UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

____________________________________________________________________________________________________


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

For the quarterly period ended ~~June 30, 2023~~March 31, 2024


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

For the transition period from to .

Commission file number 1-31234

WESTWOOD HOLDINGS GROUP, INC.

(Exact name of registrant as specified in its charter)

____________________________________________________________________________________________________


Delaware		75-2969997
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

200 CRESCENT COURT, SUITE 1200
DALLAS,	Texas	75201
(Address of principal executive office)		(Zip Code)

(214) 756-6900

(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). Yes ☒ No ☐

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.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

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 ~~July 26, 2023: 9,182,716.~~April 24, 2024: 9,313,223.

WESTWOOD HOLDINGS GROUP, INC.

INDEX


PART I	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets ~~as of~~ ~~June 30, 2023 and December 31, 2022~~	1

	Condensed Consolidated Statements of Comprehensive ~~Income~~ Inc ~~(Loss~~) ~~for the Three~~ ~~and Six~~ ~~Months Ended~~ ~~June 30, 2023 and 2022~~ome	2

	Condensed Consolidated Statements of Stockholders’ Equity ~~for the Three~~ ~~and Six~~ ~~Months Ended~~ ~~June 30, 2023 and 2022~~	3

	Condensed Consolidated Statements of Cash Flows ~~for the~~ ~~Six~~ ~~Months Ended~~ ~~June 30, 2023 and 2022~~	54

	Notes to Condensed Consolidated Financial Statements	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1716

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2623

Item 4.	Controls and Procedures	2623

PART II	OTHER INFORMATION	2825

Item 1.	Legal Proceedings	2825

Item 1A.	Risk Factors	2825

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2825

Item 6.	Exhibits	2926

Signatures		3027

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

(Unaudited)


		June 30, 2023		December 31, 2022
	March 31, 2024						March 31, 2024	December 31, 2023
ASSETS	ASSETS
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	15,229	$	23,859
Accounts receivable	Accounts receivable	13,609		13,900
Investments, at fair value	Investments, at fair value	22,894		15,342
Prepaid income taxes	Prepaid income taxes	—		446
Other current assets	Other current assets	4,154		4,645
Total current assets	Total current assets	55,886		58,192
Investments	Investments	7,247		4,455
Equity method investments	Equity method investments	4,180		6,574
Noncurrent investments at fair value	Noncurrent investments at fair value	259		3,027
Goodwill	Goodwill	39,501		35,732
Deferred income taxes	Deferred income taxes	1,535		1,762
Operating lease right-of-use assets	Operating lease right-of-use assets	3,972		4,976
Intangible assets, net	Intangible assets, net	26,889		28,952
Property and equipment, net of accumulated depreciation of $9,755 and $9,277		1,718		1,828
Property and equipment, net of accumulated depreciation of $9,421 and $10,078
Other long-term assets	Other long-term assets	918		929
Total long-term assets	Total long-term assets	86,219		88,235
Total assets	Total assets	$	142,105	$	146,427
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	5,780	$	5,678

Dividends payable	Dividends payable	1,408		1,745
Dividends payable
Dividends payable
Compensation and benefits payable	Compensation and benefits payable	5,344		8,689

Operating lease liabilities	Operating lease liabilities	1,276		1,502

Income taxes payable
Income taxes payable
Income taxes payable	Income taxes payable	1,044		—
Total current liabilities	Total current liabilities	14,852		17,614
Accrued dividends	Accrued dividends	657		701
Contingent consideration	Contingent consideration	7,763		12,901

Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	3,734		4,563
Noncurrent operating lease liabilities
Noncurrent operating lease liabilities
Total long-term liabilities	Total long-term liabilities	12,154		18,165
Total liabilities	Total liabilities	27,006		35,779
Commitments and contingencies (Note 11)	Commitments and contingencies (Note 11)					Commitments and contingencies (Note 11)
Stockholders' Equity:	Stockholders' Equity:
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 11,896,226 and outstanding 9,182,770 shares at June 30, 2023; issued 11,527,544 and outstanding 8,881,831 shares at December 31, 2022		119		115
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 12,125,042 and 11,856,737, respectively and outstanding 9,330,762 and 9,140,760, respectively
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 12,125,042 and 11,856,737, respectively and outstanding 9,330,762 and 9,140,760, respectively
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 12,125,042 and 11,856,737, respectively and outstanding 9,330,762 and 9,140,760, respectively
Additional paid-in capital	Additional paid-in capital	200,885		199,914
Treasury stock, at cost - 2,713,456 shares at June 30, 2023; 2,645,713 shares at December 31, 2022		(85,965)		(85,128)
Treasury stock, at cost – 2,794,280 and 2,715,977, respectively

Retained earnings (accumulated deficit)		(959)		(4,253)
Retained earnings
Retained earnings
Retained earnings
Total Westwood Holdings Group, Inc. stockholders’ equity	Total Westwood Holdings Group, Inc. stockholders’ equity	114,080		110,648
Noncontrolling interest in consolidated subsidiary	Noncontrolling interest in consolidated subsidiary	1,019		—
Total equity	Total equity	115,099		110,648
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	142,105	$	146,427

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)

(Unaudited)


		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
REVENUES:
REVENUES:
REVENUES:
Advisory fees:
Advisory fees:
Advisory fees:
Asset-based
Asset-based
Asset-based
Performance-based
Performance-based
Performance-based
Trust fees
Trust fees
Trust fees

Other, net

Other, net

Other, net
Total revenues
Total revenues
Total revenues
EXPENSES:
EXPENSES:
EXPENSES:
Employee compensation and benefits
Employee compensation and benefits
Employee compensation and benefits
Sales and marketing
Sales and marketing
Sales and marketing
Westwood mutual funds
Westwood mutual funds
Westwood mutual funds
Information technology
Information technology
Information technology
Professional services
Professional services
Professional services
General and administrative
General and administrative
General and administrative

(Gain) loss from change in fair value of contingent consideration

(Gain) loss from change in fair value of contingent consideration

(Gain) loss from change in fair value of contingent consideration
Acquisition expenses
Acquisition expenses
Acquisition expenses
Total expenses
Total expenses
Total expenses
Net operating income
Net operating income
Net operating income

Net investment income (loss)

Net investment income (loss)

Net investment income (loss)
Other income
Other income
Other income

Income before income taxes

Income before income taxes

Income before income taxes
Income tax provision
Income tax provision
Income tax provision
Net income
Net income
Net income

		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
REVENUES:
Advisory fees:
Asset-based		$	16,799	$	10,980	$	33,832	$	22,770
Performance-based		—		—		555		—
Trust fees		5,024		5,365		10,055		11,080

Other, net		122		(742)		230		(1,031)
Total revenues		21,945		15,603		44,672		32,819
EXPENSES:
Employee compensation and benefits		13,688		9,133		27,890		19,467
Sales and marketing		764		509		1,504		991
Westwood mutual funds		746		445		1,478		1,041
Information technology		2,566		1,847		4,949		3,676
Professional services		1,355		832		2,884		2,352
General and administrative		3,235		2,348		6,281		4,388

(Gain) loss from change in fair value of contingent consideration		(4,078)		—		(5,138)		—
Acquisition expenses		—		887		209		887
Total expenses		18,276		16,001		40,057		32,802
Net operating income (loss)		3,669		(398)		4,615		17

Net change in unrealized appreciation (depreciation) on private investments		24		(299)		24		(262)
Net investment income (loss)		211		5		383		(11)
Other income		239		234		611		392

Income (loss) before income taxes		4,143		(458)		5,633		136
Income tax provision		1,244		(80)		2,020		464
Net income (loss)		$	2,899	$	(378)	$	3,613	$	(328)
Total comprehensive income

Total comprehensive income (loss)		$	2,899	$	(378)	$	3,613	$	(328)
Total comprehensive income

Total comprehensive income
Less: Comprehensive income (loss) attributable to noncontrolling interest	Less: Comprehensive income (loss) attributable to noncontrolling interest	4		—		25		—
Comprehensive income (loss) attributable to Westwood Holdings Group, Inc.		$	2,895	$	(378)	$	3,588	$	(328)
Earnings (loss) per share:
Less: Comprehensive income (loss) attributable to noncontrolling interest
Less: Comprehensive income (loss) attributable to noncontrolling interest
Comprehensive income attributable to Westwood Holdings Group, Inc.
Comprehensive income attributable to Westwood Holdings Group, Inc.
Comprehensive income attributable to Westwood Holdings Group, Inc.
Earnings per share:
Earnings per share:
Earnings per share:
Basic
Basic
Basic	Basic	$	0.36	$	(0.05)	$	0.45	$	(0.04)
Diluted	Diluted	$	0.36	$	(0.05)	$	0.45	$	(0.04)
Diluted
Diluted
Weighted average shares outstanding:
Weighted average shares outstanding:
Weighted average shares outstanding:	Weighted average shares outstanding:
Basic	Basic	7,991,228		7,944,212		7,922,954		7,904,911
Basic
Basic
Diluted	Diluted	8,131,333		7,944,212		8,050,298		7,904,911
Diluted
Diluted

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three Months Ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~

(In thousands, except share amounts)

(Unaudited)


		Common Stock, Par			Additional Paid-In Capital				Treasury Stock				Retained Earnings (Accumulated Deficit)			Noncontrolling Interest		Total
		Shares	Amount												Total
Balance, March 31, 2023		9,212,390	$	119			$	200,453			$	(85,965)				$	(3,752)	$	1,015	$	111,870
Net income		—	—		—				—				2,895			4		2,899
		Common Stock, Par
		Common Stock, Par
		Common Stock, Par																				Additional Paid-In Capital	Treasury Stock	Retained Earnings (Accumulated Deficit)	Noncontrolling Interest	Total
	Shares
Balance, December 31, 2023
Balance, December 31, 2023
Balance, December 31, 2023
Net income (loss)

