REVENUE

Adoption of ASC 2014-09 Revenue from Contracts with Customers (Topic 606)

On January 1, 2018, we adopted ASU 2016-10 using the modified retrospective method applied to those contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606 while prior period amounts continue to be reported in accordance with our historic accounting under Topic 605.

We analyzed the revenue from prior periods and determined no material adjustments to opening retained earnings were necessary as the updated guidance is consistent with our historical revenue recognition methodology.

Revenue Recognition

Revenues are recognized when the performance obligation (the investment management and advisory or trust services provided to the client) defined by the investment advisory or sub-advisory agreement is satisfied. For each performance obligation, we determine at contract inception whether the revenue satisfies over time or at a point in time. We derive our revenues from investment advisory fees, trust fees and other sources of revenues. Advisory and Trust fees are calculated based on a percentage of assets under management and the performance obligation is realized over the current calendar quarter. Once clients receive our investment advisory services we have an enforceable right to payment.

Advisory Fee Revenues

Our advisory fees are generated by Westwood Management and Westwood International, which manage client accounts under investment advisory and sub-advisory agreements. Advisory fees are typically calculated based on a percentage of assets under management and are paid in accordance with the terms of the agreements. Advisory fees are paid quarterly in advance based on assets under management on the last day of the preceding quarter, quarterly in arrears based on assets under management on the last day of the quarter just ended or are based on a daily or monthly analysis of assets under management for the stated period. We recognize advisory fee revenues as services are rendered. Since our advance paying clients' billing periods coincide with the calendar quarter to which such payments relate, revenue is recognized within the quarter and our condensed consolidated financial statements contain no deferred advisory fee revenues. Advisory clients typically consist of institutional and mutual fund accounts.

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

Mutual funds include the Westwood Funds®, a family of mutual funds for which Westwood Management serves as advisor. These funds are available to individual investors, as well as offered as part of our investment strategies for institutional investors and private wealth accounts.

Arrangements with Performance Based Obligations

A limited number of our advisory clients have a contractual performance-based fee component in their contracts, which generates additional revenues if we outperform a specified index over a specific period of time. The revenue is based on future market performance and is susceptible to factors outside our control. We cannot conclude that a significant reversal in the cumulative amount of revenue recognized will not occur during the measurement period, and therefore the revenue is recorded at the end of the measurement period when the performance obligation has been satisfied.

Trust Fee Revenues

Our trust fees are generated by Westwood Trust pursuant to trust or custodial agreements. Trust fees are separately negotiated with each client and are generally based on a percentage of assets under management. Westwood Trust also provides trust services to a small number of clients on a fixed fee basis. The fees for most of our trust clients are calculated quarterly in arrears, based on a daily average of assets under management for the quarter. Since billing periods for most of Westwood Trust’s clients coincide with the calendar quarter, revenue is fully recognized within the quarter and our Condensed Consolidated Financial Statements do not contain a significant amount of deferred trust fee revenues.

Revenue Disaggregated

Sales taxes are excluded from revenues. The following table presents our revenue disaggregated by account type (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Advisory Fees:
Institutional	$	14,426	$	17,610	$	46,815	$	51,263
Mutual Funds	7,527		7,724		23,030		22,356
Private Wealth	70		—		134		—
Performance-based	—		—		2,984		1,417
Trust Fees	7,191		7,858		22,265		23,570
Other	640		300		953		1,265
Total revenues	$	29,854	$	33,492	$	96,181	$	99,871

We have clients in various locations around the world. The following table presents our revenue disaggregated by our clients' geographical locations (in thousands):



Three Months Ended September 30, 2018	Advisory		Trust		Performance-based		Other		Total
Asia	$	853	$	—	$	—	$	—	$	853
Australia	927		—		—		—		927
Canada	1,707		—		—		38		1,745
Europe	1,249		—		—		—		1,249
United States	17,287		7,191		—		602		25,080
Total	$	22,023	$	7,191	$	—	$	640	$	29,854

Nine Months Ended September 30, 2018
Asia	$	3,520	$	—	$	—	$	—	$	3,520
Australia	2,923		—		—		—		2,923
Canada	5,177		—		—		124		5,301
Europe	3,839		—		—		—		3,839
United States	54,520		22,265		2,984		829		80,598
Total	$	69,979	$	22,265	$	2,984	$	953	$	96,181



Three Months Ended September 30, 2017	Advisory		Trust		Performance-based		Other			Total
Asia	$	1,649	$	—	$	—	$	—		$	1,649
Australia	944		—		—		—			944
Canada	2,219		—		—		516			2,735
Europe	946		—		—		—			946
United States	19,576		7,858		—		(216		)	27,218
Total	$	25,334	$	7,858	$	—	$	300		$	33,492

Nine Months Ended September 30, 2017
Asia	$	4,696	$	—	$	—	$	—		$	4,696
Australia	2,371		—		—		—			2,371
Canada	6,351		—		—		738			7,089
Europe	3,065		—		—		—			3,065
United States	57,136		23,570		1,417		527			82,650
Total	$	73,619	$	23,570	$	1,417	$	1,265		$	99,871