Diamond Hill Investment Group, Inc. Reports Results For Second Quarter 2019

COLUMBUS, Ohio, July 31, 2019 /PRNewswire/ -- Diamond Hill Investment Group, Inc.  (the "Company," "we," "our") DHIL today reported unaudited results for the quarter ended June 30, 2019 and filed its Form 10-Q.

Selected Income Statement Data

(in thousands, except per share figures)





Three Months Ended June 30,







2019



2018



%

Change

Revenues:











    Investment advisory

$

31,511





$

33,526





(6)%

    Mutual fund administration, net

2,034





2,402





(15)%

    Total revenue

33,545





35,928





(7)%

Operating expenses

21,465





19,578





10%

Net operating income

12,080





16,350





(26)%

Investment income, net

6,519





3,565







Income before taxes

18,599





19,915





(7)%

Income tax expense

(4,442)





(5,017)





(11)%

Net income

14,157





14,898





(5)%

Net income attributable to redeemable noncontrolling interest

(962)





(528)







Net income attributable to common shareholders

$

13,195





$

14,370





(8)%













Earnings per share attributable to common shareholders - diluted

$

3.79





$

4.08





(7)%















Six Months Ended June 30,







2019



2018



%

Change

Revenues:











    Investment advisory

$

62,023





$

68,158





(9)%

    Mutual fund administration, net

4,101





5,552





(26)%

    Total revenue

66,124





73,710





(10)%

Operating expenses

42,910





39,157





10%

Net operating income

23,214





34,553





(33)%

Investment income, net

20,804





2,006







Income before taxes

44,018





36,559





20%

Income tax expense

(10,305)





(8,719)





18%

Net income

33,713





27,840





21%

Net income attributable to redeemable noncontrolling interest

(3,585)





(480)







Net income attributable to common shareholders

$

30,128





$

27,360





10%













Earnings per share attributable to common shareholders - diluted

$

8.64





$

7.81





11%

 

Selected Balance Sheet Data

(in thousands, except per share figures)





As Of



June 30, 2019



December 31, 2018

Total cash and corporate investments held directly by DHCM

$

202,218





$

196,545



Total assets

306,152





325,728



Total liabilities

54,381





67,472



Redeemable noncontrolling interest

34,076





62,680



Shareholders equity

217,695





195,576



Book value per share

$

63.22





$

55.89







For the Three Months Ended June 30,

(in millions)

2019



2018

AUM at beginning of the period

$

20,880





$

21,929



Net cash inflows (outflows)







    proprietary funds

(531)





(362)



    sub-advised funds

76





23



    institutional accounts

38





(53)





(417)





(392)



Net market appreciation and income

1,149





290



Increase (decrease) during the period

732





(102)



AUM at end of the period

$

21,612





$

21,827













Change in Assets Under Management



For the Six Months Ended June 30,

(in millions)

2019



2018

AUM at beginning of the period

$

19,108





$

22,317



Net cash inflows (outflows)







    proprietary funds

(815)





(174)



    sub-advised funds

135





126



    institutional accounts

(171)





(88)





(851)





(136)



Net market appreciation (depreciation) and income

3,355





(354)



Increase (decrease) during the period

2,504





(490)



AUM at end of the period

$

21,612





$

21,827



About Diamond Hill:

We are an independent investment management firm with significant employee ownership and $21.6 billion in assets under management as of June 30, 2019.  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

As supplemental information, we are providing performance measures that are based on methodologies other than U.S. generally accepted accounting principles ("non-GAAP").  We believe the non-GAAP measures below are useful measures of our core business activities, are important metrics in estimating the value of an asset management business and may enable more appropriate comparison to our peers.  These non-GAAP measures should not be a substitute for financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP") and may be calculated differently by other companies.  The following schedule reconciles GAAP measures to non-GAAP measures for the three and six months ended June 30, 2019 and 2018, respectively.



Three Months Ended

 June 30,



Six Months Ended

 June 30,

(in thousands, except percentages and per share data)

2019



2018



2019



2018

Total revenue

$

33,545





$

35,928





$

66,124





$

73,710



















Net operating income, GAAP basis

$

12,080





$

16,350





$

23,214





$

34,553



Non-GAAP adjustment:















Gains (losses) on deferred compensation plan investments, net(1)

1,283





456





3,695





(60)



Net operating income, as adjusted, non-GAAP basis(2)

13,363





16,806





26,909





34,493



Non-GAAP adjustment:















Tax provision on net operating income, as adjusted, non-GAAP basis(3)

(3,366)





(4,349)





(6,858)





(8,336)



Net operating income, as adjusted, after tax, non-GAAP basis(4)

$

9,997





$

12,457





$

20,051





$

26,157



















Net operating income, as adjusted after tax per diluted share, non-GAAP basis(5)

$

2.87





$

3.54





$

5.75





$

7.46



Diluted weighted average shares outstanding, GAAP basis

3,478





3,520





3,487





3,505



















Operating profit margin, GAAP basis

36

%



46

%



35

%



47

%

Operating profit margin, as adjusted, non-GAAP basis(6)

40

%



47

%



41

%



47

%



(1) Gains (losses) on deferred compensation plan investments, net: The gain (loss) on deferred compensation plan investments, which increases (decreases) deferred compensation expense included in operating income, is removed from operating income in the calculation because it is offset by an equal amount in investment income (loss) below net operating income on the income statement, and thus has no impact on net income attributable to the Company.

(2) Net operating income, as adjusted: This non-GAAP measure represents the Company's net operating income adjusted to exclude the impact on compensation expense of gains and losses on investments in the deferred compensation plan.

(3) Tax provision on net operating income, as adjusted: This non-GAAP measure represents the tax provision excluding the impact of investment related activity and is calculated by applying the unconsolidated effective tax rate to net operating income, as adjusted.

(4) Net operating income, as adjusted, after tax: This non-GAAP measure deducts from the net operating income, as adjusted, the tax provision on net operating income, as adjusted.

(5) Net operating income, as adjusted after tax per diluted share: This non-GAAP measure was calculated by dividing the net operating income, as adjusted after tax, by diluted weighted average shares outstanding.

(6) Operating profit margin, as adjusted: This non-GAAP measure was calculated by dividing the net operating income, as adjusted, by total revenue.

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.

Throughout this press release, the Company may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, 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 our actual results to differ materially from the results referred to in the forward-looking statements we make in this Quarterly Report on Form 10-Q and in our press releases are discussed under "Item 1A. Risk Factors" and elsewhere in the 2018 Annual Report and 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, 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 SEC.

Diamond Hill Investment Group logo

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SOURCE Diamond Hill Investment Group, Inc.

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