COLUMBUS, Ohio, Nov. 4, 2024
/PRNewswire/ -- Diamond Hill Investment Group, Inc. (Nasdaq: DHIL)
today reported unaudited financial results for the third quarter of
2024.
The following are selected highlights for the quarter ended
September 30, 2024:
- Assets under management ("AUM") and assets under advisement
("AUA") combined were $33.2 billion,
compared to $29.2 billion as of
December 31, 2023, and $26.6 billion as of September 30, 2023.
- Average AUM and AUA combined were $32.4
billion, compared to $27.8
billion for the third quarter of 2023.
- Net client outflows were $22.0
million, compared to $343.0
million of net outflows for the third quarter of 2023.
- Revenue was $39.0 million,
compared to $35.6 million for the
third quarter of 2023.
- Net operating profit margin was 26%, compared to 35% for the
third quarter of 2023.
- Adjusted net operating profit margin1 was 32%,
compared to 33% for the third quarter of 2023.
- Investment income was $9.7
million, compared to investment loss of $4.6 million for the third quarter of 2023.
- Net income attributable to common shareholders was $14.6 million, compared to $6.5 million for the third quarter of 2023.
- Earnings per share attributable to common shareholders -
diluted was $5.35, compared to
$2.20 for the third quarter of
2023.
- Adjusted earnings per share attributable to common shareholders
- diluted2 was $3.35,
compared to $2.85 for the third
quarter of 2023.
- The Company returned approximately $7.5
million to its shareholders - $3.4
million through the repurchase of 22,376 common shares and
$4.1 million through a dividend of
$1.50 per common share.
"We continue making progress in diversifying our asset base,
vehicle offerings and client types," said Heather Brilliant, CEO. "This is reflected in
total fixed income assets reaching $5.5
billion in Q3, the recent launch of our Core Plus Bond
Strategy and Securitized Credit Fund, which is offered as an
interval fund. Both leverage our deep expertise in securitized
assets and expand our ability to deliver great outcomes for a
broader array of clients."
_____________________________________________
|
1
|
Adjusts the
financial measure calculated in accordance with U.S. generally
accepted accounting principles ("GAAP") for the impact of market
movements on the deferred compensation liability and related
economic hedges, and the impact of any consolidated
funds. During the third quarter of 2024, no Diamond Hill
Funds were consolidated; during the third quarter of 2023,
the Diamond Hill International Fund was consolidated. Each
Diamond Hill Fund consolidated during the applicable period is
referred to as a "Consolidated Fund." See the reconciliation to the
comparable GAAP financial measure at the end of this earnings
release.
|
|
2
|
Adjusts the
financial measure calculated in accordance with GAAP for the impact
of the Consolidated Fund(s) and investment income related to
certain other investments. See the reconciliation to the
comparable GAAP financial measure at the end of this earnings
release.
|
Capital Allocation:
The Company's board of directors approved the payment of a
regular quarterly cash dividend of $1.50 per common share. The dividend will be paid
on December 6, 2024, to the Company's shareholders of record
as of the close of business on November 22, 2024.
The Company's board of directors also approved a new repurchase
plan, authorizing management to repurchase up to $50 million DHIL common shares in the open market
and in private transactions in accordance with applicable
securities laws. This new program will expire on November 4, 2026, or upon the earlier completion
of all authorized purchases under the program.
