COLUMBUS, Ohio, Feb. 27, 2015 /PRNewswire/ -- Diamond Hill Investment Group, Inc. (the "Company," "we," "our") (NASDAQ: DHIL) today reported results for the year ended December 31, 2014.
Summary of Results of Operations
(in thousands, except per share figures)
Three Months Ended
December 31,
Year Ended
December 31,
2014
2013
% Change
2014
2013
% Change
Revenues:
Investment advisory
$
24,509
$
19,180
28%
$
89,901
$
69,967
28%
Mutual fund administration, net
3,962
3,144
26%
14,658
11,465
28%
Total revenue
28,471
22,324
28%
104,559
81,432
28%
Operating expenses
10,240
12,890
(21)%
57,099
50,750
13%
Net operating income
18,231
9,434
93%
47,460
30,682
55%
Investment income
2,073
1,482
2,906
4,950
Income before taxes
20,304
10,916
86%
50,366
35,632
41%
Net income
$
12,553
$
6,750
86%
$
31,581
$
22,155
43%
Earnings per share - diluted
$
3.81
$
2.10
81%
$
9.67
$
6.94
39%
Operating profit margin
64%
42%
45%
38%
Selected Balance Sheet Data
(in thousands, except per share figures)
December 31,
2014
2013
Assets
Cash equivalents and investment portfolio
$
81,205
$
51,833
Accounts receivable
16,514
13,002
Deferred taxes
5,659
8,063
Other assets
4,331
2,455
Total assets
$
107,709
$
75,353
Liabilities
33,390
30,410
Total shareholders' equity
74,319
44,943
Total liabilities and shareholders' equity
$
107,709
$
75,353
Book value per share(a)
$
22.40
$
13.80
Outstanding shares
3,318
3,257
(a) - A $4 per share special dividend was paid in December 2014 and a $3 per share special dividend was paid in December 2013.
Change in Assets Under Management
For the Year Ended December 31,
(in millions)
2014
2013
AUM at beginning of the year
$
12,186
$
9,429
Net cash inflows (outflows)
proprietary funds
1,618
713
sub-advised funds
166
(758)
institutional accounts
478
(263)
2,262
(308)
Net market appreciation and income
1,208
3,065
Increase during the year
3,470
2,757
AUM at end of the year
$
15,656
$
12,186
Discussion of 2014 operating profit margin: The Company's fourth quarter and full year 2014 operating profit margins of 64% and 45%, respectively, were higher than historical results primarily as a result of a decrease in total compensation expense as a percentage of total revenues. A significant component of compensation expense is variable incentive compensation, which can fluctuate greatly from period to period. Incentive compensation expense is determined by many factors including investment results in client accounts, individual employee contributions, company performance and other factors.
About Diamond Hill: We are an independent investment management firm with significant employee ownership and $15.1 billion in assets under management as of January 31, 2015. We provide investment management services to institutions and individuals through mutual funds, institutional separate accounts, and private investment funds. Our entire investment team shares the same intrinsic value investment philosophy focused on absolute returns, and our interests are firmly aligned with our clients through significant investment in its strategies. For more information visit www.diamond-hill.com.
Use of Supplemental Data as Non-GAAP Performance Measure Net Operating Income After Tax
As supplemental information, we provide performance measures that are based on methodologies other than generally accepted accounting principles ("non-GAAP") for "Net Operating Income After Tax" that management uses as benchmarks in evaluating and comparing the period-to-period operating performance of the Company and subsidiaries.
The Company defines "net operating income after tax" as our net operating income less income tax provision excluding investment related activity and the tax impact related to the investment related activity. We believe that "net operating income after tax" provides a good representation of our operating performance, as it excludes the impact of investment related activity on financial results. The amount of the investment portfolio and market fluctuations on the investments may change significantly from one period to another, which can distort the underlying earnings of a company. We also believe "net operating income after tax" is an important metric in estimating the value of an asset management business. This non-GAAP measure is provided in addition to net income and net operating income and is not a substitute for net income or net operating income and may not be comparable to non-GAAP performance measures of other companies.
Year Ended December 31,
(in thousands, except per share data)
2014
2013
Net operating income, GAAP basis
$
47,460
$
30,682
Non-GAAP adjustments:
Tax provision excluding impact of investment income
(17,701)
(11,605)
Net operating income after tax, non-GAAP basis
$
29,759
$
19,077
Net operating income after tax per diluted share, non-GAAP basis
$
9.11
$
5.97
The tax provision excluding impact of investment income is calculated by applying the tax rate calculated from the income statement to net operating income.
Our management does not promote that investors consider the above non-GAAP financial measures alone, or as a substitute for, financial information prepared in accordance with GAAP.
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Throughout this press release, we may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to such matters as anticipated operating results, prospects and levels of assets under management, technological developments, economic trends (including interest rates and market volatility), expected transactions and similar matters. The words "believe," "expect," "anticipate," "estimate," "should," "hope," "seek," "plan," "intend" and similar expressions identify forward-looking statements that speak only as of the date thereof. While we believe that the assumptions underlying our forward-looking statements are reasonable, investors are cautioned that any of the assumptions could prove to be inaccurate and accordingly, our actual results and experiences could differ materially from the anticipated results or other expectations expressed in our forward-looking statements. Factors that could cause such actual results or experiences to differ from results discussed in the forward-looking statements include, but are not limited to: the adverse effect from a decline in the securities markets; a decline in the performance of our products; changes in interest rates; changes in national and local economic and political conditions, including the effects of implementation of the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012, the Jumpstart Our Business Startups Act of 2012 and the continuing economic uncertainty in various parts of the world; changes in government policy and regulation, including monetary policy; changes in our ability to attract or retain key employees; unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations; and other risks identified from time-to-time in other public documents on file with the U. S. Securities and Exchange Commission.
