Sylvia Fry - SVP and CCO Brian Casey - President and CEO Tiffany Kice - CFO

Mac Sykes - Gabelli Larry Carlin - Conestoga Capital

Thank you. Good afternoon and welcome to our second quarter earnings conference call.

I would like to start by reading our forward-looking statements disclaimer. The following discussion will include forward-looking statements.

These forward-looking statements 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 Annual Report on Form 10-K for the year ended December 31, 2014 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 our call today we have Brian Casey, our President and Chief Executive Officer and Tiffany Kice, our Chief Financial Officer.

I will now turn the call over to Brian Casey, our CEO.

Good afternoon everyone. Thanks for taking the time today to join Westwood’s second quarter of 2015 earnings call.

Similar to previous conference calls I'll discuss the current environment for our business, how our investments teams are performing as well as the trends our sales and clients service team are seeing within their market segment. But before we delve into those areas I'm pleased to report that we successfully closed the acquisition of Woodway Financial Advisors and their results are included in our financials for the first time.

It's been a long held strategic objective for Westwood Trust to expand into the vibrant Houston market and we really feel like we're partnering with the premier firm in Houston. We are in the process of integrating Woodway within the broader Westwood organization and we are pleased to say that it's been business as usual with Westwood clients so far.

Now turning it over to investments I will start with some broad commentary on the macro-environment that our three distinct investment teams have faced in the recent months. Uncertainty over possible default by Greece and the countries exit from the euro along with macro concerns in China created high levels of market volatility resulting in flat to negative returns for most equity markets.

Yield oriented assets were also negatively impacted by an increase in interest rates and anticipation of the federal reserve raising the fed funds rates later this year. Given this backdrop as was the case in the first quarter the importance of individual securities selection and investors placing greater focus on companies fundamentally bode well for our active style of management.

This was particularly true for the investment strategies managed by the U.S value team during the most recent quarter. On a relative basis our value strategy is continuing to perform well with most products out performing their respective benchmark drive of period.

On a year to date basis through June 30 every value equity strategy posted a positive return and as ahead of its benchmark. Also for the first quarter of 2015 every value equity strategy ranked in the top half of its peer group with many of the strategies including LargeCap Value, Smith, Smith Cap Plus and AllCap Value ranking in the top cortile or higher for the period.

Lastly our concentrated LargeCap and AllCap Value strategy which leveraged our analyst highest conviction recommendations continue to perform well. With both ranking in approximately the top decile of their respective peer groups since the inception six quarters ago.

We started these strategies given our belief that many investors will place a greater emphasis on higher conviction strategies in the years ahead and we’re delighted with the initial performance our portfolio teams have delivered. Within Westwood's multi-asset strategies our income opportunity strategy posted a return of minus 0.9% for the second quarter despite significant pressure on yield oriented assets.

For the second quarter and year-to-date the strategy displayed a lower volatility profile than the broader market, while also outperforming its benchmark for both periods. Our worldwide income opportunity strategy which we launched earlier in the year registered a decline of 1.3% in the second quarter also outperforming its benchmark.

Reflecting the challenging environment in the energy sector our MLP strategy declined 3% in the second quarter but outperformed the benchmark by over 300 basis points. This outperformance benefited us significantly in earning a performance fee of 1.9 million for the year ended June 30, 2015.

I want to specifically recognize Todd Williams, Matthew Na, newest MLP team member Harris Gabriel and Kasey Flannigan for a great year. While we expect volatility to remain a characteristic of the energy sector over the near-term, we continue to be the MLP asset class of attractive long-term opportunity.

It's now over three years since we established Westwood International Advisors our global and emerging markets business in Toronto. The team has proven to be a great cultural fit within Westwood and now manages over $4 billion on behalf of clients around the globe.

We believe that the team has potential to grow further in the coming years and will continue to focus on improving returns for clients. During the most recent quarterly period our global equity mandate performed well building on its year to date outperformance all the emerging market strategies slightly underperformed in their respective entities.

As we analyze our strategies today we continue to see very favorable portfolio characteristics which show a greater emphasis on higher quality and return on invested capital metrics. Historically these higher quality characteristics have worked well for us in generating excess returns we believe position us well to outperform going forward.

Our newest investment team the global convertible securities team has had a strong start to life at Westwood. Performance for the core strategic global convertible strategy remains ahead of its benchmark for the first six months of 2015 and the UCITS version of the strategy is one of the top performing convertible funds available to European investors.