Issuance of restricted stock, net of forfeitures	Issuance of restricted stock, net of forfeitures	(29,620)	—		—				—				—			—		—

Issuance of restricted stock, net of forfeitures

Issuance of restricted stock, net of forfeitures

Dividends declared ($0.15 per share)
Dividends declared ($0.15 per share)
Dividends declared ($0.15 per share)	Dividends declared ($0.15 per share)	—	—		(1,192)				—				(102)			—		(1,294)

Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expense	Stock-based compensation expense	—	—		1,624				—				—			—		1,624

Restricted stock returned for payment of taxes

Balance, June 30, 2023		9,182,770	$	119	$	200,885			$	(85,965)			$	(959)		$	1,019	$	115,099

Restricted stock returned for payment of taxes

Restricted stock returned for payment of taxes
Balance, March 31, 2024

Common Stock, Par Additional Paid-In Capital Treasury Stock Retained Earnings (Accumulated Deficit) Noncontrolling Interest Total
Shares Amount
Balance, March 31, 2022 8,575,451 $ 110 $ 196,564 $ (82,576) $ 3,162 $ — $ 117,260
Net loss — — — — (378) — (378)
Issuance of restricted stock, net of forfeitures 29,438 1 (1) — — — —
Dividends declared ($0.15 per share) — — — — (1,291) — (1,291)
Stock-based compensation expense — — 1,521 — — — 1,521
Purchases of treasury stock (93,875) — — (1,394) — — (1,394)
Balance, June 30, 2022 8,511,014 $ 111 $ 198,084 $ (83,970) $ 1,493 $ — $ 115,718


	Common Stock, Par			Additional Paid-In Capital		Treasury Stock		Retained Earnings (Accumulated Deficit)		Noncontrolling Interest		Total
	Shares	Amount
Balance, December 31, 2022	8,881,831	$	115	$	199,914	$	(85,128)	$	(4,253)	$	—	$	110,648
Net income	—	—		—		—		693		21		714
Acquisition	—	—		—		—		—		994		994

Issuance of restricted stock, net of forfeitures	398,302	4		(4)		—		—		—		—

Dividends declared ($0.15 per share)	—	—		(1,205)		—		(192)		—		(1,397)
Stock-based compensation expense	—	—		1,748		—		—		—		1,748



Restricted stock returned for payment of taxes	(67,743)	—		—		(837)		—		—		(837)
Balance, March 31, 2023	9,212,390	$	119	$	200,453	$	(85,965)	$	(3,752)	$	1,015	$	111,870

See Notes to Condensed Consolidated Financial Statements.

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

~~CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY~~

~~For the Six Months Ended June 30, 2023 and 2022~~

~~(In thousands, except share amounts)~~

~~(Unaudited)~~

Common Stock, Par Additional Paid-In Capital Treasury Stock Retained Earnings (Accumulated Deficit) Noncontrolling Interest Total
Shares Amount
Balance, December 31, 2022 8,881,831 $ 115 $ 199,914 $ (85,128) $ (4,253) $ — $ 110,648
Net income — — — — 3,588 25 3,613
Acquisition — — — — — 994 994
Issuance of restricted stock, net of forfeitures 368,682 4 (4) — — — —
Dividends declared ($0.30 per share) — — (2,397) — (294) — (2,691)
Stock-based compensation expense — — 3,372 — — — 3,372
Restricted stock returned for payment of taxes (67,743) — — (837) — — (837)
Balance, June 30, 2023 9,182,770 $ 119 $ 200,885 $ (85,965) $ (959) $ 1,019 $ 115,099

Common Stock, Par Additional Paid-In Capital Treasury Stock Retained Earnings (Accumulated Deficit) Noncontrolling Interest Total
Shares Amount
Balance, December 31, 2021 8,253,491 $ 107 $ 195,187 $ (81,750) $ 4,362 $ — $ 117,906
Net loss — — — — (328) — (328)
Issuance of restricted stock, net of forfeitures 401,203 4 (4) — — — —
Dividends declared ($0.30 per share) — — — — (2,541) — (2,541)
Stock-based compensation expense — — 2,901 — — — 2,901
Purchases of treasury stock (106,077) — — (1,594) — — (1,594)
Restricted stock returned for payment of taxes (37,603) — — (626) — — (626)
Balance, June 30, 2022 8,511,014 $ 111 $ 198,084 $ (83,970) $ 1,493 $ — $ 115,718

~~See Notes to Condensed Consolidated Financial Statements.~~

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Six Months Ended June 30,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	3,613	$	(328)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net income
Net income
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation
Depreciation
Depreciation	Depreciation	346		352
Amortization of intangible assets	Amortization of intangible assets	2,063		811
Net change in unrealized (appreciation) depreciation on investments	Net change in unrealized (appreciation) depreciation on investments	(499)		1,312

Stock-based compensation expense	Stock-based compensation expense	3,372		2,901
Stock-based compensation expense
Stock-based compensation expense
Deferred income taxes	Deferred income taxes	228		(502)
Non-cash lease expense	Non-cash lease expense	630		490
Loss on asset disposition	Loss on asset disposition	69		—
Gain on remeasurement of lease liabilities		(119)		—

Fair value change of contingent consideration	Fair value change of contingent consideration	(5,138)		—

Fair value change of contingent consideration

Fair value change of contingent consideration

Change in operating assets and liabilities:	Change in operating assets and liabilities:
Net sales of trading securities		(7,083)		12,370

Change in operating assets and liabilities:

Change in operating assets and liabilities:
Net (purchases) sales of trading securities
Net (purchases) sales of trading securities
Net (purchases) sales of trading securities
Accounts receivable	Accounts receivable	919		1,862
Other current assets	Other current assets	1,141		192
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(796)		(314)
Compensation and benefits payable	Compensation and benefits payable	(3,345)		(5,597)
Income taxes payable	Income taxes payable	1,490		(823)
Other liabilities	Other liabilities	(793)		(585)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	(3,902)		12,141
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition, net of cash acquired	Acquisition, net of cash acquired	(741)		—
Acquisition, net of cash acquired
Acquisition, net of cash acquired

Purchase of property and equipment	Purchase of property and equipment	(97)		(82)

Purchase of property and equipment

Net cash used in investing activities		(838)		(82)
Purchase of property and equipment

Net cash provided by (used in) investing activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock		—		(1,404)

Restricted stock returned for payment of taxes

Restricted stock returned for payment of taxes

Restricted stock returned for payment of taxes	Restricted stock returned for payment of taxes	(837)		(626)

Cash dividends paid	Cash dividends paid	(3,053)		(3,264)
Cash dividends paid
Cash dividends paid
Net cash used in financing activities	Net cash used in financing activities	(3,890)		(5,294)
Effect of currency rate changes on cash		—		4

NET CHANGE IN CASH AND CASH EQUIVALENTS
NET CHANGE IN CASH AND CASH EQUIVALENTS
NET CHANGE IN CASH AND CASH EQUIVALENTS	NET CHANGE IN CASH AND CASH EQUIVALENTS	(8,630)		6,769
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	23,859		15,206
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	15,229	$	21,975

SUPPLEMENTAL CASH FLOW INFORMATION:	SUPPLEMENTAL CASH FLOW INFORMATION:
SUPPLEMENTAL CASH FLOW INFORMATION:
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes
Cash paid during the period for income taxes
Cash paid during the period for income taxes	Cash paid during the period for income taxes	$	300	$	1,791
Accrued dividends	Accrued dividends	$	2,065	$	2,214
Accrued purchases of treasury stock		$	—	$	190

Additional operating lease right-of-use assets
Additional operating lease right-of-use assets
Additional operating lease right-of-use assets

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF THE BUSINESS

Westwood Holdings Group, Inc. (“Westwood”, “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 services for its clients through its wholly-owned subsidiaries, Westwood Management Corp., Westwood Advisors, L.L.C. and Salient Advisors, ~~LP ("Salient") and its majority-owned subsidiary Broadmark Asset Management LLC ("Broadmark"),~~L.P. (referred to hereinafter together as “Westwood Management”), and Westwood Trust.

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 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") and ~~assets under advisement ("AUA"), and~~ fluctuations in financial markets and in the composition of AUM ~~and AUA~~ impact our revenues and results of operations.

Westwood Management is registered with the Securities and Exchange Commission ("SEC") as an investment adviser ~~("RIA")~~ under the Investment Advisers Act of 1940. Westwood Trust is chartered and regulated by the Texas Department of Banking.

Acquisition of Broadmark Asset Management LLC

We acquired a 48% interest in Broadmark Asset Management LLC ("Broadmark") as a result of our 2022 acquisition of the asset management business of Salient Partners, L.P. (the "Salient Acquisition"). In January 2023 we acquired an additional 32% interest in Broadmark for $1.2 million (net of cash acquired), increasing our ownership of Broadmark to approximately 80%, which represents a controlling interest for financial statement consolidation purposes (the "Broadmark Acquisition"). Broadmark is a San Francisco-based ~~RIA~~registered investment adviser ("RIA") managing and/or sub-advising mutual funds, retail and institutional ~~separately managed~~separately-managed accounts.

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”~~("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 SEC.

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, ~~2022.~~2023. 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.

Recent Accounting Pronouncements

Segment Reporting

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires an entity to disclose significant segment expenses and other segment items on an annual and interim basis, and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires an entity to disclose the title and position of the Chief Operating Decision Maker. This ASU does not change how an entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. An entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. We expect this ASU to impact our disclosures, with no impact to our results of operations, cash flows or financial condition.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Income Taxes

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the income tax rate reconciliation and income taxes paid. ASU 2023-09 requires an entity to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories, with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign, and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all periods presented. We expect this ASU to impact our disclosures, with no impact to our results of operations, cash flows, or financial condition.

