WESTWOOD HOLDINGS GROUP INC

Previous wording

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, 2023 and those risks set forth below:

Current wording

Statements in this report and our 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, 2023 and those risks set forth below:

Previous wording

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 $15.8 billion and AUA of approximately $1.0 billion at June 30, 2024. We have established a track record of delivering competitive, risk-adjusted returns for our clients.

Current wording

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 $16.8 billion and AUA of approximately $1.0 billion at September 30, 2024. We have established a track record of delivering competitive, risk-adjusted returns for our clients.

Previous wording

(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.

Current wording

(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, with gains representing reductions in value and losses representing increases in value.

Previous wording

Firm-wide assets under management of $16.8 billion at June 30, 2024 consisted of $15.8 billion of AUM and $1.0 billion of AUA.

Current wording

Firm-wide assets under management of $17.7 billion at September 30, 2024 consisted of $16.8 billion of AUM and $1.0 billion of AUA.

Previous wording

AUM increased $0.8 billion to $15.8 billion at June 30, 2024 compared with $15.0 billion at June 30, 2023. The average of beginning and ending AUM for the second quarter of 2024 was $16.0 billion compared to $14.9 billion for the second quarter of 2023.

Current wording

AUM increased $2.4 billion to $16.8 billion at September 30, 2024 compared with $14.4 billion at September 30, 2023. The average of beginning and ending AUM for the third quarter of 2024 was $16.3 billion compared to $14.7 billion for the third quarter of 2023.

Previous wording

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

Current wording

(4)AUM excludes $1.0 billion and $1.1 billion of AUA as of September 30, 2024 and 2023, respectively, related to our model portfolios for which we provide investment advice on a fee basis without having investment management authority.

Previous wording

The change in AUM for the three months ended June 30, 2024 was due to net outflows of $0.3 billion.

Current wording

The change in AUM for the three months ended September 30, 2024 was due to market appreciation of $1.1 billion offset by net outflows of $0.1 billion.

Previous wording

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.

Current wording

The change in AUM for the three months ended September 30, 2023 was due to market depreciation of $0.3 billion and net outflows of $0.3 billion. Net outflows were primarily related to our SmallCap strategy.

Previous wording

The $0.3 billion increase in AUM for the six months ended June 30, 2024 was due to market appreciation of $0.8 billion offset by net outflows of $0.5 billion. Net outflows were primarily related to our LargeCap Value strategy.

Current wording

The $1.3 billion increase in AUM for the nine months ended September 30, 2024 was due to market appreciation of $1.9 billion offset by net outflows of $0.6 billion. Net outflows were primarily related to our LargeCap Value strategy.

Previous wording

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

Current wording

The $0.4 billion decrease in AUM for the nine months ended September 30, 2023 was due to net outflows of $0.9 billion offset by market appreciation of $0.5 billion. Net outflows were primarily related to our Income Opportunity and MLP strategies.

Previous wording

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.

Current wording

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 contained in our Condensed Consolidated Financial Statements and should be read in conjunction with those statements included elsewhere in this report.

Previous wording

Total revenues. Total revenues for the three months ended June 30, 2024 were comparable to revenues for the three months ended June 30, 2023.

Current wording

Total revenues. Total revenues for the three months ended September 30, 2024 were higher than revenues for the three months ended September 30, 2023 due to higher average AUM.

Previous wording

(Gain) loss from change in fair value of contingent consideration. We recorded a loss of $4.8 million upon the

Current wording

(Gain) loss from change in fair value of contingent consideration. We recorded a loss of $1.8 million upon the

Previous wording

Income tax provision. Our effective tax rate differed from the 21% statutory rate for the second quarter of 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.

Current wording

Income tax provision. Our effective tax rate differed from the 21% statutory rate for the third quarter of 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 and the discrete impact of life insurance proceeds received in 2023.

Previous wording

Total revenues. Total revenues for the six months ended June 30, 2024 were comparable to revenues for the six months ended June 30, 2023.

Current wording

Total revenues. Total revenues for the nine months ended September 30, 2024 were higher than revenues for the nine months ended September 30, 2023 due to higher average AUM.

Previous wording

remeasurement of contingent consideration of the Salient Acquisition primarily due to changes in growth projections following asset appreciation in the quarter and revised asset flow expectations.

Current wording

remeasurement of contingent consideration of the Salient Acquisition primarily due to positive changes in growth projections following asset appreciation in the period and revised asset flow expectations.

