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 ~~September 30, 2021~~March 31, 2022


☐			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 ~~October~~April 20, ~~2021: 8,305,035.~~2022: 8,578,015.

WESTWOOD HOLDINGS GROUP, INC.

INDEX


PART I	FINANCIAL INFORMATION	PAGE

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of ~~September~~March 31 ~~30, 2021~~, 202 2 and December 31, ~~2020~~20 21	1

	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~ Incom e for the Three ~~and~~ ~~Nine~~ Months Ended ~~September~~March 31 , ~~30,~~2022 and 2021 ~~and 2020~~	2

	Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2 022 and ~~Nine~~ ~~Months Ended~~ ~~September~~ ~~30,~~ 2021 ~~and 2020~~	3

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three ~~Months~~M onths Ended ~~September~~March 31 ~~30, 2021~~, 2022 and ~~2020~~2021	54

	Notes to Condensed Consolidated Financial Statements	65

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1613

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2519

Item 4.	Controls and Procedures	2520

PART II	OTHER INFORMATION	2621

Item 1.	Legal Proceedings	2621

Item 1A.	Risk Factors	2621

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2721

Item 6.	Exhibits	2822

Signatures		2923

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value and share amounts)

(Unaudited)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	18,461	$	13,016	Cash and cash equivalents	$	21,148	$	15,206
Accounts receivable	Accounts receivable	9,785		9,450		Accounts receivable	9,738		11,152
Investments, at fair value	Investments, at fair value	58,094		69,542		Investments, at fair value	52,343		65,024
Prepaid income taxes	Prepaid income taxes	79		1,700		Prepaid income taxes	235		233
Other current assets	Other current assets	2,451		2,606		Other current assets	2,407		2,246
Total current assets	Total current assets	88,870		96,314		Total current assets	85,871		93,861
Investments	Investments	4,455		8,154		Investments	4,455		4,455
Noncurrent investments at fair value	Noncurrent investments at fair value	4,185		3,527		Noncurrent investments at fair value	4,549		4,513
Goodwill	Goodwill	16,401		16,401		Goodwill	16,401		16,401
Deferred income taxes	Deferred income taxes	991		1,468		Deferred income taxes	827		848
Operating lease right-of-use assets	Operating lease right-of-use assets	5,180		6,103		Operating lease right-of-use assets	4,683		4,868
Intangible assets, net	Intangible assets, net	12,317		13,535		Intangible assets, net	11,506		11,911
Property and equipment, net of accumulated depreciation of $8,456 and $8,056		2,229		3,186
Property and equipment, net of accumulated depreciation of $8,822 and $8,637						Property and equipment, net of accumulated depreciation of $8,822 and $8,637	1,967		2,114
Other long-term assets	Other long-term assets	634		464		Other long-term assets	757		634
Total assets	Total assets	$	135,262	$	149,152	Total assets	$	131,016	$	139,605
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	$	2,775	$	1,627	Accounts payable and accrued liabilities	$	2,337	$	2,637

Dividends payable	Dividends payable	1,333		810		Dividends payable	1,724		1,800
Compensation and benefits payable	Compensation and benefits payable	6,991		7,448		Compensation and benefits payable	2,309		9,530

Operating lease liabilities	Operating lease liabilities	1,410		1,718		Operating lease liabilities	1,469		1,409
Accrued stock repurchases		36		—

Income taxes payable	Income taxes payable	752		191		Income taxes payable	990		466
Total current liabilities	Total current liabilities	13,297		11,794		Total current liabilities	8,829		15,842
Accrued dividends	Accrued dividends	1,148		526		Accrued dividends	492		1,133

Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	5,089		6,121		Noncurrent operating lease liabilities	4,435		4,724
Total long-term liabilities	Total long-term liabilities	6,237		6,647		Total long-term liabilities	4,927		5,857
Total liabilities	Total liabilities	19,534		18,441		Total liabilities	13,756		21,699
Commitments and contingencies (Note 10)	Commitments and contingencies (Note 10)	0		0		Commitments and contingencies (Note 10)	0		0
Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 10,658,681 and outstanding 8,296,864 shares at September 30, 2021; issued 10,500,549 and outstanding 8,326,948 shares at December 31, 2020		108		105
Common stock, $0.01 par value, authorized 25,000,000 shares, issued 11,030,410 and outstanding 8,575,451 shares at March 31, 2022; issued 10,658,644 and outstanding 8,253,491 shares at December 31, 2021						Common stock, $0.01 par value, authorized 25,000,000 shares, issued 11,030,410 and outstanding 8,575,451 shares at March 31, 2022; issued 10,658,644 and outstanding 8,253,491 shares at December 31, 2021	110		107
Additional paid-in capital	Additional paid-in capital	193,901		210,268		Additional paid-in capital	196,564		195,187
Treasury stock, at cost - 2,361,817 shares at September 30, 2021; 2,173,559 shares at December 31, 2020		(81,050)		(77,967)
Treasury stock, at cost - 2,454,959 shares at March 31, 2022; 2,405,154 shares at December 31, 2021						Treasury stock, at cost - 2,454,959 shares at March 31, 2022; 2,405,154 shares at December 31, 2021	(82,576)		(81,750)

Retained earnings (accumulated deficit)		2,769		(1,695)
Retained earnings						Retained earnings	3,162		4,362
Total stockholders' equity	Total stockholders' equity	115,728		130,711		Total stockholders' equity	117,260		117,906
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	135,262	$	149,152	Total liabilities and stockholders' equity	$	131,016	$	139,605

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

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

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
REVENUES:	REVENUES:									REVENUES:
Advisory fees:	Advisory fees:									Advisory fees:
Asset-based	Asset-based	$	12,011	$	8,847	$	33,846	$	29,277	Asset-based	$	11,790	$	10,450
Performance-based	Performance-based	—		713		1,959		1,408		Performance-based	—		1,959
Trust fees	Trust fees	5,952		5,787		18,233		17,395		Trust fees	5,715		6,065
Trust performance-based fees		—		37		—		77

Other, net	Other, net	(103)		70		(375)		(159)		Other, net	(289)		(155)
Total revenues	Total revenues	17,860		15,454		53,663		47,998		Total revenues	17,216		18,319
EXPENSES:	EXPENSES:									EXPENSES:
Employee compensation and benefits	Employee compensation and benefits	10,268		9,515		32,053		32,970		Employee compensation and benefits	10,334		11,548
Sales and marketing	Sales and marketing	292		215		892		946		Sales and marketing	482		230
Westwood mutual funds	Westwood mutual funds	814		421		1,573		1,370		Westwood mutual funds	596		391
Information technology	Information technology	1,937		2,158		6,190		6,219		Information technology	1,829		1,992
Professional services	Professional services	726		1,033		3,471		3,217		Professional services	1,520		1,317
General and administrative	General and administrative	1,779		2,333		5,893		6,830		General and administrative	2,040		2,072
Impairment expense		—		3,403		—		3,403
(Gain) loss on foreign currency transactions		—		419		—		(1,196)

Total expenses	Total expenses	15,816		19,497		50,072		53,759		Total expenses	16,801		17,550
Net operating income (loss)		2,044		(4,043)		3,591		(5,761)
Net operating income										Net operating income	415		769
Realized gains on private investments	Realized gains on private investments	—		—		8,371		—		Realized gains on private investments	—		8,325
Net change in unrealized appreciation (depreciation) on private investments	Net change in unrealized appreciation (depreciation) on private investments	(13)		(73)		(2,124)		(909)		Net change in unrealized appreciation (depreciation) on private investments	37		(2,326)
Investment income	Investment income	131		(43)		562		625		Investment income	(16)		196
Other income	Other income	198		34		390		102		Other income	158		50
Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary		—		(4,193)		—		(4,193)
Income (loss) before income taxes		2,360		(8,318)		10,790		(10,136)

Income before income taxes										Income before income taxes	594		7,014
Income tax expense	Income tax expense	481		1,971		3,840		1,626		Income tax expense	544		2,913
Net income (loss)		$	1,879	$	(10,289)	$	6,950	$	(11,762)
Other comprehensive income (loss):
Foreign currency translation adjustments		—		621		—		(1,250)
Reclassification of cumulative foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary		—		4,193		—		4,193
Total comprehensive income (loss)		$	1,879	$	(5,475)	$	6,950	$	(8,819)
Net income										Net income	$	50	$	4,101

Earnings (loss) per share:

Total comprehensive income										Total comprehensive income	$	50	$	4,101

Earnings per share:										Earnings per share:
Basic	Basic	$	0.24	$	(1.31)	$	0.88	$	(1.46)	Basic	$	0.01	$	0.52
Diluted	Diluted	$	0.24	$	(1.31)	$	0.88	$	(1.46)	Diluted	$	0.01	$	0.52
Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	7,887,259		7,829,478		7,886,359		8,040,417		Basic	7,865,174		7,887,044
Diluted	Diluted	7,956,081		7,829,478		7,933,860		8,040,417		Diluted	7,931,453		7,917,390

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

(In thousands, except share amounts)

(Unaudited)


		Common Stock, Par			Additional Paid-In Capital				Treasury Stock					Retained Earnings			Total				Common Stock, Par							Additional Paid-In Capital			Treasury Stock					Retained Earnings			Total
		Shares	Amount										Total			Shares				Amount			Additional Paid-In Capital		Treasury Stock								Retained Earnings
Balance, June 30, 2021		8,324,702	$	108			$	213,362			$	(80,551)							$	1,757	$	134,676
Balance, December 31, 2021																				Balance, December 31, 2021	8,253,491					$	107			$	195,187			$	(81,750)				$	4,362		$	117,906
Net income	Net income	—	—		—				—					1,879			1,879			Net income	—			—				—			—							50			50