3. BUSINESS COMBINATIONS

Broadmark

Westwood completed the Broadmark Acquisition in January 2023, increasing our investment by approximately 32%, to 80%, giving Westwood a controlling interest and requiring an allocation of the Broadmark Acquisition purchase price. The total consideration recorded for accounting purposes consisted of $1.2 million in cash (net of cash acquired).

Prior to the Broadmark Acquisition, Westwood had a $2.4 million equity method investment in Broadmark, the fair value of which was estimated using recent market transactions. Westwood's equity method investment was derecognized without gain or loss following the Broadmark Acquisition, however there was a corresponding increase to goodwill.

The Broadmark Acquisition was accounted for using the acquisition method of accounting. Accordingly, the purchase price was allocated to tangible assets acquired and liabilities assumed based on their estimated fair values as of the

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

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

~~(Unaudited)~~

acquisition date. The total consideration of $1.6 million has been allocated based on valuations of acquired assets and assumed liabilities in connection with the acquisition.

The allocation of the Broadmark Acquisition purchase price was as follows (in thousands):


	(in thousands)
Cash consideration	$	1,570
Cash acquired	(402)
Total consideration, net of cash acquired	$	1,168

Fair value of Westwood's investment in Broadmark before the business combination	2,417
Fair value of noncontrolling interest in Broadmark	994

Assets
Accounts receivable	$	629
Other current assets	150
Property and equipment	11
Other long-term assets	511
Liabilities
Accounts payable and accrued liabilities	919
Total Identifiable Net Assets	$	382

Goodwill	$	4,197

Westwood ~~owns~~recognized approximately ~~80% of Broadmark's equity and accordingly we recognized~~ $1.0 million of a noncontrolling interest in a consolidated ~~subsidiary.~~subsidiary at the acquisition date. Fair value of this interest was estimated using recent market transactions.

At the time of the Broadmark Acquisition, the Company believed that its expanded operational opportunities, enhanced range of investment strategies and expected realization of synergies were the primary factors that contributed to a

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

total purchase price that resulted in the recognition of goodwill. Goodwill arising from the Broadmark ~~acquisition~~Acquisition is not expected to be deductible for tax purposes.

For the three months ended ~~June 30,~~March 31, 2024, the Company has included $1.0 million of revenue and $(0.6) million of net income related to Broadmark in its Condensed Consolidated Statements of Comprehensive Income. For the three months ended March 31, 2023, the Company has included ~~$1.1~~$1.2 million of revenue and $0.1 million of net income related to Broadmark in its Condensed Consolidated Statements of Comprehensive Income (Loss). For the six months ended June 30, 2023, the Company has included $2.3 million of revenue and $0.1 million of net income related to Broadmark in its Condensed Consolidated Statements of Comprehensive Income (Loss).Income.

Pro Forma Financial Information

The following unaudited pro forma results of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 ~~and 2022~~ assume the Broadmark Acquisition had occurred as of January 1, 2022. This unaudited pro forma information should not be relied upon as being necessarily indicative of ~~the~~ historical results that would have been obtained ifhad the Broadmark Acquisition ~~had~~ actually occurred on that date, nor of results that may be obtained in the future.

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2023 2022 2023 2022
Total revenues $ 21,945 $ 16,725 $ 44,672 $ 35,121
Net income (loss) $ 2,899 $ (344) $ 3,613 $ (608)


	Three Months Ended March 31,
(in thousands)		2023
Total revenues		$	22,727
Net income		$	714

4. 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 such as gains and losses from our seed

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

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

~~(Unaudited)~~

money investments into new investment strategies. The "Other, net” revenues on our Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ are the unrealized gains and losses on our seed money investments, and our seed money investments are included in "Investments, at fair value" on our Condensed Consolidated Balance Sheets. Advisory and trust fees are calculated based on a percentage of AUM or AUA, as applicable, 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 ~~which manages~~for managing client accounts under investment advisory and sub-advisory agreements. Advisory fees are typically calculated based on a percentage of AUM and AUA and are paid in accordance with the terms of the agreements. Advisory fees are paid quarterly in advance based on AUM on the last day of the preceding quarter, quarterly in arrears based on AUM on the last day of the quarter just ended or are based on a daily or monthly analysis of 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 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 plans, endowments, foundations and individuals; (ii) sub-advisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including collective investment trusts; and (iv) managed account relationships with brokerage firms and other ~~RIAs~~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 suite of investment strategies for institutional investors and 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. Performance-based fees are paid after the performance obligation has been satisfied.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The revenue is based on future market performance and is subject to many 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

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 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 AUM for the 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 contain no deferred fee revenues.

Revenue Disaggregated

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

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

~~(Unaudited)~~

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


		Three Months Ended June 30,				Six Months Ended June 30,
		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Advisory Fees:
Advisory Fees:
Advisory Fees:	Advisory Fees:
Institutional	Institutional	$	9,443	$	6,632	$	19,046	$	13,681
Institutional
Institutional
Mutual Funds
Mutual Funds
Mutual Funds	Mutual Funds	7,093		4,140		14,279		8,689
Wealth Management	Wealth Management	263		208		507		400
Wealth Management
Wealth Management
Performance-based	Performance-based	—		—		555		—
Performance-based
Performance-based
Trust Fees
Trust Fees
Trust Fees	Trust Fees	5,024		5,365		10,055		11,080

Other, net	Other, net	122		(742)		230		(1,031)

Other, net

Other, net
Total revenues	Total revenues	$	21,945	$	15,603	$	44,672	$	32,819
Total revenues
Total revenues

We ~~serve~~have clients ~~primarily~~ in various locations around the ~~United States, as well as in certain international locations.~~world. The following table presents our revenue disaggregated by our clients' geographical locations (in thousands):


Three Months Ended June 30, 2023		Advisory		Trust		Other		Total
Three Months Ended March 31, 2024
Three Months Ended March 31, 2024
Three Months Ended March 31, 2024										Advisory	Trust	Other	Total

Canada	Canada	$	276	$	—	$	—	$	276

Canada

Canada

United States
United States
United States	United States	16,523		5,024		122		21,669
Total	Total	$	16,799	$	5,024	$	122	$	21,945

Three Months Ended June 30, 2022 Advisory Trust Other Total
Canada $ 303 $ — $ — $ 303
United States 10,677 5,365 (742) 15,300
Total $ 10,980 $ 5,365 $ (742) $ 15,603

Six Months Ended June 30, 2023 Advisory Trust Other Total
Canada $ 568 $ — $ — $ 568
United States 33,819 10,055 230 44,104
Total $ 34,387 $ 10,055 $ 230 $ 44,672


Six Months Ended June 30, 2022		Advisory		Trust		Other		Total
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023										Advisory	Trust	Other	Total

Canada	Canada	$	594	$	—	$	—	$	594

Canada

Canada

United States
United States
United States	United States	22,176		11,080		(1,031)		32,225
Total	Total	$	22,770	$	11,080	$	(1,031)	$	32,819

5. SEGMENT REPORTING

We operate two 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~~uses to review the financial information for operational decision-making purposes.

The ~~Company’s chief operating decision maker,~~Company's Chief Operating Decision Maker, our Chief Executive Officer, evaluates the performance of our segments based primarily on fee revenues and Economic Earnings, a non-GAAP measurement. We define Economic Earnings as net income (loss) plus non-cash equity-based compensation expense, amortization of intangible assets and deferred taxes related to goodwill. Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related

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

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

~~(Unaudited)~~

~~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.~~revenues.

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

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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.

Advisory

Our Advisory segment provides investment advisory services to (i) corporate pension and profit sharing plans, public employee retirement funds, Taft-Hartley plans, endowments, foundations and individuals, (ii) sub-advisory 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 collective investment trusts. Salient and Westwood Management, ~~Salient and Broadmark~~which provide investment advisory services to similar clients, ~~and~~ are included in our Advisory segment.

Trust

Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Trust is included in our Trust segment.
(in thousands) Advisory Trust Westwood
Holdings Eliminations Consolidated
Three Months Ended June 30, 2023
Net fee revenues from external sources $ 16,799 $ 5,024 $ — $ — $ 21,823
Net intersegment revenues 1,587 77 — (1,664) —
Other, net 122 — — — 122
Total revenues $ 18,508 $ 5,101 $ — $ (1,664) $ 21,945
June 30, 2023 segment assets $ 268,184 $ 44,412 $ 14,831 $ (185,322) $ 142,105
June 30, 2023 segment goodwill $ 23,100 $ 16,401 $ — $ — $ 39,501
Three Months Ended June 30, 2022
Net fee revenues from external sources $ 10,980 $ 5,365 $ — $ — $ 16,345
Net intersegment revenues 536 88 — (624) —
Other, net (742) — — — (742)
Total revenues $ 10,774 $ 5,453 $ — $ (624) $ 15,603
June 30, 2022 segment assets $ 223,773 $ 52,105 $ 28,586 $ (174,539) $ 129,925
June 30, 2022 segment goodwill $ — $ 16,401 $ — $ — $ 16,401

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

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

~~(Unaudited)~~


(in thousands)	(in thousands)	Advisory		Trust		Westwood Holdings		Eliminations		Consolidated		(in thousands)	Advisory	Trust	Westwood Holdings	Eliminations	Consolidated
Six Months Ended June 30, 2023
Three Months Ended March 31, 2024
Net fee revenues from external sources
Net fee revenues from external sources
Net fee revenues from external sources	Net fee revenues from external sources	$	34,387	$	10,055	$	—	$	—	$	44,442
Net intersegment revenues	Net intersegment revenues	3,249		154		—		(3,403)		—

Other, net	Other, net	230		—		—		—		230
Other, net
Other, net
Total revenues	Total revenues	$	37,866	$	10,209	$	—	$	(3,403)	$	44,672

Six Months Ended June 30, 2022
Segment assets
Segment assets
Segment assets
Segment goodwill
Segment equity-method investments
Segment expenditures for long-lived assets

Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Three Months Ended March 31, 2023
Net fee revenues from external sources
Net fee revenues from external sources
Net fee revenues from external sources	Net fee revenues from external sources	$	22,770	$	11,080	$	—	$	—	$	33,850
Net intersegment revenues	Net intersegment revenues	1,113		178		—		(1,291)		—

Other, net	Other, net	(1,031)		—		—		—		(1,031)
Other, net
Other, net
Total revenues	Total revenues	$	22,852	$	11,258	$	—	$	(1,291)	$	32,819

Segment assets
Segment assets
Segment assets
Segment goodwill
Segment equity-method investments
Segment expenditures for long-lived assets

6. INVESTMENTS

~~The~~Since 2018, in addition to the Company's acquistions of Salient and Broadmark, whose results are included in our Condensed Consolidated Statements of Comprehensive Income, the Company has made strategic investments to enhance the services we provide to our customers. Each of these investments is discussed below.