During the second quarter we launched mutual funds for both the long only convertibles strategy as well as a liquid alternative fund which we called market neutral income. This fund incorporates various convertible investment techniques within an absolute return focused framework.

As we look forward with volatility levels rising and uncertainty prevalent convertibles are well positioned relative to many traditional asset classes. The pairing of short duration bonds with long dated options offers investors both upside potential and down side protection.

The risk adjusted return nature of the global convertible asset class with its asymmetric profile should provide a level of support in a volatile environment. I'll turn your attention to distribution transit firms starting with our private wealth business.

Post the acquisition of Woodway our private wealth business now has combined assets of over $5.6 billion and accounts for approximately 25% of total firm assets under management. Growing and building a geographically diversified footprint within our private wealth business has been the key initiative for Westwood Trust for many years.

The client base of our private wealth business combines high net worth individuals and smaller institutions. This client base is one that if taken care of in the right way can deliver steady growth and very long tenured client relationships with low levels of redemption.

After six year at bull market tax season provided some challenges for many clients as higher tax rates combined with the lack of unrealized losses that could be harvested to reduce realized capital gains resulted in higher tax build. Team members accounted clients on maintaining diversification and made portfolio adjustments as required.

Similarly the lower interest environment continues to challenge those clients that rely on portfolio income. New product offerings such as global convertible securities and master limited partnerships have proven to be welcome editions to client portfolios by boosting income levels.

In terms of organic growth we saw strong net flows particularly from our Dallas office during the second quarter. One of these new accounts was $100 million it is a short term partnership account that will likely only be with us for 12 to 36 months but has already lead to other longer more permanent relationships with the principles.

As we look forward we will continue to analyze opportunities to further expand our private wealth business particularly in geographies that offer strong growth potential and where we can find partners that share similar cultural values. Turning to our mutual funds business for the second quarter we posted net mutual fund sales positive net mutual fund sales albeit at a much slower pace than the first quarter.

A continued bright spot is the second consecutive quarter of positive flows for our emerging markets fund as well as our MLP and strategic energy fund which we launched at the end of 2014. As you know we've invested significantly in our mutual funds complex in recent years.

With the addition of the two aforementioned convertible funds as well as the launch of the worldwide income opportunity fund in the second quarter we now have 15 mutual funds diversified across a number of categories. The new funds as well as improved performance of our existing funds such as LargeCap Value and Smith Cap position us well to grow this part of the business in the years ahead.

After a very strong start to the year our institutional business saw a slowdown in the second quarter while net institutional flows were negative for the quarter they remain positive for the year to date period. Most of the outflows in the second quarter resulted from asset allocation decisions and were partial redemptions of larger mandates that clients have kept with Westwood.

Our institutional client retention rate has historically been very high and remains well over 98% for 2015. In April we launched a UCITS offering of our emerging markets plus strategy for a Canadian institutional client as the third sub fund and our UCITS platform.

As we look forward the institutional pipeline remains quite strong and the sales team is working hard on bringing new business to the firm over the remainder of the year. Before wrapping up I also wanted to inform you that we've hired our first Chief Information Officer as we've grown in our business has become more complex we felt that now is the appropriate time to add a senior technology leader that will ensure we're thinking strategically and operating efficiently as we move forward.

Fabian Gomez brings over 25 years of senior level technology experience in the asset management industry and we welcome him to the Westwood leadership team. To conclude we're very happy with how business is progressing as we move through 2015 while no doubt a competitive environment for asset management firms we believe that’s its truly unique for a firm our size to have multiple platforms for growth.

A seasoned institutional business of over 30 years a trust business that is nearly 20 years old and mutual fund business that will be 10 years old later this year and a UCITS business that is young but already profitable. Our focus will always be on creating culture of employee ownership with a focus on investment and client service excellence.

This combination of factors is at the center of what has made Westwood successful and what we'll drive our success in the future. We just surpassed 13 years as a public company on the New York Stock Exchange and I’d like to thank our long term shareholders for your support and to all of my long tenured colleagues for making Westwood what it is today.

I'll now turn the call over to Tiffany Kice our CFO.

Thanks Brian and good afternoon everyone. As Brian mentioned earlier we completed the acquisition of Woodway on April 1 and Woodway's financial result have been consolidated in our financial statements for the second quarter of 2015.

For the second quarter 2015 we are reporting total revenue of 37.3 million up 21% or 6.4 million from the same period in 2014. With asset base advisory fees up 24% or 5.4 million and trust fees up 54% or 2.8 million.

