whg-20240331

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The following table presents the total stock-based compensation expense recorded for stock-based compensation arrangements for the periods indicated (in thousands):


	Three Months Ended March 31,
	2024		2023
Service condition stock-based compensation expense			$	1,283
Performance condition stock-based compensation expense			97
Stock-based compensation expense under the Plan	—		1,380
Canadian Plan stock-based compensation expense	—		—
Total stock-based compensation expense	$	—	$	1,380

1,28397—1,380———1,38013.22.5

Restricted Stock Subject Only to a Service Condition

We calculate compensation cost for restricted stock grants by 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, with adjustments for forfeitures recorded as they occur.

The following table details the status and changes in our restricted stock grants subject only to a service condition for the three months ended March 31, 2024:


	Shares	Weighted Average Grant Date Fair Value
Non-vested, January 1, 2020	396,598	$	48.31
Granted	262,373	$	27.39
Vested	(140,974)	$	53.06
Forfeited	(26,372)	$	39.72
Non-vested, March 31, 2024	491,625	$	36.25

396,59848.31262,37327.39140,97453.0626,37239.72491,62536.25

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 of Directors. 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 three months ended March 31, 2024:


	Shares	Weighted Average Grant Date Fair Value
Non-vested, January 1, 2020	80,975	$	49.73

Vested	(35,275)	$	55.11
Non-vested, March 31, 2024	45,700	$	45.58

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____________________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________________________________

FORM 10-Q

____________________________________________________________________________________________________


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

For the quarterly period ended March 31, 2024


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

For the transition period from to .

Commission file number 1-31234

____________________________________________________________________________________________________

WESTWOOD HOLDINGS GROUP, INC.

(Exact name of registrant as specified in its charter)

____________________________________________________________________________________________________


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

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

(214) 756-6900

(Registrant’s telephone number, including area code)

____________________________________________________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $0.01 per share	WHG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Shares of common stock, par value $0.01 per share, outstanding as of April 24, 2024: 9,313,223.

____________________________________________________________________________________________________

WESTWOOD HOLDINGS GROUP, INC.

INDEX


PART I	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Comprehensive Inc ome	2

	Condensed Consolidated Statements of Stockholders’ Equity	3

	Condensed Consolidated Statements of Cash Flows	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II	OTHER INFORMATION	25

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 6.	Exhibits	26

Signatures		27

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

(Unaudited)


	March 31, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	25,888	$	20,422
Accounts receivable	15,178		14,394
Investments, at fair value	20,667		32,674
Prepaid income taxes	—		205
Other current assets	4,750		4,543
Total current assets	66,483		72,238
Investments	7,247		7,247
Equity method investments	4,519		4,284
Noncurrent investments at fair value	241		241
Goodwill	39,501		39,501
Deferred income taxes	1,570		726
Operating lease right-of-use assets	3,404		3,673
Intangible assets, net	23,761		24,803
Property and equipment, net of accumulated depreciation of $9,421 and $10,078	1,272		1,444
Other long-term assets	1,044		1,010
Total long-term assets	82,559		82,929
Total assets	$	149,042	$	155,167
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	6,846	$	6,130

Dividends payable	1,384		1,692
Compensation and benefits payable	2,949		9,539
Operating lease liabilities	1,406		1,286

Income taxes payable	2,035		—
Total current liabilities	14,620		18,647
Accrued dividends	663		675
Contingent consideration	7,184		10,133

Noncurrent operating lease liabilities	2,820		3,266
Total long-term liabilities	10,667		14,074
Total liabilities	25,287		32,721
Commitments and contingencies (Note 11)
Stockholders' Equity:
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 12,125,042 and 11,856,737, respectively and outstanding 9,330,762 and 9,140,760, respectively	122		119
Additional paid-in capital	201,899		201,622
Treasury stock, at cost – 2,794,280 and 2,715,977, respectively	(86,930)		(85,990)

Retained earnings	6,749		4,650
Total Westwood Holdings Group, Inc. stockholders’ equity	121,840		120,401
Noncontrolling interest in consolidated subsidiary	1,915		2,045
Total equity	123,755		122,446
Total liabilities and stockholders' equity	$	149,042	$	155,167

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share data and share amounts)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
REVENUES:
Advisory fees:
Asset-based	$	16,817	$	17,033
Performance-based	—		555
Trust fees	5,113		5,031

Other, net	802		108
Total revenues	22,732		22,727
EXPENSES:
Employee compensation and benefits	14,711		14,202
Sales and marketing	628		740
Westwood mutual funds	721		732
Information technology	2,290		2,383
Professional services	1,489		1,529
General and administrative	2,901		3,046

(Gain) loss from change in fair value of contingent consideration	(2,949)		(1,060)
Acquisition expenses	—		209
Total expenses	19,791		21,781
Net operating income	2,941		946