Issuance of restricted stock, net of forfeitures	Issuance of restricted stock, net of forfeitures	(2,336)	—		—				—					—			—			Issuance of restricted stock, net of forfeitures	371,765			3				(3)			—					—			—
Return of capital ($2.50 per share)		—	—		(20,823)				—					—			(20,823)
Dividends declared ($0.10 per share)		—	—		—				—					(867)			(867)

Dividends declared ($0.15 per share)																				Dividends declared ($0.15 per share)	—			—				—			—					(1,250)			(1,250)

Stock-based compensation expense	Stock-based compensation expense	—	—		1,362				—					—			1,362			Stock-based compensation expense	—			—				1,380			—					—			1,380

Purchases of treasury stock	Purchases of treasury stock	(25,502)	—		—				(499)					—			(499)			Purchases of treasury stock	(12,202)			—				—			(200)					—			(200)

Balance, September 30, 2021		8,296,864	$	108	$	193,901			$	(81,050)				$	2,769		$	115,728
Restricted stock returned for payment of taxes																				Restricted stock returned for payment of taxes	(37,603)			—				—			(626)					—			(626)
Balance, March 31, 2022																				Balance, March 31, 2022	8,575,451			$	110			$	196,564		$	(82,576)				$	3,162		$	117,260

Common Stock, Par Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Earnings (Accumulated Deficit) Total
Shares Amount
Balance, June 30, 2020 8,382,342 $ 106 $ 208,572 $ (78,050) $ (4,814) $ 5,615 $ 131,429
Net loss — — — — — (10,289) (10,289)
Other comprehensive income — — — — 621 — 621
Foreign currency translation adjustments reclassification — — — — 4,193 — 4,193
Issuance of restricted stock, net of forfeitures (15,531) — — — — — —
Stock-based compensation expense — — 488 — — — 488
Dividend reversal for forfeited restricted stock — — — — — 50 50
Balance, September 30, 2020 8,366,811 $ 106 $ 209,060 $ (78,050) $ — $ (4,624) $ 126,492


	Common Stock, Par			Additional Paid-In Capital		Treasury Stock		Retained Earnings (Accumulated Deficit)		Total
	Shares	Amount
Balance, December 31, 2020	8,326,948	$	105	$	210,268	$	(77,967)	$	(1,695)	$	130,711
Net income	—	—		—		—		4,101		4,101


Issuance of restricted stock, net of forfeitures	129,905	2		(2)		—		—		—
Dividends declared ($0.10 per share)	—	—		—		—		(801)		(801)
Stock-based compensation expense	—	—		1,722		—		—		1,722

Purchases of treasury stock	(92,491)	—		—		(1,404)		—		(1,404)

Restricted stock returned for payment of taxes	(51,359)	—		—		(884)		—		(884)
Balance, March 31, 2021	8,313,003	$	107	$	211,988	$	(80,255)	$	1,605	$	133,445

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~

~~For the Nine Months Ended September 30, 2021 and 2020~~CASH FLOWS

(In ~~thousands, except share amounts)~~

~~(Unaudited)~~thousands)

(Unaudited)

Common Stock, Par Additional Paid-In Capital Treasury Stock Retained Earnings (Accumulated Deficit) Total
Shares Amount
Balance, December 31, 2020 8,326,948 $ 105 $ 210,268 $ (77,967) $ (1,695) $ 130,711
Net income — — — — 6,950 6,950
Issuance of restricted stock, net of forfeitures 158,134 3 (3) — — —
Return of capital ($2.50 per share) — — (20,823) — — (20,823)
Dividends declared ($0.10 per share) — — — — (2,486) (2,486)
Stock-based compensation expense — — 4,459 — — 4,459
Purchases of treasury stock (136,859) — — (2,199) — (2,199)
Restricted stock returned for payment of taxes (51,359) — — (884) — (884)
Balance, September 30, 2021 8,296,864 $ 108 $ 193,901 $ (81,050) $ 2,769 $ 115,728

Common Stock, Par Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Loss Retained Earnings (Accumulated Deficit) Total
Shares Amount
Balance, December 31, 2019 8,881,086 $ 103 $ 203,441 $ (63,281) $ (2,943) $ 10,967 $ 148,287
Net loss — — — — — (11,762) (11,762)
Other comprehensive loss — — — — (1,250) — (1,250)
Foreign currency translation adjustments reclassification — — — — 4,193 — 4,193
Issuance of restricted stock, net of forfeitures 236,000 3 (3) — — — —
Dividends declared ($0.43 per share), net of forfeitures — — — — — (3,829) (3,829)
Stock-based compensation expense — — 5,409 — — — 5,409
Reclassification of compensation liability to be paid in shares — — 213 — — — 213
Purchases of treasury stock (679,756) — — (12,952) — — (12,952)
Purchases of treasury stock under employee stock plans (27,474) — — (697) — — (697)
Restricted stock returned for payment of taxes (43,045) — — (1,120) — — (1,120)
Balance, September 30, 2020 8,366,811 $ 106 $ 209,060 $ (78,050) $ — $ (4,624) $ 126,492


	Three Months Ended March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	50	$	4,101
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	177		207
Amortization of intangible assets	405		406
Net change in unrealized depreciation on investments	239		2,432
Realized gains on private investments	—		(8,325)
Stock based compensation expense	1,380		1,722
Deferred income taxes	21		40
Non-cash lease expense	185		307
Gain on asset disposition	—		(148)



Change in operating assets and liabilities:
Net sales (purchases) of trading securities	12,406		(4,444)
Accounts receivable	1,414		(2,295)
Other current assets	(283)		23
Accounts payable and accrued liabilities	(301)		803
Compensation and benefits payable	(7,221)		(5,026)
Income taxes payable	524		3,630
Other liabilities	(226)		(478)
Net cash provided by (used in) operating activities	8,770		(7,045)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of investments	—		9,258
Sale of property and equipment	—		501
Purchase of property and equipment	(30)		(9)
Purchase of investments	—		(15)

Net cash (used in) provided by investing activities	(30)		9,735
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock	(200)		(1,045)

Restricted stock returned for payment of taxes	(626)		(884)

Cash dividends paid	(1,972)		(801)
Net cash used in financing activities	(2,798)		(2,730)
Effect of currency rate changes on cash	—		13
NET CHANGE IN CASH AND CASH EQUIVALENTS	5,942		(27)
Cash and cash equivalents, beginning of period	15,206		13,016
Cash and cash equivalents, end of period	$	21,148	$	12,989

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	—	$	769
Accrued dividends	$	2,216	$	1,339
Accrued purchases of treasury stock	$	—	$	359

See Notes to Condensed Consolidated Financial Statements.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In thousands)~~

~~(Unaudited)~~
Nine Months Ended September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,950 $ (11,762)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation 571 697
Amortization of intangible assets 1,218 1,293
Net change in unrealized (appreciation) depreciation on investments 2,425 1,132
Realized gains on private investments (8,371) —
Stock based compensation expense 4,459 5,409
Deferred income taxes 477 (191)
Non-cash lease expense 923 1,253
Gain on asset disposition (148) —
Impairment of goodwill — 3,403
Currency translation adjustment reclassification — 4,193
Change in operating assets and liabilities:
Net (purchases) sales of trading securities 11,191 (11,891)
Accounts receivable (335) 3,634
Other current assets (15) 246
Accounts payable and accrued liabilities 1,149 (47)
Compensation and benefits payable (430) (3,769)
Income taxes payable 2,191 492
Other liabilities (1,195) (1,174)
Net cash (used in) provided by operating activities 21,060 (7,082)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of investments 9,258 —
Sale of property and equipment 501 —
Purchase of property and equipment (114) (92)
Purchase of investments (15) —
Net cash provided by (used in) investing activities 9,630 (92)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock (2,164) (12,952)
Purchase of treasury stock under employee stock plans — (697)
Restricted stock returned for payment of taxes (884) (1,120)
Cash dividends paid (22,125) (11,043)
Net cash used in financing activities (25,173) (25,812)
Effect of currency rate changes on cash (72) (1,187)
NET CHANGE IN CASH AND CASH EQUIVALENTS 5,445 (34,173)
Cash and cash equivalents, beginning of period 13,016 49,766
Cash and cash equivalents, end of period $ 18,461 $ 15,593
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for income taxes $ 506 $ 1,294
Accrued dividends $ 2,481 $ 1,448
Accrued purchases of treasury stock $ 36 $ —

~~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. and Westwood Advisors, L.L.C. (referred to hereinafter together as “Westwood Management”)~~, Westwood Trust~~ and Westwood ~~International Advisors Inc. (“Westwood International Advisors”).~~ ~~On July 27, 2020, Westwood’s Board of Directors~~ ~~approved the liquidation of Westwood International Advisors, which occurred effective September 30, 2020.~~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. Prior to its liquidation, our wholly owned subsidiary, Westwood International Advisors, provided investment advisory services to institutional clients, the Westwood Funds®, other mutual funds, the UCITS Fund (which was liquidated in June 2020), 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"). Accordingly, 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 advisor ("RIA") under the Investment Advisers Act of 1940. Westwood Trust is chartered and regulated by the Texas Department of Banking.

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, ~~2020, filed with the SEC.~~2021. 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~~

~~Recently Adopted~~

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Simplifying the Accounting for Income Taxes~~, which is intended to simplify various aspects of the income tax accounting guidance, including interim-period accounting for enacted changes in tax law. ASU 2019-12 is effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted. We adopted this ASU as of January 1, 2021 and it did not have a significant effect on our Condensed Consolidated Financial Statements.

3. REVENUE

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

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

revenues from investment advisory fees, trust fees and other sources of revenues. Advisory and trust fees are calculated based on a percentage of AUM and the performance obligation is realized over the current calendar quarter. Once clients receive our investment advisory services we have an enforceable right to payment.

