SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



¨☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

(Exact name of registrant as specified in its charter)

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share	WHG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☒

Shares of common stock, par value $0.01 per share, outstanding as of April ~~19, 2019: 8,971,173.~~22, 2020: 8,500,061.

WESTWOOD HOLDINGS GROUP, INC.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data and share amounts)

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019

(In thousands, except share amounts)

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE BUSINESS

Westwood Holdings Group, Inc. (“Westwood”, ~~the “Company”~~“the Company”, “we”, “us” or “our”) was incorporated under the laws of the State of Delaware on December 12, 2001. Westwood manages investment assets and provides ~~investment management~~ services ~~to institutional investors, private wealth~~for its clients ~~and financial intermediaries~~ through its wholly-owned subsidiaries, Westwood Management Corp. and Westwood Advisors, L.L.C. ~~(together~~(referred to hereinafter together as “Westwood Management”), Westwood Trust and Westwood International Advisors Inc. (“Westwood ~~International”~~International Advisors”). Westwood Management provides investment advisory services to institutional clients, a family of mutual funds called the Westwood Funds®, other mutual funds, individual investors and clients of Westwood Trust. Westwood International Advisors provides investment advisory services to institutional clients, the Westwood Funds®, other mutual funds, the UCITS Fund, individual investors and clients of Westwood Trust. Westwood Trust provides trust and custodial services and participation in self-sponsored common trust funds (“CTFs”) to institutions and high net worth individuals. Revenue is largely dependent on the total value and composition of assets under management ~~(“AUM”~~("AUM"). Accordingly, fluctuations in financial markets and in the composition of AUM impact our revenues and results of operations.

~~Divestiture~~Westwood Management is registered with the Securities and Exchange Commission ("SEC") as an investment advisor ("RIA") under the Investment Advisers Act of ~~our Omaha Operations~~1940. Westwood Trust is chartered and regulated by the Texas Department of Banking. Westwood International Advisors is registered as a portfolio manager and exempt market dealer with the Ontario Securities Commission and the Autorité des marchés financiers in Québec.

~~On September 6, 2017, we entered into an agreement to sell the Omaha-based component of our Wealth Management business. The sale closed on January 12, 2018. We received proceeds of~~ ~~$10.0 million~~, net of working capital requirements, and recorded a $524,000 gain on the sale, which is included as “Gain on sale of operations” on our Condensed Consolidated Statements of Comprehensive Income. The sale reduced goodwill and intangible assets but did not have a material impact on our Condensed Consolidated Balance Sheet. The following table presents cash proceeds received and net assets sold (in thousands):

~~The component is reported within both our Advisory and Trust segments. The sale did not represent a major strategic shift in our business and did not qualify for discontinued operations reporting.~~

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements are unaudited and are presented in accordance with the requirements for quarterly reports on Form 10-Q and consequently do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The Company’s Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) necessary in the opinion of management to present fairly our interim financial position and results of operations and cash flows for the periods presented. The accompanying Condensed Consolidated Financial Statements are presented in accordance with GAAP and the rules and regulations of the ~~Securities and Exchange Commission (“SEC”).~~

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC. Operating results for the periods in these Condensed Consolidated Financial Statements are not necessarily indicative of results for any future period. The accompanying Condensed Consolidated Financial Statements include the accounts of Westwood and its subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation. In the current year, we created a new expense item on the Condensed Consolidated Statements of Comprehensive Income for “(Gain) loss on foreign currency transactions,” which was previously included in “General and Administrative” expense, and a new cash flow item on the Condensed Consolidated Statements of Cash Flows for Non-cash lease expense, which was previously included in the changes in operating assets and liabilities within “Other liabilities.” Prior year financial statements were reclassified to conform to this presentation. These reclassifications had no impact on net income, stockholders’ equity or cash flows as previously reported.

Recent Accounting Pronouncements

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~. ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases at the commencement date, excluding short-term leases. Leases will be classified as either financing or operating, with classification impacting the pattern of expense recognition in the income statement. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We adopted the standard as of January 1, 2019 under the modified retrospective approach, which provides a method for recording existing leases at adoption and in comparative periods that approximates the results of a full retrospective approach. We elected the package of practical expedients permitted under the transition guidance, which, among other things, allows us to carry forward the historical lease classification and elect hindsight to determine certain lease terms for existing leases. See further discussion in Note 13 “Leases.”

~~The following table summarizes the impacts of the adoption of ASU 2016-02 to our previously reported results (in thousands):~~

~~In June 2018, the FASB issued ASU 2018-07,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.~~ The purpose of this amendment is to simplify the accounting for share-based payments granted to nonemployees for goods and services by aligning it with the accounting used for arrangements with employees. We adopted the standard as of January 1, 2019 and it did not have a material impact on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of this amendment is to modify, remove and add certain disclosure requirements for fair value measurements. Under ASU 2018-13, entities are required to disclose the amount of total gains or losses recognized in other comprehensive income attributable to assets and liabilities categorized within Level 3 of the fair value hierarchy. The ASU ~~also adds~~includes an incremental requirement about significant unobservable inputs for Level 3 fair value measurements. The requirement to disclose reasons for transfers between Level 1 and Level 2 was removed. Various requirements for Level 3 disclosure were also modified. The amendments in this ASU are effective for all entities for fiscal years and interim periods beginning after December 15, 2019. We ~~do not expect the amendment to have a material~~adopted this ASU as of January 1, 2020, and further information is included in Note 5 "Fair Value." There was no significant impact on our Condensed Consolidated Financial ~~Statements, and we plan to adopt this amendment within the required time frame.~~Statements.

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The purpose of this amendment is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments in this update are effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. We doadopted this ASU as of January 1, 2020 under the prospective transition method. Incremental costs related to hosting arrangements will be recorded on the Condensed Consolidated Balance Sheets in either other current or other long-term assets, instead of intangible assets, net. Related amortization will be recorded in information technology expense on the Condensed Consolidated Statements of Comprehensive Income (Loss), amortization of previously capitalized costs were recorded in general and administrative expense.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief. The purpose of this amendment is to amend ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to allow companies to irrevocably elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that were previously recorded at amortized cost and are within the scope of ASC 326-20, Financial Instruments-Credit Losses: Amortization Cost, if the instruments are eligible for the fair value option under Accounting Standards Codification 825 - Financial Instruments. The fair value option election does not ~~expect the amendment~~apply to held-to-maturity debt securities. The amendments in this update are effective for public companies for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. We adopted this ASU as of January 1, 2020, and it did not have a ~~material~~significant impact on our Condensed Consolidated Financial ~~Statements, and we plan to adopt the standard within the required time frame.~~Statements.

3. EARNINGS PER SHARE

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of shares outstanding for the applicable period. Diluted earnings per share is computed based on the weighted average number of shares outstanding plus the effect of any dilutive shares of restricted stock granted to employees and non-employee directors. There were approximately ~~51,000~~131,000 and ~~10,000~~51,000 anti-dilutive restricted shares outstanding for the three months ended March 31, ~~2019~~2020 and ~~2018,~~March 31, 2019, respectively.

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share and share amounts):

Three Months Ended March 31,
2019 2018
Net income $ 392
$ 7,978

Weighted average shares outstanding - basic 8,363,109
8,270,793
Dilutive potential shares from unvested restricted shares 92,277
268,752
Weighted average shares outstanding - diluted 8,455,386
8,539,545

Earnings per share:
Basic $ 0.05
$ 0.96
Diluted $ 0.05
$ 0.93

During 2018, we ~~entered into~~made a $5.4 million strategic investment in ~~an equity position of a private company,~~InvestCloud, which is included in “Investments” on our Condensed Consolidated Balance Sheets. This investment represents an equity interest in a private company without a ~~readily-determinable~~readily determinable fair value. The Company has elected to apply the measurement alternative of cost minus impairment, if any, plus or minus changes resulting from observable price changes. Following observable price changes for this investment in 2019, we recorded a gain of $2.8 million. As of March 31, ~~2019 and December 31, 2018,~~2020 there were no additional observable price changes or indicators of impairment for this investment.

~~In February 2019, we made a $250,000~~Our investment in ~~Westwood Hospitality Fund I, LLC,~~Charis, a private ~~investment fund. Our investment~~bank, is included in ~~“Investments” on our Condensed Consolidated Balance Sheets and will be measured at fair value on a recurring basis using net asset value (“NAV”) as a practical expedient.~~

~~All other~~“Noncurrent investments ~~are accounted for as trading securities, are carried at fair value on a recurring basis and are included in “Investments,~~ at fair value” on our Condensed Consolidated Balance ~~Sheets.~~Sheets and is measured at fair value on a recurring basis. Following fair value increases resulting from market transactions, we recorded a gain of $0.6 million in 2019. In the three months ended March 31, 2020, we recorded a loss of $1.0 million, primarily as a result of a downturn in the banking industry due to global macroeconomic effects of the Coronavirus Disease 2019 ("COVID-19") pandemic.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

All other investments are carried at fair value on a recurring basis and are accounted for as trading securities.

Investments carried at fair value are presented in the table below (in thousands):

Cost
Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Market
Value
March 31, 2019:
U.S. Government and Government agency obligations $ 32,386
$ 234
$ —
$ 32,620
Money market funds 10,511
—
—
10,511
Equity funds 6,424
146
(100 ) 6,470
Total trading securities 49,321
380
(100 ) 49,601
Private investment fund 250
—
—
250
Total investments carried at fair value $ 49,571
$ 380
$ (100 ) $ 49,851

December 31, 2018:
U.S. Government and Government agency obligations $ 48,177
$ 232
$ —
$ 48,409
Money market funds 10,354
—
—
10,354
Equity funds 7,344
—
(326 ) 7,018
Total trading securities $ 65,875
$ 232
$ (326 ) $ 65,781

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, approximately ~~$6.4~~$4.4 million and ~~$6.1~~$6.4 million, respectively, in corporate funds were invested in Westwood Funds®. See Note 8 “Variable Interest Entities.”

5. FAIR VALUE MEASUREMENTS

We determine estimated fair values for our financial instruments using available information. The fair value amounts discussed in our Condensed Consolidated Financial Statements are not necessarily indicative of either amounts realizable upon disposition of these instruments or our intent or ability to dispose of these assets. The estimated fair value of cash and cash equivalents, accounts receivable, prepaid income taxes, other current assets, accounts payable and accrued liabilities, dividends payable, compensation and benefits payable and income taxes payable approximates their carrying value due to their short-term maturities. The carrying amount of investments designated as trading securities, primarily U.S. Government and Government agency obligations, money market funds, Westwood Funds® mutual funds, Westwood Investment Funds Plc (the “UCITS Fund”) and Westwood Trust common trust fund shares, equals their fair value based on prices quoted in active markets and, with respect to common trust funds, the net asset value of the shares held as reported by each fund. Market values of our money market holdings generally do not fluctuate. Our strategic investment in a private company discussed in Note 4 “Investments” is excluded from the recurring fair value table shown below, as we have elected to apply the measurement alternative for this investment.

