WESTWOOD HOLDINGS GROUP INC

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, 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 fluctuations in financial markets and in the composition of AUM impact our revenues and results of operations.

Westwood Management is registered with the Securities and Exchange Commission ("SEC") as an investment adviser 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") via 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 managing and/or sub-advising mutual funds, retail and institutional separately-managed accounts.

Acquisition of Controlling Interest in Asset Management Business of Salient Partners, L.P.

On November 18, 2022, we completed our acquisition (the "Salient Acquisition") of the asset management business of Salient Partners, L.P., a Delaware limited partnership (“Salient Partners”).

Salient Partners is a Houston-based real asset and investment firm that offered a suite of strategies focused on energy and infrastructure, real estate and tactical alternative investments. Westwood purchased substantially all of the properties, rights and assets and assumed certain liabilities of Salient Partners. Westwood acquired Salient Partners’ four distinct investment capabilities: Energy Infrastructure, Tactical Absolute Return, Real Estate, and Private Investments.

As part of the Salient Acquisition, we also acquired Salient Capital, L.P. ("SCLP") and Salient Advisors, L.P. ("Salient Advisors"). SCLP is an SEC-registered broker-dealer and Financial Industry Regulatory Authority ("FINRA") member and serves as a sub-placement agent for private placements. Salient Advisors is an SEC registered investment adviser, a Commodity Futures Trading Commission ("CFTC") registered Commodity Pool Operator ("CPO") and a National Futures Association ("NFA") member. Salient Advisors is an advisor to the Westwood Salient Tactical Plus Fund, which is subadvised by Broadmark.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation and Principles of Consolidation

The accompanying Consolidated Financial Statements include the accounts of Westwood and its subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.

We assess each legal entity that we manage to determine whether consolidation is appropriate at the onset of the relationship. We first determine whether the entity is a variable interest entity (“VIE”), or a voting interest entity (“VOE”), under GAAP and whether we have a controlling financial interest in the entity. Assessing whether or not an entity is a VOE or VIE and if it requires consolidation involves judgment and analysis. Factors considered in this assessment include, but are not limited to, the legal organization of the entity, our equity ownership and contractual involvement with the entity and any related party or de facto agent implications of our involvement with the entity. We reconsider whether entities are a VIE or VOE whenever contractual arrangements change, the entity receives additional equity or returns equity to its investors or changes in facts and circumstances occur that change investors’ abilities to direct the activities of the entity.

A VIE is an entity in which (i) the total equity investment at risk is not sufficient to enable the entity to finance its activities without subordinated financial support, (ii) the at-risk equity holders, as a group, lack the characteristics of a controlling financial interest or (iii) the entity is structured with disproportionate voting rights, and substantially all of the activities are conducted on behalf of an investor with disproportionately few voting rights. That is, the at-risk equity holders do not have the obligation to absorb significant losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact the entity’s economic performance. An enterprise must consolidate all VIEs of which it is the primary beneficiary. We determine if a sponsored investment meets the definition of a VIE by considering whether the fund’s equity investment at risk is sufficient to finance its activities without additional subordinated financial support and whether the fund’s at-risk equity holders absorb any losses, have the right to receive residual returns and have the right to direct the activities of the entity most responsible for the entity’s economic performance. The primary beneficiary of a VIE is defined as the party that, considering the involvement of related parties and de facto agents, has (i) the power to direct the activities of the VIE that most significantly affect its economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. This evaluation is updated on a continuing basis.

A VOE is an entity that is outside the scope of the guidance for VIEs. Consolidation of a VOE is required when a reporting entity owns a controlling financial interest in a VOE. Ownership of a majority of the voting interests is the usual condition for a controlling financial interest.

We evaluated (i) our relationship as sponsor of the Common Trust Funds (“CTFs”) and managing member of the private equity funds Westwood Hospitality, 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 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, the Company is not exposed to a majority of the economics of those entities and does not qualify as primary beneficiaries for those entities. We have not consolidated our investments in those entities for the periods ending December 31, 2023 and 2022.

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 December 31, 2023 and 2022.

Use of Estimates

The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses in the financial statements. Such estimates include, but are not limited to, the Company's estimates in connection with values of long lived assets, provision for income tax, goodwill, intangible assets, contingent consideration and accrued expenses. Actual results could differ significantly from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of money market accounts and other short-term, highly liquid investments with maturities of three months or less, other than pooled investment vehicles that are considered investments. We maintain some cash and cash equivalents balances with financial institutions that are in excess of Federal Deposit Insurance Corporation insurance limits. The Company has not experienced losses on uninsured cash accounts, which are held at large, well-capitalized financial institutions.

