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

Company Release - 7/31/2019 4:15 PM ET

COLUMBUS, Ohio, July 31, 2019 /PRNewswire/ -- Diamond Hill Investment Group, Inc.  (the "Company," "we," "our") (NASDAQ: 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.

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SOURCE Diamond Hill Investment Group, Inc.

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