~~InvestCloud. During 2018, we~~We made a strategic investment during 2018 in InvestCloud, which is included in “Investments” on our Condensed Consolidated Balance ~~Sheets.~~Sheets at its carrying value of $4.4 million. This investment represents an equity interest in a private company without a 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 InvestCloud's recapitalization in the first quarter of 2021, we re-invested $4.4 million of our proceeds into newly-issued shares of InvestCloud. No impairments of this investment were recorded during the three months ended March 31, 2024 or 2023.

~~Charis~~. Our investment in Charis was included in “Noncurrent investments at fair value” on our December 31, 2022 Condensed Consolidated Balance Sheets and was measured at fair value on a recurring basis. On April 3, 2023, Charis was acquired by Vista Bank ("Vista") in a transaction in which the Company traded its shares in Charis for shares in Vista.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

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

(Unaudited)

Our investment in Vista is included in “Investments” on our Condensed Consolidated Balance ~~Sheets.~~Sheets at its carrying value of $2.8 million. This investment represents an equity interest in a private company without a 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. No impairments of this investment were recorded during the three months ended March 31, 2024 or 2023.

Private ~~Equity Funding~~Investment Fund. In 2019, we made a $0.3 million investment in Westwood Hospitality. Our investment is included in “Noncurrent investments at fair value” on our Condensed Consolidated Balance Sheets and it is measured at fair value on a recurring basis using net asset value ("NAV") as a practical expedient.

Zarvona Energy Fund GP, L.P. and Zarvona Energy Fund II-A, L.P. These investments represent ownership interests in non-controlled partnerships. These investments are included in “Equity method investments” on our Condensed Consolidated Balance Sheets and are measured based on our share of the net earnings or losses of the investees.

~~Broadmark Asset Management LLC~~. This investment represented a 47.5% ownership interest in a non-controlled corporation prior to the Broadmark Acquisition in 2023. This investment is included in “Equity method investments” on our Condensed Consolidated Balance Sheets at December 31, 2022. In January 2023, as a result of the Broadmark Acquisition, we acquired additional equity interests in Broadmark and accounted for that investment as a consolidated subsidiary.

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

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

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

~~(Unaudited)~~

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


			Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
June 30, 2023:
U.S. Government and Government agency obligations			$	14,776	$	—	$	(256)	$	14,520
		Cost									Cost	Gross Unrealized Gains	Gross Unrealized Losses	Estimated Fair Value
March 31, 2024:
U.S. Government securities
U.S. Government securities
U.S. Government securities
Money market funds	Money market funds		4,194		111		—		4,305
Equity funds	Equity funds		3,639		81		(274)		3,446
Equities	Equities		490		—		(13)		477
Exchange-traded bond funds	Exchange-traded bond funds		160		—		(14)		146
Total trading securities	Total trading securities		23,259		192		(557)		22,894
Private investment fund	Private investment fund		265		7		(13)		259

Total investments carried at fair value	Total investments carried at fair value		$	23,524	$	199	$	(570)	$	23,153
Total investments carried at fair value
Total investments carried at fair value

December 31, 2022:
U.S. Government and Government agency obligations			$	5,728	$	—	$	(389)	$	5,339
December 31, 2023:
December 31, 2023:
December 31, 2023:
U.S. Government securities
U.S. Government securities
U.S. Government securities
Money market funds	Money market funds		4,093		111		—		4,204
Equity funds	Equity funds		4,863		32		(446)		4,449
Equities	Equities		1,278		—		(65)		1,213
Exchange-traded bond funds	Exchange-traded bond funds		159		—		(22)		137
Total trading securities	Total trading securities		16,121		143		(922)		15,342
Private investment fund	Private investment fund		265		—		(30)		235
Private equity			3,475		—		(683)		2,792

Total investments carried at fair value	Total investments carried at fair value		$	19,861	$	143	$	(1,635)	$	18,369
Total investments carried at fair value
Total investments carried at fair value

The investments shown below are included in our Condensed Consolidated Balance Sheets as Equity method investments, as follows (in thousands):


		June 30, 2023				December 31, 2022
		Carrying value		Ownership		Carrying value		Ownership
	March 31, 2024															March 31, 2024						December 31, 2023
	Carrying value														Carrying value	Ownership					Carrying value	Ownership
Zarvona Energy Fund GP, L.P.	Zarvona Energy Fund GP, L.P.	$	3,461	50.0	%	$	3,438	50.0	%	Zarvona Energy Fund GP, L.P.	$	3,800	50.0	50.0	%		$	3,565	50.0	50.0	%
Zarvona Energy Fund II-A, L.P.	Zarvona Energy Fund II-A, L.P.	700		0.5	%	700		0.5	%	Zarvona Energy Fund II-A, L.P.	700		0.5	0.5	%		700		0.5	0.5	%
Broadmark Asset Management LLC		—		—	%	2,417		47.5	%
Salient MLP Total Return Fund, L.P.	Salient MLP Total Return Fund, L.P.	11		—	%	11		—	%	Salient MLP Total Return Fund, L.P.	11		—	—	%		11		—	—	%
Salient MLP Total Return TE Fund, L.P.	Salient MLP Total Return TE Fund, L.P.	8		0.2	%	8		0.2	%	Salient MLP Total Return TE Fund, L.P.	8		0.2	0.2	%		8		0.2	0.2	%
Total	Total	$	4,180			$	6,574

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

7. FAIR VALUE MEASUREMENTS

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 1 – quoted market prices in active markets for identical assets

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

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

Our strategic investments in InvestCloud and Vista, discussed in Note 6 “Investments,” are excluded from the recurring fair value table shown below because we have elected to apply the measurement alternative for those ~~investments=.~~

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

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

~~(Unaudited)~~

investments.

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):


		Level 1		Level 2		Level 3		Investments Measured at NAV (1)		Total
As of June 30, 2023:
	Level 1												Level 1	Level 2	Level 3	Investments Measured at NAV (1)	Total
As of March 31, 2024:
Investments in trading securities
Investments in trading securities
Investments in trading securities	Investments in trading securities	$	22,894	$	—	$	—	$	—	$	22,894
Private investment fund	Private investment fund	—		—		—		259		259

Total assets measured at fair value	Total assets measured at fair value	$	22,894	$	—	$	—	$	259	$	23,153
Total assets measured at fair value
Total assets measured at fair value
Salient Acquisition contingent consideration	Salient Acquisition contingent consideration	$	—	$	—	$	7,763	$	—	$	7,763
Total liabilities measured at fair value	Total liabilities measured at fair value	$	—	$	—	$	7,763	$	—	$	7,763

As of December 31, 2022:
As of December 31, 2023:
As of December 31, 2023:
As of December 31, 2023:
Investments in trading securities
Investments in trading securities
Investments in trading securities	Investments in trading securities	$	15,342	$	—	$	—	$	—	$	15,342
Private investment fund	Private investment fund	—		—		—		235		235
Private equity		—		—		2,792		—		2,792

Total assets measured at fair value
Total assets measured at fair value
Total assets measured at fair value	Total assets measured at fair value	$	15,342	$	—	$	2,792	$	235	$	18,369
Salient Acquisition contingent consideration	Salient Acquisition contingent consideration	$	—	$	—	$	12,901	$	—	$	12,901
Total liabilities measured at fair value	Total liabilities measured at fair value	$	—	$	—	$	12,901	$	—	$	12,901
(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.	(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.											(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.

Prior to our exchange of Charis shares ~~in Charis~~ for shares in Vista in 2023, our investment in Charis was included within Level 3 of the fair value hierarchy as we valued it utilizing inputs not observable in the market. Historically, our investment was measured at fair value on a recurring basis using a market approach based on either a price to tangible book value multiple range determined to be reasonable in the current environment, or on market transactions. On April 3, 2023, Charis was acquired by Vista in a transaction in which the Company exchanged its shares in Charis for shares in Vista.

