COLUMBUS, Ohio, Oct. 30, 2018 /PRNewswire/ -- Diamond Hill Investment Group, Inc.
(the "Company," "we," "our") (NASDAQ:DHIL) today reported unaudited results for the quarter ended September 30, 2018 and
filed its Form 10-Q.
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Three Months Ended September 30,
|
|
|
|
2018
|
|
2017
|
|
Change
|
|
Revenue
|
$
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37,471,647
|
|
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$
|
36,771,629
|
|
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2%
|
|
Net operating income
|
16,915,845
|
|
|
16,887,332
|
|
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—%
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|
Operating margin
|
45%
|
|
|
46%
|
|
|
|
|
Investment income, net
|
5,210,332
|
|
|
2,767,747
|
|
|
|
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Income tax provision
|
(5,726,807)
|
|
|
(6,496,980)
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|
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(12)%
|
|
Net income attributable to common shareholders
|
15,208,053
|
|
|
12,698,847
|
|
|
20%
|
|
Earnings per share attributable to common shareholders - diluted
|
$
|
4.31
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|
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$
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3.67
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|
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17%
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|
|
|
|
|
|
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Nine Months Ended September 30,
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|
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2018
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2017
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Change
|
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Revenue
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$
|
111,181,363
|
|
|
$
|
107,353,244
|
|
|
4%
|
|
Net operating income
|
51,469,336
|
|
|
48,595,555
|
|
|
6%
|
|
Operating margin
|
46%
|
|
|
45%
|
|
|
|
|
Investment income, net
|
7,216,278
|
|
|
9,673,720
|
|
|
|
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Income tax provision
|
(14,446,092)
|
|
|
(19,018,708)
|
|
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(24)%
|
|
Net income attributable to common shareholders
|
42,567,882
|
|
|
38,094,182
|
|
|
12%
|
|
Earnings per share attributable to common shareholders - diluted
|
$
|
12.11
|
|
|
$
|
11.05
|
|
|
10%
|
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As Of
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September 30, 2018
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|
December 31, 2017
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|
September 30, 2017
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|
Assets under management (millions)
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$
|
22,629
|
|
|
$
|
22,317
|
|
|
$
|
21,455
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|
|
Book value per share
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$
|
63.38
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|
|
$
|
49.69
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|
|
$
|
53.24
|
|
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Total outstanding shares
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3,534,148
|
|
|
3,470,428
|
|
|
3,468,565
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|
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For the Three Months Ended September 30,
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(in millions)
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2018
|
|
2017
|
|
AUM at beginning of the period
|
$
|
21,827
|
|
|
$
|
20,924
|
|
|
Net cash inflows (outflows)
|
|
|
|
|
proprietary funds
|
(158)
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|
|
106
|
|
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sub-advised funds
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(130)
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|
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(65)
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|
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institutional accounts
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(82)
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|
|
1
|
|
|
(370)
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|
|
42
|
|
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Net market appreciation and income
|
1,172
|
|
|
489
|
|
|
Increase during the period
|
802
|
|
|
531
|
|
|
AUM at end of the period
|
$
|
22,629
|
|
|
$
|
21,455
|
|
|
|
|
|
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Change in Assets Under Management
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|
For the Nine Months Ended September 30,
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(in millions)
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2018
|
|
2017
|
|
AUM at beginning of the period
|
$
|
22,317
|
|
|
$
|
19,381
|
|
|
Net cash inflows (outflows)
|
|
|
|
|
proprietary funds
|
(332)
|
|
|
805
|
|
|
sub-advised funds
|
(3)
|
|
|
(197)
|
|
|
institutional accounts
|
(171)
|
|
|
(206)
|
|
|
(506)
|
|
|
402
|
|
|
Net market appreciation and income
|
818
|
|
|
1,672
|
|
|
Increase during the period
|
312
|
|
|
2,074
|
|
|
AUM at end of the period
|
$
|
22,629
|
|
|
$
|
21,455
|
|
Special Dividend:
The Company today announced that its board of directors has approved a $8.00 per share special
cash dividend to shareholders of record on December 3, 2018 payable December
11, 2018. The Company will finalize the tax characterization of the dividend in February
2019 and expects 100% of the distribution to be classified as a qualified dividend.