Accounts Receivable

Accounts receivable represents balances arising from services provided to customers and are recorded on an accrual basis, net of any allowance for credit losses. Accounts receivable are written off when they are determined to be uncollectible. Any allowance for doubtful accounts is estimated based on the Company’s historical amounts written off, existing conditions in the industry, and the financial stability of the customer. The majority of our accounts receivable balances consist of advisory and trust fees receivable from customers that we believe are, and have experienced to be, fully collectible. Accordingly, our Consolidated Financial Statements include neither an allowance for credit losses, nor provision for credit losses.

Investments

Investments that are measured at fair market value are classified as trading securities and are carried at quoted market values on the accompanying Consolidated Balance Sheets. Net unrealized holding gains or losses on investments classified as trading securities are reflected as a component of other revenues. We measure realized gains and losses on investments using the specific identification method.

For an investment 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. The Company will reassess whether such an investment qualifies for the measurement alternative at each reporting period. In evaluating an investment for impairment or observable price changes, we will use inputs including recent financing events, as well as other available information regarding the investee's historical and forecasted performance.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We determined the estimated fair values of our financial instruments using available information. The fair value amounts discussed in Notes 6 “Investments” and 7 “Fair Value Measurements” are not necessarily indicative of either the amounts realizable upon disposition of these instruments or of our intent or ability to dispose of these assets. The estimated fair value of cash and cash equivalents, included in Level 1 of the fair value hierarchy as discussed in Note 7 "Fair Value Measurements", approximates their carrying value due to their short-term maturities. The carrying amount of investments designated as “trading” securities, primarily U.S. Government securities, money market funds, equity funds, equities and exchange-traded bond funds, equals fair value based on prices quoted in active markets and, with respect to funds, the reported net asset value (“NAV”) of the shares held. Market values of our money market holdings generally do not fluctuate.

Our investments in InvestCloud and Vista are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes.

Our investment in Westwood Hospitality is measured at fair value using NAV as a practical expedient.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying liabilities assumed at the date of acquisition. Goodwill is tested at least annually for impairment.

We test more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include declines in revenues, earnings or cash flows, or the development of a material adverse change in the business climate. We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, which is referred to as a component. We have identifiedtwo reporting units, which are consistent with our reporting segments: Advisory and Trust. The Company is not required to calculate the fair value of a reporting unit unless we determine that it is more likely than not that its fair value is less than the carrying amount. We assess goodwill for impairment using either a qualitative or quantitative assessment. The qualitative assessment includes consideration of the current trends in the industry in which we operate, macroeconomic conditions and recent financial performance of our reporting units. The quantitative analysis requires a comparison of each reporting unit’s carrying value to the fair value of the respective unit. An impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The fair value of each reporting unit is estimated using a market multiple approach and an income approach.

We completed our most recent annual goodwill impairment assessment during the third quarter of 2023, and determined that no goodwill impairment related to the Advisory and Trust segments was required. There was no goodwill impairment in either segment during the years ended December 31, 2023, 2022 or 2021.

Our intangible assets represent the acquisition date fair value of the acquired client relationships, trade names, non-compete agreements and the cost of internally-developed software, each of which is reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition. We periodically review our intangible assets for events or circumstances that would indicate impairment. See Note 11 “Goodwill and Other Intangible Assets.”

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of furniture and equipment is provided over the estimated useful lives of the assets (from 3 to 7 years), and depreciation on leasehold improvements is provided over thelesser of the estimated useful life or lease term using the straight-line method. We capitalize leasehold improvements, furniture and fixtures, computer hardware and most office equipment purchases. We include depreciation in the “General and administrative” line on our Consolidated Statements of Comprehensive Income (Loss).

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 money investments into net investment strategies. The "Other, net” revenues on our 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 Consolidated Balance Sheets. Our seed money investments were $3.0 million and $7.3 million at December 31, 2023 and 2022, respectively. Advisory and Trust fees are calculated based on a percentage of AUM and AUA, and the performance obligation is realized over the then-current calendar quarter. Once clients receive our investment advisory services we have an enforceable right to payment.

Incremental costs to obtain a contract are eligible to be capitalized if the costs are expected to be recovered over the service period. We incur certain incremental costs in obtaining new business and continually evaluate whether costs should be capitalized and amortized over the expected period of benefit of the asset. Certain costs used to fulfill a contract such as the distribution services utilized to sell our Westwood Funds® are expensed as incurred. We recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.