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 June 30, Six Months Ended June 30,
2023 2022 2023 2022
Beginning balance $ 2,792 $ 4,326 $ 2,792 $ 4,369
Exchange of shares (2,792) — (2,792) —
Unrealized gains (losses) on private investments — (302) — (345)
Ending balance $ — $ 4,024 $ — $ 4,024


	Fair Value using Significant Unobservable Inputs (Level 3)
	Three Months Ended
	March 31, 2023
Beginning balance	$	2,792




Unrealized gains (losses) on private investments	—
Ending balance	$	2,792

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The following table summarizes the changes in Level 3 liabilities 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 June 30, Six Months Ended June 30,
2023 2022 2023 2022
Beginning balance $ 11,841 $ — $ 12,901 $ —
Total (gains) losses included in earnings (4,078) — (5,138) —
Ending balance $ 7,763 $ — $ 7,763 $ —

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

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

~~(Unaudited)~~


	Fair Value using Significant Unobservable Inputs (Level 3)
	Three Months Ended March 31,
	2024		2023
Beginning balance	$	10,133	$	12,901



Total (gains) losses included in earnings	(2,949)		(1,060)
Ending balance	$	7,184	$	11,841

The ~~June 30, 2023~~March 31, 2024 contingent consideration fair value of ~~$7.8~~$7.2 million was valued based upon updated revenue growth projections ~~following AUM outflows in 2023~~ and ~~current volatility~~financial inputs. The fair value of contingent consideration related to both the revenue retention earn-out and the growth earn-out is measured using the Monte Carlo simulation model, which considered assumptions including revenue growth projections, revenue volatility, risk free rates and discount rates. The projected contingent payment is discounted ~~back~~ to the current period using a discounted cash flow model. Increases or decreases in projected revenues, probabilities of payment, discount rates, projected payment dates and other inputs may result in significantly higher or lower fair value measurements.

The following table represents the range of the unobservable inputs utilized in the fair value measurement of the contingent consideration classified as level 3:

Range
Earn-out Unobservable Input Low High Weighted Average Rate
Revenue Retention earn-out Discount rate 13.0% 13.5% 13.25%
Volatility 15.0% 25.0% 20.00%
Growth earn-out Discount rate 13.0% 13.5% 13.25%
Volatility 15.0% 25.0% 20.00%


As of March 31, 2024:		Range
Earn-out	Unobservable Input	Low	High	Weighted Average Rate
Revenue Retention earn-out	Discount rate	7.5%	8.5%	8.00%
	Volatility	—%	5.0%	—%

Growth earn-out	Discount rate	7.5%	8.5%	8.00%
	Volatility	1.5%	11.5%	6.50%

As of March 31, 2023:		Range
Earn-out	Unobservable Input	Low	High	Weighted Average Rate
Revenue Retention earn-out	Discount rate	12.5%	13.0%	12.75%
	Volatility	6.1%	16.1%	11.00%

Growth earn-out	Discount rate	12.5%	13.0%	12.75%
	Volatility	6.1%	16.1%	11.00%

8. INCOME TAXES

Our effective income tax rate differed from the 21% statutory rate for the three ~~and six~~ months ended ~~2023~~March 31, 2024 and ~~2022~~2023 due to permanent differences between book and tax restricted stock expense based on a decrease in our stock price between the restricted stock grant and vesting dates.

9. EARNINGS ~~(LOSS)~~ PER SHARE

Basic earnings ~~(loss)~~ per common share is computed by dividing comprehensive income ~~(loss)~~ attributable to Westwood Holdings Group, Inc. by the weighted average number of shares outstanding for the applicable period. Diluted earnings ~~(loss)~~ 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 ~~106,000~~20,000 and ~~89,000~~109,000 anti-dilutive restricted shares outstanding for the three months ended ~~June 30,~~March 31, 2024 and March 31, 2023, ~~and June 30, 2022,~~ respectively. ~~There were approximately 108,000 and 87,000 anti-dilutive restricted shares outstanding for the six months ended June 30, 2023 and June 30, 2022, respectively.~~

~~The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share and share amounts):~~
Three Months Ended June 30, Six Months Ended June 30,
2023 2022 2023 2022
Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. $ 2,895 $ (378) $ 3,588 $ (328)
Weighted average shares outstanding - basic 7,991,228 7,944,212 7,922,954 7,904,911
Dilutive potential shares from unvested restricted shares 140,105 — 127,344 —
Weighted average shares outstanding - diluted 8,131,333 7,944,212 8,050,298 7,904,911
Earnings (loss) per share:
Basic $ 0.36 $ (0.05) $ 0.45 $ (0.04)
Diluted $ 0.36 $ (0.05) $ 0.45 $ (0.04)

1412

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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,
	2024		2023
Comprehensive income attributable to Westwood Holdings Group, Inc.	$	2,296	$	693
Weighted average shares outstanding - basic	8,099,028		7,853,921
Dilutive potential shares from unvested restricted shares	293,468		114,583

Weighted average shares outstanding - diluted	8,392,496		7,968,504
Earnings per share:
Basic	$	0.28	$	0.09
Diluted	$	0.27	$	0.09

10. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying ~~identifiable assets~~liabilities at the date of acquisition. Goodwill is not amortized but is reviewed for impairment annually, or between annual assessments if a triggering event occurs or circumstances change that would more likely than not result in the fair value of a reporting unit below its carrying amount. We completed our most recent annual goodwill impairment assessment during the third quarter of ~~2022~~2023 and determined that no goodwill impairment related to the Advisory or Trust segment was required. There was no goodwill impairment during the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 or ~~June 30, 2022.~~March 31, 2023.

Changes in goodwill were as follows (in thousands):
Three Months Ended Six Months Ended
June 30, 2023
Beginning balance $ 39,929 $ 35,732
Broadmark Acquisition1
— 4,197
Salient Acquisition Adjustment2
(428) (428)
Ending balance $ 39,501 $ 39,501


	Trust Segment		Advisory Segment		Total
Balance at December 31, 2023	$	16,401	$	23,100	$	39,501

Balance at March 31, 2024	$	16,401	$	23,100	$	39,501


	Trust Segment		Advisory Segment		Total
Balance at December 31, 2022	$	16,401	$	19,331	$	35,732
Broadmark Acquisition	—		4,197		4,197
Balance at March 31, 2023	$	16,401	$	23,528	$	39,929

1 ~~The $4.2 million of acquired goodwill is attributable to the Advisory segment.~~

2 ~~Represents subsequent purchase price adjustments for the 2022 Salient Acquisition.~~

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 significant estimates regarding their useful lives, growth rates and potential attrition. We periodically review intangible assets for events or circumstances that would indicate impairment. No intangible asset impairments were recorded during the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 or ~~June 30, 2022.~~March 31, 2023.

11. LEASES

As of ~~June 30, 2023~~March 31, 2024 there have been no material changes outside the ordinary course of business to our leases since December 31, ~~2022.~~2023. For information regarding our leases, refer to Note 12 “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, ~~2022.~~2023.

12. STOCKHOLDERS' EQUITY

Share Repurchase Program

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

As of ~~June 30, 2023,~~March 31, 2024, there are ~~$1.9~~$1.8 million of shares that may yet be repurchased under our plan.

During the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023, the Company did not repurchase any shares of our common stock. During the three months ended June 30, 2022, the Company repurchased 57,984 shares of our common stock at an average price of $14.29 per share, including commissions, for an aggregate purchase price of $0.8 million under our share repurchase plan. During the six months ended June 30, 2022, the Company repurchased 70,186 shares of our common stock at an average price of $14.65 per share, including commissions, for an aggregate purchase price of $1.0 million under our share repurchase plan.

13. VARIABLE INTEREST ENTITIES

We evaluated (i) our relationship as sponsor of the Common Trust Funds (“CTFs”) and managing member of the private equity funds Westwood Hospitality, ~~and~~ Westwood Technology Opportunities Fund I, LP and Westwood Energy Secondaries (collectively the “Private Funds”), (ii) our advisory relationships with the Westwood Funds® and (iii) our investments in InvestCloud, Vista, Zarvona Energy Fund GP and Zarvona Energy Fund II-A as discussed in Note 6 “Investments” (“Private Equity”) to determine whether each of these entities is a variable interest entity (“VIE”) or voting ownership entity (“VOE”).

Based on our analyses, we determined that the CTFs, Private Funds and Zarvona Energy Fund II-A were VIEs, as the at-risk equity holders do not have the ability to direct the activities that most significantly impact the entities' economic

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

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

~~(Unaudited)~~

performance, and, while 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.~~affairs, the Company is not exposed to a majority of the economics of those entities and does not qualify as primary beneficiaries for those entities. As we do not qualify as primary beneficiaries for those entities, we have not consolidated our investments in those entities for the periods ending ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

Based on our analyses, we determined the Westwood Funds®, InvestCloud, Vista, and Zarvona Energy Fund GP (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 and (iii) are not structured with disproportionate voting rights and are VOEs. As we do not own controlling financial interests in those entities, we have not consolidated our investments in those entities for the periods ending ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

We recognized fee revenue from the Westwood VIEs and Westwood VOEs as follows (in millions):
Three Months Ended Six Months Ended
June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022
Fee Revenues $ 7.9 $ 5.1 $ 15.9 $ 10.8


	Three Months Ended
	March 31, 2024		March 31, 2023
Fee Revenues	$	7.8	$	8.0

The following table displays the AUM and the risk of loss in each vehicle (in millions):

As of June 30, 2023

Assets
Under
Management

Corporate
Investment

Amount at Risk

As of March 31, 2024

Assets
Under
Management

Corporate
Investment

Amount at Risk

VIEs/VOEs:

Westwood Funds®

4,169

—

Common Trust Funds

634

—

Private Funds

11.4

Private Funds

Private Equity

—

0.3

All other assets:

Wealth Management

3,204

Wealth Management

Institutional

6,969

Total Assets Under Management

14,989

Total Assets Under Management

14. RELATED PARTY TRANSACTIONS

The Company engages in transactions with its affiliates in the ordinary course of business. Westwood Management provides investment advisory services to 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

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

schedules applied to AUM. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and March 31, 2023, ~~and June 30, 2022,~~ the Company earned immaterial fees from the affiliated funds.