ASC 820, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value and requires disclosures regarding certain fair value measurements. ASC 820 establishes a three-tier hierarchy for measuring fair value, as follows:

~~level~~•Level 1 – quoted market prices in active markets for identical assets

~~level~~•Level 2 – inputs other than quoted prices that are directly or indirectly observable

~~level~~•Level 3 – significant unobservable inputs where there is little or no market activity

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~Our strategic investment in InvestCloud, discussed in Note 4 “Investments,” is excluded from the recurring fair value table shown below because we have elected to apply the measurement alternative for this investment.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

The following table summarizes the values of our investments measured at fair value on a recurring basis within the fair value hierarchy as of the dates indicated (in thousands):

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Level 1 Level 2 Level 3
Investments Measured at NAV ⁽¹⁾
Total
As of March 31, 2019:
Investments in trading securities $ 49,601
$ —
$ —
$ —
$ 49,601
Private investment fund —
—
—
250
250
Total investments carried at fair value $ 49,601
$ —
$ —
$ 250
$ 49,851

As of December 31, 2018:
Investments in trading securities $ 65,781
$ —
$ —
$ —
$ 65,781
Total investments carried at fair value $ 65,781
$ —
$ —
$ —
$ 65,781

(1) Comprised of certain investments measured at fair value using NAV as a practical expedient. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on our Condensed Consolidated Balance Sheets.


	Level 1		Level 2		Level 3		Investments Measured at NAV ⁽¹⁾		Total
As of March 31, 2020:
Investments in trading securities	$	37,272	$	—	$	—	$	—	$	37,272
Private investment fund	—		—		—		263		263
Private equity	—		—		2,980		—		2,980
Total assets measured at fair value	$	37,272	$	—	$	2,980	$	263	$	40,515

As of December 31, 2019:
Investments in trading securities	$	50,324	$	—	$	—	$	—	$	50,324
Private investment fund	—		—		—		263		263
Private equity	—		—		3,975		—		3,975
Total assets measured at fair value	$	50,324	$	—	$	3,975	$	263	$	54,562

(1) Comprised of certain investments measured at fair value using net asset value ("NAV") as a practical expedient. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on our Condensed Consolidated Balance Sheets.

Our investment in Charis is included within Level 3 of the fair value hierarchy as we value that investment utilizing inputs not observable in the market. Our investment is measured at fair value on a recurring basis using a market approach based on a price to tangible book value multiple range that is determined to be reasonable in the current environment, or market transactions. Management believes this valuation methodology is consistent with the banking industry and we will reevaluate our methodology and inputs on a quarterly basis.

The following table summarizes the changes in Level 3 investments measured at fair value on a recurring basis for the periods presented (in thousands):


	Fair Value using Significant Unobservable Inputs (Level 3)
	Three Months Ended March 31,
	2020		2019
Beginning balance	$	3,975	$	—



Unrealized gains (losses) on private investments	(995)		—
Ending balance	$	2,980	$	—

The March 31, 2020 private investment fair value of $3.0 million was valued using a market approach based on a price to tangible book value multiple, with unobservable book value multiples ranging from $1.05 to $1.25 per share, with a weighted average of $1.12 per share. Significant increases (decreases) in book value multiples in isolation would have resulted in a significantly higher (lower) fair value measurement.

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying identifiable assets at the date of acquisition. Goodwill is not amortized but is tested for impairment at least annually. We completed our most recent annual goodwill impairment assessment during the third quarter of ~~2018~~2019 and determined that no impairment loss was required. NoNaN impairments on goodwill were recorded during the three months ended March 31, ~~2019~~2020 or ~~2018.~~2019.

Other Intangible Assets

Our intangible assets represent the acquisition date fair value of acquired client relationships, trade names, non-compete agreements and internally developed software and are reflected net of amortization. In valuing these assets, we made

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

significant estimates regarding their useful lives, growth rates and potential attrition. We periodically review intangible assets for events or circumstances that would indicate impairment. NoNaN intangible asset impairments ~~on intangible assets~~ were recorded during the three months ended March 31, ~~2019~~2020 or ~~2018.~~2019.

7. STOCKHOLDERS' EQUITY

~~Accumulated Other Comprehensive Loss~~Share Repurchase Program

~~The components~~In February 2020, our Board of ~~“Accumulated other comprehensive loss” were as follows (in thousands):~~Directors authorized management to repurchase up to an additional $10.0 million of our outstanding common stock on the open market or in privately negotiated transactions, bringing the total available under the share repurchase program to $12.9 million. As of March 31, 2020, approximately $8.1 million remained available under the share repurchase program.

During the three months ended March 31, 2020, the Company repurchased 272,059 shares of our common stock at an average price of $17.89 per share, including commissions, for an aggregate purchase price of $4.9 million under our share repurchase plan.

As of March 31, 2019 As of December 31, 2018
Foreign currency translation adjustment $ (4,052 ) $ (4,883 )
Accumulated other comprehensive loss $ (4,052 ) $ (4,883 )

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

8. VARIABLE INTEREST ENTITIES

We ~~have~~ evaluated (i) ~~our advisory relationships with the UCITS Fund and the Westwood Funds®, (ii)~~ our relationship as sponsor of the Common Trust Funds (“CTFs”) and managing member of the private ~~investment~~equity funds Westwood Hospitality Fund I, LLC and Westwood Technology Opportunities Fund I, LP (collectively, the “Private Funds”), (ii) our advisory relationships with Westwood Investment Funds PLC (the “UCITS Fund”) and the Westwood Funds® and (iii) ~~the private company~~our investments in InvestCloud and Charis discussed in Note 4 “Investments” (“(“Private Equity”) to determine whether each of these entities is a variable interest entity (“VIE”) or voting ownership entity (“VOE”).

Based on our ~~analysis,~~analyses, we determined that the CTFs and Private Funds were VIEs, as the at-risk equity holders do not have the ability to direct the activities that most significantly impact the ~~entity’s~~entities' economic performance, and the Company and its representatives have a majority control of the entities' respective boards of directors and can influence the respective entities' management and affairs.

Although we have related parties on the UCITS Fund board of directors, the shareholders have rights to remove the current directors by a simple majority vote and so we determined that the UCITS Fund is not a VIE. As

Based on our analyses, we determined the ~~Company and its representatives do not have representation on the~~UCITS Fund, Westwood Funds® ~~or the~~, and Private Equity ~~independent boards of directors, which~~(i) have sufficient equity at risk to finance the entities' activities independently, (ii) have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entities that most significantly impact the entities' economic performance ~~we determined that the Westwood Funds®~~ and ~~the Private Equity were~~(iii) are not ~~VIEs. Therefore, the UCITS Fund, Westwood Funds® and Private Equity should be analyzed under the VOE consolidation method.~~ structured with disproportionate voting rights.

Based on our ~~analysis~~analyses of our investments in these entities for the periods ending March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we have not consolidated the CTFs or Private Funds ~~or LLCs~~ under the VIE method or the UCITS Fund, Westwood Funds® or Private Equity under the VOE ~~method, and therefore the financial results of these entities are not included in the Company’s consolidated financial results.~~method.

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, our seed investments ~~aggregated approximately $6.4 million and $6.1 million, respectively,~~ in the Westwood ~~Funds.~~Funds aggregated approximately $4.4 million and $6.4 million, respectively. The seed investments were provided for the sole purpose of showing the economic substance needed to establish the ~~funds. The Company's seed investments in these~~ funds and are included in “Investments, at fair value” on our Condensed Consolidated Balance Sheets.

We have not otherwise provided any financial support not previously contractually obligated to provide, and there are no arrangements that would require us to provide additional financial support to any of these entities. Our seed investments in the above-mentioned Westwood Funds®, ~~the UCITS Fund and the CTFs~~ are accounted for as investments ~~in accordance~~consistent with our other investments described in Note 4 “Investments.” We recognized fee revenue from the Westwood VIEs and Westwood VOEs of approximately ~~$8.7~~$5.7 million and ~~$12.6~~$8.7 million for the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively.

The following table displays the ~~assets under management,~~AUM, the amounts of our seed investments included in “Investments” on our consolidated balance sheets, and the risk of loss in each vehicle (in millions):

As of March 31, 2019
Assets
Under
Management Corporate
Investment Amount at Risk
VIEs/VOEs:
Westwood Funds® $ 3,168
$ 6.4
$ 6.4
Common Trust Funds 1,687
—
—
UCITS Fund 317
—
—
Private Funds 10
0.3
0.3
Private Equity —
5.4
5.4
All other assets:
Wealth Management 2,671

Institutional 8,918

Total Assets Under Management $ 16,771

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


	As of March 31, 2020
	Assets Under Management		Corporate Investment		Amount at Risk
VIEs/VOEs:
Westwood Funds®	$	1,500	$	4.4	$	4.4
Common Trust Funds	1,089		—		—
UCITS Fund	230		—		—
Private Funds	13		0.3		0.3
Private Equity	—		11.1		11.1
All other assets:
Wealth Management	2,663
Institutional	6,105
Total Assets Under Management	$	11,600

9. REVENUE

Revenue Recognition

Revenues are recognized when the performance obligation (the investment management and advisory or trust services provided to the client) defined by the investment advisory or sub-advisory agreement is satisfied. For each performance obligation, we determine at contract inception whether the revenue satisfies over time or at a point in time. We derive our revenues from investment advisory fees, trust fees and other sources of revenues. Advisory and ~~Trust~~trust fees are calculated based on a percentage of ~~assets under management~~AUM and the performance obligation is realized over the current calendar quarter. Once clients receive our investment advisory services we have an enforceable right to payment.

Advisory Fee Revenues

Our advisory fees are generated by Westwood Management and Westwood International Advisors, which manage client accounts under investment advisory and sub-advisory agreements. Advisory fees are typically calculated based on a percentage of ~~assets under management~~AUM and are paid in accordance with the terms of the agreements. Advisory fees are paid quarterly in advance based on ~~assets under management~~AUM on the last day of the preceding quarter, quarterly in arrears based on ~~assets under management~~AUM on the last day of the quarter just ended or are based on a daily or monthly analysis of ~~assets under management~~AUM for the stated period. We recognize advisory fee revenues as services are rendered. Since our advance paying clients' billing periods coincide with the calendar quarter to which such payments relate, revenue is recognized within the quarter and our ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements contain no deferred advisory fee revenues. Advisory clients typically consist of institutional and mutual fund accounts.

Institutional investors include separate accounts of (i) corporate pension and profit sharing plans, public employee retirement funds, ~~Taft Hartley~~Taft-Hartley plans, endowments, foundations and individuals; (ii) subadvisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including the UCITS Fund and collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers.

Mutual funds include the Westwood Funds®, a family of mutual funds for which Westwood Management serves as advisor. These funds are available to individual investors, as well as offered as part of our investment strategies for institutional investors and ~~private~~ wealth management accounts.

Arrangements with Performance Based Obligations

A limited number of our advisory clients have a contractual performance-based fee component in their contracts, which generates additional revenues if we outperform a specified index over a specific period of time, and a limited number of our mutual fund offerings have fees that generate additional revenues if we outperform specified indices over specific periods of time.

The revenue is based on future market performance and is ~~susceptible~~subject to factors outside our control. We cannot conclude that a significant reversal in the cumulative amount of revenue recognized will not occur during the measurement period, and therefore the revenue is recorded at the end of the measurement period when the performance obligation has been satisfied.

Trust Fee Revenues

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Our trust fees are generated by Westwood Trust pursuant to trust or custodial agreements. Trust fees are separately negotiated with each client and are generally based on a percentage of ~~assets under management.~~AUM. Westwood Trust also provides trust services to a small number of clients on a fixed fee basis. The fees for most of our trust clients are calculated quarterly in arrears, based on a daily average of ~~assets under management~~AUM for the ~~quarter.~~quarter, or monthly, based on the month-end value of AUM. Since billing periods for most of Westwood Trust’s clients coincide with the calendar quarter, revenue is fully recognized within the quarter and our Condensed Consolidated Financial Statements ~~do not~~ contain ~~a significant amount of~~no deferred ~~trust~~advisory fee revenues.

