WHG Westwood Holdings Group Inc - 10-K

Item 1A.    Risk Factors.

We believe these represent the material risks currently facing our business. Our business, financial condition or results of operations could be materially adversely affected by these risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. You should carefully consider the risks described below before making an investment decision. You should also refer to the other information included or incorporated by reference in this Report, including our financial statements and related notes.

Risks Related to the Investment Industry

Our results of operations depend upon the market value and composition of AUM and AUA, which can fluctuate significantly based on various factors, some of which are beyond our control.

Our revenues are primarily generated from fees derived as a percentage of AUM and AUA. The value of our AUM and AUA can be negatively impacted by several factors, including:

• Market performance: Performance of the securities markets could be impacted by a number of factors beyond our control, including, among others, general economic downturns, political uncertainty, acts of terrorism or natural disasters. Negative performance within the securities markets or short-term volatility within the securities markets could result in investors withdrawing assets, decreasing their rates of investment or shifting assets to cash or other asset classes or strategies that we do not manage, all of which could reduce our revenues. In addition, during periods of slowing growth or declining revenues, profits and profit margins are adversely affected because certain expenses remain relatively fixed.

• Investment performance: Because we compete with many asset management firms based on our investment strategies, the maintenance and growth of AUM and AUA is largely dependent on the investment performance of the assets that we manage. Poor performance may result in the loss or reduction of client accounts, which decreases revenues. Underperformance relative to peer groups and/or relevant benchmarks for our various investment strategies could adversely affect our results of operations, especially if such underperformance continues for an extended period of time. The historical returns of our strategies and the ratings and rankings we, or the mutual funds that we advise, have generated should not be considered indicative of the future results of these strategies or of any other strategies that we may develop. The investment performance we achieve for our customers varies over time and variances can be wide. Certain of our investment strategies have capacity constraints because there may be a limit to the number of securities available for certain strategies to operate effectively. In those instances, we may choose to limit access to new or existing investors.

The investment management and wealth management industry is highly competitive and innovative.

The investment management and wealth management industry is highly competitive based on factors such as investment performance, fee rates, continuity of investment professionals and client relationships, the quality of client service, corporate positioning, business reputation and differentiated products. Several factors increase competitive risks, including the following:

• Potential competitors have a relatively low cost of entering the investment management industry;

• Many competitors have greater financial, technological, marketing and other resources, more comprehensive name recognition and more personnel;

• The continuing trend toward consolidation in the investment management industry, and the securities business in general, has served to increase the size and strength of some of our competitors;

• Recent changes in consumer demand for technological capabilities, including the enhanced ability for firms to offer lower fees for passive management strategies, have increased competition;

• Shifts in demand for alternative investment styles, asset classes and distribution vehicles may cause our competitors to be perceived as more attractive;

• Other industry participants, hedge funds and alternative asset managers may seek to recruit our investment professionals;

• Some competitors charge lower fees for their investment management services;

• Some competitors may provide more comprehensive client services, including banking, financial planning and tax planning at levels beyond those we currently provide; and

• Some competitors may have more sophisticated, innovative or advanced distribution networks.

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 and our business could be adversely affected.

In addition, the use of various technologies based on artificial intelligence ("AI") is expanding rapidly in our industry. Our competitors may have access to more advanced technology, including AI, which might enable our competitors to innovate better and more quickly, or to compete more effectively on quality and price, which could impact our profitability.

Interest in AI may increase competition and lower barriers to entry in the industry, and we may be unable to compete with the products or services offered by new competitors, resulting in lower earnings or the ability to operate sustainably.

Some of our strategies invest in the securities of non-U.S. companies, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks.

Some of our strategies offer access to global markets with exposure to non-U.S. companies. Fluctuations in foreign currency exchange rates could negatively affect the returns of clients invested in these strategies. Investments in non-U.S. issuers may also be affected by tax policies in countries or regions in which we are invested, as well as political, social and economic uncertainty or other diplomatic developments. Many financial markets are less developed or efficient than U.S. financial markets with limited liquidity and higher price volatility and may also lack an established regulatory framework. Liquidity and price volatility may be adversely affected by political or economic events, government policies and social or civil unrest within a particular country. These risks, among others, could adversely affect the performance of our strategies invested in securities of non-U.S. issuers and may be particularly acute in emerging or less developed markets. As a result, we may be unable to attract or retain client investments in these strategies, and assets invested in these strategies may experience significant declines in value and our results of operations may be negatively affected.

Legal and Regulatory Risks

Our business is subject to extensive regulation, which is subject to frequent change, with attendant compliance costs and serious consequences for violations; expansion into international markets and introduction of new products and services increases our regulatory and operational risks.

Virtually all aspects of our business are subject to laws and regulations, including the Investment Advisers Act, the Investment Company Act, the Patriot Act, the Finance Code and anti-money laundering laws. These laws and regulations generally grant regulatory agencies broad administrative powers, including the power to limit or restrict us from operating our business, as well as powers to place us under conservatorship or closure if we fail to comply with such laws and regulations. Violations of such laws or regulations could subject us or our employees to disciplinary proceedings and civil or criminal liability, including revocation of licenses, censures, fines or temporary suspensions, permanent barring from the conduct of business, conservatorship or closure. Any such proceeding or liability could have a material adverse effect upon our business, financial condition, results of operations and business prospects.

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.