Advisory Fee Revenues

Our advisory fees are generated by Westwood Management ~~and Westwood International Advisors (prior to its closure, effective September 30, 2020),~~ which ~~manage~~manages client accounts under investment advisory and sub-advisory agreements. Advisory fees are typically calculated based on a percentage of AUM 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 Condensed Consolidated Financial Statements contain no deferred advisory fee revenues. Advisory clients typically consist of institutional and mutual fund accounts.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

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) subadvisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles including ~~the UCITS Fund and~~ collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers. ~~The UCITS Fund was liquidated in June 2020.~~

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 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.

The revenue is based on future market performance and is subject to 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. 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.

Revenue Disaggregated

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

Sales taxes are excluded from revenues. The following table presents our revenue disaggregated by account type (in thousands). In 2021, we recast certain prior year revenues related to performance-based fees.


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Advisory Fees:	Advisory Fees:									Advisory Fees:
Institutional	Institutional	$	7,579	$	6,897	$	23,662	$	22,349	Institutional	$	7,048	$	8,858
Mutual Funds	Mutual Funds	4,232		2,541		11,648		8,005		Mutual Funds	4,549		3,414
Wealth Management	Wealth Management	200		122		495		331		Wealth Management	193		137

Trust Fees	Trust Fees	5,952		5,824		18,233		17,472		Trust Fees	5,715		6,065

Other, net	Other, net	(103)		70		(375)		(159)		Other, net	(289)		(155)
Total revenues	Total revenues	$	17,860	$	15,454	$	53,663	$	47,998	Total revenues	$	17,216	$	18,319

We serve clients primarily in the United States, as well as in certain international locations. The following table presents our revenue disaggregated by our clients' geographical locations (in thousands):


Three Months Ended September 30, 2021		Advisory		Trust		Performance-based		Other		Total
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022	Advisory		Trust		Other		Total

Canada	Canada	$	293	$	—	$	—	$	—	$	293	Canada	$	291	$	—	$	—	$	291

United States	United States	11,718		5,952		—		(103)		17,567		United States	11,499		5,715		(289)		16,925
Total	Total	$	12,011	$	5,952	$	—	$	(103)	$	17,860	Total	$	11,790	$	5,715	$	(289)	$	17,216

Three Months Ended September 30, 2020 Advisory Trust Performance-based Other Total
Canada $ 337 $ — $ — $ — $ 337
Europe 475 — 708 — 1,183
United States 8,035 5,787 42 70 13,934
Total $ 8,847 $ 5,787 $ 750 $ 70 $ 15,454

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Nine Months Ended September 30, 2021 Advisory Trust Performance-based Other Total
Canada $ 866 $ — $ — $ — $ 866
Europe 638 — 262 — 900
United States 32,352 18,233 1,687 (375) 51,897
Total $ 33,856 $ 18,233 $ 1,949 $ (375) $ 53,663


Nine Months Ended September 30, 2020		Advisory		Trust		Performance-based		Other		Total
Asia		$	729	$	—	$	—	$	—	$	729
Three Months Ended March 31, 2021												Three Months Ended March 31, 2021	Advisory		Trust		Performance-based		Other		Total

Canada	Canada	1,234		—		—		—		1,234		Canada	$	276	$	—	$	—	$	—	$	276
Europe	Europe	2,299		—		803		—		3,102		Europe	638		—		262		—		900
United States	United States	25,015		17,395		682		(159)		42,933		United States	9,546		6,065		1,687		(155)		17,143
Total	Total	$	29,277	$	17,395	$	1,485	$	(159)	$	47,998	Total	$	10,460	$	6,065	$	1,949	$	(155)	$	18,319

4. SEGMENT REPORTING

We operate 2 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 reviews 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 and Economic Earnings. Westwood Holdings Group, Inc., the parent company of Advisory and Trust, does not have revenues and

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

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) subadvisory 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 ~~the UCITS Fund (liquidated in June 2020) and~~ collective investment trusts. Westwood Management ~~and Westwood International Advisors (prior to its closure, effective September 30, 2020), which provide~~provides investment advisory services to similar clients, ~~are~~and is included in our Advisory segment.

Trust

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.
(in thousands) Advisory Trust Westwood
Holdings Eliminations Consolidated
Three Months Ended September 30, 2021
Net fee revenues from external sources $ 12,011 $ 5,952 $ — $ — $ 17,963
Net intersegment revenues 576 93 — (669) —
Other, net (103) — — — (103)
Total revenues $ 12,484 $ 6,045 $ — $ (669) $ 17,860
Segment assets $ 215,903 $ 57,503 $ 12,261 $ (150,405) $ 135,262
Segment goodwill $ — $ 16,401 $ — $ — $ 16,401
Three Months Ended September 30, 2020
Net fee revenues from external sources $ 9,560 $ 5,824 $ — $ — $ 15,384
Net intersegment revenues 590 70 — (660) —
Other, net 70 — — — 70
Total revenues $ 10,220 $ 5,894 $ — $ (660) $ 15,454
Segment assets $ 201,307 $ 52,723 $ 16,892 $ (126,538) $ 144,384
Segment goodwill $ — $ 16,401 $ — $ — $ 16,401


(in thousands)	Advisory		Trust		Westwood Holdings		Eliminations		Consolidated
Three Months Ended March 31, 2022
Net fee revenues from external sources	$	11,790	$	5,715	$	—	$	—	$	17,505
Net intersegment revenues	577		90		—		(667)		—

Other, net	(289)		—		—		—		(289)
Total revenues	$	12,078	$	5,805	$	—	$	(667)	$	17,216

Segment assets	$	222,545	$	57,913	$	12,876	$	(162,318)	$	131,016
Segment goodwill	$	—	$	16,401	$	—	$	—	$	16,401

Three Months Ended March 31, 2021
Net fee revenues from external sources	$	12,409	$	6,065	$	—	$	—	$	18,474
Net intersegment revenues	676		81		—		(757)		—

Other, net	(155)		—		—		—		(155)
Total revenues	$	12,930	$	6,146	$	—	$	(757)	$	18,319

Segment assets	$	207,193	$	54,143	$	12,603	$	(124,275)	$	149,664
Segment goodwill	$	—	$	16,401	$	—	$	—	$	16,401

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

(in thousands) Advisory Trust Westwood Holdings Eliminations Consolidated
Nine Months Ended September 30, 2021
Net fee revenues from external sources $ 35,805 $ 18,233 $ — $ — $ 54,038
Net intersegment revenues 1,876 261 — (2,137) —
Other, net (375) — — — (375)
Total revenues $ 37,306 $ 18,494 $ — $ (2,137) $ 53,663
Nine Months Ended September 30, 2020
Net fee revenues from external sources $ 30,685 $ 17,472 $ — $ — $ 48,157
Net intersegment revenues 1,809 187 — (1,996) —
Net interest and dividend revenue 31 — — — 31
Other, net (190) — — — (190)
Total revenues $ 32,335 $ 17,659 $ — $ (1,996) $ 47,998

5. INVESTMENTS

During 2018, we made a $5.4 million strategic investment in InvestCloud, a digital financial services provider ("InvestCloud"), which is included in “Investments” on our Condensed Consolidated Balance Sheets. 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 observable price changes for this investment in the year ended December 31, 2019, we recorded an unrealized gain of $2.8 million. Following InvestCloud's recapitalization in the first quarter of 2021, we recorded a realized gain of approximately $8.3 million when our originally purchased shares were redeemed. Following this redemption we re-invested $4.4 million of our proceeds into newly issued shares of InvestCloud.

Our investment in Charis, the parent company of Westwood Private Bank ("Charis"), is included in “Noncurrent investments at fair value” on our Condensed Consolidated Balance Sheets and is measured at fair value on a recurring basis. In the ~~nine~~three months ended ~~September 30,~~March 31, 2021, we recorded unrealized gains of approximately ~~$0.7~~$0.4 million following fair value increases from market transactions. ~~In the nine months ended September 30, 2020, we recorded an unrealized loss of $0.7 million, primarily as a result of the global macroeconomic effects of COVID-19.~~

In 2019 we made a $0.3 million investment in Westwood Hospitality Fund I, LLC, a private investment fund. Our investment is included in “Noncurrent investments at fair value” on our Condensed Consolidated Balance Sheets and is measured at fair value on a recurring basis using net asset value (“NAV”) as a practical expedient.

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):


	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2022:
U.S. Government and Government agency obligations	$	18,267	$	—	$	(529)	$	17,738
Money market funds	28,272		—		—		28,272
Equity funds	4,760		88		(90)		4,758
Equities	1,309		127		—		1,436
Exchange-traded bond funds	144		—		(5)		139
Total trading securities	52,752		215		(624)		52,343
Private investment fund	265		—		(42)		223
Private equity	3,420		906		—		4,326
Total investments carried at fair value	$	56,437	$	1,121	$	(666)	$	56,892

December 31, 2021:
U.S. Government and Government agency obligations	$	39,926	$	—	$	(491)	$	39,435
Money market funds	19,661		—		—		19,661
Equity funds	4,135		158		(7)		4,286
Equities	1,296		206		—		1,502
Exchange-traded bond funds	140		—		—		140
Total trading securities	65,158		364		(498)		65,024
Private investment fund	265		—		(121)		144
Private equity	3,420		949		—		4,369
Total investments carried at fair value	$	68,843	$	1,313	$	(619)	$	69,537

6. FAIR VALUE MEASUREMENTS

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~Investments carried at fair value are presented in the table below (in thousands):~~
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair
Value
September 30, 2021:
U.S. Government and Government agency obligations $ 43,860 $ — $ (508) $ 43,352
Money market funds 9,748 — (20) 9,728
Equity funds 1,258 118 — 1,376
Equities 3,469 29 (3) 3,495
Exchange-traded bond funds 142 1 — 143
Total trading securities 58,477 148 (531) 58,094
Private investment fund 265 — (154) 111
Private equity 3,420 667 (13) 4,074
Total investments carried at fair value $ 62,162 $ 815 $ (698) $ 62,279
December 31, 2020:
U.S. Government and Government agency obligations $ 65,132 $ 2 $ (180) $ 64,954
Money market funds 4,003 — — 4,003
Equity funds 90 — (5) 85
Equities 288 94 — 382
Exchange-traded bond funds 115 3 — 118
Total trading securities 69,628 99 (185) 69,542
Private investment fund 250 — (154) 96
Private equity 3,420 11 — 3,431
Total investments carried at fair value $ 73,298 $ 110 $ (339) $ 73,069

~~6. FAIR VALUE MEASUREMENTS~~

ASC 820, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value and requires 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

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

•Level 3 – significant unobservable inputs where there is little or no market activity

Our strategic investment in InvestCloud, discussed in Note 5 “Investments,” is excluded from the recurring fair value table shown below because we have elected to apply the measurement alternative for this investment.