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

Revenue Disaggregated

Sales taxes are excluded from revenues. The following table presents our revenue disaggregated by account type (in thousands):


	Three Months Ended March 31,
	2020		2019
Advisory Fees:
Institutional	$	7,900	$	10,439
Mutual Funds	3,071		5,865
Wealth Management	131		102
Performance-based	—		180
Trust Fees	5,951		6,539
Other, net	(384)		737
Total revenues	$	16,669	$	23,862

Three Months Ended March 31,
2019 2018
Advisory Fees:
Institutional $ 10,439
$ 16,705
Mutual Funds 5,865
7,750
Wealth Management 102
28
Performance-based 180
1,335
Trust Fees 6,539
7,609
Other 737
140
Total revenues $ 23,862
$ 33,567

We ~~have~~serve clients in various locations around the world. The following table presents our revenue disaggregated by our clients' geographical locations (in thousands):


Three Months Ended March 31, 2020	Advisory		Trust		Performance-based		Other		Total
Asia	$	417	$	—	$	—	$	—	$	417

Canada	490		—		—		—		490
Europe	1,009		—		—		—		1,009
United States	9,186		5,951		—		(384)		14,753
Total	$	11,102	$	5,951	$	—	$	(384)	$	16,669


Three Months Ended March 31, 2019	Advisory		Trust		Performance-based		Other			Total
Asia	$	406	$	—	$	—	$	—		$	406
Australia	591		—		—		—			591
Canada	824		—		—		40			864
Europe	977		—		180		—			1,157
United States	13,608		6,539		—		697			20,844
Total	$	16,406	$	6,539	$	180	$	737	��	$	23,862

Three Months Ended March 31, 2018 Advisory Trust Performance-based Other Total
Asia $ 1,431
$ —
$ —
$ —
$ 1,431
Australia 1,022
—
—
—
1,022
Canada 1,830
—
—
49
1,879
Europe 1,243
—
—
—
1,243
United States 18,957
7,609
1,335
91
27,992
Total $ 24,483
$ 7,609
$ 1,335
$ 140
$ 33,567

10. LONG-TERM INCENTIVE COMPENSATION

Restricted Stock Awards

We have issued restricted shares to our employees and non-employee directors. The ~~Fifth~~Sixth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan (the “Plan”) reserves shares of Westwood common stock for issuance to eligible employees, directors and consultants of Westwood or its subsidiaries in the form of restricted ~~stock. The total number of~~stock and stock options. In April 2019, stockholders approved an additional 200,000 shares ~~issuable~~to be authorized under the Plan, ~~(including predecessor plans to~~increasing the ~~Plan) may not exceed 4,848,100 shares. At March 31, 2019, approximately 280,000 shares remain available for issuance under the Plan.~~

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

total number of shares issuable under the Plan (including predecessor plans to the Plan) to 5,048,100 shares. In the event of a change in control of Westwood, the Plan contains provisions providing for the acceleration of the vesting of restricted stock. At March 31, 2020, approximately 286,376 shares remain available for issuance under the Plan.

The following table presents the total stock-based compensation expense recorded for stock-based compensation arrangements for the periods indicated (in thousands):

Three Months Ended March 31,
2019 2018
Service condition stock-based compensation expense $ 2,188
$ 2,790
Performance condition stock-based compensation expense 928
1,276
Stock-based compensation expense under the Plan 3,116
4,066
Canadian Plan stock-based compensation expense 136
121
Total stock-based compensation expense $ 3,252
$ 4,187

Under the Plan, we have granted to employees and non-employee directors restricted stock subject to service conditions and to certain key employees restricted stock subject to both service and performance conditions.

As of March 31, ~~2019,~~2020, there was approximately ~~$22.0~~$17.5 million of unrecognized compensation cost for restricted stock grants under the Plan, which we expect to recognize over a weighted-average period of ~~2.8~~3.0 years. Our two types of restricted stock grants under the Plan are discussed below.

Restricted Stock Subject Only to a Service Condition

We calculate compensation cost for restricted stock grants by using the fair market value of our common stock at the date of grant, the number of shares issued and an adjustment for restrictions on dividends. This compensation cost is amortized on a straight-line basis over the applicable vesting period, with adjustments for forfeitures recorded as they occur.

The following table details the status and changes in our restricted stock grants subject only to a service condition for the three months ended March 31, ~~2019:~~2020:


	Shares	Weighted Average Grant Date Fair Value
Non-vested, January 1, 2020	396,598	$	48.31
Granted	243,344	$	27.54
Vested	(127,812)	$	54.73
Forfeited	(1,811)	$	57.38
Non-vested, March 31, 2020	510,319	$	36.77

Shares Weighted Average
Grant Date Fair Value
Non-vested, January 1, 2019 440,073
$ 56.40
Granted 177,416
38.77
Vested (150,589 ) 57.03
Forfeited (21,061 ) 50.32
Non-vested, March 31, 2019 445,839
$ 49.46

Restricted Stock Subject to Service and Performance Conditions

Under the Plan, certain key employees were provided agreements for grants of restricted shares that vest over multiple year periods subject to achieving annual performance goals established by the Compensation Committee of Westwood’s Board of Directors. Each year the Compensation Committee establishes specific goals for that year’s vesting of the restricted shares. The date that the Compensation Committee establishes annual goals is considered to be the grant date and the fair value measurement date to determine expense on the shares that are likely to vest. The vesting period ends when the Compensation Committee formally approves the performance-based restricted stock vesting based on the specific performance goals from the Company’s audited consolidated financial statements. If a portion of the performance-based restricted shares does not vest, no compensation expense is recognized for that portion and any previously recognized compensation expense related to shares that do not vest is reversed.

In March 2019, the Compensation Committee established fiscal 2019 goals based on various departmental and company-wide performance goals. During the first three months of 2019, we recorded expense related to the applicable percentage of the performance-based restricted shares expected to meet or exceed the performance goals needed to earn the shares.

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

The following table details the status and changes in our restricted stock grants subject to service and performance conditions for the three months ended March 31, ~~2019:~~2020:

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Shares Weighted Average
Grant Date Fair Value
Non-vested, January 1, 2019 156,293
$ 55.66
Granted 21,186
37.97
Vested (80,493 ) 56.09
Forfeited (19,495 ) 55.18
Non-vested, March 31, 2019 77,491
$ 50.29


	Shares	Weighted Average Grant Date Fair Value
Non-vested, January 1, 2020	80,975	$	49.73

Vested	(35,275)	$	55.11
Non-vested, March 31, 2020	45,700	$	45.58

The Share Award Plan of Westwood Holdings Group, Inc. for Service Provided in Canada to its Subsidiaries (the “Canadian Plan”) provides compensation in the form of common stock for services performed by employees of Westwood ~~International.~~International Advisors. Under the Canadian Plan, no more than $10 million CDN ($~~7.5~~7.1 million in U.S. Dollars using the exchange rate on March 31, ~~2019)~~2020) may be funded to the plan trustee for purchases of common stock with respect to awards granted under the Canadian Plan. At March 31, ~~2019,~~2020, approximately ~~$2.3~~$1.4 million CDN ($~~1.7~~1.0 million in U.S. Dollars using the exchange rate on March 31, ~~2019)~~2020) remains available for issuance under the Canadian Plan, or approximately ~~48,000~~53,000 shares based on the closing share price of our stock of ~~$35.27~~$18.31 as of March 31, ~~2019.~~2020. During the first three months of ~~2019,~~2020, the trust formed pursuant to the Canadian Plan purchased 27,474 Westwood common shares in the open market ~~25,047 Westwood common shares~~ for approximately ~~$980,000.~~$0.7 million. As of March 31, ~~2019,~~2020, the trust holds ~~61,078~~63,712 shares of Westwood common stock. As of March 31, ~~2019,~~2020, unrecognized compensation cost related to restricted stock grants under the Canadian Plan totaled ~~$1.3~~$0.7 million, which we expect to recognize over a weighted-average period of ~~2.2~~1.7 years.

Mutual Fund Share Incentive Awards

We may grant ~~annually to certain employees~~ mutual fund incentive awards, which are bonus awards based on our mutual funds achieving specific performance ~~goals.~~goals, annually to certain employees. Awards granted are notionally credited to a participant account maintained by us that contains a number of mutual fund shares equal to the award amount divided by the net closing value of a fund share on the date the amount is credited to the account. We maintain the award in a corporate investment account until vesting. The investment may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Unvested mutual fund awards are included under “Investments, at fair value” on our Condensed Consolidated Balance Sheets.

Awards vest over approximately two years of service following the year in which the participant earned the award. We begin accruing a liability for mutual fund incentive awards when we believe it is probable that the award will be earned and record expense for these awards over the service period of the award, which is three years. During the year in which the amount of the award is determined, we record expense based on the expected value of the award. After the award is earned, we record expense based on the value of the shares awarded and the percentage of the vesting period that has elapsed. Our liability under these awards may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Upon vesting, participants receive the value of the mutual fund share awards adjusted for earnings or losses attributable to the underlying mutual funds. For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, we recorded expense of approximately ~~$8,000~~$9,000 and ~~$174,000,~~$8,000, respectively, related to mutual fund share incentive awards. ~~During~~For the ~~first quarter of~~three months ended March 31, 2019, we ~~also~~ recorded a net $134,000 credit to mutual fund expense, primarily related to the forfeiture of a mutual fund ~~award.~~award during the first quarter. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we had an accrued liability of approximately ~~$42,000~~$28,000 and ~~$635,000,~~$79,000, respectively, related to mutual fund share incentive awards.

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

Our ~~effective~~ income tax rate ~~was 73.8%~~differed from the 21% statutory rate for the first quarter of ~~2019, compared with 23.9% for~~2020 primarily due to a discrete benefit adjustment related to the remeasurement of certain deferred taxes following the enactment of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). Income taxes differed from the 21% statutory rate in the first quarter of ~~2018. The current quarter rate was negatively impacted by~~2019 primarily due to a ~~$638,000~~$0.6 million discrete tax expense related to a permanent difference between book and tax restricted stock expense based on a decrease in our stock price between the grant and vesting dates.

The Company is subject to taxation in the United States and various state and foreign jurisdictions. Our 2015, 2016 and 2017 tax returns are currently under audit in a state jurisdiction in which we operate. It is reasonably possible that the audits may be completed during the next twelve months, and we do not expect the result of the audits to have a material impact on our Consolidated Financial Statements.