We reported performance based advisory fees of 1.9 million during the quarter compared to 3.4 million in the second quarter of 2014. Net income of 9.8 million increased 14% from the second quarter of 2014 and diluted earnings per share of $1.23 increased 10% from $1.12 in the same period of 2014.

Economic earnings a non-GAAP metric of 14.4 million increase 23% as compared to 11.7% in the second quarter of 2014. Economic earnings per share increased $1.80 per share from a $1.52 per share in the same period of 2014.

Firm related assets under management increased to a record 23.1 billion primarily due to the Woodway acquisition which contributed 1.6 billion in assets under management. At quarter end our assets under management consisted of institutional assets of 13.2 billion or 57% of the total private wealth assets of 5.6 billion or 24% of the total and mutual fund assets to 4.3 billion or 19% of total.

Our balance sheet continues to be very solid with cash and investment with 69 million in note debt. Our Board of Directors approved a quarterly cash dividend of $0.50 per share payable on October 1st, 2015 to stockholders of record on September 11, 2015.

This represents an annualize dividend yield of 3.4% at yesterday's closing price. We encourage you to review the presentation we posted on the website reflecting second quarter highlights as well as longer term trends in the growth of our assets under management, revenue earnings and dividend.

I'll now turn the call back over to Brian to conclude.

Thanks Tiffany great job. If anybody has a question, please let the operator know.

My first is, do you think that the volatility in the energy space has dampened investor longer term investment appetite for both the MLP and income opportunity strategies?

I don’t I believe in fact one of our larger clients just put some additional funds with us in the last couple of weeks in frankly at our trust company just heard a presentation on opportunistic investing and in the energy area so I do think there is a lot of discussion there is obviously a lot of uncertainty but uncertainty creates opportunities so I think you will see continued investment in that area.

And congratulations on the new hire in the CIO role do you think you will ramp-up technologies spending from here or do you just expect and the points of efficiencies for you?

Well. I think there will be a technology spend as a firm has been pretty consistent over the years and launched up with our growth I think they will find it efficiencies and I think they will find ways to make us better as a firm we've just our business has become more complex and more variables in the last several years and it was time to make a higher with them.

Hello, Brain and Tiffany. This is Larry Carlen sitting here with Bob Mitchell.

Hi Larry, hi Bob.

Just a question on the institutional business you talked about the pipeline being strong what products are you seeing that strengthen and is there any way to give us the general sense of how much that pipeline has increased year-over-year?

I'll answer the first part. That the interest level often times performance to search activity and we've had terrific performance in our Small Cap and AllCap strategies and the search activity has picked up there we've had continued ongoing interest in our EM strategies so we've had a lot of interest there.

It was great to see our LargeCap performance do so well over the last 12 months we've actually moved into the closer to top cortile for the last 12 months. And we have a 31 year record in LargeCap that when you look at it, it doesn’t take where many quarters of good performance to make that long-term record look really attractive so those are really the areas our global converts team has off to a fantastic start that's a niche product but it's also one where there is an appetite specially from Europeans for that asset class and the fund is up to a terrific performance start.

So those of the just in terms on a relative basis year-over-year we've had pretty strong search activity has been pretty consistent I can re tell whether it's higher today than it was a year ago I can just tell you that's it's positive and there is no shortage of opportunities.

And on the Woodway acquisition, can you talk about what's involved in integrating that and what type of synergies do you think you can get from Woodway?

Yes. Well there is.

The Woodway as I said in prior calls they didn’t need us to be successful they are already a successful business and so varies where I think we can add some efficiencies obviously there is efficiencies with respect to crooked of areas in the finance and accounting areas and the HR areas those are the kind of the low hanging fruit and then we have some things that we've learned operationally over the years that maybe helpful those are really the from a financial perspective the most help we can do financially but there is also things that as a firm we can do we certainly has a pretty broad based research department, we have a lot of things that are available but we wanted to be really careful and how we introduce those to clients we want them to be value add as opposed to this is how we do it their clients are already happy so they don’t again need us so there is lots of opportunities we had our trust board meeting this afternoon and we have the leaders of our Dallas business our Oklahoma business and our Houston business it's all together and it's a great opportunity to learn from each other and for all of us to get better.

I don’t have anything further I just reiterate again to thank all of our long-term shareholders including Bob and Larry and the Gabelli organization for their support over what is now 13 years it's been a terrific run and we really think this is just the beginning. So thank you if you have any further questions feel free to call us or visit our Web site at westwoodgroup.com.

Thank you.