WHG 10-K & 10-Q changes, risk factors and insider trading

We have faced significant competition from competitors with lower fee, passive investment strategies. Investment advisors emphasizing passive products have gained, and may continue to gain, significant market share from active managers like us, which could have a material adverse effect on our business. If we are unable to compete effectively, our earnings could be reduced,reduced and our business could be adversely affected.

The regulatory environment in which we operate is subject to change. We may be adversely affected as a result of new or revised legislation or regulations or by changes in the interpretation or enforcement of existing laws and regulations. In recent years, regulators have increased their oversight of the financial services industry. Some regulations focus on the investment management industry while other, more broadly focused regulations still affect our industry.

We engage in product offerings and international business activities through our global multi-asset securities product offerings that are available to our international and domestic clients. As of December 31, 2024,2025, approximately 1% of our AUM is managed for clients who are domiciled outside the U. S. As a result, we face increased operational, regulatory, compliance, marketing, client service, reputational and foreign exchange rate risks. Rapid regulatory change is occurring internationally with respect to financial institutions, including, but not limited to, anticipated revisions to the European Communities (Undertakings for Collective Investment in Transferable Securities, or "UCITS") Regulations 2011 and the Markets in Financial Instruments Directive.institutions. The failure of our compliance and internal control systems to properly identify and mitigate such additional risks, or of our operating infrastructure to support international activities, could result in operational failures and actions by regulatory agencies, which could have a material adverse effect on our business.

Our business involves risks of being engaged in litigation and liability that could increase our expenses and reduce our results of operations.Manyoperations. Many aspects of our business involve substantial risks of liability. We could be named as defendants or co-defendants in lawsuits or could be involved in disputes that involve the threat of lawsuits seeking substantial damages. As an SEC-RIA, mutual fund adviser, trustee to certain Trust clients and publicly traded entity, we are subject to governmental and self-regulatory organization examinations, investigations and proceedings. Our investment strategies could be subject to actual or threatened lawsuits and governmental and self-regulatory organization investigations and proceedings, any of which could harm the investment returns or reputation of the applicable fund or result in our being liable for any resulting damages. There has been an increased incidence recently of litigation and regulatory investigations in the asset management industry, including customer claims and class action suits seeking substantial damages. While customers do not have legal recourse against us solely on the basis of poor investment results, if our investment strategies perform poorly or we provide poor financial advice, we are more likely to become subject to litigation brought by dissatisfied clients. In addition, to the extent customers are successful in claiming that their losses resulted from fraud, negligence, willful misconduct, breach of contract or other similar misconduct, these clients may have remedies against us, the mutual funds and other funds we advise or our investment professionals under the federal securities laws or state law. See the discussion of legal proceedings in Item 3. "Legal ProceedingsProceedings.".

We have incurred significant costs to develop new investment strategies, launch newETFs mutualand fundsother underinvestment the Westwood Funds® name,vehicles, and upgrade our business infrastructure. We expect to continue to incur significant costs related to such improvements.

The development of new investment strategies, whether through acquisition or internal development, requires a substantial amount of time and significant financial resources, including expenses related to compensation, sales and marketing, information technology, legal counsel and other professional services. Our ability to market and sell a new investment strategy depends on our financial resources, the investment performance of the specific strategy, the timing of the offering, the timing of regulatory approvals and our marketing strategies. Once an investment strategy is developed, we must effectively introduce the strategy to existing and prospective clients.clients, as well as consultants. Our ability to sell new investment strategies to existing and prospective clients may depend on our ability to meet or exceed the performance of our competitors offering the same or a similar strategy. We may not be able to manage the assets within a given investment strategy profitably, and it may take years before we produce the kind of results that will attract clients. If we are unable to realize the benefits of the costs and expenses incurred in developing new investment strategies, we may experience losses as a result of our management of these investment strategies, and our ability to introduce further new investment strategies and compete in our industry may be hampered.