The Dodd-Frank Act of 2010 significantly increased and revised the federal rules and regulations governing the financial services industry and has generally resulted in increased compliance and administrative requirements. For example, the SEC’s adoption of Form PF and revisions to Form ADV impose additional reporting requirements for SEC-registered investment advisors. ERISA Section 408(b)(2) and related regulations require additional information to be provided to ERISA-governed retirement plans. We believe that changes in laws, rules and regulations, including those discussed above, have increased our administrative and compliance costs however we are unable to quantify the increased costs attributable to such changes. See "Item 1. Business — Regulation."

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, 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. 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.

We devote considerable time and resources to both domestic and international compliance; however, we may fail to timely and properly identify regulatory requirements or modify our compliance procedures for changes in our regulatory environment, which may subject us to legal proceedings, domestic and foreign government investigations, penalties and fines.

Our business involves risks of being engaged in litigation and liability that could increase our expenses and reduce our results of operations. 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 Proceedings."

Business and Operational Risks

Due to the substantial cost and time required to introduce new investment strategies or expand the market for current strategies, we may not be able to successfully introduce investment strategies in a timely manner, or at all.

We have incurred significant costs to develop new investment strategies, launch ETFs and other investment 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, 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.

To introduce new investment strategies, we may seek to add new investment teams. To the extent we are unable to recruit and retain investment teams to complement our existing business model, we may not be successful in diversifying and increasing our investment strategies and client assets, which could have a material adverse effect on our business and future prospects. The addition of a new team using an investment strategy with which we may have limited or no experience may

require additional resources to update our operational platform and could strain our operational resources and increase the possibility of operational errors.  Additional investments may be required to improve our operational platform. If any new teams or strategies perform poorly and fail to attract sufficient assets, our results of operations and reputation may be adversely affected.

Damage to our reputation could harm our business and have a material adverse effect on our results of operations.

Our brand is a valuable intangible asset that could be vulnerable to threats that can be difficult or impossible to anticipate or control. Regulatory inquiries and rumors could damage our reputation, even if they are unfounded or satisfactorily addressed. Our reputation could also be negatively affected by employees and third parties acting on our behalf, who may circumvent our controls or act in a manner inconsistent with our policies and procedures. Public perception of our brand could be negatively affected by decreases in our profitability, AUM or stock price. Damage to our brand could impede our ability to attract and retain customers and key employees and could reduce our AUM, which could have a material adverse effect on our results of operations.

Our success depends on certain key employees and our ability to attract and develop new, talented professionals. Our inability to attract and retain key employees could compromise our future success.

Our future success depends upon our ability to attract and retain professional and executive employees, including investment, marketing, client service and management personnel. There is substantial competition for skilled personnel within the asset management business, and failure to attract, develop, retain and motivate qualified personnel could negatively impact our business, financial condition, results of operations and future prospects. In order to retain or replace key personnel, we may be required to increase compensation, which would decrease net income. Investment and sales professionals often maintain strong relationships with their clients, and their departure may cause us to lose client accounts, which could have a material impact on our revenues and results of operations.

Failure to perform operational tasks or the misrepresentation of products and services could have an adverse effect on our reputation and our business, financial condition and results of operations.

Our operations are complex, and our failure to properly perform portfolio responsibilities, including security pricing, corporate actions, investment restrictions compliance, daily net asset value calculations, account reconciliations, tax reporting, investment performance calculations and portfolio oversight could result in reputational harm or subject us to regulatory sanctions, fines, penalties and litigation.

We use advertising materials, public relations information and other external communications to market and sell our investment products. Failure to accurately calculate and present investment performance data within established guidelines and regulations could result in reputational harm or subject us to regulatory sanctions, fines, penalties and litigation.

Damage to our reputation could impede our ability to attract and retain customers and key employees and could reduce our AUM, which could have a material adverse effect on our results of operations. Significant regulatory sanctions, fines, penalties, and litigation could also materially adversely affect our financial condition and results of operations.

Failure to select appropriate third-party vendors and apply appropriate oversight of third-party vendors could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.

We rely on third-party vendors to perform important portions of our operations, and there is no assurance that our third-party vendors will properly perform or follow our processes, policies and procedures. There is no assurance that our plans for transition or delegation to a third-party vendor will be successful or that there will not be interruptions in service from these third parties. A third-party vendor's failure to accurately perform important operations or follow our processes, policies and procedures could result in the loss of clients, significant regulatory sanctions, fines, penalties and litigation, which could have a material adverse effect on our business, financial condition and results of operations.

We are a holding company dependent on the operations and funds of our subsidiaries.

We are a holding company, with no revenue-generating operations or assets other than our ownership interests in Westwood Management and Westwood 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.

Technology and Privacy Risks

Failure to implement and maintain effective cybersecurity controls could disrupt our operations and have a material adverse effect on our results of operations, reputation and stock price.

Our business is dependent on information technology systems and the cybersecurity controls we and our third party vendors have in place to protect those systems and the information contained therein. Despite the implementation of protective measures and endeavoring to modify them as circumstances warrant, our computer systems, software, networks and vendors may be vulnerable to human error, natural disasters, power loss, spam attacks, unauthorized access, distributed denial of service attacks, computer viruses and other malicious code, and other events that could result in significant liability and damage to our reputation, and have an ongoing impact on the security and stability of our operations. The techniques used in these attacks are increasingly sophisticated, change frequently and are often not recognized until launched. A failure of our controls or our third party vendors' controls to protect our information technology from an external or internal attack or to prevent a breach of confidential client or competitive information could materially interrupt our operations and expose us to regulatory and legal actions, which could have a material adverse effect on our operating results, reputation and stock price. As attempted attacks continue to evolve in scope and sophistication, we may be required to expend substantial additional resources to modify or enhance our protective measures, to investigate and remediate vulnerabilities or other exposures or to communicate about cyber attacks to our customers.