12. RELATED PARTY TRANSACTIONS

Some of our directors, executive officers and their affiliates invest personal funds directly in trust accounts that we manage. For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, we recorded trust fees from these accounts of ~~$78,000~~$95,000 and ~~$95,000,~~$78,000, respectively. There was ~~$78,000~~approximately $95,000 and ~~$84,000~~$100,000 due from these accounts as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The Company engages in transactions with its affiliates in the ordinary course of business. Westwood International Advisors and Westwood Management provide investment advisory services to the UCITS Fund and the Westwood Funds®~~, and Westwood International provides investment advisory services to the UCITS Fund.~~. Certain members of our management serve on the board of directors of the UCITS Fund, and we have capital invested in three of the Westwood Funds®. Under the terms of the investment advisory agreements, the Company earns quarterly fees paid by clients of the fund or by the funds directly. The fees are based on negotiated fee schedules applied to ~~assets under management. These fees are commensurate with market rates.~~AUM. For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, the Company earned approximately ~~$820,000~~$0.5 million and ~~$1.2~~$0.8 million, respectively, in fees from the affiliated funds. ~~These fees do not include fees paid directly to Westwood International by certain clients invested in the UCITS Fund that have an investment management agreement with Westwood International.~~ As of March 31, ~~2019~~2020 and December 31, ~~2018, $311,000~~2019, $0.2 million and ~~$295,000,~~$0.2 million, respectively, of these fees were outstanding and included in “Accounts receivable” on our Condensed Consolidated Balance Sheets.

~~As discussed in Note 4 “Investments,” the Company made a strategic investment in~~ ~~an equity position of a private company during 2018~~. We previously entered into a separate agreement with this private company to implement portfolio management and digital solutions products. For the three months ended March 31, 2019 and 2018, we incurred approximately $132,000 and $75,000, respectively, in expenses payable to this company, which are included in “Information technology expenses” on our Condensed Consolidated Statements of Comprehensive Income.

WeAs of March 31, 2020, there have operating leases for corporate offices and for certain office equipment. The lease terms for our corporate offices vary and have remaining lease terms ranging from 1 to 7 years. The corporate office lease payments are fixed and are based upon contractual monthly rates. The majoritybeen no material changes outside the ordinary course of ~~our corporate office leases do not include options to extend or terminate the leases, and each lease is re-negotiated before its leasing period ends. We lease office equipment for a period of 2 years.~~

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

~~The following table presents the components of lease costs, as well as supplemental cash flow information, related~~business to our leases ~~(in thousands):~~

~~Operating lease cost is included in “General and administrative” expense on our Condensed Consolidated Statements of Comprehensive Income.~~

~~The following table presents~~since December 31, 2019. For information regarding our ~~operating~~ leases, ~~(in thousands, except years and rates):~~refer to Note 15 “Leases” in Part IV, Item 15. “Exhibits, Financial Statement Schedules” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

~~The maturities of lease liabilities are as follows (in thousands):~~

14. SEGMENT REPORTING

We operate ~~two~~2 segments: Advisory and Trust. These segments are managed separately based on the types of products and services offered and their related client bases. The Company’s segment information is prepared on the same basis that management reviews the financial information for operational decision-making purposes. The Company’s chief operating decision maker, our Chief Executive Officer, evaluates the performance of our segments based primarily on fee revenues and Economic Earnings. Refer to the "Supplemental Financial Information" section in Item 2. "Management Discussion and Analysis of Financial Conditions and Results" for the Economic Earnings calculation. Westwood Holdings Group, Inc., the parent company of Advisory and Trust, does not have revenues and is the entity in which we record typical holding company expenses including employee compensation and benefits for holding company employees, directors’ fees and investor relations costs. All segment accounting policies are the same as those described in the summary of significant accounting policies. Intersegment balances that eliminate in consolidation have been applied to the appropriate segment.

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

Our Advisory segment provides investment advisory services to (i) corporate ~~retirement~~pension and profit sharing plans, public employee retirement funds, Taft-Hartley plans, endowments, foundations and individuals, (ii) subadvisory relationships where Westwood provides investment management services to the Westwood Funds®, funds offered by other financial institutions and funds offered by our Trust segment and (iii) pooled investment vehicles, including the UCITS Fund ~~as well as~~and collective investment ~~subadvisory services to mutual funds and our Trust segment.~~trusts. Westwood Management and Westwood International Advisors, which provide investment advisory services to similar clients, are included in our Advisory segment.

Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Trust is included in our Trust segment.

(in thousands) Advisory Trust Westwood
Holdings Eliminations Consolidated
Three Months Ended March 31, 2019
Net fee revenues from external sources $ 16,586
$ 6,539
$ —
$ —
$ 23,125
Net intersegment revenues 1,016
71
—
(1,087 ) —
Net interest and dividend revenue 225
86
—
—
311
Other, net 432
(6 ) —
—
426
Total revenues $ 18,259
$ 6,690
$ —
$ (1,087 ) $ 23,862
Economic Earnings $ 4,880
$ 1,253
$ (2,017 ) $ —
$ 4,116
Less: Restricted stock expense 3,252
Intangible amortization 413
Deferred taxes on goodwill 59
Net income $ 392

Segment assets $ 226,362
$ 62,696
$ 19,746
$ (127,655 ) $ 181,149
Segment goodwill $ 3,403
$ 16,401
$ —
$ —
$ 19,804

Three Months Ended March 31, 2018
Net fee revenues from external sources $ 25,818
$ 7,609
$ —
$ —
$ 33,427
Net intersegment revenues 2,037
55
—
(2,092 ) —
Net interest and dividend revenue 141
46
—
—
187
Other, net (43 ) (4 ) —
—
(47 )
Total revenues $ 27,953
$ 7,706
$ —
$ (2,092 ) $ 33,567
Economic Earnings $ 13,800
$ 1,220
$ (2,378 ) $ —
$ 12,642
Less: Restricted stock expense 4,187
Intangible amortization 418
Deferred taxes on goodwill 59
Net income $ 7,978

Segment assets $ 204,343
$ 60,584
$ 18,132
$ (107,943 ) $ 175,116
Segment goodwill $ 3,403
$ 16,401
$ —
$ —
$ 19,804

We are providing a performance measure that we refer to as Economic Earnings. Our management and the Board of Directors review Economic Earnings to evaluate our ongoing performance, allocate resources and determine our dividend policy. We also believe that this performance measure is useful for management and investors when evaluating our underlying operating and financial performance and our available resources.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)


(in thousands)	Advisory		Trust		Westwood Holdings		Eliminations		Consolidated
Three Months Ended March 31, 2020
Net fee revenues from external sources	$	11,102	$	5,951	$	—	$	—	$	17,053
Net intersegment revenues	624		50		—		(674)		—
Net interest and dividend revenue	20		—		—		—		20
Other, net	(404)		—		—		—		(404)
Total revenues	$	11,342	$	6,001	$	—	$	(674)	$	16,669






Segment assets	$	236,817	$	49,606	$	21,962	$	(150,583)	$	157,802
Segment goodwill	$	3,403	$	16,401	$	—	$	—	$	19,804

Three Months Ended March 31, 2019
Net fee revenues from external sources	$	16,586	$	6,539	$	—	$	—	$	23,125
Net intersegment revenues	1,016		71		—		(1,087)		—
Net interest and dividend revenue	225		86		—		—		311
Other, net	432		(6)		—		—		426
Total revenues	$	18,259	$	6,690	$	—	$	(1,087)	$	23,862






Segment assets	$	226,362	$	62,696	$	19,746	$	(127,655)	$	181,149
Segment goodwill	$	3,403	$	16,401	$	—	$	—	$	19,804

In calculating Economic Earnings, we add to net income the non-cash expense associated with equity-based compensation awards of restricted stock, amortization of intangible assets and the deferred taxes related to the tax-basis amortization of goodwill. Although depreciation on property and equipment is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent a decline in the value of the related assets that will ultimately require replacement.

~~The following tables provide a reconciliation of Net income to Economic Earnings (in thousands):~~

Three Months Ended March 31,
2019 2018
Net income $ 392
$ 7,978
Add: Stock-based compensation expense 3,252
4,187
Add: Intangible amortization 413
418
Add: Tax benefit from goodwill amortization 59
59
Economic Earnings $ 4,116
$ 12,642

15. SUBSEQUENT EVENTS

~~Dividend Declared~~Share Repurchase Program

In April ~~2019, Westwood’s~~2020, we repurchased 407,697 shares of our common stock for an aggregate purchase price of approximately $8.1 million, which completed the amount previously authorized under our share repurchase program.

On April 28, 2020, the Board of Directors ~~declared a quarterly cash dividend~~authorized an additional $10.0 million of ~~$0.72 per common~~ share ~~payable on July 1, 2019, to stockholders of record on June 7, 2019.~~repurchases under our share repurchase program.


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

Statements in this report and the Annual Report to Stockholders that are not purely historical facts, including, without limitation, statements about our expected future financial position, results of operations or cash flows, as well as other statements including, without limitation, words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” “could,” “goal,” “potentially,” “may,” ~~“target,” “designed,” “on track,” “comfortable with,” “optimistic”~~“designed” 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, the risks described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC, and those risks set forth below:

• the composition and market value of our ~~assets under management;~~AUM;

~~regulations adversely affecting the financial services industry;~~

~~competition in the investment management industry;~~

~~our assets under management includes investments in foreign companies;~~

~~our ability to develop and market new investment strategies successfully;~~

~~our reputation and our relationships with current and potential customers;~~

~~our ability to attract and retain qualified personnel;~~

~~our ability to maintain effective cyber security;~~

~~our ability to perform operational tasks;~~

~~our ability to identify and execute on our strategic initiatives;~~

~~our ability to maintain effective information systems;~~

~~our ability to select and oversee third-party vendors;~~

~~litigation risks;~~

~~our ability to properly address conflicts of interest;~~

~~our ability to maintain adequate insurance coverage;~~

~~our ability to maintain an effective system of internal controls;~~

• our ability to maintain our fee structure in light of competitive fee pressures;

~~our relationships with investment consulting firms; and~~• the impact of the COVID-19 pandemic;

• the significant concentration of our revenues in a small number of ~~customers.~~customers;

• our ability to avoid termination of client agreements and the related investment redemptions;

• regulations adversely affecting the financial services industry;

• competition in the investment management industry;

• our ability to develop and market new investment strategies successfully;

• our AUM include investments in foreign companies;

• our reputation and our relationships with current and potential customers;

• our ability to attract and retain qualified personnel;

• our ability to maintain effective cyber security;

• our ability to perform operational tasks;

• our ability to identify and execute on our strategic initiatives;

• our ability to maintain effective information systems;

• our ability to select and oversee third-party vendors;

• litigation risks;

• our ability to declare and pay dividends;

• our ability to fund future capital requirements on favorable terms;

• our ability to properly address conflicts of interest;

• our ability to maintain adequate insurance coverage;

• our ability to maintain an effective system of internal controls;

• our stock is thinly traded and may be subject to volatility;

• our organizational documents contain provisions that may prevent or deter another group from paying a premium over the market price to our stockholders to acquire our stock;

• we are a holding company dependent on the operations and funds of our subsidiaries; and

• our relationships with investment consulting firms.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. We are not obligated and do not undertake an obligation to publicly release any revisions to these forward-looking statements to

reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events or otherwise.

Overview

We manage investment assets and provide services for our clients through our subsidiaries, Westwood Management Corp. and Westwood Advisors, L.L.C. (each of which is an SEC-registered investment advisor and referred to hereinafter together as “Westwood Management”), Westwood International Advisors Inc. (“Westwood ~~International”~~International Advisors”) and Westwood Trust. Westwood Management provides investment advisory services to institutional investors, a family of mutual funds called the Westwood Funds®, other mutual funds, an Irish investment company authorized pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulation 2011 (as amended) (the “UCITS Fund”), individuals and clients of Westwood Trust. Westwood International Advisors provides investment advisory services to institutional clients, the Westwood Funds®, other mutual funds, the UCITS Fund and clients of Westwood Trust. Westwood Trust provides trust and custodial services and participation in common trust funds to institutions and high net worth individuals. Our revenues are generally derived from fees based on a percentage of ~~assets under management.~~AUM.