We are a holding company, with no revenue-generating operations or assets other than our ownership interests in Westwood Management,Management and Westwood Trust and Broadmark.Trust. Accordingly, we are dependent on the cash flow generated by these operating subsidiaries and rely on dividends or other intercompany transfers from our operating subsidiaries to generate the funds necessary to meet our obligations.

We, asAs a public company, we have controls and procedures that relate to cybersecurity disclosure and are required under the federal securities laws to disclose information relating to certain cyber attacks or other information security breaches. Successful cyber attacks at other asset management companies or other market participants, whether or not we are affected, could lead to a general loss of customer confidence in the industry that could negatively affect us, including harming the market perception of the effectiveness of our security measures, which could result in a loss of business.

•we may have difficulty entering into new markets in which we are not experienced in an efficient and cost-effective manner while maintaining adequate standards, controls and procedures;

We manage investment assets and provide services for our clients through our subsidiaries, Westwood Management Corp., Westwood Advisors, L.L.C. andL.L.C., Salient Advisors, LPL.P. ("Salient Advisors") and Broadmark Asset Management LLC ("Broadmark"), (each of which is a registered investment adviser ("RIA") registered with the Securities and Exchange Commission ("SEC"), and Salient Capital, L.P., ("SCLP") an SEC-registered investment advisorbroker-dealer and Financial Industry Regulatory Authority ("FINRA") member, collectively referred to hereinafter together as “"Westwood Management”") 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.

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

We have built a foundation in terms of personnel and infrastructure to support a much larger business and we have developed investment strategies that we believe will be sought after within our target institutional, wealth management and intermediary markets. Developing new products and growing the organization has resulted in our incurring expenses that, in some cases, have not yet generated significant offsetting revenues. We believedevelop new products that investorswe believe will recognizebe thein potentialdemand forby clients and investors, thereby generating new revenue streams inherentfor inus; these products and services howeverhowever, there is no guarantee that theynew products will occur.be successful in generating demand and incremental revenues.

•AUM as of December 31, 20242025 was $16.6$16.5 billion, 7%consistent higher thanwith December 31, 2023.2024. Quarterly average AUM increased 9%5% to $16.3$17.1 billion for 20242025 versus 2023,2024, whichwhich, along with higher revenues from our ETFs and private energy secondaries funds, contributed to a 6%3% increase in total revenue from 2023.2024.

•Our SMidCapMLP Value,Total Multi-Asset,Return, Income Opportunity, Multi-Asset Income, Alternative Income, Credit Opportunities, RealWestwood EstateSalient Income,Enhanced MLPMidstream SMA,Income MLP High ConvictionETF and MLPWestwood &Salient Enhanced Energy InfrastructureIncome ETF strategies performed strongly by beating their primary benchmarks for the year.

Westwood Mutual Funds

Expenses for Westwood mutual funds relate to our marketing, distribution and administration of the Westwood Funds®. mutual funds and Westwood ETFs.

(Gain) loss from change in fair value of contingent consideration (Gain) loss from change in fair value of contingent consideration consists of fair value adjustments related to contingent consideration from ourthe 2022Salient acquisition of Salient,Acquisition, with gains representing reductions in value and losses representing increases in value.

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.

(3)Mutual Funds & ETFs include the Westwood Funds®, a family of mutual funds and Westwood ETFs, for which Westwood Management or Salient Advisors serves as advisor. These funds are available to individual investors, institutional investors and wealth management accounts.

The following table and discussion of our results of operations isare based upon data derived from our Consolidated Statements of Operations contained in our Consolidated Financial Statements and should be read in conjunction with these statements included elsewhere in this Report.

(Gain) loss from change in fair value of contingent consideration. We recorded a loss of $4.9 million upon the remeasurement of contingent consideration, payable in the first quarter of 2025consideration for the Salient Acquisition primarily,Acquisition, due to positive changes in growth projections following asset appreciation and asset flows in the period.

