Westwood(WHG) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements Westwood Holdings Group reported slightly increased Q1 2025 revenues but a significant drop in net income due to a prior-year non-recurring gain, with total assets decreasing and operating cash flow reversing to an outflow Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $135.0 million, a decrease from $150.0 million at December 31, 2024, primarily due to reductions in cash and investments, while total liabilities significantly decreased due to contingent consideration settlement and lower compensation payable Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $9,418 | $18,847 | | Investments, at fair value | $19,696 | $27,694 | | Total assets | $134,988 | $149,989 | | Liabilities | | | | Compensation and benefits payable | $2,416 | $10,924 | | Contingent consideration | $— | $4,657 | | Total liabilities | $13,602 | $27,657 | | Equity | | | | Total equity | $121,386 | $122,332 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, total revenues increased slightly to $23.3 million, but a net operating loss of $68,000 was recorded, primarily due to the absence of a $2.9 million gain from contingent consideration in the prior year, leading to a sharp decline in net income attributable to the company Q1 2025 vs Q1 2024 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenues | $23,252 | $22,732 | | Total expenses | $23,320 | $19,791 | | Gain from change in fair value of contingent consideration | $— | $(2,949) | | Net operating income (loss) | $(68) | $2,941 | | Income attributable to Westwood Holdings Group, Inc. | $478 | $2,296 | | Diluted EPS | $0.05 | $0.27 | Condensed Consolidated Statements of Stockholders' Equity Total equity decreased from $122.3 million at the end of 2024 to $121.4 million at March 31, 2025, primarily driven by dividend declarations and taxes paid on restricted stock returns, partially offset by net income and stock-based compensation expense - Dividends of $0.15 per share were declared during the first quarter of 2025, totaling approximately $1.4 million[13] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $4.9 million for Q1 2025, a significant shift from the $8.1 million provided in Q1 2024, mainly due to decreased compensation payable and contingent consideration payments, leading to a $9.4 million fall in cash and cash equivalents Q1 2025 vs Q1 2024 Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(4,900) | $8,133 | | Net cash used in investing activities | $(1,418) | $(3) | | Net cash used in financing activities | $(3,111) | $(2,664) | | Net Change in Cash and Cash Equivalents | $(9,429) | $5,466 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business structure, accounting policies, and financial components, highlighting revenue growth in institutional advisory fees, the Advisory segment's profitability, new investment holdings, and a subsequent quarterly dividend declaration - The company operates through two main segments: Advisory and Trust, with the Advisory segment providing investment advisory services and the Trust segment offering trust and custodial services[19][37] Revenue by Account Type (in thousands) | Account Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Institutional | $10,254 | $9,471 | | Mutual Funds | $6,832 | $6,911 | | Wealth Management | $645 | $435 | | Trust Fees | $5,429 | $5,113 | - The final payment for the revenue retention earn-out related to the Salient acquisition was made in Q1 2025, reducing the contingent consideration liability to zero[54] - On April 29, 2025, the Board of Directors declared a quarterly cash dividend of $0.15 per share, payable on July 1, 2025[72] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 2% year-over-year revenue growth to higher average Assets Under Management (AUM), which increased 5% to $17.0 billion, while the significant drop in net income is explained by a non-recurring $2.9 million gain on contingent consideration in Q1 2024, and despite a solid liquidity position, cash and liquid investments decreased to $26.9 million from $44.6 million at year-end Firm-wide Assets Under Management (AUM) (in millions) | Category | As of March 31, 2025 | As of March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Institutional | $8,985 | $7,742 | 16% | | Wealth Management | $4,107 | $4,219 | (3)% | | Mutual Funds | $3,891 | $4,189 | (7)% | | Total AUM | $16,983 | $16,150 | 5% | - The change in AUM for Q1 2025 was driven by net inflows of $0.6 billion, primarily in the SmallCap Value strategy, offset by market depreciation of $0.3 billion[95] Reconciliation to Non-GAAP Economic Earnings (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Income attributable to Westwood Holdings Group, Inc. | $478 | $2,296 | | Stock-based compensation expense | $1,327 | $1,515 | | Intangible amortization | $1,045 | $1,042 | | Other adjustments & tax impacts | $(336) | $(1,841) | | Economic Earnings | $2,514 | $3,012 | - Cash and liquid investments decreased from $44.6 million at year-end 2024 to $26.9 million as of March 31, 2025[108] Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no significant changes in its Quantitative and Qualitative Disclosures about Market Risk since its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no significant changes in market risk disclosures from those reported in the 2024 Form 10-K[117] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes to internal controls over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[118] - No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[119] PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - None[120] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the risk factors previously disclosed in the Form 10-K[122] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock during the three months ended March 31, 2025, and the share repurchase program has no expiration date and may be discontinued at any time - During the three months ended March 31, 2025, the Company did not repurchase any shares of our common stock[123] Exhibits This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data formatted in iXBRL