|
Selected Income
Statement Data
|
|
|
Three Months Ended
September 30,
|
|
|
|
2024
|
|
2023
|
|
% Change
|
|
Revenue
|
$
39,018,232
|
|
$
35,554,280
|
|
10 %
|
|
Compensation and
related costs, excluding deferred compensation expense
(benefit)
|
19,509,116
|
|
17,837,787
|
|
9 %
|
|
Deferred compensation
expense (benefit)
|
2,250,168
|
|
(859,252)
|
|
NM
|
|
Other
expenses
|
7,041,477
|
|
6,214,551
|
|
13 %
|
|
Total operating
expenses
|
28,800,761
|
|
23,193,086
|
|
24 %
|
|
Net operating
income
|
10,217,471
|
|
12,361,194
|
|
(17) %
|
|
Investment income
(loss), net
|
9,668,961
|
|
(4,636,952)
|
|
NM
|
|
Net income before
taxes
|
19,886,432
|
|
7,724,242
|
|
157 %
|
|
Income tax
expense
|
(5,241,839)
|
|
(2,523,649)
|
|
108 %
|
|
Net income
|
14,644,593
|
|
5,200,593
|
|
182 %
|
|
Net income attributable
to redeemable noncontrolling interest
|
—
|
|
1,272,839
|
|
NM
|
|
Net income attributable
to common shareholders
|
$
14,644,593
|
|
$
6,473,432
|
|
126 %
|
|
|
|
|
|
|
|
Earnings per share
attributable to common shareholders - diluted
|
$
5.35
|
|
$
2.20
|
|
143 %
|
|
Weighted average shares
outstanding - diluted
|
2,738,588
|
|
2,939,055
|
|
(7) %
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2024
|
|
2023
|
|
% Change
|
|
Revenue
|
$
111,974,495
|
|
$
102,895,420
|
|
9 %
|
|
Compensation and
related costs, excluding deferred compensation expense
|
55,987,247
|
|
51,600,045
|
|
9 %
|
|
Deferred compensation
expense
|
4,571,396
|
|
1,867,983
|
|
145 %
|
|
Other
expenses
|
20,762,944
|
|
18,338,448
|
|
13 %
|
|
Total operating
expenses
|
81,321,587
|
|
71,806,476
|
|
13 %
|
|
Net operating
income
|
30,652,908
|
|
31,088,944
|
|
(1) %
|
|
Investment income,
net
|
18,380,048
|
|
9,722,494
|
|
89 %
|
|
Net income before
taxes
|
49,032,956
|
|
40,811,438
|
|
20 %
|
|
Income tax
expense
|
(13,246,590)
|
|
(11,338,849)
|
|
17 %
|
|
Net income
|
35,786,366
|
|
29,472,589
|
|
21 %
|
|
Net income attributable
to redeemable noncontrolling interest
|
—
|
|
(859,126)
|
|
NM
|
|
Net income attributable
to common shareholders
|
$
35,786,366
|
|
$
28,613,463
|
|
25 %
|
|
|
|
|
|
|
|
Earnings per share
attributable to common shareholders - diluted
|
$
12.90
|
|
$
9.61
|
|
34 %
|
|
Weighted average shares
outstanding - diluted
|
2,774,819
|
|
2,977,853
|
|
(7) %
|
|
|
|
|
|
|
|
Selected Assets
Under Management and Assets Under Advisement Data
|
|
|
|
|
|
Change in AUM and
AUA
|
|
For the Three Months
Ended September 30,
|
|
(in
millions)
|
2024
|
|
2023
|
|
AUM at beginning of the
period
|
$
29,291
|
|
$
26,066
|
|
Net cash inflows
(outflows)
|
|
|
|
|
Diamond Hill
Funds
|
423
|
|
(260)
|
|
Separately managed
accounts
|
(313)
|
|
(251)
|
|
Collective investment
trusts
|
(23)
|
|
184
|
|
Other pooled
vehicles
|
(109)
|
|
(16)
|
|
(22)
|
|
(343)
|
|
Net market appreciation
(depreciation) and income
|
2,006
|
|
(740)
|
|
Increase (decrease)
during the period
|
1,984
|
|
(1,083)
|
|
AUM at end of the
period
|
31,275
|
|
24,983
|
|
AUA at end of
period
|
1,957
|
|
1,638
|
|
Total AUM and AUA at
end of period
|
$
33,232
|
|
$
26,621
|
|
|
|
|
|
Average AUM during the
period
|
$
30,488
|
|
$
26,004
|
|
Average AUA during the
period
|
1,928
|
|
1,756
|
|
Total average AUM and
AUA during the period
|
$
32,416
|
|
$
27,760
|
|
|
|
|
|
Change in AUM and
AUA
|
|
For the Nine Months
Ended September 30,
|
|
(in
millions)
|
2024
|
|
2023
|
|
AUM at beginning of the
period
|
$
27,418
|
|
$
24,763
|
|
Net cash inflows
(outflows)
|
|
|
|
|
Diamond Hill
Funds
|
632
|
|
(349)
|
|
Separately managed
accounts
|
(661)
|
|
(340)
|
|
Collective investment
trusts
|
394
|
|
67
|
|
Other pooled
vehicles
|
(40)
|
|
260
|
|
325
|
|
(362)
|
|
Net market appreciation
and income
|
3,532
|
|
582
|
|
Increase during the
period
|
3,857
|
|
220
|
|
AUM at end of the
period
|
31,275
|
|
24,983
|
|
AUA at end of
period
|
1,957
|
|
1,638