As 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.

Our business is vulnerable to systems failures that could have a material adverse effect on our business, financial condition and results of operations.

Any delays or inaccuracies in securities pricing information or information processing could give rise to claims that could have a material adverse effect on our business, financial condition and results of operations. We are highly dependent on information systems and third-party vendors for securities pricing information, information processing and updates for certain software. We, or our third-party vendors, may suffer a systems failure or interruption, whether caused by an earthquake, fire, other natural disaster, power or telecommunications failure, unauthorized access, force majeure, act of war or otherwise, and our back-up procedures and capabilities may be inadequate to prevent the risk of extended interruptions in operations.

Misuse of assets and information in the possession of our employees and third-party vendors could damage our reputation and result in costly litigation and liability for our clients and us.

Our employees and certain third-party vendors handle significant amounts of assets along with financial and personal information for our clients. Our employees or third party vendors could misuse or improperly disclose such information, either inadvertently or intentionally, which could harm our reputation. We have implemented a system of controls to minimize the risk of fraudulent use of assets and information; however, our controls may be insufficient to prevent fraudulent actions by employees or third party vendors. If our controls are ineffective, we could be subject to costly litigation, which could consume financial resources, distract management, damage our reputation and result in regulatory sanctions. Such fraudulent actions could also adversely affect clients, causing them to seek redress.

Risks Related to Ownership of Stock and Corporate Governance

Our stock is thinly traded and may be subject to volatility.

Although our common stock is traded on the New York Stock Exchange, it may be relatively illiquid, or "thinly traded," which can increase share price volatility and make it difficult for larger investors to buy or sell shares in the public market without affecting the share price. Investors may be unable to buy or sell a certain quantity of our shares in the public market within one or more trading days. If any such limited trading in our stock continues, it may be difficult for holders to sell their shares in the public market at any given time at prevailing prices.

The prevailing market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including actual or anticipated fluctuations in operating results; changes in market valuations of other similar companies; additions or departures of key personnel; future sales of common stock; deviations in net revenues or in losses from levels expected by the investment community; and trading volume fluctuations.

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.

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.

Risks Related to our Clients

Competitive fee pressures could reduce revenues and profit margins.

To the extent we have to compete on the basis of price, we may not be able to maintain a profitable fee structure. In recent years, there has been a trend toward lower fees in the investment management industry driven in large part by low-cost, passive strategies, and we are actively marketing lower fee structures to stay competitive. We cannot be assured that we will succeed in providing investment returns and service levels that will allow us to maintain a profitable fee structure. Continued fee reductions on existing or future new business could have an adverse effect on our profit margins and results of operations.

In addition, we have performance fee agreements with certain clients who pay a fee if we outperform a specified index over predetermined periods of time. We may not be able to outperform such indexes, and failure to do so would cause us to earn none or only part of those potential revenues, which could have a material adverse effect on our revenues and results of operations. Our revenues from performance-based fees can fluctuate significantly between measurement periods, depending on how we perform relative to the indexes specified in these agreements. For example, we earned performance fees of $1.1 million in 2025, $1.9 million in 2024 and $1.6 million in 2023.

Our business is dependent on investment advisory, sub-advisory, and trust agreements that are subject to termination or non-renewal and investments we manage under such agreements may be redeemed. As a result, we could lose clients on very short notice.

Substantially all of our revenues are derived pursuant to investment advisory, sub-advisory and trust agreements with our clients that are subject to termination without advance notice. Investors in funds that we advise or sub-advise may redeem their investments at any time without prior notice, thereby reducing our AUM. These investors may redeem for any reason, including general financial market conditions, our absolute or relative investment performance or their own financial condition and requirements. In a declining stock market, the pace of redemptions could accelerate. Substantial additional redemptions or a termination or failure to renew a material number of these agreements would adversely affect our revenues and have a material adverse effect on our earnings and financial condition.

A small number of clients account for a substantial portion of our business, and a reduction or loss of business with any of these clients could have a material adverse effect on our business, financial condition and results of operations.

We are dependent to a significant degree on our ability to maintain our relationships with clients, consultants, managed account platforms and other intermediaries. Our ten largest clients accounted for approximately 20 %, 20 % and 21 % of our fee revenues for the years ended December 31, 2025, 2024 and 2023, respectively. There can be no assurance that we will be successful in maintaining existing relationships, securing additional relationships or achieving the superior investment performance necessary to earn performance-based advisory fees. Our failure to retain one or more of these large relationships or to establish additional profitable relationships could have a material adverse effect on our business, financial condition and results of operations.

General Risk Factors

We have made and may continue to make business combinations as a part of our business strategy, which may present risks and uncertainties.

We may continue to seek business acquisitions as a means of broadening our offerings and capturing additional opportunities. However, there is no guarantee that we will be successful in identifying target companies that meet our criteria

for acquisition. Additionally, future acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms, if at all.

