Westwood Q2 2026 Earnings: Revenue Growth Restores Operating Profit

Westwood Holdings Group (NYSE: WHG) reported Q2 2026 revenue of $25.3 million, up approximately 9.6% from $23.1 million a year earlier, while diluted EPS increased to $0.17 from $0.12. Higher asset-based advisory and trust fees lifted operating income, while lower compensation expense versus the first quarter helped net income nearly double sequentially without another private-investment gain.

Core Financial Results

For the quarter ended June 30, 2026, asset-based advisory fees increased by $1.4 million year over year and trust fees rose by $0.3 million. Other revenue increased by $0.5 million from a small prior-year base.

Total expenses rose approximately 4.6%, slower than revenue growth. Compensation and benefits increased 5.3% year over year, while professional-services expense rose 21.9%, but the overall operating leverage expanded the GAAP operating margin by approximately 4.4 percentage points.

Operating margins and percentage changes are calculated from the reported figures and may differ slightly because of rounding.

Business and Platform Performance

Management attributed the year-over-year revenue increase particularly to growth in Westwood’s ETFs and private energy secondaries funds. ETF platform assets surpassed $400 million, while Private Capital platform assets exceeded $500 million. Managed Investment Solutions flows reached $350 million, although Westwood did not provide a comparable prior-period figure for these milestones.

Firmwide assets under management and advisement totaled $17.9 billion at quarter-end. Westwood reported $17.0 billion of AUM and approximately $1.0 billion of assets under advisement, with the individual figures subject to rounding.

Several strategies beat their primary benchmarks, including Enhanced Balanced, Alternative Income, Real Estate Income, MLP & Energy Infrastructure, Enhanced Midstream Income and Enhanced Energy Income. Management also reported top-quartile peer rankings for three strategies and a top-decile ranking for Real Estate Income.

Lower Compensation Restored Operating Profit Without an Investment Gain

The sequential improvement was primarily operating-driven. Revenue was broadly consistent with the first quarter at $25.3 million, but compensation and benefits declined to $14.2 million from $17.2 million, helping total expenses fall to $23.3 million from $26.5 million. As a result, Westwood moved from a $1.5 million first-quarter operating loss to $2.1 million of second-quarter operating income.

Net income increased to $1.5 million from $0.8 million despite the absence of the $2.0 million realized private-investment gain recognized in the first quarter. Higher income taxes partly offset the benefit from lower compensation expense.

GAAP earnings also grew considerably faster year over year than non-GAAP Economic Earnings. Westwood’s Economic Earnings calculation added back $1.3 million of stock-based compensation, $0.6 million of intangible amortization and a $0.1 million tax benefit related to goodwill, while subtracting a $0.6 million tax effect from the adjustments.

Cash Flow and Balance Sheet

For the first six months of 2026, operating cash flow was $3.0 million, up from $2.4 million in the comparable 2025 period. These are year-to-date figures rather than standalone second-quarter cash flows.

Cash and cash equivalents declined to $22.6 million from $26.2 million at the end of 2025. Positive operating cash flow was more than offset by $2.4 million of investing outflows and $4.2 million of financing outflows, including $2.9 million of cash dividends. Westwood reported $56.5 million in combined cash and investments and $126.3 million of stockholders’ equity at June 30.

The board declared another quarterly cash dividend of $0.15 per common share, payable October 1, 2026, to shareholders of record on September 1.

Management’s View

CEO Brian Casey emphasized the asset milestones reached by the ETF and Private Capital platforms, along with continued performance across the Multi-Asset and Wealth Team strategies. Management’s growth priorities include expanding the Private Capital business and Managed Investment Solutions pipeline, as well as the planned listing of the PWRX ETF on the Texas Stock Exchange.

Risks Investors Should Monitor

• Sensitivity to assets and flows: Asset-based advisory fees represented approximately 76% of quarterly revenue. Changes in market values, client flows or redemptions can therefore affect both revenue and profitability.
• Expense control: Compensation declined substantially from the first quarter but remained above the prior-year level. Professional-services expense also increased nearly 22% year over year, creating a potential offset if revenue growth slows.
• Execution on newer platforms: ETFs and private energy secondaries were identified as important revenue drivers. Sustaining their contribution depends on retaining assets and converting the Managed Investment Solutions pipeline into fee-generating business.
• Cash deployment: First-half operating cash flow was positive, but the cash balance declined after investment spending, leasehold improvements, investment purchases and dividends. The balance between growth investments and shareholder distributions remains an important consideration.

Summary

Westwood’s second-quarter improvement came from higher fee revenue and better expense alignment, producing a larger increase in GAAP operating profit than in non-GAAP Economic Earnings. The ETF and Private Capital asset milestones provide potential support for future fees, while the next points to monitor are asset flows, compensation and professional-services costs, and whether positive operating cash flow is sufficient to fund both platform expansion and shareholder distributions.