|
|
Total AUM and AUA at
end of period
|
$
33,232
|
|
$
26,621
|
|
|
|
|
|
Average AUM during the
period
|
$
29,333
|
|
$
25,495
|
|
Average AUA during the
period
|
1,870
|
|
1,796
|
|
Total average AUM and
AUA during the period
|
$
31,203
|
|
$
27,291
|
|
Net Cash Inflows
(Outflows) Further Breakdown
|
|
For the Three Months
Ended
September 30,
|
|
For the Nine Months
Ended
September 30,
|
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Net cash inflows
(outflows)
|
|
|
|
|
|
|
|
|
Equity
|
$
(477)
|
|
$
(732)
|
|
$
(1,199)
|
|
$
(1,448)
|
|
Fixed
Income
|
455
|
|
389
|
|
1,524
|
|
1,086
|
|
$
(22)
|
|
$
(343)
|
|
$
325
|
|
$
(362)
|
|
|
|
|
|
|
|
|
About Diamond Hill:
Diamond Hill invests on behalf of
clients through a shared commitment to its valuation-driven
investment principles, long-term perspective, capacity
discipline and client alignment. An independent active asset
manager with significant employee ownership, Diamond Hill's investment strategies include
differentiated U.S. and international equity, alternative
long-short equity and fixed income.
Non-GAAP Financial Measures and Reconciliation
As supplemental information, the Company is providing certain
financial measures that are based on methodologies other than GAAP
("non-GAAP"). Management believes the non-GAAP financial
measures below are useful measures of the Company's core business
activities, are important metrics in estimating the value of an
asset management business, and help facilitate comparisons to
Company operating performance across periods. These non-GAAP
financial measures are presented for supplemental informational
purposes only, should not be used as a substitute for financial
measures calculated in accordance with GAAP and may be calculated
differently from similarly titled non-GAAP measures used by other
companies. The following schedules reconcile the differences
between financial measures calculated in accordance with GAAP and
non-GAAP financial measures for the three-month and nine-month
periods ended September 30, 2024 and
2023, respectively. Investors are encouraged to review the
related GAAP financial measures and the reconciliation of these
non-GAAP financial measures to their most directly comparable GAAP
financial measures, as well as the Company's condensed consolidated
financial statements and related notes included elsewhere in this
report.
|
Three Months Ended
September 30, 2024
|
|
(in thousands, except
percentages and per share data)
|
Total
operating
expenses
|
|
Net
operating
income
|
|
Total
non-operating
income (loss)
|
|
Income tax
expense(4)
|
|
Net income
attributable
to common
shareholders
|
|
Earnings per
share
attributable
to common
shareholders
- diluted
|
|
Net
operating
profit margin
|
|
GAAP
Basis
|
$
28,801
|
|
$
10,217
|
|
$ 9,669
|
|
$
5,242
|
|
$
14,645
|
|
$
5.35
|
|
26 %
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation liability(1)
|
(2,250)
|
|
2,250
|
|
(2,250)
|
|
—
|
|
—
|
|
—
|
|
6 %
|
|
Other investment
income(3)
|
—
|
|
—
|
|
(7,419)
|
|
(1,956)
|
|
(5,463)
|
|
(2.00)
|
|
—
|
|
Adjusted Non-GAAP
basis
|
$
26,551
|
|
$
12,467
|
|
$
—
|
|
$
3,286
|
|
$
9,182
|
|
$
3.35
|
|
32 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2023
|
|
(in thousands, except
percentages and per share data)
|
Total
operating
expenses
|
|
Net
operating
income
|
|
Total
non-operating
income
(loss)
|
|
Income tax
expense(4)
|
|
Net income
attributable
to common
shareholders
|
|
Earnings per
share
attributable
to common
shareholders
- diluted
|
|
Net
operating
profit margin
|
|
GAAP
Basis
|
$
23,193
|
|
$
12,361
|
|
$
(4,637)
|
|
$
2,524
|
|
$
6,473
|
|
$
2.20
|
|
35 %
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation liability(1)
|
859
|
|
(859)
|
|
859
|
|
—
|
|
—
|
|
—
|
|
(2) %
|
|
Consolidated
Fund(2)
|
—
|
|
121
|
|
3,269
|
|
593
|
|
1,525
|
|
0.52
|
|
—
|
|
