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.
|
Three Months Ended
September 30,
|
|
|
|
2018
|
|
2017
|
|
Change
|
Revenue
|
$
|
37,471,647
|
|
|
$
|
36,771,629
|
|
|
2%
|
Net operating income
|
16,915,845
|
|
|
16,887,332
|
|
|
—%
|
Operating margin
|
45%
|
|
|
46%
|
|
|
|
Investment income,
net
|
5,210,332
|
|
|
2,767,747
|
|
|
|
Income tax
provision
|
(5,726,807)
|
|
|
(6,496,980)
|
|
|
(12)%
|
Net income
attributable to common shareholders
|
15,208,053
|
|
|
12,698,847
|
|
|
20%
|
Earnings per share
attributable to common shareholders - diluted
|
$
|
4.31
|
|
|
$
|
3.67
|
|
|
17%
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2018
|
|
2017
|
|
Change
|
Revenue
|
$
|
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
|
|
|
|
Income tax
provision
|
(14,446,092)
|
|
|
(19,018,708)
|
|
|
(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%
|
|
As Of
|
|
September 30,
2018
|
|
December 31,
2017
|
|
September 30,
2017
|
Assets under
management (millions)
|
$
|
22,629
|
|
|
$
|
22,317
|
|
|
$
|
21,455
|
|
Book value per
share
|
$
|
63.38
|
|
|
$
|
49.69
|
|
|
$
|
53.24
|
|
Total outstanding
shares
|
3,534,148
|
|
|
3,470,428
|
|
|
3,468,565
|
|
|
For the Three Months
Ended September 30,
|
(in
millions)
|
2018
|
|
2017
|
AUM at beginning of
the period
|
$
|
21,827
|
|
|
$
|
20,924
|
|
Net cash inflows
(outflows)
|
|
|
|
proprietary funds
|
(158)
|
|
|
106
|
|
sub-advised funds
|
(130)
|
|
|
(65)
|
|
institutional accounts
|
(82)
|
|
|
1
|
|
|
(370)
|
|
|
42
|
|
Net market
appreciation and income
|
1,172
|
|
|
489
|
|
Increase during the
period
|
802
|
|
|
531
|
|
AUM at end of the
period
|
$
|
22,629
|
|
|
$
|
21,455
|
|
|
|
|
|
|
Change in Assets
Under Management
|
|
For the Nine Months
Ended September 30,
|
(in
millions)
|
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.