The success of our historical and future business combinations also depends on our ability to integrate the operations of the acquired businesses efficiently and effectively with our existing operations and realize the anticipated benefits from them. The potential risks associated with successful integration and realization of benefits include, but are not limited to the following:

• our due diligence may not identify or fully assess valuation issues, potential liabilities or other acquisition risks;

• acquired entities may not achieve anticipated revenue targets, cost savings or other synergies or benefits, or acquisitions may not result in improved operating performance, which could adversely affect our earnings, and we may be unable to recover investments in any such acquisitions;

• we may have difficulty integrating acquired businesses, resulting in unforeseen difficulties and greater expenses than expected;

• we may have difficulty entering into new markets in an efficient and cost-effective manner while maintaining adequate standards, controls and procedures;

• key personnel within an acquired organization may resign from their related positions resulting in a significant loss to our strategic and operational efficiency associated with the acquired company;

• the effectiveness of our daily operations may be reduced by the redirection of employees and other resources to acquisition and integration activities;

• we may assume liabilities of an acquired business (including litigation, tax liabilities, and other contingent liabilities), including liabilities that were unknown at the time of the acquisition, that pose future risks to our working capital needs, cash flows and the profitability of related operations;

• we may assume unprofitable projects that pose future risks to our working capital needs, cash flows and the profitability of related operations; or

• business acquisitions may include substantial transactional costs to complete the acquisition that exceed the estimated financial and operational benefit.

Failure to effectively execute our strategic growth plan could result in damage to our reputation and could have a material adverse effect on our business, financial condition and results of operations.

We believe that we have established a strong platform to support future growth but there is no assurance that we will appropriately execute our strategic plans, including but not limited to acquisitions, divestitures or other strategic transactions.

As part of our long-term business strategy, we may pursue corporate development transactions including the acquisition of asset management firms, mutual funds, wealth management firms and investment professionals or teams. Acquisitions involve inherent risks that could compromise the success of the combined business and dilute the holdings of current stockholders. See “Item 1. Business — Growth Strategy.” If we are incorrect when assessing the value, strengths, weaknesses, liabilities and potential profitability of such transactions, or if we fail to adequately integrate the acquired businesses or individuals, the success of the combined business could be compromised. Business acquisitions are subject to the risks commonly associated with such transactions including, among others, potential exposure to unknown liabilities of acquired companies and to acquisition costs and expenses, the difficulty and expense of integrating the operations and personnel of the acquired companies, potential disruptions to the business of the combined company and potential diversion of management’s time and attention, the impairment of relationships with and the possible loss of key employees and clients as a result of changes in management, potential litigation or other legal risks, potential write-downs related to goodwill impairments in connection with acquisitions and dilution to the stockholders of the combined company if the acquisition is made for stock of the combined company. In addition, investment strategies, technologies or businesses of acquired companies may not be effectively assimilated into our business or may have a negative effect on the combined company’s revenues or earnings. The combined company may also incur significant expenses to complete acquisitions and support acquired investment strategies and businesses. Further, any such acquisitions may be funded with cash, debt or equity, which could dilute the holdings or limit the rights of stockholders. Finally, we may not be successful in identifying attractive acquisition candidates or completing acquisitions on favorable terms.

Divestitures involve inherent risks that could compromise the success of our business. Risks related to divestitures can include difficulties in the separation of the divested business, loss of clients, retention or obligation to indemnify certain liabilities, the failure of counterparties to satisfy payment obligations, unfavorable market conditions that may impact any earnout or contingency payment due to us, unexpected difficulties in losing employees of the divested business or asset impairments.

As consumer demand for digital interaction with investment advisors and portfolios continues to grow, we are exploring opportunities to develop digital solutions to enhance services to our clients. If we are incorrect in assessing the value, strengths, weaknesses and potential profitability of such solutions, or if we fail to adequately integrate the solutions, the success of our overall business could be compromised. The initial investment in the necessary technological capabilities and the potential diversion of management’s time and attention could have a material impact to our business, financial condition and results of operations.

There is no assurance that we will be successful in overcoming these or other risks encountered with acquisitions, divestitures and other strategic transactions. These risks may prevent us from realizing the expected benefits from acquisitions or divestitures and could result in the failure to realize the full economic value of a strategic transaction.

Various factors may hinder the declaration and payment of dividends.

We have historically paid a quarterly dividend; however, payment of future dividends is subject to the discretion of our Board, and various factors may impact our ability to maintain the current dividend or pay dividends at all. Such factors include our financial position, capital requirements and liquidity, tax regulations, stock repurchase plans, state corporate and banking law restrictions, results of operations and other factors that our Board may consider relevant. As a holding company, our ability to pay dividends is dependent on the dividends and income we receive from our subsidiaries. Currently, our primary source of cash consists of dividends from Westwood Management or Westwood Trust. The payment of dividends by Westwood Trust is subject to the discretion of its Board and compliance with applicable laws, including the provisions of the Finance Code applicable to Westwood Trust. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We may not be able to fund future capital requirements on favorable terms, if at all.

We cannot be certain that financing to fund our working capital or other cash requirements, if needed, will be available on favorable terms, if at all. Our capital requirements may vary greatly from quarter to quarter depending on, among other things, capital expenditures, technological investments and fluctuations in our operating results and financing activities. If financing becomes necessary, we may or may not be able to obtain financing on favorable terms, if at all. Further, any future equity financings could dilute the relative percentage ownership of then existing common stockholders, and any future debt financings could involve restrictive covenants that limit our ability to take certain actions.

Failure to properly identify and address conflicts of interest could harm our reputation or cause clients to withdraw funds, which could adversely affect our business and results of operations.

