----------- ------
Cash earnings $ 3,511 $ 3,219 9
=========== =========== ======

Diluted weighted average shares 6,512,720 6,263,222 4
Cash earnings per share $ 0.54 $ 0.51 6

Total expenses $ 7,328 $ 6,100 20
Less: Restricted stock expense (1,775) (1,537) 15
----------- ----------- ------
Cash expenses $ 5,553 $ 4,563 22%
=========== =========== ======

Nine Months Ended
September 30, %
-----------------------
2008 2007 Change
----------- ----------- ------
Net Income $ 5,422 $ 4,662 16%
Add: Restricted stock expense 4,927 3,797 30
----------- ----------- ------
Cash earnings $ 10,349 $ 8,459 22
=========== =========== ======

Diluted weighted average shares 6,438,128 6,142,196 5
Cash earnings per share $ 1.61 $ 1.38 17

Total expenses $ 20,495 $ 16,830 22
Less: Restricted stock expense (4,927) (3,797) 30
----------- ----------- ------
Cash expenses $ 15,568 $ 13,033 19%
=========== =========== ======
*T

As supplemental information, we are providing non-GAAP performance
measures that we refer to as cash earnings, cash earnings per share
(or Cash EPS), and cash expenses. We provide these measures in
addition to, but not as a substitute for, net income, earnings per
share and total expenses, which are reported on a GAAP basis.
Management and our Board of Directors review cash earnings, Cash EPS
and cash expenses to evaluate Westwood's ongoing performance, allocate
resources and review dividend policy. We believe that these non-GAAP
performance measures, while not substitutes for GAAP net income,
earnings per share and total expenses, are useful for both management
and investors to evaluate Westwood's underlying operating and
financial performance and its available resources. We do not advocate
that investors consider these non-GAAP measures without considering
financial information prepared in accordance with GAAP.

We define cash earnings as net income plus the non-cash expense
associated with equity-based compensation awards of restricted stock
and stock options. We define cash expenses as total expenses less
non-cash equity-based compensation expense. Although depreciation on
fixed assets is a non-cash expense, we do not add it back when
calculating cash earnings or deduct it when calculating cash expenses
because depreciation charges represent a decline in the value of the
related assets that will ultimately require replacement. In addition,
we do not adjust cash earnings for tax deductions related to
restricted stock expense. Cash EPS represents cash earnings divided by
diluted weighted average shares outstanding.

(WHG-G)

Westwood Holdings Group, Inc.
Bill Hardcastle, 214-756-6900

Copyright Business Wire 2008