One of our directors ~~serves~~served as a consultant to the Company under a consulting agreement. We recorded immaterial expenses related to this agreement for the three ~~and six~~ months ended ~~June 30, 2023 and June 30, 2022.~~March 31, 2023.

15. SUBSEQUENT EVENTS

Dividend Declared

On ~~August 2, 2023,~~May 1, 2024, the Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock payable on ~~October 2, 2023~~July 1, 2024 to stockholders of record on ~~September 1, 2023.~~

June 3, 2024.

1615

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,” “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, ~~2022~~2023 and those risks set forth below:

•the composition and market value of our AUM and AUA;

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

•risks associated with actions of activist stockholders;

•distributions to our common stockholders have included and may in the future include a return of capital;

•inclusion of foreign company investments in our AUM;

•regulations adversely affecting the financial services industry;

•our ability to maintain effective cyber security;

•litigation risks;

•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 perform operational tasks;

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

•our dependence on the operations and funds of our subsidiaries;

•our ability to maintain effective information systems;

•our ability to prevent misuse of assets and information in the possession of our employees and third-party vendors, which could damage our reputation and result in costly litigation and liability for our clients and us;

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

•competition in the investment management industry;

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

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

•we have made and may continue to make business combinations as a part of our business strategy, which may present certain risks and uncertainties;

•our relationships with investment consulting firms;

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

•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; and

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

1716

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., Westwood Advisors, L.L.C., and Salient Advisors, LP ~~and Broadmark Asset Management LLC~~ (each of which is an SEC-registered investment advisor ~~("RIA")~~ and referred to hereinafter together as “Westwood Management”) and Westwood Trust.

Westwood Management provides investment advisory services to institutional investors, a family of mutual funds called the Westwood Funds®, other mutual funds, individuals 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.

~~In January 2023 we acquired an additional 32% interest in Broadmark for $1.6 million, increasing our ownership~~ Our revenues are generally derived from fees based on a percentage of Broadmark to approximately 80%. Broadmark's tactical absolute return strategies offer us an established client base and provide future growth potential. Prior to the Broadmark acquisition, we had a $2.4 million equity method investment in Broadmark, which we derecognized upon acquiring a controlling interest in January 2023.AUM.

Our revenues are generally derived from fees based on a percentage of AUM and AUA, and Westwood Management and Westwood Trust collectively had AUM of approximately ~~$15.0~~$16.2 billion and AUA of approximately ~~$1.2~~$1.0 billion at ~~June 30, 2023.~~March 31, 2024. We have established a track record of delivering competitive, risk-adjusted returns for our clients.

With respect to most of our ~~client~~ AUM, we utilize a “value” investment style focused on achieving superior long-term, risk-adjusted returns by investing in companies with high levels of free cash flow, improving returns on equity and strengthening balance sheets that are well positioned for growth but whose value is not fully recognized in the marketplace. This investment approach is designed to limit downside during unfavorable periods and provide superior real returns over the long term. Our investment teams have significant industry ~~experience, with~~experience. Our investment team members have an average investment experience of over twenty ~~years of investment experience among members.~~years.

We have built a foundation in terms of personnel and infrastructure to support a much larger business and we have developed investment strategies that we believe will be sought after within our target institutional, wealth management and intermediary markets. Developing new products and growing the organization has resulted in our incurring expenses that, in some cases, have not yet generated significant offsetting revenues. We believe that investors will recognize the potential for new revenue streams inherent in these products and services; however, there is no guarantee that they will occur.

Revenues

We derive our revenues from investment advisory fees, trust fees and other revenues. Our advisory fees are generated by Westwood Management, which manages client accounts under investment advisory and sub-advisory agreements. Advisory fees are typically calculated based on a percentage of AUM and AUA and are paid in accordance with the terms of the agreements. Advisory fees are paid quarterly in advance based on AUM on the last day of the preceding quarter, quarterly in arrears based on AUM on the last day of the quarter just ended or are based on a daily or monthly analysis of AUM for the stated period. We recognize advisory fee revenues as services are rendered. 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 revenue for performance-based fees at the end of the measurement period. 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 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 AUM. Westwood Trust also provides trust services to a small number of clients on a fixed fee basis. Trust fees are primarily calculated quarterly in arrears based on a daily average of AUM for the quarter. 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 contain no deferred advisory fee revenues.

Our other revenues primarily consist of investment income from seed money investments into new investment strategies.

Employee Compensation and Benefits

Employee compensation and benefits costs generally consist of salaries, sales commissions, incentive compensation, stock-based compensation expense and benefits.

Sales and Marketing

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

Westwood Mutual Funds

Expenses for Westwood mutual funds relate to our marketing, distribution and administration of the Westwood Funds®.

Information Technology

Information technology expenses include 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 sub-advisory fees, audit, legal and other professional services.

General and Administrative

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

(Gain) loss from change in fair value of contingent consideration

(Gain) loss from change in fair value of contingent consideration consists of fair value adjustments related to contingent consideration from our 2022 acquisition of Salient.

Acquisition ~~Expense~~expenses

Acquisition ~~expense consists~~expenses consist of costs related to ~~our 2022 acquisition of Salient.~~the Salient Acquisition.

Net ~~change~~Change in ~~unrealized appreciation (depreciation)~~Unrealized Appreciation (Depreciation) on Private Investments

Net change in unrealized appreciation (depreciation) on private investments includes changes in the value of our private equity investments.

Net Investment Income

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

Other Income

Other income primarily consists of income from the sublease of a portion of our corporate ~~offices.~~offices and the receipt of life insurance proceeds.

Firm-wide Assets Under Management

Firm-wide assets under management of ~~$16.2~~$17.2 billion at ~~June 30, 2023~~March 31, 2024 consisted of ~~$15.0~~$16.2 billion of AUM and ~~$1.2~~$1.0 billion of AUA.

AUM increased ~~$2.9~~$1.2 billion to $16.2 billion at March 31, 2024 compared with $15.0 billion at ~~June 30, 2023 compared with $12.1 billion at June 30, 2022.~~March 31, 2023. The average of beginning and ending AUM for the ~~second~~first quarter of ~~2023~~2024 was ~~$15.0~~$15.8 billion compared to ~~$13.0~~$14.9 billion for the ~~second~~first quarter of ~~2022.~~

2023.

The following table displays AUM as of ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in millions):


		As of June 30,
		2023		2022		Change
		As of March 31,
		As of March 31,
		As of March 31,
		2024
		2024
		2024										2023				Change
Institutional(1)	Institutional(1)	$	6,969	$	5,889	18	%	Institutional(1)	$	7,742	$		$	7,039	10		10	%
Wealth Management(2)	Wealth Management(2)	3,851		3,676		5
Mutual Funds(3)	Mutual Funds(3)	4,169		2,570		62
Total AUM(4)	Total AUM(4)	$	14,989	$	12,135	24	%	Total AUM(4)	$	16,150	$		$	14,951	8		8	%

(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) sub-advisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including collective investment trusts; and (iv) managed account relationships with brokerage firms and other RIAs 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. provides advisory services to high net worth individuals. Investment sub-advisory services are provided for the common trust funds by Westwood Management and unaffiliated sub-advisors. For certain assets in this category Westwood Trust provides limited custodial services for a minimal or no fee, viewing these assets as potentially converting to fee-generating managed assets in the future.

(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, institutional investors and wealth management accounts.

(4)AUM excludes ~~$1.2~~$1.0 billion and ~~$246 million~~$1.2 billion of AUA as of ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively, related to our model portfolios for which we provide investment advice on a fee basis without having investment management authority.

Roll-Forward of Assets Under Management


		Three Months Ended June 30,				Six Months Ended June 30,
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
(in millions)
(in millions)
(in millions)	(in millions)	2023		2022		2023		2022
Institutional	Institutional
Institutional
Institutional
Beginning of period assets*
Beginning of period assets*
Beginning of period assets*	Beginning of period assets*	$	7,039	$	6,716	$	6,968	$	7,037
Inflows	Inflows	109		36		239		115
Inflows
Inflows
Outflows	Outflows	(415)		(105)		(576)		(260)
Outflows
Outflows
Net client flows
Net client flows
Net client flows	Net client flows	(306)		(69)		(337)		(145)

Market appreciation (depreciation)	Market appreciation (depreciation)	236		(758)		338		(1,003)

Market appreciation (depreciation)

Market appreciation (depreciation)
Net change	Net change	(70)		(827)		1		(1,148)
Net change
Net change
End of period assets
End of period assets
End of period assets	End of period assets	$	6,969	$	5,889	$	6,969	$	5,889

Wealth Management	Wealth Management

Wealth Management

Wealth Management
Beginning of period assets
Beginning of period assets
Beginning of period assets	Beginning of period assets	$	3,765	$	4,181	$	3,666	$	4,420
Inflows	Inflows	88		87		178		196
Inflows
Inflows
Outflows
Outflows
Outflows	Outflows	(146)		(143)		(276)		(289)
Net client flows	Net client flows	(58)		(56)		(98)		(93)
Net client flows
Net client flows
Market appreciation (depreciation)
Market appreciation (depreciation)
Market appreciation (depreciation)	Market appreciation (depreciation)	144		(449)		283		(651)
Net change	Net change	86		(505)		185		(744)
Net change
Net change
End of period assets
End of period assets
End of period assets	End of period assets	$	3,851	$	3,676	$	3,851	$	3,676

Mutual Funds	Mutual Funds

Mutual Funds

Mutual Funds
Beginning of period assets*
Beginning of period assets*
Beginning of period assets*	Beginning of period assets*	$	4,147	$	2,957	$	4,145	$	3,046
Inflows	Inflows	218		142		522		410
Inflows
Inflows
Outflows
Outflows
Outflows	Outflows	(336)		(200)		(714)		(418)
Net client flows	Net client flows	(118)		(58)		(192)		(8)
Net client flows
Net client flows
Market appreciation (depreciation)
Market appreciation (depreciation)
Market appreciation (depreciation)	Market appreciation (depreciation)	140		(329)		216		(468)
Net change	Net change	22		(387)		24		(476)
Net change
Net change
End of period assets
End of period assets
End of period assets	End of period assets	$	4,169	$	2,570	$	4,169	$	2,570

Total AUM	Total AUM

Total AUM

Total AUM
Beginning of period assets
Beginning of period assets
Beginning of period assets	Beginning of period assets	$	14,951	$	13,854	$	14,779	$	14,503
Inflows	Inflows	415		265		939		721
Inflows
Inflows
Outflows	Outflows	(897)		(448)		(1,566)		(967)
Outflows
Outflows
Net client flows
Net client flows
Net client flows	Net client flows	(482)		(183)		(627)		(246)

Market appreciation (depreciation)	Market appreciation (depreciation)	520		(1,536)		837		(2,122)

Market appreciation (depreciation)

Market appreciation (depreciation)
Net change
Net change
Net change	Net change	38		(1,719)		210		(2,368)
End of period assets	End of period assets	$	14,989	$	12,135	$	14,989	$	12,135
End of period assets
End of period assets

* Certain assets under management acquired from Salient were reclassified from Mutual Funds to Institutional as of December 31, 2022 to be consistent with the classification of existing assets.