The SEC and other regulators have increased their scrutiny of potential conflicts of interest, and we have implemented procedures and controls that we believe are reasonably designed to address these issues. However, appropriately dealing with conflicts of interest is complex, and if we fail, or appear to fail, to deal appropriately with conflicts of interest, we could face reputational damage, litigation or regulatory proceedings, any of which may adversely affect our results of operations.

As we expand the scope of our business and our client base, we must also continue to monitor and address any potential new conflicts between the interests of our stockholders and those of our clients. Our clients may withdraw funds if they perceive conflicts of interest between the investment decisions we make for strategies in which they have invested and our obligations to our stockholders. For example, we may limit the growth of assets in or close strategies or otherwise take action to slow the flow of assets when we believe it is in the best interest of our clients, even though our AUM and investment management fees may be negatively impacted. Similarly, we may establish or add new investment teams or expand operations into other geographic areas or jurisdictions if we believe such actions are in the best interest of our clients, even though our results of operations may be adversely affected in the short term. Although we believe such actions enable us to retain client assets and maintain our profit margins, if clients perceive a change in our investment or operational decisions favors a strategy to maximize short term results, they may withdraw funds, which could adversely affect our revenues and results of operations.

Insurance coverage may be inadequate to cover legal and regulatory proceedings.

We maintain insurance coverage in amounts and on terms we believe appropriate to cover legal and regulatory matters and potential cybersecurity attacks; however, we can make no assurance that there will be adequate coverage or that a specific claim will be covered by our insurance policies. Additionally, insurance premiums may rise for substantially the same coverage amounts and terms, which will increase our expenses and reduce net income.

Failure to maintain effective internal controls could have a material adverse effect on our business and stock price.

Effective internal controls are necessary to provide reliable financial reports. If we cannot provide reliable financial reports, our brand and operating results could be harmed. All internal control systems, no matter how well designed, contain inherent limitations, and systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

We cannot be certain that the measures we take to evaluate and improve our internal controls will ensure that we implement and maintain adequate controls over our financial processes and reporting. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we fail to maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended, we may not be able to ensure that we can conclude that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Failure to achieve and maintain an effective internal control environment could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis in conjunction with our Consolidated Financial Statements and related notes thereto appearing elsewhere in this Report.

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,” “forecast”, “explore,” “believe,” “plan,” “estimate,” “expect,” “intend,” “should,” "potentially," “could,” “goal,” “may,” “target,” “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 Exchange Act. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results, our financial condition, and the timing of some events could differ materially from those projected in or contemplated by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others:

• the composition and market value of our AUM and AUA;

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

• 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 cybersecurity;

• 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;

• 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;

• we have made and may continue to make business combinations as a part of our business strategy, which may present certain risks and uncertainties;

• our relationships with investment consulting firms;

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

• our ability to declare and pay dividends;

• 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.

Additional factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed under the section entitled “Item 1A. Risk Factors” and elsewhere in this Report. The forward-looking statements are based only on currently available information and 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., Westwood Advisors, L.L.C., Salient Advisors, L.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 broker-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®, Westwood ETFs, other mutual funds, individuals, private capital funds and clients of Westwood Trust.

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

SCLP serves as a sub-placement agent for private placements.

Our revenues are generally derived from fees based on a percentage of AUM and AUA, and Westwood Management and Westwood Trust collectively had AUM of approximately $16.5 billion and AUA of approximately $0.9 billion at December 31, 2025. We have established a track record of delivering competitive, risk-adjusted returns for our clients.

With respect to most of our AUM, we utilize a “value” investment style focused on achieving superior long-term, risk-adjusted returns by investing in companies with high levels of free cash flow, improving returns on equity and strengthening balance sheets that are well positioned for growth but whose value is not fully recognized in the marketplace. This investment approach is designed to limit downside during unfavorable periods and provide superior real returns over the long term. Our investment teams have significant industry experience. Our investment team members have average investment experience of over twenty years.

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 develop new products that we believe will be in demand by clients and investors, thereby generating new revenue streams for us; however, there is no guarantee that new products will be successful in generating demand and incremental revenues.

2025 Highlights

The following items were reported for the year ended December 31, 2025:

• Launched Westwood Enhanced Income Opportunity ETF (YLDW).

• AUM as of December 31, 2025 was $16.5 billion, consistent with December 31, 2024. Quarterly average AUM increased 5% to $17.1 billion for 2025 versus 2024, which, along with higher revenues from our ETFs and private energy secondaries funds, contributed to a 3% increase in total revenue from 2024.

• Our MLP Total Return, Income Opportunity, Multi-Asset Income, Alternative Income, Credit Opportunities, Westwood Salient Enhanced Midstream Income ETF and Westwood Salient Enhanced Energy Income ETF strategies performed strongly by beating their primary benchmarks for the year.

• We paid $5.4 million of dividends to our common stockholders.

• Our financial position remains strong with liquid cash and investments of $44.1 million and no debt as of December 31, 2025 .

Revenues

We derive our revenues from investment advisory fees, trust fees and other revenues. Our advisory fees are generated by Westwood Management, which manages client accounts under investment advisory and sub-advisory agreements. Advisory fees are typically calculated based on a percentage of AUM and AUA and are paid in accordance with the terms of the agreements. Advisory fees are paid quarterly in advance based on AUM on the last day of the preceding quarter, quarterly in

arrears based on AUM on the last day of the quarter just ended or are based on a daily or monthly analysis of AUM for the stated period. We recognize advisory fee revenues as services are rendered. Certain of our clients have a contractual performance-based fee component in their contracts, which generates additional revenues if we outperform a specified index over a specific period of time. We record revenue for performance-based fees at the end of the measurement period. Since our advance paying clients’ billing periods coincide with the calendar quarter to which such payments relate, revenue is recognized within the quarter, and our Consolidated Financial Statements contain no deferred advisory fee revenues.