Stock-Based Compensation

We have issued restricted stock to certain U.S. employees and Board of Directors (the "Board") in accordance with our Ninth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan (the “Plan”).

Stock-based compensation expense reflects the fair value of stock-based awards measured at grant date and is recognized over the relevant service period. We expense the fair value of stock-based compensation awards granted to our employees and directors in our Consolidated Financial Statements on a straight-line basis over the period that services are required to be provided in exchange for the award (“requisite service period”), which is typically the period over which the award vests. Stock-based compensation is recognized only for awards that vest. We measure the fair value of compensation cost related to restricted stock awards based on the closing market price of our common stock on the grant date. For performance-based share awards, we assess actual performance versus the predetermined performance goals and record compensation expense once we conclude it is probable that we will meet the performance goals required to vest the applicable performance-based awards. We account for restricted stock forfeitures as they occur.

Income Taxes

We file a U. S. federal income tax return as a consolidated group for Westwood and its U.S.-based subsidiaries. Deferred income tax assets and liabilities are determined based on temporary differences between the financial statements and income tax bases of assets and liabilities as measured at enacted income tax rates.

Deferred income tax expense is generally the result of changes in deferred tax assets and liabilities. Deferred taxes relate primarily to incentive compensation and stock-based compensation expense. We record net deferred tax assets to the extent we believe such assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. In the event we were to determine that we would not be able to realize our deferred income tax assets in the future, we would record a valuation allowance. No such valuation allowance has been recorded in our Consolidated Financial Statements.

We account for uncertain tax positions by recognizing the impact of a tax position in our Consolidated Financial Statements when we believe it is more likely than not that the tax position would not be sustained upon examination by the appropriate tax authority based on the merits of the position. We include penalties and interest on income-based taxes, if any, in the “General and administrative” line on our Consolidated Statements of Comprehensive Income (Loss). See Note 9 “Income Taxes.”

Leases

We determine if an arrangement contains a lease at inception, and leases are classified as either operating or finance leases at the lease commencement date. An arrangement contains a lease if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in exchange for consideration.

Right-of-use ("ROU") assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we generally use our estimated incremental borrowing rate at commencement date to determine the present value of lease payments. When readily determinable, we use the rate implicit in the lease.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Lease expense for operating leases and short-term leases is recognized on a straight-line basis over the lease term. Expenses associated with operating leases are recorded in “General and administrative” expenses on our Consolidated Statements of Comprehensive Income (Loss). Short-term leases with a term of 12 months or less are not capitalized.

Business Combinations

In allocating the purchase price of a business combination, the Company records all assets acquired and liabilities assumed at fair value, with the excess of the purchase price over the aggregate fair values recorded as goodwill. The purchase price of an acquisition is allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values as of the date of acquisition. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The fair value assigned to identifiable intangible assets acquired is based on estimates and assumptions made by management at the time of the acquisition. The Company adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date as it obtains more information as to facts and circumstances existing as of the acquisition date. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

The acquired client relationships, trade names and non-compete agreements are subject to fair value measurements based primarily on significant inputs not observable in the market and thus represent level 3 measurements. The valuation of an acquired client relationship utilizes an income approach, which provides an estimate of the fair value of an asset based on discounted cash flows and management estimates, including the estimated growth associated with existing clients, market growth and client attrition. The valuation of acquired trade names uses a relief from royalty method in which the fair value of the intangible asset is estimated to be the present value of royalties saved because the Company owns the intangible asset. Revenue projections and estimated useful lives are used in estimating the fair value of the trade names. The non-compete agreements are calculated using the differential cash flow method (with-or-without method), which utilizes the probability of certain employees competing with the Company and revenue projections to calculate the valuation of non-competition agreements.

When an acquisition includes future contingent consideration on achieving certain milestones, the Company estimates the earn-out fair value using Monte Carlo simulation models. The Monte Carlo simulations considered assumptions including revenue volatility, risk free rates, discount rates and payment 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 or projected payment dates may result in higher or lower fair value measurements. Fluctuations in any of the inputs may result in a significantly lower or higher fair value measurement. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date, and the fair value of the contingent consideration is remeasured at each subsequent reporting period with any change in fair value recognized as income or expense within the Consolidated Statements of Comprehensive Income (Loss).

