WESTWOOD HOLDINGS GROUP INC
For the period ended Dec 31, 2024. Filed Mar 5, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 5, 2025
WHG$18.63+0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-07.
0001165002-24-000022
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-05.
0001165002-25-000022
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 167 previous paragraphs and 151 current paragraphs.
119 unchanged; 27 reworded; 4 added; 18 removed; 3 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
•Launched two new ETFs: Westwood Salient Enhanced Midstream Income ETF (MDST) and Westwood Salient Enhanced Energy Income ETF (WEEI).
Current report
•Entered a partnership with WEBs Investments Inc., a new firm to develop and launch innovative investment strategies for investors and advisors.
Current report
(Gain) loss from change in fair value of contingent consideration. We recorded a loss of $4.9 million upon the
Current report
remeasurement of contingent consideration, payable in the first quarter of 2025 for the Salient Acquisition primarily, due to positive changes in growth projections following asset appreciation and asset flows in the period.
Removed paragraphs (18)
Previous report
•Added the Managed Investment Solutions team, bolstering our ability to provide customized solutions to institutional and wealth investors.
Previous report
•Acquired an additional 32% interest in Broadmark, an RIA managing and/or sub-advising mutual funds, retail and institutional separately-managed accounts, resulting in our holding an approximately 80% controlling interest.
Previous report
Realized Gains on Private Investments
Previous report
Realized gains on private investments includes amounts by which the net proceeds from the sale or redemption of our private investments exceeded costs.
Previous report
(4)AUM for 2023, 2022 and 2021 excludes approximately $1.1 billion, $1.3 billion and $0.3 billion of assets under advisement, respectively, related to our model portfolios for which we provide investment advice on a fee basis without having investment management authority. We added $0.9 billion of AUA from the Salient Acquisition.
Previous report
Net inflows were primarily related to our SmallCap Value strategy, partially offset by net outflows in our Enhanced Balance strategy.
Previous report
In late 2020 we decided to exit the stand-alone convertibles business and our Global Convertibles team transitioned back to Aviva Investors, from which they had joined Westwood. As a result, $1.6 billion in two sub-advised Global Convertibles mandates returned to Aviva as of April 1, 2021.
Previous report
Total Revenues. Total revenues decreased $4.4 million, or 6%, to $68.7 million compared with $73.1 million for 2021. The decrease was attributable to a $2.3 million decrease in Trust fees due to lower average AUM, and a decrease in performance fees, partially offset by a $0.8 million increase in asset-based advisory fees.
Previous report
Sales and Marketing. Sales and marketing expenses increased as in-person sales activities returned to pre-COVID-19 levels.
Previous report
Professional Services. Professional services expenses increased primarily due to higher subadvisory expenses and various legal costs.
Previous report
General and administrative. General and administrative expenses increased 12% to $9.1 million compared to $8.9 million in 2021 primarily due to higher rent expense following our Houston, Texas office space expansion.
Previous report
Acquisition expenses. Acquisition expenses are related to the Salient Acquisition and consisted primarily of investment banking fees, legal fees, information technology expenses related to systems integrations, mutual fund costs related to proxy solicitations and information technology integration costs. $1.8 million of acquisition expenses incurred in the nine months ended September 30, 2022 were included in Professional Services ($1.0 million), Westwood Mutual Funds ($0.5 million) and Information Technology ($0.3 million) before being reclassified to acquisition expenses upon consummation of the Salient Acquisition.
Previous report
Consolidation
Previous report
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.
Previous report
To assess whether we have the power to direct the activities of an entity that most significantly impact the VIE’s economic performance, we consider all the facts and circumstances, including, but not limited to, the legal organization of the
Previous report
VIE, our equity ownership and contractual involvement with the entity and any related party or de facto agent implications of our involvement with the entity. This assessment includes identifying the activities that most significantly impact the entity’s economic performance and identifying which party, if any, has power over those activities.
Previous report
Entities that do not qualify as a VIE are assessed for consolidation under the VOE model. Under the VOE model, we consolidate the entity if we determine that we have a controlling financial interest in the entity through our ownership of greater than 50% of the outstanding voting shares of the entity and that other equity holders do not have substantive voting, participating or liquidation rights.