While this is the eleventh consecutive year that the company has paid a special dividend, there can be no assurance that the
Company will pay a dividend in the future. The board of directors and management continually review various factors to
determine whether the Company has capital in excess of that required for the business and the appropriate use of any excess
capital. The factors considered include the Company's investment opportunities, the Company's risks, and future dividend and
capital gain tax rates. We believe that we should retain a larger portion of our operating profits so that we can adequately seed
new strategies and support existing strategies, which we believe will help us to continue to grow the Company's intrinsic value
per share over the long term. The board of directors has also authorized its management to repurchase the Company's common
shares having an aggregate purchase price up to $50.0 million. The authority to repurchase
shares will be exercised from time to time as market conditions warrant and is subject to regulatory considerations.
Evaluating management's stewardship of capital for shareholders is a central part of our intrinsic value investment discipline
that we practice for our clients. We hold ourselves to the same standard that we look for when evaluating investments for our
clients.
About Diamond Hill:
We are an independent investment management firm with significant employee ownership and $22.6
billion in assets under management as of September 30, 2018. We provide investment management services to
institutions and individuals through mutual funds, institutional separate accounts, an exchange traded fund, 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 nine months ended
September 30, 2018 and 2017, respectively.
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
(in thousands, except percentages and per share data)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Total revenue
|
$
|
37,472
|
|
|
$
|
36,772
|
|
|
$
|
111,181
|
|
|
$
|
107,353
|
|
|
|
|
|
|
|
|
|
|
Net operating income, GAAP basis
|
$
|
16,916
|
|
|
$
|
16,887
|
|
|
$
|
51,469
|
|
|
$
|
48,596
|
|
|
Non-GAAP adjustment:
|
|
|
|
|
|
|
|
|
Gains on deferred compensation plan investments,
net(1)
|
983
|
|
|
451
|
|
|
923
|
|
|
1,472
|
|
|
Net operating income, as adjusted, non-GAAP basis(2)
|
17,899
|
|
|
17,338
|
|
|
52,392
|
|
|
50,068
|
|
|
Non-GAAP adjustment:
|
|
|
|
|
|
|
|
|
Tax provision on net operating income, as adjusted, non-GAAP
basis(3)
|
(4,633)
|
|
|
(5,731)
|
|
|
(12,897)
|
|
|
(16,342)
|
|
|
Net operating income, as adjusted, after tax, non-GAAP
basis(4)
|
$
|
13,266
|
|
|
$
|
11,607
|
|
|
$
|
39,495
|
|
|
$
|
33,726
|
|
|
|
|
|
|
|
|
|
|
Net operating income, as adjusted after tax per diluted share, non-GAAP
basis(5)
|
$
|
3.76
|
|
|
$
|
3.35
|
|
|
$
|
11.24
|
|
|
$
|
9.78
|
|
|
Diluted weighted average shares outstanding, GAAP basis
|
3,532
|
|
|
3,461
|
|
|
3,515
|
|
|
3,448
|
|
|
|
|
|
|
|
|
|
|
Operating profit margin, GAAP basis
|
45
|
%
|
|
46
|
%
|
|
46
|
%
|
|
45
|
%
|
|
Operating profit margin, as adjusted, non-GAAP
basis(6)
|
48
|
%
|
|
47
|
%
|
|
47
|
%
|
|
47
|
%
|
|
(1)
|
Gains on deferred compensation plan investments, net: The gain on
deferred compensation plan investments, which increases 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 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 was
calculated by taking 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 tax rate from the actual tax provision to net operating income, as adjusted.
|
|
|
|
(4)
|
Net operating income, as adjusted, after tax: This non-GAAP
measure was calculated by taking the net operating income, as adjusted, less 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 2017 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.
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SOURCE Diamond Hill Investment Group, Inc.