Equity Method Investments

Investments in entities where we have the ability to exercise significant influence, but do not control, are accounted for under the equity method of accounting and are included in "Equity method investments" on our Consolidated Balance Sheets. Significant influence typically exists if we have a 20% to 50% ownership interest in the investee. We evaluate our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

The Company’s proportionate share of the net income or loss of equity method investments is included in "Other income" on the Consolidated Statements of Comprehensive Income (Loss), and any dividends received reduce the carrying value of the investment.

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.

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 period 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 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):

Westwood recognized approximately $1.0 million of a noncontrolling interest in a consolidated 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 total purchase price that resulted in the recognition of goodwill. Goodwill arising from the Broadmark Acquisition is not expected to be deductible for tax purposes.

For the year ended December 31, 2023, the Company has included $4.4 million of revenue and $4.1 million of net income related to Broadmark in its Consolidated Statements of Comprehensive Income (Loss).

Pro Forma Financial Information

The following unaudited pro forma results of operations for the years ended December 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 historical results that would have been obtained had the Broadmark Acquisition actually occurred on that date, nor of results that may be obtained in the future.

Salient

Westwood completed the Salient Acquisition on November 18, 2022. The total consideration recorded for accounting purposes consisted of (i) $33.4 million in cash (net of cash acquired) and (ii) estimated contingent consideration of $12.9 million.

The Salient Acquisition was accounted for using the acquisition method of accounting. Accordingly, the purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date. The total consideration of $46.3 million was allocated at November 18, 2022 based on valuations of acquired assets and assumed liabilities in connection with the acquisition.

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

The estimated $12.9 million of contingent consideration, as of the acquisition date, relates to two separate earn-outs:

1. Revenue retention earn-out

The Salient Acquisition contains contingent consideration related to revenue retention, which has a maximum payment amount of $15.0 million. The gross amount is based on the retention of a minimum level of net revenue in the fifteen, eighteen, twenty-one and twenty-four months following the close of the Salient Acquisition. As this earn-out is expected to be settled with cash it was accounted for as a liability on our Consolidated Balance Sheets.

The acquisition-date fair value of the revenue retention earn-out was estimated by using overall revenue growth projections combined with existing customer base revenues, both discounted and probability-weighted. Fair value measurement of the revenue retention earn-out was estimated using Monte Carlo simulation models and was based primarily on significant inputs not observable in the market and thus represents a level 3 measurement as defined in ASC 820. See further discussion in Note 7 "Fair Value Measurements."

2. Growth earn-out

The Salient Acquisition contains contingent consideration related to growth, which has a maximum payment amount of $10.0 million. The growth earn-out payment is based on growth in net revenue in the second and third years following the close of the Salient Acquisition. The growth earn-out payment, if any, would be paid in shares of the Company’s common stock in amounts equivalent to the dollar value of the earn-out. As this earn-out did not satisfy the equity classification criteria of ASC 805, Business Combinations it was accounted for as a liability on our Consolidated Balance Sheets.

The acquisition-date fair value of the growth earn-out was estimated by using overall revenue growth projections combined with existing customer base revenues, both discounted and probability-weighted. Fair value measurement of the growth earn-out was estimated using Monte Carlo simulation models and was based primarily on significant inputs not observable in the market and thus represents a level 3 measurement as defined in ASC 820. See further discussion in Note 7 "Fair Value Measurements."

The following are the identifiable intangible assets acquired (in thousands) and their respective useful lives:

The client relationships asset was valued using the income approach (multi-period excess earnings method) and is amortized to “General and administrative” expense on our Consolidated Statements of Comprehensive Income (Loss) over an estimated useful life of fifteen years. Significant assumptions and estimates utilized in the model include the revenue growth projections, earnings growth rates, contributory asset charges and the selection of discount rates.

The trade name asset was valued using the relief-of-royalty method and is amortized to "General and administrative" expense on our Consolidated Statements of Comprehensive Income (Loss) over an estimated useful life of three years. Significant assumptions and estimates utilized in the model include the revenue growth projections, earnings growth rates, royalty rates and the selection of discount rates.

The non-compete agreements asset was valued using the differential discounted cash flow method (with and without method) and is amortized to "General and administrative" expense on our Consolidated Statements of Comprehensive Income (Loss) over an estimated useful life of three years. Significant assumptions and estimates utilized in the model include the revenue growth projections, earnings growth rates, length of the non-compete agreements, ability to compete, the impact of competition and the selection of discount rates.

At the time of the acquisition, the Company believed that its enhanced size, expanded range of investment strategies and expected realization of synergies were the primary factors that contributed to a total purchase price that resulted in the recognition of goodwill. As of December 31, 2022, $5.9 million of the goodwill arising from the acquisition was expected to be deductible for tax purposes. During the year ended December 31, 2023, the Company reduced the Salient Acquisition goodwill by $0.4 million due to post-acquisition adjustments.