Previous report
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.
Reworded paragraphs (27)
Previous wording
•our ability to maintain effective cyber security;
Current wording
•our ability to maintain effective cybersecurity;
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 $15.5 billion and AUA of approximately $1.1 billion at December 31, 2023. 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 $16.6 billion and AUA of approximately $1.0 billion at December 31, 2024. We have established a track record of delivering competitive, risk-adjusted returns for our clients.
Previous wording
•AUM as of December 31, 2023 was $15.5 billion, 5% higher than December 31, 2022. Quarterly average AUM increased 15% to $15.0 billion for 2023 versus 2022, which contributed to a 31% increase in total revenue from 2022.
Current wording
•AUM as of December 31, 2024 was $16.6 billion, 7% higher than December 31, 2023. Quarterly average AUM increased 9% to $16.3 billion for 2024 versus 2023, which contributed to a 6% increase in total revenue from 2023.
Previous wording
•Our SMidCap Value, SmallCap Value, MidCap Value, High Alpha, Enhanced Balanced, High Income, Alternative Income, Global Real Estate and Select Income strategies performed strongly by beating their primary benchmarks for the year.
Current wording
•Our SMidCap Value, Multi-Asset, Credit Opportunities, Real Estate Income, MLP SMA, MLP High Conviction and MLP & Energy Infrastructure strategies performed strongly by beating their primary benchmarks for the year.
Previous wording
•We paid $5.5 million of dividends to our common stockholders.
Current wording
•We paid $5.4 million of dividends to our common stockholders.
Previous wording
•Our financial position remains strong with liquid cash and short-term investments of $53.1 million and no debt as of December 31, 2023.
Current wording
•Our financial position remains strong with liquid cash and investments of $44.6 million and no debt as of December 31, 2024.
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 $16.6 billion at December 31, 2023 consisted of $15.5 billion of AUM and $1.1 billion of AUA.
Current wording
Firm-wide assets under management of $17.6 billion at December 31, 2024 consisted of $16.6 billion of AUM and $1.0 billion of AUA.
Previous wording
AUM increased $0.3 billion, or 2%, to $14.8 billion at December 31, 2022 compared to $14.5 billion at December 31, 2021. Quarterly average AUM decreased $1.2 billion, down 9%, to $13.1 billion for 2022 compared with $14.3 billion for 2021. The decrease in average AUM was primarily due to $1.5 billion of market depreciation in 2022.
Current wording
AUM increased $1.1 billion, or 7%, to $16.6 billion at December 31, 2024 compared to $15.5 billion at December 31, 2023. Quarterly average AUM increased $1.4 billion, up 9%, to $16.3 billion compared with $15.0 billion for 2023. The increase in average AUM was primarily due to $1.9 billion of market appreciation in 2024.
Previous wording
The increase in AUM for the year ended December 31, 2021 was due to market appreciation of $2.2 billion and net inflows of $0.8 billion, partially offset by the transition of our Global Convertibles team.
Current wording
The increase in AUM for the year ended December 31, 2024 was due to market appreciation of $1.9 billion offset by net outflows of $0.8 billion. Net outflows were primarily related to our LargeCap Value and SmallCap Value strategies.
Previous wording
The increase in AUM for the year ended December 31, 2022 was due to $2.7 billion of AUM from the Salient Acquisition, offset by market depreciation of $1.5 billion and net outflows of $0.9 billion. Net outflows were primarily related to our LargeCap Value, Income Opportunity and Enhanced Balanced strategies.
Current wording
The increase in AUM for the year ended December 31, 2022 was due to $2.7 billion of AUM from the Salient Acquisition partially offset by market depreciation of $1.5 billion and net outflows of $0.9 billion. Net outflows were primarily related to our LargeCap Value, Income Opportunity and Enhanced Balanced strategies.