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

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

Employee Compensation and Benefits

Employee compensation and benefits costs generally consist of salaries, sales commissions, incentive compensation, stock-based compensation expense and benefits.

Sales and Marketing

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

Westwood Funds

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

Information Technology

Information technology expenses include 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 sub-advisory fees, audit, 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, Directors' fees, investor relations, licenses and fees, office supplies and other miscellaneous expenses.

(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 the Salient Acquisition, with gains representing reductions in value and losses representing increases in value.

Acquisition expenses

Acquisition expenses consist of costs related to the Salient Acquisition.

Net Change in Unrealized Appreciation on Private Investments

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

Net Investment Income

Net 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 and the receipt of life insurance proceeds.

Firm-wide Assets Under Management

Firm-wide assets under management of $17.4 billion at December 31, 2025 consisted of $16.5 billion of AUM and $0.9 billion of AUA.

AUM of $16.5 billion at December 31, 2025 was consistent with $16.6 billion at December 31, 2024. Quarterly average AUM increased $0.7 billion, up 5%, to $17.1 billion compared with $16.3 billion for 2024. The increase in average AUM was primarily due to the timing of both $1.0 billion of market appreciation in 2025 and inflows.

AUM increased $1.1 billion, or 7%, to $16.6 billion at December 31, 2024 compared to $15.5 billion at December 31, 2023. Quarterly average AUM increased $1.4 billion, up 9%, to $16.3 billion compared with $15.0 billion for 2023. The increase in average AUM was primarily due to $1.9 billion of market appreciation in 2024.

The following table presents our AUM (in millions, except percentages):

As of December 31,

Change

Change

Institutional (1)

Wealth Management (2)

Mutual Funds & ETFs (3)

Total AUM

(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) sub-advisory relationships where Westwood provides investment management services for funds offered by other financial institutions; (iii) pooled investment vehicles, including collective investment trusts; and (iv) managed account relationships with brokerage firms and other registered investment advisors that offer Westwood products to their customers.

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

(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.

Roll-Forward of Assets Under Management

Year Ended December 31, 2025

AUM (in millions)

Institutional

Wealth Management

Mutual

Funds & ETFs

Total

Beginning of period assets

Client flows:

Inflows

Outflows

Net client flows

Market appreciation (depreciation)

Net change

End of period assets

The decrease in AUM for the year ended December 31, 2025 was due to net outflows of $1.0 billion offset by market appreciation of $1.0 billion. Net outflows were primarily related to our LargeCap Value strategy.

Year Ended December 31, 2024

AUM (in millions)

Institutional

Wealth Management

Mutual

Funds & ETFs

Total

Beginning of period assets

Client flows:

Inflows

Outflows

Net client flows

Market appreciation (depreciation)

Net change

End of period assets

The increase in AUM for the year ended December 31, 2024 was due to market appreciation of $1.9 billion offset by net outflows of $0.8 billion. Net outflows were primarily related to our LargeCap Value and SmallCap Value strategies.

Year Ended December 31, 2023

AUM (in millions)

Institutional

Wealth Management

Mutual

Funds

Total

Beginning of period assets*

Client flows:

Inflows

Outflows

Net client flows

Market appreciation (depreciation)

Net change

End of period assets

* Certain assets under management acquired from Salient were reclassified from Mutual Funds to Institutional as of December 31, 2022 to be consistent with the classification of existing assets.

The increase in AUM for the year ended December 31, 2023 was due to market appreciation of $2.0 billion offset by net outflows of $1.3 billion. Net outflows were primarily related to our Income Opportunity, MLP & Energy Infrastructure, LargeCap Value and SmallCap Value strategies.

Roll-Forward of Assets Under Advisement

Years Ended December 31,

AUA (in millions)

Beginning of period assets

Inflows

Outflows

Net client flows

Market appreciation (depreciation)

Net change

End of period assets

Results of Operations

The following table and discussion of our results of operations are 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.

Years ended December 31,

(in thousands, except percentages)

Change

Change

Revenues:

Advisory fees:

Asset-based

Performance-based

Trust fees

Trust performance-based fees

Other revenues, net

Total revenues

Expenses:

Employee compensation and benefits

Sales and marketing

Westwood funds

Information technology

Professional services

General and administrative

(Gain) loss from change in fair value of contingent consideration

Acquisition expenses

Total expenses

Net operating income

Net change in unrealized appreciation on private investments

Net investment income

Other income

Income before income taxes

Income tax provision

Net income

Less: Income (loss) attributable to noncontrolling interest

Income attributable to Westwood Holdings Group, Inc.

NM - Not meaningful

Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Total Revenues. Total revenues increased $3.0 million, or 3%, to $97.8 million compared to $94.7 million for 2024. The increase was attributable to higher average assets under management and higher revenues from our ETFs and private energy secondaries funds.

Westwood funds . Westwood fund expenses increased 31% to $4.3 million compared to $3.3 million for 2024, primarily due to increased administration and distribution expenses related to our ETFs, driven by higher fund assets.