For the year ended December 31, 2022, the Company included $3.1 million of revenue and $0.1 million of net loss related to Salient in its Consolidated Statements of Comprehensive Income (Loss).

Pro Forma Financial Information

The following unaudited pro forma results of operations for the twelve months ended December 31, 2022 and 2021 assume the Salient Acquisition had occurred on January 1, 2021, after giving effect to acquisition accounting adjustments relating to amortization of the valued intangible assets and to record additional compensation costs related to restricted stock granted as a result of the acquisition. These unaudited pro forma results exclude one-time, non-recurring costs related to the acquisition, including $7.1 million of acquisition expenses in 2022. This unaudited pro forma information should not be relied upon as being necessarily indicative of the historical results that would have been obtained if the Salient Acquisition had actually occurred on that date, nor of the results that may be obtained in the future.

4. REVENUE

Advisory Fee Revenues

Our advisory fees are generated by Westwood Management 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 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 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.

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, and are paid monthly and quarterly in arrears. Since billing periods for most of Westwood Trust’s clients coincide with the calendar quarter, revenue is fully recognized within the quarter and our Consolidated Financial Statements contain no deferred fee revenues.

Revenue Disaggregated

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

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

5. SEGMENT REPORTING:

We operatetwo 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 uses to review the financial information for operational decision-making purposes.

The Company's Chief Operating Decision Maker, our Chief Executive Officer, evaluates the performance of our segments based primarily on fee revenues.

Westwood Holdings Group, Inc., the parent company of Advisory and Trust, does not have revenues and is the entity in which we record typical holding company expenses including employee compensation and benefits for holding company employees, directors’ fees and investor relations costs. All segment accounting policies are the same as those described in the summary of significant accounting policies. Intersegment balances that eliminate in consolidation have been applied to the appropriate segment.

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, which provide investment advisory services to similar clients, 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.

Geographical information

Refer to Note 4, “Revenue” for our revenue disaggregated by our clients' geographical location. As of December 31, 2023 and 2022, all of our property and equipment was in the United States.

6. INVESTMENTS:

Since 2018, the Company has made strategic investments to enhance the services we provide our customers. Each of these investments is discussed below.

We made a strategic investment during 2018 in InvestCloud, which is included in “Investments” on our Consolidated Balance 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 years ended December 31, 2023, 2022 or 2021.

Our investment in Vista is included in “Investments” on our Consolidated Balance 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 years ended December 31, 2023, 2022 or 2021.

Our investment in Charis was included in “Noncurrent investments at fair value” on our December 31, 2022 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 exchanged its shares in Charis for shares in Vista.

Private Equity Funding. In 2019, we made a $0.3 million investment in Westwood Hospitality. Our investment is included in “Noncurrent investments at fair value” on our Consolidated Balance Sheets and 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 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 was included in “Equity method investments” on our 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 subsequently have 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.

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

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

The following amounts represent income from all investments, except for income tax amounts, are included in our Consolidated Statements of Comprehensive Income (Loss) under the headings “Other revenues, net," "Net change in unrealized appreciation (depreciation) on private investments," or "Investment Income" (in thousands):

7. FAIR VALUE MEASUREMENTS:

ASC 820 defines fair value, establishes a framework for measuring fair value and requires additional 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 and liabilities

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

•Level 3 – 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, as we have elected to apply the measurement alternative for those investments.

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

Prior to our exchange of Charis shares for shares in Vista, 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):

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

The December 31, 2023 contingent consideration fair value of $10.1 million was valued based upon updated revenue growth projections and 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 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. Fluctuations in any of the inputs may result in a significantly lower or higher fair value measurement.

The following table represents the range of the unobservable inputs utilized in the December 31, 2023 fair value measurement of the contingent consideration classified as level 3:

8. EMPLOYEE BENEFITS:

Restricted Stock Awards

We have issued restricted shares to certain employees and non-employee directors. The Ninth Amended and Restated Westwood Holdings Group, Inc. Stock Incentive Plan ("the Plan") reserves shares of Westwood common stock for issuance to eligible employees, directors and consultants of Westwood or its subsidiaries in the form of restricted stock and stock options. In April 2023, stockholders approved an additional 350,000 shares to be authorized under the Plan, increasing the total number of shares issuable under the Plan (including predecessor plans to the Plan) to 6,248,100 shares. In the event of a change in control of Westwood, the Plan contains provisions providing for the acceleration of the vesting of restricted stock. At December 31, 2023, approximately 646,000 shares remain available for issuance under the Plan.