Other investment
income(3)
|
—
|
|
—
|
|
509
|
|
143
|
|
366
|
|
0.13
|
|
—
|
|
Adjusted Non-GAAP
basis
|
$
24,052
|
|
$
11,623
|
|
$
—
|
|
$
3,260
|
|
$
8,364
|
|
$
2.85
|
|
33 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2024
|
|
(in thousands, except
percentages and per share data)
|
Total
operating
expenses
|
|
Net
operating
income
|
|
Total
non-operating
income (loss)
|
|
Income tax
expense(4)
|
|
Net income
attributable
to common
shareholders
|
|
Earnings per
share
attributable
to common
shareholders
- diluted
|
|
Net
operating
profit margin
|
|
GAAP
Basis
|
$
81,322
|
|
$
30,653
|
|
$
18,380
|
|
$
13,247
|
|
$
35,786
|
|
$
12.90
|
|
27 %
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation liability(1)
|
(4,571)
|
|
4,571
|
|
(4,571)
|
|
—
|
|
—
|
|
—
|
|
4 %
|
|
Other investment
income(3)
|
—
|
|
—
|
|
(13,809)
|
|
(3,731)
|
|
(10,078)
|
|
(3.64)
|
|
—
|
|
Adjusted Non-GAAP
basis
|
$
76,751
|
|
$
35,224
|
|
$
—
|
|
$
9,516
|
|
$
25,708
|
|
$
9.26
|
|
31 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2023
|
|
(in thousands, except
percentages and per share data)
|
Total
operating
expenses
|
|
Net
operating
income
|
|
Total
non-operating
income (loss)
|
|
Income tax
expense(4)
|
|
Net
income
attributable
to common
shareholders
|
|
Earnings per
share
attributable
to common
shareholders
- diluted
|
|
Net
operating
profit margin
|
|
GAAP
Basis
|
$
71,806
|
|
$
31,089
|
|
$ 9,722
|
|
$
11,339
|
|
$
28,613
|
|
$
9.61
|
|
30 %
|
|
Non-GAAP
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation liability (1)
|
(1,868)
|
|
1,868
|
|
(1,868)
|
|
—
|
|
—
|
|
—
|
|
2 %
|
|
Consolidated
Fund(2)
|
—
|
|
330
|
|
(4,148)
|
|
(840)
|
|
(2,119)
|
|
(0.71)
|
|
—
|
|
Other investment
income(3)
|
—
|
|
—
|
|
(3,706)
|
|
(1,053)
|
|
(2,653)
|
|
(0.89)
|
|
—
|
|
Adjusted Non-GAAP
basis
|
$
69,938
|
|
$
33,287
|
|
$
—
|
|
$
9,446
|
|
$
23,841
|
|
$
8.01
|
|
32 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) This non-GAAP adjustment removes the
compensation expense resulting from market valuation changes in the
Company's deferred compensation plans' liability and the related
net gains/losses on investments designated as an economic hedge
against the related liability. Amounts deferred under the deferred
compensation plans are adjusted for appreciation/depreciation of
investments chosen by participants. The Company believes it
is useful to offset the non-operating investment income or loss
realized on the hedges against the related compensation expense and
remove the net impact to help readers understand the Company's core
operating results and to improve comparability from period to
period.
(2) This non-GAAP adjustment removes the impact
that the Consolidated Fund has on the Company's GAAP consolidated
statements of income. Specifically, the Company adds back the
operating expenses and subtracts the investment income of the
Consolidated Fund. The adjustment to net operating income
represents the operating expenses of the Consolidated Fund, net of
the elimination of related management and administrative
fees. The adjustment to net income attributable to common
shareholders represents the net income of the Consolidated Fund,
net of redeemable non-controlling interests. The Company
believes removing the impact of the Consolidated Fund helps readers
understand its core operating results and improves comparability
from period to period.
(3) This non-GAAP adjustment represents the net
gains or losses earned on the Company's non-consolidated investment
portfolio that are not designated as economic hedges of the
deferred compensation plans' liability, non-consolidated seed
investments, and other investments. The Company believes
adjusting for these non-operating income or loss items helps
readers understand the Company's core operating results and
improves comparability from period to period.
