WESTWOOD HOLDINGS GROUP INC

Previous wording

Westwood Trust provides trust and custodial services and participation in common trust funds to institutions and high net worth individuals. Our revenues are generally derived from fees based on a percentage of AUM.

Current wording

Westwood Trust provides trust and custodial services and participation in common trust funds to institutions and high net worth individuals.

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 $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.

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 $17.0 billion and AUA of approximately $1.0 billion at March 31, 2025. We have established a track record of delivering competitive, risk-adjusted returns for our clients.

Previous wording

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

Current wording

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

Previous wording

Our trust fees are generated by Westwood Trust pursuant to trust or custodial agreements. Trust fees are separately negotiated with each client and are generally based on a percentage of AUM. Westwood Trust also provides trust services to a small number of clients on a fixed fee basis. Trust fees are primarily calculated quarterly in arrears based on a daily average of AUM for the quarter. Since billing periods for most of Westwood Trust's clients coincide with the calendar quarter, revenue is fully recognized within the quarter, and our Consolidated Financial Statements contain no deferred advisory fee revenues.

Current wording

Our trust fees are generated by Westwood Trust pursuant to trust or custodial agreements. Trust fees are separately negotiated with each client and are generally based on a percentage of AUM. Westwood Trust also provides trust services to a small number of clients on a fixed fee basis. Trust fees are primarily calculated quarterly in arrears based on a daily average of AUM for the quarter. Since billing periods for most of Westwood Trust's clients coincide with the calendar quarter, revenue is fully recognized within the quarter, and our Condensed Consolidated Financial Statements contain no deferred advisory fee revenues.

Previous wording

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

Current wording

Other income primarily consists of income from the sublease of a portion of our corporate offices.

Previous 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.

Current wording

Firm-wide assets under management of $18.0 billion at March 31, 2025 consisted of $17.0 billion of AUM and $1.0 billion of AUA.

Previous 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.

Current wording

AUM increased $0.8 billion to $17.0 billion at March 31, 2025 compared with $16.2 billion at March 31, 2024. The average of beginning and ending AUM for the first quarter of 2025 was $16.8 billion compared to $15.8 billion for the first quarter of 2024.

Previous wording

(2)Wealth Management includes assets for which Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals pursuant to trust or agency agreements and assets for which Westwood Advisors, L.L.C. provides advisory services to high net worth individuals. Investment sub-advisory services are provided for the common trust funds by Westwood Management and unaffiliated sub-advisors. For certain assets in this category Westwood Trust provides limited custodial services for a minimal or no fee, viewing these assets as potentially converting to fee-generating managed assets in the future.

Current wording

(2)Wealth Management includes assets for which Westwood Trust provides trust and custodial services and participation in common trust funds that it sponsors to institutions and high net worth individuals pursuant to trust or agency agreements and assets for which Westwood Advisors, L.L.C. provides advisory services to high net worth individuals. Investment sub-advisory services are provided for the common trust funds by Westwood

Previous 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.

Current wording

The change in AUM for the three months ended March 31, 2025 was due to net inflows of $0.6 billion offset by market depreciation of $0.3 billion. Net inflows were primarily related to our SmallCap Value strategy.

Previous 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.

Current wording

The change in AUM for the three months ended March 31, 2024 was due to market appreciation of $0.9 billion and net outflows of $0.2 billion. Net outflows were primarily related to our LargeCap Value strategy.

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

Previous wording

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

Current wording

(Gain) loss from change in fair value of contingent consideration. In 2024 we recorded a gain of $2.9 million upon the

Previous 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.

Current wording

remeasurement of contingent consideration due to positive changes in growth projections following asset appreciation and asset flows in the period.

Previous 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.

Current wording

Income tax provision. Our effective income tax rate differed from the 21% statutory rate for the three months ended March 31, 2025 due to permanent differences related to executive compensation. Our effective income tax rate differed from the 21% statutory rate for the three months ended March 31, 2024 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.

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 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.

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 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 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 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.

Current wording

We define Economic Earnings as 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 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.

Current wording

The following tables (in thousands, except share and per share amounts) provide a reconciliation of 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 $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.

Current wording

We had cash and liquid investments of $26.9 million and $44.6 million as of March 31, 2025 and December 31, 2024, respectively.

Previous 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.

Current wording

During the three months ended March 31, 2025, cash flow used in operating activities was $4.9 million, which included net sales of investments of $8.0 million and reductions in compensation and benefits payable of $8.5 million and contingent consideration of $4.4 million following the final payment for the revenue retention earn-out. During the three months ended March 31, 2024, cash flow provided by operating activities was $8.1 million, which included net sales of investments of $12.4 million and a reduction in compensation and benefits payable of $6.6 million.

Previous 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.

Current wording

Cash flow used in investing activities during the three months ended March 31, 2025 was related to the purchase of investments and internally developed software. Cash flow used in investing activities during the three months ended March 31, 2024 was related to the acquisition of property and equipment.

Previous 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.

Current wording

Cash flows used in financing activities of $3.1 million for the three months ended March 31, 2025 reflected the payment of dividends, deferred contingent consideration payments and restricted stock returned for the payment of taxes. Cash flows used in financing activities of $2.7 million for the three months ended March 31, 2024 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 September 30, 2024, Westwood Trust had approximately $12.3 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 "Cash and cash equivalents" and