The following table presents the total stock-based compensation expense recorded and the total income tax benefit recognized for stock-based compensation arrangements for the years indicated (in thousands):

Restricted Stock

Under the Plan, we have granted to certain employees and non-employee directors restricted stock subject to service conditions and to certain key employees restricted stock subject to both service and performance conditions. We accrue dividends on unvested restricted stock, which are due and payable upon vesting of restricted stock. Accrued dividends coming due within the next twelve months are included in “Dividends payable” on the Consolidated Balance Sheets, with the remaining noncurrent portion of accrued dividends included in “Accrued dividends” on the Consolidated Balance Sheets. At December 31, 2023, we had $1.7 million and $0.7 million in "Dividends payable" and "Accrued dividends", respectively, and the Dividends payable were related to unvested restricted stock. At December 31, 2022, we had $1.7 million and $0.7 million in Dividends payable and Accrued dividends, respectively.

As of December 31, 2023, there was approximately $9.4 million of unrecognized compensation cost for restricted stock grants under the Plan, which we expect to recognize over a weighted-average period of 2.4 years. In order to satisfy tax liabilities that employees will owe on shares that vest, we may withhold a sufficient number of vested shares from employees on the date vesting occurs to cover minimum tax withholding requirements. We withheld 67,743 shares in 2023 for this purpose. Our two types of restricted stock grants under the Plan are discussed below.

Restricted Stock Subject Only to a Service Condition

For the years ended December 31, 2023, 2022 and 2021, we granted restricted stock to certain employees and non-employee directors. Employee shares generally vest over three years and Director shares vest overone year. We calculate compensation cost for restricted stock grants using the fair market value of our common stock at the date of grant, the number of shares issued and an adjustment for restrictions on dividends. This compensation cost is amortized on a straight-line basis over the applicable vesting period.

The following table details the status and changes in our restricted stock grants that are subject only to a service condition for the year ended December 31, 2023:

The following table shows the weighted-average grant date fair value for shares granted and the total fair value of shares vested during the years indicated:

Restricted Stock Subject to Service and Performance Conditions

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

The following table details the status and changes in our restricted stock grants subject to service and performance conditions for the year ended December 31, 2023:

The following table shows the total fair value of shares vested during the years indicated:

Mutual Fund Share Incentive Awards

We may grant mutual fund incentive awards, which are annual bonus awards based on our mutual funds achieving specific performance goals, to specific employees. Awards granted are notionally credited to a participant account maintained by us that contains a number of mutual fund shares equal to the award amount divided by the net closing value of a fund share on the date the amount is credited to the account. We maintain the award in a corporate investment account until vesting. The investment may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. We account for these awards similarly to stock-based compensation awards. As of December 31, 2023 and 2022, approximately $2.0 million of unvested mutual fund awards was included under "Investments, at fair value" on our Consolidated Balance Sheets.

Awards vest after approximatelytwo years of service following the year in which the participant earned the award. We begin accruing a liability for mutual fund incentive awards when we believe it is probable that the award will be earned and record expense for these awards over the service period of the award. During the year in which the amount of the award is determined, we record expense based on its expected value. After the award is earned, we record expense based on the value of the shares awarded and the percentage of the vesting period that has elapsed. Our liability under these awards may increase or decrease based on changes in the value of the mutual fund shares awarded, including reinvested income from the mutual funds during the vesting period. Upon vesting, participants receive the mutual fund share awards adjusted for earnings or losses attributable to the underlying mutual funds. For the years ended December 31, 2023 and 2022, we recorded expense of $0.7 million and $0.6 million, respectively, related to mutual fund share incentive awards. For the year ended December 31, 2021, mutual fund share incentive award activity was insignificant. As of December 31, 2023 and 2022, approximately $1.5 million and $1.0 million, respectively, of mutual funds award liability was included under "Compensation and benefits payable" on our Consolidated Balance Sheets.

Benefit Plans

Westwood has a defined contribution and profit-sharing plan that was established in July 2002 and covers substantially all employees. Discretionary employer profit-sharing contributions become fully vested after four years of service by the participant. For U.S. employees, Westwood provides a 401(k) match of up to 6% of eligible compensation and contributions vest immediately.