We define Economic Earnings as Incomeincome (loss) attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, impairment expense, amortization of intangible assets, currency translation adjustment reclassification andreclassification, deferred taxes related to goodwill.goodwill and the tax impact of adjustments to GAAP income (loss). Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement. Although gains and losses from changes in the fair value of contingent consideration are non-cash, we do not add or subtract those back when calculating Economic Earnings because gains and losses on changes in the fair value of contingent consideration are considered regular following an acquisition. In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding.

For the year ended December 31, 2024,2025, our Economic Earnings decreasedincreased by 62%105% to $7.0$14.3 million compared with $18.3$7.0 million for the year ended December 31, 2023.2024. 20242025 Economic Earnings was impacted by higher 2025 revenues offset byand losses from changes in the fair value of contingent consideration.consideration in 2024.

The following tables provide Economic Earnings (Loss) by segment:

During 2024,2025, cash flow provided by operating activities was $21.1$18.9 million, compared to $21.1 million during 2024 and cash used in operating activities of $1.2 million during 20232023. andThe cash provided by operating activitiesdecrease of $51.5$2.2 million duringfrom 2022.2024 to 2025 primarily reflected the final contingent consideration payment related to the Salient Acquisition. The increase of $22.3 million from 2023 to 2024 primarily reflected the net sales of investments in 2024 compared to net purchases of investments in 2023. The decrease of $52.7 million from 2022 to 2023 primarily reflected net sales of investments in 2022 to fund the Salient Acquisition.

Cash flow used in investing activities in 2025 and 2024 primarily related to the purchases of strategic investments, compared to cash flow provided by investing activities in 2023 related to the receipt of life insurance proceeds offset by the Broadmark Acquisition. Cash flow used in investing activities in 2022 was primarily related to the Salient Acquisition.

Cash used in financing activities was $7.9 million in 2025 compared to $18.1 million and $6.4 million in 2024 compared to $6.4 million and $9.1 million in 2023 and 2022,2023, respectively. The change from 20232024 to 20242025 related to 2025 noncontrolling interest activity, 2024 payments for contingent consideration for the Salient Acquisition and treasury stock purchases in 2024. The change from 20222023 to 20232024 primarily related to treasurycontingent stockconsideration purchases in 2022.payments.

Our revenues are generally derived from fees based on a percentage of AUM and AUA, and Westwood Management and Westwood Trust collectively had AUM of approximately $17.3$17.0 billion and AUA of approximately $0.9$1.0 billion at MarchJune 31,30, 2026. We have established a track record of delivering competitive, risk-adjusted returns for our clients.

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 privately held investments.

Other Income (Expense)

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

Firm-wide assets under management of $18.3$17.9 billion at MarchJune 31,30, 2026 consisted of $17.3$17.0 billion of AUM and $0.9$1.0 billion of AUA.

AUM increaseddecreased $0.3 billion to $17.3$17.0 billion at MarchJune 31,30, 2026 compared with $17.0$17.3 billion at MarchJune 31,30, 2025. The average of beginning and ending AUM ("average AUM") for the firstsecond quarter of 2026 was $16.9$17.1 billion compared to $16.8$17.2 billion for the firstsecond quarter of 2025.

The following table displays AUM as of MarchJune 31,30, 2026 and 2025 (in millions):

(3)Mutual Funds &and ETFs include the Westwood Funds®, a family of mutual funds and Westwood ETFs, for which Westwood Management or Salient Advisors serves as advisor. These funds are available to individual investors, institutional investors and wealth management accounts.

Three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025

The change in AUM for the three months ended MarchJune 31,30, 2026 was due to market appreciation of $0.8$1.2 billion offset by net outflows of $0.1$1.6 billion. Net outflows were primarily related to our SmallCapLargeCap Value and LargeCapSmallCap Value strategies.

The change in AUM for the three months ended MarchJune 31,30, 2025 was due to netmarket inflowsappreciation of $0.6 billion offset by marketnet depreciationoutflows of $0.3$0.2 billion. Net inflows were primarily related to our SmallCap Value strategy.