Previous wording

Income tax provision. Our effective tax rate for the six months ended June 30, 2024 differed from the 21% statutory rate for 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 and the discrete impact of life insurance proceeds received in 2023.

Current wording

Income tax provision. Our effective tax rate for the nine months ended September 30, 2024 differed from the 21% statutory rate for 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 and the discrete impact of life insurance proceeds received in 2023.

Previous wording

As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings (Loss) 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 (Loss) 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.

Current wording

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 attributable to Westwood Holdings Group, Inc. and earnings 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 attributable to Westwood Holdings Group, Inc. or earnings per share, are useful for management and investors when evaluating our underlying operating and financial performance and our available resources. We do not advocate that investors consider these non-GAAP measures without also considering financial information prepared in accordance with GAAP.

Previous wording

We define Economic Earnings (Loss) 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 (Loss) 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 (Loss) 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 (Loss) for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings (Loss) divided by diluted weighted average shares outstanding.

Current wording

We define Economic Earnings as comprehensive income 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.

Previous wording

The following tables (in thousands, except share and per share amounts) provide a reconciliation of comprehensive income (loss) attributable to Westwood Holdings Group, Inc. to Economic Earnings (Loss) and Economic Earnings (Loss) by segment. We have included the tax impact of adjustments for all periods presented.

Current wording

The following tables (in thousands, except share and per share amounts) provide a reconciliation of comprehensive income attributable to Westwood Holdings Group, Inc. to Economic Earnings and Economic Earnings by segment. We have included the tax impact of adjustments for all periods presented.

Previous wording

We had cash and short-term investments of $44.1 million and $53.1 million as of June 30, 2024 and December 31, 2023, respectively. At June 30, 2024 and December 31, 2023, working capital aggregated $50.5 million and $53.6 million, respectively.

Current wording

We had cash and short-term investments of $48.3 million and $53.1 million as of September 30, 2024 and December 31, 2023, respectively. At September 30, 2024 and December 31, 2023, working capital aggregated $52.5 million and $53.6 million, respectively.

Previous wording

During the six months ended June 30, 2024, cash flow provided by operating activities was $11.7 million, which included net sales of current investments of $11.4 million, partially to pay compensation and benefits payable, and a reduction in compensation and benefits payable of $4.2 million. During the six months ended June 30, 2023, cash flow used in operating activities was $3.9 million, which included net sales of current investments of $7.1 million and a reduction in compensation and benefits payable of $3.3 million.

Current wording

During the nine months ended September 30, 2024, cash flow provided by operating activities was $12.2 million, which included net sales of current investments of $6.3 million and a reduction in compensation and benefits payable of $1.3 million. During the nine months ended September 30, 2023, cash flow used in operating activities was $5.7 million, which included net purchases of current investments of $15.6 million and a reduction in compensation and benefits payable of $1.4 million.

Previous wording

Cash flow used in investing activities during the six months ended June 30, 2024 was related to the purchase of investments. Cash flow used in investing activities during the six months ended June 30, 2023 was primarily for the Broadmark Acquisition.

Current wording

Cash flow used in investing activities during the nine months ended September 30, 2024 was related to the purchase of investments. Cash flow provided by investing activities during the nine months ended September 30, 2023 was primarily due to the receipt of life insurance proceeds, offset by cash for the Broadmark Acquisition.

Previous wording

Cash flows used in financing activities of $6.8 million for the six months ended June 30, 2024 reflected the payment of dividends, deferred contingent consideration payments, purchases of treasury stock and restricted stock returned for the payment of taxes. Cash flows used in financing activities of $3.9 million for the six months ended June 30, 2023 reflected the payment of dividends and restricted stock returned for the payment of taxes.

Current wording

Cash flows used in financing activities of $8.3 million for the nine months ended September 30, 2024 reflected the payment of dividends, deferred contingent consideration payments, purchases of treasury stock and restricted stock returned for the payment of taxes. Cash flows used in financing activities of $5.1 million for the nine months ended September 30, 2023 reflected the payment of dividends and restricted stock returned for the payment of taxes.

Previous wording

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, 2024, Westwood Trust had approximately $12.4 million in excess of its minimum capital requirement.

Current wording

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 September 30, 2024, Westwood Trust had approximately $12.3 million in excess of its minimum capital requirement.