~~Divestiture~~We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our ~~Omaha Operations~~

~~On September 6, 2017,~~business, particularly the impact on global stock markets. In the first quarter of 2020, we ~~entered into an agreement~~took a number of precautionary measures designed to ~~sell~~help minimize the ~~Omaha-based component~~risk of the spread of the virus to our ~~Wealth Management business.~~employees, including suspending all non-essential travel for our employees and encouraging our employees to work remotely. The ~~sale closed on January 12, 2018. We received proceeds of $10.0 million, net of working capital requirements,~~investments we have made in technology over the past several years, particularly our significant investments in cloud-based systems and ~~recorded a gain on the sale of $524,000, which is included as “Gain on sale of operations” on~~business continuity planning, have allowed our ~~Consolidated Statement of Comprehensive Income. The component is reported within both~~entire team to serve our ~~Advisory and Trust segments. The sale did not represent a major strategic shift in our business and did not qualify for discontinued operations reporting.~~clients seamlessly from their homes.

Revenues

We derive our revenues from investment advisory fees, trust fees and other revenues. Our advisory fees are generated by Westwood Management and Westwood International Advisors, which manage client accounts under investment advisory and subadvisory agreements. Advisory fees are typically calculated based on a percentage of ~~assets under management~~AUM and are paid in accordance with the terms of the agreements. Advisory fees are paid quarterly in advance based on ~~assets under management~~AUM on the last day of the preceding quarter, quarterly in arrears based on ~~assets under management~~AUM on the last day of the quarter just ended or are based on a daily or monthly analysis of ~~assets under management~~AUM for the stated period. We recognize advisory fee revenues as services are rendered. ~~A limited number~~Certain of our clients have a contractual performance-based fee component in their contracts, which generates additional revenues if we outperform a specified index over a specific period of time. We record ~~revenues from~~revenue for performance-based fees at the end of the measurement period. Since our advance paying ~~clients'~~clients’ billing periods coincide with the calendar quarter to which such payments relate, revenue is recognized within the quarter, and our Condensed Consolidated Financial Statements contain no deferred advisory fee revenues.

Our trust fees are generated by Westwood Trust pursuant to trust or custodial agreements. Trust fees are separately negotiated with each client and are generally based on a percentage of ~~assets under management.~~AUM. Westwood Trust also provides trust services to a small number of clients on a fixed fee basis. Trust fees are primarily ~~either~~ calculated quarterly in arrears based on a daily average of ~~assets under management~~AUM for the quarter. ~~Since billing periods for most of Westwood Trust’s clients coincide with the calendar quarter or monthly based on the month-end assets under management.~~ Since billing periods for most of Westwood Trust's clients coincide with the calendar quarter, revenue is fully recognized within the quarter, and our Condensed Consolidated Financial Statements ~~do not~~ contain ~~a significant amount of~~no deferred ~~trust~~advisory fee revenues.

Our other revenues ~~generally~~primarily consist of ~~interest and~~ investment ~~income. Although we generally invest most of~~income from our ~~cash in U.S. Treasury securities, we also invest in equity and fixed income instruments and money market funds, including~~ seed money ~~for~~investments into new investment strategies.

Employee Compensation and Benefits

Employee compensation and benefits expenses generally consist of salaries, incentive compensation, equity-based compensation and benefits.

Sales and Marketing

Sales and marketing expenses relate to our marketing efforts, including travel and entertainment, direct marketing and advertising costs.

Westwood Mutual Funds

Westwood Mutual Funds expenses relate to our marketing, distribution and administration of the Westwood Funds®.

Information Technology

Information technology expenses are generally costs associated with proprietary investment research tools, maintenance and support, computing hardware, software licenses, telecommunications and other related costs.

Professional Services

Professional services expenses generally consist of costs associated with subadvisory fees, audit, tax, legal and other professional services.

General and Administrative

General and administrative expenses generally consist of costs associated with the lease of ~~our~~ office space, amortization, depreciation, insurance, custody expense, Board of ~~Directors'~~Directors fees, investor relations, licenses and fees, office supplies and other miscellaneous expenses.

Gain (Loss) on Foreign Currency Transactions

Gain (loss) on foreign currency transactions consists of foreign currency transactions primarily related to Westwood International Advisors.

~~Gain~~Unrealized Gains (Losses) on ~~Sale of Operations~~Private Investments

~~Gain on sale of operations~~Unrealized gains (losses) in private investments includes changes in the ~~gain on the sale~~value of our ~~Omaha-based component~~private equity investments.

Investment Income

Investment income primarily includes interest and dividend income on fixed income securities and money market funds.

Other Income

Other income consists of income from the sublease of a portion of our ~~Wealth Management business.~~corporate headquarters office.

Assets Under Management

~~Assets under management (“AUM”)~~AUM decreased ~~$5.8~~$5.2 billion to $11.6 billion at March 31, 2020 compared with $16.8 billion at March 31, ~~2019 compared with $22.6 billion at March 31, 2018.~~2019. The average of beginning and ending ~~assets under management~~AUM for the first quarter of ~~2019~~2020 was ~~$16.7~~$13.4 billion compared to ~~$23.4~~$16.7 billion for the first quarter of ~~2018.~~2019. These decreases are due to net outflows ~~including $629 million of outflows related to the sale of the Omaha-based component of~~primarily in our ~~Wealth Management business,~~LargeCap Value and Income Opportunity strategies and market depreciation, partially offset by ~~market appreciation, over the last twelve months.~~net inflows to our SmallCap Value strategies.

The following ~~table~~table displays ~~assets under management~~AUM as of March 31, 2020 and 2019 (in millions):



	As of March 31,
	2020		2019		Change
Institutional⁽¹⁾	$	6,335	$	9,235	(31)	%
Wealth Management⁽²⁾	3,765		4,368		(14)
Mutual Funds⁽³⁾	1,500		3,168		(53)
Total AUM⁽⁴⁾	$	11,600	$	16,771	(31)	%

(1)Institutional includes (i) separate accounts of corporate pension and ~~2018:~~profit sharing plans, public employee retirement funds, Taft-Hartley plans, endowments, foundations and individuals; (ii) subadvisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including the UCITS Fund and collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers.

(2)Wealth Management includes assets for which Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals pursuant to trust or agency agreements and assets for which Westwood Advisors, L.L.C. provided advisory services to high net worth individuals. Investment subadvisory services are provided for the common trust funds by Westwood Management, Westwood International Advisors and external unaffiliated subadvisors. For certain assets in this category Westwood Trust currently provides limited custody services for a minimal or no fee, viewing these assets as potentially converting to fee-generating managed assets in the future. As an example, some assets in this category consist of low-basis stock currently held in custody for clients where we believe such assets may convert to fee-generating managed assets following an intergenerational transfer of wealth.

(3)Mutual Funds include the Westwood Funds®, a family of mutual funds for which Westwood Management serves as advisor. These funds are available to individual investors, as well as offered as part of our investment strategies for institutional and wealth management accounts.

(4)AUM excludes $222 million and $264 million of assets under advisement (“AUA”) as of March 31, 2020 and 2019, respectively, related to our model portfolios for which we provided consulting advice but for which we did not have direct discretionary investment authority.

% Change
March 31, 2019
As of March 31, vs.
2019 2018 March 31, 2018
(in millions)
Institutional⁽¹⁾
$ 9,235
$ 13,377
(31 )%
Wealth Management⁽²⁾
4,368
5,001
(13 )
Mutual Funds⁽³⁾
3,168
4,244
(25 )
Total Assets Under Management⁽⁴⁾
$ 16,771
$ 22,622
(26 )%

~~________________~~

~~(1)~~

~~Institutional~~ includes (i) separate accounts of corporate pension and profit sharing plans, public employee retirement funds, Taft-Hartley plans, endowments, foundations and individuals; (ii) subadvisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including the UCITS Fund and collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers.

~~(2)~~

~~Wealth Management~~ includes assets for which Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals pursuant to trust or agency agreements and assets for which Westwood Advisors, L.L.C. provided advisory services to high net worth individuals. Investment subadvisory services are provided for the common trust funds by Westwood Management, Westwood International Advisors and external unaffiliated subadvisors. For certain assets in this category Westwood Trust currently provides limited custody services for a minimal or no fee, viewing these assets as potentially converting to fee-generating managed assets in the future. As an example, some assets in this category consist of low-basis stock currently held in custody for clients where we believe such assets may convert to fee-generating managed assets following an intergenerational transfer of wealth.


~~(3)~~	~~Mutual Funds~~ ~~include the Westwood Funds~~®, a family of mutual funds for which Westwood Management serves as advisor. These funds are available to individual investors, as well as offered as part of our investment strategies for institutional and private wealth accounts.


~~(4)~~	~~AUM excludes $264 million and $250 million of assets under advisement (~~“~~AUA~~”~~) as of March 31, 2019 and 2018, respectively, related to our model portfolios for which we provided consulting advice but for which we did not have direct discretionary investment authority.~~

Roll-Forward of Assets Under Management


	Three Months Ended March 31,
(in millions)	2020		2019
Institutional
Beginning of period assets	$	8,739	$	9,327
Inflows	313		254
Outflows	(731)		(1,202)
Net client flows	(418)		(948)
Market appreciation (depreciation)	(1,986)		856
Net change	(2,404)		(92)
End of period assets	$	6,335	$	9,235

Wealth Management
Beginning of period assets	$	4,438	$	4,043
Inflows	73		101
Outflows	(127)		(117)
Net client flows	(54)		(16)

Market appreciation (depreciation)	(619)		341
Net change	(673)		325
End of period assets	$	3,765	$	4,368

Mutual Funds
Beginning of period assets	$	2,058	$	3,236
Inflows	174		165
Outflows	(310)		(526)
Net client flows	(136)		(361)
Market appreciation (depreciation)	(422)		293
Net change	(558)		(68)
End of period assets	$	1,500	$	3,168

Total AUM
Beginning of period assets	$	15,235	$	16,606
Inflows	560		520
Outflows	(1,168)		(1,845)
Net client flows	(608)		(1,325)

Market appreciation (depreciation)	(3,027)		1,490
Net change	(3,635)		165
End of period assets	$	11,600	$	16,771

Three Months Ended March 31,
(in millions) 2019 2018
Institutional
Beginning of period assets $ 9,327
$ 14,421
Inflows 254
393
Outflows (1,202 ) (1,389 )
Net flows (948 ) (996 )
Market appreciation (depreciation) 856
(48 )
Net change (92 ) (1,044 )
End of period assets $ 9,235
$ 13,377

Wealth Management
Beginning of period assets $ 4,043
$ 5,566
Inflows 101
65
Outflows⁽¹⁾
(117 ) (584 )
Net flows (16 ) (519 )
Market appreciation (depreciation) 341
(46 )
Net change 325
(565 )
End of period assets $ 4,368
$ 5,001

Mutual Funds
Beginning of period assets $ 3,236
$ 4,242
Inflows 165
343
Outflows (526 ) (285 )
Net flows (361 ) 58
Market appreciation (depreciation) 293
(56 )
Net change (68 ) 2
End of period assets $ 3,168
$ 4,244

Total AUM
Beginning of period assets $ 16,606
$ 24,229
Inflows 520
801
Outflows (1,845 ) (2,258 )
Net flows (1,325 ) (1,457 )
Market appreciation (depreciation) 1,490
(150 )
Net change 165
(1,607 )
End of period assets $ 16,771
$ 22,622

~~________________~~


~~(1)~~	~~Wealth Management outflows include approximately $453 million of assets related to the sale of the Omaha-based component of our Wealth Management business for the three months ended March 31, 2018.~~

Three months ended March 31, ~~2019~~2020 and ~~2018~~2019

The $3.6 billion decrease in AUM for the three months ended March 31, 2020 was due to market depreciation of $3.0 billion and net outflows of $608 million. Market depreciation was primarily related to our LargeCap Value and SmallCap Value strategies. Net outflows were primarily related to our LargeCap Value and Income Opportunity strategies, partially offset by net inflows to our SmallCap Value strategies.