The following table displays our profit-sharing and retirement plan contributions for the periods presented (in thousands):

9. INCOME TAXES:

Income Tax Provision

Income (loss) before income taxes by jurisdiction was as follows (in thousands):

Income tax expense differs from the amount that would otherwise have been calculated by applying the U.S. Federal corporate tax rate of 21% to income before income taxes. The difference between the Federal corporate tax rate and the effective tax rate is comprised of the following (in thousands).

We include penalties and interest on income-based taxes in the “General and administrative” line on our Consolidated Statements of Comprehensive Income (Loss). Penalties and interest were insignificant for the years ended December 31, 2023, 2022 and 2021.

Income tax provision as set forth in the Consolidated Statements of Comprehensive Income (Loss) consisted of the following components (in thousands):

Deferred Income Taxes

The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities are presented below (in thousands).

The Company is subject to taxation in the U. S. and various state and foreign jurisdictions. As of December 31, 2023, the Company’s 2020, 2021 and 2022 tax years are open for examination by the Internal Revenue Service, and various state and foreign jurisdiction tax years remain open to examination.

At December 31, 2023 and 2022, the Company's gross liability related to uncertain tax positions was de minimis. A number of years may elapse before an uncertain tax position is finally resolved. To the extent that the Company has favorable tax settlements, or determines that accrued amounts are no longer needed due to a lapse in the applicable statute of limitations or other changes in circumstances, such liabilities, as well as the related interest and penalties, are reversed as a reduction of income tax expense, net of federal tax effects, in the period such determination is made. A reconciliation of the change in recorded uncertain tax positions during the years ended December 31, 2023 and 2022 follows (in thousands):

10. 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 using the treasury stock method. There were approximately 63,000,120,000 and 116,000 anti-dilutive restricted shares as of December 31, 2023, 2022 and 2021, respectively, which were excluded from weighted average shares outstanding.

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

11. GOODWILL AND OTHER INTANGIBLE ASSETS:

Goodwill

Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying liabilities assumed at the date of acquisition. Changes in goodwill were as follows (in thousands):

1 Represents subsequent purchase price adjustments for the Salient Acquisition.

Goodwill is not amortized but is tested for impairment at least annually. We completed our annual goodwill impairment assessment during the third quarter of 2023 and determined that no impairment loss was required. No impairments were recorded during the years ended December 31, 2023, 2022 or 2021.

Other Intangible Assets

Our intangible assets represent the acquisition date fair value of acquired client relationships, internally-developed software, non-compete agreements and trade names, and are reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition.

The following is a summary of intangible assets at December 31, 2023 and 2022 (in thousands, except years):

Amortization expense, which is included in “General and administrative” expense on our Consolidated Statements of Comprehensive Income (Loss), was $4.1 million, $1.9 million and $1.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Estimated amortization expense for intangible assets over the next five years, and thereafter, is as follows (in thousands):

12. LEASES:

We have operating leases for corporate offices and certain office equipment. The lease terms of our corporate offices vary and have remaining lease terms ranging from one to six years. The corporate office lease payments are fixed and are based upon contractual monthly rates. The majority of our corporate office leases do not include options to extend or terminate the leases. We lease office equipment for a period of two years, and the incremental borrowing rate was 5%.

In 2022, we expanded our Houston, Texas office space and extended that lease through September 2029. We evaluated the corporate debt environment in 2022 to determine a collateralized discount rate of 7%. In 2023 we leased additional office space in Chicago, Illinois through the second quarter of 2029.

The following table presents the components of lease costs related to our leases (amounts in thousands):

Sublease income relates to subleasing a portion of our corporate offices.

The following table presents supplemental cash flow information related to our leases (amounts in thousands):

Operating lease costs are included in "General and administrative" expense on our Consolidated Statements of Comprehensive Income (Loss). We lease our offices under non-cancelable operating lease agreements with expiration dates that run through 2029.

The following table presents information regarding our operating leases (in thousands, except years and rates):

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

13. BALANCE SHEET COMPONENTS:

Property and Equipment

The following table reflects information about our property and equipment as of December 31, 2023 and 2022 (in thousands):

14. COMMITMENTS AND CONTINGENCIES:

Purchase commitments

Our purchase commitments primarily consist of outsourced information technology services, software licenses and commitments for financial research tools. As of December 31, 2023, our purchase commitments for the next five years and thereafter were as follows (in thousands):

As of December 31, 2023, we did not have any material off-balance sheet arrangements.