Three months ended ~~June 30, 2023~~March 31, 2024 compared to the three months ended ~~June 30, 2022~~March 31, 2023

The change in AUM for the three months ended ~~June 30, 2023~~March 31, 2024 was due to market appreciation of ~~$0.5 billion and net outflows of $0.5 billion. Net outflows were primarily related to our Income Opportunity strategy.~~

~~The $1.7 billion decrease in AUM for the three months ended June 30, 2022 was due to market depreciation of $1.5 billion and net outflows of $0.2 billion. Net outflows~~ ~~were primarily related to our SmallCap strategy.~~

~~Six months ended June 30, 2023 compared to the six months ended June 30, 2022~~

The $0.2 billion increase in AUM for the six months ended June 30, 2023 was due to market appreciation of $0.8 billion and net outflows of $0.6 billion. Net outflows were primarily related to our Income Opportunity and Quality AllCap strategies.

~~The $2.4 billion decrease in AUM for the six months ended June 30, 2022 was due to market depreciation of $2.1~~$0.9 billion and net outflows of $0.2 billion. Net outflows were primarily related to our ~~SmallCap~~LargeCap Value strategy.

The $0.2 billion increase in AUM for the three months ended March 31, 2023 was due to market appreciation of $0.3 billion and ~~Enhanced Balance strategies.~~net outflows of $0.1 billion. Net outflows were primarily related to our Quality AllCap strategy.

Roll-Forward of Assets Under Advisement

~~AUA has historically been disclosed in totality due to its relative insignificance to our business. However, following our 2022 acquisition of~~ ~~Salient's asset management business, AUA is now a more meaningful component of our business. Accordingly, we will present further AUA details going forward:~~


		Three Months Ended June 30,		Six Months Ended June 30,
	Three Months Ended March 31,								Three Months Ended March 31,
(in millions)	(in millions)	2023		2023		(in millions)	2024	2023
Assets Under Advisement	Assets Under Advisement
Beginning of period assets
Beginning of period assets
Beginning of period assets	Beginning of period assets	$	1,180	$	1,255
Inflows	Inflows	38		84
Outflows	Outflows	(94)		(189)
Net client flows	Net client flows	(56)		(105)
Market appreciation (depreciation)	Market appreciation (depreciation)	46		20
Net change	Net change	(10)		(85)
End of period assets	End of period assets	$	1,170	$	1,170

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 of Comprehensive Income ~~(Loss)~~ contained in our Condensed Consolidated Financial Statements and should be read in conjunction with those statements included elsewhere in this report.

2220


		Three Months Ended
		Three Months Ended						Six Months Ended
		Three Months Ended
		June 30,						June 30,
		2023		2022		Change		2023		2022		Change
		Three Months Ended
		March 31,
		March 31,
		March 31,
		2024
		2024
		2024
Revenues:
Revenues:
Revenues:	Revenues:
Advisory fees: asset-based	Advisory fees: asset-based	$	16,799	$	10,980	53	%	$	33,832	$	22,770	49	%
Advisory fees: asset-based
Advisory fees: asset-based
Advisory fees: performance-based	Advisory fees: performance-based	—		—		NM		555		—		NM
Advisory fees: performance-based
Advisory fees: performance-based
Trust fees: asset-based
Trust fees: asset-based
Trust fees: asset-based	Trust fees: asset-based	5,024		5,365		(6)		10,055		11,080		(9)

Other, net	Other, net	122		(742)		(116)		230		(1,031)		(122)

Other, net

Other, net
Total revenues
Total revenues
Total revenues	Total revenues	21,945		15,603		41		44,672		32,819		36
Expenses:	Expenses:
Expenses:
Expenses:
Employee compensation and benefits
Employee compensation and benefits
Employee compensation and benefits	Employee compensation and benefits	13,688		9,133		50		27,890		19,467		43
Sales and marketing	Sales and marketing	764		509		50		1,504		991		52
Sales and marketing
Sales and marketing
Westwood mutual funds
Westwood mutual funds
Westwood mutual funds	Westwood mutual funds	746		445		68		1,478		1,041		42
Information technology	Information technology	2,566		1,847		39		4,949		3,676		35
Information technology
Information technology
Professional services
Professional services
Professional services	Professional services	1,355		832		63		2,884		2,352		23
General and administrative	General and administrative	3,235		2,348		38		6,281		4,388		43
General and administrative
General and administrative
(Gain) loss from change in fair value of contingent consideration	(Gain) loss from change in fair value of contingent consideration	(4,078)		—		NM		(5,138)		—		NM
(Gain) loss from change in fair value of contingent consideration
(Gain) loss from change in fair value of contingent consideration
Acquisition expenses
Acquisition expenses
Acquisition expenses	Acquisition expenses	—		887		NM		209		887		(76)

Total expenses	Total expenses	18,276		16,001		14		40,057		32,802		22
Net operating income (loss)		3,669		(398)				4,615		17

Net change in unrealized appreciation (depreciation) on private investments		24		(299)		(108)		24		(262)		(109)
Total expenses

Total expenses
Net operating income
Net operating income
Net operating income

Net investment income

Net investment income

Net investment income	Net investment income	211		5		4,120		383		(11)		(3,582)
Other income	Other income	239		234		2		611		392		56
Other income
Other income

Income (loss) before income taxes		4,143		(458)				5,633		136
Income before income taxes

Income before income taxes

Income before income taxes
Income tax provision	Income tax provision	1,244		(80)		(1655)		2,020		464		335
Net income (loss)		$	2,899	$	(378)	(867)	%	$	3,613	$	(328)	(1,202)	%
Income tax provision
Income tax provision
Net income
Net income
Net income
Less: Comprehensive income (loss) attributable to noncontrolling interest	Less: Comprehensive income (loss) attributable to noncontrolling interest	4		—		NM		25		—		NM
Comprehensive income (loss) attributable to Westwood Holdings Group, Inc.		$	2,895	$	(378)	(866)	%	$	3,588	$	(328)	(1,194)	%
Less: Comprehensive income (loss) attributable to noncontrolling interest
Less: Comprehensive income (loss) attributable to noncontrolling interest
Comprehensive income attributable to Westwood Holdings Group, Inc.
Comprehensive income attributable to Westwood Holdings Group, Inc.
Comprehensive income attributable to Westwood Holdings Group, Inc.

_________________________

NM Not meaningful

Three months ended ~~June 30, 2023~~March 31, 2024 compared to three months ended ~~June 30, 2022~~March 31, 2023

Total revenues. Total revenues ~~increased $6.3 million, or 41%, to $21.9 million~~ for the three months ended ~~June 30, 2023 compared with $15.6 million~~March 31, 2024 were comparable to revenues for the three months ended ~~June 30, 2022. Asset-based advisory fees increased $5.8 million, or 53%, reflecting higher average AUM following our 2022 acquisition of Salient.~~

~~Employee compensation and benefits.~~ ~~Employee compensation and benefits increased $4.6 million to $13.7 million compared with $9.1 million for 2022 due to additional headcount resulting from the Salient acquisition.~~

~~Information Technology.~~ ~~Information technology expenses increased $0.8 million, or 39%, to $2.6 million compared with $1.8 million for 2022 primarily due to additional software licenses and investment research expenses.~~

~~Professional services.~~ ~~Professional services increased $0.6 million, or 63%, to $1.4 million compared with $0.8 million for 2022 primarily due to an increase in legal and advisory costs.~~

~~General and Administrative.~~ General and administrative expenses increased $0.9 million, or 38%, to $3.2 million compared with $2.3 million for 2022 primarily due to increased intangible asset amortization following the Salient acquisition.March 31, 2023.

(Gain) loss from change in fair value of contingent consideration. We recorded a gain of ~~approximately $4.1~~$2.9 million upon the

remeasurement of contingent consideration of the ~~2022~~ Salient ~~acquisition.~~Acquisition primarily due to changes in growth projections and

volatility assumptions.

Income tax provision. Our effective tax rate differed from the 21% statutory rate for the ~~second~~first quarter of ~~2023 primarily due to permanent differences between book and tax restricted stock expense based on a decrease in our stock price between the restricted stock grant and vesting dates.~~

~~Six months ended June 30, 2023 compared to six months ended June 30, 2022~~

~~Total revenues~~. Total revenues increased $11.9 million, or 36%, to $44.7 million for the six months ended June 30, 2023 compared with $32.8 million for the six months ended June 30, 2022. Asset-based advisory fees increased $11.0 million, or 49%, reflecting higher average AUM following our 2022 acquisition of Salient. Trust fees decreased $1.0 million, or 9%, primarily related to lower average AUM.