The $165 million increase in ~~assets under management~~AUM for the three months ended March 31, 2019 was due to market appreciation of $1.5 billion, partially offset by net outflows of $1.3 billion. Net outflows were primarily related to our Emerging Markets and Income Opportunity strategies, partially offset by net inflows to our SmallCap Value strategy.

The $1.6 billion decrease in assets under management for the three months ended March 31, 2018 was due to market depreciation of $150 million and net outflows of $1.5 billion. Net outflows were primarily related to our Emerging Markets and LargeCap Value strategies and the divestiture of our Omaha operations,

~~partially offset by net inflows to our SmallCap Value strategy.~~

Results of Operations

The following table (dollars in thousands) and discussion of our results of operations are based upon data derived from the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~comprehensive income~~Comprehensive Income (Loss) contained in our ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements and should be read in conjunction with those statements included elsewhere in this report.


						% Change
	Three Months Ended					March 31, 2019			Three Months Ended
	March 31,					vs.			March 31,
	2019		2018			March 31, 2018			2020		2019		Change
Revenues:								Revenues:
Advisory fees: asset-based	$	16,406	$	24,483		(33	)%	Advisory fees: asset-based	$	11,102	$	16,406	(32)	%
Advisory fees: performance-based	180		1,335			(87	)	Advisory fees: performance-based	—		180		(100)
Trust fees	6,539		7,609			(14	)	Trust fees	5,951		6,539		(9)
Other revenues	737		140			NM		Other revenues	(384)		737		NM
Total revenues	23,862		33,567			(29	)	Total revenues	16,669		23,862		(30)
Expenses:								Expenses:
Employee compensation and benefits	14,610		17,759			(18	)	Employee compensation and benefits	12,668		14,610		(13)
Sales and marketing	530		443			20		Sales and marketing	478		530		(10)
Westwood mutual funds	846		985			(14	)	Westwood mutual funds	515		846		(39)
Information technology	1,977		2,038			(3	)	Information technology	2,031		1,977		3
Professional services	1,149		1,028			12		Professional services	1,193		1,149		4

General and administrative	2,434		2,414			1		General and administrative	2,306		2,434		(5)
(Gain) loss on foreign currency transactions	820		(1,063		)	NM		(Gain) loss on foreign currency transactions	(2,938)		820		NM
Total expenses	22,366		23,604			(5	)	Total expenses	16,253		22,366		(27)
Net operating income	1,496		9,963			(85	)	Net operating income	416		1,496		(72)
Gain on sale of operations	—		524			NM
Income before income taxes	1,496		10,487			(86	)
Provision for income taxes	1,104		2,509			(56	)
Unrealized gains (losses) on private investments								Unrealized gains (losses) on private investments	(995)		—		NM
Investment income								Investment income	544		—		NM
Other income								Other income	34		—		NM
Income (loss) before income taxes								Income (loss) before income taxes	(1)		1,496		(100)
Income tax expense (benefit)								Income tax expense (benefit)	(1,103)		1,104		(200)
Net income	$	392	$	7,978		(95	)%	Net income	$	1,102	$	392	181	%

_________________________

NM Not meaningful

Three months ended March 31, ~~2019~~2020 compared to three months ended March 31, ~~2018~~2019

Total Revenues. Total revenues decreased ~~$9.7~~$7.2 million, or ~~29%~~30%, to $16.7 million for the three months ended March 31, 2020 compared with $23.9 million for the three months ended March 31, ~~2019 compared with $33.6~~2019. Asset-based advisory fees decreased $5.3 million, or 32%, and Trust fees decreased $0.5 million, or 9%, both primarily due to lower average AUM.

Employee Compensation and Benefits. Employee compensation and benefits decreased $1.9 million, or 13%, to $12.7 million for the three months ended March 31, 2018. Asset-based advisory fees decreased $8.1 million, or 33%, and Trust fees decreased $1.1 million, or 14%, both primarily due to lower average assets under management. Performance-based fees decreased $1.1 million, or 86.5%, to $0.22020 compared with $14.6 million for the three months ended March 31, ~~2019 compared with $1.3 million for the three months ended March 31, 2018.~~

~~Employee Compensation and Benefits.~~ ~~Employee compensation and benefits~~ ~~decreased$3.2 million, or~~ ~~18%, to~~ ~~$14.6 million~~ ~~for the three months ended March 31, 2019 compared with $17.8 million for the three months ended March 31, 2018.~~2019. The decrease was primarily due to reductions in compensation relating to short- and long-term incentive compensation as a result of lower asset-based revenues as compared to the prior year ~~quarter.~~and lower headcount.

Westwood Mutual Funds. Westwood mutual funds expenses decreased $0.3 million, or 39%, to $0.5 million for the three months ended March 31, 2020 compared with $0.8 million for the three months ended March 31, 2019. The decrease was primarily due to lower service fees following declines in market values for the Westwood funds.

(Gain) loss on foreign currency transactions. We recorded ~~$820,000~~$2.9 million in foreign currency ~~losses~~gains in the current quarter as a result of ~~a 2.2% decrease~~fluctuations in the Canadian dollar exchange rate.

~~Provision~~Unrealized gains (losses) on private investments. We recorded a loss of $1.0 million in the current quarter on a private investment to reflect a decrease in the valuation multiple because of a downturn in the banking industry due to global macroeconomic effects of the COVID-19 pandemic..

Income Tax Expense (Benefit). Our income tax rate differed from the 21% statutory rate for ~~Income Taxes. The~~the first quarter of 2020 primarily due to a discrete benefit adjustment related to the remeasurement of certain beginning deferred taxes with the enactment of the CARES Act. Our effective tax rate ~~increased to 73.8% for~~will be impacted throughout fiscal year 2020 by the ~~three months ended March 31, 2019 from 23.9% for the three months ended March 31, 2018. The~~remeasurement of current ~~quarter rate was negatively impacted by a $638,000 discrete tax expense related to a permanent difference between book and tax restricted stock expense based~~deferred taxes on a ~~decrease in our stock price between the grant and vesting dates.~~nondiscrete basis.

Supplemental Financial Information

As supplemental information, we ~~provide a non-U.S. generally accepted accounting principles (“non-GAAP”)~~are providing non-GAAP performance ~~measure~~measures that we refer to as Economic ~~Earnings.~~Earnings and Economic EPS. We provide ~~this measure~~these measures in addition to, ~~but~~ not as a substitute for, net income and earnings per share, which are reported on a ~~U.S. generally accepted accounting principles (“GAAP”)~~GAAP basis. Our management and Board of Directors review Economic Earnings and Economic EPS to evaluate our ongoing performance, allocate resources, and review ~~the~~our dividend policy. We believe that ~~this~~these non-GAAP performance ~~measure,~~measures, while not ~~a substitute~~substitutes for GAAP net income isor earnings per share, are useful for management and investors when evaluating our underlying operating and financial performance and our available resources. We do not advocate that investors consider ~~this~~these non-GAAP ~~measure~~measures without also considering financial information prepared in accordance with GAAP.

~~In calculating~~We define Economic Earnings ~~we add back to~~as net income ~~the~~plus non-cash ~~expense associated with~~ equity-based compensation ~~awards of restricted stock,~~expense, amortization of intangible assets, and deferred taxes related to ~~the tax-basis amortization of~~ goodwill. Although depreciation on ~~property and equipment~~fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent aan allocation of the decline in the value of the related assets that will ultimately require replacement. In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding.

The following tables provide a reconciliation of Net income to Economic Earnings and Economic Earnings by segment (in thousands, except share and per share amounts):


	Three Months Ended March 31,						Change
	2020		2019
Net income	$	1,102	$	392	181	%
Add: Stock-based compensation expense	2,616		3,252		(20)
Add: Intangible amortization	423		413		2
Add: Tax benefit from goodwill amortization	59		59		—
Economic Earnings	$	4,200	$	4,116	2	%

Diluted weighted average shares outstanding	8,458,473		8,455,386
Economic Earnings per share	$	0.50	$	0.49

Economic Earnings by Segment
Advisory	$	4,293	$	4,880	(12)	%
Trust	992		1,253		(21)
Westwood Holdings	(1,085)		(2,017)		46
Consolidated	$	4,200	$	4,116	2	%

Three Months Ended March 31, %
Change
2019 2018
Net income $ 392
$ 7,978
(95 )%
Add: Stock-based compensation expense 3,252
4,187
(22 )
Add: Intangible amortization 413
418
(1 )
Add: Tax benefit from goodwill amortization 59
59
—
Economic Earnings $ 4,116
$ 12,642
(67 )%
Diluted weighted average shares outstanding 8,455,386
8,539,545

Economic Earnings per share $ 0.49
$ 1.48

Liquidity and Capital Resources

We fund our operations and cash requirements with cash generated from operating activities. We may also use cash from operations to pay dividends to our stockholders. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, we had no debt. The changes in net cash provided by operating activities generally reflect the changes in earnings plus the effects of non-cash items and changes in working capital, including liquidation of investments used to cover current liabilities. Changes in working capital, especially accounts receivable and accounts payable, are generally the result of timing differences between collection of fees billed and payment of operating expenses.

During the three months ended March 31, ~~2019,~~2020, cash flow provided by operating activities was ~~$10.6~~$11.5 million, which included ~~$16.5~~liquidation of $12.9 million ~~liquidation~~ of current investments, partially offset by a ~~$12.3~~$7.4 million ~~decrease~~reduction in compensation and

benefits ~~payables.~~payable. Cash flow used in investing activities ~~of $321,000~~ during the three months ended March 31, ~~2019~~2020 was primarily related to purchases of property and equipment, while the prior year quarter was primarily related to our investment in a private investment ~~fund, while~~fund. Cash flows used in financing activities of $13.1 million for the ~~prior year quarter experienced cash flow provided by investing activities as a result~~three months ended March 31, 2020 reflected the payment of dividends, purchases of treasury shares under our share repurchase plan and for our Canadian share award plan and restricted stock returned for the ~~sale~~payment of ~~the Omaha-based component of our wealth management business.~~taxes. Cash flow used in financing activities of $11.1 million for the three months ended March 31, 2019 reflected the payment of dividends, purchases of restricted stock returned for payment of taxes and purchases of treasury shares for our Canadian share award plan.