15. REGULATORY CAPITAL REQUIREMENTS:

Westwood Trust must maintain cash and investments in an amount equal to the required minimum restricted capital of $4.0 million as required by the Texas Finance Code. Restricted capital is included in Investments in the accompanying Consolidated Balance Sheets. At December 31, 2023, Westwood Trust had approximately $11.1 million in excess of its minimum capital requirement.

Westwood Trust is limited under applicable Texas law in the payment of dividends of undivided profits, which is that part of equity capital equal to the balance of net profits, income, gains and losses since formation minus subsequent distributions to stockholders and transfers to surplus or capital under share dividends or appropriate Board resolutions. At the discretion of its Board, Westwood Trust may make quarterly and special dividend payments, or other distributions, to Westwood out of its undivided profits. No dividend payments were made in 2023, 2022 or 2021.

SCLP, a broker-dealer of the Company, is registered with the SEC as broker-dealers and members of FINRA. The Company’s broker-dealer subsidiaries are subject to SEC Uniform Net Capital Rule (Rule 15c3-1) which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, to not exceed 15 to 1. As such, they are subject to the minimum net capital requirements promulgated by the SEC. As of December 31, 2023, SCLP had net capital of $558,000 which was $526,000 in excess of its required minimum net capital of $32,000. As of December 31, 2022, SCLP had net capital of $320,000, which was $315,000 in excess of its required minimum net capital of $5,000.

16. VARIABLE INTEREST ENTITIES:

As discussed in Note 2 “Summary of Significant Accounting Policies,” the CTFs and Private Funds (together the “Westwood VIEs”) are considered VIEs, and the Westwood Funds® and Private Equity are considered VOEs (together the “Westwood VOEs”). We receive fees for managing assets in these entities commensurate with market rates. As of December 31, 2023 and 2022, we evaluated all of the Westwood VIEs and Westwood VOEs to determine whether or not we should consolidate the entities into our Consolidated Financial Statements. For the Westwood VIEs, we evaluated whether or not we qualify as the primary beneficiary based on whether we have the obligation to absorb significant losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact the entity’s economic performance, and concluded that we do not qualify as a primary beneficiary for those entities. For the Westwood VOEs, we evaluated whether or not we own a controlling financial interest in the entities, and we concluded that we do not. Based on our analyses, we have not consolidated the Westwood VIEs or Westwood VOEs into our Consolidated Financial Statements for the years ended December 31, 2023 or 2022.

We have not otherwise provided any financial support that we were not previously contractually obligated to provide and there are no arrangements that would require us to provide additional financial support to any of these entities. Our seed investments in the Westwood Funds® are accounted for as investments in accordance with our other investments described in Note 6 “Investments.”

We recognized fee revenue from the Westwood VIEs and Westwood VOEs of approximately $32.4 million, $23.2 million and $22.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The following table displays the AUM, the amount of our seed investments that are included in “Investments” and “Investments, at fair value” on the Consolidated Balance Sheets, and the financial risk of loss in each vehicle (in millions):

17. RELATED PARTY TRANSACTIONS:

Some of our directors, executive officers and their affiliates invest personal funds directly in trust accounts that we manage. At both December 31, 2023 and at December 31, 2022, there was approximately $0.1 million in fees due from these accounts. For the years ended December 31, 2023 and 2022 we recorded trust fees from these accounts of $0.3 million. For the year ended December 31, 2021 we recorded trust fees from these accounts of $0.4 million.

One director serves as a consultant to the Company under a consulting agreement for which we recorded expenses of $0.1 million for each of the years ended December 31, 2023, 2022 and 2021.

18. CONCENTRATION:

For the years ended December 31, 2023, our ten largest clients accounted for approximately 21% of our fee revenue. For the years ended December 31, 2022 and 2021, our ten largest clients accounted for approximately 22% of our fee revenue. No single customer accounted for 10% or more of our fee revenues in any of these years. The following table presents advisory fee revenue received from our single largest client in each year (in thousands):

19. SUBSEQUENT EVENTS:

Dividends Declared

On February 14, 2024, the Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock payable on April 3, 2024 to stockholders of record on March 1, 2024.

Restricted Stock Grants

On February 23, 2024 we issued approximately $3.2 million of restricted stock to employees, or approximately 268,000 shares based on the closing price of our stock on February 23, 2024. The shares are subject to vesting conditions described in Note 8 “Employee Benefits” of our Consolidated Financial Statements in this Report.

INDEX TO EXHIBITS

• Filed herewith.

• Indicates management contract or compensation plan, contract or arrangement.

Pursuant to Item 601(b)(32) of SEC Regulation S-K, these exhibits are furnished rather than filed with this Report.