Previous wording
AUA has historically been disclosed in total due to its relative insignificance to our business. However, following our November 2022 acquisition of Salient's asset management business, AUA has become a more meaningful component of our business. Accordingly, we will present further AUA details going forward:
Current wording
AUA has historically been disclosed in aggregate due to its relative insignificance to our business. Following our November 2022 acquisition of Salient's asset management business, AUA becane a more meaningful component of our business and accordingly, we will present AUA details from the year ended December 31, 2023 going forward:
Previous wording
The following table and discussion of our results of operations is based upon data derived from our Consolidated Statements of Comprehensive Income (Loss) contained in our Consolidated Financial Statements and should be read in conjunction with these statements included elsewhere in this Report.
Current wording
The following table and discussion of our results of operations is based upon data derived from our Consolidated Statements of Operations contained in our Consolidated Financial Statements and should be read in conjunction with these statements included elsewhere in this Report.
Previous wording
Employee Compensation and Benefits. Employee compensation and benefits expenses decreased due to lower commissions and incentive compensation, partially offset by higher salaries following an increase in headcount from the Salient Acquisition.
Current wording
Employee Compensation and Benefits. Employee compensation and benefits expenses increased primarily due to higher performance-related incentive compensation following increased AUM balances and additional headcount.
Previous wording
Provision for Income Taxes. The effective tax rate was 10.9% for 2022 compared to 30.3% for 2021. Our income tax rate differed from the 21% statutory tax rate 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 date, along with the impact of state and local taxes.
Current wording
Provision for Income Taxes. The effective tax rate was 44.9% for 2024 compared to 23.2% for 2023. Our income tax rate differed from the 21% statutory tax rate 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 date, along with the impact of state and local taxes.
Previous 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 (loss) attributable to Westwood Holdings Group, Inc. and earnings (loss) per share, which are reported on a GAAP basis. Our management and Board 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.
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, Income (loss) attributable to Westwood Holdings Group, Inc. and earnings (loss) per share, which are reported on a GAAP basis. Our management and Board 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 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.
Previous wording
We define Economic Earnings as Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, impairment expense, amortization of intangible assets, currency translation adjustment reclassification 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.
Current wording
We define Economic Earnings as Income (loss) attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, impairment expense, amortization of intangible assets, currency translation adjustment reclassification 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
For the year ended December 31, 2023, our Economic Earnings increased by 589% to $18.3 million compared with $2.7 million for the year ended December 31, 2022. 2023 Economic Earnings was impacted by higher revenues and the receipt of life insurance proceeds, offset by higher expenses following the Salient Acquisition.
Current wording
For the year ended December 31, 2024, our Economic Earnings decreased by 62% to $7.0 million compared with $18.3 million for the year ended December 31, 2023. 2024 Economic Earnings was impacted by higher revenues offset by losses from changes in the fair value of contingent consideration.
Previous wording
The following table provides a reconciliation of Comprehensive income (loss) attributable to Westwood Holdings Group, Inc. to Economic Earnings. We have included the tax impact of adjustments for all periods presented:
Current wording
The following table provides a reconciliation of Income (loss) attributable to Westwood Holdings Group, Inc. to Economic Earnings:
Previous wording
We had cash and short-term investments of $53.1 million and $39.2 million as of December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, working capital aggregated $53.6 million and $40.6 million, respectively.
Current wording
We had cash and liquid investments of $44.6 million and $53.1 million as of December 31, 2024 and 2023, respectively.
Previous wording
Westwood Trust is required by the Texas Finance Code to maintain cash and investments in an amount equal to the minimum restricted capital of$4.0 million. 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.
Current wording
Westwood Trust is required by the Texas Finance Code to maintain cash and investments in an amount equal to the minimum restricted capital of$4.0 million. Restricted capital is included in "Investments at fair value" in the accompanying Consolidated Balance Sheets. At December 31, 2024, Westwood Trust had approximately $11.9 million in excess of its minimum capital requirement.
Previous wording
During 2023, cash flow used in operating activities was $1.2 million, compared to cash provided by operating activities of $51.5 million during 2022 and $19.4 million during 2021. The decrease of $52.7 million from 2022 to 2023 primarily reflected the net purchases of investments in 2023, compared to net sales of investments in 2022 to fund the Salient Acquisition. The increase of $32.1 million from 2021 to 2022 primarily reflected net sales of investments and net income in 2021.