We had cash and short-term investments of ~~$102.0~~$82.4 million as of March 31, ~~2019~~2020 and ~~$118.2~~$100.1 million as of December 31, ~~2018.~~2019. Cash and cash equivalents ~~as of March 31, 2019 and December 31, 2018~~ included approximately ~~$33.0~~$32 million and $31 million of undistributed income from Westwood ~~International.~~International Advisors as of March 31, 2020 and December 31, 2019, respectively. If these funds were needed for our U.S. operations, we would be required to accrue and subsequently pay a 5% incremental Canadian withholding ~~taxes~~tax to repatriate all or a portion of these funds. Our current intention is to permanently reinvest the funds subject to withholding taxes outside of the U.S., and our current forecasts do not demonstrate a need to repatriate them to fund our U.S. operations. At March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, working capital aggregated ~~$106.7~~$84.7 million and ~~$112.6~~$95.6 million, respectively.

Westwood Trust must maintain cash and investments in an amount equal to the minimum restricted capital of $4.0 million, as required by the Texas Finance Code. Restricted capital is included in Investments in the accompanying Condensed Consolidated Balance Sheets. At March 31, ~~2019,~~2020, Westwood Trust had approximately ~~$17.3~~$6.8 million in excess of its minimum capital requirement.

Our future liquidity and capital requirements will depend upon numerous factors, including our results of operations, the timing and magnitude of capital expenditures or strategic initiatives, our dividend policy and other business and risk factors described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, filed with the SEC. We believe that current cash and short-term investment balances plus cash generated from operations will be sufficient to meet both the operating and capital requirements of our ordinary business operations through at least the next twelve months. However, there can be no assurance that we will not require additional financing within this time frame. The failure to raise needed capital on attractive terms, if at all, could have a material adverse effect on our business, financial condition and results of operations.

Contractual Obligations

As of March 31, ~~2019,~~2020, there have been no material changes outside of the ordinary course of business to our contractual obligations since December 31, ~~2018.~~2019. For information regarding our contractual obligations, refer to “Contractual Obligations” in Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Critical and Significant Accounting Policies and Estimates

~~Effective January 1, 2019, we adopted ASU 2016-02,~~ ~~Leases.~~ Refer to Note 2 “Summary of Significant Accounting Policies” and Note 13 “Leases” in our Condensed Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for a detailed description of the adoption of ASU 2016-02.

There have been no ~~other~~ significant changes in our critical or significant accounting policies and estimates since December 31, ~~2018.~~2019. Information with respect to our critical accounting policies and estimates that we believe could have the most significant effect on our reported consolidated results and require difficult, subjective or complex judgment by management is described under “Critical Accounting Policies and Estimates” in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

Accounting Developments

Refer to Note 2 “Summary of Significant Accounting Policies” in our Condensed Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for a description of recently issued accounting guidance.


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our Quantitative and Qualitative Disclosures about Market Risk from those previously reported in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

During the quarter ended March 31, 2019, we implemented the necessary internal controls to ensure we adequately evaluate our contracts for the identification of leases and properly assess the discount rates used to value leases under Accounting Standards Update 2016-02, ~~Leases. There~~2020, there were no ~~other~~ changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Due to our significant investments in cloud-based systems, the impact of our workforce working remotely did not hinder the execution of our internal control processes and procedures.

PART II. OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

None.


~~ITEM 1A.~~	~~RISK FACTORS~~

~~We face~~ITEM 1A. RISK FACTORS

Our business and future results may be affected by a number of ~~significant~~ risks and uncertainties that should be considered carefully. In addition, this report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in ~~our business,~~such forward-looking statements as a result of certain factors, including ~~those detailed under “Risk Factors”~~the risks described in ~~our~~Part I, Item 1A of the Company’s Annual Report on Form 10-K for the ~~fiscal~~ year ended December 31, ~~2018~~2019 and ~~summarized~~the risks set forth below.

The Company believes that there has been no material change in its risk factors as previously disclosed in the Form 10-K other than as set forth below.

Risks Related to the Investment Industry

The recent COVID-19 pandemic, and other potential outbreaks, could negatively impact our businesses, financial condition and results of operations.

We may face risks related to the recent outbreak of COVID-19, which has been declared a pandemic by the World Health Organization. The full impact of COVID-19 is unknown and rapidly evolving. The outbreak and any preventative or protective actions that governments, we or our clients may take in respect of this ~~report under “Management’s Discussion~~virus may result in a period of disruption, including with respect to our financial reporting capabilities and ~~Analysis~~our operations generally, and could potentially impact our clients and third party vendors. Any resulting financial impact cannot be reasonably estimated at this time, but the COVID-19 pandemic could have a material adverse effect on the Company’s business, prospects, results of ~~Financial Condition~~operations, reputation, financial condition, cash flows or ability to continue current operations without any direct or indirect impairment or disruption.

The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and ~~Results~~cannot be predicted, including new information which may emerge concerning the severity of ~~Operations.” These risks~~COVID-19 and ~~uncertainties may affect our current position and future prospects and should be considered carefully in evaluating us, including making an investment in our common stock.~~the actions to contain the virus or treat its impact, among others.


~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table displays information with respect to the treasury shares we purchased during the three months ended March 31, ~~2019:~~2020:


	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (1)
Repurchase program ⁽¹⁾				—	$	8,085,000
March 2020	272,059	$	17.89
Canadian Plan ⁽²⁾	27,474	$	25.39	—	$	964,410
Employee transactions ⁽³⁾
February 2020	34,453	$	27.49
March 2020	8,592	$	20.09

(1)On July 20, 2012, our Board of Directors authorized management to repurchase up to $10.0 million of our outstanding common stock on the open market or in privately negotiated transactions. In July 2016, Westwood's Board of Directors authorized an additional $5.0 million of repurchases under the share repurchase program, and in February 2020 an additional $10.0 million. The share repurchase program has no expiration date and may be discontinued at any time by the Board of Directors.

Period
Total
number of
shares
purchased

Average
price paid
per share

Total number
of shares
purchased as
part of publicly
announced
plans or
programs

Maximum number (or
approximate
dollar value)
of shares that
may yet be
purchased
under the
plans or
programs (1)
Repurchase program ⁽¹⁾
—
$ —
—
$ 5,366,000
Canadian Plan ⁽²⁾
—
$ —
—
CDN $ 2,259,000
Employee transactions ⁽³⁾
—
$ —
—
—
Feb 1-28, 2019 43,855
$ 39.06
—
—
March 1-31, 2019 18,181
$ 39.96
—
—
(2)On April 18, 2013, our stockholders approved the Share Award Plan of Westwood Holdings Group, Inc. for Service Provided in Canada to its Subsidiaries (the “Canadian Plan”), which contemplates a trustee purchasing up to $10.0 million CDN of our outstanding common stock on the open market for the purpose of making share awards to our Canadian employees. The Canadian Plan has no expiration date and may be discontinued at any time by the Board of Directors.

(3)Consists of shares of common stock tendered by an employee at the market close price on the date of vesting in order to satisfy the employee’s minimum tax withholding obligations from vested restricted shares. We anticipate having additional shares tendered in subsequent periods for the same purpose.

~~(1)~~

On July 20, 2012, our Board of Directors authorized management to repurchase up to $10.0 million of our outstanding common stock on the open market or in privately negotiated transactions. In July 2016, Westwood's Board of Directors authorized an additional $5.0 million of repurchases under the share repurchase program. The share repurchase program has no expiration date and may be discontinued at any time by the Board of Directors.

~~(2)~~

On April 18, 2013, our stockholders approved the Share Award Plan of Westwood Holdings Group, Inc. for Service Provided in Canada to its Subsidiaries (the “Canadian Plan”), which contemplates a trustee purchasing up to $10.0 million CDN of our outstanding common stock on the open market for the purpose of making share awards to our Canadian employees. The Canadian Plan has no expiration date and may be discontinued at any time by the Board of Directors.


~~(3)~~	Consists of shares of common stock tendered by an employee at the market close price on the date of vesting in order to satisfy the employee’s minimum tax withholding obligations from vested restricted shares. We anticipate having additional shares tendered in subsequent periods for the same purpose.

ITEM 6. EXHIBITS


~~ITEM 6.~~	~~EXHIBITS~~



31.1*		Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a)

31.2*		Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a)

32.1**		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*	~~XBRL Instance Document~~

101.SCH*	~~XBRL Taxonomy Extension Schema Document~~

101.CAL*	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.DEF*	~~XBRL Taxonomy Extension Definition Linkbase Document~~

101.LAB*	~~XBRL Taxonomy Extension Label Linkbase Document~~

101.PRE*	~~XBRL Taxonomy Extension Presentation Linkbase Document~~


101			~~Filed herewith.~~			The following financial information from Westwood Holdings Group, Inc.'s Quarterly Report on Form 10-Q for the period ended March 31, 2020, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019; (ii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019; (iii) Condensed Consolidated Statements of Stockholders' Equity; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019; and (v) Notes to the Condensed Consolidated Financial Statements.


*104	~~Furnished herewith.~~	Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:

April 29, 2020

WESTWOOD HOLDINGS GROUP, INC.

~~Dated:~~

~~April 24, 2019~~

~~WESTWOOD HOLDINGS GROUP, INC.~~

By:

~~By:~~

/s/ Brian O. Casey

Brian O. Casey

President and Chief Executive Officer

By:

/s/ Murray Forbes III

Murray Forbes III

Chief Financial Officer and Treasurer


	March 31, 2019			December 31, 2018					March 31, 2020			December 31, 2019

ASSETS								ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	52,421		$	52,449		Cash and cash equivalents			$	45,116		$	49,766
Accounts receivable	15,563			18,429			Accounts receivable		11,172			13,177
Investments, at fair value	49,601			65,781			Investments, at fair value		37,272			50,324
Prepaid income taxes	864			349			Prepaid income taxes		658			1,150
Other current assets	3,622			2,731			Other current assets		2,168			2,544
Total current assets	122,071			139,739			Total current assets		96,386			116,961
Investments (including investments at fair value of $250 and $0)	5,675			5,425
Investments							Investments		8,154			8,154
Noncurrent investments at fair value							Noncurrent investments at fair value		3,243			4,238
Goodwill	19,804			19,804			Goodwill		19,804			19,804
Deferred income taxes	4,838			5,102			Deferred income taxes		3,831			2,216
Operating lease right-of-use assets	8,472			8,698			Operating lease right-of-use assets		7,220			7,562
Intangible assets, net	15,549			15,961			Intangible assets, net		14,833			15,256
Property and equipment, net of accumulated depreciation of $6,689 and $6,462	4,740			4,454
Property and equipment, net of accumulated depreciation of $7,570 and $7,395							Property and equipment, net of accumulated depreciation of $7,570 and $7,395		3,931			4,152
Other long-term assets							Other long-term assets		400			364
Total assets	$	181,149		$	199,183		Total assets		$	157,802		$	178,707
LIABILITIES AND STOCKHOLDERS' EQUITY							LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:							Current liabilities:
Accounts payable and accrued liabilities	$	2,672		$	2,518		Accounts payable and accrued liabilities		$	1,676		$	2,145

Dividends payable	7,232			7,710			Dividends payable		4,834			7,362
Compensation and benefits payable	2,646			15,102			Compensation and benefits payable		2,323			9,975

Operating lease liabilities	1,538			1,432			Operating lease liabilities		1,622			1,584
Accrued stock repurchases							Accrued stock repurchases		920			—
Income taxes payable	1,254			365			Income taxes payable		323			289
Total current liabilities	15,342			27,127			Total current liabilities		11,698			21,355
Accrued dividends	748			1,576			Accrued dividends		411			1,303

Noncurrent operating lease liabilities	8,949			9,331			Noncurrent operating lease liabilities		7,304			7,762