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

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


	Level 1		Level 2		Level 3		Investments Measured at NAV (1)		Total
As of March 31, 2022:
Investments in trading securities	$	52,343	$	—	$	—	$	—	$	52,343
Private investment fund	—		—		—		223		223
Private equity	—		—		4,326		—		4,326
Total assets measured at fair value	$	52,343	$	—	$	4,326	$	223	$	56,892

As of December 31, 2021:
Investments in trading securities	$	65,024	$	—	$	—	$	—	$	65,024
Private investment fund	—		—		—		144		144
Private equity	—		—		4,369		—		4,369
Total assets measured at fair value	$	65,024	$	—	$	4,369	$	144	$	69,537

(1) Comprised of certain investments measured at fair value using net asset value ("NAV") as a practical expedient. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on our Condensed Consolidated Balance Sheets.

Level 1 Level 2 Level 3
Investments Measured at NAV (1)
Total
As of September 30, 2021:
Investments in trading securities $ 58,094 $ — $ — $ — $ 58,094
Private investment fund — — — 111 111
Private equity — — 4,074 — 4,074
Total assets measured at fair value $ 58,094 $ — $ 4,074 $ 111 $ 62,279
As of December 31, 2020:
Investments in trading securities $ 69,542 $ — $ — $ — $ 69,542
Private investment fund — — — 96 96
Private equity — — 3,431 — 3,431
Total assets measured at fair value $ 69,542 $ — $ 3,431 $ 96 $ 73,069
(1) Comprised of certain investments measured at fair value using net asset value ("NAV") as a practical expedient. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented on our Condensed Consolidated Balance Sheets.

Our investment in Charis is included within Level 3 of the fair value hierarchy as we value that investment utilizing inputs not observable in the market. Our investment is measured at fair value on a recurring basis using a market approach based on a price to tangible book value multiple range that is determined to be reasonable in the current environment, or on market transactions. Management believes this valuation methodology is consistent with the banking industry and we will reevaluate our methodology and inputs on a quarterly basis.

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


		Fair Value using Significant Unobservable Inputs (Level 3)									Fair Value using Significant Unobservable Inputs (Level 3)
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Beginning balance	Beginning balance	$	4,087	$	3,314	$	3,431	$	3,975	Beginning balance	$	4,369	$	3,431

Unrealized gains (losses) on private investments	Unrealized gains (losses) on private investments	(13)		(73)		643		(734)		Unrealized gains (losses) on private investments	(43)		441
Ending balance	Ending balance	$	4,074	$	3,241	$	4,074	$	3,241	Ending balance	$	4,326	$	3,872

The ~~September 30, 2021~~March 31, 2022 private investment fair value of ~~$4.1~~$4.3 million was valued using a market approach based on a price to tangible book value multiple, with unobservable book value multiples ranging from ~~$1.42~~$1.43 to ~~$2.22~~$2.13 per share, with a weighted average of ~~$1.50~~$1.57 per share. Significant increases (decreases) in book value multiples in isolation would have resulted in a significantly higher (lower) fair value measurement.

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

7. INCOME TAXES

Our effective income tax rate differed from the 21% statutory rate for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 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. In addition, in the first quarter of 2020, a discrete benefit adjustment related to the remeasurement of certain deferred taxes following the enactment of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") lowered our effective tax rate.dates.

Our effective income tax rate differed from the 21% statutory rate for the three and nine months ended September 30, 2020 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, and a 5% incremental Canadian withholding tax (net of U.S. tax federal deduction) incurred on repatriated funds following closure of our Westwood International Advisors office in the third quarter of 2020, partially offset by ~~the enactment of the CARES Act which lowered our effective tax rate~~.

~~WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~(Unaudited)~~

8. EARNINGS ~~(LOSS)~~ PER SHARE

Basic earnings ~~(loss)~~ per common share is computed by dividing net income ~~(loss)~~ available to common stockholders 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. There were approximately ~~40,000~~85,000 and ~~623,000~~234,000 anti-dilutive restricted shares outstanding for the three months ended ~~September 30,~~March 31, 2022 and March 31, 2021, ~~and September 30, 2020, respectively. There were approximately 138,000 and 360,000 anti-dilutive restricted shares outstanding for the nine months ended September 30, 2021 and September 30, 2020,~~ respectively.

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Net income (loss)		$	1,879	$	(10,289)	$	6,950	$	(11,762)
Net income										Net income	$	50	$	4,101

Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	7,887,259		7,829,478		7,886,359		8,040,417		Weighted average shares outstanding - basic	7,865,174		7,887,044
Dilutive potential shares from unvested restricted shares	Dilutive potential shares from unvested restricted shares	68,822		—		47,501		—		Dilutive potential shares from unvested restricted shares	66,279		30,346

Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	7,956,081		7,829,478		7,933,860		8,040,417		Weighted average shares outstanding - diluted	7,931,453		7,917,390

Earnings (loss) per share:
Earnings per share:										Earnings per share:
Basic	Basic	$	0.24	$	(1.31)	$	0.88	$	(1.46)	Basic	$	0.01	$	0.52
Diluted	Diluted	$	0.24	$	(1.31)	$	0.88	$	(1.46)	Diluted	$	0.01	$	0.52

9. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the cost of acquired assets over the fair value of the underlying identifiable assets at the date of acquisition. Goodwill is not amortized but is tested for impairment at least annually. We completed our most recent annual goodwill impairment assessment during the third quarter of 2021, and determined that no goodwill impairment related to the Trust segment was required. ~~In 2020 we recorded $3.4 million of~~There was no goodwill impairment ~~expense related to our Advisory segment.~~in the Trust segment during the three months ended March 31, 2022 or March 31, 2021.

Other Intangible Assets

Our intangible assets represent the acquisition date fair value of acquired client relationships, trade names, non-compete agreements and internally developed software and are reflected net of amortization. In valuing these assets, we made significant estimates regarding their useful lives, growth rates and potential attrition. We periodically review intangible assets for events or circumstances that would indicate impairment. No intangible asset impairments were recorded during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 or ~~September 30, 2020.~~March 31, 2021.

10. LEASES

In February 2021, we sublet approximately 10,000 square feet of our Dallas, Texas office space to a third party. The agreement began in the first quarter of 2021 and provides for monthly rent of approximately $20,000 through the fourth quarter of 2025.

~~In February 2021, we terminated our Toronto, Ontario office space lease, originally expiring in October 2021.~~

As of ~~September 30, 2021, aside from the above,~~March 31, 2022 there have been no material changes outside the ordinary course of business to our leases since December 31, ~~2020.~~2021. For information regarding our leases, refer to Note 11 “Leases” in Part IV, Item 15. “Exhibits, Financial Statement Schedules” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

11. STOCKHOLDERS' EQUITY

Share Repurchase Program

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~11. STOCKHOLDERS' EQUITY~~

~~Share Repurchase Program~~

In February 2020, our Board of Directors authorized management to repurchase up to an additional $10.0 million of our outstanding common stock on the open market or in privately negotiated transactions. In April 2020, our Board of Directors authorized management to repurchase up to an additional $10.0 million of share repurchases under our share repurchase program.

During the three months ended ~~September 30, 2021,~~March 31, 2022, the Company repurchased ~~25,502~~12,202 shares of our common stock at an average price of ~~$19.57~~$16.39 per share, including commissions, for an aggregate purchase price of ~~$0.5~~$0.2 million under our share repurchase plan. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, the Company repurchased ~~136,859~~92,491 shares of our common stock at an average price of ~~$16.07~~$15.19 per share, including commissions, for an aggregate purchase price of ~~$2.2~~$1.4 million under our share repurchase plan.

The Company did not repurchase any shares of our common stock during the three months ended September 30, 2020. During the nine months ended September 30, 2020, the Company repurchased 679,756 shares of our common stock at an average price of $19.05 per share, including commissions, for an aggregate purchase price of $13.0 million under our share repurchase plan.

~~Return of Capital Distribution~~

On July 27, 2021, we declared a return of capital distribution of $2.50 per common share, which was paid in August 2021. The $20.8 million distribution to shareholders was treated as a return of capital and recorded as a reduction to additional paid-in-capital in the condensed consolidated balance sheets as of September 30, 2021.

12. VARIABLE INTEREST ENTITIES

We evaluated (i) our relationship as sponsor of the Common Trust Funds (“CTFs”) and managing member of the private equity funds Westwood Hospitality Fund I, LLC and Westwood Technology Opportunities Fund I, LP (collectively the “Private Funds”), (ii) our advisory relationships with the Westwood Funds®, and (iii) our investments in InvestCloud and Charis discussed in Note 5 “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 and Private Funds 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 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.