Current wording
During 2024, cash flow provided by operating activities was $21.1 million, compared to cash used in operating activities of $1.2 million during 2023 and cash provided by operating activities of $51.5 million during 2022. The increase of $22.3 million from 2023 to 2024 primarily reflected the net sales of investments in 2024 compared to net purchases of investments in 2023. The decrease of $52.7 million from 2022 to 2023 primarily reflected net sales of investments in 2022 to fund the Salient Acquisition.
Previous wording
Cash flow provided by investing activities in 2023 was primarily related to the receipt of life insurance proceeds offset by the Broadmark Acquisition, while cash flow used in investing activities in 2022 was primarily related to the Salient Acquisition. Cash flow provided by investing activities in 2021 was related to realized gains on private investments and the sale of property and equipment following the sublease of a portion of our Dallas, Texas corporate office space.
Current wording
Cash flow used in investing activities in 2024 primarily related to the purchases of strategic investments, compared to cash flow provided by investing activities in 2023 related to the receipt of life insurance proceeds offset by the Broadmark Acquisition. Cash flow used in investing activities in 2022 was primarily related to the Salient Acquisition.
Previous wording
Cash used in financing activities was $6.4 million in 2023 compared to $9.1 million and $26.8 million in 2022 and 2021, respectively. The change from 2022 to 2023 related to treasury stock purchases in 2022. The change from 2021 to 2022 primarily related to lower dividends in 2022.
Current wording
Cash used in financing activities was $18.1 million in 2024 compared to $6.4 million and $9.1 million in 2023 and 2022, respectively. The change from 2023 to 2024 related to payments for contingent consideration for the Salient Acquisition and treasury stock purchases in 2024. The change from 2022 to 2023 primarily related to treasury stock purchases in 2022.
Previous wording
Our future liquidity and capital requirements will depend upon numerous factors, including results of operations, the timing and magnitude of capital expenditures or strategic initiatives, our dividend policy and other business and risk factors described under “Item 1A. Risk Factors” in this Report. We believe that current cash and short-term investment balances plus cash generated from operations will be sufficient to meet 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.
Current wording
Our future liquidity and capital requirements will depend upon numerous factors, including results of operations, the timing and magnitude of capital expenditures or strategic initiatives, our dividend policy and other business and risk factors described under “Item 1A. Risk Factors” in this Report. We believe that current cash and liquid investment balances plus cash generated from operations will be sufficient to meet 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.
Previous wording
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). For the year ended December 31, 2023, changes in growth projections and volatility assumptions were the primary drivers of changes in our fair value estimates.
Current wording
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 Operations. For the years ended December 31, 2024 and 2023, changes in growth projections, due to increases in AUM and AUA values, and volatility assumptions were the primary drivers of changes in our fair value estimates.
Previous wording
We account for income taxes in accordance with ASC 740, Income Taxes, which requires recognition of the amount of taxes payable or refundable for the current year, as well as deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the reported amounts on the Consolidated Financial Statements. 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).
Current wording
We account for income taxes in accordance with ASC 740, Income Taxes, which requires recognition of the amount of taxes payable or refundable for the current year, as well as deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and the reported amounts on the Consolidated Financial Statements. We include penalties and interest on income-based taxes, if any, in the “General and administrative” line on our Consolidated Statements of Operations.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Total Revenues. Total revenues increased $4.9 million, or 6%, to $94.7 million compared to $89.8 million for 2023. The increase was attributable to higher average assets under management.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
•Integrated Salient's asset management business, following our 2022 acquisition.
Previous report — wording carried elsewhere
Net change in unrealized appreciation (depreciation) on private investments. We recorded a $1.6 million net change in unrealized depreciation to reflect a market transaction related to our previous investment in Charis.
Previous report — wording carried elsewhere
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. Changes in working capital, especially accounts receivable and accounts payable, generally result from timing differences between collection of fees billed and payment of operating expenses.