(4) The income tax expense impacts were
calculated and resulted in the overall non-GAAP effective tax rates
of 26.4% for the three months ended September 30, 2024, 28.0% for the three months
ended September 30, 2023, 27.0% for
the nine months ended September 30,
2024, and 28.4% for the nine months ended September 30, 2023.
The Company does not recommend that investors consider non-GAAP
financial measures alone, or as a substitute for, financial
information prepared in accordance with GAAP.
Cautionary Note Regarding Forward-Looking Statements
Throughout this press release, the Company may make
"forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995, as amended (the "PSLR
Act"), Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements are provided under the "safe harbor"
protection of the PSLR Act of 1995. Forward-looking
statements include, but are not limited to, statements regarding
anticipated operating results, prospects and levels of AUM or AUA,
technological developments, economic trends (including interest
rates and market volatility), expected transactions and similar
matters. The words "may," "believe," "expect," "anticipate,"
"target," "goal," "project," "estimate," "guidance," "forecast,"
"outlook," "would," "will," "continue," "likely," "should," "hope,"
"seek," "plan," "intend," and variations of such words and similar
expressions identify forward-looking statements. Similarly,
descriptions of the Company's objectives, strategies, plans, goals,
or targets are also forward-looking statements.
Forward-looking statements are based on the Company's expectations
at the time such statements are made, speak only as of the dates
they are made and are susceptible to a number of risks,
uncertainties and other factors. While the Company believes
that the assumptions underlying its forward-looking statements are
reasonable, investors are cautioned that any of the assumptions
could prove to be inaccurate and, accordingly, the Company's actual
results and experiences may differ materially from the anticipated
results or other expectations expressed in its forward-looking
statements.
Factors that may cause the Company's actual results or
experiences to differ materially from results discussed in
forward-looking statements are discussed under Part I, Item 1A
(Risk Factors) and elsewhere in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2023, as well as
in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2024. These factors include, but are
not limited to: (i) any reduction in the Company's AUM or AUA; (ii)
withdrawal, renegotiation, or termination of investment advisory
agreements; (iii) damage to the Company's reputation; (iv) failure
to comply with investment guidelines or other contractual
requirements; (v) challenges from the competition the Company faces
in its business; (vi) challenges from industry trends towards lower
fee strategies and model portfolio arrangements; (vii) adverse
regulatory and legal developments; (viii) unfavorable changes in
tax laws or limitations; (ix) interruptions in or failure to
provide critical technological service by the Company or third
parties; (x) adverse civil litigation and government investigations
or proceedings; (xi) failure to adapt to or successfully
incorporate technological changes, such as artificial intelligence,
into the Company's business; (xii) risk of loss on the Company's
investments; (xiii) lack of sufficient capital on satisfactory
terms; (xiv) losses or costs not covered by insurance; (xv) a
decline in the performance of the Company's products; (xvi) changes
in interest rates and inflation; (xvii) changes in national and
local economic and political conditions; (xviii) the continuing
economic uncertainty in various parts of the world; (xix) the
after-effects of the COVID-19 pandemic and the actions taken in
connection therewith; (xx) political uncertainty caused by, among
other things, political parties, economic nationalist sentiments,
tensions surrounding the current socioeconomic landscape; and (xxi)
other risks identified from time-to-time in the Company's public
documents on file with the U.S. Securities and Exchange
Commission.
In light of the significant uncertainties in forward-looking
statements, the inclusion of such information should not be
regarded as a representation by the Company or any other person
that its expectations, objectives and plans will be achieved. All
forward-looking statements made in this press release are based on
information presently available to the management of the Company
and speak only as of the date hereof. Readers are cautioned not to
place undue reliance on forward-looking statements. New risks and
uncertainties arise from time to time, and factors that the Company
currently deems immaterial may become material, and it is
impossible for the Company to predict these events or how they may
affect it. The Company assumes no obligation to update any
forward-looking statements after the date they are made, whether as
a result of new information, future events or developments or
otherwise, except as required by law, although it may do so from
time to time. The Company does not endorse any projections
regarding future performance that may be made by third parties.
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SOURCE Diamond Hill Investment Group, Inc.