Based on our analyses, we determined the Westwood Funds® and Private Equity (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.

Based on our analyses of our investments in these entities for the periods ended ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we have not consolidated the CTFs or Private Funds under the VIE method or the Westwood Funds® or Private Equity under the VOE method.

We recognized fee revenue from the Westwood VIEs and Westwood VOEs as follows (in millions):
Three Months Ended Nine Months Ended
September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020
Fee Revenues $ 5.5 $ 4.2 $ 15.8 $ 14.4


	Three Months Ended
	March 31, 2022		March 31, 2021
Fee Revenues	$	5.7	$	4.9

The following table displays the AUM and the risk of loss in each vehicle (in millions):


	As of March 31, 2022
	Assets Under Management		Corporate Investment		Amount at Risk
VIEs/VOEs:
Westwood Funds®	$	2,957	$	—	$	—
Common Trust Funds	876		—		—

Private Funds	7		0.2		0.2
Private Equity	—		8.8		8.8
All other assets:
Wealth Management	3,298
Institutional	6,716
Total Assets Under Management	$	13,854

1411

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

~~The following table displays the AUM and the risk of loss in each vehicle (in millions):~~
As of September 30, 2021
Assets
Under
Management Corporate
Investment Amount at Risk
VIEs/VOEs:
Westwood Funds® $ 2,863 0 0
Common Trust Funds 892 0 0
Private Funds 4 0.1 0.1
Private Equity — 8.3 8.3
All other assets:
Wealth Management 3,340
Institutional 6,701
Total Assets Under Management $ 13,800

13. RELATED PARTY TRANSACTIONS

Some of our directors, executive officers and their affiliates invest personal funds directly in trust accounts that we manage. For both of the three months ended September 30, 2021 and September 30, 2020, we recorded trust fees from these accounts of $0.1 million. For both of the ~~nine months ended~~ September 30, 2021 and September 30, 2020, we recorded trust fees from these accounts of $0.3 million. There were no amounts due from these accounts as of September 30, 2021, and there was $0.1 million due from these accounts as of December 31, 2020.

One of our directors serves as a consultant to the Company under a consulting agreement. We recorded expenses of $0.1 million related to this agreement for both of the nine months ended September 30, 2021 and September 30, 2020.

The Company engages in transactions with its affiliates in the ordinary course of business. Westwood ~~International Advisors (prior to its closure, effective September 30, 2020) and Westwood~~ Management ~~provide~~provides investment advisory services to the ~~UCITS Fund and the~~ Westwood Funds®~~. Certain members of our management served on the board of directors of the UCITS Fund (liquidated as of June 2020)~~. Under the terms of the investment advisory agreements, the Company earns quarterly fees paid by clients of the fund or by the funds directly. The fees are based on negotiated fee schedules applied to AUM. ~~The~~For the three months ended March 31, 2022 and March 31, 2021, the Company earned noinsignificant fees from the affiliated ~~funds~~funds.

One of our directors serves as a consultant to the Company under a consulting agreement. We recorded insignificant expenses related to this agreement for both the three months ended ~~September 30, 2020,~~March 31, 2022 and ~~$0.6 million in fees for the~~ March 31, 2021~~nine months ended~~ ~~September 30, 2020.~~.

14. SUBSEQUENT EVENTS

Dividends Declared

On ~~October~~April 27, ~~2021,~~2022, the Board of Directors declared a quarterly cash dividend of $0.15 per share of common stock payable on ~~January 3,~~July 1, 2022 to stockholders of record on ~~December~~June 3, ~~2021.~~2022.

1512

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

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, ~~2020, filed with the SEC,~~2021 and those risks set forth below:

•the composition and market value of our AUM;

•our ability to maintain our fee structure in light of competitive fee pressures;

•our stockholder rights agreement may make it more difficult for others to obtain control over us, even if it would be beneficial to our stockholders;

•risks associated with actions of activist stockholders;

•distributions to our common stockholders have included and may in the future include a return of capital;

•inclusion of foreign company investments in our AUM;

•regulations adversely affecting the financial services industry;

•our ability to maintain effective cyber security;

•litigation risks;

•our ability to develop and market new investment strategies successfully;

•our reputation and our relationships with current and potential customers;

•our ability to attract and retain qualified personnel;

•our ability to perform operational tasks;

•our ability to select and oversee third-party vendors;

•our dependence on the operations and funds of our subsidiaries;

•our ability to maintain effective information systems;

•our ability to prevent misuse of assets and information in the possession of our employees and third-party vendors, which could damage our reputation and result in costly litigation and liability for our clients and us;

•our stock is thinly traded and may be subject to volatility;

•in addition to our stockholder rights agreement, our organizational documents contain provisions that may prevent or deter another group from paying a premium over the market price to our stockholders to acquire our stock;

•competition in the investment management industry;

•our ability to avoid termination of client agreements and the related investment redemptions;

•the significant concentration of our revenues in a small number of customers;

•our relationships with investment consulting firms;

•the impact of the recent COVID-19 pandemic;

•our ability to identify and execute on our strategic initiatives;

•our ability to declare and pay dividends;

1613

•our ability to fund future capital requirements on favorable terms;

•our ability to properly address conflicts of interest;

•our ability to maintain adequate insurance coverage; and

•our ability to maintain an effective system of internal controls.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. We are not obligated and do not undertake an obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events or otherwise.

Overview

We manage investment assets and provide services for our clients through our subsidiaries, Westwood Management Corp. and Westwood Advisors, L.L.C. (each of which is an SEC-registered investment advisor and referred to hereinafter together as “Westwood Management”)~~, Westwood International Advisors Inc. (“Westwood International Advisors”)~~ and Westwood Trust. Westwood Management provides investment advisory services to institutional investors, a family of mutual funds called the Westwood Funds®, other mutual funds, individuals and clients of Westwood Trust.

~~On July 27, 2020, our Board of Directors approved the closure of Westwood International Advisors and Westwood’s office in Toronto, Canada.~~

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. Westwood International Advisors provided investment advisory services to an Irish investment company authorized pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulation 2011 (as amended) (the “UCITS Fund”), which was liquidated in June 2020.

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, particularly ~~the~~its impact on global stock markets. Beginning in 2020, we have taken a number of precautionary measures designed to help minimize the risk of spreading the virus to our employees, including ~~encouraging~~enabling our employees to work remotely. The investments we have made in technology over the past several years, particularly our significant investments in cloud-based systems and business continuity planning, have allowed our team to serve our clients ~~interchangeably~~seamlessly from their homes or our offices. While our ability to meet with clients declined at the beginning of the pandemic, subsequently we were able to restore our communications to pre-pandemic levels as our clients embraced digital interactions.

Revenues

We derive our revenues from investment advisory fees, trust fees and other revenues. Our advisory fees are generated by Westwood Management ~~and Westwood International Advisors (prior to its closure, effective September 30, 2020),~~ which ~~manage~~manages client accounts under investment advisory and subadvisory agreements. Advisory fees are typically calculated based on a percentage of AUM 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.

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.

Our other revenues primarily consist of investment income from our seed money investments into new investment strategies.

Employee Compensation and Benefits

Employee compensation and benefits expenses generally consist of salaries, incentive compensation, equity-based compensation and benefits.

Sales and Marketing

Sales and marketing expenses relate to our marketing efforts, including travel and entertainment, direct marketing and advertising costs.

Westwood Mutual Funds

Westwood Mutual Funds expenses relate to our marketing, distribution and administration of the Westwood Funds®.

Information Technology

Information technology expenses are generally costs associated with proprietary investment research tools, maintenance and support, computing hardware, software licenses, telecommunications and other related costs.

Professional Services

Professional services expenses generally consist of costs associated with subadvisory fees, audit, tax, legal and other professional services.

General and Administrative

General and administrative expenses generally consist of costs associated with the lease of office space, amortization, depreciation, insurance, custody expense, Board of Directors' fees, investor relations, licenses and fees, office supplies and other miscellaneous expenses.

~~Impairment Expense~~

~~Impairment expense consists of long-lived asset impairments, generally goodwill or intangible assets.~~

~~Gain (Loss) on Foreign Currency Transactions~~

~~Gain (loss) on foreign currency transactions consists of foreign currency transactions primarily related to Westwood International Advisors.~~

Realized Gains on Private Investments

Realized gains on private investments includes amounts by which the net proceeds from the sale or redemption of our private investments exceeded costs.

Net change in unrealized appreciation (depreciation) on Private Investments

Net change in unrealized appreciation (depreciation) on private investments includes changes in the value of our private equity investments.

Investment Income

Investment income primarily includes interest and dividend income on fixed income securities and money market funds.

Other Income

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

~~Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary~~

Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary includes a cumulative adjustment following the substantially completed liquidation of a foreign subsidiary, Westwood International Advisors.

Assets Under Management

AUM ~~increased $1.8~~decreased $0.6 billion to ~~$13.8~~$13.9 billion at ~~September 30, 2021~~March 31, 2022 compared with ~~$12.0~~$14.5 billion at ~~September 30, 2020.~~March 31, 2021. The average of beginning and ending AUM for the ~~third~~first quarter of ~~2021~~2022 was ~~$14.1~~$14.2 billion compared to ~~$11.9~~$13.8 billion for the ~~third~~first quarter of ~~2020.~~

2021.