Total liabilities	25,039			38,034			Total liabilities		19,413			30,420
Commitments and contingencies (Note 13)							Commitments and contingencies (Note 13)
Stockholders' Equity:							Stockholders' Equity:
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,340,629 and outstanding 8,975,865 shares at March 31, 2019; issued 10,182,583 and outstanding 8,904,902 shares at December 31, 2018	104			102
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,548,103 and outstanding 8,780,041 shares at March 31, 2020; issued 10,306,570 and outstanding 8,881,086 shares at December 31, 2019							Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,548,103 and outstanding 8,780,041 shares at March 31, 2020; issued 10,306,570 and outstanding 8,881,086 shares at December 31, 2019		106			103
Additional paid-in capital	197,598			194,116			Additional paid-in capital		206,267			203,441
Treasury stock, at cost - 1,364,764 shares at March 31, 2019; 1,277,681 shares at December 31, 2018	(62,077		)	(58,711		)
Treasury stock, at cost - 1,768,061 shares at March 31, 2020; 1,425,483 shares at December 31, 2019							Treasury stock, at cost - 1,768,061 shares at March 31, 2020; 1,425,483 shares at December 31, 2019		(69,965)			(63,281)
Accumulated other comprehensive loss	(4,052		)	(4,883		)	Accumulated other comprehensive loss		(6,185)			(2,943)
Retained earnings	24,537			30,525			Retained earnings		8,166			10,967
Total stockholders' equity	156,110			161,149			Total stockholders' equity		138,389			148,287
Total liabilities and stockholders' equity	$	181,149		$	199,183		Total liabilities and stockholders' equity		$	157,802		$	178,707


	Three Months Ended March 31,							Three Months Ended March 31,
	2019			2018				2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES:							CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	392		$	7,978		Net income	$	1,102	$	392
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	212			213			Depreciation	233		212
Amortization of intangible assets	413			418			Amortization of intangible assets	423		413
Unrealized (gains) losses on trading investments	(374		)	232
Unrealized (gains) losses on investments							Unrealized (gains) losses on investments	1,133		(374)
Stock based compensation expense	3,252			4,187			Stock based compensation expense	2,616		3,252
Deferred income taxes	273			(859		)	Deferred income taxes	(1,643)		273
Non-cash lease expense	242			270			Non-cash lease expense	305		242
Gain on sale of operations	—			(524		)

Change in operating assets and liabilities:							Change in operating assets and liabilities:
Net sales of investments - trading securities	16,554			2,175			Net sales of investments - trading securities	12,916		16,554
Accounts receivable	2,981			(2,575		)	Accounts receivable	1,844		2,981
Other current assets	(886		)	3,027			Other current assets	326		(886)
Accounts payable and accrued liabilities	(275		)	(22		)	Accounts payable and accrued liabilities	(469)		(275)
Compensation and benefits payable	(12,305		)	(13,712		)	Compensation and benefits payable	(7,356)		(12,305)
Income taxes payable	379			871			Income taxes payable	475		379
Other liabilities	(293		)	(327		)	Other liabilities	(383)		(293)
Net cash provided by operating activities	10,565			1,352			Net cash provided by operating activities	11,522		10,565
CASH FLOWS FROM INVESTING ACTIVITIES:							CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(71		)	(299		)	Purchase of property and equipment	(16)		(71)
Proceeds from Omaha divestiture	—			10,013

Purchase of investments	(250		)	—			Purchase of investments	—		(250)
Net cash provided by (used in) investing activities	(321		)	9,714

Net cash used in investing activities							Net cash used in investing activities	(16)		(321)
CASH FLOWS FROM FINANCING ACTIVITIES:							CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock							Purchases of treasury stock	(3,947)		(981)
Purchase of treasury stock under employee stock plans	(981		)	(726		)	Purchase of treasury stock under employee stock plans	(697)		—
Restricted stock returned for payment of taxes	(2,385		)	(4,687		)	Restricted stock returned for payment of taxes	(1,120)		(2,385)
Cash dividends paid	(7,686		)	(7,332		)	Cash dividends paid	(7,324)		(7,686)
Net cash used in financing activities	(11,052		)	(12,745		)	Net cash used in financing activities	(13,088)		(11,052)
Effect of currency rate changes on cash	780			(1,020		)	Effect of currency rate changes on cash	(3,068)		780
Net Change in Cash and Cash Equivalents	(28		)	(2,699		)	Net Change in Cash and Cash Equivalents	(4,650)		(28)
Cash and cash equivalents, beginning of period	52,449			54,249			Cash and cash equivalents, beginning of period	49,766		52,449
Cash and cash equivalents, end of period	$	52,421		$	51,550		Cash and cash equivalents, end of period	$	45,116	$	52,421

Supplemental cash flow information:							Supplemental cash flow information:
Cash paid during the period for income taxes	$	453		$	—		Cash paid during the period for income taxes	$	64	$	453
Accrued dividends	$	7,980		$	7,836		Accrued dividends	$	5,245	$	7,980
Accrued purchase of property and equipment	$	425		$	29		Accrued purchase of property and equipment	$	—	$	425
Accrued purchases of treasury stock							Accrued purchases of treasury stock	$	920	$	—



Cash Proceeds	$	10,013
Net assets sold:
Accounts receivable	99
Other current assets	112
Goodwill	7,340
Intangible assets, net	2,170
Property and equipment, net	18
Accounts payable and accrued liabilities	(241		)
Other liabilities	(9		)
Gain on sale of operations	$	524



Balance Sheet as of December 31, 2018:	As Previously Reported		New Lease Standard Adjustment			As Restated
Operating lease right-of-use assets	$	—	$	8,698		$	8,698
Operating lease liabilities	—		1,432			1,432
Noncurrent operating lease liabilities	—		9,331			9,331
Deferred rent	2,065		(2,065		)	—



	March 31, 2019			December 31, 2018
Operating lease right-of-use assets	$	8,472		$	8,698
Operating lease liabilities	$	1,538		$	1,432
Non-current lease liabilities	$	8,949		$	9,331
Total lease liabilities	$	10,487		$	10,763
Weighted-average remaining lease term - (in years)	6.4			6.6
Weighted-average discount rate	5.0		%	5.0		%



x☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


																										Common Stock, Par									Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
	Common Stock, Par				Additional Paid-In Capital				Treasury Stock				Accumulated Other Comprehensive Gain (Loss)				Retained Earnings				Total					Shares			Amount
Balance, December 31, 2019												Balance, December 31, 2019								8,881,086					$	103		$	203,441		$	(63,281)		$	(2,943)		$	10,967		$	148,287
Net income																								Net income		—			—			—			—			—			1,102		1,102
Other comprehensive loss																								Other comprehensive loss		—			—			—			—			(3,242)			—		(3,242)
	Shares		Amount					Additional Paid-In Capital				Treasury Stock				Accumulated Other Comprehensive Gain (Loss)				Retained Earnings				Total
BALANCE, December 31, 2018	8,904,902		$	102
Net income	—		—		—					—													—			392	392
Other comprehensive gain	—		—		—				—				831				—				831
Issuance of restricted stock, net of forfeitures	158,046		2		(2		)		—				—				—				—			Issuance of restricted stock, net of forfeitures		241,533			3			(3)			—			—			—		—
Dividends declared ($0.72 per share)	—		—		—				—				—				(6,380		)		(6,380		)
Dividends declared ($0.43 per share)																								Dividends declared ($0.43 per share)		—			—			—			—			—			(3,903)		(3,903)
Stock based compensation expense	—		—		3,252				—				—				—				3,252			Stock based compensation expense		—			—			2,616			—			—			—		2,616
Reclassification of compensation liability to be paid in shares	—		—		232				—				—				—				232			Reclassification of compensation liability to be paid in shares		—			—			213			—			—			—		213
Purchases of treasury stock	(25,047	)	—		—				(981		)		—				—				(981		)	Purchases of treasury stock		(272,059)			—			—			(4,867)			—			—		(4,867)
Purchase of treasury stock under employee stock plans																								Purchase of treasury stock under employee stock plans		(27,474)			—			—			(697)			—			—		(697)
Restricted stock returned for payment of taxes	(62,036	)	—		—				(2,385		)		—				—				(2,385		)	Restricted stock returned for payment of taxes		(43,045)			—			—			(1,120)			—			—		(1,120)
BALANCE, March 31, 2019	8,975,865		$	104	$	197,598			$	(62,077	)		$	(4,052	)		$	24,537			$	156,110
Balance, March 31, 2020																								Balance, March 31, 2020		8,780,041			$	106		$	206,267		$	(69,965)		$	(6,185)		$	8,166	$	138,389


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2020:
U.S. Government and Government agency obligations	$	27,418	$	331	$	—	$	27,749
Money market funds	5,065		—		—		5,065
Equity funds	4,666		—		(208)		4,458
Total trading securities	37,149		331		(208)		37,272
Private investment fund	250		13		—		263
Private equity	3,420		—		(440)		2,980
Total investments carried at fair value	$	40,819	$	344	$	(648)	$	40,515

December 31, 2019:
U.S. Government and Government agency obligations	$	39,074	$	174	$	—	$	39,248
Money market funds	4,592		—		—		4,592
Equity funds	6,399		85		—		6,484
Total trading securities	$	50,065	$	259	$	—	$	50,324
Private investment fund	250		13		—		263
Private equity	3,420		555		—		3,975
Total investments carried at fair value	$	53,735	$	827	$	—	$	54,562



	As of March 31, 2019			As of December 31, 2018
Foreign currency translation adjustment	$	(4,052	)	$	(4,883	)
Accumulated other comprehensive loss	$	(4,052	)	$	(4,883	)



Three Months Ended March 31, 2018	Advisory		Trust		Performance-based		Other		Total
Asia	$	1,431	$	—	$	—	$	—	$	1,431
Australia	1,022		—		—		—		1,022
Canada	1,830		—		—		49		1,879
Europe	1,243		—		—		—		1,243
United States	18,957		7,609		1,335		91		27,992
Total	$	24,483	$	7,609	$	1,335	$	140	$	33,567



	Shares		Weighted Average Grant Date Fair Value
Non-vested, January 1, 2019	440,073		$	56.40
Granted	177,416		38.77
Vested	(150,589	)	57.03
Forfeited	(21,061	)	50.32
Non-vested, March 31, 2019	445,839		$	49.46



Year Ending December 31,	Operating Leases
2019 (excluding the three months ended March 31, 2019)	$	1,572
2020	2,119
2021	2,083
2022	1,717
2023	1,719
2024	1,550
Thereafter	1,852
Total undiscounted lease payments	$	12,612
Less discount	(2,125		)
Total lease liabilities	$	10,487



	Three Months Ended March 31,				% Change
	2019		2018		% Change
Net income	$	392	$	7,978	(95	)%
Add: Stock-based compensation expense	3,252		4,187		(22	)
Add: Intangible amortization	413		418		(1	)
Add: Tax benefit from goodwill amortization	59		59		—
Economic Earnings	$	4,116	$	12,642	(67	)%
Diluted weighted average shares outstanding	8,455,386		8,539,545
Economic Earnings per share	$	0.49	$	1.48



Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (1)
Repurchase program ⁽¹⁾	—	$	—	—		$	5,366,000
Canadian Plan ⁽²⁾	—	$	—	—	CDN	$	2,259,000
Employee transactions ⁽³⁾	—	$	—	—		—
Feb 1-28, 2019	43,855	$	39.06	—		—
March 1-31, 2019	18,181	$	39.96	—		—