Net investment income (loss)	455		172
Other income	185		372

Income before income taxes	3,581		1,490
Income tax provision	1,415		776
Net income	$	2,166	$	714



Total comprehensive income	$	2,166	$	714
Less: Comprehensive income (loss) attributable to noncontrolling interest	(130)		21
Comprehensive income attributable to Westwood Holdings Group, Inc.	$	2,296	$	693
Earnings per share:
Basic	$	0.28	$	0.09
Diluted	$	0.27	$	0.09
Weighted average shares outstanding:
Basic	8,099,028		7,853,921
Diluted	8,392,496		7,968,504

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2024 and 2023

(In thousands, except share amounts)

(Unaudited)


	Common Stock, Par			Additional Paid-In Capital		Treasury Stock		Retained Earnings (Accumulated Deficit)		Noncontrolling Interest		Total
	Shares	Amount
Balance, December 31, 2023	9,140,760	$	119	$	201,622	$	(85,990)	$	4,650	$	2,045	$	122,446
Net income (loss)	—	—		—		—		2,296		(130)		2,166



Issuance of restricted stock, net of forfeitures	268,305	3		(3)		—		—		—		—

Dividends declared ($0.15 per share)	—	—		(1,235)		—		(197)		—		(1,432)

Stock-based compensation expense	—	—		1,515		—		—		—		1,515



Restricted stock returned for payment of taxes	(78,303)	—		—		(940)		—		—		(940)
Balance, March 31, 2024	9,330,762	$	122	$	201,899	$	(86,930)	$	6,749	$	1,915	$	123,755


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

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

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



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

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,166	$	714
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	174		176
Amortization of intangible assets	1,042		1,021
Net change in unrealized (appreciation) depreciation on investments	(632)		(369)

Stock-based compensation expense	1,515		1,748
Deferred income taxes	(844)		(136)
Non-cash lease expense	269		320
Loss on asset disposition	—		69



Fair value change of contingent consideration	(2,949)		(1,060)


Change in operating assets and liabilities:
Net (purchases) sales of trading securities	12,404		47
Accounts receivable	(784)		(657)
Other current assets	(242)		(17)
Accounts payable and accrued liabilities	719		141
Compensation and benefits payable	(6,591)		(5,612)
Income taxes payable	2,240		881
Other liabilities	(354)		(445)
Net cash provided by (used in) operating activities	8,133		(3,179)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition, net of cash acquired	—		(1,168)


Purchase of property and equipment	(3)		(84)



Net cash provided by (used in) investing activities	(3)		(1,252)
CASH FLOWS FROM FINANCING ACTIVITIES:


Restricted stock returned for payment of taxes	(940)		(837)

Cash dividends paid	(1,724)		(1,840)
Net cash used in financing activities	(2,664)		(2,677)

NET CHANGE IN CASH AND CASH EQUIVALENTS	5,466		(7,108)
Cash and cash equivalents, beginning of period	20,422		23,859
Cash and cash equivalents, end of period	$	25,888	$	16,751

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	9	$	32
Accrued dividends	$	2,047	$	1,972

Additional operating lease right-of-use assets	$	—	$	1,217

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. DESCRIPTION OF THE BUSINESS

Westwood Holdings Group, Inc. (“Westwood”, “the Company”, “we”, “us” or “our”) was incorporated under the laws of the State of Delaware on December 12, 2001. Westwood manages investment assets and provides services for its clients through its wholly-owned subsidiaries, Westwood Management Corp., Westwood Advisors, L.L.C. and Salient Advisors, 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") as a result of our 2022 acquisition of the asset management business of Salient Partners, L.P. (the "Salient Acquisition"). In January 2023 we acquired an additional 32% interest in Broadmark for $1.2 million (net of cash acquired), increasing our ownership of Broadmark to approximately 80%, which represents a controlling interest for financial statement consolidation purposes (the "Broadmark Acquisition"). Broadmark is a San Francisco-based registered investment adviser ("RIA") managing and/or sub-advising mutual funds, retail and institutional separately-managed accounts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements are unaudited and are presented in accordance with the requirements for quarterly reports on Form 10-Q and consequently do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). The Company’s Condensed Consolidated Financial Statements reflect all adjustments (consisting only of normal recurring adjustments) necessary in the opinion of management to present fairly our interim financial position and results of operations and cash flows for the periods presented. The accompanying Condensed Consolidated Financial Statements are presented in accordance with GAAP and the rules and regulations of the SEC.

The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements, and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for the periods in these Condensed Consolidated Financial Statements are not necessarily indicative of results for any future period. The accompanying Condensed Consolidated Financial Statements include the accounts of Westwood and its subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.

Recent Accounting Pronouncements

Segment Reporting

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

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Income Taxes

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

3. BUSINESS COMBINATIONS

Broadmark

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

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