The following table displays AUM as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (in millions):


		As of September 30,							As of March 31,
		2021		2020		Change			2022		2021		Change
Institutional(1)	Institutional(1)	$	6,701	$	6,044	11	%	Institutional(1)	$	6,716	$	7,569	(11)	%
Wealth Management(2)	Wealth Management(2)	4,236		4,094		3		Wealth Management(2)	4,181		4,360		(4)
Mutual Funds(3)	Mutual Funds(3)	2,863		1,824		57		Mutual Funds(3)	2,957		2,564		15
Total AUM(4)	Total AUM(4)	$	13,800	$	11,962	15	%	Total AUM(4)	$	13,854	$	14,493	(4)	%

(1)Institutional includes (i) separate accounts of corporate pension and profit sharing plans, public employee retirement funds, Taft-Hartley plans, endowments, foundations and individuals; (ii) subadvisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including ~~the UCITS Fund and~~ collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers. ~~The UCITS Fund was liquidated in June 2020.~~

(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 subadvisory services are provided for the common trust funds by Westwood Management ~~Westwood International Advisors (prior to its closure, effective September 30, 2020)~~ and external unaffiliated subadvisors. For certain assets in this category Westwood Trust currently provides limited custodial services for a minimal or no fee, viewing these assets as potentially converting to fee-generating managed assets in the future.

(3)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, institutional investors and wealth management accounts.

(4)AUM excludes ~~$283~~$314 million and ~~$240~~$272 million of assets under advisement (“AUA”) as of ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, related to our model portfolios for which we provided consulting advice but for which we did not have direct discretionary investment authority.

Roll-Forward of Assets Under Management


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021
Institutional	Institutional									Institutional
Beginning of period assets	Beginning of period assets	$	7,123	$	6,183	$	6,567	$	8,739	Beginning of period assets	$	7,037	$	6,567
Inflows	Inflows	64		117		1,797		592		Inflows	79		732
Outflows	Outflows	(401)		(655)		(2,372)		(2,554)		Outflows	(155)		(219)
Net client flows	Net client flows	(337)		(538)		(575)		(1,962)		Net client flows	(76)		513

Market appreciation (depreciation)	Market appreciation (depreciation)	(85)		399		709		(733)		Market appreciation (depreciation)	(245)		489
Net change	Net change	(422)		(139)		134		(2,695)		Net change	(321)		1,002
End of period assets	End of period assets	$	6,701	$	6,044	$	6,701	$	6,044	End of period assets	$	6,716	$	7,569

Wealth Management	Wealth Management									Wealth Management
Beginning of period assets	Beginning of period assets	$	4,427	$	3,985	$	4,335	$	4,438	Beginning of period assets	$	4,420	$	4,335
Inflows	Inflows	98		99		241		228		Inflows	109		60
Outflows	Outflows	(238)		(187)		(655)		(535)		Outflows	(146)		(207)
Net client flows	Net client flows	(140)		(88)		(414)		(307)		Net client flows	(37)		(147)
Market appreciation (depreciation)	Market appreciation (depreciation)	(51)		197		315		(37)		Market appreciation (depreciation)	(202)		172
Net change	Net change	(191)		109		(99)		(344)		Net change	(239)		25
End of period assets	End of period assets	$	4,236	$	4,094	$	4,236	$	4,094	End of period assets	$	4,181	$	4,360

Mutual Funds	Mutual Funds									Mutual Funds
Beginning of period assets	Beginning of period assets	$	2,857	$	1,740	$	2,143	$	2,058	Beginning of period assets	$	3,046	$	2,143
Inflows	Inflows	248		208		1,004		650		Inflows	268		438
Outflows	Outflows	(194)		(192)		(565)		(754)		Outflows	(218)		(209)
Net client flows	Net client flows	54		16		439		(104)		Net client flows	50		229
Market appreciation (depreciation)	Market appreciation (depreciation)	(48)		68		281		(130)		Market appreciation (depreciation)	(139)		192
Net change	Net change	6		84		720		(234)		Net change	(89)		421
End of period assets	End of period assets	$	2,863	$	1,824	$	2,863	$	1,824	End of period assets	$	2,957	$	2,564

Total AUM	Total AUM									Total AUM
Beginning of period assets	Beginning of period assets	$	14,407	$	11,908	$	13,045	$	15,235	Beginning of period assets	$	14,503	$	13,045
Inflows	Inflows	410		424		3,042		1,470		Inflows	456		1,230
Outflows	Outflows	(833)		(1,034)		(3,592)		(3,843)		Outflows	(519)		(635)
Net client flows	Net client flows	(423)		(610)		(550)		(2,373)		Net client flows	(63)		595
Market appreciation (depreciation)	Market appreciation (depreciation)	(184)		664		1,305		(900)		Market appreciation (depreciation)	(586)		853
Net change	Net change	(607)		54		755		(3,273)		Net change	(649)		1,448
End of period assets	End of period assets	$	13,800	$	11,962	$	13,800	$	11,962	End of period assets	$	13,854	$	14,493

Three months ended ~~September 30,~~March 31, 2022 compared to the three months ended March 31, 2021 ~~and 2020~~

The $0.6 billion decrease in AUM for the three months ended ~~September 30, 2021~~March 31, 2022 was due to market depreciation of $0.6 billion and net outflows of ~~$0.4 billion and market depreciation of $0.2~~$0.1 billion. Net outflows were primarily related to our ~~LargeCap Value and SmallCap Value strategies.~~Enhanced Balance strategy.

The ~~$0.1~~$1.4 billion increase in AUM for the three months ended ~~September 30, 2020 was due to market appreciation of $0.7 billion offset by net outflows of $0.6 billion. Net outflows were primarily related to our closed Emerging Markets strategy.~~

~~Nine months ended September 30, 2021 and 2020~~

~~The $0.8 billion increase in AUM for the nine months ended September 30,~~March 31, 2021 was due to market appreciation of ~~$1.3~~$0.9 billion ~~offset by~~and net ~~outflows~~inflows of $0.6 billion. Net outflows were primarily related to the outflow of $1.6 billion from the closure of two Global Convertibles accounts. In the fourth quarter of 2020, we made the decision to exit the stand-alone convertibles business and our Global Convertibles team transitioned back to Aviva Investors, the firm from which they previously joined Westwood. As a result, $1.6 billion in two sub-advised Global Convertibles mandates returned to Aviva as of April 1, 2021. These outflows were partially offset by net inflows ~~to our SmallCap Value strategy.~~

~~The $3.3 billion decrease in AUM for the nine months ended September 30, 2020 was due to net outflows of $2.4 billion and market depreciation of $0.9 billion. Net outflows~~ were primarily related to our ~~Emerging Markets and LargeCap Value strategies.~~SmallCap strategy.

Results of Operations

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.


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Change		2021		2020		Change			2022		2021		Change
Revenues:	Revenues:													Revenues:
Advisory fees: asset-based	Advisory fees: asset-based	$	12,011	$	8,847	36	%	$	33,846	$	29,277	16	%	Advisory fees: asset-based	$	11,790	$	10,450	13	%
Advisory fees: performance-based	Advisory fees: performance-based	—		713		(100)		1,959		1,408		39		Advisory fees: performance-based	—		1,959		(100)
Trust fees: asset-based	Trust fees: asset-based	5,952		5,787		3		18,233		17,395		5		Trust fees: asset-based	5,715		6,065		(6)
Trust fees: performance-based		—		37		(100)		—		77		(100)

Other, net	Other, net	(103)		70		(247)		(375)		(159)		136		Other, net	(289)		(155)		86
Total revenues	Total revenues	17,860		15,454		16		53,663		47,998		12		Total revenues	17,216		18,319		(6)
Expenses:	Expenses:													Expenses:
Employee compensation and benefits	Employee compensation and benefits	10,268		9,515		8		32,053		32,970		(3)		Employee compensation and benefits	10,334		11,548		(11)
Sales and marketing	Sales and marketing	292		215		36		892		946		(6)		Sales and marketing	482		230		110
Westwood mutual funds	Westwood mutual funds	814		421		93		1,573		1,370		15		Westwood mutual funds	596		391		52
Information technology	Information technology	1,937		2,158		(10)		6,190		6,219		0		Information technology	1,829		1,992		(8)
Professional services	Professional services	726		1,033		(30)		3,471		3,217		8		Professional services	1,520		1,317		15
General and administrative	General and administrative	1,779		2,333		(24)		5,893		6,830		(14)		General and administrative	2,040		2,072		(2)
Impairment expense		—		3,403		(100)		—		3,403		(100)
(Gain) loss on foreign currency transactions		—		419		(100)		—		(1,196)		(100)

Total expenses	Total expenses	15,816		19,497		(19)		50,072		53,759		(7)		Total expenses	16,801		17,550		(4)
Net operating income (loss)		2,044		(4,043)				3,591		(5,761)
Net operating income														Net operating income	415		769
Realized gains on private investments	Realized gains on private investments	—		—		NM		8,371		—		NM		Realized gains on private investments	—		8,325		(100)
Net change in unrealized appreciation (depreciation) on private investments	Net change in unrealized appreciation (depreciation) on private investments	(13)		(73)		(82)		(2,124)		(909)		134		Net change in unrealized appreciation (depreciation) on private investments	37		(2,326)		(102)
Investment income	Investment income	131		(43)		(405)		562		625		(10)		Investment income	(16)		196		(108)
Other income	Other income	198		34		482		390		102		282		Other income	158		50		216
Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary		—		(4,193)		(100)		—		(4,193)		(100)
Income (loss) before income taxes		2,360		(8,318)				10,790		(10,136)

Income before income taxes														Income before income taxes	594		7,014
Income tax expense	Income tax expense	481		1,971		(76)		3,840		1,626		136		Income tax expense	544		2,913		(81)
Net income (loss)		$	1,879	$	(10,289)	(118)	%	$	6,950	$	(11,762)	(159)	%
Net income														Net income	$	50	$	4,101	(99)	%

_________________________

NM Not meaningful

Three months ended ~~September 30, 2021~~March 31, 2022 compared to three months ended ~~September 30, 2020~~

March 31, 2021

Total revenues. Total revenues ~~increased $2.4~~decreased $1.1 million, or ~~16%~~6%, to ~~$17.9~~$17.2 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared with ~~$15.5~~$18.3 million for the three months ended ~~September 30, 2020.~~March 31, 2021. Asset-based advisory fees increased ~~$3.2~~$1.3 million, or ~~36%~~13%, and Trust fees ~~increased $0.2~~decreased $0.4 million, or 3%6%. Performance-based advisory fees decreased ~~$0.7~~$2.0 million due to reflecting lower ~~realization of~~ performance fees in the three months ended ~~September 30, 2021.~~March 31, 2022.