Three months ended MarchJune 31,30, 2026 compared to three months ended MarchJune 31,30, 2025

Total revenues. Total revenues for the three months ended MarchJune 31,30, 2026 were higher than revenues for the three months ended MarchJune 31,30, 2025 due to higher average AUM and growth from our ETFs and private energy secondaries funds.funds and gains on our seed money investments.

Employee compensation and benefits. Employee compensation and benefits for the three months ended MarchJune 31,30, 2026 increased compared to the three months MarchJune 31,30, 2025 primarily due to higher incentive compensation costs.costs and higher costs related to our alternatives investment team.

Professional services. Professional services costs for the three months ended MarchJune 31,30, 2026 increased compared to the three months ended MarchJune 31,30, 2025 primarily due to additional legalconsulting and recruiting expenses.

Income tax provision. Our effective income tax rate differed from the 21% statutory rate for the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 due to permanent differences related to executivean Internal Revenue Code Section 162(m) limitation on compensation deductions and the impact of state and local taxes. In addition, a separate expansion of Section 162(m), enacted under prior law and scheduled to take effect in 2027, could further increase our effective tax rate and income tax expense, potentially materially.

We define Economic Earnings as income attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, amortization of intangible assets and deferred taxes related to goodwill. Although depreciation on fixed assets is a non-cash expense, we do not add it back when calculating Economic Earnings because depreciation charges represent an allocation of the decline in the value of the related assets that will ultimately require replacement. Although gains and losses from changes in the fair value of contingent consideration are non-cash, we do not add or subtract those back when calculating Economic Earnings because gains and losses on changes in the fair value of contingent consideration are considered regular following an acquisition. In addition, we do not adjust Economic Earnings for tax deductions related to restricted stock expense or amortization of intangible assets. Economic EPS represents Economic Earnings divided by diluted weighted average shares outstanding.

Historically we have funded our operations and cash requirements with cash generated from operating activities. We may seek additional sources of cash to fund investments or acquisitions. These additional sources of cash may take the form of debt, and there can be no assurance that financing would be available at all or, if so, on terms that are acceptable to us. We may also use cash from operations to pay dividends to our stockholders, for deferred contingent consideration payments, or for providing seed capital for certain investments. We had no debt as of March 31, 2026 and December 31, 2025. 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.

We had cash and liquid investments of $34.2$56.5 million and $44.1$63.4 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively.

During the threesix months ended MarchJune 31,30, 2026, cash flow usedprovided inby operating activities included net sales of equity investments of $6.1 million and reductions in compensation and benefits payable of $9.0$5.4 million. During the threesix months ended MarchJune 31,30, 2025, cash flow usedprovided inby operating activities was $4.9$2.4 million, which included net sales of investments of $8.0 million andmillion, reductions in compensation and benefits payable of $8.5$5.2 million and contingent consideration of $4.4 million following the final payment for the revenue retention earn-out.

Cash flow providedused byin investing activities during the threesix months ended MarchJune 31,30, 2026 was related to the net salespurchases of investments, purchases of leasehold improvements and property and equipment, and return of capital from investments and purchases of property and equipment.investments. Cash flow used in investing activities during the threesix months ended MarchJune 31,30, 2025 was related to the purchase of investments and internally developed software.

Cash flows used in financing activities of $2.9$4.2 million for the threesix months ended MarchJune 31,30, 2026 reflected the payment of dividends and restricted stock returned for the payment of taxes. Cash flows used in financing activities of $3.1$4.4 million for the threesix months ended MarchJune 31,30, 2025 reflected the payment of dividends, deferred contingent consideration payments and restricted stock returned for the payment of taxes.taxes and deferred contingent consideration payments.

Westwood Trust is required to maintain cash and investments in an amount equal to the minimum restricted capital of $4.0 million, as required by the Texas Finance Code. Restricted capital is included in "Cash and cash equivalents" and "Investments, at fair value" in the accompanying Condensed Consolidated Balance Sheets. At MarchJune 31,30, 2026, Westwood Trust had approximately $8.8$13.7 million in excess of its minimum capital requirement.