Information technology. Information technology costs increased 13% to $10.9 million compared to $9.7 million in 2024, primarily due to additional investment resource tools and software licenses.

Professional services. Professional services expense increased $1.4 million, or 26%, to $6.9 million in 2025 primarily due to additional consulting costs.

(Gain) loss from change in fair value of contingent consideration. In 2025 we did not adjust our contingent consideration from the 2022 Salient Acquisition as the specific revenue thresholds were not met.

Net change in unrealized appreciation on private investments. In 2025 we recorded an unrealized gain of approximately $2.0 million for our investment in TXSE following observable price changes.

Provision for Income Taxes. The effective tax rate was 26.9% for 2025 compared to 44.9% for 2024. Our income tax rate differed from the 21% statutory tax rate due to permanent differences due to executive compensation and the impact of state and local taxes.

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Total Revenues. Total revenues increased $4.9 million, or 6%, to $94.7 million compared to $89.8 million for 2023. The increase was attributable to higher average assets under management.

Employee Compensation and Benefits. Employee compensation and benefits expenses increased primarily due to higher performance-related incentive compensation following increased AUM balances and additional headcount.

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

Provision for Income Taxes. The effective tax rate was 44.9% for 2024 compared to 23.2% for 2023. Our income tax rate differed from the 21% statutory tax rate 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, along with the impact of state and local taxes.

Supplemental Financial Information

As supplemental information, we are providing non-GAAP performance measures that we refer to as Economic Earnings and Economic EPS. We provide these measures in addition to, not as a substitute for, income (loss) attributable to Westwood Holdings Group, Inc. and earnings (loss) per share, which are reported on a GAAP basis. Our management and Board review Economic Earnings and Economic EPS to evaluate our ongoing performance, allocate resources, and review our dividend policy. We believe that these non-GAAP performance measures, while not substitutes for GAAP income (loss) attributable to Westwood Holdings Group, Inc. 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 as income (loss) attributable to Westwood Holdings Group, Inc. plus non-cash equity-based compensation expense, impairment expense, amortization of intangible assets, currency translation adjustment reclassification, deferred taxes related to 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.

Non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are that they can have a material impact on the equivalent GAAP measures or they may be calculated differently by other companies.

We compensate for these limitations on the use of non-GAAP financial measures by relying primarily on our GAAP results and using non-GAAP financial measures only as a supplement. We believe that providing non-GAAP diluted net earnings per share and non-GAAP Income (loss) in addition to the related GAAP measures provides greater transparency to the information used in our financial and operational decision-making.

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

The following table provides a reconciliation of income (loss) attributable to Westwood Holdings Group, Inc. to Economic Earnings:

For the years ended December 31,

(in thousands, except percentages and per share data)

Change

Change

Change

Change

Income (loss) attributable to Westwood Holdings Group, Inc.

Stock-based compensation expense

Intangible amortization

Tax benefit from goodwill amortization

Tax impact of adjustments to GAAP net income (loss)

Economic Earnings

Economic Earnings per Share

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

For the years ended December 31,

(in thousands, except percentages)

Change

Change

Change

Change

Advisory net income

Stock-based compensation expense

Intangible amortization

Tax benefit from goodwill amortization

Tax impact of adjustments to GAAP net income

Economic Earnings

For the years ended December 31,

(in thousands, except percentages)

Change

Change

Change

Change

Trust net income

Stock-based compensation expense

Intangible amortization

Tax benefit from goodwill amortization

Tax impact of adjustments to GAAP net income

Economic Earnings

For the years ended December 31,

(in thousands, except percentages)

Change

Change

Change

Change

Other net loss

Stock-based compensation expense

Intangible amortization

Tax impact of adjustments to GAAP net income (loss)

Economic Earnings (Loss)

Liquidity and Capital Resources

As of December 31,

Balance Sheet Data (in thousands)

Cash and cash equivalents

Accounts receivable

Total liquid assets

Liquid investments

Historically we have funded our operations and cash requirements with cash generated from operating activities. We may also use cash from operations to pay dividends to our stockholders or for deferred contingent consideration payments. We had no debt as of December 31, 2025 and 2024. 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 $44.1 million and $44.6 million as of December 31, 2025 and 2024, respectively.

Westwood Trust is required by the Texas Finance Code to maintain cash and investments in an amount equal to the minimum restricted capital of $ 4.0 million . Restricted capital is included in "Investments at fair value" in the accompanying Consolidated Balance Sheets. At December 31, 2025, Westwood Trust had approximately $ 13.2 million in excess of its minimum capital requirement.

For the years ended December 31,

Cash Flow Data (in thousands)

Operating cash flows

Investing cash flows

Financing cash flows

During 2025, cash flow provided by operating activities was $18.9 million, compared to $21.1 million during 2024 and cash used in operating activities of $1.2 million during 2023. The decrease of $2.2 million from 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.

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

Our future liquidity and capital requirements will depend upon numerous factors, including results of operations, the timing and magnitude of capital expenditures or strategic initiatives, our dividend policy and other business and risk factors described under “Item 1A. Risk Factors” in this Report. We believe that current cash and liquid investment balances plus cash generated from operations will be sufficient to meet the operating and capital requirements of our ordinary business operations through at least the next twelve months, however there can be no assurance that we will not require additional financing within this time frame. 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.