~~Employee compensation and benefits.~~ ~~Employee compensation and benefits increased $8.4 million to $27.9 million compared with $19.5 million for 2022 due to additional headcount resulting from the Salient acquisition.~~

~~Sales and marketing.~~ ~~Sales and marketing expenses increased $0.5 million, or 52%, to $1.5 million compared with $1.0 million for 2022 due to higher product placement fees.~~

~~Information Technology.~~ ~~Information technology expenses increased $1.2 million, or 35%, to $4.9 million compared with $3.7 million for 2022 primarily due to additional software licenses and investment research expenses.~~

~~General and Administrative.~~ General and administrative expenses increased $1.9 million, or 43%, to $6.3 million compared with $4.4 million for 2022 primarily due to increased intangible asset amortization following the Salient acquisition.

~~(Gain) loss from change in fair value of contingent consideration.~~ ~~We recorded a gain of approximately $5.2 million upon the remeasurement of contingent consideration of the 2022 Salient acquisition.~~

~~Income tax provision. The effective tax rate for the six months ended June 30, 2023 differed from the 21% statutory rate for 2023~~2024 primarily due to permanent differences between book and tax restricted stock expense based on a decrease in our stock price between the restricted stock grant and vesting dates.

Supplemental Financial Information

As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic EPS. We provide these measures in addition to, not as a substitute for, comprehensive income ~~(loss)~~ attributable to Westwood Holdings Group, Inc. and earnings ~~(loss)~~ per share, which are reported on a GAAP basis. Our management and Board of Directors review Economic Earnings and Economic EPS to evaluate our ongoing performance, allocate resources, and review our dividend policy. We believe that these non-GAAP performance measures, while not substitutes for GAAP comprehensive income ~~(loss)~~ attributable to Westwood Holdings Group, Inc. or earnings ~~(loss)~~ 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 these non-GAAP measures without also considering financial information prepared in accordance with GAAP.

We define Economic Earnings as comprehensive income ~~(loss)~~ attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, amortization of intangible assets and deferred taxes related to goodwill. Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement. Although gains and losses from changes in the fair value of contingent consideration are non-cash, we do not add or subtract those back when calculating Economic Earnings because gains and losses on changes in the fair value of contingent consideration are considered regular following an acquisition. 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 (in thousands, except share and per share amounts) provide a reconciliation of ~~net~~comprehensive income attributable to Westwood Holdings Group, Inc. to Economic Earnings and Economic Earnings by ~~segment (in thousands, except share and per share amounts):~~segment. We have included the tax impact of adjustments for all periods presented.


		Three Months Ended June 30,				Change				Six Months Ended June 30,
		2023		2022				2023				2022				Change
Comprehensive income (loss) attributable to Westwood Holdings Group, Inc.		$	2,895	$	(378)			(866)	%			$	3,588			$	(328)			(1,194)	%
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Comprehensive income attributable to Westwood Holdings Group, Inc.
Comprehensive income attributable to Westwood Holdings Group, Inc.
Comprehensive income attributable to Westwood Holdings Group, Inc.
Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expense	Stock-based compensation expense	1,624		1,521		7				3,372				2,901				16

Intangible amortization	Intangible amortization	1,042		406		157				2,063				811				154

Intangible amortization

Intangible amortization

Tax benefit from goodwill amortization	Tax benefit from goodwill amortization	125		59		112				250				118				112

Tax benefit from goodwill amortization

Tax benefit from goodwill amortization
Tax impacts of adjustments to GAAP comprehensive income
Tax impacts of adjustments to GAAP comprehensive income
Tax impacts of adjustments to GAAP comprehensive income
Economic Earnings	Economic Earnings	$	5,686	$	1,608	254	%			$	9,273			$	3,502			165	%
Earnings (loss) per share		$	0.36	$	(0.05)	(820)	%			$	0.45			$	(0.04)			(1225)	%
Economic Earnings
Economic Earnings
Earnings per share
Earnings per share
Earnings per share
Stock-based compensation expense
Stock-based compensation expense
Stock-based compensation expense	Stock-based compensation expense	0.19		0.19		0				0.41				0.37				11

Intangible amortization	Intangible amortization	0.13		0.05		160				0.26				0.10				160

Intangible amortization

Intangible amortization

Tax benefit from goodwill amortization	Tax benefit from goodwill amortization	0.02		0.01		100				0.03				0.01				200

Tax benefit from goodwill amortization

Tax benefit from goodwill amortization
Tax impacts of adjustments to GAAP comprehensive income
Tax impacts of adjustments to GAAP comprehensive income
Tax impacts of adjustments to GAAP comprehensive income
Economic Earnings per share	Economic Earnings per share	$	0.70	$	0.20	250	%			$	1.15			$	0.44			161	%
Economic Earnings per share
Economic Earnings per share
Diluted weighted average shares outstanding
Diluted weighted average shares outstanding
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	8,131,333		7,944,212						8,050,298				7,904,911

Economic Earnings by Segment:	Economic Earnings by Segment:

Economic Earnings by Segment:

Economic Earnings by Segment:
Advisory
Advisory
Advisory	Advisory	$	4,733	$	3,494	35	%			$	9,740			$	7,838			24	%
Trust	Trust	1,183		839		41				1,665				1,627				2
Trust
Trust
Westwood Holdings
Westwood Holdings
Westwood Holdings	Westwood Holdings	(222)		(2,725)		(92)				(2,124)				(5,963)				(64)
Consolidated	Consolidated	$	5,694	$	1,608	254	%			$	9,281			$	3,502			165	%
Consolidated
Consolidated

Liquidity and Capital Resources

~~We fund~~Historically we have funded our operations and cash requirements with cash generated from operating activities. We may also use cash from operations to pay dividends to our ~~stockholders.~~stockholders or for deferred contingent consideration payments. We had no debt as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022.~~2023. The changes in net cash provided by operating activities generally reflect 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.

We had cash and short-term investments of ~~$38.1~~$46.6 million and ~~$39.2~~$53.1 million as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, respectively. At ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, working capital aggregated ~~$41.0~~$51.9 million and ~~$40.6~~$53.6 million, respectively.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, cash flow ~~used in~~provided by operating activities was ~~$3.9~~$8.1 million, which included net sales of current investments of ~~$7.1~~$12.4 million and a reduction in compensation and benefits payable of ~~$3.3~~$6.6 million. During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, cash flow ~~provided by~~used in operating activities was ~~$12.1~~$3.2 million, which included ~~net sales of $12.4 million of current investments and a $1.9 million change in accounts receivable, partially offset by~~ a reduction in compensation and benefits payable of $5.6 million.

Cash flow used in investing activities during the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 was ~~primarily for~~related to the ~~Broadmark Acquisition.~~acquisition of property and equipment. Cash flow used in investing activities during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was ~~related to purchases of property and equipment.~~primarily for the Broadmark Acquisition.

Cash flows used in financing activities of ~~$3.9~~$2.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023 reflected the payment of dividends and restricted stock returned for the payment of taxes. Cash flows used in financing activities of $5.3 million for the six months ended June 30, 2022 reflected the payment of dividends, treasury stock repurchases and restricted stock returned for the payment of taxes.

Westwood Trust is required to 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 ~~June 30, 2023,~~March 31, 2024, Westwood Trust had approximately ~~$7.9~~$10.2 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, ~~2022.~~2023. 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. 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 ~~June 30, 2023,~~March 31, 2024, there have been no material changes outside of the ordinary course of business to our contractual obligations since December 31, ~~2022.~~2023. 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, ~~2022.~~2023.

Critical and Significant Accounting Policies and Estimates

There have been no significant changes in our critical or significant accounting policies and estimates since December 31, ~~2022.~~2023. 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, ~~2022.~~2023.

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

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, ~~2022.~~2023.

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 ~~June 30, 2023,~~March 31, 2024, there were no 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 employees working remotely did not hinder the execution of our internal control processes and procedures.~~

2724

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Our business and future results may be affected by a number of 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 such forward-looking statements as a result of certain factors, including the risks described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and the risks set forth below.

There have been no material changes to the risk factors previously disclosed in the Form 10-K. You should carefully consider the following risks and the risks included in the Company’s Annual Report on Form 10-K, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. The occurrence of any single risk or any combination of risks could materially and adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock.

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

Our share repurchase program has no expiration date and may be discontinued at any time by the Board of Directors. During the three months ended ~~June 30, 2023,~~March 31, 2024, the Company did not repurchase any shares of our common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the quarter ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

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*						The following financial information from Westwood Holdings Group, Inc.'s Quarterly Report on Form 10-Q for the period ended ~~June 30, 2023,~~March 31, 2024, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022;~~2023; (ii) Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~2022;~~2023; (iii) Condensed Consolidated Statements of Stockholders' Equity; (iv) Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 and ~~2022;~~2023; and (v) Notes to the Condensed Consolidated Financial Statements.

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

* Filed herewith.

** Furnished herewith.

2926

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:

~~August 2, 2023~~May 1, 2024

WESTWOOD HOLDINGS GROUP, INC.

By:

/s/ Brian O. Casey

Brian O. Casey

Chief Executive Officer

By:

/s/ Murray Forbes III

Murray Forbes III

Chief Financial Officer and Treasurer

3027


Three Months Ended June 30, 2022	Advisory		Trust		Other		Total


Canada	$	303	$	—	$	—	$	303

United States	10,677		5,365		(742)		15,300
Total	$	10,980	$	5,365	$	(742)	$	15,603