~~Westwood mutual funds expense.~~Employee compensation and benefits. ~~Mutual fund expenses increased $0.4~~Employee compensation and benefits decreased $1.2 million ~~or 93%,~~ to ~~$0.8~~$10.3 million compared with $11.5 million for ~~the three months ended September 30,~~ 2021 ~~compared with $0.4 million for the three months ended September 30, 2020 primarily due to one-time costs related to a change in mutual fund administration.~~

~~General and administrative expense.~~ General and administrative expenses decreased $0.5 million, or 24%, to $1.8 million for the three months ended September 30, 2021 compared with $2.3 million for the three months ended September 30, 2020 primarily due to lower ~~rent expense following recent office space reductions.~~commissions and incentive compensation.

~~Impairment expense.~~Sales and marketing. ~~We recorded $3.4~~Sales and marketing expenses increased $0.3 million, ~~of impairment expense related~~or 110%, to ~~our Advisory segment goodwill in the three months ended September 30, 2020.~~$0.5 million compared with $0.2 million for 2021 as in-person sales activities returned to pre-COVID-19 levels.

~~(Gain) loss~~Realized gains on ~~foreign currency transactions.~~ ~~We recorded foreign currency gains and losses as a result of fluctuations in the Canadian dollar exchange rate prior to closing Westwood International Advisors in 2020.~~

~~Foreign currency translation adjustments to net income (loss) upon liquidation of a foreign subsidiary.~~private investments. We recorded a ~~cumulative foreign currency translation adjustment~~realized gain of ~~$4.2~~approximately $8.3 million ~~following the substantially completed liquidation of Westwood International Advisors~~in connection with InvestCloud's recapitalization in the ~~three months ended September 30, 2020.~~first quarter of 2021.

Net change in unrealized appreciation (depreciation) on private investments. We recorded a $2.8 million net change in unrealized depreciation to reflect the recognition of previously recorded unrealized gains in connection with InvestCloud's recapitalization in the first quarter of 2021, partially offset by $0.4 million of fair value increases from market transactions related to our investment in Charis.

Income tax expense. Our effective tax rate of ~~20.4%~~91.6% differed from the 21% statutory rate for the ~~third~~first quarter of ~~2021~~2022 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.~~Our effective tax rate of (23.7)% differed from the 21% statutory rate for the third quarter of 2020 d~~ue 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, and a 5% incremental Canadian withholding tax (net of U.S. tax federal deduction) incurred on repatriated funds following closure of our Westwood International Advisors office in the third quarter of 2020, partially offset by the enactment of the CARES Act which lowered our effective tax rate.

~~Nine months ended September 30, 2021 compared to nine months ended September 30, 2020~~

~~Total revenues~~. Total revenues increased $5.7 million, or 12%, to $53.7 million for the nine months ended September 30, 2021 compared with $48.0 million for the nine months ended September 30, 2020. Asset-based advisory fees increased $4.5 million, or 16% and Trust fees increased $0.8 million, or 5%, both primarily due to higher average AUM. Performance-based advisory fees increased $0.6 million, or 39%, primarily due to higher realization of performance fees in the nine months ended September 30, 2021.

~~General and administrative expense.~~ General and administrative expenses decreased $0.9 million, or 14%, to $5.9 million for the nine months ended September 30, 2021 compared with $6.8 million for the nine months ended September 30, 2020 primarily due to lower rent expense following recent office space reductions.

~~Impairment expense.~~ ~~We recorded $3.4 million of impairment expense related to our Advisory segment goodwill in the nine months ended September 30, 2020.~~

~~(Gain) loss on foreign currency transactions.~~ ~~We recorded foreign currency gains and losses as a result of fluctuations in the Canadian dollar exchange rate, prior to closing Westwood International Advisors in 2020.~~

~~Realized gains on private investments.~~ ~~We recorded a realized gain of approximately $8.3 million following InvestCloud's recapitalization in the first quarter of 2021.~~

~~Income Tax Expense~~. The effective tax rate of 35.6% for the nine months ended September 30, 2021 differed from the 21% statutory rate for 2021 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. The effective tax rate for the nine months ended September 30, 2020 ~~differed from the 21% statutory rate for 2020 d~~ue 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, and a 5% incremental Canadian withholding tax (net of U.S. tax federal deduction) incurred on repatriated funds following closure of our Westwood International Advisors office in the third quarter of 2020, partially offset by the enactment of the CARES Act which lowered our effective tax rate.

2217

Supplemental Financial Information

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, net income ~~(loss)~~ 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 net income ~~(loss)~~ 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.

We define Economic Earnings ~~(Loss)~~ as net income ~~(loss)~~ 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 ~~(Loss)~~ because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement. 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 ~~(Loss)~~ divided by diluted weighted average shares outstanding.

The following tables provide a reconciliation of net income ~~(loss)~~ to Economic Earnings ~~(Loss)~~ and Economic Earnings ~~(Loss)~~ by segment (in thousands, except share and per share amounts):
Three Months Ended September 30, Change Nine Months Ended September 30,
2021 2020 2021 2020 Change
Net income (loss) $ 1,879 $ (10,289) (118) % $ 6,950 $ (11,762) (159) %
Add: Stock-based compensation expense 1,362 488 179 4,459 5,409 (18)
Add: Impairment expense — 3,403 (100) — 3,403 (100)
Add: Intangible amortization 406 435 (7) 1,218 1,293 (6)
Add: Currency translation adjustment reclassification — 4,193 (100) — 4,193 (100)
Add: Tax benefit from goodwill amortization 59 59 — 177 177 —
Economic Earnings (Loss) $ 3,706 $ (1,711) (317) % $ 12,804 $ 2,713 372 %
Diluted weighted average shares outstanding 7,956,081 7,829,478 7,933,860 8,040,417
Economic Earnings (Loss) per share $ 0.47 $ (0.22) $ 1.61 $ 0.34
Economic Earnings (Loss) by Segment:
Advisory $ 4,416 $ 1,244 255 % $ 14,885 $ 6,550 127 %
Trust 2,015 1,458 38 6,507 3,783 72
Westwood Holdings (2,725) (4,413) (38) (8,588) (7,620) 13
Consolidated $ 3,706 $ (1,711) (317) % $ 12,804 $ 2,713 372 %


	Three Months Ended March 31,				Change
	2022		2021
Net income	$	50	$	4,101	(99)	%
Stock-based compensation expense	1,380		1,722		(20)

Intangible amortization	405		406		—

Tax benefit from goodwill amortization	59		59		—
Economic Earnings	$	1,894	$	6,288	(70)	%

Earnings per share	$	0.01	$	0.52	(98)	%
Stock-based compensation expense	0.17		0.21		(19)

Intangible amortization	0.05		0.05		—

Tax benefit from goodwill amortization	0.01		0.01		0
Economic Earnings per share	$	0.24	$	0.79	(70)	%
Diluted weighted average shares outstanding	7,931,453		7,917,390

Economic Earnings by Segment:
Advisory	$	4,344	$	6,550	(34)	%
Trust	788		2,984		(74)
Westwood Holdings	(3,238)		(3,246)		—
Consolidated	$	1,894	$	6,288	(70)	%

Liquidity and Capital Resources

We fund our operations and cash requirements with cash generated from operating activities. We may also use cash from operations to pay dividends to our stockholders. We reinstated ~~our~~a dividend in the first quarter of 2021, following ~~its~~a suspension in the second quarter of 2020 ~~in order to preserve~~as we preserved capital and ~~provide~~ additional financial flexibility amid the uncertainties created by COVID-19. On July 27, 2021, we declared a return of capital distribution of $2.50 per common share. This $20.8 million distribution to shareholders was treated as a return of capital and recorded as a reduction to additional paid-in-capital in the ~~condensed consolidated balance sheets as of September 30, 2021.~~COVID-19 pandemic.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had no debt. 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, including

liquidation of investments used to cover current liabilities. Changes in working capital, especially accounts receivable and

accounts payable, are generally the result of timing differences between collection of fees billed and payment of operating expenses.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, cash flow provided by operating activities was ~~$21.1~~$8.8 million, which included net sales of ~~$11.2~~$12.4 million of current investments ~~a $2.2 million change in income taxes payable, and a $1.1 million change in accounts payable and accrued liabilities,~~ partially offset by ~~decreases of $1.2 million in other liabilities and $0.4 million~~a reduction in compensation and benefits ~~payable.~~

payable of $7.2 million. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, cash flow used in operating activities was ~~$7.1~~$7.0 million, which included ~~liquidation~~net purchases of ~~$11.9~~$4.4 million of current investments, ~~and~~a reduction in compensation and benefits payable of ~~$3.8~~$5.0 million, ~~partially offset by~~and a ~~$3.6~~$2.3 million change in accounts receivable, partially offset by income taxes payable and positive adjustments to net income.