Cash Dividends

The following table summarizes dividends declared during 2025 and 2024:

2025 Dividends

Declaration Date

Record Date

Paid Date

Dividend Per Share

February 12, 2025 (1)

March 3, 2025

April 1, 2025

April 30, 2025

June 2, 2025

July 1, 2025

August 8, 2025

September 2, 2025

October 1, 2025

October 30, 2025

December 1, 2025

January 2, 2026

2024 Dividends

Declaration Date

Record Date

Paid Date

Dividend Per Share

February 14, 2024 (1)

March 1, 2024

April 3, 2024

May 1, 2024 (1)

June 3, 2024

July 1, 2024

July 31, 2024 (1)

September 2, 2024

October 1, 2024

October 30, 2024 (1)

December 2, 2024

January 3, 2025

(1) This dividend was treated for accounting purposes as a return of capital.

Contractual Obligations

Purchase commitments

Our purchase commitments primarily consist of outsourced information technology services, software licenses and commitments for financial research tools. As of December 31, 2025, our purchase commitments for the next five years and thereafter were as follows (in thousands):

Payments due in:

Total

Less than 1 year

1-3 years

4-5 years

Thereafter

Purchase commitments (1)

(1)    A “purchase commitment” is defined as an agreement to purchase goods or services that is enforceable and legally binding and that specifies all significant terms, including (a) fixed or minimum quantities to be purchased; (b) fixed, minimum or variable price provisions; and (c) the approximate timing of the transaction. The above purchase commitments exclude agreements that are cancelable without significant penalty.

Critical Accounting Estimates

The preparation of our Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent losses and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. In applying accounting principles, we often must make individual estimates and assumptions regarding expected outcomes or uncertainties. Our estimates, judgments and assumptions are continually evaluated based on available information and experience. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. We believe the following are areas where the degree of judgment and complexity in determining amounts recorded in our Consolidated Financial Statements make accounting estimates critical.

Business Combinations

Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities assumed. In a business combination, we allocate the purchase price to the acquired business’ identifiable assets and liabilities at their acquisition date fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill.

The assets acquired and liabilities assumed in our business combinations consist of acquired working capital and finite-lived and indefinite-lived intangible assets. The carrying value of acquired working capital approximates its fair value, given the short-term nature of these assets and liabilities. We estimated the fair value of finite-lived and indefinite-lived intangible assets acquired using a discounted cash flow approach, which included an analysis of the future cash flows expected to be generated by such assets and the risk associated with achieving such cash flows. The key assumptions used in the discounted cash flow model include the discount rate that is applied to the discretely forecasted future cash flows to calculate the present value of those cash flows and the estimate of future cash flows attributable to the acquired intangible assets, which include revenues, operating expenses and taxes. Our estimates are inherently uncertain and subject to refinement. As a result, during the

measurement period, which may be up to one year from the acquisition date, we may record adjustments to the fair value of assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Contingent Consideration

When an acquisition includes future contingent consideration on achieving certain milestones, the Company estimates the earn-out fair value using Monte Carlo simulation models. The Monte Carlo simulations considered assumptions including revenue volatility, risk free rates, discount rates and payment discount rates. The projected contingent payment is discounted back to the current period using a discounted cash flow model. Increases or decreases in projected revenues, probabilities of payment, discount rates or projected payment dates may result in higher or lower fair value measurements. Fluctuations in any of the inputs may result in a significantly lower or higher fair value measurement. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date, and the fair value of the contingent consideration is remeasured at each subsequent reporting period with any change in fair value recognized as income or expense within the Consolidated Statements of Operations. For the years ended December 31, 2025 and 2024, changes in growth projections, due to increases in AUM and AUA values, and volatility assumptions were the primary drivers of changes in our fair value estimates.

Goodwill

Goodwill is tested at least annually for impairment. We assess the recoverability of the carrying amount of goodwill either qualitatively or quantitatively as of July 1 of each fiscal year, or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. We test more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include declines in revenues, earnings or cash flows, or the development of a material adverse change in the business climate.

We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, which is referred to as a component. We have identified two reporting units, which are consistent with our reporting segments: Advisory and Trust. The Company is not required to calculate the fair value of a reporting unit unless we determine that it is more likely than not that its fair value is less than the carrying amount. We assess goodwill for impairment using either a qualitative or quantitative assessment.

The qualitative goodwill impairment assessment requires evaluating factors, based on the weight of evidence, to determine whether a reporting unit's carrying value would more likely than not exceed its fair value. As part of our goodwill qualitative testing process, we evaluate various factors that are specific to the reporting unit as well as industry and macroeconomic factors in order to determine whether they are reasonably likely to have a material impact on the fair value of our reporting units. Based on the qualitative analyses performed in 2025, we concluded that there were no changes that were reasonably likely to cause the fair value of the Advisory and Trust reporting units to be less than those reporting unit's carrying values, and determined that there was no impairment of our goodwill. In the event we were to determine that a reporting unit's carrying value would more likely than not exceed its fair value, quantitative testing would be performed comparing carrying values to estimated fair values.

The quantitative analysis requires a comparison of each reporting unit’s carrying value to the fair value of the respective unit. If the carrying value exceeds the fair value, an impairment charge is recorded based on that difference.

We completed our most recent annual goodwill impairment assessment during the third quarter of 2025 and determined that no goodwill impairment related to the Advisory or Trust segment was required. There was no goodwill impairment for either segment during the years ended December 31, 2025, 2024 or 2023.

Accounting Developments

See Note 2 “Summary of Significant Accounting Policies” to our Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” for a description of any new accounting standards and their anticipated effects on our Consolidated Financial Statements.