Cash flow used in investing activities during the three months ended March 31, 2022 was related to purchases of property and equipment. Cash flow provided by investing activities during the ~~nine~~three months ended ~~September 30,~~March 31, 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. ~~Cash flow used in investing activities during the nine months ended September 30, 2020 was related to purchases of property and equipment.~~

Cash flows used in financing activities of ~~$25.2~~$2.8 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 reflected the payment of dividends, ~~including those treated as a return~~restricted stock returned for the payment of ~~capital for accounting purposes,~~taxes and treasury stock repurchases. Cash flows used in financing activities of $2.7 million for the three months ended March 31, 2021 reflected treasury stock repurchases, the payment of dividends and restricted stock returned for the payment of taxes. Cash flow used in financing activities of $25.8 million for the nine months ended September 30, 2020 reflected treasury stock repurchases, the payment of dividends, restricted stock returned for payment of taxes and purchases of treasury stock under employee stock plans.

We had cash and short-term investments of ~~$76.6~~$73.5 million as of ~~September 30, 2021~~March 31, 2022 and ~~$82.6~~$80.2 million as of December 31, ~~2020.~~2021. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, working capital aggregated ~~$75.6~~$77.0 million and ~~$84.5~~$78.0 million, respectively.

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, 2021,~~March 31, 2022, Westwood Trust had approximately ~~$18.3~~$19.5 million in excess of its minimum capital requirement.

Our future liquidity and capital requirements will depend upon numerous factors, including our results of operations, the timing and magnitude of capital expenditures or strategic initiatives, our dividend policy and other business and risk factors described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2020, filed with the SEC.~~2021. We believe that current cash and short-term investment balances plus cash generated from operations will be sufficient to meet both the operating and capital requirements of our ordinary business operations through at least the next twelve ~~months. However,~~months, however there can be no assurance that we will not require additional financing within this time frame. ~~The failure~~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.

The United States Department of Labor released its regulatory agenda in the Spring of 2021, which confirmed that a fiduciary rule rewrite is in progress. This rewrite is expected to address the definition of fiduciary. At this time, we cannot predict the content or form of any such rule or its impact on our business, results of operations and financial condition. Our business is highly regulated, and changes in regulation and in supervisory and enforcement policies may materially impact our capitalization or cash flows, reduce our profitability and limit our growth. We will continue to monitor the potential impact of this development on our business.

Contractual Obligations

As of ~~September 30, 2021,~~March 31, 2022, there have been no material changes outside of the ordinary course of business to our contractual obligations since December 31, ~~2020.~~2021. For information regarding our contractual obligations, refer to “Contractual Obligations” in Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Critical and Significant Accounting Policies and Estimates

There have been no significant changes in our critical or significant accounting policies and estimates since December 31, ~~2020.~~2021. Information with respect to our critical accounting policies and estimates that we believe could have the most significant effect on our reported consolidated results and require difficult, subjective or complex judgment by management is described under “Critical Accounting Policies and Estimates” in Part II, Item 7. “Management’s Discussion

and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Accounting Developments

Refer to Note 2 “Summary of Significant Accounting Policies” in our Condensed Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q for a description of recently issued accounting guidance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our Quantitative and Qualitative Disclosures about Market Risk from those previously reported in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

During the quarter ended ~~September 30, 2021,~~March 31, 2022, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Due to our significant investments in cloud-based systems, the impact of our employees working remotely did not hinder the execution of our internal control processes and procedures.

2520

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Our business and future results may be affected by a number of risks and uncertainties that should be considered carefully. In addition, this report also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including the risks described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and the risks set forth below.

~~Except as discussed below, there~~There have been no material changes to the risk factors previously disclosed in the Form 10-K. You should carefully consider the following risks and the risks included in the Company’s Annual Report on Form 10-K, together with all of the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. The occurrence of any single risk or any combination of risks could materially and adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock.

~~Risks Related to Ownership of Stock and Corporate Governance~~

~~Distributions to our common stockholders have included and may in the future include a return of capital.~~

Future distributions to our common stockholders may include a return of capital. To the extent that we distribute amounts that exceed our accumulated earnings, these distributions would constitute a return of capital to the extent of the common stockholder’s adjusted tax basis in its shares of our common stock. A return of capital represents a return of a common stockholder’s original investment in shares of our common stock and should not be confused with a distribution from earnings. Although return of capital distributions may not be taxable, such distributions may increase an investor’s tax liability for capital gains upon the sale of our common stock by reducing the investor’s tax basis in its shares of our common stock. Such returns of capital reduce our asset base and could result in future needs for debt or capital infusions, which could have a material adverse impact on our business.

~~Our stockholder rights agreement (“Rights Agreement”) may make it more difficult for others to obtain control over us, even if it would be beneficial to our stockholders.~~

In May of 2021, our Board of Directors adopted a stockholder rights agreement. Pursuant to its terms, we have distributed a dividend of one right for each outstanding share of common stock of the Company to stockholders of record at the close of business on May 12, 2021. These rights would cause substantial dilution to the ownership of any person or group that attempts to acquire us on terms not approved by our Board of Directors and may have the effect of deterring hostile takeover attempts. These provisions could discourage a future takeover attempt which individual stockholders might deem to be in their best interests or in which stockholders could receive a premium for their shares over current prices.

We believe these provisions protect our stockholders from coercive or otherwise unfair takeover tactics by effectively requiring those who seek to obtain control of the Company to negotiate with our Board of Directors and by providing our Board with more time to assess any acquisition of control. However, these provisions could apply even if an acquisition of control of the Company may be considered beneficial by some stockholders and could delay or prevent an acquisition of control that our Board of Directors determines is not in the best interests of our Company and our stockholders.

Actions of activist stockholders could cause us to incur substantial costs, divert the attention and resources of our management and the Board of Directors, and have an adverse effect on our business and stock price.

We have been and may continue to be subject to proposals by stockholders urging us to take certain corporate actions or seeking to acquire control over the Company. If activist stockholder activities continue or new activities arise, our business could be adversely affected as responding to actions by activist stockholders can be costly and time-consuming, disrupt our operations, and divert the attention of management and our Board of Directors, all of which could interfere with our ability to execute our strategic plan. We have retained, and may be required to continue to retain, the services of various professionals to advise us on activist stockholder matters, including legal, financial and communications advisors, the costs of which may adversely affect our financial results. In addition, the perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist stockholder initiatives may result in the loss of potential business opportunities, result in

~~the loss of key personnel, harm our ability to attract new investors, clients and employees, and cause our stock price to experience periods of volatility or stagnation.~~

In addition to our Rights Agreement, our organizational documents contain provisions that may prevent or deter another group from paying a premium over the market price to our stockholders to acquire our stock.

Our organizational documents currently contain provisions that establish that stockholders cannot act by written consent, and that authorize our Board of Directors to issue, without shareholder approval, blank check preferred stock. In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law relating to business combinations. These provisions could delay, deter or prevent a merger, consolidation, tender offer or other business combination or change of control involving us that could include a premium over the market price of our common stock that some or a majority of our stockholders might consider to be in their best interests.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On July 20, 2012, our Board of Directors authorized management to repurchase up to $10.0 million of our outstanding common stock on the open market or in privately negotiated transactions. ~~Westwood's~~Our Board of Directors authorized an additional $5.0 million of repurchases under the share repurchase program in July 2016, an additional $10.0 million in February 2020, and an additional $10.0 million in April 2020. The share repurchase program has no expiration date and may be discontinued at any time by the Board of Directors.

Between January 1, 2022 and March 31, 2022, under the share repurchase program, the Company repurchased 12,202 shares of our common stock at an average price of $16.39 per share, including commissions, for an aggregate purchase price of $0.2 million. The following table displays information with respect to the treasury shares we purchased during the three months ended ~~September 30, 2021:~~March 31, 2022:


		Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (1)			Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (1)
Repurchase program (1)	Repurchase program (1)					$	7,800,000	Repurchase program (1)					$	6,900,000
September 2021		25,502	$	19.57	25,502
February 2022								February 2022	12,202	$	16.39	12,202

(1)These purchases relate to the share repurchase program and were authorized in April 2020.

2721

ITEM 6. EXHIBITS



31.1*						Certification of Chief Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a)

31.2*						Certification of Chief Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a)

32.1**						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2**						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101*						The following financial information from Westwood Holdings Group, Inc.'s Quarterly Report on Form 10-Q for the period ended ~~September 30, 2021,~~March 31, 2022, formatted in Inline eXtensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020;~~2021; (ii) Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 and ~~2020;~~2021; (iii) Condensed Consolidated Statements of Stockholders' Equity; (iv) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020;~~2021; and (v) Notes to the Condensed Consolidated Financial Statements.

104*						Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101)

* Filed herewith.

** Furnished herewith.

2822

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated:

~~October~~April 27, ~~2021~~2022

WESTWOOD HOLDINGS GROUP, INC.

By:

/s/ Brian O. Casey

Brian O. Casey

President and Chief Executive Officer

By:

/s/ Murray Forbes III

Murray Forbes III

Chief Financial Officer and Treasurer

2923


Three Months Ended September 30, 2020	Advisory		Trust		Performance-based		Other		Total


Canada	$	337	$	—	$	—	$	—	$	337
Europe	475		—		708		—		1,183
United States	8,035		5,787		42		70		13,934
Total	$	8,847	$	5,787	$	750	$	70	$	15,454


Nine Months Ended September 30, 2021	Advisory		Trust		Performance-based		Other		Total


Canada	$	866	$	—	$	—	$	—	$	866
Europe	638		—		262		—		900
United States	32,352		18,233		1,687		(375)		51,897
Total	$	33,856	$	18,233	$	1,949	$	(375)	$	53,663


	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Fee Revenues	$	5.5	$	4.2	$	15.8	$	14.4


	As of September 30, 2021
	Assets Under Management		Corporate Investment	Amount at Risk
VIEs/VOEs:
Westwood Funds®	$	2,863	0	0
Common Trust Funds	892		0	0

Private Funds	4		0.1	0.1
Private Equity	—		8.3	8.3
All other assets:
Wealth Management	3,340
Institutional	6,701
Total Assets Under Management	$	13,800